With the unanimous approval of Resolution No. 3304 by the Governing Board at the July, 13, 2011 meeting to place a $298 Million General Obligation Bond Measure on the June 5, 2012 Primary Election ballot, it will be necessary for the Board to appoint a bond counsel, underwriter and financial advisor to assist the administration with the legal and financial documents (bond issuance scenarios, tax rate statement, etc.) that must be completed prior to the submittal of the resolution to the Fresno County Elections Office and in the issuance of bonds upon passage of the bond measure by the voters of the District. In addition, these services are necessary when the District from time to time issues Certificates of Participation (COP's), Tax and Revenue Anticipation Notes (TRANS), Refunding Issuances, etc.
Following is a description of the proposed firms along with their respective fee schedules:
It is recommended that Jones Hall be appointed as the District's bond counsel. The District has used William Madison, the Managing Partner at Jones Hall since the mid 1980's as its bond counsel on all municipal financial transactions. Jones Hall is a leader in the bond counsel industry both in the State of California and nationally. The sole legal practice of Jones Hall is limited to municipal financial transactions. Mr. Madison has worked closely with the administration and other members of the financing team in developing bond amortization schedules that has allowed the District to sell $453.2 million of voter approved general obligation bonds since 1986 and actually reduce the tax rate for the repayment of bonds from $240 per $100,000 of assessed valuation in 1986-87 to a projected tax rate of approximately $156 per $100,000 of assessed valuation in 2011-12.
The fee schedule negotiated with Jones Hall is extremely competitive and is based on the same sliding scale schedule included in the current agreement with Jones Hall that was approved by the Governing Board in 2002 in anticipation of the 2004 bond measure. The minimum fee for each bond sale is $25,000 and the maximum is $80,000. The administration applied the proposed fee schedule to 19 general obligation bond issuances sold in 2009 and 2010 and found the schedule negotiated with Jones Hall resulted in the lowest fee when compared to the other 19 transactions. The proposed fee schedules for the other municipal transactions (COP's, TRANS, etc.) are based on the same schedules included in the 2002 agreement.
It is recommended that Stone & Youngberg (S&Y) be appointed as the District's underwriter on all municipal financial transactions including the 2012 $298 Million General Obligation Bond Measure. The District has utilized this firm as its underwriter since 1997. Bruce Kerns, Managing Partner, has represented S&Y on all of the District financing issues since their appointment. Along with the District's bond counsel, Mr. Kerns and his staff have worked with the administration since their appointment in the mid 1990's and have attended numerous meetings with members of the Fresno County Treasurer's Office to develop bond amortization schedules whereby the annual tax rate for the repayment of outstanding bonds has never exceeded that of the previous year.
The proposed fee schedule that has been negotiated with S&Y is very competitive and reflects current market conditions and the fact that the administration is recommending that the financing team include a financial advisory firm which has not been the case since 1997. The lower fee schedule from S&Y compared to the schedules used in the past will more than offset the cost of the financial advisory firm that the administration is recommending be added to the District's municipal financing team. (See below). The proposed maximum not-to-exceed fee schedule for the sale of general obligation bonds is 0.125% to 0.350% of the par value of the bond issuance. The lowest percentage is applied to bonds that mature in year 1 and the highest percentage is applied to bonds that mature after 15 years. Using the same 19 general obligation bond sales mentioned above, the fees for underwriting services for the comparative sales in 19 school districts throughout California ranged from 0.56% to a high of 1.96% with an average underwriter fee of 1.21%.
The fee schedule for the sale of COP's is also based on a sliding scale that ranges from 0.250% to 0.500% of the par value of COP's issued. Although the District has never issued COP's that mature beyond 15 years, there is a fee of 0.750% included in the proposal if the District ever need to issue COP's with some of the issuance extending beyond 15 years. If the District issues a TRANS in the future, the underwriter fee proposed by S&Y would be 0.005% of the PAR value of the TRANS.
As noted above the District utilized the services of a Financial Advisor to assist the administration in the sale of general obligation bonds, COP's and TRANS until 1997 when several members of the firm the District had been using for more than 15 year started focusing on providing services to cities, counties and special districts. Because the District administration at that time had significant experience in issuing bonds and COP's, a decision was made to utilize the services of S&Y for both financial advisory work and the sale of the issuance. Because of more complex regulations, the continual changes in establishing the annual tax rate for repayment of bonds and the need in today's financial environment to create an "arms length" between the firm providing financial advisory services and the underwriter, there is once again a need to include a financial advisory firm as part of the District's financial advisory team.
The administration issued a Request for Qualifications (RFQ) several weeks ago requesting Statement of Qualifications (SOQ's) from qualified financial advisory firms. The District received SOQ's from six (6) California financial advisory firms who provide the requested services to California governmental agencies including school districts. After reviewing the SOQ's and discussing each firm submitting SOQ's with individuals with knowledge of each firm, the administration selected the three most qualified firms to be interviewed by a panel of administrators in the Administrative Services Division.
Based on the interviews and subsequent reference checks, it is the recommendation to enter into an agreement with Keygent Advisors to service as the District's Financial Advisory firm. Keygent specializes in performing independent strategic and technical financial advisory/structuring services to California school districts. Tony Hsieh and Chet Wang have many years of experience advising clients on strategic and financial matters, and will be our primary contacts with Keygent. The minimum fee for each bond sale, COP sale, or refunding is $55,000 and the maximum is $75,000. If the District chooses to issue TRANs, the fee will not exceed $7,500.