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4. Bank Building Financing Proposal.:..:.:.:...:... ........ .-...... _.......... . ..... . . ..... ...... ... .. . ... .............. .. ......... ........_ ....... . .:::; ....... _ .......... .. ...... ..... 'ri• :.s: •:i;. i � }, is •� .$: %�• �• �: for, a� ... ........ ... - ---------- A ... ........ ............. . . ......... . ........ ..... .... ........... o ' 1 municipal Group, .:..:.....:..: ................ . ....:.:.::.:...... . .................... .......... ............ . ........_ ......_ - ............._ __...:........ , .: -� -_- -- =_ _ January 17, 2007 City Of Kalispell PO Box 1997 Kalispell, MT 59903-1997 RE: Installment Purchase Financing of the City Hall Refinance Dear Staff and Council Members: Municipal Services Group, Inc. is pleased to present this proposal for installment purchase financing of the City ball Refinance for the City Of Kalispell. We value your business, and look forward to assisting with this acquisition. We have provided financing for a number of entities in your region, and are excited at the prospect of this opportunity. MSG has provided Installment Purchase Financing exclusively to public entities for over 18 years, providing our services accompanied by flexible terms and competitive rates to more than 3,500 municipalities nationwide. MSG provides a standardized document, which is easy to understand and execute. As a measure of protection for its clients, MSG advance funds its transactions. This ensures interest rate protection and insulates the Municipality from assuming any market risk, while at the same time guaranteeing funds for the acquisition. In addition, under this advance funding structure, the quoted interest rate reflects an integration of anticipated earnings from the Acquisition Account into the payment stream. This results in a lower interest rate. We are pleased that you have given us this financing opportunity and trust that this will meet your needs and objectives. If you have any questions or would like to discuss our services in greater detail, I can be reached at 800-861-0788, or via email at codyo@munibank.com. Please visit our website: www.munibank.com Sincerely, Cody Ogden Territory Manager Dew-, cos An4eies: rnarbtte, Seattle: The Mkm�ipal �in�nce 800.53U,3140 800*861,0458 8W,861.0445 800,861.0369 � fa• 2c� year.. saiesC�rrum�ar�C.com c1im0mun�k.com ttavids@r�nibar�k.com mic��rt�ibA.com Municipal Installment -Purchase Financing Proposal For the: city of Kalispell Acquisition of: city Hall Refinance EXECUTIVE SUMMARY Municipal Services Group Inc. is pleased to present this proposal to provide installment purchase financing, for the Installment Purchase Financing of the City Hall Refinance. The program presents a sound way of enabling the city Of Kalispell to refinance the City Hall ("the Project") in a fiscally conservative and effective manner. This Executive Summary includes not only the basic terms of the proposed financing, but also an illustration of the comprehensive array of other financial services and consulting elements that MSG can provide. This array of services is essential in providing a turn -key package enabling the Municipality to foreclose incurring the underwriting costs typically associated with traditional public offerings such as bonds or certificated financings. In conjunction with the information gathered by the Municipality which justifies the needs and benefits surrounding the acquisition of the Project, these integrated services provide quantifiable and definitive information sufficient for Municipality management to make an informed decision. The tax-exempt Installment Purchase structure proposed (sometimes referred to as a municipal lease) provides a quick, easy and cost effective method to facilitate essential acquisitions, while spreading the cost over the useful life of the Project. Compared to the typical route of issuing bonds, the savings are significant. There are no fees, points or other costs associated with our financings. We provide a straight and even amortization of the amount borrowed at the stated interest rate. Principal and interest are retired with each and every payment. In addition, due to the Private Placement nature of this tax-exempt debt, no voter referendum or bond election is required. Municipal managers have found this method of purchasing capital equipment and projects to be an invaluable cash flow management tool, which is more cost-effective than bonds or other forms of public debt. The agreement passes title to the Municipality upon commencement of the agreement with Municipal Services Group ("MSG") maintaining a security interest. At the end of the stated term, this security interest is released and the Municipality owns the Project at no additional cost. BACKGROUND ON MSG MSG is in its second decade of providing professional consulting and financial underwriting services to municipal entities nationwide. As one of the most experienced financial services firms in the country, MSG specializes in tax-exempt financing from coast to coast. Headquartered in Denver, CO, MSG has offices in Charlotte, NC, and Dallas, Tx, and Seattle, WA. We count among our many vendor clients numerous Fortune 500 companies. MSG's expertise and capability has been acquired and refined as a result of providing consulting and financial services over an 13-year period, approaching one billion dollars in value for over 3500 municipal customers. This experience is underscored by our extraordinary track record of successfully enabling these municipalities to deploy optimal solutions to what had previously been viewed as insurmountable operating and replacement challenges. MSG regards this comprehensive approach as instrumental in assessing the total benefit of any equipment acquisition or project and offers a full array of fiduciary services (traditionally outsourced by other underwriting firms) at no additional cost to the municipality or the vendor. COMPREHENSIVE SERVICES AVAILABLE & COST JUSTIFICATION ANALYSIS As a component of the underwriting process, MSG can create a specific Accelerated Acquisition Analysis@ (AAA) as an integral part of your acquisition package. This analysis (typically used in fleet financings) illustrates the true cost of incremental purchasing and the negative impact that improper rotation or delayed acquisition of assets can have on the Municipality. It serves as a strong cost justification tool, reinforcing the cost effectiveness of financing. The AAA can also serve your needs in supplementing any type of presentation to your Board for these types of acquisitions as well. When applicable, MSG can also provide an Installment Purchase vs. Bond Analysis so that your financial management colleagues will be able to compare this commonly used (yet much more costly) option to the MSG financing. In creating this Analysis, we use the same estimated rates and costs of bond issuance used by bond firms nationwide to provide the Municipality with an accurate comparison. MSG's services also include: The preliminary underwriting assessment In person or online presentations using Webinar technology 4. Document preparation, including jurisdictional specific negotiated refinement Ongoing service processing for the term of the financing Coverage of all MSG underwriting and legal fees (MSG internal counsel) MSG developed this program to address the growing problem being experience by its clients in fulfilling annual capital needs. As a result of this effort, MSG is able to deploy this type of financing program while providing the client with the ability to select their vendor(s) of choice. MSG has been active in successfully administering and applying such specialized programs nationwide for over a decade, often performing this service under a "private label" as administrators for such firms as Layne Christensen, Badger Meter, and Utility Services, to name but a few. PROGRAM ATTRIBUTES Broad project (and equipment) acquisition applicability and flexibility Negotiated refinements to the documentation consistent with portfolio investment considerations 4. Cash flow improvement through Financing vs. Paying Cash 4w Savings over traditional approaches such as bond issues Equity is established with each payment 4. Allows for prepayment No Residual at end of the term 4. Financing administration throughout the term OBJECTIVES Recommending a Cost Effective Agreement Structure Providing an appropriate structure to optimize the reduction of financing and acquisition costs Preparation of refined cost justification analysis to facilitate Board approval Preparing Tax-exempt Documentation . Performing a timely credit analysis and underwriting 4. Prompt financing subject to approved credit 44, Rating the financial merits of the transaction consistent with portfolio investment assessment criteria Providing funds for the entire acquisition, including allowable "soft" costs such as engineering and architect's fees 14. Providing fiduciary management of the Acquisition Account 4. Payments made over the useful life of the asset SUBSEQUENT ACQUISITION PROVISION MSG also provides an index of the Interest Rate for any Additional Equipment that the Municipality may choose to acquire in the future, thus facilitating subsequent acquisitions under their capital plan in the same manner as determining the Adjusted Interest Rate. This assures yield relationship maintenance with U.S. Treasuries and Bloomberg Bond Scale rates for comparable maturities and credit characteristics. This precludes arbitrary interest rate determination for funds to acquire Additional Equipment. PORTFOLIO ALLOCATION - ADVANCE FUNDING/ACQUISITION ACCOUNT Funds from MSG's Portfolio will be deposited into an acquisition account upon commencement of the installment purchase financing Agreement. This process will allow for the full settlement with the vendor, consistent with delivery and acceptance by the Municipality. Providing MSG with appropriate certifications and titles reflecting the first lien security interest therein (when applicable) enables MSG to wire transfer settlements to the vendor. The account is established and managed by MSG on behalf of the Municipality with disbursements made at the sole direction of the Municipality. Interest earnings benefit the Municipality in the form of a lower interest rate by subsidizing or buying down the financing cost. No fees are assessed to you or the vendor for: Establishing the account Collateralizing the funds Managing and disbursing payments to vendors from installation commencement to final settlement Management of all appropriate security interest filings 4. The disbursements are flexible and can be structured to accommodate your requirements consistent with the approximated installation period and pursuant to progress/acceptance schedules to be provided by the Municipality. SERVICING Our firm deploys a comprehensive program of customer services throughout the entire term of the financing, including but not limited to: Trustee management, maintaining collateralized fiduciary equipment/project acquisition accounts - with no fees to the Municipality Documentation management related to maintaining appropriate security interests in collateral positions, thus protecting the interests of all parties. Acquisition proceeds management for vendor settlements, subject to authorized documentation Servicing portfolio payments throughout the term related to MSG's private placement funding Ongoing customer support regarding issues that arise subsequent to the financing Management and reconciliation of insurance coverage related to liability and property damage All of these customer service related activities result in MSG incurring the human resources and infrastructure costs associated with providing such comprehensive support within the context of the Plan. FINANCING ATTRIBUTES DOCUMENTATION STRUCTURE By structuring a cost effective alternative to paying cash, you can realize additional interest income through leaving these funds invested, drawing payments out to meet debt service. This legal arbitrage in effect lessens the cost of the Project while assisting in the preservation of liquidity for the Municipality, and perhaps providing a buffer in the event of unforeseen future expenditures. The terms and conditions of the MSG proposed to facilitate the financing are as follows: 44, Facilitates legal documentation approval by recognized Bond Counsel Complies with the laws of the State of Montana May require a Debt Service Reserve 4. Allows Municipal Services Group assignment privileges DOCUMENTATION ITEMS MSG will provide: 4. Lease and Option Agreement 4. Required Exhibits 44. UCC-1 Filing (when applicable) The Municipality will provide: Copy of Deed of Trust Preliminary title search and subsequent Lender's Title Insurance Policy 4 Contractor's Payment and Performance Bond ALTA Survey Appraisal corresponding to FIRREA* regulations Phase I Environmental Audit CREDIT REVIEW AND UNDERWRITING MSG unites municipal and vendor client's financial needs with the confidence of underwriting all of its transactions. That confidence comes from more then a decade of successfully underwriting municipal Installment Purchase Financings without a single default. MSG's Ultimate Recovery Rating@ has become the model by which others are measured. All transactions are rated to assure an investment based on full and enlightened disclosure and assessment, resulting in being able to refine and offer the most cost effective financing available. Financial qualification assessment will require the following information to perform a credit review: Preceding three years' annual audited financial statements Interim, to date financial statement, if available Budget summary for the current fiscal year Project descriptions and feasibility Demographic Highlights YOUR RATE STRUCTURE The rate structure prepared by MSG is predicated on the Municipality's rating per Moody's and the following: Fixed interest rate for the term Rate protection through locking of the current portfolio allocation for a 30 day period. The rate quoted will be valid during this 30 day period, in which time document execution must be completed to ensure the fixed rate for the term. 4. Source of repayment: Enterprise Fund with reliance upon the General Fund on an appropriations basis as a secondary and supplemental source of repayment in the event of a shortfall. 4. Payments per the attached schedule 4. Credit approval by way of MSG's credit analysis and underwriting criteria 4. Proper execution of mutually acceptable documentation MSG advance funding to ensure availability for vendor settlement, upon delivery and acceptance by the municipality. Compliance with the laws of the State of Montana The option to prepay the obligation at any time Opinion of the Customer's Counsel, with respect to enforceability which shall opine that the agreement is legal, valid and binding and qualified as a tax-exempt obligation under the Tax Reform Act of 1986. The issue is Bank Qualified, therefore within the $1 o million total municipal financing for the year TIME FRAME CONSIDERATIONS With interest rates still near historical lows, we encourage a prompt passage of a resolution, which can easily be provided by MSG. MSG can then proceed to secure the portfolio allocation yield, and expedite the financing process. We thank you again for this opportunity, and trust that this proposal will meet your needs and objectives, consistent with your acquisition plans. MSG's personnel await the opportunity to be of further assistance to you, and to assisting you in this acquisition through providing our expertise throughout the process, and bringing this proposal to closure. . An acquisition account will be established for this financing, with a disbursement of funds to begin on February 21, 2007 = - DOCUMENTATION MUST BE RECEIVED BY; February 21, 2007 1:7 tr al'AtTI-J-4 Term: 15 Years 10 Years Ac uisition Cost: $1,050 782.00 $ "1,050,782.00 Capitalized Interest: .00 .00 FirstlDown Payment: .00 .00 Documentation Fee: .00 .00 Total Amount Financed: $1,050,782.00 $1,0500782.00 Payment lode: Semi -Annual In Arrears Semi -Annual In Arrears Factor: * .046199 .062582 Base Interest Rate: 4.50% 4.48% Treasury Note Index %: ** 94.34% 94.92% PayEnent Amount: $48 545.44 $651,760.33 Total Amount: $1,466,363.11 $1,315,206.61 Less Amount Financed: $1,050,782.00 $1,050,782.00 Financing Cost: $405,581.11 $2641424.61 * Should the amount to be financed vary, simply multiply the new amount times the factor to determine the payment ** with respect to the current acquisition/financing, provided all documents have been returned in a form acceptable to the Lessor within thirty (30) days of the Dated Date (the `Period"), the Base Interest Rate can remain in effect. In the event all documents have not been returned within the Period in a form acceptable to the Lessor and/or if the U.S. Treasury Note Yield for a maturity comparable to the Agreement Term increases significantly, the Lessor reserves the right to adjust and determine a new Base Interest Rate (the Adjusted Base Interest Rate"}. The Adjusted Base Interest Rate shall be determined by the Lessor as of the business day immediately preceding receipt of documents in a form acceptable to the Lessor through multiplying the then current U.S. Treasury Note Yield by the U.S. Treasury Note Index Percent. This rate shall then be reconciled to the appropriate like -term Bloomberg, MM❑ (or other recognized publication of market yields for tax-exempt municipal bonds as determined by Lessor in its sole discretion) scale of tax exempt yields so as to assure a minimum of 15 basis points over the yield of the selected scale to determine the correct Adjusted Base Interest Rate. Lessor, in its sole discretion, will at the time of such calculation determine which classification (Aaa, Aa, A, etc.) is most appropriate and applicable to determine this Adjusted Base Interest Rate. The Adjusted Base Interest Rate will then be used to amortize the Principal Balance and will be fixed for the term of the financing at dosing. This Adjusted Base Interest Rate would apply assuming the transaction retains its original assumptions regarding purchase price, payment term and modes, and escrow funding. For subsequent acquisition financings and Individual Payment Schedules a current market Base Interest Rate shall be determined as of the business day immediately preceding the Dated Date of any Subsequent Individual Payment Schedule by multiplying the U. S. Treasury Note Yield for a maturity comparable to the requested financing term by the U.S. Treasury Note Index Percent. This rate shall then be reconciled to the appropriate life -term Bloomberg, MMD (or other recognized publication of market yields for tax- exempt municipal bonds as determined by Lessor in its sole discretion) scale of tax exempt yields so as to assure a minimum of 15 basis points over the yield of the selected scale to determine the correct Base Interest Rate. Lessor, in its sole discretion, will at the time of such calculation determine which classification (Aaa, Aa, A, etc) is most appropriate and applicable to determine this Base Interest Rate. This Base Interest Rate (valid for a specific time period outlined in the accompanying proposal) will be used to amortize the Principal Balance and will be fixed for the term of the financing at closing. This Base Interest Rate will be applicable assuming the transaction retains characteristics and assumptions similar to those in the original financing regarding collateral, purchase price, payment term and modes, and escrow funding. Exhibit E Schedule of Payments Dated Date: January 22, 2007 City Hall Refinance PMT # Payment Date Payment Principal Portion Interest Portion Purchase Price 1 Jul-22-2007 48,545.44 247902.85 23,642.59 1,0501598.79 :; : : ..: : . . ; .. r— % 00 : *, 4 :.. : : _ . .:.::. 2 4 3* . ............... 23 08 �2 . ...: 23, 74 :-.. ..-..A 3 Jul-22-2008 48,545.44 28,036.08 22,509.36 996,�447.98 4 Jr-22-2 .. .� :..:.:-. : 45. _ .: �8 9�tW--...-..- .:. . : .. ::..:.:,.% -..:: 5 Jul-22-�2009 48,54.5.44 27,226.88 2'1,324.58 940,032.12 . :..........:::... _ ...:......: . . . . �, ::........:.;:::::::..:. J� _ _ .: ._.. .-...4n.. 4: 8 545�44 _ _ .. ..... ...................................... ....:...::.... . 27 833��3 5 -......:....:....:.. ........................................................ _ ........ . 7 �. ....:......::.: %-...4-...: _ . ....:-.:.�." _ _. ' 9 8.'. ...... .....::.....:�:::.- 7 ... . Jul-22-2010 48,545.44 28,459.80 20,085.84 881,256.48 8 �.- J2 . 45�44• .. 209W9 144 49 '_,930 w 9 Jul-22-2011 48,545.44 299754.69 18,790.75 820,022.33 ....-. --20 4855sr44 344 8 .. - 8 21.25 "�:....::.".....�:..::.�... 7881 s3 .::.. .. .... .. .... ... 11 . ...Jul-22-2012 8, 545.44 4.... 31,108.72 '17,435.72 75C y225.88 +IG ......................................... 4649 ' ...... ......... ..... 4 45. 4 . 3 8 88 ... .... . . 6 ..... ' 72335�31 ,.-- ..,....'.-..- 13 J u 1-22-2013 48, 545.44 32, 524.36 16, 021. 08 889, 782.92 : :.:..:..:...:... 1 :. Ja:-'- .:.:. 4 5 : : ::::..:..:: _ -3.�58 _ _ 495 F5 -.-- 15 Jul-22-2014 48,545. 34,004.42 14,541.02 620,5'18.89 ......... J ��- .:: .. 4 5�4 # ` 7` .. ....--......; ...... 58 I� . . ... 17 ... ... .... ........ Jul-22-�20'15 . ... .. 48,545.44 35,551.84 . . 12,993.50 548,378.48 . . .. . Js- -: 0 _ �8 5.4 - . _ 3 3 ... . 9 . _.. 1 4. ............ 19 Jul-22-2018 48,545.44 37,169.67 119375.77 473,220.5f .. __ . . ..... ...... .:.. -0 .. ............... ... .: : .. ,$*� ......:.. _ ............ .... .. ...... ._ 639�� . . ......_ t...... ...... ... ..... .._.. ....:...... . .. .... 47 ` ....f......... . ... ..:.:....:.... . 21 Jul-22-20'17 48, 545.44 38,861.12 9, 884. 32 394, 918.89 ..� J 22 2018 = 4 5 44 ;__ _ �75�. _ :O$9-: -_ 894,� -....-.:- .:-:...:- _ -- = _- 23 Jul-22-2018 48, 545.44 40, 629.54 .. 7, 915. 90 313, 341.98 .......:............:.:.:..:.. ... .:.. ..:..:....::.:.::::. .. ::.: . . . ; 4 . : ..... . ..::::.::... . ..........: ......::.:::. ...........:... - _ ... .,. .� J.22 . M. 444 8 5 ..... .... .. . .. _.. ....... 41 ` 7 _ _ 543� 1 - ... _ ......-. .. . .. - _ - -. . _ . - . ....... 7 -.. -....:.........: . . $21 .. ....7.. 25 Jul-�22-2019 48,545.44 42,478.44 69057.00 228,352.83 .. . . . - w.45 5 43:4�4 _ . : 1 4 . 27 Jul-22-2020 48,545.44 44,411.48 4,133.98 139,808.71 J 2 5� 4 ,0 7 3� 34. ' .. . 94 5 �1 - ... .. 29 Jul-22-2021 48,545.44 4fi,432.47 2,112.97 47,560.93 . 3 :: .._ _ _ : J��2-2 2 . 4 5 ::: _ . :. 4 4 7.0 _: - _:: 1 068 5 ........ _ _ :_ �* TOTAL: 1,458,383.20 1,050,782.00 405,581.20 Exhibit E Schedule of Payments Dated Date: January 22, 2007 City Hall Refinance PMT # Payment Date Payment Principal Portion Interest Portion Purchase Price 1 Jul-22-2997 659789.33 42,222.81 23,537.52 1,D28,f47.54 ...... . ..... . .......... .08 3 Jul-22-2998 65,760.33 44,135.58 21,624.75 937,877.27 5 Jul-22-2999 65, 7G9.33 46,135.00 1 %625.33 843, 393.58 .=. 3#..9 3.......... . ... 4 1 ?.... =1. 74- . .. .... 7 '9 7 Jul-22-2019 65,789.33 48,225.99 17,535.33 745,044.56 J�� �73 :: 45.2�=: = 9 Jul-22-2011 85,789.33 50,409.87 15,350.55 642,872.97 J. �7�3 558�8 = . 4$2 *� _ �899 5�8 . 11 Jul-22-2612 65,789.33 52,593.32 13,9C7.01 535, 111.52 J�2 1 7 �3 5 83. 88 48 27 13 Jul-�22-2913 65 0 754. 33 55, 080.42...... 109679.91 425,191. 57 30 .... 15 Jul-22-2014 65, 789.33 57, 575.88 8,184.87 309, 733.88 1�- A,7385� -f4t7 .... �,4. 17 Jul-22-2915 65, 789.33 60,183.94 5578. 39 189, 552.80 6 2 . . .. .... 19 Jui-22-2915 65,789.33 62,910.38 2,849.95 64,455.11 2 - J�21�7 ,7 � 3 _9s6 1 . TOTAL: 1,315,298.64 119509782.99 264,424.89 InterCap Comparison 5.000% 4.500% 4.000% 3.500% 3.000% 2.500% 2.000% --�-- herCap Syr Treasury 1 gyr treasury 15yr Treasury -- Syr General obrgabon Bond --1 oyr General obligation Bond 15yr General Gbfigafion Bond Feb-04 Aug-04 Feb-05 Aug-05 Feb-06 Auger Feb-07 Dates As shown in the example above, InterCap rates have steadily increased since February of 2004, when the market reached a 40-year low, While monies loaned under the InterCap program will continue to fluctuate over time, this is an excellent time to take advantage of lower fixed rates. one could easily take the position that while for every story stating that rates will rise there is a conflicting one predicting a decrease in rates, it is reasonable to believe that since interest rates have not been at the relatively low current range for over 40 years, that they will once again seek their normal level over time to arrive at rates higher than those today. The example also reflects how much rates have risen in the last month. This slaw yet steamy inevitable climb over time can result in significant increases in interest cast to the City. Types . . .. ......of equipmeid we finance �: � : ski • • � ; ile fIT y�r it t Aircraft and Helicopters Automobiles Computer Systems Construction & Street Maintenance Duplicating and Printing Equipment Fire Apparatus and Rescue Vehicles Garbage Recycling Plan Medical and Laboratory Equipment ....... .... .... . --- _ _ ...... ..-.. _. __ . -- =�__ y_= __....... of If L* -'� dk .T T ww Portable Buildings Trucks and Bodies Real Estate PrD*ts Refuse Collection Vehicles School Buffs Telecomrnu Water- Store and Wafter Pipeline Projects Sanitation Treatment Plants About Munkipd Services Group, Inc Municipal Services Group is a nationwide provider of financing that enables local governments to provide essential equipment and projects to their members. Our financial solutions have been used in local governments from Maine to California since 1988. We employ a team of financial professionals with years of experience understanding and meeting the needs of municipalities. More than 1,5001oca1 governments have chosen MSG to finance their equipment and project acquisitions.