City of Sacramento
City Council Report
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Sacramento, CA 95814
www.cityofsacramento.org
File ID: 2022-01559 9/20/2022 Consent Item 09.
Establishment of City’s Pool of Bond Underwriters
File ID: 2022-01559
Location: Citywide
Recommendation: Adopt a Resolution: 1) approving a pool of firms qualified to provide bond underwriting services to the City for fiscal year (FY) 2022/23 through FY2026/27; and 2) authorizing the City Treasurer to select firms from the pool as needed to participate on City financing projects.
Contact: Claudia Lara, Debt Analyst, (916) 808-2267, [email protected]; Brian Wong, Debt Manager, (916) 808-5811, [email protected], Office of the City Treasurer Presenter: None.
Attachments:
1-Description/Analysis
2-Resolution
Description/Analysis
Issue Detail: On several occasions in the past, the City Council has authorized the City Treasurer to establish a “pool” to provide bond underwriting services to the City during a five-year period, and the City Treasurer, at their discretion, has selected firms from the pool to underwrite the City’s bond financings.
The current pool was established in July 2017 and expired on June 30, 2022, after being extended.
During the timeframe the pool was in effect, the City completed the issuance of several long-term bond financings. Over the next five years, the City anticipates issuing various types of debt in which underwriting services will be required.
Policy Considerations: Establishing a pool for bond underwriters to provide services during a specified period is a typical practice of cities and other local governmental agencies that issue debt in the municipal bond market, and the State of California also has a large pool of firms that provide bond underwriting services. Additionally, it is a best practice of the Government Finance Officers City of Sacramento Page 1 of 3
File ID: 2022-01559 9/20/2022 Consent Item 09.
Association to select bond underwriters for negotiated debt financings via a request for proposals or request for qualifications process. The practice provides staff with immediate access to specialized expertise, maintains continuity for City projects, and ensures competitive exposure and access to the financial markets (bond financing market and investors).
Economic Impacts: None.
Environmental Considerations:
California Environmental Quality Act (CEQA): Not applicable, the recommendation does not constitute a “project” and is therefore exempt from the California Environmental Quality Act (CEQA).
Sustainability: Not applicable.
Commission/Committee Action: None.
Rationale for Recommendation: During the five-year term of the proposed pool, the City anticipates issuing multiple series of land-secured bonds (Mello-Roos community facilities districts). Establishing the pool of bond underwriting firms allows the City to take advantage of the firms’ combined financing expertise, marketing and distribution strengths, and financial strength. Underwriters that are currently engaged in financing projects will continue to provide underwriting services to the City on those projects.
Financial Considerations: There are no budget implications associated with the recommendation.
Compensation for underwriters is negotiated at the time of each financing and is contingent upon the sale of bonds.
Local Business Enterprise (LBE): Not applicable.
Background: On several occasions in the past, Council has authorized the City Treasurer to establish a pool of bond underwriters eligible to provide financial expertise and services to the City for its debt-financing needs. The current pool was established in July 2017 and expired on June 30, 2022, after being extended. On April 15, 2022, the Office of the City Treasurer distributed a Request for Qualifications (RFQ) to firms capable of providing bond underwriting services to the City. In response to the RFQ, 15 firms submitted statements of qualifications (SOQ) to the City. After a careful review of the SOQs by the Office of the City Treasurer’s staff with the objective of establishing a pool of bond underwriters with a variety of experience needed to meet the City’s needs and the specific goal of including firms with the backgrounds and capacities required in certain critical areas that will be important to the City in next five years, the Office of the City Treasurer recommends that the pool consist of the following seven firms:
City of Sacramento Page 2 of 3
File ID: 2022-01559 9/20/2022 Consent Item 09.
- BofA Securities, Inc.
- Goldman Sachs & Co. LLC
- Morgan Stanley & Co. LLC
- Piper Sandler & Co.
- Raymond James & Associates, Inc.
- Siebert Williams Shank & Co., LLC
- Stifel, Nicolaus & Company, Inc.
The City Treasurer will select firms from the pool on an as-needed basis to perform underwriting services. A firm’s inclusion in the pool does not guarantee that it will be selected to serve on a financing. Establishing a pool of firms eligible to provide underwriting or investment-banking services during a three-year period meets several objectives of the City:
- It enables the City to periodically evaluate and identify its financing needs and determine which firms can best meet these needs.
- It allows the City to evaluate changes in the industry and the capabilities of firms to adapt to these changes.
- It sizes the pool relative to the anticipated volume and type of debt to be used over the five-year term; although firms are included in the pool their participation in any financing is not guaranteed.
- It provides incentives and continuity on long-term complex projects. - It provides expertise in certain credit types that the City may not be as familiar with issuing.
City of Sacramento Page 3 of 3
RESOLUTION NO. 2022-XXXX
Adopted by the Sacramento City Council
September 20, 2022
ESTABLISHING THE CITY’S POOL OF BOND UNDERWRITERS FOR
FISCAL YEARS 2022/23 THROUGH 2026/27
BACKGROUND
A. On several occasions in the past, the City Council has authorized the City Treasurer to establish a pool of bond underwriters to provide underwriting services to the City for its debt- financing needs. The current pool was established in July 2017, and expired on June 30, 2022, after being extended.
B. The City Treasurer desires to establish a new pool to provide underwriting services for the City’s debt-financing needs for fiscal year 2022/23 through fiscal year 2026/27. With such a pool in place, the City Treasurer will be better able to access specialized expertise, maintain continuity with complex projects, and ensure that at a competitive cost of borrowing is available for City projects.
C. On April 15, 2022, the City Treasurer distributed a Request for Qualifications (RFQ) to firms capable of providing bond underwriting services to the City.
D. In response to the RFQ, 15 firms submitted statements of qualifications (SOQ) to the City. After a review of the SOQs by staff of the City Treasurer’s Office, the City Treasurer recommended that the pool covering the period of fiscal year 2022/23 through fiscal year 2026/27 consist of the following seven firms: BofA Securities, Inc., Goldman Sachs & Co. LLC, Morgan Stanley & Co. LLC, Piper Sandler & Co., Raymond James & Associates, Inc., Siebert Williams Shank & Co., LLC, and Stifel, Nicolaus & Company, Inc.
BASED ON THE FACTS SET FORTH IN THE BACKGROUND, THE CITY COUNCIL RESOLVES AS FOLLOWS:
Section 1. The City Treasurer’s recommendation to establish a pool of underwriters and investment bankers eligible to provide the City with underwriting services for fiscal year 2022/23 through fiscal year 2026/27 is hereby approved, with the pool consisting of the following seven firms: BofA Securities, Inc., Goldman Sachs & Co. LLC, Morgan Stanley & Co. LLC, Piper Sandler & Co., Raymond James & Associates, Inc., Siebert Williams Shank & Co., LLC, and Stifel, Nicolaus & Company, Inc.
Section 2. For each new financing or refinancing project that may commence between fiscal year 2022/23 through fiscal year 2026/27, the City Treasurer is authorized, at the Treasurer’s discretion and in the
Treasurer’s judgment, to select from the pool the bond underwriting firm or firms to provide bond underwriting services for that project.