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HomeMy WebLinkAboutA6583 - STIFEL, NICOLAUS & CO INC - UNDERWRITER ENGAGEMENT SVCSSTIFEL March 29,2019 David H. Ready City Manager/Executive Director City of Palm Springs/Palm Springs Financing Authority 3200 E. Tahquitz Canyon Way Palm Springs, CA 92262 Re; Underwriter Engagement Relating to Potential Municipal Securities Transaction for the City of Palm Springs Financing Authority 2019 Airport Passenger Facility Charge Revenue Bonds Dear Mr. Ready: The City of Palm Springs Financing Authority (the "issuer'') and Stifel, Nicolaus & Company, Incorporated ("Stifel") are entering into this engagement letter to confirm that they are engaged in discussions related to a potential issue of municipal securities as identified above to fund improvements at the Palm Springs International Airport (the "Issue") and to formalize Stifel's role as underwriter with respect to the issue. Engagement as Underwriter The Issuer is aware of the "Municipal Advisor Rule" of the Securities and Exchange Commission ("SEC") and the underwriter exclusion from the definition of "municipal advisor" for a firm serving as an underwriter for a particular issuance of municipal securities. The Issuer hereby designates Stifel as an underwriter for the Issue. The Issuer expects that Stifel will provide advice to the Issuer on the structure, timing, terms and other matters concerning the Issue. Limitation of Engagement It is the Issuer's intent that Stifel serve as an underwriter for the Issue, subject to satisfying applicable procurement laws or policies, formal approval by the City Council, finalizing the structure of the Issue and executing a bond purchase agreement. While the Issuer presently engages Stifel as the underwriter for the Issue, this engagement letter is preliminary, nonbinding and may be terminated at any time by the Issuer, without penalty or liability for any costs incurred by the underwriter, or Stifel. Furthermore, this engagement letter does not restrict the Issuer from entering into the Issue with any other underwriters or selecting an underwriting syndicate that does not include Stifel. Disclosures Required by MSRB Rule G-17 Concerning the Role ofthe Underwriter The Issuer hereby confirms and acknowledges each of the following concerning the role that Stifel would have as an underwriter: (I) Municipal Securities Rulemaking Board ("MSRB") Rule G-17 requires an underwriter to deal fairly at all times with both municipal issuers and investors; Mr. David Ready City of Palm Springs Financing Authority March 29, 2019 Page 2 (2) the underwriter's primary role is to purchase securities with a view to distribution in an arm's-length commercial transaction with the issuer and it has financial and other interests that differ from those of the issuer; (3) unlike a municipal advisor, the underwriter does not have a fiduciary duty to Issuer under the federal securities laws and is, therefore, not required by federal law to act in the best interests of Issuer without regard to its own financial or other interests; (4) the underwriter has a duty to purchase securities from Issuer at a fair and reasonable price, but must balance that duty with its duty to sell municipal securities to investors at prices that are fair and reasonable; and (5) the underwriter will review the official statement for Issuer's securities, in accordance with, and as part of, its responsibilities to investors under the federal securities laws, as applied to the facts and circumstances of the transaction. Disclosures Concerning the Underwriter's Compensation The underwriter will be compensated by a fee and/or an underwriting discount that will be set forth in the bond purchase agreement to be negotiated and entered into in connection with the Issue. Payment or receipt of the underwriting fee or discount will be contingent on the closing of the transaction and the amount of the fee or discount may be based, in whole or in part, on a percentage of the principal amount of the Issue. While this form of compensation is customary in the municipal securities market, it presents a conflict of interest since the underwriter may have an incentive to recommend to the Issuer a transaction that is unnecessary or to recommend that the size of the transaction be larger than is necessary. Conflicts of Interest Disclosures Stifel has not identified any additional potential or actual material conflicts that require disclosure. Disclosures Relating to Complex Municipal Securities Financing Since Stifel has not recommended a "complex municipal securities financing" to the Issuer, additional disclosures regarding the financing structure for the Issue are not required under MSRB Rule G-I7. However, if Stifel recommends, or if the Issue is ultimately structured in a manner considered a "complex municipal securities financing" to the Issuer, this letter will be supplemented to provide disclosure of the material financial characteristics of that financing structure as well as the material financial risks of the financing that are known to us and are reasonably foreseeable at that time. Mr. David Ready City of Palm Springs Financing Authority March 29, 2019 Page 3 It is our understanding that you have the authority to bind the Issuer by contract with us, and that you are not a party to any conflict of interest relating to the subject transaction. If our understanding is incorrect, please notify the undersigned as soon as possible. Sincerely, Stifel, Nicolaus & Company, Incorporated By: ^i6ion Name: Sara Oberlies Brown Title: Managing Director Issuer accepts and acknowledges the foregoing. Accepted and Executed: Name: David H. Ready Title: City Manager/ Executive Director APPROVED BY CITY COUNCIL AIM})