HomeMy WebLinkAboutAUTHORIZE RAYMOND JAMES ASSOCIATES TO CONDUCT UNDERWRITING SERVICES FOR THE REYNOLDS STREET DEPOT PROJECT ON A NON-BINDING BASIS WITH THE OPTION TO TERMINATE SUCH SERVICES AT ANY TIME RAYMOND JAMES®
September 13,2017
Augusta, Georgia
535 Telfair Street
Augusta,Georgia 30901
Re: Letter of Intent for Underwriting Services—Depot Projects
The Honorable Hardie Davis,Jr., Mayor:
In order for Raymond James&Associates, Inc. ("RJA")to give you advice regarding one or more related
transactions, and to document our compliance with an exception to the Municipal Advisor Rule,we ask
that you agree,and acknowledge by signing below,to the following:
Augusta, Georgia (the "City") is aware of the "Municipal Advisor Rule" of the Securities and Exchange
Commission (effective July 1, 2014) and the underwriter exception from the definition of "municipal
advisor" for a firm serving as an underwriter for one or more series of bonds or other municipal
securities.
The Authority wishes to engage RJA as the underwriter/placement agent for bonds to be issued for the
Depot Project, (collectively, the "Bonds") that the City currently anticipates issuing. As an
underwriter/placement agent, RJA may provide advice to the City on the structure, timing, terms, and
other similar matters concerning the Bonds.
It is the City's present intention that RJA will underwrite the Bonds, subject to satisfaction of applicable
procurement laws, formal approval by the City, finalizing the structure of the Bonds, and the execution
of a mutually agreed upon Bond Purchase Agreement. While the City presently engages RJA as the
underwriter for the Bonds, this engagement letter is preliminary and nonbinding, and may be
terminated at any time by either the City or RJA without liability or obligation on the part of either party.
Furthermore,this engagement letter does not restrict the City from entering into the proposed Bonds or
any other municipal securities transaction with any other underwriters or selecting an underwriting
syndicate that does not include RJA.This letter serves as acknowledgement of the attached G-17 letter.
Sincerely yours,
Acknowledged and Agreed to by:
Raymond James&Associates,Inc. Augusta,Georgia
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By: By: 1-74.4"Al-41:
J.Owens, Hon. Hardie Davis,Jr,
Senior Vice Presidentf Mayor
Attachment: G-17 Disclosure Letter
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Two Buckhead Plaza,Suite 702 I/ 3050 Peachtree Road,N.W. // Atlanta,GA 30305/I T 404.240.6840 I/ www.raymondjames.com
Raymond James If Associates,Inc.,member Now York Stock ExctanpdSIPC
RAYMOND JAMFS®
September 13,2017
Augusta, Georgia
535 Telfair Street
Augusta,Georgia 30901
Attn: Honorable Hardie Davis,Jr., Mayor
Re: Disclosures by Underwriter
Pursuant to MSRB Rule G-17
Depot Project Bonds
Honorable Hardie Davis,Jr., Mayor:
We are writing to provide you, as Mayor of Augusta, Georgia (the "Issuer"), and an official of the Issuer
with the authority to bind the Issuer by contract,with certain disclosures relating to the captioned bond.
issue(the "Bonds"),as required by Municipal Securities Rulemaking Board (MSRB) Rule G-17 as set forth
in MSRB Notice 2012-25(May 7,2012)1.
The Issuer has engaged Raymond James & Associates, Inc. ("RJA"), to serve as an underwriter, and not
as a financial advisor or municipal advisor, in connection with the issuance of the Bonds.
As part of our services as underwriter, RJA may provide advice concerning the structure, timing, terms,
and other similar matters concerning the issuance of the Bonds.
I. Disclosures Concerning the Underwriter's Role:
(i) MSRB Rule G-17 requires an underwriter to deal fairly at all times with both municipal issuers and
investors.
(ii)The primary role of the underwriter is to purchase the Bonds with a view to distribution in an arm's-
length commercial transaction with the Issuer. The underwriter has financial and other interests that
differ from those of the Issuer.
(iii) Unlike a municipal advisor, the underwriter does not have a fiduciary duty to the Issuer under the
federal securities laws and are, therefore, not required by federal law to act in the best interests of the
Issuer without regard to their own financial or other interests.
(iv)The underwriter has a duty to purchase the Bonds from the Issuer at a fair and reasonable price, but
must balance that duty with their duty to sell the Bonds to investors at prices that are fair and
reasonable.
Interpretive Notice Concerning the Application of MSRB Rule G-17 to Underwriters of Municipal Securities
(effective August 2,2012).
Two Buckhead Plaza,Suite 702 11 3050 Peachtree Road,N.W. I/ Atlanta,GA 303051/ T 404.240.6840/I www.raymondjames.com
Raymond James t Associates,Inc.,member New York Stock Excharpe/SIPC
RAYMOND JAMES®
(v)The underwriter will review the official statement for the Bonds in accordance with, and as part of,
their respective responsibilities to investors under the federal securities laws,as applied to the facts and
circumstances of this transaction2.
II. Disclosures Concerning the Underwriter's Compensation:
The underwriter will be compensated by a fee and/or an underwriting discount that will be set forth in
the bond purchase agreement to be negotiated and entered into in connection with the issuance of the
Bonds. Payment or receipt of the underwriting fee or discount will be contingent on the closing of the
transaction and the amount of the fee or discount may be based, in whole or in part,on a percentage of
the principal amount of the Bonds. While this form of compensation is customary in the municipal
securities market, it presents a conflict of interest since the underwriters may have an incentive to
recommend to the Issuer a transaction that is unnecessary or to recommend that the size of the
transaction be larger than is necessary.
III.Additional Conflicts and Business Relationships Disclosures:
RJA has identified the following additional potential or actual material conflicts or business relationships
we wish to call to your attention:
In the ordinary course of its various business activities, RJA and its affiliates, officers, directors, and
employees may purchase, sell or hold a broad array of investments and may actively trade securities,
derivatives, loans, commodities, currencies, credit default swaps, and other financial instruments for
their own account and for the accounts of customers. Such investment and trading activities may
involve or relate to assets, securities and/or instruments of the Issuer (whether directly, as collateral
securing other obligations or otherwise)and/or persons and entities with relationships with the Issuer.
RJA and its affiliates also may communicate independent investment recommendations, market advice
or trading ideas and/or publish or express independent research views in respect of such assets,
securities or instruments and at any time may hold, or recommend to clients that they should acquire,
long and/or short positions in such assets,securities and instruments.
• Conflicts of Interest/Payments to or from Third Parties
o In the ordinary course of its business, RJA and its affiliates have engaged,and may in the
future engage, in transactions with, and perform services for, the Issuer and its affiliates
for which they received or will receive customary fees and expenses.
IV. Disclosures Concerning Structure of Municipal Securities Financing:
Since RJA has recommended to the Issuer a financing structure that may be considered a "complex
municipal securities financing"for purposes of MSRB Rule G-17,attached is a description of the material
financial characteristics of that financing structure as well as the material financial risks of the financing
that are known to the underwriter and reasonably foreseeable at this time.
2 Under federal securities law, an issuer of securities has the primary responsibility for disclosure to investors.
The review of the official statement by the underwriter is solely for purposes of satisfying the underwriters'
obligations under the federal securities laws and such review should not be construed by an issuer as a
guarantee of the accuracy or completeness of the information in the official statement.
Two Buckhead Plaza,Suite 702 I! 3050 Peachtree Road,N.W. II Atlanta,GA 30305/I T 404.240.68401/ www.raymondjames.com
Raymond Janes&Associates,Inc„member New York Stock Exchange/SIPC
RAYMOND JAMES®
In accordance with the requirements of MSRB Rule G-17, if RJA recommends a "complex municipal
securities financing" to the Issuer that is not otherwise described herein, this letter will be
supplemented to provide disclosure of the material financial characteristics of that financing structure
as well as the material financial risks of the financing that are known to the underwriter and reasonably
foreseeable at that time.
If you or any other Issuer official has any questions or concerns about these disclosures, then please
make those questions or concerns known immediately to the undersigned. In addition,the Issuer should
consult with its own financial and/or municipal, legal, accounting, tax and other advisors, as applicable,
to the extent it deems appropriate.
It is our understanding that you have the authority to bind the Issuer by contract with us, and that you
are not a party to any conflict of interest relating to the subject transaction. If our understanding is
incorrect,please notify the undersigned immediately.
Under MSRB Rules,we are required to seek your acknowledgement that you have received this letter.
Accordingly, please send me an email to that effect. Depending on the structure of the transaction that
the Issuer decides to pursue,or if additional potential or actual material conflicts are identified,we may
be required to send you additional disclosures regarding the material financial characteristics and risks
of such transaction and/or describing those conflicts.At that time,we also will seek your
acknowledgement of receipt of any such additional disclosures.
We look forward to working with you and the Issuer in connection with the issuance of the Bonds. We
appreciate your business.
Sincerely,
RAYMOND JAMES&ASSOCIATES, INC.
By:
CC: Kirby Glaze,Project Consultant
Two Buckhead Plaza,Suite 702 // 3050 Peachtree Road,N.W. /I Atlanta,GA 30305/I T 404 240 6840 II www.raymondjames.com
Raymond Jamas&Associates,Inc.,member New York Stock ExmangeFSIPC
Fixed Rate Structure Disclosure
The following is a general description of the financial characteristics and security structures of
fixed rate municipal bonds ("Fixed Rate Bonds"), as well as a general description of certain
financial risks that you should consider before deciding whether to issue Fixed Rate Bonds. If
you decide that you would like to pursue this financing alternative, we may provide you with
additional information more specific to your particular issue.
Financial Characteristics
Maturity and Interest. Fixed Rate Bonds are interest-bearing debt securities issued by state and
local governments, political subdivisions and agencies and authorities. Maturity dates for Fixed
Rate Bonds are fixed at the time of issuance and may include serial maturities (specified
principal amounts are payable on the same date in each year until final maturity) or one or more
term maturities (specified principal amounts are payable on each term maturity date) or a
combination of serial and term maturities. The final maturity date typically will range between 10
and 30 years from the date of issuance. Interest on the Fixed Rate Bonds typically is paid
semiannually at a stated fixed rate or rates for each maturity date.
Redemption. Fixed Rate Bonds may be subject to optional redemption, which allows you, at
your option, to redeem some or all of the bonds on a date prior to scheduled maturity, such as in
connection with the issuance of refunding bonds to take advantage of lower interest rates.
Fixed Rate Bonds will be subject to optional redemption only after the passage of a specified
period of time, often approximately ten years from the date of issuance, and upon payment of
the redemption price set forth in the bonds, which may include a redemption premium. You will
be required to send out a notice of optional redemption to the holders of the bonds, usually not
less than 30 days prior to the redemption date. Fixed Rate Bonds with term maturity dates also
may be subject to mandatory sinking fund redemption, which requires you to redeem specified
principal amounts of the bonds annually in advance of the term maturity date. The mandatory
sinking fund redemption price is 100% of the principal amount of the bonds to be redeemed.
Security
Payment of principal of and interest on a municipal security, including Fixed Rate Bonds, may
be backed by various types of pledges and forms of security, some of which are described
below.
General Obligation Bonds
"General obligation bonds" are debt securities to which your full faith and credit is pledged to
pay principal and interest. If you have taxing power, generally you will pledge to use your ad
valorem (property) taxing power to pay principal and interest. Ad valorem taxes necessary to
pay debt service on general obligation bonds may not be subject to state constitutional property
tax millage limits (an unlimited tax general obligation bond). The term "limited" tax is used when
such limits exist.
General obligation bonds constitute a debt and, depending on applicable state law, may require
that you obtain approval by voters prior to issuance. In the event of default in required
payments of interest or principal, the holders of general obligation bonds have certain rights
under state law to compel you to impose a tax levy.
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Revenue Bonds
"Revenue bonds" are debt securities that are payable only from a specific source or sources of
revenues. Revenue bonds are not a pledge of your full faith and credit and you are obligated to
pay principal and interest on your revenue bonds only from the revenue source(s) specifically
pledged to the bonds. Revenue bonds do not permit the bondholders to compel you to impose
a tax levy for payment of debt service. Pledged revenues may be derived from operation of the
financed project or system, grants or excise or other specified taxes. Generally, subject to state
law or local charter requirements, you are not required to obtain voter approval prior to issuance
of revenue bonds. If the specified source(s) of revenue become inadequate, a default in
payment of principal or interest may occur. Various types of pledges of revenue may be used to
secure interest and principal payments on revenue bonds. The nature of these pledges may
differ widely based on state law, the type of issuer, the type of revenue stream and other
factors.
The description above regarding "Security" is only a brief summary of certain possible security
provisions for the bonds and is not intended as legal advice. You should consult with your bond
counsel for further information regarding the security for the bonds.
Financial Risk Considerations
Certain risks may arise in connection with your issuance of Fixed Rate Bonds, including some
or all of the following:
Issuer Default Risk
You may be in default if the funds pledged to secure your bonds are not sufficient to pay debt
service on the bonds when due. The consequences of a default may be serious for you and,
depending on applicable state law and the terms of the authorizing documents, the holders of
the bonds, the trustee and any credit support provider may be able to exercise a range of
available remedies against you. For example, if the bonds are secured by a general obligation
pledge, you may be ordered by a court to raise taxes. Other budgetary adjustments also may
be necessary to enable you to provide sufficient funds to pay debt service on the bonds. If the
bonds are revenue bonds, you may be required to take steps to increase the available revenues
that are pledged as security for the bonds. A default may negatively impact your credit ratings
and may effectively limit your ability to publicly offer bonds or other securities at market interest
rate levels. Further, if you are unable to provide sufficient funds to remedy the default, subject
to applicable state law and the terms of the authorizing documents, you may find it necessary to
consider available alternatives under state law, including (for some issuers) state-mandated
receivership or bankruptcy. A default also may occur if you are unable to comply with
covenants or other provisions agreed to in connection with the issuance of the bonds.
This description is only a brief summary of issues relating to defaults and is not intended as
legal advice. You should consult with your bond counsel for further information regarding
defaults and remedies.
Redemption Risk
Your ability to redeem the bonds prior to maturity may be limited, depending on the terms of any
optional redemption provisions. In the event that interest rates decline, you may be unable to
take advantage of the lower interest rates to reduce debt service.
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Refinancing Risk
If your financing plan contemplates refinancing some or all of the bonds at maturity (for
example, if you have term maturities or if you choose a shorter final maturity than might
otherwise be permitted under the applicable federal tax rules), market conditions or changes in
law may limit or prevent you from refinancing those bonds when required. Further, limitations in
the federal tax rules on advance refunding of bonds (an advance refunding of bonds occurs
when tax-exempt bonds are refunded more than 90 days prior to the date on which those bonds
may be retired) may restrict your ability to refund the bonds to take advantage of lower interest
rates.
Reinvestment Risk
You may have proceeds of the bonds to invest prior to the time that you are able to spend those
proceeds for the authorized purpose. Depending on market conditions, you may not be able to
invest those proceeds at or near the rate of interest that you are paying on the bonds, which is
referred to as "negative arbitrage".
Tax Compliance Risk
The issuance of tax-exempt bonds is subject to a number of requirements under the United
States Internal Revenue Code, as enforced by the Internal Revenue Service (IRS). You must
take certain steps and make certain representations prior to the issuance of tax-exempt bonds.
You also must covenant to take certain additional actions after issuance of the tax-exempt
bonds. A breach of your representations or your failure to comply with certain tax-related
covenants may cause the interest on the bonds to become taxable retroactively to the date of
issuance of the bonds, which may result in an increase in the interest rate that you pay on the
bonds or the mandatory redemption of the bonds. The IRS also may audit you or your bonds, in
some cases on a random basis and in other cases targeted to specific types of bond issues or
tax concerns. If the bonds are declared taxable, or if you are subject to audit, the market price
of your bonds may be adversely affected. Further, your ability to issue other tax-exempt bonds
also may be limited.
This description of tax compliance risks is not intended as legal advice and you should consult
with your bond counsel regarding tax implications of issuing the bonds.
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Special Risk Factors related to Tax Allocation District Bonds
The following additional special risk factors are common to Tax Allocation District Bonds ("TAD
Bonds") and the associated real estate development projects ("Development"). We may provide
you with additional information related to the particular financing alternative that is ultimately
chosen.
THERE CAN BE NO ASSURANCE THAT THE DEVELOPMENT WILL GENERATE A
SUFFICIENT AMOUNT OF TAX ALLOCATION INCREMENTS SUCH THAT THERE WILL BE
SUFFICIENT MONEYS TO PAY PRINCIPAL OF AND INTEREST ON THE TAD BONDS
WHEN DUE. THE ABILITY OF THE DEVELOPMENT TO GENERATE SUCH TAX
ALLOCATION INCREMENTS IS DEPENDENT ON AND SUBJECT TO FUTURE EVENTS
AND CIRCUMSTANCES WHICH CANNOT BE FORESEEN OR PREDICTED WITH
CERTAINTY. THERE CAN BE NO ASSURANCE THAT THE ASSUMPTIONS SET FORTH IN
ANY APPRAISAL, FEASIBILITY REPORT OR INCREMENT PROJECTION STUDY WILL BE
ACHIEVED.
Failure to Complete the Development
Undeveloped or partially developed land is inherently less valuable than developed land and
provides less security to the Bondholders should it be necessary for the Issuer to foreclose on
the property due to the nonpayment of taxes. The failure to complete the Development as
planned, or substantial delays in the completion of the Development may reduce the value of
the property within the Tax Allocation District and increase the length of time during which taxes
will be payable from undeveloped property, and may affect the willingness and ability of the
owners of property within the Tax Allocation District to pay the ad valorem property taxes when
due.
Payment of the Ad Valorem Tax is not a Personal Obligation of the Owners
An owner of a taxable parcel is not personally obligated to pay the taxes. Rather, the
ad valorem property tax is an obligation which is secured only by a lien against the taxable
parcel. If the value of a taxable parcel is not sufficient, taking into account other liens imposed
by public agencies, to secure fully the ad valorem property tax, the Issuer has no recourse
against the owner.
Land Values
The fair market value of the property within the Tax Allocation District is a critical factor in
determining the investment quality of the TAD Bonds. If a property owner is delinquent in the
payment of taxes, the Issuer's only remedy is to commence foreclosure proceedings in an
attempt to obtain funds to pay the taxes. Reductions in property values due to a downturn in the
economy, physical events such as fires or floods, stricter land use regulations, delays in
development or other events could adversely impact pledged revenues and the TAD Bonds.
Economic Risks Affecting Tax Allocation Increments
Future collections of ad valorem taxes could be adversely affected by a number of economic
factors not within the Issuer's control, resulting in reductions in Tax Allocation Increments
available to pay debt service on the TAD Bonds. Substantial damage to, or destruction of,
improvements that have been or will be constructed in the Tax Allocation District could cause a
material decline in assessed valuation and could impair the ability of the taxpayers in the Tax
Allocation District to pay their respective portions of real estate taxes. There can be no
assurance that the improvements in the Tax Allocation District are or will be insured under fire
and extended coverage insurance policies, and, even if such insurance exists, the proceeds
thereof will not be assigned as security for the payment of real estate taxes or the TAD Bonds.
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In addition, any insurance proceeds may not be sufficient to repair or rebuild the improvements.
The restoration of the improvements may be delayed by other factors, or the terms of then-
applicable mortgage financing could require the application of insurance proceeds to the
reduction of mortgage balances. Any of the foregoing circumstances could result in the
assessed valuation of property in the Tax Allocation District remaining depressed for an
unknown period of time and decrease the amount of Tax Allocation Increments available to pay
debt service on the TAD Bonds.
Failure to Maintain Levels of Assessed Valuation
There can be no assurance that the assessed value of the Development will equal or exceed
the projected assessed value. There can be no assurance that such assessed value will be
maintained throughout the terms of the TAD Bonds. If at any time during the term of the TAD
Bonds, the actual assessed value is less than projected, the amount available to pay debt
service will be less than projected and may not be sufficient to pay the TAD Bonds.
Owners of property in the Tax Allocation District have the right to appeal the assessed value of
their property. Any failure to pay ad valorem taxes during such appeal, or any successful
appeal, may result in insufficient amounts available to pay debt service on the TAD Bonds.
Tax Delinquencies
In order to pay debt service on the TAD Bonds, it is necessary that ad valorem taxes from the
Tax Allocation District be paid in a timely manner. Delinquencies by the owners of property in
the Tax Allocation District in payment of ad valorem taxes may result in insufficient monies to
pay the TAD Bonds when due. Further, the unwillingness or inability of a property owner to pay
ad valorem tax bills, including the tax allocation increments as evidenced by property tax
delinquencies may also indicate an unwillingness or inability to make such tax payments in the
future.
Reliance on Projections
The amount of tax allocation increments which will be available to pay the TAD Bonds on a
year-to-year basis cannot be known at this time. The revenue projections may involve known
and unknown risks, uncertainties and other factors which may cause the actual results,
performance and achievement to be different from the future results, performance or
achievements expressed or implied by such forward-looking statements.
Bankruptcy
Although a bankruptcy proceeding would not cause the right to collect ad valorem taxes to be
extinguished, the amount and priority of any tax lien could be modified if the value of the
property falls below the value of the lien. If the value of the property is less than the lien, such
excess amount could be treated as an unsecured claim by the bankruptcy court. In addition,
bankruptcy of a property owner could result in a delay in completing a tax sale of the property.
Such delay would increase the likelihood of a delay or default in payment of the TAD Bonds and
the possibility of delinquent tax installments not being paid in full.
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