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HomeMy WebLinkAbout1998-08-25 Finance Committee MinutesFinance Committee Special Meeting Financial Presentations August25,1998 Councilors Attending: Jim Tyler, Joe Baldacci, John Rohman, Gerry Palmer Staff Attending: Ron Heller, Edward Burrett, Dave Pellegrino, Erik Stumpfel People's Heritage Bank Presentation Comic Bmrbw� Vice President of the Public Finance Division at People's, marked the Committee for opportanity to speak in response to the RFP which was submitted. Listed below are the highlights of Ms. Brennan's presentation. • Maine's largest independent steta-wide bank- nearly 100 branches Gom, Kittery to Ft. Kent • Maine based holding company is a$10 billion asset based operation • Public Finance Division is the leading provider of government banking services to Maine's cities, towns, counties and state agencies. • Headquarters and Operations center in Maine Decisions are made locally • 60 people employed in the City of Bangor with benefits and payroll totaling newly $2 million $25,000 paid to the City in persoml and property taxes • During 1998 will contribute newly $1 million to charitable organizations in Maine • m Bangor in 1998 will cormlbute newly S50," to various organizations including EMMC, Maine Coastal ArtiRts groom, and Bangor YMCA • Containment made to be a major supporter of the Bangor Symphony Orchesha in 1999 • Employces volunteer 100's ofhows m local community organizations in Bangor Awarded highest rating - outstanding - by regulators for contributions to Maine communities. Ms. Brennan updated the Committee concerning Richard Ranrdgan, who would be the financial advisor for the City, if chosen. Mr. Rwmigun is one of the most respected financial advisors in Maine. • He has newly 25 years of experience in both government and me private sector. • He was the finance director of the City of Portland for many years. He began working on bond issues for the City of Portland in 1979. • He's beet the financial advisor for many communities throughout Mame among them, York and Cumberland Counties. • During the past year, he has successfully won each and every bid for competitive financial advisory services m the State of Maine. • His customers include the County of Hancock, which recently had a $6 million issue for a jail, Aubum Water District, recently had $1.5 million revenue bond issue; City of Waterville, the end of 1997 issued $3.8 million in general obligation bonds; the Town of Vwsalbom, which had a refinancing of $500,000; andhe is the fmanewd advisor for MSAD 60 in Berwick which is constructing a $34 million school. These deals were closed on time at competitive ries. Page 2 Financial Fasen=Om Finance Committee Meeting- August 25, 1998 Another member of the team is John Qusrtarmo., the former Finance Director for the City of Bangor, whowill work with Mr. Rmmigan. He knows the City's £mantes intimately and most of the City staff. Ms. Bremavwiil also work with Mr. Rannignsm She has agraduate degree in public finance, and has worked in government. Prior to working for People's, she worked for a Wali Street fpm of Santana, Leeman and Hutton and also with CitiBank. Mr. Rarmigan will have ail the resources of People's fmancial group, a $10 billion operation, behind biro. People's Heritage Bank submitted the lowest bid for Bangor's Financial Advisory Services. It was 30% lower them the closest competitor. In summary, People's Heritage Bank is the low bidder. Richard Rummager, who would advise the City of Bangor, is eminently qualified. People's believes thew proposal meets the specifications of the RFP and is the most advantageous to the City of Bangor. Comments from Council John Rohman commented than on the bid process. In a situation such as this, it seems the low bid In always important but it seems the difference in bidding, $9,000 to $13,000, is a significant number. If there are track records with companies, that $4,000 is going to be wiped out so he wouldn't give w much weight to aproposal like this on a bid process as he would from a general contactor, for example. Jim Tyler asked if there would be an action on this tonight or would it be brought back to the next Fimmpce Committee meeting. Ed Barrett answered that it is hoped that a decision will be made tonight so as to begin moving forward on preparing the bond issue. . EA asked Ms. Borman if, based on the financial statements included, Here was anything in them that she would like to know more about or is concerned about Ms. Brennan explained that Mr. Rarmigan prepared the farrecial proposal. Shedid not look at Bangor's financial statements, however, she did look at the Moody's rating for 1997 and everything indicated that the community is very strong economically with a great deal of vitality and Bangor is strategically located regionally. Councilor Rohman asked Ron Heller to comment on his recommendation of Moors&Cabot. Ran explained that a lot of it is based on the City's experience when Joe Charas when he was with Fleet. Ron commented that Purple's Heritage experience does not compare to Mr. CmInnon th terms of the breadth and amount of deals that have been done which is primarily why Ron recommended Moors and Cabot These are times that there is a need to go outside of the state m get the expertise that is needed. Councilor Baldanci asked if the City has done business with Moors and Cabot. Ron swered no. Councilor Balloter asked what was known specifically about than l . Ron explained that not a great deal was known about the firm but staff has dealt with Mr. Cuetma and knowshisworkwherrisexceptional. Councilor Baldacciaskediftluswerewodctlatiscomprised more ofateam effort. Ed Barret[ answered that he has worked with Mr. Cuetma a long tape and his experience wilt him is that he is a very strong team player. He is very responsive and works very closely with his clients. Page 3 Financial Presentations Finance Committee Meeting -August 25,1998 Councilor Palmer asked what kind oftime would be involved for the financial advisor and over what length of time. Ron answered it would be approximately 8 weeks to put it mgether. A lot of information is already in place. It would approximate a quarter tmejob; 10 homes per week over the next 8-10 weeks. Councilor Palmer asked Ms. Braman what kind of other resource people them were if Mr. Ramigan were not available. Ms Brennan commented that John Q. and herself would always be available or would have someone available. Fd Bartel[ asked the value of hiring a financial advisor and what would distinguish the value added service that the City would receive from another. Ms. Brennan commented that she did not went to give the impression that someone that has done 2 or 3 is qualified to do that many more. Mr. Rannigan has done more than the most recent work which was included is the proposal. 1n toms ofvalue added, it is a local organization, a team that the City is familiar with, and Mr. Roentgen's 25 years experience on both sides of the table. In terms of performance, Mr. Ramigan gives 120%. Ron Heller asked Ms. Brisman if they had experience in other types of bond structures. The City is looking into is the'/ -day options. Ms. Brennan could not comment as to his experiente in that area. Ms. Braman explained that she has been involved with options, trading etc. in her experiensc m an investment advisor. Ron cornmmted that that is something that he would consider important in choosing the service provider. He would like to do some our of the ordinary type of things. Ms. Branum commented that she has never rum into any frencial situation where Mr. Ramhingan wasn't able to do what it was the customer wanted. She will have Mr. Romagna get back to the Committee on his knowedge in that area. The Committee flanked Ms. Brennan for her presentation. Discussion Councilor Tyler asked staff to describe what source of outside banking the City does and what fume. Ron explained that the City has Principally two types of larking relationships. Thera is investment banking which is a significant but small pan of it and there is everything else, checking accounts, money markets, sweep accounts, courier service, etc. The second type of banking is covered by People's Heritage. Councilor Tyler asked whatpereerni of the City's banking does People's have. Ron explained that they have 95-98%. Moors and Cabot Presentation Joe Cuetam addressed the Committee explaining his credentials. He demonstrated that the City of Bangor is entitled to a high level of quality services and that what he has been able to do in the past and he has the ability to deliver those services. • For the but 26 years he has progressive expanded experience to the securities industry from the Federal Reserve Bank of Boston, corporate dealers to Boston and New York and in Portland, Maine. • He received his academic training at the University of Maine in Orono.' • He is registered with the MSRB and the NST as a registered rep and a securities principal Page4 Financial Presentations Finance Committee Meeting- August 25, 1998 which gives him supervisory authority. • 31% of his experience in the last 25 years has been in the securities sales business. 30%of his job has been responsibility as atrader underwriter or in his current capacity of the Senior Management Team and has ttadmi and underwriters who work for hut. 39% of his experience has been as a banker, originating bond deals as early as 1972 and thea 1982 and than for 10 years. • Moors and Cabot knows the Maine market and has experience in the Maine market. Joe has worked with many Councils be the last 10 years. • Bonds are Iris only job and he feels he has demonstrated to a variety of his clients that they have been left with a very strong feeling of having been well served coal having saved money. Mr. Commit summarized his familiarity with different aspects of the City including the Charter, the ratings agencies view of the City's debt, management and economic characteristics, the experience of the City's reception by the market, financing document and the requirements of Maine mouse and State deparimenml rules and regulations. Moors and Cabot will provide continuity and consistency. Ice pointed out various letters from other clients complimenting him on the quality of service he gave and his professionalism. Joe is very serious about working for the City ofBangor and feels he can do a superjob for the City in the capacity of financial advisor. Comments from Comcil Councilor Palmer asked foram explaramonofthe relationship between Joe and Moors&Cabot. Joe explained that Moors and Cabot has hired him with the expectation that be can bring anew venture that is consistent with thein overall mission of being in the securities business, opening investment banking group, having it expand and be an ancillary and important part of their overall services business. He works with the understanding that he will create this business for them that is very riskless because the underwriters mice the risk. The difference between Joe end Moors and Cabot would be that Joe has experienced l2 years of the same munwaraent in Portland, he fully expects htobeatoWlytmuparentchangefromthe Co=il'sperspective. Mooraand Cabotbaverysmall fum, ownedbytwo people. They arewell capitalizedwith a consortium ofpeople who have worked at Paine Webber and Merrill Lynch. They have a $300,000 average commission, and has a client hstof200-300cliems. Councilor Palmercommented that Assented asifMr.Cuetemwereaone- man show and his cmncem is what happens if the one-man show gets ill or is out of position. Mr. Cuaera�ered allofthepr malswereone-menshows. Hedoeshavesomesecondnryback up. He las a process so then he could be gone for 2-3 weeks and his assistant can keep the process going. The Committee thanked Mr. Covers for his presentation. Discussion Ed Barrett repeated staff's recommendation of Joe Cnetam with Moors & Cabot because of his experience, background and his direct experience with the City of Bangor. Staff has been exceptionally happy wire the service received from People's Heritage Bank as the City's primary banker. They are starting to get the area of financial advisory services, but it is a Page 5 Financial PreseNaRrnu Finance Committee Meeting - August 25, 1998 fairly newvenNmfor done, but it is still aleerning process for them. Staff feelstheywouldreceive a better quality prodmt from Moors & Cabot. Councilor Returns commented that this doesn't appear to be an easy process because staff knew who they wanted before putting out the UP's and it seems to come down to a matter of trust and education. He asked what would it mem for the bottom line dollars f the City of Budget. Ed explained dent one of the difficulties is that there are a lot of factors to consider. There is a lot of give and take that goes on between the City looking at its fnancial prognosis and an analysis of what will result in the best totes in the market. How the deal is muctured can affect the interest rate. Timing can also have an effect. It is very hard to say what that effect is. Solicitor Stumpfel commented that if you compete the City's financial position today to where it was in 1989, it is astonishing how far the City has come and how much better off the City is. This would be a team effort between the Finance Director, Manager, Furnace Commodore, Council, Financial Advisor, and the Bond Counsel. Dave Pellegrino added that People's total fixed cost of issuance of $8,925 is before fees and expenses. Moon & Cabot's total cost, everything included, is $10,000. There is less than SI,000 difference in total bees and People's may be more. Councilor Baldre ci com manned the his problem was less with Mr. Cuetabas credentials, however he does dislike the fact that pan of this whole presentation seemed to be attacks on People's. Ice felt the process wam't handled well. He feels it shouldn't be to issue with the staff that someone called individual Councilors. It is Coumil's role to know, about dispu es. The bottom line is that the Council has a right to know what is going on. People's Heritage deserved the right to a presentation. Fd commented that he would never tell anyone that they in not have a debt to lips to a Councilor but in dealing with a annealing where a staff member is going to be working very closely with an individual, as a matter of common professional coum ay, they should have talked with Ron and if they then weren't satisfied, they should have gone to Fd. There is a trust relationship that goes into working with People's. This contract would be for up b a 3 yen period. If at my time if staff is dissatisfied with the service, the City could fere that provider. Councilor Palmer moved to accept the recommendation of Moon & Cabot. Motion seconded