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HomeMy WebLinkAbout4 Underwriter Services Agenda Item # 4 Memorandum To: Board of Directors From: Mary Chapman, Administrative Services Manager Date: July 14, 2006 SUBJECT: Consideration of approving a Request for Proposals for underwriter services for the proposed 2006 Certificates of Participation Since the Board just authorized staff to proceed with the long term financing of the water system projects last night, we have just directed Sandra McDonald of McDonald partners to draft an RFP to seek proposals from underwriters. This is the first task on her list of tasks that was approved last night. We do not have a draft for this packet but will provide a copy to each of you as soon as we receive it. j __ _ _ _. .. .. .. . . ............ ........ ..... ........ .._._..... .. Agenda Item # 4 _ r Memorandum To: Board of Directors From: Mary Chapman, Administrative Services Manager Date: July 14, 2006 SUBJECT: Consideration of approving a Request for Proposals for underwriter services for the proposed 2006 Certificates of Participation Please find RFP attached. TRUCKEE DONNER PUBLIC UTILITY DISTRICT REQUEST FOR PROPOSALS UNDERWRITING SERVICES The Truckee Donner Public Utility District ("TDPUD" or "the District") anticipates issuing approximately $27 million of tax-exempt Certificates of Participation by late September, 2006. The COPs are expected to be secured solely by payments made from net revenues of TDPUD's water system. The District is accepting proposals from investment banking firms who are interested in serving as TDPUD's senior managing underwriter for the proposed transaction. The District The District was formed and operates under the State of California Public Utility District Act. The District provides electric and water service to portions of Nevada and Placer counties. TDPUD was established on August 9, 1927 and is comprised of approximately 44 square miles in eastern Nevada County and approximately 1.5 square miles in adjacent Placer County. The District is situated in the Sierra Nevada Mountains, 180 miles northeast of San Francisco, 32 miles west of Reno, Nevada and 12 miles north of Lake Tahoe. Truckee's close proximity to surrounding ski areas and Lake Tahoe resorts has made the area a growing center of tourism and vacation homes. The District derives its revenues primarily from electric and water system user charges and fees. With the exception of two Community Facilities Districts for which the District collects Mello Roos taxes, and a special assessment district,TDPUD does not levy any general taxes against real and personal property. The Water System The District serves approximately 12,000 water customers in the Truckee,Glenshire and Donner Lake areas. The District produces all of its water from 13 deep wells and distributes water through a system that currently includes 36 pump stations, 39 storage tanks and a piping network that includes more than 202 miles of transmission and distribution lines. The 2006 Project The District will use the proceeds of the Series 2006 COPS (i) to build new water transmission facilities, (ii) to repair and replace existing pipelines, (iii)to purchase pumping related equipment, (iv) to complete improvements in the Donner Lake portion of the service area, and (v) to reimburse the District for internal loans to the Water Enterprise that were used to finance a portion of the Donner Lake improvements. The cost of the project components are approximately: 24" Brockway Transmission Pipeline $4,000,000 Pipeline Replacement Projects 2006-2010 12,300.000 Generators and SCADA System 580,000 Donner Lake Completion& Internal Loan Take-out 1,479,272 Series 2006 Project Total $18,359,272 1996 COP Refunding&Outstanding Debt The District is also considering a refunding of some or all of the District's $8,465,000 of outstanding 1996 COPs. The 1996 COPS are the only outstanding COPS that are secured by net revenues of the Water Enterprise. The District has approximately$3,500,000 million outstanding under a loan provided by the State of California, Department of Water Resources pursuant to the Safe Drinking Water Bond Law of 1986 (the "DWR Loan"). The DWR loan is payable out of water system rates and charges and is considered to be on a parity lien with the 1996 COPS. The District has several capital lease transactions that are secured directly by the equipment or capital improvements financed. The District also has approximately $12,500,000 outstanding under a State of California Revolving Fund Loan (the "SRF" Loan). The SRF loan is secured solely by assessments on parcels in the Donner Lake Service area. Water Rates To prepare for the issuance of additional debt and to build unrestricted reserves, the District Board approved an increase in water rates of on July 13, 2006. The rate adjustments, which were imposed on all customers, represent a 6.0% increase effective on January 1, 2007 and a 6% increase effective on January 1,2008. In addition to the increase in general service rates,the District Board approved the imposition of a customer surcharge in the Donner Lake area of $6.65 per month. The surcharge is intended to offset the portion of the 2006 COP debt service that is related to the Donner Lake improvements. No additional rate increases are expected to be necessary to support the proposed transaction. 2006 Transaction It is contemplated that the District will issue fixed rate, certificates of participation as soon as the Certificates can be documented, rated and marketed. It is expected that the Certificates will be issued in a single series, however the amortization will match the useful life of the assets financed. Generally, the refunding component, if any, will be structured to produce level savings, the portion of the transaction used to construct system improvements will be structured to produce level debt service over thirty years, and the portion of the transaction used to finance equipment will be structured with level debt over five years. No derivative structures are currently being considered. A portion of the capital improvements are related to growth in the District's service area. In keeping with the District's policy that Facilities Fees paid by developers should pay for growth related projects, the District intends to use a portion of its Facilities Fees to pay debt service on the related portion of the COPS. The District has engaged McDonald Partners as financial advisor and Stradling Yoeca Carlson & Rauth as bond counsel for the proposed transaction. Additional information A copy of the District's Audit for the Fiscal Year ending December 31, 2005 is available on the District's website (www.tdpud.org). A copy of the Official Statement for the District's 1996 COP is available on the Muni Statements website (www.munistatements.com). Copies of the financial statements or the Official Statement may also be obtained by contacting the District's financial advisor. All questions related to the District, the proposed transaction or the form of the proposal should be directed to the District's Administrative Services Manager,Mary Chapman, at(530)582-3906 or the District's Financial Advisor, Sandra McDonald,at(925)743-8498. Proposal Content If your firm is interested in serving as the District's senior managing underwriter for the proposed transaction, please submit a response to the following questions: t) Please comment on whether you believe the District should pursue a refunding of the Series 1996 COPS. 2) Do you foresee any obstacles in the District's financing plan? Please comment on the use of multiple revenue streams to support the transaction and whether you believe bond insurance will be available and beneficial to the District. 3)Please describe your firm's experience in selling tax-exempt California revenue bonds. 4) Please provide a list of the individuals who will be assigned to work with the District. Describe the role of each individual and include the telephone and facsimile number of each member of the primary banking team. Include a brief resume of each individual's education, training and experience. 5) Please provide a fee quote that includes all components of the gross spread. Please indicate what portions of the quote may be considered fixed. Please assume that the Financial Advisor has developed a financial pro-forma and will take the lead in preparing the District's rating presentation. In estimating underwriter's counsel expenses, please note that Stadling Yocca will draft the preliminary and final official statements. Please indicate which firm you would consider using for underwriters' counsel. 6) Why should TDPUD select your firm to senior manage the proposed transaction? Please submit two copies of your proposal to: Ms. Mary Chapman Administration Services Manager Truckee Donner PUD 11570 Donner Pass Road Truckee,CA 96160 marychapman@tdpud.org Please submit one copy of your proposal to: Ms. Sandra McDonald Principal McDonald Partners 222 High Eagle Road Alamo,CA 94507 sandra@mcdonaldpartners.com. E-mail deliveries (PDF files) in lieu of hard copies are acceptable. All proposals must be received by the close of business on Monday,August 7. Selection Process The District currently plans to select a sole, senior manager. After the proposals are reviewed, TDPUD staff intends to make a recommendation to the District's Board of Directors at the Board's regular meeting on August 16, 2006.