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Home My WebLink AboutRESPONSE - RFP - P936 FINANCIAL ADVISORY INVESTMENT BANKING SERVICEMay 27, 2004 PRESENTATION TO George K. Baum & Company Int esttlient Bankers Since 1928 717 Seventeenth Street, Suite 2500 Denver, Colorado 80202 800.722.1670 1 303.292.1600 Conclusion George K. Baum & Company is uniquely positioned to successfully complete the City's COP program. Our advantages include: • Experience on point • Knowledge • Resources to get the job done • Strength in pricing and marketing COPS • Liquidity in secondary market = investor confidence • We can complete the financing with great speed Presentation to City of Fort Collins Key Facts Baum has served as underwriter on more than 1,340 tax-exempt revenue bond issues, and 130 certificate of participation (COP) issues since 1995, together totaling more than $51.8 billion. George K. Baum & Company is also active in the secondary market, trading approximately $400 million of housing bond annually. Since 1994, our firm has traded $7.1 billion of Colorado bonds. Page 8 George K Baum & Company Investment BankLm Since 1928 Commitment to the State of Colorado George K. Baum & Company has 84 Colorado -based employees. The firm and its employees are active and committed members of the Colorado business and civic community. The firm and its employees continue to support the arts, charitable and business organizations, and civic and social causes via financial and personal contributions (money and time). A partial list of the groups we have supported in recent years include: Denver Metro Chamber of Commerce Colorado Association of School Boards Colorado Education Network Downtown Denver Partnership Leadership Denver Denver Regional Council of Governments Colorado Counties Inc. Colorado Municipal League Colorado Government Finance Officers Association Leadership Denver Urban Peak Denver Community Leadership Forum Colorado Symphony Colorado Community Revitalization Association Colorado Association of School Executives Season for Non -Violence Kids Voting Denver Habitat for Humanity American Cancer Society United Way Smart Government, Inc. Theodora House Samaritan House MLK Business Social Responsibility Luncheon Anti -Defamation League Presentation to City of Fort Collins George K. Baum & Company Investment Bankers Since 1928 Presentation to City of Fort Collins Presented by 0George K. Baum &Company Investment Bankers Since 1928 May 27, 2004 Recognized Leader in Serving Colorado Issuers George K. Baum & Company is a recognized leader in Colorado among underwriters and financial advisors to municipalities. Our experience is unmatched by the other proposing firms. Colorado Underwriter Ranking By Number of Issues,1998 to Present George L Baum & Company _ Newman & Associates ■ AG Edwards & Sons Inc. Lehman Brothers Wells Fargo Bank UBS Financial Services Inc. 0 50 100 150 200 250 300 Number of Issues Underwritten Colorado Financial Advisor Rankings By Par Amount, 1998 to Present $0 $.5 $1.0 $1.5 $2.0 $2.5 $3.0 $3.5 Total Amount in Billions Presentation to City of Fort Collins George K. Baum & Company Im esunenr Bankers Since 1928 Commitment to Colorado Issuers Colorado Presence • George K. Baum & Company has maintained its municipal finance headquarters in Denver since 1990. • The firm has the largest and most active public finance, municipal bond sales and trading, and municipal research operations in Colorado, with more than 80 employees located in Denver. • Our Colorado clients have tremendous access to the professionals assigned to their engagement(s), in addition to our large support staff. • Our firm has traded more than $57 billion of municipal securities in the secondary market since 1994, including more than $7 billion of Colorado municipal securities. We are a major market maker in Colorado municipal bonds in the secondary market. Investors' knowledge of our willingness to provide secondary market liquidity significantly enhances our ability to generate demand for the new Colorado issues we underwrite, which ultimately results in stronger pricing. Presentation to City of Fort Collins George K. Baum & Company Investment Bank-ts Since 1928 Experience Financial Advisory & Underwriting Experience • Since 1995, George K. Baum & Company has served as financial advisor on 476 issues with a total par value of approximately $6.7 billion. • We have also provided many of the same services that a financial advisor provides in connection with the more than 1,800 negotiated issues we have senior managed during this same time period. • Additionally, Baum has served as underwriter on more than 1,340 tax- exempt revenue bond issues, and 130 certificate of participation (COP) issues since 1995, together totaling more than $51.8 billion. • Our hands-on experience in structuring, underwriting and marketing municipal bond issues —coupled with our extensive advisory experience — has proven extremely valuable to our financial advisory clients. Presentation to City of Fort Collins George K. Baum & Company Investment Bankers Since 1928 Our Team Douglas Houston, SVP......................................................... Lead Banker Troy Bernberg, AVP..........................Transaction Management Assistance James Cleveland, SVP............................................. Quantitative Analysis Mary Katherine Sells, FVP................................ Research/Credit Analyses Bob Lombardi, EVP.......................................... Underwriting/Syndication Douglas Houston Team Leader • More than 30 years of municipal and governmental finance experience qI • Specialist in financial advisory services, certificates of participation/lease revenue financings, municipal utilities, airports, redevelopment, mass transit projects, credit evaluations, refundings and derivative and swap advisory services • Worked on Fort Collins financings since 1987 Troy Bernberg Transaction Management Assistance • Performs quantitative analysis including structuring of amortization schedules, cash flow analyses, financial assessments, and other transaction functions • Works on new issue and refunding transactions encompassing many types of taxable and tax-exempt municipal securities James Cleveland Manager, Quantitative Finance Group • More than 28 years of quantitative finance experience • Specializes in refunding bond issues, structured financings, and oth technically -driven bond issues • Performed quantitative analysis for more than $12 billion of tax-exE taxable financings involving more than 400 issuers during his caree • Worked on Fort Collins financings since 1987 Mary -Katherine Sells Research/Credit Analyses • Develops credit analyses for governmental and higher education iss credit rating and enhancement presentations • Considered an expert in evaluating COP credits • Developed key ratings presentations for Fort Collins in 1998 which rating upgrades Robert Lombardi Sales, Trading & Underwriting/Syndication • 30 years underwriting and trading experience • Priced over $15 billion in tax-exempt and taxable bonds • Priced nearly all Colorado financings underwritten by our firm durir last 20 years, including all COP and Fort Collins financings Our Team Approach The professionals serving the City of Fort Collins on a day-to-day basis a in Denver, providing local access to technical resources. We have a ve interest in our home state and local Colorado communities. Presentation to City of Fort Collins George K. Baum & Company Investnim Bankers Since 1928 Key Considerations for COP Financing COP Financings in General • COPS remain one of the most complex and often controversial financing methods. • Projects perceived as highly essential will be well received by rating agencies, insurers and investors. • COPS are regarded as a state -by -state specialty product. Investors look to in -state firms for confidence to invest in a COP issue. • Community and political support is essential to COP projects. • Projects perceived by outsiders as somewhat less essential, may encounter rating and insurance difficulties, and could meet investor resistance. • Redemption provisions are an overlooked key for investors. • Disclosure regarding litigation and risk factors must be carefully considered. • CON are often more successfully marketed via negotiated sale rather than through a competitive bid process. • Pricing a COP issue effectively requires experience, muscle and timing. Presentation to City of Fort Collins Key Questions • Should a "Master Lease" structure be used that incorporates all facilities financed under the same lease as the parking garage and city office building were? • Does the City have clear title to the improvements to be financed? Do some of the sites need to be purchased with COP funds? • Are there any title complications which may create difficulties in establishing collateral for the COPs? • For those sites already owned by the City, what is the best mechanism for incorporating the land into the project lease, e.g., sale to the leasing entity, ground lease tied to the length of the financing? Page 5 George K. Baum & Company Inwstrmnc Bankcn Since 1928 COPs for Open Space Acquisition Special Considerations for Open Space COPS • Utilizing COPs to acquire open space is the most specialized type of COP financing. • There is often widespread misunderstanding of "essentiality" of an open space project. • Strong credit features are often discounted. • Environmental issues often need to be addressed and finessed. • The real estate deal often must be closed quickly to capitalize on a special opportunity. Presentation to City of Fort Collins Case Study In 2003, George K. Baum & Company publicly sold more than $15 million Open Space Acquisition COPs for the City of Colorado Springs. A number of difficulties typical to open space financing were encountered and overcome: • The COP financing, which involved a complex acquisition of open space, was executed in a short amount of time. • A 50-acre portion of the 732-acre project had been used as landfill, and a plan was developed for the City to purchase the 50-acre site separately with open space cash. This eliminated environmental risk from the project —a very important concern for the rating agencies and investors. • A city council composed of a majority of new members had never been through the COP process and were receiving negative input from the anti -tax community. Because of this negative input, some members did not want to use COPS for open space. Through meetings and education, a strong majority of council members voted to support the financing. • An extensive credit presentation was created by George K. Baum & Company and in person presentations and conference calls were held with Moody's and several bond insurers. Despite strong support from analysts, rating and insurance committees discounted the essentiality of the City's open space program and rated the COPS two notches below the GOs. Insurers declined coverage. • George K. Baum & Company worked with bond counsel to make sure the disclosure was made as "litigation" and not as a "risk factor" as had recently been done for other COP issues. • The above controversies, all beyond the control of the City, resulted in only two narrowly separated bids received, one of which was from George K. Baum & Company acting by itself. The winning bid was submitted by a syndicate of over ten firms. Good interest rates were received due to the strength of the overall bond market in 2003 and the issue closed in a timely manner, meeting the needs of the City and the Trust for Public Lands. Page 6 George K Baum & Company Im estmcnt Bankcn Sine 1928 Strategies for Fort Collins Based on direct and recent experience with open space and facility COPS in Colorado, George K. Baum & Company suggests the following strategies for utilizing COPS to acquire open space and the Police Services Building for the City of Fort Collins: • Retain George K. Baum & Company as Investment Banker. Our financing professionals have extensive experience structuring COP financings for facilities and open space acquisition in Colorado. Open space COPS have become product unique to Colorado, and require a concentrated effort by a proven Colorado underwriter to tell the "story" to investors through an extensive pre -sale marketing campaign. • Negotiated Sale. Structuring the COPS through a negotiated sale will provide the City with the most dependable access to the market, and greater flexibility in structuring to create greater demand from investors. • Market the COPS Quickly. The earlier the City completes the financing process, the less propaganda will come into play from Douglas Bruce and anti -tax activists as the November election approaches. • Include Open Space in Master Lease. Every effort should be made to include open space in a master lease with the Police Services Building. • Extensive Credit Presentations. Thorough credit presentations should be developed for in -person meetings with Moody's, S&P and bond insurers in New York. These presentations should include a description of all open space programs in Colorado to demonstrate success, importance and support for these programs in our state. • Involve Multiple Members of Credit Committees. Credit presentations must involve multiple members of each entity's credit committee and will be held in the offices of each firm. It is not enough to convince individual analysts of the viability of Colorado's open space programs —rating agencies and insurance companies must be convinced to change firm -wide policies. • Go for "One Notch". Moody's rates open space COPS two rather than one notch below general obligation bonds. • Develop Convincing Argument. The argument that open space appreciates in value and essentiality should be developed. Rating agencies and insurers must be convinced that open space appreciates in value. • Bond Insurance. The City should aggressively seek bond insurance. • Capitalize on the City's Key Advantage. Fort Collins has both city and county taxes that are voter approved and earmarked, an advantage over other open space acquisition financing programs. Credit entities must be helped to appreciate the significance of this in a tax -resistant state like Colorado. • Prepare "Salient Features" Marketing Memorandum and Distribute Widely to Educate Investors. Presentation to City of Fort Collins George K Baum & Company Investment Bankers Since 1928