HomeMy WebLinkAboutD.A. Davidson & Co. - 050216cc"`s
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FIXED INCOME CAPITAL MARKETS
March 3, 2016
Jefferson County
Attention: Ms. Stacie Prada, County Treasurer
Mr. Philip Morley, County Administrator
(P.O. Box 571) 1820 Jefferson Street
Port Townsend, WA 98368
Re: Underwriting Engagement Letter for Limited Tax General Obligation Refunding Bonds
On behalf of D.A. Davidson & Co. ("Davidson"), we wish to thank you for the opportunity to serve as
underwriter (also known as "placement agent") for Jefferson County ("Issuer") on its proposed offering
and issuance of Limited Tax General Obligation Refunding Bonds (the "Securities"). This letter will
confirm the terms of our engagement; however, it is anticipated that this letter will be replaced and
superseded by a bond purchase agreement to be entered into by the parties (the "Purchase Agreement") if
and when the Securities are priced following successful completion of the offering process.
1. Services to be Provided by Davidson. The Issuer hereby engages Davidson to serve as
managing underwriter (or placement agent) of the proposed offering and issuance of the Securities, and in
such capacity Davidson agrees to provide the following services:
• Analyze and report on the cost-effectiveness of refinancing any outstanding Limited Tax General
Obligation debt
• Develop a marketing plan for the offering, including identification of potential investors
• Assist in the preparation of the official statement (if any) and other offering documents
• Contact potential investors, provide them with offering -related information, respond to their
inquiries and, if requested, coordinate their due diligence sessions
• If the Securities are to be rated, assist in preparing materials to be provided to securities ratings
agencies and in developing strategies for meetings or conference calls with the ratings agencies
• Consult with counsel and other service providers about the offering and the terms of the Securities
• Inform the Issuer of the marketing and offering process
• Negotiate the pricing, including the interest rate, and other terms of the Securities
• Obtain CUSIP number(s) for the Securities and arrange for their DTC book -entry eligibility
• Plan and arrange for the closing and settlement of the issuance and the delivery of the Securities
• Such other usual and customary underwriting services as may be requested by the Issuer
Fixed Income Capital Markets
Columbia Center • 701 5th Avenue, Suite 4050 • Seattle, WA 98104 • (206) 389-4062 • 1-888-389-8001 • FAX (206) 389-4040
www.davidsoncompanies.com/ficm/
• As Placement Agent, send out a Request for Proposals to various banks for a fixed interest rate bid
for the term of the outstanding bonds. (With a private placement to a bank, there is no Official
Statement and no rating presentation.)
As underwriter, Davidson will not be required to purchase the Securities except pursuant to the terms of the
Purchase Agreement, which will not be signed until successful completion of the pre -sale offering period.
This letter does not obligate Davidson to purchase any of the Securities.
2. No Advisory or Fiduciary Role. The Issuer acknowledges and agrees that: (i) the primary
role of Davidson, as an underwriter, is to purchase securities, for resale to investors, in an arm's-length
commercial transaction between the Issuer and Davidson and that Davidson has financial and other interests
that may differ from those of the issuer.; (ii) Davidson is not acting as a municipal advisor, financial advisor,
or fiduciary to the Issuer and has not assumed any advisory or fiduciary responsibility to the Issuer with
respect to the transaction contemplated hereby and the discussions, undertakings and procedures leading
thereto (irrespective of whether Davidson has provided other services or is currently providing other
services to the Issuer on other matters); (iii) the only obligations Davidson has to the Issuer with respect to
the transaction contemplated hereby expressly are set forth in this agreement; and (iv) the Issuer has
consulted its own financial and/or municipal, legal, accounting, tax and other advisors, as applicable, to the
extent it deems appropriate. If the Issuer would like a municipal advisor in this transaction that has legal
fiduciary duties to the Issuer, then the Issuer is free to engage a municipal advisor to serve in that capacity.
In addition, the Issuer acknowledges receipt of certain regulatory disclosures as required by the Municipal
Securities Rulemaking Board that are attached to this agreement as Exhibit A. Issuer further acknowledges
that Davidson may be required to supplement or make additional disclosures as may be necessary as the
specific terms of the transaction progress.
3. Fees and Expenses. Davidson's proposed underwriting fee/placement agent fee is no
greater than $11,000. The Issuer shall be responsible for paying all other costs of issuance, including
without limitation, bond counsel and all other expenses incident to the performance of the Issuer's
obligations under the proposed offering.
4. Term and Termination. The term of this engagement shall extend from the date of this
letter to the closing of the offering of the Securities. Notwithstanding the forgoing, either party may
terminate Davidson's engagement at any time without liability of penalty upon at least 30 days' prior written
notice to the other party. If Davidson's engagement is terminated by the Issuer, the Issuer agrees to
reimburse Davidson for its out-of-pocket expenses incurred until the date of termination.
5. Indemnification; Limitation of Liability. The Issuer agrees that neither Davidson nor its
employees, officers, agents or affiliates shall have any liability to the Issuer for the services provided
hereunder except to the extent it is judicially determined that Davidson engaged in gross negligence or
willful misconduct. In addition, to the extent permitted by applicable law, the Issuer shall indemnify, defend
and hold Davidson and its employees, officers, agents and affiliates harmless from and against any losses
claims, damages and liabilities that arise from or otherwise relate to this Agreement, actions taken or
omitted in connection herewith, or the transactions and other matters contemplated hereby, except to the
extent such losses, claims, damages or liabilities are judicially determined to be the result of Davidson's
gross negligence or willful misconduct.
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6. Miscellaneous. This letter shall be governed and construed in accordance with the laws of
the State of Washington. This Agreement may not be amended or modified except by means of a written
instrument executed by both parties hereto. This Agreement may not be assigned by either party without
the prior written consent of the other party.
If there is any aspect of this Agreement that you believe requires further clarification, please do not hesitate
to contact us. If the foregoing is consistent with your understanding of our engagement, please sign and
return the enclosed copy of this letter.
Again, we thank you for the opportunity to assist you with your proposed financing and the confidence you
have placed in us.
Very truly yours,
D.A. DAVIDSON & CO.
By: James M. Nelson
Signature:
Title: Senior Vice President
d
Accepted this �ay of May, 2016
Jefferson County
Board of Commissioners
Kathleen Kler, Chair
ATTEST: SEAL:
AveA
Carolyn Ave ,Deputy Clerk the Board t k
ZA roved As To F
AZ
David Alvarez, Chief Civil Dep Prosecuting Attorney
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D.A. Davidson & Co. (hereinafter referred to as "Davidson" or "underwriter") intends/ proposes to serve
as an underwriter, and not as a financial advisor or municipal advisor, in connection with the issuance of
the Bonds.
As part of our services as sole underwriter, Davidson may provide advice concerning the structure, timing,
terms, and other similar matters concerning the issuance of the Bonds.
Disclosures Concerning the Underwriters Role:
(i) MSRB Rule G•17 requires an underwriter to deal fairly at all times with both municipal issuers
and investors.
(ii) The underwriters' primary role is to purchase the Bonds with a view to distribution in an
arm's-length transaction with the Issuer. The underwriters financial and other interests that
may differ from those of the Issuer.
(iii) Unlike a municipal advisor, the underwriters do not have a fiduciary duty to the Issuer under
the federal securities laws and are, therefore, not required by federal law to act in the best
interests of the Issuer without regard to their own financial or other interests.
(iv) The underwriters have a duty to purchase the Bonds from the Issuer at a fair and reasonable
price, but must balance that duty with their duty to sell the Bonds to investors at prices that
are fair and reasonable.
(v) The underwriter will draft and review the official statement for the Bonds in accordance with,
and as part of, their respective responsibilities to investors under the federal securities laws,
as applied to the facts and circumstances of this transaction.
Disclosures Concerning the Underwriters Compensation:
As underwriter, Davidson will be compensated by a fee and/or an underwriting discount that will be set
forth in the bond purchase agreement to be negotiated and entered into in connection with the issuance
of the Bonds. Payment or receipt of the underwriting fee or discount will be contingent on the closing of
the transaction and the amount of the fee or discount may be based, in whole or in part, on a percentage
of the principal amount of the Bonds. While this form of compensation Is customary in the municipal
securities market, it presents a conflict of interest since the underwriter may have an incentive to
recommend to the Issuer a transaction that is unnecessary or to recommend that the size of the
transaction be larger than is necessary.
Additional Conflicts Disclosure:
Davidson has not identified any additional potential or actual material conflicts that require disclosure
Risk Disclosures Pursuant to MSRB Rule G-17 - Fixed Rate Bonds
The following is a general description of the financial characteristics and security structures of fixed rate
municipal bonds ("Fixed Rate Bonds"), as well as a general description of certain financial risks that you
should consider before deciding whether to issue Fixed Rate Bonds.
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Financial Characteristics
Maturity and Interest. Fixed Rate Bonds are interest-bearing debt securities issued by state and local
governments, political subdivisions and agencies and authorities. Maturity dates for Fixed Rate Bonds are
fixed at the time of issuance and may include serial maturities (specified principal amounts are payable
on the same date in each year until final maturity) or one or more term maturities (specified principal
amounts are payable on each term maturity date) or a combination of serial and term maturities. The
final maturity date typically will range between 10 and 30 years from the date of issuance. Interest on the
Fixed Rate Bonds typically is paid semiannually at a stated fixed rate or rates for each maturity date.
Redemption. Fixed Rate Bonds may be subject to optional redemption, which allows you, at your option,
to redeem some or all of the bonds on a date prior to scheduled maturity, such as in connection with the
issuance of refunding bonds to take advantage of lower interest rates.
Fixed Rate Bonds will be subject to optional redemption only after the passage of a specified period of
time, often approximately ten years from the date of issuance, and upon payment of the redemption price
set forth in the bonds, which may include a redemption premium. You will be required to send out a notice
of optional redemption to the holders of the bonds, usually not less than 30 days prior to the redemption
date. Fixed Rate Bonds with term maturity dates also may be subject to mandatory sinking fund
redemption, which requires you to redeem specified principal amounts of the bonds annually in advance
of the term maturity date. The mandatory sinking fund redemption price is 100% of the principal amount
of the bonds to be redeemed.
Security
Payment of principal of and interest on a municipal security, including Fixed Rate Bonds, may be backed
by various types of pledges and forms of security, some of which are described below.
General Obligation Bonds. the County has irrevocably pledged that, for as long as any of the Bonds are
outstanding, it will levy taxes annually without limitation as to rate or amount upon all the taxable
property within the County in an amount sufficient, together with other money legally available and to be
used therefor to pay, when due, the principal of and interest on the Bonds. The full faith, credit and
resources of the County have been irrevocably pledged for the prompt payment of the principal of and
interest on the Bonds.
The Bonds are not obligations of the State or any other municipal corporation other than the County.
The description above regarding "Security" is only a brief summary of certain possible security provisions
for the bonds and is not intended as legal advice. You should consult with your bond counsel for further
information regarding the security for the bonds.
Financial Risk Considerations
Certain risks may arise in connection with your issuance of Fixed Rate Bonds, including some or all of the
following:
Issuer Default Risk. You may be in default if the funds pledged to secure your bonds are not sufficient to
pay debt service on the bonds when due. The consequences of a default may be serious for you and,
depending on applicable state law and the terms of the authorizing documents, the holders of the bonds,
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the trustee and any credit support provider may be able to exercise a range of available remedies against
you. For example, if the bonds are secured by a general obligation pledge, you may be ordered by a court
to raise taxes. Other budgetary adjustments also may be necessary to enable you to provide sufficient
funds to pay debt service on the bonds. A default may negatively impact your credit ratings and may
effectively limit your ability to publicly offer bonds or other securities at market interest rate levels.
Further, if you are unable to provide sufficient funds to remedy the default, subject to applicable state
law and the terms of the authorizing documents, you may find it necessary to consider available
alternatives under state law, including (for some issuers) state -mandated receivership or bankruptcy. A
default also may occur if you are unable to comply with covenants or other provisions agreed to in
connection with the issuance of the bonds.
This description is only a brief summary of issues relating to defaults and is not intended as legal advice.
You should consult with your bond counsel for further information regarding defaults and remedies.
Redemption Risk. Your ability to redeem the bonds prior to maturity may be limited, depending on the
terms of any optional redemption provisions. In the event that interest rates decline, you may be unable
to take advantage of the lower interest rates to reduce debt service.
Refinancing Risk. If your financing plan contemplates refinancing some or all of the bonds at maturity (for
example, if you have term maturities or if you choose a shorter final maturity than might otherwise be
permitted under the applicable federal tax rules), market conditions or changes in law may limit or prevent
you from refinancing those bonds when required. Further, limitations in the federal tax rules on advance
refunding of bonds (an advance refunding of bonds occurs when tax-exempt bonds are refunded more
than 90 days prior to the date on which those bonds may be retired) may restrict your ability to refund
the bonds to take advantage of lower interest rates.
Reinvestment Risk. You may have proceeds of the bonds to invest prior to the time that you are able to
spend those proceeds for the authorized purpose. Depending on market conditions, you may not be able
to invest those proceeds at or near the rate of interest that you are paying on the bonds, which is referred
to as "negative arbitrage".
Tax Compliance Risk. The issuance of tax-exempt bonds is subject to a number of requirements under the
United States Internal Revenue Code, as enforced by the Internal Revenue Service (IRS). You must take
certain steps and make certain representations prior to the issuance of tax-exempt bonds. You also must
covenant to take certain additional actions after issuance of the tax-exempt bonds. A breach of your
representations or your failure to comply with certain tax -related covenants may cause the interest on
the bonds to become taxable retroactively to the date of issuance of the bonds, which may result in an
increase in the interest rate that you pay on the bonds or the mandatory redemption of the bonds.
The IRS also may audit you or your bonds, in some cases on a random basis and in other cases targeted to
specific types of bond issues or tax concerns. If the bonds are declared taxable, or if you are subject to
audit, the market price of your bonds may be adversely affected. Further, your ability to issue other tax-
exempt bonds also may be limited.
This description of tax compliance risks is not intended as legal advice and you should consult with your
bond counsel regarding tax implications of issuing the bonds.
If you or any other Issuer officials have any questions or concerns about these disclosures, please make
those questions or concerns known immediately to the undersigned. In addition, you should consult with
C.
the Issuer's own financial and/or municipal, legal, accounting, tax and other advisors, as applicable, to the
extent you deem appropriate.
JEFFERSON COUNTY
BOARD OF COUNTY COMMISSIONERS
AGENDA REQUEST
TO: Board of County Commissioners
FROM: Philip Morley, County Administrato
DATE: May 2, 2016
RE: Underwriting Engagement Letter for LTGO Refunding Bonds; D.A. Davidson &
Co.; up to $11,000 plus expenses.
STATEMENT OF ISSUE: Board approval of an Agreement with D.A. Davidson & Co. to underwrite
the refunding of the County's 2007 Limited Term General Obligation Bond (LTGO) that funded a portion
of JeffCom's Tower and communications infrastructure project. New LTGO Bonds will be issued.
ANALYSIS: The Agreement with D.A. Davidson & Co. is for underwriting the refunding of the
County's 2007 Limited Term General Obligation Bond (LTGO) that funded a portion of JeffCom's
Tower and communications infrastructure project. Approximately $1,300,000 of new LTGO Bonds will
be issued at lower interest rate, saving JeffCom $10,000412,000 per year for the remaining 11 years of
the term of the original bonds.
The original 2007 bonds were issued by Jefferson County when JeffCom was still a department of the
County. Since JeffCom's reorganization as an independent entity, the County and JeffCom have an
Interlocal Agreement to ensure tax revenues collected by the County for JeffCom are applied to the bond
payments. Under this bond refund, the new bonds would be issued by the County and serviced under the
same arrangement.
Jim Nelson, with D.A. Davidson, has successfully provided bond underwriting services to Jefferson
County for many years. The proposed bond refunding and Engagement Letter is recommended by
Treasurer Stacie Prada. JeffCom Director Karl Hatton has been coordinating with the Treasurer on the
refund, and informed the JeffCom Administrative Board of the refunding at the JeffCom Board's meeting
in March. The Prosecutor's Office has reviewed the Engagement Letter and approved it as to form.
FISCAL EMPACT: None to Jefferson County. Underwriting costs of up to $11,000 plus expenses will
come out of the bond refinancing proceeds, with a net savings to JeffCom estimated at $10,000-12,000
per year for the next 11 years.
RECOMMENDATION: Approve the proposed Underwriting Engagement Letter.
REVAWN" BY..
L"Philip Morl R i Date
CONTRACT REVIEW FORM
CONTRACT WITH: D.A. Davidson & Co.
CONTRACT FOR: Underwriting for LTGO Bond Refund TERM: Thru closing of offering
COUNTY DEPARTMENT: County Administrator Office
For More Information Contact: Stacie Prada x-154 APR 2 6 2016
Contact Phone #:
RETURN TO: Philip Morley RETURN BY: asap
(Person in Department) (Date)
AMOUNT: Up to $11,000 + expenses PROCESS:
Revenue:
Expenditure:
Matching Funds Required:
Sources(s) of Matching Funds
From Bond Refund savings
Step 1: REVIEW BY
Review by:
Date Reviewed:
. APPROVED FORM
Comments
x Exempt from Bid Process
Consultant Selection Process
Cooperative Purchase
Competitive Sealed Bid
Small Works Roster
Vendor List Bid
RFP or RFQ
Other
ii
❑ Returned for revision (See Comments)
Step 2: REVIEW B ROSECUTITTO N
M,
Review by: LVA( c— z-
>�:7APPROVED
Date Reviewed: 7V -r,,1 .71 If /-
AS TO FORM El Returned f r evision ee Comments)
Comments
Step 3: (If required) DEPARTMENT MAKES REVISIONS & RESUBMITS TO
RISK MANAGEMENT AND PROSECUTING ATTORNEY
Step 4: CONTRACTOR/CONSULTANT SIGNS APPROPRIATE NUMBER OF
ORIGINALS
Step 5: SUBMIT TO BOCC FOR APPROVAL
Submit originals and 6 copies of Contract, Review Form, and Agenda Bill to BOCC Office.
Place "Sign Here" markers on all places the BOCC needs to sign.
MUST be in BOCC Office by 4:40 p.m. TUESDAY for the following Monday's agenda.
(This form to stay with contract throughout the contract review process.)
Philip Morley
From: Jim Nelson <jnelson@dadco.com>
Sent: Tuesday, April 26, 2016 2:39 PM
To: Stacie Prada; Philip Morley
Subject: RE: Jefferson County - estimated totla financing costs for the LTGO Refunding Bond
Stacie and Phillip,
The following is an update on the estimated Total Financing Costs ($21,022) for the Refunding Bond:
-Bond Attorney $9,922
-Placement Agent $7,800
-CPA Verification Agent $2,500 (verifies the escrow)
-Escrow Agent $800 (manages the funds and redeems Bonds on the Call Date of June 1, 2017).
The financing costs are sized into the principal amount of the Refunding Bond. Therefore, the estimated Total Net
Savings number is a "net net" number with the financing costs already deducted. If you have any questions, please call
206-389-4062.
Sincerely,
JIM NELSON I Senior Vice President
E-mail: jnelson@dadco.com
Office: 206.389.4062 1 Toll Free: 888.389.8001 1 Cell: 206.713.9354
D.A. Davidson & Co. I Columbia Center
701 5th Avenue, Suite 4050 1 Seattle, WA 98104
D A DA`'IDS0N
FIXED INCOME CAPITAL MARKETS
Unless otherwise agreed to, the primary role of Davidson, as an underwriter/placement agent, is to purchase securities for resale to investors, in an
arm's-length commercial transaction between the Issuer and Davidson or to arrange for placement of securities with an investor. As
underwriter/placement agent Davidson is not acting as a fiduciary to the Issuer and Davidson has financial and other interests that may differ from
those of the Issuer.
From: Jim Nelson
Sent: Tuesday, April 26, 2016 12:35 PM
To: 'Stacie Prada'; Philip Morley; asears@co.jefferson.wa.us; Marc Greenough (marc.greenough@foster.com); Grant M.
Brooks (grant. brooks@foster.com); Suzanne Eide; Lisa Takeuchi; Crystal Vogl; Jordan Donohue; joe.smith@gt.com;
carolyn.morrison@usbank.com; greg.skutnik@usbank.com; ryan.brennan@usbank.com
Subject: Jefferson County - financing schedule and distribution list for LTGO Refunding Bond
Stacie, Philip, Anne, Marc, Grant, Suzanne, Lisa, Crystal, Jordan, Joe, Carolyn, Greg and Ryan,
Attached is the financing schedule and distribution list for the Jefferson County advance refunding of a portion of the
2007 Limited Tax General Obligation Bonds.
Please review and let me know if you have any questions or comments.
Sincerely,
Jefferson
Townsend,
May 2, 2016
D.A. Davidson & Co.
Attn: Jim Nelson, Senior Vice President
701 5th Avenue, Suite 4050
Seattle, WA 98104
AGREEMENT re: Underwriting Engagement Letter for Limited Tax General Obligation
Refunding Bonds; In the Amount up to $11,000 plus expenses; Jefferson County
Administrator's Office; D.A. Davidson & Co.
Dear Mr. Nelson,
Enclosed is the Original Contract re: Underwriting Engagement Letter for Limited Tax
General Obligation Refunding Bonds; In the Amount up to $11,000 plus Expenses; Jefferson
County Administrator's Office; D.A. Davidson & Co. for your records.
Tha you,
Julie harm
Executive Secretary I
Enclosure
Phone (360) 385-9100 Fax (360) 385-9382 jeffbocc@co.jefferson.wa.us