REQUEST FOR PROPOSALS for UNDERWRITING SERVICES PROPOSED GENERAL OBLIGATION BOND ISSUE, SERIES OF 2015 RFP # 2014/15-04 Issued by: STATE COLLEGE AREA SCHOOL DISTRICT November 26, 2014
TABLE OF CONTENTS INTRODUCTION...1 SPECIFICATIONS SCOPE OF WORK...1 RESPONSE SPECIFICATIONS...2 PROPOSAL EVALUATION CRITERIA...5 OTHER INFORMATION...5 PROPOSAL SUBMISSION AND DUE DATES...8 EXHIBIT 1 Non Collusion Affidavit
INTRODUCTION The State College Area School District, (the School District) seeks to select a firm or firms of underwriters to serve as manager and/or co-manager(s) in connection with the issuance of up to $105 million principal amount of general obligation bonds to be issued in one or more series to fund the construction, renovation and equipping of State College High School (the State High Project ). It is anticipated that the first financing will close on or before April 15, 2015. The School District is currently in the process of designing substantial renovations and new construction to State College Area High School. The School District currently estimates the cost of the project at $115 million. In accordance with the Commonwealth of Pennsylvania s Act 1, the School District put a referendum question on the ballot at the May 14, 2014, primary election seeking voter approval to borrow up to $85 million of Electoral Debt and use the proceeds to substantially renovate and rebuild State College High School. The referendum WAS approved by the voters. The School District will apply to PDE for approval of an exception under the referendum exception allowed by Act 1. The School District will utilize approximately $10 million of its capital reserve fund as well as issue up to $20 million of General Obligation Debt not subject to the referendum exception. The School District reserves the right to sell its debt through competitive, negotiated or any other means. By responding to this RFP, responding firms recognize that the School District may decide to pursue financing by means other than a negotiated underwriting. Nothing in this RFP, the evaluation or selection process of the School District shall be construed to obligate, in any way, the School District to utilize any underwriting firm or firms. SPECIFICATIONS Section 1: Scope of Work The bond underwriter(s) shall provide, but are not limited to the following services to the School District: 1.1. Develop one or more financing structures for consideration based upon the financing needs and repayment abilities of the School District. Provide a schedule of issuance, an estimate of bond issuance costs, and annual debt service payments. 1.2. Advise the School District on the merits and cost benefits of insuring or not insuring the bonds. 1.3. Establish the interest rates, prices, yields and maturity schedules for the bonds. 1.4. Identify the components of underwriting spread including take-down, commissions, risk, expenses and management fees. 1.5. Manage the marketing, sale and distribution of bonds to institutional and retail accounts. Provide order flow information on the day of pricing. Establish priority of orders and manage syndicate and selling group. 1.6. Deliver proceeds at closing. Provide for such certificates and receipts as Bond or School District Counsel determine. 1
Section 2: Response Specifications 2.1. Proposals will be accepted only from entities which: (a) are free from all obligations, interests and regulatory problems which might conflict with the interests of the School District; (b) are experienced in public finance transactions and have an established reputation for excellence and the ability to successfully transact public finance business; and (c) are able to demonstrate the availability of relevant resources, including capital, personnel, data processing, credit analysis, sales distribution capacity, and other professional services necessary in connection with the issuance, structuring, underwriting, and sale of the Bonds. 2.1.1. Failure to meet the three criteria listed above will be cause for immediate disqualification of the proposal. 2.2. The School District reserves the right to establish the underwriting team. 2.2.1. The School District reserves the right to establish participation percentages among co-managers in order to facilitate local distribution of securities and any other policy goal of the School District. 2.2.2. The School District reserves the right to monitor the bond allocation process and to intervene, as appropriate, to ensure that participation percentages among comanagers are honored, local distribution of securities is facilitated and any other policy goals of the School District are met. 2.2.3. Joint proposals are permitted, however, the School District reserves the right to select both senior and co-managers independently of any joint proposal. 2.3. Required Components of Proposal: 2.3.1. Proposals should respond to each of the following requests in the order indicated. Each request should be identified by its own numbered tab within the proposal for ease of reference. Additionally, in a cover letter at the beginning of the proposal, specify whether your firm wants to be considered as a senior manager, co-manager or both. It is anticipated that State College Area School District will select a single Manager and/or co-manager(s) for the proposed issue. 2.4.Conflict of interest and adverse legal situation: 2.4.1. Affirm that your firm and all individuals that will be assigned to this transaction are free from all obligations, interest and regulatory problems that might conflict with the interests of the School District. 2.4.2. Identify all pending litigation or regulatory action, either state or federal, related to public finance in which your firm or any predecessor or associated firm is involved or has been involved in the past five (5) years. 2.4.3. Provide the Non-collusion Affidavit attached as Exhibit 1, hereto. 2
2.4.4. Disclose any information about your firm that presently, or in the future, could impair your firm s ability to provide the services required for this transaction. 2.5.Firm s qualifications and experience: 2.5.1. List your firm s senior management experience in similar size financing for bond/note issues. Also, indicate your firm s experience with rating agencies and primary bond insurers by noting each issue that was either rated and/or used bond insurance, the rating and the name of the insurer that was selected by the issuer. 2.5.2. Please indicate the capital position of your firm for the year ending December 31, 2013, or other most recent fiscal year, and the four preceding years. Please provide a copy of your firm s latest audited financial statements that reflect your firm s capital position. 2.5.3. Please indicate your firm s historical performance in utilizing its capital to underwrite tax-exempt securities. Please provide the amount of capital utilized to underwrite tax-exempt securities over the past three years. Please indicate your firm s underwriting commitments of tax-exempt securities expressed as a percentage of your firm s total underwriting of securities. 2.5.4. Please indicate the amount of tax-exempt bonds for which your firm has served as a senior manager of negotiated transactions for the past three years (2011, 2012 and 2013) as well as year to date (2014). 2.5.5. Please indicate the amount of tax-exempt bonds issued for Pennsylvania School Districts for which your firm served as senior manager of negotiated transactions for the last three years. 2.5.5.1. Please provide a list of Districts and the par amount of each issue. 2.5.6. Please provide no less than four references from issuers concerning your firm s qualifications and experience in education financing. 2.5.7. Please indicate the number of registered salespersons in your firm nationally, and the number of salespersons registered in the Commonwealth of Pennsylvania. 2.5.8. Please describe your firm s ability to provide distribution of tax-exempt bonds to both the retail and institutional sectors. Please provide a historical analysis of your firm s actual distribution of tax-exempt bonds to retail and institutional buyers for the past two years (2012 and 2013) and year to date (2014). 2.5.9. Please describe your firm s ability to provide distribution of tax-exempt bonds in the Commonwealth of Pennsylvania to both the retail and institutional sectors. Please provide a historical analysis of your firm s actual distribution of tax-exempt bonds to retail and institutional buyers for the past two years (2012 and 2013) as well as year to date (2014). 3
2.6.Financing team s qualifications and experience: 2.6.1. Identify all members of your team who would be involved in the proposed transaction. 2.6.2. Please provide their background, relevant experience, and their role in the proposed transaction. 2.7.Marketing: 2.7.1. Briefly describe your firm s and team s municipal sales and distribution network (retail and institutional), including the number of offices, registered representatives, municipal salespersons and municipal traders. Describe how in-state investors will be handled. 2.7.2. Outline your strategy for distributing (selling) the proposed bonds. Describe your firm s commitment to using capital to underwrite the offering. Cite specific examples and contacts for the transactions listed. Describe your firm s ability to underwrite the issuance of tax-exempt debt under adverse market conditions. 2.7.3. The School District desires to afford local investors ample opportunity to purchase the School District s bonds. Please describe how you would structure the pre-marketing, marketing and priority of orders to meet this goal. 2.8.Financing recommendations and analysis: 2.8.1. What type of bond structure would you recommend for the proposed issues? What other relevant alternative(s) do you believe should be considered? 2.8.2. Describe your firm s quantitative capabilities, particularly as it relates to the structure(s) you recommended in this proposal. 2.9.Underwriting fee: 2.9.1. Please provide a breakdown of your proposed underwriter s discount and expenses assuming State College Area School District issues bonds under the following scenarios: 2.9.1.1. $40 million principal amount of general obligation bonds to be issued on or before March 1, 2015, and 2.9.1.2. $85 million principal amount of general obligation bonds to be issued on or before March 1, 2015, and 2.9.1.3. $105 million on or before March 1, 2015. 2.9.2. Included in this fee proposal should be the following: (1) management fee; (2) expenses, including underwriter s counsel, if required, printing, etc.; (3) average takedown; and (4) risk, if applicable. 4
2.9.3. Describe any other costs for which your firm will request to be reimbursed. 2.10. Project time line: 2.10.1. Please provide a timetable listing each task that needs to be accomplished to meet the schedule for the bond issue to be completed by March 1, 2015. 2.11. Please set forth any further information or insights that you believe are relevant to consideration of your firm as an underwriter of the bonds (response is optional). Section 3: Proposal Evaluation Criteria 3.1. All acceptable proposals will be evaluated by a committee composed of School District staff and the District s Financial Advisor, NW Financial Group, LLC in accordance with the School District purchasing rules and regulations, based on the criteria in paragraph 3.3. 3.2. Once the evaluation committee has narrowed the number of proposals for further consideration, telephone conference calls and/or on-site presentations may be necessary but not required to assist in determining the best-qualified firm. Interested respondents should reserve time in the afternoon and evening of December 17, 2014 for interviews. 3.3. Evaluations will be based on overall services, qualifications and costs. Award will not necessarily be made to the firm submitting the lowest cost. Section 4: Other Information 4.1. The School District reserves the right to utilize any structures presented in the proposals, even if the proposing vendor is not selected. 4.2. The School District reserves the right to reject any and all proposals with or without cause, and to waive any irregularities in the responses received as a result of this request, when such irregularities are not in conflict with the applicable regulations of the Commonwealth Department of Education or School District Purchasing Policies and Procedures. In addition, the School District reserves the right to make such investigations as it deems necessary as to the qualifications of any and all proposers, and to conduct pre-contract negotiations. 4.3. Discussions and interviews may be held with firms under final consideration prior to making a selection for award; however, proposals may be accepted without such discussions or interviews. 4.4. In the event that mutually acceptable terms cannot be reached within a reasonable period of time, the School District reserves the right to undertake negotiations with the next most advantageous firm without undertaking a new procurement process. A copy of additional terms and conditions that a firm wishes to offer for consideration should be enclosed with the proposal. Payment of fees and expenses, not to exceed the maximum proposed, will be made upon satisfactory completion of the required services. 5
4.5. The School District has retained NW Financial Group, LLC as its financial advisor. 4.6. Contractor means a person or organization with whom the State College Area School District (SCASD) has contracted for the provision of goods and services under a contract, and is synonymous with underwriter, bond underwriter, manager, entities, co-manager or firm. 4.7. Indemnification. The work performed by the Contractor shall be at the risk of the Contractor exclusively. To the fullest extent permitted by law, Contractor shall indemnify, defend (at Contractor s sole expense) and hold harmless the Owner, joint ventures, representatives, members, designees, officers, directors, employees, agents, successors and assigns ( Indemnified Parties ) from and against any and all claims for bodily injury, death or damage to property, demands, damages, actions, causes of actions, suits, losses, judgments, obligations and any liabilities, costs and expenses (including but not limited to investigative and repair costs, attorneys fees and costs) ( Claims ) which arise or are in any way connected with the work performed, materials furnished, or services provided under this agreement by Contractor or its agents. These indemnity and defense obligations shall apply to any acts or omissions, negligent or willful misconduct of the Contractor, its employees or agents, whether active or passive. Said indemnity and defense obligations shall further apply, whether or not said claims arise out of the concurrent act, omission or negligence of the Indemnified Parties, whether active or passive. Contractor shall not be obligated to indemnify or defend Owner for claims found to be due to the sole negligence or willful misconduct of Indemnified Parties. 4.8. Contractor s indemnification and defense obligations hereunder shall extend to claims occurring after this agreement is terminated as well as while it is in force, and shall continue until it is finally adjudicated and any and all actions against the indemnified parties for such matters which are indemnified hereunder are fully and finally barred by applicable laws. 4.9. Assignment/Subcontract/Successors 4.9.1. Contractor shall not assign, sell, transfer, or subcontract rights, or delegate responsibilities, in whole or in part, without the prior written approval of the SCASD. No such written approval shall relieve Contractor of any obligations, and any transferee or subcontractor shall be considered the agent of the Contractor. The Contractor shall remain liable to the SCASD as if no such assignment, transfer, or subcontract had occurred. A financing arrangement will not be considered a subcontract. 4.10. Right to Audit. The awarded Contractor is responsible for keeping accurate and reasonable records related to its performance and obligations under any executed agreement. In particular, records will be kept documenting any price, cost or budget computations required under the contract. The Contractor agrees that the SCASD or its duly authorized representative has the right to audit any directly pertinent books, documents, papers and records related to transactions and/or performance of the terms and conditions of any contract. The Contractor shall make available to the SCASD or its agents all such records and documents for audit on the Contractor s premises during 6
regular and reasonable working hours. The Contractor further agrees to disclose within 90 days of receipt, any independent auditors reports, which bear directly on the performance or administration of the agreement. The right to audit shall include periodic examinations of records throughout the term of the contract and for a period of seven (7) years after its termination. The right to audit shall also apply to agents and subcontractors hired by the Contractor for the purpose of fulfilling the contract. In the event that audits discover substantive findings related to fraud, misrepresentation or nonperformance, the SCASD may recoup the costs of the audit work from the Contractor as well as any legal remedies available under applicable law. 4.11. Discrimination Prohibited. According to 62 Pa.C.S.A. 3701, the Contractor agrees that: 4.11.1. In the hiring of employees for the performance of work under the contract or any subcontract, no contractor, subcontractor or any person acting on behalf of the contractor or subcontractor shall by reason of gender, race, creed or color discriminate against any citizen of this Commonwealth who is qualified and available to perform the work to which the employment relates. 4.11.2. No contractor or subcontractor or any person on their behalf shall in any manner discriminate against or intimidate any employee hired for the performance of work under the contract on account of gender, race, creed, or color. 4.11.3. The contract may be canceled or terminated by the government agency, and all money due or to become due under the contract may be forfeited for a violation of the terms or conditions of that portion of the contract. 4.12. Human Relations Act. The provisions of the Pennsylvania Human Relations Act, Act 222 of October 27, 1955 (P.L. 744) (43 P.S. Section 951, et. seq.) of the Commonwealth of Pennsylvania prohibit discrimination because of race, color, religious creed, ancestry, age, sex, national origin, handicap or disability, by employers, employment agencies, labor organizations, Contractors and others. The Contractor shall agree to comply with the provisions of this Act as amended that is made part of this specification. Your attention is directed to the language of the Commonwealth s nondiscrimination clause in 16 PA. Code 49.101. 4.13. Contract Law. Any contract resulting from this RFP will be subject to the laws of the Commonwealth of Pennsylvania and the Pennsylvania Department of Education Public School Code. The total contract shall include this Request for Proposal, the Contractor s proposal response, and the negotiated and executed contract between the parties. 4.14. Non-Collusion Affidavit. The Contractor/Contractor, in accordance with Pennsylvania Department of Education requirements, must sign an affidavit of noncollusion which has been attached hereto as Exhibit 1. This document must be signed and returned with the proposal response submitted. 7
4.15. Bribery. Any Contractor that attempts to influence a district employee to award this contract to such Contractor s firm by promising to provide or by providing to such district employee any gratuity, entertainment, commission, or any other gift, in exchange for a promise to award the contract to such Contractor shall be disqualified from further consideration of award and shall be subject to any penalties under applicable law. Section 5: Proposal Submission and Due Dates 5.1. Original copies of your proposal should be submitted to the following parties by 4:00 PM (EDT) on December 9, 2014. The timeliness of the bid is the receipt of the original copies at the address listed below. Late proposals will not be accepted. All proposals must be signed by an officer authorized to commit and negotiate on behalf of the financial institution. Proposals should be delivered to: 7 physical copies, 1 electronic copy 1 physical copy, 1 electronic copy Randy Brown Business Administrator State College Area School District Tom Beckett Senior Vice President NW Financial Group, LLC 131 W. Nittany Avenue 886 Vaughn Road 814-231-1021 610-326-4900 rlb21@scasd.org tbeckett@nwfinancial.com 5.2. The School District reserves the right to reject any or all proposals, to conduct interviews, and to negotiate final terms with proposers. All bids must remain firm through June 30, 2015. Nothing in this RFP, the responses, or in the acceptance of any responses in whole or in part shall oblige the School District to complete negotiations with the related financial institution. The School District will not provide an engagement letter to any financial institution. The School District reserves the right to end, in its sole discretion, negotiations with a financial institution at any time up to the consummation of the transactions arising from this RFP. 5.3. Schedule. The School District plans to select an underwriter in a most expeditious manner. Negotiation with the selected provider will be completed upon selection. 8
5.4. Additional Information and Questions For general information and questions, all questions must be submitted in writing by December 4, 2014 to the School District s financial advisor, Dave Eckhart or Tom Beckett of NW Financial Group, LLC at deckhart@nwfinancial.com and tbeckett@nwfinancial.com with copy to Randy Brown, Business Administrator rlb21@scasd.org. 9
Exhibit 1 Non-Collusion Affidavit
State of (state where executed) SS: NON-COLLUSION AFFIDAVIT County of (county where executed) I,, being first duly sworn, depose and say that: (name of affiant) 1. Affiant is of, the bidder (representative capacity) (name of bidder) that has submitted the attached bid. 2. Affiant is fully informed respecting the preparation and contents of the attached bid and of all pertinent circumstances respecting the bid 3. The bid is genuine and not a collusive or sham bid, or otherwise in restraint of free and competitive bidding. 4. The bidder has not been a party to any collusion with any government official or employee as to quantity, quality, or price in the prospective contract or with respect to any other terms of the prospective contract or with respect to discussions between the bidder and any governmental official concerning exchange of money or other things of value for special consideration in the letting of a contract. 5. The bidder been convicted or found liable for any act (has or has not) prohibited by Federal or State law in any jurisdiction involving conspiracy or collusion with respect to bidding on any public contract within the last three years. The bidder s statement that has been convicted or found liable for any act prohibited by Federal or State law in any jurisdiction involving conspiracy Or collusion with respect to bidding on any public contract within the last three years does not prohibit a government agency from accepting a bid from or awarding a contract to that bidder, but it may be grounds for administrative suspension or debarment in the discretion of the government agency under the rules and regulations of that agency or, in the case of a government agency with no administrative suspension or debarment regulations or procedures, may be grounds for consideration on the question of whether the agency should decline to award a contract to that bidder on the basis of lack of responsibility. (affiant s signature) Sworn and subscribed to before me This of, 20. Notary Public