Full Text
City of Missoula, Montana Item to be Referred to City Council Committee Committee: Administration & Finance Item: Recommended Acceptance of Bond Purchase Contract with DA Davidson for the Sale of the Sewer Bonds Financing the upgrade of the Headworks Date: October 14, 2010 Prepared by: Brentt Ramharter Initiated by: City Administration based on recommendation from City's Financial Advisor Action Required: Accept the proposed pricing for the city's sewer revenue bonds for the $11.5 million Taxable Sewer System Revenue Bonds, Series 2010 (Recovery Zone Economic Development Bonds) priced today, October 18, 2010. Recommended Motion: I move the City Council accept the terms and conditions associated with the proposed contracted sale and pricing of the city's the $11.5 million sewer revenue bonds (Taxable Sewer System Revenue Bonds, Series 2010 - Recovery Zone Economic Development Bonds) with DA Davidson. Timeline: Referral to committee: October 14, 2010 Committee discussion: October 18, 2010 at 6:45 PM – prior to council meeting Council acts to set hearing: Not needed. Public Hearing: Not needed. Deadline: Need to have Council accept and award the bond purchase contract pricing by DA Davidson at the October 18, 2010 council meeting, as the underwriters will only hold their bids for 24 hours. Background and Alternatives Explored: Previously last month the following components of a bond resolution were approved to accomplish a negotiated sale with a selected underwriter (DA Davidson was chosen): The $11,500,000 (maximum par amount) of Taxable Sewer System Revenue Bonds, Series 2010 (Recovery Zone Economic Development Bonds) utilizes financing that is taxable to handle the construction costs for the recently awarded Sewer Headworks Project, but is subsidized by the federal government to provide the equivalent of tax exempt financing with a 45% interest reimbursement that would be paid to the city at each interest payment date. This financing contains very favorable terms to pay for the costs associated with the sewer plant headworks upgrade. The current sizing for this project is actually projected to be $10,875,000. This resolution identifies a maximum sizing of $11.5 million to accommodate any additional costs requested by ---PAGE BREAK--- the selected underwriter such as bond insurance (these costs would then give us an even lower interest rate). This resolution has been prepared by the City's bond counsel, Dorsey Whitney. This resolution authorizes the following actions to be taken, as the recommended pricing of the bonds will be done on a negotiated basis: 1. Based upon the complexities and timing of issuing the Bonds as taxable Economic Recovery Zone Development Bonds, Springsted, Inc., of St. Paul, Minnesota (“Springsted”), the City’s financial advisor and the City Finance Director/Treasurer have recommended a negotiated sale of the Bonds. This Council hereby confirms a negotiated sale to be in the City’s best interest. 2. The City Finance Director/Treasurer, in consultation with Springsted, is authorized to prepare and submit a request for proposals (“RFP”) for underwriters for the Bonds. 3. Upon receipt of responses to the RFP, the Mayor and City Finance Director/Treasurer, in consultation with Springsted, are hereby authorized to select an underwriter for the Bonds and proceed with the preparation of the documents necessary for the issuance of the Bonds. 4. The City Finance Director/Treasurer, City Clerk and other officers of the City, in cooperation with in cooperation with Springsted, financial consultants to the City, and Dorsey & Whitney LLP, bond counsel to the City, are hereby authorized and directed to prepare a Preliminary Official Statement to be distributed to potential purchasers of the Bonds. Such preliminary official statement shall contain such information as shall be advisable and necessary to describe accurately the City and the security for, and terms and conditions of, the Bonds. The City Finance Director/Treasurer is authorized on behalf of the City to deem such Preliminary Official Statement “near final” as of its date, in accordance with Rule 15c2- 12(b)(1) under the Securities Exchange Act of 1934. Financial Implications: See discussion above: These bond proceeds are needed to complete the financing package developed by the City Council to reconstruct the headworks at the city's wastewater plant. Sewer rates were increased last year by 5% and will be increased by 5% in 2011, 2012 and 2013 to handle the debt service requirements of this financing as well as the revenue bonds issued to complete the Rattlesnake Valley sewer project currently under construction. Attachments: Final Bond Purchase Agreement Spreadsheet Final Official Statement