HomeMy WebLinkAbout09554RESOLUTION NO. 955
A RESOLUTION APPROVING THE ENGAGEMENT OF GEORGE K. BAUM
& COMPANY, AND AUTHORIZING THAT FIRM TO WORK WITH JAMES
CAPITAL ADVISORS AND KUTAK ROCK LLP TO PREPARE A PLAN FOR
THE REDEMPTION OF THE CITY OF PUEBLO'S SINGLE FAMILY
MORTGAGE REVENUE BONDS, 1978 SERIES A, AND THE CITY'S
CAPITAL IMPROVEMENT RESIDUAL REVENUE BONDS, SERIES 1988;
APPROVING THE ENGAGEMENT LETTER WITH GEORGE K. BAUM &
COMPANY; AND DESCRIBING CERTAIN GOALS FOR THE PLAN.
WHEREAS, the City of Pueblo, in the County of Pueblo and State of Colorado (the
"City "), is a municipal corporation duly organized and existing as a home rule city pursuant to
Article XX of the Constitution of the State of Colorado (the "Constitution ") and the home rule
charter of the City (the "Charter "); and
WHEREAS, all legislative powers possessed by the City, conferred by Article XX of the
State Constitution, or contained in the Charter, as either has from time to time been amended, or
otherwise existing by operation of law, are vested in a board of councilmen, also known as the
city council (the "City Council "); and
WHEREAS, the City previously issued its Single Family Mortgage Revenue Bonds
(Midland Federal Savings and Loan Association, Pueblo, Colorado — Originator and Servicer),
1978 Series A, in the initial principal amount of $20,000,000, of which approximately
$3,390,000 remains outstanding (the "1978 Bonds "), and its Capital Improvement Residual
Revenue Bonds, Series 1988, in the initial principal amount of $279,639.15, which principal
amount has accumulated to approximately $940,000 (the "1988 Bonds "); and
WHEREAS, the investment banking firm of George K. Baum & Company ( "Baum ") has
presented a proposal to the City Council whereby Baum, working with James Capital Advisors,
the financial advisor for the City ( "James Capital "), Kutak Rock LLP, bond counsel for the City
( "Kutak "), and the City Attorney, would prepare a plan for the redemption of the 1978 Bonds,
which would result in the transfer of the remaining assets securing the 1978 Bonds to the trustee
for the 1988 Bonds, and the consequent sale of those assets, the redemption of the 1988 Bonds,
and the distribution of the net assets to the City (cumulatively, the "Plan"); and
WHEREAS, the City Council has previously recycled the volume cap available from the
payments on the 1978 Bonds through a program sponsored and administered by the Colorado
Housing and Finance Authority ( "CHFA "), in order to make available low interest mortgage
loans to residents of the City, and wishes similarly to recycle volume cap from the proposed
redemption of the 1978 Bonds under the Plan; and
WHEREAS, Baum has assured the City Council that such a recycling can be
accomplished as part of the Plan; and
WHEREAS, the City Council has considered the proposal and hereby determines that it
is in the best interests of the City and its residents to engage Baum to work with James Capital,
02- 112333.03
Kutak and the City Attorney, to prepare the Plan, which will then be presented to the City
Council for final approval; and
WHEREAS, the Plan shall include a form of sales agreement for the remaining mortgage
loans and possibly other agreements to effectuate the Plan (together, the "Agreements "); and
WHEREAS, the City Council presently intends to adopt the Plan and approve the
Agreements if the final results are similar to those currently anticipated and the Agreements are
satisfactory to the City Attorney and the City's bond counsel; and
WHEREAS, Baum has presented to the City Council at this meeting a form of
engagement agreement, dated March 25, 2002 (the "Engagement Agreement ");
BE IT RESOLVED BY THE CITY COUNCIL OF PUEBLO:
Section 1. Approval of Engagement Agreement. The Engagement Agreement, in
substantially the form presented to the City Council, is hereby authorized and approved, and the
President or Vice President of the City Council is hereby directed to execute and deliver the
Engagement Agreement in substantially the form approved, but with such changes therein as
shall be deemed necessary or desirable by the officer executing the same, after review by the
City Attorney, his execution to be conclusive evidence of such approval.
Section 2. Approval of Preparation of Plan. Baum is hereby authorized, pursuant to
the terms of the Engagement Agreement, to work with James Capital and Kutak, as well as other
professionals, including the City Attorney, to develop the details of the Plan, which shall include
provisions for recycling the volume cap available from the payment of the 1978 Bonds, which
Plan and the Agreements will then be presented to City Council for final approval and adoption.
Section 3. Other Action. The officers and agents of the City are hereby authorized and
directed to take all action necessary or appropriate to effectuate the provisions of this Resolution.
Section 4. Repeals. All resolutions, motions, orders, bylaws, rules or regulations, or
parts thereof, in conflict with this resolution are hereby repealed only to the extent of such
inconsistency.
Section 5. Severability. If any section, paragraph, clause or provision of this resolution
shall for any reason be held to be invalid or unenforceable, the invalidity or unenforceability of
such section, paragraph, clause or provision shall not affect any of the remaining parts or
provisions of this resolution.
Section 6. Effective Date. This resolution shall take effect immediately upon its
introduction and passage.
02- 112333.03 2
INTRODUCED this March 25, 2002.
By Patrick Avalos
Councilperson
APPROVED
By
President of the Council
ATTEST:
City k
02- 112333.03
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Background Paper for Proposed
RESOLUTION
AGENDA ITEM # vk I
DATE: MARCH 25, 2002
DEPARTMENT: FINANCE DEPARTMENT
ROBERT HAIN, ASST. CITY MGR. FOR FISCAL OPERATIONS
TITLE
A RESOLUTION APPROVING THE ENGAGEMENT OF GEORGE K. BAUM &
COMPANY, AND AUTHORIZING THAT FIRM TO WORK WITH JAMES CAPITAL
ADVISORS AND KUTAK ROCK LLP TO PREPARE A PLAN FOR THE REDEMPTION
OF THE CITY OF PUEBLO'S SINGLE FAMILY MORTGAGE REVENUE BONDS, 1978
SERIES A, AND THE CITY'S CAPITAL IMPROVEMENT RESIDUAL REVENUE
BONDS, SERIES 1988; APPROVING THE ENGAGEMENT LETTER WITH GEORGE
K. BAUM & COMPANY; AND DESCRIBING CERTAIN GOALS FOR THE PLAN.
ISSUE
Should City Council approve an agreement between George K. Baum & Company and
the City of Pueblo, a Municipal Corporation?
RECOMMENDATION
The Staff recommendation is, Approval of Resolution.
BACKGROUND
In 1978 the City issued Mortgage Revenue Bonds totaling $20,000,000. In 1988 the
City issued Residual Revenue Bonds, which allowed the City to cash out some of the
excess revenues accruing in the 1978 Bond. For this reason the two issues are linked
and need to be handled as one. The balance still due on these bonds is approximately
$3.4 million. George K. Baum is proposing to redeem both issues by selling off the
assets of the Bond Trust, and by utilizing reserve and residual revenues built up in the
Trust accounts. According to their preliminary research we are in a window of
opportunity to maximize the return to the City. This is due to market conditions and
expiration of prepayment penalties in the Bonds.
This agreement does not authorize George K. Baum and Company to make any
commitments on behalf of the City. It only authorizes them to pull together and prepare
a plan to accomplish the stated goals and present that plan to the Council for approval.
No fees will be payable if they cannot accomplish the stated goals.
FINANCIAL IMPACT
George K. Baum and Company proposes that the City will realize a cash payment after
payment of all fees. They estimate that this payment will exceed $400,000.
Additionally, They are assuring the City that as in the past recycled volume cap for the
approximate $3.4 million dollar balance of the outstanding bonds will be earmarked by
CHFA for use by the City. The difference being that because of the redemption, the
availability will be accelerated into the current year.
George K. Baum & Company
INVESTMENT BANKERS SINCE 1928
March 25, 2002
Mr. Robert Hain
Assistant City Manager for Fiscal Operations
City of Pueblo, Colorado
#1 City Hall Place, Box 1427
Pueblo, Colorado 81002
Dear Mr. Hain:
This engagement letter outlines the services to be performed by George K. Baum & Company for the City of Pueblo,
Colorado (the "City") related to its currently outstanding Series 1978A Single Family Mortgage Revenue Bonds and
1988 Capital Improvement Residual Revenue Bonds (collectively the "Bonds "). The steps necessary to complete our
engagement are detailed below.
Our engagement is being undertaken in an effort to maximize the residual payment to the City after full and final
payment of the Bonds. Specific tasks we will perform include due diligence and analysis of the mortgage loan portfolio,
selling of the mortgages and any other investments that are part of the Trust Estate, performing financial analysis
including "yield proof" runs and analysis of potential forgiveness issues, review of bond and mortgage documentation,
purchasing the required escrow securities (if any), and redeeming, on various dates, the remaining Bonds. Lastly, per
the request of the City, we will make certain that all borrowing capacity that remains in the 1978A program is recycled
through CHFA's current program. George K. Baum & Company will charge a fee of $75,000 for these services. Given
market conditions as of today, the City may expect in excess of $400,000 upon redemption of the Bonds.
All fees, costs and expenses of this transaction shall be paid out of the residual assets remaining after full and final
payment of the Bonds and neither, the City or George K. Baum & Company will have any personal obligation or
responsibility to pay any fees and expenses except out of such proceeds. In the event the transaction does not close for
any reason, then no amount will be due and payable to the City or George K. Baum & Company.
Please do not hesitate to call me at (303) 391 -5453 with any questions you may have. This agreement shall commence
with the date of approval by the City and shall extend for a period of one year. It is anticipated that this transaction will
take at least 60 days to complete.
Sincerely,
GEORGE K. BAUM & COMPANY
C 4,4'e If
C. Scott Riffle
First Vice President
Agreed to:
City of Pueblo, Colorado Date 3- 25-Zt0
Authorized Officer
cc: James Manire
E:\ Groups\PUBFIMLisa\RIFFLE\Pueblo 1978A & 1988 \pueblo engage letter.doc
717 Seventeenth Street Suite 2500 • Denver, Colorado 80202 -3354
Phone (303) 292 -1600