Special Meeting of the Common Council Wednesday, January 10, 2018 6:45 PM Council Chambers, City Hall, 2nd Floor, 27 West Main Street, New Britain, Connecticut NOTICE - The Common Council of the City of New Britain, Connecticut will hold a special meeting on Wednesday evening, January 10, 2018 at 6:45 p.m. in the Council Chambers, City Hall, 27 West Main Street, New Britain, Connecticut. PUBLIC PARTICIPATION ROLL CALL READING OF WARRANT WARRANT Warrant PRESENTATION AGENDA RESTRUCTURING SUMMARY PRESENTATION Restructuring Summar 1.10.18 1. To accept a report of the Standing Bonding Subcommittee of the Common Council Committee on Administration, Finance and Law regarding a $115,000,000 Appropriation and Bond Authorization to Refund Any of the City s Outstanding General Obligation Bonds. Report 2. To act upon a Resolution regarding a $115,000,000 Appropriation and Bond Authorization to Refund Any of the City s Outstanding General Obligation Bonds. Resolution ADJOURNMENT 1
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City of New Britain, CT January 10, 2018 John J. Healey Managing Director Phone: 860.466.7310 jhealey@mesirowfinancial.com Richard W. Thivierge Managing Director Phone: 860.466.7315 rthivierge@mesirowfinancial.com 3
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3 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 1934. 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., 2018, 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. 5
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5 Presented below are federal funds effective rates and the 30-year treasury rates shown on December 1 st from 1980 through 2017. As evidenced by the graph, rates have declined significantly over the past 37 years. 25.00 Federal Funds Effective Rates 30 - Year Treasury Bond Yield 20 -YR Bond GO Index 20.00 15.00 10.00 5.00 0.00 Source: U.S. Department of the Treasury, Bloomberg LP and the Bond Buyer. 7
Yield 6 Presented below are the yield curves for the 30-Year Treasury over the past 5 years. As apparent from the graph below, the yield curve has flattened. 4.50% US Tsy 1/5/2018 US Tsy 1/5/2017 US Tsy 1/5/2016 US Tsy 1/5/2015 US Tsy 1/6/2014 4.00% 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% 1 2 3 5 7 10 20 30 Years Out Source: Bloomberg LP 8
7 MMD Yields Presented below are the yield curves for the AAA MMD yields over the past 5 years. As apparent from the graph below, the yield curve has flattened. MMD Yields as of 1/5/2018 MMD Yields as of 1/5/2017 MMD Yields as of 1/5/2016 4.5 MMD Yields as of 1/5/2015 MMD Yields as of 1/6/2014 4 3.5 3 2.5 2 1.5 1 0.5 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Years Out Source: Bloomberg LP 9
8 Displayed in the graph below are the 2018 Year-to-Date 10-Year Treasury rates. The 10-Year Treasury has been trending higher in interest rates. The value of 1 basis point for the proposed 2018 Restructuring is $111,272.70. This means that each one basis point increase in interest rates results in an additional cost of $111,272.70 or inversely each one basis point decrease in interest rates results in a reduced cost of $111,272.70 for the 2018 Restructuring On Monday, January 8 th, the 10-Year Treasury closed at 2.48% and today the 10-Treasury is at 2.56%. The 8 basis point increase in the 10-Year Treasury rate equates to an increased cost of $890,181.60 for the 2018 Restructuring. YTD 10-Year Treasury Rate 2.600% 2.550% 2.500% 2.450% 2.400% 2.350% 2.300% 10
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10 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 2018. $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 12
11 Restructuring Objective: To create a comprehensive restructuring of the City s debt profile including; lowering the maximum annual debt service payment from ~$40MM to ~$26MM, creating near-and-mid-term relief and gradual declines in annual debt service payments. Taking Advantage of Statutory Changes: In the 2017 legislative session, the Connecticut General Assembly passed a change to the municipal bonding statutes that opens a five-year window whereby municipalities may now restructure their existing debt obligations out beyond its original final maturity, not to exceed 30 years. This was done to allow municipalities, like New Britain, to be able to manage their debt without having to look to the state for additional assistance. Restructuring Assumptions: 23 year amortization for the 2018 Restructuring will be utilized to minimize dissavings, based upon the rate environment at the time of pricing; the 2018 Restructuring Bonds would have capitalized interest utilized through and including Fiscal 2020 in order to enhance the City s near-term relief. The 2018 Restructuring Bonds are assumed to be done on a fixed-rate taxable basis. Accomplishing the Restructuring: The 2018 Restructuring is accomplished by refunding and restructuring existing principal and interest payments and amortizing them in later years. The debt service on the outstanding bonds that were selected for the restructuring would be paid from proceeds of the 2018 Restructuring Bonds. The 2018 Restructuring Bonds would amortize in years 2020 through 2040. This approach helps to mitigate the City s maximum annual debt service payments. Component Descriptions: o Component A: Defeasing selected near-term maturities that are able to be advanced refunded on a taxable basis. o Component B: Defeasing interest on outstanding bonds through and including March 2020. 13
12 Presented below in red are the City s existing annual debt service payments. Shown in green are the proposed annual debt service payments after the 2018 Restructuring. 45,000,000 40,000,000 35,000,000 30,000,000 10-Year Principal Amortization Rate: 50% 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 - Existing Debt Debt Service after Restructuring 14
13 Presented below are the results of the 2018 Restructuring shown on an annual basis. The figures presented below are in thousands. 23-Year Repayment Term Component A Component B Total Impact Existing (Savings) & (Savings) & New Debt Total (Savings) & Present Value Year End Debt Service Dissavings Dissavings Service Dissavings From Closing Date 6/30/2018 24,296 (1,434) (1,639) 21,224 (3,072) (3,070) 6/30/2019 29,188 (8,008) (3,277) 17,902 (11,285) (10,967) 6/30/2020 36,373 (12,971) (3,075) 20,326 (16,047) (15,070) 6/30/2021 39,357 (14,261) 380 25,477 (13,881) (12,548) 6/30/2022 34,273 (9,029) 380 25,624 (8,649) (7,555) 6/30/2023 31,883 (6,719) 380 25,544 (6,339) (5,353) 6/30/2024 31,466 (6,316) 380 25,530 (5,936) (4,847) 6/30/2025 29,190 (4,010) 380 25,560 (3,629) (2,859) 6/30/2026 20,871 3,724 380 24,975 4,104 3,184 6/30/2027 13,872 4,924 855 19,651 5,779 4,329 6/30/2028 12,165 4,778 857 17,799 5,635 4,085 6/30/2029 11,079 5,185 858 17,122 6,043 4,238 6/30/2030 10,888 5,275 858 17,021 6,133 4,161 6/30/2031 10,745 5,408 857 17,010 6,265 4,113 6/30/2032 9,133 7,233 859 17,225 8,092 5,135 6/30/2033 9,076 7,374 856 17,307 8,230 5,054 6/30/2034 8,048 8,172 857 17,076 9,029 5,363 6/30/2035 8,018 6,911 859 15,787 7,769 4,467 6/30/2036 5,105 10,555 859 16,519 11,414 6,344 6/30/2037 5,108 10,573 858 16,539 11,431 6,147 6/30/2038 15,349 860 16,209 16,209 8,430 6/30/2039 15,347 855 16,202 16,202 8,152 6/30/2040 15,349 859 16,208 16,208 7,889 380,134 63,409 6,296 449,837 69,705 18,821 15
14 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., 2018, Mesirow Financial Holdings, Inc. All rights reserved. 16
CITY OF NEW BRITAIN NEW BRITAIN, CONNECTICUT REPORT OF: STANDING BONDING SUBCOMMITTEE ITEM #: To Her Honor, the Mayor, and the Common Council of the City of New Britain: the undersigned beg leave to report the following: RE: $115,000,000 Appropriation and Bond Authorization to Refund Any of the City s Outstanding General Obligation Bonds At a meeting of the Standing Bonding Subcommittee of the Committee on Administration, Finance and Law (the Bonding Subcommittee ) held on January 10, 2018 on a motion by Bonding Subcommittee member and seconded by Bonding Subcommittee member, the following resolution was adopted: RESOLVED, that the Bonding Subcommittee recommends to the Common Council that the sum of $115,000,000 be appropriated for the purpose of paying, funding or refunding prior to maturity any of the City s outstanding General Obligation Bonds, applicable redemption premiums, if any, with respect thereto, to pay interest costs on such bonds through June 30, 2020, to pay costs with respect to the issuance of such bonds, and to fund one or more escrow accounts, if any, for such purposes, and to meet said appropriation and in lieu of a tax therefor, bonds of the City be issued pursuant to Article XII of the City Charter and Chapter 109 of the Connecticut General Statutes, as amended, or any other provision of law thereto enabling, in an amount not to exceed $115,000,000 or so much thereof as may be necessary after deducting other sources of funds available therefor. BE IT FURTHER RESOLVED, that the Bonding Subcommittee recommends to the Common Council that the bonds may be sold in a single issue or may be consolidated with other authorized but unissued bonds of the City. The bonds shall be issued in fully registered form, be executed in the name and on behalf of the City by the facsimile or manual signatures of the Mayor and the Treasurer, bear the City seal or a facsimile thereof, be certified and payable at a bank or trust company designated by the Mayor and the Treasurer which bank or trust company may also be designated as the registrar and transfer agent, and be approved as to their legality by Bond Counsel to the City. The bonds may be issued in one or more series and shall bear such rate or rates of interest as determined by the Mayor and the Treasurer. The bonds shall be general obligations of the City and each of the bonds shall recite that every requirement of law relating to its issue has been duly complied with, that such bonds are within every debt and other limit prescribed by law, and that the full faith and credit of the City are pledged to the payment of the principal thereof and interest thereon. The aggregate principal amount of bonds to be issued, the annual installments of principal, the redemption provisions, if any, the interest rate or 17 6135973v1
rates, form, manner and date of issuance and sale, and other terms, details and particulars of such bonds shall be determined by the Mayor and the Treasurer. BE IT FURTHER RESOLVED, that the Bonding Subcommittee recommends to the Common Council that the bonds may be sold by the Mayor and the Treasurer in a public sale, sealed proposal or a negotiated underwriting and the Mayor and the Treasurer are authorized to select the underwriter or underwriters and to enter into, execute and deliver on behalf of the City a contract of purchase for such bonds on such terms and conditions as they shall determine. BE IT FURTHER RESOLVED, that the Bonding Subcommittee recommends to the Common Council that the Mayor and the Treasurer are hereby authorized, on behalf of the City, to enter into agreements or otherwise covenant for the benefit of bondholders to provide information on an annual or other periodic basis to the Municipal Securities Rulemaking Board or any other municipal securities information repositories or state based information repositories (the Repositories ) and to provide notices to the Repositories of material events as enumerated in Securities and Exchange Commission Exchange Act Rule 15c2-12, as amended, as may be necessary, appropriate or desirable to effect the sale of the bonds authorized by this resolution. Any agreements or representations to provide information to Repositories made prior hereto are hereby confirmed, ratified and approved. BE IT FURTHER RESOLVED, that the Bonding Subcommittee recommends to the Common Council that the Mayor and the Treasurer are further authorized to enter into, execute and deliver, on behalf of the City, any agreements they deem reasonable or necessary to provide credit enhancement and liquidity to the bonds. The Mayor and the Treasurer are further authorized to appoint a certifying agent, paying agent, transfer agent, registrar, interest rate advisor, escrow agent and such other advisors and consultants as they may deem necessary or desirable, and to execute and deliver on behalf of the City any and all bond insurance or credit enhancement, continuing disclosure or other agreements they deem necessary to provide for the issuance of such bonds. BE IT FURTHER RESOLVED, that the Bonding Subcommittee recommends to the Common Council that the Mayor and the Treasurer are authorized to issue all or any portion of the bonds as bonds the interest on which is includable in the gross income of the owners thereof for federal income tax purposes and it is hereby found and determined that the issuance of any such bonds is in the public interest. Richard Reyes, Chairman Bonding Subcommittee of the Committee on Administration, Finance and Law 18 6135973v1
RESOLUTION Item # RE: $115,000,000 Appropriation and Bond Authorization to Refund Any of the City s Outstanding General Obligation Bonds To Her Honor, the Mayor, and the Common Council of the City of New Britain: the undersigned beg leave to recommend the adoption of the following: At a meeting of the Common Council held on January 10, 2018 on a motion by Council member and seconded by Council member the following resolution was adopted: RESOLVED, by the Common Council of the City of New Britain on the recommendation of the Standing Bonding Subcommittee of the Committee on Administration, Finance and Law adopted at its meeting held on January 10, 2018, that the sum of $115,000,000 be appropriated for the purpose of paying, funding or refunding prior to maturity any of the City s outstanding General Obligation Bonds, applicable redemption premiums, if any, with respect thereto, to pay interest costs on such bonds through June 30, 2020, to pay costs with respect to the issuance of such bonds, and to fund one or more escrow accounts, if any, for such purposes, and to meet said appropriation and in lieu of a tax therefor, bonds of the City be issued pursuant to Article XII of the City Charter and Chapter 109 of the Connecticut General Statutes, as amended, or any other provision of law thereto enabling, in an amount not to exceed $115,000,000 or so much thereof as may be necessary after deducting other sources of funds available therefor. BE IT FURTHER RESOLVED, that the bonds may be sold in a single issue or may be consolidated with other authorized but unissued bonds of the City. The bonds shall be issued in fully registered form, be executed in the name and on behalf of the City by the facsimile or manual signatures of the Mayor and the Treasurer, bear the City seal or a facsimile thereof, be certified and payable at a bank or trust company designated by the Mayor and the Treasurer which bank or trust company may also be designated as the registrar and transfer agent, and be approved as to their legality by Bond Counsel to the City. The bonds may be issued in one or more series and shall bear such rate or rates of interest as determined by the Mayor and the Treasurer. The bonds shall be general obligations of the City and each of the bonds shall recite that every requirement of law relating to its issue has been duly complied with, that such bonds are within every debt and other limit prescribed by law, and that the full faith and credit of the City are pledged to the payment of the principal thereof and interest thereon. The aggregate principal amount of bonds to be issued, the annual installments of principal, the redemption 19 6135965v1
provisions, if any, the interest rate or rates, form, manner and date of issuance and sale, and other terms, details and particulars of such bonds shall be determined by the Mayor and the Treasurer. BE IT FURTHER RESOLVED, that the bonds may be sold by the Mayor and the Treasurer in a public sale, sealed proposal or a negotiated underwriting and the Mayor and the Treasurer are authorized to select the underwriter or underwriters and to enter into, execute and deliver on behalf of the City a contract of purchase for such bonds on such terms and conditions as they shall determine. BE IT FURTHER RESOLVED, that the Mayor and the Treasurer are hereby authorized, on behalf of the City, to enter into agreements or otherwise covenant for the benefit of bondholders to provide information on an annual or other periodic basis to the Municipal Securities Rulemaking Board or any other municipal securities information repositories or state based information repositories (the Repositories ) and to provide notices to the Repositories of material events as enumerated in Securities and Exchange Commission Exchange Act Rule 15c2-12, as amended, as may be necessary, appropriate or desirable to effect the sale of the bonds authorized by this resolution. Any agreements or representations to provide information to Repositories made prior hereto are hereby confirmed, ratified and approved. BE IT FURTHER RESOLVED, that the Mayor and the Treasurer are further authorized to enter into, execute and deliver, on behalf of the City, any agreements they deem reasonable or necessary to provide credit enhancement and liquidity to the bonds. The Mayor and the Treasurer are further authorized to appoint a certifying agent, paying agent, transfer agent, registrar, interest rate advisor, escrow agent and such other advisors and consultants as they may deem necessary or desirable, and to execute and deliver on behalf of the City any and all bond insurance or credit enhancement, continuing disclosure or other agreements they deem necessary to provide for the issuance of such bonds. BE IT FURTHER RESOLVED, that the Mayor and the Treasurer are authorized to issue all or any portion of the bonds as bonds the interest on which is includable in the gross income of the owners thereof for federal income tax purposes and it is hereby found and determined that the issuance of any such bonds is in the public interest. Alderman Richard Reyes 20 6135965v1