Loading...
HomeMy WebLinkAbout24-104 Approving an Underwriter Engagement Letter with Piper Sandler and Co re Water Revenue Bonds 10-23-2024RESOLUTION N0.24-104 A RESOLUTION OF THE BOARD OF TRUSTEES OF THE TOWN OF FIRESTONE, COLORADO, APPROVING AN UNDERWRITER ENGAGEMENT LETTER WITH PIPER SANDLER & CO FOR SERVICES REGARDING WATER REVENUE BONDS WHEREAS, the Town of Firestone ("Town") may consider financing various water supply, treatment, distribution, and storage projects through the issuance of water revenue bonds and possible refinancing of outstanding revenue bonds; and WHEREAS, the performance of such tasks requires that the Town retain an Underwriter who can provide services, which pertain to structuring of a potential financing and marketing of the securities, which includes but is not limited to, advice with respect to terms and conditions affecting the bond, creating a feasible and efficient structure for the bonds to enhance marketability and coordinating the printing and distribution of preliminary and final statements; and WHEREAS, it is in the best interest of the Town to have Piper Sandler & Co. serve as the Underwriter because of its expertise, qualifications, experience, knowledge, and familiarity with the Town's Water Action Plan and overall water system. NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF TRUSTEES OF THE TOWN OF FIRESTONE, COLORADO: The Underwriter Engagement Letter with Piper Sandler & Co. is approved in substantially the same form as the attached hereto and made a part of this resolution and the Mayor is authorized to execute the Engagement Letter on behalf of the Town. INTRODUCED, READ AND ADOPTED this 23rd day of October, 2024. TOWN OF A TEST: A{ 3 Missy Carranco, Deputy Town Clerk APPROVED AS TO William Jr PIPER I SANDLER AJ Krieger, Town Manager Town of Firestone 9950 Park Avenue Firestone, CO 80504 Re: Underwriter Engagement Letter Water Enterprise Revenue Bonds, Series 2025 (the "Securities") Dear Mr. Krieger: 114415"Street Suite 2050 Denver, Colorado 80202 P 303-405-0844 Piper Sandler & Co. Since 1895. Member SIPC and NYSE. October 8, 2024 This letter confirms the agreement (the "Agreement") between Piper Sandler & Co. ("Piper Sandler" or "we" or "us") and the Town of Firestone (the "Issuer" or "you") as follows: 1. Engagement. The Issuer hereby engages Piper Sandler, represented by Nate Eckloff, Managing Director, to serve as an underwriter for the Securities. As currently contemplated, the transaction will be an underwriting of the Securities (amount to be determined at a later date) to fund the Town's water system capital projects. Sale and delivery of the Securities by the Issuer will occur on the day of closing ("Closing Date"). 2. Scope of Services. Piper Sandler agrees, as appropriate and directed by you, to provide the following services. (a) Develop a financing plan for the Securities and assist you in determining the economic impact of the Securities; (b) Provide advice concerning structure, timing, terms and other similar matters concerning the Securities, including recommendations as to maturities, interest rates, structure, security, timing, and amount of proceeds needed to implement your project; (c) Review and make comments with respect to sale documents, as applicable, including Explanatory Statements, Authorizing Bond Resolutions, bond declarations and indentures and other underlying documents relating to the Securities; (d) Develop a sale schedule that incorporates all aspects of bringing Securities to market and arranging for a successful closing of the transaction; (e) Assist in the preparation of the preliminary and final Official Statements to be issued by you relating to the Securities for final approval by you and your agents, including bond counsel; (f) Assist in making presentations to rating agencies with respect to the Securities; (g) Evaluate and make recommendations concerning the use of bond insurance and any other available credit enhancements; (h) Distribute preliminary and final Official Statements and other documents to a broad list of institutions, banks, trusts, insurance companies, professional investment advisors, and other prospective investors in Securities; (i) If deemed appropriate by Piper Sandler and you, an underwriting group for the purpose of underwriting the Securities, and inform you as to the membership of any group so formed; (j) Develop a marketing plan for the offering, including identification of potential investors; (k) Negotiate the pricing, including the interest rate, and other terms of Securities; Page 2 (I) Obtain CUSIP numbers) for Securities and arranging for their DTC book -entry eligibility as required; (m) Provide a final schedule of debt service payments for Securities; (n) Review and make comments with respect to closing documents prepared by Bond Counsel; (o) Plan and arrange for the closing and settlement of the issuance and the delivery of Securities; 3. Fees and Expenses. For our services, you agree to pay us an underwriting discount not to exceed $4.45/$1,000 (0.445%) of the par amount of the Securities payable by wire transfer of immediately available funds at closing. In addition, underwriting expenses including underwriter's counsel, as well as closing costs including CUSIP, Ipreo, day loan, DTC and wire fees will be payable separately from the underwriter's discount from bond proceeds at closing. For avoidance of doubt, the fees and expenses shall not be payable in the event a closing of the Securities does not occur. 4. Other Matters Relating to Our Engagement. The parties agree that we are not making a final commitment to underwrite securities until certain events have occurred including among other things, a successful authorizing bond election, satisfactory completion and execution of all final documentation for an offering including all terms and conditions and credit approval by Piper Sandier's internal credit approval process. This Agreement is therefore not a final commitment by us express or implied, to underwrite or purchase any securities. If you elect to conduct a public offering of the Securities, you and Piper Sandler will enter into a definitive bond purchase agreement which shall supersede the provisions of this agreement in any conflicting respects, except that the parties agree that the fee provisions set forth in Section 3 will continue to apply. You acknowledge that you have retained us solely to provide the services to you as set forth in this agreement. As underwriter, Piper Sandler may provide advice concerning the structure, timing, terms, and other similar matters concerning the transaction. You acknowledge and agree that: (i) the primary role of Piper Sandler as an underwriter, is to sell securities to investors in an arms -length commercial transaction and that Piper Sandler has financial and other interests that differ from your interests (ii) Piper Sandler is not acting as a municipal advisor, financial advisor or fiduciary to you or any other person or entity and has not assumed any advisory or fiduciary responsibility to you with respect to the transaction contemplated herein and the discussions, undertakings and proceedings leading thereto (irrespective of whether Piper Sandler has provided other services or is currently providing other services to you on other matters) (iii) the only obligations Piper Sandler has to you with respect to the transaction contemplated hereby expressly are set forth in this agreement and (iv) you have consulted your own legal, accounting, tax, financial and other advisors, as applicable, to the extent deemed appropriate in connection with the transaction contemplated herein. 5. Disclosure. Attached to this letter are regulatory disclosures required by the Securities and Exchange Commission and the Municipal Securities Rulemaking Board to be made by us at this time because of this engagement. We may be required to send you additional disclosures regarding the material financial characteristics and risks of such transaction or describing those conflicts. At that time, we also will seek your acknowledgement of receipt of any such additional disclosures. It is our understanding that you have the authority to bind the Issuer by contract with us, and that you are not a party to any conflict of interest relating to the Securities. If our understanding is incorrect, please notify the undersigned immediately. 6. Termination. You or we may terminate our engagement under this agreement, with or without cause, upon ten (10) days' written notice to the other party. The fee, expense reimbursement, your representations, warranties and agreements, Cl" miscellaneous provisions of this agreement will survive any termination of our engagement under this agreement. Page 3 7. Section Headings. Section headings contained herein are for convenience of reference only and are not part of this agreement. 8. Amendment This agreement may be amended only by a written instrument executed by each of the Parties. The terms of this agreement may be waived only by a written instrument executed by the party waiving compliance. 9. Entire Agreement. This agreement embodies the entire agreement and understanding between you and us and supersedes all prior agreements and understandings relating to the subject matter of this agreement. 10. No Assignment. This agreement has been made by the Issuer and Piper Sandler, and no other person shall acquire or have any right under or by virtue of this agreement. 11. Governing Law. This agreement, and all claims or causes of action (whether in contract or tort) that may be based upon, arise out of or relate to this agreement or the negotiation, execution or performance of this agreement, will be governed by and construed in accordance with the laws of Colorado. 12. Effectiveness. This agreement shall become effective upon its execution by duly authorized officials of all parties hereto and shall be valid and enforceable from and after the time of such execution. 13. Severability. In the event any provision of this agreement shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof. You and us will endeavor in good faith negotiations to replace the invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid or unenforceable provisions. 14. Counterparts. This agreement may be executed in several counterparts (including counterparts exchanged by email in PDF format), each of which shall be an ornal and all of which shall constitute but one and the same instrument. 15. Notices. Any notice required or permitted to be given under this agreement shall be given in writing and shall be effective from the date sent by registered or certified mail, by hand, facsimile or overnight courier to the addresses set forth on the first page of this agreement with a copy sent to the General Counsel of such Party. Page 4 Please confirm that the foregoing correctly and completely sets forth our understanding by signing and returning to us the enclosed duplicate of this engagement agreement. Sincerely, Nate Eckloff Managing Director Piper Sandler & Co. Acknowledgement and Approval of Engagement and Receipj of Appendix A Disclosures Krieger Town of Firestone Date: td Page 5 Appendix A — G-17 Disclosure Thank you for engaging Piper Sandler & Co. ("Piper Sandler") to serve as your underwriter. We are writing to provide you with certain disclosures relating to the captioned bond issue (Bonds), as required by Municipal Securities Rulemaking Board (MSRB) Rule G-17 as set forth in MSRB Notice 2019-20 (Nov. 8, 2019)" Piper Sandler & Co. intends 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 underwriting services, we may provide advice concerning the structure, timing, terms, and other similar matters concerning the issuance of the Bonds. The following G-17 conflict of interest disclosures are now broken down into three types, including: 1) dealer -specific conflicts of interest disclosures (if applicable); 2) transaction -specific disclosures (if applicable); and 3) standard disclosures. Dealer -Specific Conflicts of /nterest Disclosures Piper Sandler has identified the following actual or potentia12 material conflicts of interest: • We have entered into a separate agreement with Charles Schwab & Co., Inc. that enables Charles Schwab & Co., Inc. to distribute certain new issue municipal securities underwritten by or allocated to us which could include the Bonds. Under that agreement, we will share with Charles Schwab & Co., a portion of the fee or commission paid to us. Transaction -Specific Disclosures • Disclosures Concerning Complex Municipal Securities Financing: o Since we have not recommended a "complex municipal securities financing" to the Issuer or Obligor, additional disclosures regarding the financing structure for the Bonds are not required under MSRB Rule G-17. Standard Disclosures • Disclosures Concerning the Underwriters' Role: o MSRB Rule G-17 requires an underwriter to deal fairly at all times with both issuers and investors. o The underwriters' primary role is to purchase the Bonds with a view to distribution in an arm's- length commercial transaction with the Issuer. The underwriters have financial and other interests that differ from those of the Issuer. o Unlike a municipal advisor, an underwriter does not have a fiduciary duty to the Issuer under the federal securities laws and is, therefore, not required by federal law to act in the best interests of the Issuer without regard to its own financial or other interests. o The Issuer may choose to engage the services of a municipal advisor with a fiduciary obligation to represent the Issuer's interest in this transaction. o 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. o The underwriters will review the official statement for the Bonds in accordance with, and a part of, their respective responsibilities to investors under the federal securities laws, as applied to the facts and circumstances of this transaction.3 ' Revised Interpretive Notice Concerning the Application of MSRB Rule G-17 to Underwriters of Municipal Securities (effective Mar. 31, 2021). z When we refer to potential material conflicts throughout this letter, we refer to ones that are reasonably likely to mature into actual material conflicts during the course of the transaction, which is the standard required by MSRB Rule G-17. 3 Under federal securities law, an issuer of securities has the primary responsibility for disclosure to investors. The • Disclosures Concerning the Underwriters' Compensation: o The underwriters 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 underwriters 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. 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 the Issuer's own financial and/or municipal, legal, accounting, tax and other advisors, as applicable, to the extent you deem appropriate. Please note that nothing in this letter should be viewed as a commitment by the underwriters to purchase or sell all the Bonds and any such commitment will only exist upon the execution of any bond purchase agreement or similar agreement and then only in accordance with the terms and conditions thereof. You have been identified by the Issuer as a primary contact for the Issuer's receipt of these disclosures, and that you are not a party to any disclosed conflict of interest relating to the subject transaction. If our understanding is incorrect, please notify the undersigned immediately. We are required to seek your acknowledgement that you have received this letter. Accordingly, please send me an email to that effect, or sign and return the enclosed copy of this letter to me at the address set forth above. Otherwise, an email read receipt from you or automatic response confirming that our email was opened by you will serve as an acknowledgment that you received these disclosures. Depending on the structure of the transaction that the Issuer decides to pursue, or if additional actual or potential material conflicts are identified, we may be required to send you additional disclosures regarding the material financial characteristics and risks of such transaction and/or describing those conflicts. At that time, we also will seek your acknowledgement of receipt of any such additional disclosures, review of the official statement by the underwriters is solely for purposes of satisfying the underwriters' obligations under the federal securities laws and such review should not be construed by an issuer as a guarantee of the accuracy or completeness of the information in the official statement. Page 7 Appendix B — 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 are known to us and reasonably foreseeable at this time and that you should consider before deciding whether to issue Fixed Rate Bonds. If you have any questions or concerns about these disclosures, please make those questions or concerns known immediately to us. In addition, you should consult with your financial and/or municipal, legal, accounting, tax, and other advisors, as applicable, to the extent you deem appropriate. 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, whether for their benefit or as a conduit issuer for a nongovernmental entity. 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 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, 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. Revenue Bonds. "Revenue bonds" are debt securities that are payable only from a specific source or sources of revenues. Revenue bonds are not a pledge of your full faith and credit, and you are obligated to pay principal and interest on your revenue bonds only from the revenue source(s) specifically pledged to the bonds. Revenue bonds do not permit the bondholders to compel you to impose a tax levy for payment of debt service. Pledged revenues may be derived from operation of the financed project or system, grants or excise or other specified taxes. Generally, subject to state law or local charter requirements, you are not required to obtain voter approval prior to issuance of revenue bonds. If the specified source(s) of revenue become inadequate, a default in payment of principal or interest may occur. Various types of pledges of revenue may be used to secure interest and principal payments on revenue bonds. The nature of these pledges may differ widely based on state law, the type of issuer, the type of revenue stream and other factors. The description above regarding "Security" is only a 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 the following (generally, the obligor, rather than the issuer, will bear these risks for conduit revenue bonds): Issuer Default Risk. You may be in default if the funds pledged to secure your bonds are not enough 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, 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. If the bonds are revenue bonds, you may be required to take steps to increase the available revenues that are pledged as security for 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 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. For all 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, it may be necessary for you 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. Redemption Risk. Your ability to redeem the bonds prior to maturity may be limited, depending on the terms of any optional redemption provisions. If interest rates decline, you may be unable to take advantage of the lower interest rates to reduce debt service. Refinancino Risk. If your financing plan contemplates refinancing some or all 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. Reinvestment Risk. You may have proceeds from the issuance of the bonds available 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 several 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 tax-exempt bonds. A breach of your representations or your failure to comply with certain tax -related covenants may cause the interest on 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 tax-exempt 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.