Special Meeting of the Common Council

Transcription

1 Special Meeting of the Common Council Monday, December 11, :00 PM Council Chambers, City Hall, 2nd Floor, 27 West Main Street, New Britain, Connecticut WARRANT Warrant - There will be a special meeting of the Common Council on Monday, December 11, 2017, at 7:00 p.m., in Council Chambers, City Hall, 27 West Main Street, New Britain, Connecticut. Warrant Presentation 1

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3 City of New Britain, Connecticut December 11, 2017 John J. Healey Managing Director Phone: Richard W. Thivierge Managing Director Phone:

4 2 This presentation is not for public use or distribution. Mesirow Financial is providing the information contained herein for discussion purposes only in anticipation of serving as underwriter. Mesirow Financial is not acting as an advisor to the municipal entity or any obligated person of the municipal entity (collectively, the Issuer ). The information provided is not intended to be and should not be construed as advice within the meaning of Section 15B of the Securities Exchange Act of The information should not be construed as recommending an action to the Issuer. The primary role of Mesirow Financial, as an underwriter, is to purchase securities, for resale to investors, in an arm s-length commercial transaction between the Issuer and Mesirow Financial. Mesirow Financial is not acting as a municipal advisor, financial advisor or fiduciary to the Issuer or any other person or entity. Unlike a municipal advisor, Mesirow Financial does not have a fiduciary duty to the Issuer under the federal securities laws and has financial and other interests that differ from those of the Issuer. Mesirow Financial has a duty to deal fairly at all times with the Issuer and to purchase securities from the Issuer at fair and reasonable prices, but must balance that duty with our duty to sell securities to investors at prices that are fair and reasonable. Mesirow Financial s other business units may be holding or trading bonds issued by Issuer in client or proprietary accounts. Mesirow Financial is not conveying or soliciting non-public information and does not want any non-public information regarding the Issuer. The Issuer should discuss any and all information contained in this communication with any and all internal or external financial and/or municipal, legal, accounting, tax and other advisors, to the extent it deems appropriate. If the Issuer would like a municipal advisor in this transaction that has legal fiduciary duties to the Issuer, then the Issuer is free to engage a municipal advisor to serve in that capacity. Mesirow Financial refers to Mesirow Financial Holdings, Inc. and its divisions, subsidiaries and affiliates. The Mesirow Financial name and logo are registered service marks of Mesirow Financial Holdings, Inc., 2017, Mesirow Financial Holdings, Inc. All rights reserved. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. Any opinions, yields, or values expressed are subject to change without notice. Any performance information shown represents historical information only. It should not be assumed that past performance will equal future performance or that future performance will be profitable. Any chart, graph, or formula should not be used by itself to make any investment decision. It should be assumed that client returns will be reduced by commissions or any other such fees and other expenses that may be incurred in the management of the account. Fees Performance information provided also contemplates reinvestment of dividends. LEGAL, INVESTMENT AND TAX NOTICE: Information is not intended to be and should not be construed as an offer, solicitation or recommendation with respect to any transaction and should not be treated as legal advice, investment advice or tax advice. Clients should under no circumstances rely upon this information as a substitute for obtaining specific legal or tax advice from their own professional legal or tax advisors. IRS CIRCULAR 230 NOTICE: To the extent that this communication or any attachment concerns tax matters, it is not intended to be used, and cannot be used by a taxpayer, for the purpose of avoiding any penalties that may be imposed by law. Securities offered through Mesirow Financial, Inc. member FINRA. 4

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6 4 A bond is a debt instrument that allows issuers to finance capital needs. It obligates the issuer to pay to the bondholder the principal plus interest A buyer of the bond is the lender or investor A seller of the bond is the borrower or issuer When an investor purchases a bond, he or she is lending money to a government, municipality, corporation, federal agency or other entity In return for buying the bond, the issuer promises to pay the investor a specified rate of interest during the life of the bond and to repay the face value of the bond (the principal) when it matures, or comes due A bond can also be thought of as a contract between the issuer and investor This contract specifies, for example, the terms of the bonds, the funds from which debt service will be paid and any operating covenants In addition to operating covenants, the bond documents require the issuer to spend the bond proceeds for specific projects Among the types of bonds an investor can choose from are: U.S. government securities Municipal bonds Corporate bonds Mortgage and asset-backed securities Federal agency securities Foreign government bonds 6

7 5 General Obligation ( G.O. ) Secured by a pledge of the Issuer s full faith and credit to repay bonds Full faith and credit implies that all sources of revenue will be used to pay debt service on the bonds Can be unlimited or limited, depending on whether bonds are secured by all or a portion of ad valorem taxes Revenue Bonds Secured from a specific stream of revenues, such as a user fee or dedicated tax Used to finance specific enterprises or projects that backed by the project s revenues (i.e.: utilities, airports, housing, healthcare, etc.) Notes Short-term municipal securities typically in anticipation of a future revenue source Examples include Revenue Anticipation Notes ( RANs ), Bond Anticipation Notes ( BANs ), Tax Anticipation Notes ( TANs ), and others Commercial Paper Short-term promissory notes issued for periods up to 270 days Tends to be more flexibility in setting maturities and determining rates than notes Variable Rate Bonds Shorter-term bonds with traditional, long-dated nominal maturities that have short-term put features Bears interest at a floating rate that resets daily, weekly, monthly, or quarterly Sometimes issued with insurance and Standby Bond Purchase Agreement or a Letter of Credit (LOC) Floating Rate Notes (FRNs): A floating rate bond with no liquidity facility with an interest rate based on a fixed spread to an index Other Types Special Obligation Bond: Bonds secured by a limited revenue source or promise to pay Double-Barreled Bonds: Revenue bonds backed by a general obligation pledge Moral Obligation Bonds: Revenue bonds backed by revenue sources and an Issuer s moral (but not legal) pledge Certificates of Participation: Certificates that entitle investors to a share of lease payments from a particular project 7

8 6 Underwriters Underwriters' Counsel Financial Advisor Bond Counsel Auditor Issuer/ Borrower Rating Agencies Engineering/ Feasibility Consultant Insurer/Bank Corporation Counsel Bond Trustee Trustee's Counsel 8

9 7 Fixed rate financings have historically been the most common approach for municipal Issuers Features serial and term bonds with established interest rates Tend to be priced off of MMD Often includes a variety of redemption features: Optional Redemptions: Allows bonds to be redeemed prior to their maturities Mandatory Redemptions: Requires bonds to be redeemed prior to their maturities Mandatory and/or Optional Sinking funds: Reserves set aside to redeem term bonds over a specified period prior to the stated maturity KEY INDICES MMD A natural, AAA state G.O. yield curve produced by Thomson Financial Bond Buyer Indices Treasury Yields The main, fixed-rate index used to price bonds at all points on the yield curve 20 Bond Index: Estimation of the yield offered on 20-year general obligations with a composite rating of A 25 Bond Index ( Revdex ): Estimation of the yield offered on 30-year revenue bonds including a broad range of types of issuers and vary in ratings from Baa1/A to AAA/Aaa. Yields offered on obligations backed by the full faith and credit of the U.S. Government Typically considered a risk free rate Common benchmark maturities include 6- months, 1-year, 5-years, 10 years, and 30 years Advantages No interest rate risk Minimized future tax rate risk No liquidity facility needed Call options are relatively cheap Increased predictability of cash flows Politically popular Disadvantages Based on historical experience, interest expense tends to be higher initially Less flexible call features Difficult to convert to alternative modes Higher issuance costs Limited opportunities for advance refundings Possibility for negative arbitrage 9

10 8 Bonds with long-dated maturities that have short-term demand features Includes Variable Rate Demand Bonds ( VRDBs ) and Auction Rate Securities ( ARS ) Following the recent insurer downgrades, the ARS market has essentially dried up The coupon rate on the bonds resets at some interval (daily, weekly, quarterly, etc.) Holders of these bonds can demand that the bond be tendered for purchase at par plus accrued interest on predetermined dates The bonds are often used in conjunction with derivatives to achieve a synthetic fixed structure KEY INDICES SIFMA Created by the Security Industry and Financial Markets Association 1-Month LIBOR Used to gauge short-term rates in the market A 7-day, high-grade market index comprised of tax-exempt VRDOs from MMDs extensive database The Index serves as a benchmark floating rate in a large proportion of swap transactions Stated rate of interest at which banks may borrow funds from one another for one month Variations include overnight LIBOR, 3 month LIBOR, and 6 month LIBOR Used to gauge liquidity and short-term rates Advantages Allows Issuers to take advantage of short-term rates for long-dated maturities Better matches assets with liabilities Provides future refinancing flexibility Lower issuance costs Interest rate risk Disadvantages Need for Letter of Credit protection or other liquidity facility Tax risk Renewal Risk 10

11 9 $ Billions Fixed Rate Debt Variable Rate Debt Interest Rate Mode Locked-in for life of bond Resets periodically (weekly, daily, etc.) Interest Payable Semiannually Typically monthly Other variations are possible Callable Standard 10-year call option Anytime, with no prepayment penalty -Serial bonds Structure -Term bonds -Typically term bonds -Capital Appreciation Bonds -Serial bonds are possible -Other variations Denominations $5,000 $25,000 or $100,000 Principal Repayment 1 30 years 1 30 years Fixed and Variable Rate Debt Since * Fixed rate Variable Rate 11 *As of 11/9/2017

12 10 Most transactions involve Issuers issuing debt to meet capital needs This type of financing is known as a new money transaction Other transactions involve Issuers raising funds to replace higher cost debt with lower cost debt, to restructure debt service or release the issuer from restrictive operating covenants Example: An Issuer originally sold bonds with an interest rate of 9%. Today, rates are at 6%. To achieve savings, the Issuer may choose to refund the bonds yielding 9% with bonds yielding 6% This type of financing is known as a refunding transaction Executed properly, a refunding can create debt service savings for an Issuer KEY TYPES OF REFUNDINGS ADVANCE REFUNDING A refunding that refunds a bond issue more than 90 days in advance of the original issue s call or maturity date. An issue can be advance refunded only once. CURRENT REFUNDING A refunding transaction that refunds a bond issue within 90 days of the original issue s call or maturity date. An issue can be current refunded an unlimited number of times New Money Issue Standard 10-year call option (in 2026) Advance Refunding Can Occur (any date before 2026 at a premium) New Money Issue in April 2016; Standard 10 year call option Current Refunding Can Occur as early as January

13 11 The key feature of municipal securities are their tax-exempt status: Unlike many other securities, interest earned on tax-exempt debt is excluded from the gross income of a bondholder under federal and/or state law In most states, interest income earned on debt issued by governmental entities within the state is also exempt from state and local taxes Interest income from U.S. territories and possessions, including Guam, is exempt from federal, state, and local income taxes TAX EXEMPTION OF MUNICIPAL BONDS A HISTORICAL PERSPECTIVE In Pollock v. Farmers Loan and Trust Company, the Court rules that states are immune from federal interference with their borrowing power The Supreme Court passes the 16th Amendment, which establishes the modern income tax system and creates the basis for municipal bonds to be tax-exempt Congress establishes Section 103 of the Internal Revenue Code, which set forth the basic tax exemption for interest on municipal securities The Tax Reform Act is passed and imposes new restrictions on municipal securities, including limits on private activity bond, advance refundings and arbitrage-related restrictions The IRS issues new regulations regarding arbitrage and rebate rules in connection with guaranteed investment contracts and bond defeasance escrows The Housing and Economic Recovery Act provides AMT and volume cap relief for housing bonds. TARP passes, providing potential relief for municipal issuers 13

14 12 Millions Competitive Sale Frequent or Known Issuer Simple or Well-Known Bond Structure High Quality Credits Stable Market Environment Fixed Rate Debt Negotiated Sale Less Frequent or Less Known Issuer Complex Bond Structure Lower Quality Credits Volatile Market Environment Variable Rate Debt Issuer Wants Control Over Bond Issuance and Distribution Process Requires Long-Term Banking Support for Long-Term Capital Program Needs NEGOTIATED AND COMPETITIVE ISSUANCE SINCE YTD Negotiated Competitive 14

15 13 Competitive Sale Advantages Negotiated Sale Advantages Historically, had lower gross underwriting spread (or compensation but recently not true) Offer potential bidders equal opportunity Investment bank takes on all interest rate risk during marketing period Easier to delegate pricing and lead management decisions totally to the dynamics of the market place Doesn t require an underwriter selection process Flexibility in timing of sale Stronger marketing and education efforts for investors Competition for business has minimized costs of issuance Ability to change structure in response to market conditions Easier to comply with disclosure regulations Easier to coordinate dealings with syndicate through one lead manager Promotes control over distribution process and accountability Competitive Sale Disadvantages No pre-marketing/education process Financing stricture determined when Notice of Sale is published (2 weeks prior to sale date) Ensures broad-based distribution of securities Ensures commitment to secondary market-making Access to lead manager s personnel and experience Allows issuer to hire underwriters based on level of service No effective structuring of syndicate to reach broadest network of buyers Negotiated Sale Disadvantages Less flexibility in timing of sales No ability to control quality of distribution process Less flexibility of structure Will not necessarily foster ongoing commitment to market-making poor liquidity and wider spreads No technical and investment banking support Leaves basis for perception as to not receiving the best market rates on issues Sometimes have higher gross underwriting spread Generates high level of investment banking lobbying In a bull market, a competitive bid may produce better shortterm economics due to dealers willingness to inventory securities 15

16 14 Step 1: Develop Deal Timeline Step 2: Pre- Marketing Step 3: Pre-Pricing Step 4: Pricing Step 5: Post-Pricing Review forward calendar and economic release calendar Establish a financing schedule and set pricing date Establish preliminary pricing structure for the transaction Begin drafting the bond documents and marketing campaign materials Meetings/calls with rating agencies Finalize and release ratings and POS Circulate internal Sales Memo Launch investor marketing campaign (i.e. investor presentation, one-onone calls with investors, print and online advertising) Due diligence call Get issuer approval of structure, takedowns, pricing priority and designation policy Request price views from syndicate Circulate consensus spread wire Review market conditions, preliminary structure and anticipated pricing levels with issuer Receive issuer approval to proceed with sale Circulate preliminary pricing wire Hold order period (typically one or two days depending on deal size, structure, and market conditions) Review order book and reprice maturities where necessary Finalize structure Receive verbal award Review allotments with issuer and distribute bonds accordingly Circulate final pricing wire Sign Bond Purchase Agreement Written award Circulate summary of designations to syndicate members Finalize and release Official Statement Closing Commence continuing disclosure undertakings 16

17 15 Prior to pricing day, the Issuer and Financing Team develop a plan to effectively market the bonds REPRESENTATIVE MARKETING TIMELINE Fixed Rate Bonds Investor Outreach Post POS Internet Roadshow Individual Direct Outreach Release Preliminary Structure Wire Preliminary Pricing Call Formal Order Period Day 1 Days 4-7 Day 11 Day 13 Day 14 Day 15 Internal Retail Call One-on-One Investor Follow-Up Market Update Call Retail Order Period Sign Bond Purchase Contact 1-2 Weeks 17

18 16 Positioning bonds for purchase by a variety of investors can help achieve lower yields Target by investor type, recent cashflow data, regional preference, sector preference, prevailing investment thesis, etc. Mutual Funds Property & Casualty Companies Investment Advisors / Trust Departments Retail Investors 18

19 A bond yield is essentially the market s view on the value of a future cash flow The aggregation of current market views on the value of cash flows at all points in the future is known as term structure, more commonly referred to as a yield curve Each fixed income market uses its own yield curve as a benchmark In the municipal market, the daily published AAA MMD rates forms the benchmark yield curves for that particular day The benchmark yield curve informs the market of the present value of the ideal investment at any point in the future on that day Any difference between the bond yield and the AAA MMD yield received on a bond is known as spread HISTORICAL AAA MMD AAA MMD as of 11/14/2007 AAA MMD as of 11/14/2012 AAA MMD as of 11/14/2015 AAA MMD as of 11/14/2016 AAA MMD as of 11/14/

20 18 While the coupon of the bond determines the bond cash flows, the yield of the bond is used as the discount rate to arrive at the price of the bond The par value of a bond is its value at the maturity date - i.e. the amount the investor will be paid when the bond comes due When a bond is priced at less than par, it is said to be priced at a discount When a bond is priced at more than par, it is said to be priced at a premium A bond s yield is typically measured as a yield to maturity (YTM) the rate of return anticipated on a bond if it is held until the maturity date Relationship Between Coupon Rate, YTM and Price Par Bonds Coupon = Yield Bond Price = Par Value Discount Bonds Coupon < Yield Bond Price < Par Value Premium Bonds Coupon > Yield Bond Price > Par Value Below we extend the example from the previous slide to also detail the calculation of bond price assuming the same cash flows (5% coupon), but varying yields (4%, 5%, 6%) Yield at 5.0% (par) Yield at 4.0% (premium) Yield at 6.0% (discount) Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 $47.62 $45.35 $43.19 $41.14 $39.18 $37.31 $35.53 $33.84 $32.23 $ $1, $48.08 $46.23 $44.45 $42.74 $41.10 $39.52 $38.00 $36.53 $35.13 $ $1, $47.17 $44.50 $41.98 $39.60 $37.36 $35.25 $33.25 $31.37 $29.59 $ $ Total Price 20

21 19 Illinois Finance Authority State of Illinois Clean Water Initiative Revolving Fund Revenue Bonds, Series 2017 Final Transaction Structure Maturity Par Serial or Amount Term Coupon Yield 7/1/2018 8,700,000 Serial 5% 0.77% 1/1/ ,000,000 Serial 5% 0.87% 7/1/ ,100,000 Serial 5% 0.92% 1/1/ ,620,000 Serial 5% 0.96% 7/1/ ,440,000 Serial 5% 1.02% 1/1/ ,015,000 Serial 5% 1.11% 7/1/ ,680,000 Serial 5% 1.17% 1/1/ ,900,000 Serial 5% 1.25% 7/1/ ,115,000 Serial 5% 1.31% 1/1/ ,750,000 Serial 5% 1.40% 7/1/ ,170,000 Serial 5% 1.47% 1/1/ ,585,000 Serial 5% 1.59% 7/1/ ,745,000 Serial 5% 1.67% 1/1/ ,835,000 Serial 5% 1.77% 7/1/ ,730,000 Serial 5% 1.85% 1/1/ ,555,000 Serial 5% 1.97% 7/1/ ,920,000 Serial 5% 2.03% 1/1/ ,205,000 Serial 5% 2.11% 7/1/ ,445,000 Serial 5% 2.17% 1/1/ ,505,000 Serial 5% 2.25% 7/1/ ,170,000 Serial 5% 2.30% 1/1/ ,385,000 Serial 5% 2.37% 7/1/ ,010,000 Serial 5% 2.42% 1/1/ ,920,000 Serial 5% 2.47% 7/1/ ,705,000 Serial 5% 2.51% 7/1/ ,385,000 Term 5% 2.58% 7/1/ ,640,000 Term 5% 2.64% 7/1/ ,180,000 Term 5% 2.70% 7/1/ ,370,000 Term 5% 2.76% 7/1/ ,930,000 Term 5% 2.81% 7/1/ ,280,000 Term 5% 2.84% 7/1/ ,035,000 Term 5% 2.87% The Order Period Order Status Review Re-Pricing Short/ Intermediate Funds 10% Day of Pricing Typically 1-3 hour timeframe Investors (retail/institutional) enter all orders Investors may request change to structure, coupon and/or yield Review orders by maturity and unsold balances The transaction may be re-priced or re-structured depending upon: Investor demand per maturity Number and type of investors Volatility in the market Comparable transactions Breakdown of Anticipated Buyers Arbitrage Accounts 25% Investment Advisors 10% Bank Trusts 5% "Mom and Pop" Retail 5% Bond Funds 30% Insurance Companies 15% 21

22 20 The cost of issuance of the bonds is paid from bond proceeds. Bond proceeds are the funds produced by the sale of the bonds less the underwriter s discount for providing the capital. The components of cost of issuance and underwriter s discount are typically broken-down as follows: Borrower s Costs of Issuance Bond Counsel Trustee/Paying Agent (upfront and annual) Ratings (upfront and in some cases annual) Financial Advisor Fee Auditors Fee (if any) Printing (and electronic posting) Bond Insurance Premium or Upfront Credit Enhancement Fee if any Letter of Credit or liquidity costs are charged annually and paid quarterly in arrears Remarketing/Broker-Dealer Fees Only in connection with variable rate and auction rate issues Charged annually and paid quarterly in arrears Verification Agent Fee Components of Underwriter s Discount Average Takedown ($ per 1,000 bond) Management Fee Compensation for banking services Expenses of Underwriters Underwriters Counsel Fees Blue Sky Qualification Federal Funds Wire/Day Loan Regulatory Fees Wire/Syndicate Communications Costs (DALCOMP) Travel and Other Out-of-Pocket Expenses CUSIP Interest on Good Faith Check 22

23 21 Award Issuer and underwriter agree to pricing levels Bond allotments Verbal and written award Bond Closing Typically 1-2 weeks after pricing Documents finalized and signed Funds wired to appropriate parties Continuing Disclosure Issuer must abide by Continuing Disclosure Agreement Agree to provide annual financials and other relevant information to the market in a timely manner Rating agencies will monitor the Issuer annually for any significant changes in financial or credit situation 23

24 22 Many of the characteristics of traditional residential mortgages are translatable to municipal bonds, thereby providing a foundation for understanding the contours and intricacies of municipal bonds Similarities Between Residential Mortgages and Municipal Bonds Purpose Residential Mortgages Used to fund the purchase of an asset (a home) or to refinance an existing mortgage Municipal Bonds Used to fund a public project or to refinance (refund) an existing loan/bond obligation Key People Eligibility Payment Terms Home Buyer (investor), Home Seller (client), Real Estate Brokers, Real Estate Lawyer, Mortgage Banker Based on income and credit score (which gives consideration to other existing fixed and variable rate debt, repayment history, length of credit history, etc.) Fixed Rate up to 30-years or Adjustable-Rate Mortgage (ARM) Municipal Bond Investors, Municipal Entity (client), Financial Advisor, Attorneys, Investment Bankers Based on management's expertise, financing team's expertise, and fundamental credit characterstics like key financial metrics, expected future borrowing, etc. Fixed Rate typically up to 30-years or Variable Rate (Variable Rate Demand Bond, Floating Rate Note, etc.) Fixed Rate Benchmark Interest Rate Prime Rate (Fixed Rate), LIBOR (or other short term interest rate benchmark) Municipal Market Data (MMD), U.S. Treasury Bonds Floating Rate Benchmark Interest Rate LIBOR, 11th District Cost of Funds Index (COFI), One-Year Constant Maturity Treasury (CMT) SIFMA, LIBOR, Inflation Example Amortizations Monthly Level Payments or Balloon Payment Semi-Annual Payments (every 6 months), Balloon Payment Additional Financing Costs Timeline Closing Costs (including loan origination costs, title search fees, surveys, credit report costs), Private Mortgage Insurance Can vary significantly, but typically around 4 to 6 weeks from application to closing Costs of Issuance (including Financial Advisor fees, various fees for attorneys, consultant fees, rating agency fees), Underwriter's fees, Bond Insurance Can vary significantly, but typically around 8 to 12 weeks from establishment of financing team to closing 24

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26 24 Presented below is the current debt profile for the City. The maximum annual debt service payment which occurs in Fiscal Year 2021 is approximately 62% greater than the annual debt service payment due for Fiscal Year $45,000,000 $40,000,000 $35,000,000 $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $0 10-Year Principal Amortization Rate: 77% 2017C Bonds 2017B Refunding Bonds 2017A Refunding Bonds 2016A Refunding Bonds Series 2015 POB Refunding Bonds Series 2015A Bonds Series 2014A Bonds Series 2013 Bonds Series 2012 Bonds Series 2010B_3 Bonds Series 2010B_2 Bonds Series 2010A Bonds Series 2009 Bonds Series 2008B Refunding Bonds Series 2008A GO Bonds Series 2007 Bonds Series 2006 Bonds MERF Bonds 1998 Series POB 26

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28 26 % Tax Exempt and Taxable Yield Curves AAA MMD 12/08/17 AAA MMD 12/08/16 US Tsy 12/08/17 US Tsy 12/08/16 bp Change in US Treasury v. AAA MMD: 11/08/17 v. 12/08/17 35 AAA MMD US Treasury Observations Current Cumulative Frequency Histogram for 30 Yr MMD Present 2.56% as of 12/08/ percentile 100% 75% Histogram for 30 Yr Treasury present 2.77% as of 12/08/ percentile Frequency Current Cumulative Frequency 100% 90% 80% 70% 60% % 25% % 40% 30% 20% 10% % % 28 Data Sources: The Municipal Market Monitor (TM3) and the U.S. Department of Treasury - Daily Treasury Yield Curve Rates

29 27 110% Tax Exempt Yield Curves as a Percentage of 30 Yr MMD 110% Taxable Yield Curves as a Percentage of 30-Yr Treasury 100% 100% 90% 90% 80% 80% 70% 70% 60% 60% 50% 40% 30% % of 30 yr AAA MMD 12/08/2016 % of 30 yr AAA MMD 12/08/ % 40% 30% % of 30 yr US Tsy 12/08/2016 % of 30 yr US Tsy 12/08/ % 20% 10% 10% 0% % Fed Funds Target Rate vs. MMD US Treasury v. AAA MMD: 12/08/17 MMD US Treasury MMD/UST 140% 120% % % 60% 40% % Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Fed Funds Target Rate 1-yr AAA MMD 5-yr AAA MMD 10-yr AAA MMD 30-yr AAA MMD Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec % 29 Data Sources: The Municipal Market Monitor (TM3) and the U.S. Department of Treasury - Daily Treasury Yield Curve Rates

30 % AA MMD Credit Spread - 5-Year Maturity 0.40% AA MMD Credit Spread - 10-Year Maturity 0.35% 0.35% 0.30% 0.30% 0.25% 0.25% % 0.20% % 0.20% 0.15% 0.15% 0.10% 0.10% 0.05% 0.05% 0.00% Oct-17 Jul-17 Apr-17 Jan-17 Oct-16 Jul-16 Apr-16 Jan-16 Oct-15 Jul-15 Apr-15 Jan-15 Oct-14 Jul-14 Apr-14 Jan-14 Oct-13 Jul-13 Apr-13 Jan-13 Oct-12 Jul-12 Apr-12 Jan-12 Oct-11 Jul % Oct-17 Jul-17 Apr-17 Jan-17 Oct-16 Jul-16 Apr-16 Jan-16 Oct-15 Jul-15 Apr-15 Jan-15 Oct-14 Jul-14 Apr-14 Jan-14 Oct-13 Jul-13 Apr-13 Jan-13 Oct-12 Jul-12 Apr-12 Jan-12 Oct-11 Jul-11 AA GO 5-Year Credit Spreads Average +2 STD DEV -2 STD DEV AA GO 10-Year Credit Spreads Average +2 STD DEV -2 STD DEV 0.40% AA MMD Credit Spread - 20-Year Maturity 0.40% AA MMD Credit Spread - 30-Year Maturity 0.35% 0.35% 0.30% 0.30% 0.25% 0.25% % 0.20% % 0.20% 0.15% 0.15% 0.10% 0.10% 0.05% 0.05% 0.00% Oct-17 Jul-17 Apr-17 Jan-17 Oct-16 Jul-16 Apr-16 Jan-16 Oct-15 Jul-15 Apr-15 Jan-15 Oct-14 Jul-14 Apr-14 Jan-14 Oct-13 Jul-13 Apr-13 Jan-13 Oct-12 Jul-12 Apr-12 Jan-12 Oct-11 Jul % Oct-17 Jul-17 Apr-17 Jan-17 Oct-16 Jul-16 Apr-16 Jan-16 Oct-15 Jul-15 Apr-15 Jan-15 Oct-14 Jul-14 Apr-14 Jan-14 Oct-13 Jul-13 Apr-13 Jan-13 Oct-12 Jul-12 Apr-12 Jan-12 Oct-11 Jul-11 AA GO 20-Year Credit Spreads Average +2 STD DEV -2 STD DEV AA GO 30-Year Credit Spreads Average +2 STD DEV -2 STD DEV 30 Data Source: The Municipal Market Monitor (TM3)

31 % A MMD Credit Spread - 5-Year Maturity 1.20% A MMD Credit Spread - 10-Year Maturity 1.00% 1.00% 0.80% 0.80% % 0.60% % 0.60% 0.40% 0.40% 0.20% 0.20% 0.00% Oct-17 Jul-17 Apr-17 Jan-17 Oct-16 Jul-16 Apr-16 Jan-16 Oct-15 Jul-15 Apr-15 Jan-15 Oct-14 Jul-14 Apr-14 Jan-14 Oct-13 Jul-13 Apr-13 Jan-13 Oct-12 Jul-12 Apr-12 Jan-12 Oct-11 Jul-11 A GO 5-Year Credit Spreads Average +2 STD DEV -2 STD DEV 0.00% Oct-17 Jul-17 Apr-17 Jan-17 Oct-16 Jul-16 Apr-16 Jan-16 Oct-15 Jul-15 Apr-15 Jan-15 Oct-14 Jul-14 Apr-14 Jan-14 Oct-13 Jul-13 Apr-13 Jan-13 Oct-12 Jul-12 Apr-12 Jan-12 Oct-11 Jul-11 A GO 10-Year Credit Spreads Average +2 STD DEV -2 STD DEV 1.20% A MMD Credit Spread - 20-Year Maturity 1.20% A MMD Credit Spread - 30-Year Maturity 1.00% 1.00% 0.80% 0.80% % 0.60% % 0.60% 0.40% 0.40% 0.20% 0.20% 0.00% Oct-17 Jul-17 Apr-17 Jan-17 Oct-16 Jul-16 Apr-16 Jan-16 Oct-15 Jul-15 Apr-15 Jan-15 Oct-14 Jul-14 Apr-14 Jan-14 Oct-13 Jul-13 Apr-13 Jan-13 Oct-12 Jul-12 Apr-12 Jan-12 Oct-11 Jul-11 A GO 20-Year Credit Spreads Average +2 STD DEV -2 STD DEV 0.00% Oct-17 Jul-17 Apr-17 Jan-17 Oct-16 Jul-16 Apr-16 Jan-16 Oct-15 Jul-15 Apr-15 Jan-15 Oct-14 Jul-14 Apr-14 Jan-14 Oct-13 Jul-13 Apr-13 Jan-13 Oct-12 Jul-12 Apr-12 Jan-12 Oct-11 Jul-11 A GO 30-Year Credit Spreads Average +2 STD DEV -2 STD DEV 31 Data Source: The Municipal Market Monitor (TM3)

32 % BBB MMD Credit Spread - 5-Year Maturity 2.50% BBB MMD Credit Spread - 10-Year Maturity 2.00% 2.00% 1.50% 1.50% % 1.00% % 1.00% 0.50% 0.50% 0.00% Oct-17 Jul-17 Apr-17 Jan-17 Oct-16 Jul-16 Apr-16 Jan-16 Oct-15 Jul-15 Apr-15 Jan-15 Oct-14 Jul-14 Apr-14 Jan-14 Oct-13 Jul-13 Apr-13 Jan-13 Oct-12 Jul-12 Apr-12 Jan-12 Oct-11 Jul-11 BBB GO 5-Year Credit Spreads Average 0.00% Oct-17 Jul-17 Apr-17 Jan-17 Oct-16 Jul-16 Apr-16 Jan-16 Oct-15 Jul-15 Apr-15 Jan-15 Oct-14 Jul-14 Apr-14 Jan-14 Oct-13 Jul-13 Apr-13 Jan-13 Oct-12 Jul-12 Apr-12 Jan-12 Oct-11 Jul-11 BBB GO 10-Year Credit Spreads Average +2 STD DEV -2 STD DEV +2 STD DEV -2 STD DEV 2.50% BBB MMD Credit Spread - 20-Year Maturity 2.50% BBB MMD Credit Spread - 30-Year Maturity 2.00% 2.00% 1.50% 1.50% % 1.00% % 1.00% 0.50% 0.50% 0.00% Oct-17 Jul-17 Apr-17 Jan-17 Oct-16 Jul-16 Apr-16 Jan-16 Oct-15 Jul-15 Apr-15 Jan-15 Oct-14 Jul-14 Apr-14 Jan-14 Oct-13 Jul-13 Apr-13 Jan-13 Oct-12 Jul-12 Apr-12 Jan-12 Oct-11 Jul-11 BBB GO 20-Year Credit Spreads Average +2 STD DEV -2 STD DEV 0.00% Oct-17 Jul-17 Apr-17 Jan-17 Oct-16 Jul-16 Apr-16 Jan-16 Oct-15 Jul-15 Apr-15 Jan-15 Oct-14 Jul-14 Apr-14 Jan-14 Oct-13 Jul-13 Apr-13 Jan-13 Oct-12 Jul-12 Apr-12 Jan-12 Oct-11 Jul-11 BBB GO 30-Year Credit Spreads Average +2 STD DEV -2 STD DEV 32 Data Source: The Municipal Market Monitor (TM3)

33 31 $MM USD Series1 20-Yr AAA MMD $2,500 $2,000 $1,500 $1,000 $500 $0 ($500) ($1,000) ($1,500) ($2,000) ($2,500) ($3,000) ($3,500) ($4,000) ($4,500) ($5,000) Period of Meredith Whitney muni headline risk 01/06/10 04/07/10 06/30/10 09/22/10 12/15/10 03/09/11 Investor flight to quality from Eurozone crisis Investor sell-off in anticipation of 2013 Tax Reform 06/01/11 08/24/11 11/16/11 02/08/12 05/02/12 07/25/12 10/17/12 01/09/13 04/03/13 06/26/13 09/18/13 12/11/13 03/05/14 05/28/14 08/20/14 Puerto Rico GO debt downgraded 11/12/14 02/04/15 04/29/15 07/22/15 FOMC Fed Funds rate lift-off Post-election sell-off Fed s announcement of scaling-back quantitative easing (QE) program. Headline risk related to Detroit bankruptcy protection and Puerto Rico fiscal strain 10/14/15 01/06/16 03/30/16 06/22/16 09/14/16 12/07/16 03/01/17 05/24/ Tax Reform Uncertainty 08/16/17 11/08/17 % Year MMD Trailing 16-Week Data Muni Fund Reporting Date Weekly Fund Flow ($MM USD) 20-Yr AAA MMD 8/2/2017 $ % 8/9/2017 $ % 8/16/2017 $ % 8/23/2017 $ % 8/30/2017 $ % 9/6/2017 $ % 9/13/2017 $ % 9/20/2017 $ % 9/27/2017 $ % 10/4/2017 ($97.26) 2.64% 10/11/2017 $ % 10/18/2017 $ % 10/25/2017 $ % 11/1/2017 ($165.44) 2.64% 11/8/2017 $ % 11/15/2017 $ % 11/22/2017 $ % 11/29/2017 $ % 12/6/2017 ($579.27) 2.36% 33 As of the weekly reporting date of 12/06/2017 Data Source: EPFR Global Fund Flows and Allocations Data All Muni Funds (Retail and Institutional Funds).

34 32 34

35 Independently owned, diversified financial services firm established in 1937 Global presence with 16 U.S. locations and 2 international offices in London and Hong Kong Employee-owned / Incentivized for long-term growth Key Stats: $34.3 billion in assets under management and an additional $77.2 billion of currency risk assets¹ $366 million in revenues² $326 million in capital² Estimated bond underwriting capacity of $4.65 Billion³ Not a bank Low leverage No high-risk financial products on the balance sheet No need to sell financial products Management philosophy Willingness and track-record of taking risk on behalf of our clients As of 9/30/17 2. As of 3/31/17 3. Per net capital requirement computation methodology under Title 17 Code of Federal Regulations c3-1(c)(2)(vi)(B)(2).

36 Partnering with institutional, municipal and corporate clients to provide unique and innovative solutions bankers, salespeople, traders and analysts in locations across the U.S. advised M&A deals valued at $5 billion+ in aggregate value Global M&A advisor serving the middle-market and providing customized solutions to meet the unique needs of our clients. annual trading volume Established broker-dealer offering a suite of innovative financial products and services combined with extensive market expertise to serve the unique liquidity needs of institutional investors. transactions totaling over $175 billion in par amount Innovative debt financing solutions to fund capital and infrastructure projects of government agencies, non-profits and other taxexempt borrowers. completed sale-leaseback transactions Fully integrated net lease investment and asset management group specializing in working with corporate management teams to unlock the hidden value of their real estate holdings. rank in domestic private placements* Long-term financing solutions at favorable fixed rates for commercial real estate owners and developers of properties tenanted by investmentgrade credits. in transaction volume Structuring and placement expertise for alternative debt structures providing optimal execution, including enhanced leverage, enhanced cash flow and tax risk mitigation strategies As of 6/30/17. *Private Placement Monitor League Tables 2016.

37 35 Millions Commitment to Public Finance After the economic shock of 2008, Mesirow Financial invested in public finance as a strategic growth area and have opened two new Public Finance offices in the past year in Hartford, CT and Indianapolis, IN. Greatly enhanced sales and trading performance Addition of a new Santa Monica trading desk with the hiring of Chris Tota and Neil Mathisen Experienced quantitative staff with adept technical and structuring capabilities Mesirow s bankers are highly skilled, with many having over 20 years of experience at top investment banks Addition of three public finance bankers: John Healey and Richard Thivierge (Connecticut), Greg Clark (Indianapolis), Addition of six new quantitative analysts Capital and Underwriting Experience Since 2015, Mesirow has significantly increased our senior managed underwriting volume for both negotiated and competitive transactions. Ability to win competitive bids demonstrates keen market awareness, ability to aggressively price bonds, and willingness to commit capital Our lead underwriter, Jay Murphy, in our NYC office provides strong underwriting leadership, as evidenced by 2015 and 2016 seniormanaged underwriting statistics $2,500 $2,000 $1,500 $1,000 $500 $- Senior Managed Transactions * 37 Source: Bloomberg *As of 10/31/2017

38 36 Mesirow Financial plans to bring to the transaction an experienced team of professionals from its Public Finance team, Sales & Trading desk, and Credit Research department. This team would be able to provide the Town with a depth of knowledge and understanding of how the Town can raise the funds needed, while doing so at the lowest total interest cost (TIC). Local Coverage John Healey Managing Director Richard Thivierge Managing Director Underwriting Jay Murphy Managing Director Head of Public Finance Todd Waldrop Senior Managing Director Sales & Trading Joe Wark Senior Managing Director John Weber Managing Director Credit Research Blake Anderson Managing Director Mark Whitaker Managing Director Quantitative Support Andrew Nicodemus Associate Bing Hsu Quantitative Analyst 38

39 37 Mesirow Financial is expanding its traditional Midwest footprint, having underwritten bonds in 23 states over the past three years Sole or senior on over 195 series of bonds totaling $4 billion for issuers across the country over the last 3 years Value-added co-senor or co-manager on over 235 transactions totaling $71 billion in bonds Placement agent on 27 series of non-rated bonds totaling $122 million Town of Trumbull, CT $24,500,000 Issue of 2017, Series B Co-Manager City of Bridgeport, CT $99,500,000 Series 2017D Taxable Co-Manager City of Cleveland $71,985,000* Water Revenue Bonds Series BB&CC, 2017 Co-Manager State of Wisconsin $290,575, Series A&B Co-Manager Texas Public Finance Authority Texas Southern University $55,490,000 Series 2016 A Revenue Senior Manager Chicago Board of Education $500,000,000 Series 2017A&B Co-Manager City of Chicago $1,162,500,000 Series 2017A&B Co-Senior Manager San Diego Redevelopment (Successor Agency) $219,965,000 Series 2017A&B Tax Allocation Co-Manager Sweetwater Union High School District $265,710,000 Series 2017 GO Sole Manager Texas Transportation Comm. $770,155,000 Series 2017A&B GO Co-Manager Village of Rosemont $100,000,000 Series 2016A&B GO Sole Manager Atlanta Development Authority $144,855,000 Refunding Tax Allocation Bonds Series 2016 A-E Co-Senior Manager 39

40 Our capital position is strong with approximately $112 million in total capital and $70 million of excess net capital as of September 30, We are willing and able to commit up to 100% of excess net capital to support any municipal financing. Depending on the size of the financing, Mesirow Financial has historically received subordinated loans from its parent, which has capital of $326 million as of September 30, Total Capital $112,585,286 Net Capital $70,027,004 Excess Net Capital $69,777,004 Parent Company Capital $326,000,000 Underwriting Capacity on Sole-Managed Basis 2 $4,650,000,000 Consequently, Mesirow Financial may have the current ability to underwrite up to approximately $4.65 billion 1 in financing, based on current regulatory haircut parameters. Recent Examples of Using Firm Capital to Assist Clients Sale Date Issue Description Deal Size Liability % $ Committed % Committed 10/26/2017 State of Illinois $4,500,000,000 1% $5,000, % 9/20/2017 Atlanta Development Authority $25,700,000 65% $2,155, % 9/18/2017 City of Hutto, Texas $80,070,000 70% $29,495, % 7/29/2017 City of Calumet City, Illinois $9,250, % $835, % 3/15/2017 Manteno CUSD #5, Illinois $4,055, % $1,230, % 12/7/2016 Village of Rosemont, Illinois $100,000, % $35,070, % 11/10/2016 City of Fishers, Indiana $20,485, % $2,045, % 10/11/2016 SD #153 Homewood, Illinois $4,435, % $2,355, % 9/15/2016 Niles Park District, Illinois $2,000, % $600,000 30% 8/24/2016 Texas Southern University, Series 2016 $55,490,000 50% $4,070, % 3/24/2016 Sweetwater Union High School District $265,710, % $4,260, % 3/8/2016 Del Mar College District $15,110,000 40% $1,750, % 2/9/2016 Fort Bend County, Texas $64,440,000 25% $3,000, % Per net capital requirement computation methodology under Title 17 Code of Federal Regulations c3-1(c)(2)(vi)(B)(2). 2. Depending on the size of the financing, Mesirow Financial has historically received subordinated loans from its parent, which has capital of $326 million. Consequently, Mesirow Financial may have the current ability to underwrite up to approximately $4.65 billion in financing, based on current regulatory haircut parameters.

41 39 Millions Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Institutional and Retail Distribution Dedicated and highly experienced sales and trading operation comprised of 29 individuals, with 8 traders and 19 salespeople Additional 136 salespeople who cover a range of fixed income products, including municipals, to Tier 2 and Tier 3 accounts Average monthly volume of secondary market municipal trades: $1.5 billion nationally per month Focused coverage of independent advisors, broker-dealers, asset managers, and other firms that deliver retail orders National Secondary Market Trading Volume New Santa Monica Sales and Trading Office Recent hire of Chris Tota and Neal Mathisen in newly established Santa Monica office Buy-side credit research group is continually engaged with our accounts Headed by the firm s Senior Municipal Strategist, Blake Anderson, a former managing director at Putnam Investments (30 years of experience) Mesirow Financial s Secondary Market Trading Volume 3,000 2,500 2,000 1,500 1, US Muni Bonds Average Monthly Trading 41 Source: Bloomberg

42 40 Secondary Market Trading We consistently assist our clients through secondary market trading of their bonds, which helps maintain pricing stability and provides investors with liquidity for future primary market issuances Nationally over the past year, we have averaged approximately $1.7 billion in secondary market trading per month We have traded over $1.5 billion of Connecticut paper since 2013 National Secondary Market Trading Volume ($MM) Connecticut Secondary Market Trading Volume ($MM) 42 Source: Bloomberg as of 8/1/2017

43 41 To learn more about our Public Finance group, please visit mesirowfinancial.com/publicfinance The information contained herein is intended for informational purposes only and is applicable to Qualified Purchasers only. This is not an offer or sale of securities. Securities are only offered to Qualified Purchasers. Financing terms are determined on a case-by-case basis and will vary according to suitability. Securities offered through Mesirow Financial, Inc., member SIPC. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. Any opinions expressed are subject to change without notice. It should not be assumed that any recommendations incorporated herein will be profitable or will equal past performance. Any listing of representative clients was not selected based on specific performance criteria but rather lists significant institutional relationships. We do not represent that any client listed specifically approves or disapproves of our advisory services. Mesirow Financial Holdings, Inc. or any of its affiliates does not provide tax or legal advice. The products and services mentioned may have tax consequences and, therefore, you should consult your tax advisor in order to understand the tax consequences of any product or service mentioned. The Mesirow Financial name and logo are registered service marks of Mesirow Financial Holdings, Inc., 2016, Mesirow Financial Holdings, Inc. All rights reserved. 43