presentation to : cml workshop financing public improvements january 30, 2009 top tips for issuing...
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Presentation to :
CML WorkshopFinancing Public ImprovementsJanuary 30, 2009
Top Tips for Issuing Municipal Bonds
Since 1895. Member SIPC and FINRA.
Jason SimmonsVice President
Investment Banker303.820.5873
Helen CreggerVice President
Investment Banker303.820.5856
Michael LundVice President
Investment Banker303.820.5872
Piper Jaffray & Co.Public Finance Services
1200 17th St., Suite 1250
Denver, CO 80202
2CML Workshop – Financing Public Improvements
January 30, 2009
1. DETERMINE THE END GOAL
• What is final project?• New Recreation Center• Water Treatment Facility• Detention Facility• Commercial or Residential Development
3CML Workshop – Financing Public Improvements
January 30, 2009
2. PLAN AHEAD
• Start early!• Many projects take a few years from initial
discussions to the bond issuance process.• Start laying the ground work for rate increases
for enterprise revenue bonds if necessary.• May need to work in election for voter
authorized projects.• Coordinate bond issuance with start of
construction.
4CML Workshop – Financing Public Improvements
January 30, 2009
3. FAMILIARIZE YOURSELF WITH PROCESS
• Gain an understanding of the bond issuance process by utilizing available resources• CML Workshops and Publications• GFOA Workshops and Recommended
Practices• Other Municipalities• Bond Community
5CML Workshop – Financing Public Improvements
January 30, 2009
4. ASSEMBLE YOUR TEAM EARLY
• Get the professionals on board early to help in the decision process
• Determine composition of the team• Do you want do use a Financial Advisor?• Do you envision a competitive or negotiated
sale?• Will you have a Senior Managing Underwriter
and Co-Managers?• Will you use the same firm as both Bond
Counsel and Disclosure Counsel?
6CML Workshop – Financing Public Improvements
January 30, 2009
5. EVALUATE FINANCING OPTIONS
Credit QualityMarket
ConsiderationsOther
Considerations
General Obligation Bonds
Highest Widest market acceptance
Requires vote
Sales Tax Revenue Bonds
Same as or one notch lower than GO rating
Widely accepted but spreads can fluctuate based on coverage
General pledge of all revenues vs. dedicated revenues, requires vote
Certificates of Participation
One or two notches below GO Rating
Market does not like Annual Appropriation Risk, essentiality key
Does not require a vote but no dedicated revenue stream
Enterprise Revenue Bonds
Dependent on essentiality of revenue stream and coverage levels
Essential revenue such as water and sewer are more widely accepted
Need to form enterprise under TABOR and monitor revenues
7CML Workshop – Financing Public Improvements
January 30, 2009
6. DEVELOP A FINANCING PLAN
• Create a financial model and timetable that works for you
• Go to market when you need the moneyPrepare Legal Documents
Obtain Ratings and/or Insurance
Prepare to Market Bonds
Bond Pricing
Bond Closing with Funds Available
4 to 6 weeks
2 to 3 weeks
1 to 2 weeks
1 to 2 days
1 week to1 month from pricing
8CML Workshop – Financing Public Improvements
January 30, 2009
7. BE AWARE OF MARKET CONDITIONS
• Do not want to be surprised at the outcome• Ask you underwriter or financial advisor to give
you frequent market updates.• What is the overall level of interest rates?• What other issues are have been completed
recently or are on the calendar?• What are investors thoughts about insurance?• How will investors view your security and
ratings?
9CML Workshop – Financing Public Improvements
January 30, 2009
8. UNDERSTAND OBLIGATIONS
• Spend down requirements of bond proceeds• Continuing Disclosure 15 c-2-12
A study released in 2008* found that more than half of the municipal bonds sold between 1996-2005 have been delinquent in filing financial disclosures.
• Bond covenantsRate maintenanceAdditional bonds tests
• Ratings require some monitoring
* Source: Bond Buyer Wednesday, September 3, 2008
10CML Workshop – Financing Public Improvements
January 30, 2009
9. EVALUATE PROCESS
• It is difficult to evaluate the process based on final borrowing costs.• Did you work well with the financing team
and did they work well together?• Did you feel your story was accurately
reflected in the rating process?• What would you change next time?
11CML Workshop – Financing Public Improvements
January 30, 2009
10. ENJOY A JOB WELL DONE
The bond issuance process is a time consuming task that is accomplished in addition to all of your other day to day duties so take time to celebrate upon a successful closing.
12CML Workshop – Financing Public Improvements
January 30, 2009
TOP TEN TIPS
1. Determine the End Goal2. Plan Ahead3. Familiarize Yourself with the Process4. Assemble Your Team Early5. Evaluate Financing Options6. Develop a Financing Plan7. Be Aware of Market Conditions8. Understand Obligations9. Evaluate the Process10.Enjoy a Job Well Done