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HomeMy WebLinkAboutCRA-R-23-0045 BackupJune 5, 2023 Siebert Williams Shank & Co., LLC Response to: Request for Proposals The City of Miami, Florida Non -Ad Valorem Special Obligation Bonds, Series 2023 •• • • F =.:' Siebert •" ...' Williams :...!: Shank A SHANK YALL1AMSCISNEROS Cl7AAPANY TABLE OF CONTENTS Proposal Response Question C: Letter of Transmittal Question D: Marketing and Distribution Question E: Structure Ideas and City Experience Question F: Transaction Details Proposal Response Exhibit A — Fee Proposal Resumes Page 1 2 5 8 Appendix A a:» „ Siebert Williams Shank Disclaimer Siebert Williams Shank & Co., LLC ("SWS" or "Siebert Williams Shank") is providing this information in response to the City of Miami, Florida (the "City") Request for Proposals (the "RFP") in connection to its upcoming Non -Ad Valorem Special Obligation Bonds transaction. Pursuant to the RFP, SWS submits this response for the City's consideration in anticipation of SWS serving as a prospective underwriter only, and not as a municipal advisor. The information contained herein is not advice being provided by a municipal advisor but instead is being provided solely in direct response to the RFP. Please see the important disclosures below for further information about SWS's role, the nature of the information provided in this RFP response, and the duties owed and not owed to the City by SWS. Disclosures Regarding SWS's Role as Underwriter, Not as Municipal Advisor SWS is providing the information contained in this document for discussion purposes only as prospective underwriter or in anticipation of serving as underwriter on a future transaction in response to the RFP, and not as financial advisor or municipal advisor. Should it be chosen to serve as an underwriter as a result of its response to the RFP, the primary role of SWS, as underwriter, will be to purchase securities with a view toward distribution and/or for resale to investors in an arm's-length commercial transaction with the City. As an underwriter, SWS would have financial and other interests that differ from those of the City. An underwriter is required to deal fairly at all times with both issuers and investors. An underwriter has a duty to purchase securities from an 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. SWS, as underwriter, will review any official statement for the City'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. This RFP response is an effort by SWS to be selected as an underwriter. SWS is not acting or seeking to act as a municipal advisor to the City. Rather, as an underwriter acting for its own interest and unlike a municipal advisor, SWS will not have or owe a fiduciary duty to the City pursuant to Section 15B of the Securities Exchange Act of 1934, as amended (the "Act"), and, therefore, is not required by federal law to act in the best interests of the City without regard to its own financial or other interests. The City should consult with its own financial and/or municipal, legal, accounting, tax and other advisors, as applicable, to the extent it deems appropriate before acting on any information or material contained in this RFP response. If the City would like a municipal advisor in this transaction and does not have one that owes fiduciary duties to it, then the City is free to engage a municipal advisor to serve in that capacity. No Recommendations or Advice SWS is not recommending any action to the City except as in direct response to the RFP. Unless otherwise expressly stated herein, the information provided consists of general information that is factual in nature and may incorporate certain hypothetical information based on the facts and assumptions described in the RFP. In order to properly respond to the RFP, SWS has presented structuring and marketing recommendations that meet the needs of the City as set forth in the RFP. Such information, hypotheticals, facts and assumptions are not intended to be or imply a recommendation or to be construed as "advice" within the meaning of Section 158 of the Act. Rather they are presented in direct response to the RFP. Additional Disclosures and Disclaimer All information contained in this document was obtained from sources believed to be reliable and in good faith, but no representation or warranty, express or implied, is made as to its accuracy or completeness. All information, hypotheticals, facts and assumptions (including prices, rates, yields and other calculations) are current only as of the date of this report, and are subject to change without notice. Any estimations or hypothetical results based on market conditions or the occurrence of future events are based upon the best judgment of SWS from publicly available information as of the date of this report. The source for all municipal firm rankings throughout this response is SDC Platinum. THERE IS NO GUARANTEE THAT ANY OF THESE ESTIMATES OR HYPOTHETICALS WILL BE ACHIEVED. Member FINRA and SIPC Siebert Williams Shank City of Miami, Florida Request for Proposals June 5, 2023 Via Email Dear Ms. Paschal, Siebert Williams Shank & Co., LLC Mailing Address: 100 S. Ashley Dr, Suite 600 Tampa, FL 33602 Siebert Williams Shank & Co., LLC ("SWS"), formally Siebert Brandford Shank, is pleased to submit our response to the City of Miami's (the "City" or "Miami") Request for Proposals to serve the City as part of its underwriting syndicate on its anticipated issuance of the Non -Ad Valorem Special Obligation Bonds, Series 2023 (the "Bonds"). We believe our extensive experience in marketing and pricing bonds similar to that contemplated by the City in these turbulent markets and proven distribution channels uniquely qualify us to serve the City as senior managing underwriter for the Bonds. LEADING NATIONAL UNDERWRITER. SWS has consistently provided high-level investment banking services for nearly 26 years, allowing the firm to establish itself as one of the top national firms in municipal underwriting. For Q1, 2023, SWS ranked #8 as Senior Manager for negotiated deals; SWS also ranked 12th nationally for negotiated senior -managed transactions in 2022 and has ranked 13th each of the 5 years prior (2017-2021, full to bookrunner, full if joint). Our firm's impressive track record is further evidenced by our #1 ranking in the same category among Minority or Woman - owned Business Enterprise ("M/WBE") firms for a record 25 years. Additionally, our firm has received some of the highest industry award recognitions, having led Bond Buyer Deal of the Year Award -winning transactions every year from 2019 to 2022. RELEVANT EXPERIENCE & LOCAL PRESENCE. Having served in over $53.3 billion Florida debt, including senior managing $2.7 billion, and many other comparable special obligation transactions nationally, SWS is prepared to guide the City through the issuance of the Bonds. Our experience with issuers within the State of Florida (the "State" or "Florida") includes recent bookrunning engagements on behalf of Broward County and the City of Miramar, as well as transactions for Miami -Dade County, Palm Beach Schools, and the Cities of Tallahassee, Tampa, and West Palm Beah, among many others. Our recent experience with similar credits to the Bonds includes senior managed engagements for the City of Hartford, Connecticut's Special Obligation Bonds (State Contract Assistance), which was issued in April 2023 in a volatile market, and the City of Miramar's Special Obligation Revenue Bonds, in addition to sophisticated state -appropriation credits like the Dormitory Authority of the State of New York and the State Public Works Board of the State of California. SWS has continued to expand its footprint within the State, and now operates four regional offices in Florida: West Palm Beach, Fort Lauderdale, Miami, and our recently established Tampa office, led by Central Florida native Robert Cox, Senior Vice President. The firm's recent transactional engagements in the region, as well as our on -the -ground presence, keep us apprised of regional dynamics, making us a valuable underwriter to the City. STRUCTURING SUMMARY. As discussed, the City intends to utilize the funds that are anticipated to become available from the sale of the existing site of the MRC in 2026 or 2027 towards the partial repayment of the Bonds. In our response we outline alternative structuring options that include a separate series of bonds with a put or a short call that would allow Miami the flexibility to legally retire a portion of the Bonds while keeping an overall level principal and interest repayment structure at a reduced cost. ABILITY TO EXECUTE IN CHALLENGING MARKETS AND STRONG CAPITAL POSITION. Given recent market volatility, it is particularly important for the City's underwriter to have demonstrated the ability to execute transactions and, when necessary, commit capital in all market environments. As detailed within, SWS has successfully helped its clients navigate this volatility by developing an appropriate marketing strategy and leveraging the expertise of our sales force. Our ability to commit capital when necessary is further enhanced by the growth of our excess net capital, rising nearly 10-fold since 2009. As of December 31, 2022, our total available capital allows SWS to serve as sole managing underwriter on a transaction of approximately $2.0 billion, and as senior manager with 50% liability on an approximate $4.0 billion transaction. We thank you for the opportunity to submit our proposal. SWS firmly believes it has the capabilities and experience to serve the City as senior underwriter on its upcoming transaction, and affirms that the undersigned Jonathan Kirn, Senior Managing Director, is authorized to commit the firm to the terms of the proposal. While SWS believes its qualifications would best serve the City as senior manager, if not selected in that capacity, the firm would welcome the opportunity to serve as co -senior or co -managing underwriter to support the City's offering. If you have any questions or require any additional information, please do not hesitate to contact either of the undersigned. Sincerely, .X4(:Cj4-- Jonathan Kirn Senior Managing Director Phone: (202) 872-8052 Fax: (202) 872-3608 Email: jkirn@siebertwilliams.com Robert Cox Senior Vice President Phone: (813)-675-3600 Fax: n/a Email: rcox@siebertwilliams.com cc: Mr. Sergio Masvidal and Mr. Pete Varona, PFM Financial Advisors LLC Page I 1 Siebert ii Williams 4Shank City of Miami, Florida Request for Proposals Marketing and Distribution (3-page limit) NATIONAL UNDERWRITING ACTIVITY. SWS is a prolific underwriter, consistently ranking highly among peers in various categories for more than two decades. In recent years, the firm has experienced exponential growth through both organic and strategic partnerships, allowing it to maintain its leadership position in the industry and senior -manage many of the nation's largest and most complex bond issuances. SWS's recent national senior - managed engagements on behalf of local governments include the Cities of Hartford ($125 million, Apr. 2023), Pittsburgh ($58 million, Mar. 2023), Chicago ($524 million, Dec. 2022), Atlanta ($409 million, Oct. 2022), and San Antonio ($286 million, Aug. 2022), among many others. Our success in structuring, marketing, and pricing bonds on behalf of local governments is evidenced by significant repeat senior - managed business with Florida issuers and many other prominent issuers across the nation, including the Counties of Broward (12 transactions, $1 billion total) and Miami -Dade (4 transactions, $458 million), and the Cities of New York (9 transactions, $5 billion), Chicago (9 transactions, $3 billion), Atlanta (8 transactions, $2 billion), and Philadelphia (6 transactions, $2 billion), among others. FLORIDA UNDERWRITING ACTIVITY. SWS and the primary bankers assigned to the City have extensive experience with Florida issuers, having participated as a managing underwriter in $53.3 billion in Florida debt financings, including senior managing $2.7 billion since the firm's founding. The firm's statewide presence is further demonstrated by our inclusion in the senior manager pools for the Counties of Miami -Dade and Broward and the City of Tallahassee, in addition to transactional mandates for the City of Riviera Beach, the School District of Palm Beach County, and the Village of Wellington over the upcoming months in 2023. To the right, we summarize our negotiated underwriting experience nationally and in Florida since January 2021. CASE STUDIES. Below and on the following page we provide case studies of our recent senior -led transactions in the State — both of which were led by Jonathan Kirn and Robert Cox, and Andrew Gurley, the primary bankers and underwriter, respectively, assigned to the City. 2022 Senior Managed Rankings (All Firms) Full to Bookrunner, Full if Joint Firm Par Rank ($bn) 2022 Senior Managed Rankings (M/WBE) Full to Bookrunner, Full if Joint Firm Par Rank ($bn) 1 Siebert Williams Shank 12,227 1 2 Loop Capital Markets 9,774 2 3 Ramirez & Co Inc 8,044 3 4 Academy Securities Inc 1,438 4 5 Estrada Hinojosa 626 5 6 Cabrera Capital Markets 613 6 7 Rice Financial Products 205 7 8 Stern Brothers & Co 114 8 National Experience Year 2021 2022 2023 YTD otal Senior -Managed # of $ mils 40 32 14 86 7,273 12,227 5,215 $24,715 Co -Managed i # of issues $ milsU 137 50,241 147 63,197 50 26,390 334 $139,828 Florida Experience Year 2021 2022 2023 YTD* otal Senior -Managed # of $ mils 1 1 2 51 199 $250 Co -Managed • # of issues $ mill 3 1,842 1 287 4 $2,129 J P Morgan BofA Securities Morgan Stanley RBC Capital Markets Citi Goldman Sachs Wells Fargo Barclays Stifel Jefferies Raymond James Siebert Williams Shank Piper Sandler UBS Financial Services 40,459 34,513 27,978 27,286 25,671 23,509 20,145 19,532 16,497 14,581 12,849 12,227 12,039 10,681 9 American Veterans 4 9 10 11 12 13 14 Note co -managed values are inclusive of co -senior engagements Source: SDC *Does not include 3 current co -managed mandates, expected to price in 2023 Broward County, Florida I $199,265,000 Water and Sewer Utility Revenue Bonds, Series 2022A ■ On February 2nd, 2022 SWS served as bookrunning senior manager on Broward County's (the "County") Water and Sewer Utility Revenue Bonds, Series 2022A. Proceeds of the Series 2022A Bonds were used to pay all or a portion of the costs of additional improvements to the County's Water and Sewer Utility System (the "2022 Project") ■ The Series 2022A Bonds were marketed in a volatile environment, with MMD rates increasing by 12 bps to 17 bps from the time the POS and investor roadshow were posted on January 26th, to the time the bonds were pre -marketed on February 1st ■ SWS prepared an investor presentation for the sale that highlighted the County's economic strengths and its strong recovery from the COVID-19 pandemic, the strengths of the County's Water and Sewer Utility credit, and the County's strategic management of its Water and Sewer Utility debt, as demonstrated by its healthy debt service coverage ratios both in the near and long-term ■ The Series 2022A Bonds were 9.7x oversubscribed (excluding stock orders), with a majority of orders being placed in the 2045 serial maturity (12.8x) and the 2047 Term Bond (9.7x) - Spreads were tightened by 2 bps to 5 bps in maturities 2029 through 2037, and by 10 bps to 12 bps in maturities 2038 through 2047 compared to the spreads that were shown to investors during the pre -marketing process ■ Due to favorable pricing results, level of overall interest and tightened spreads, the County chose to upsize the transaction by 10% ■ The Series 2022A Bonds achieved an all -in TIC of 3.097%. City of Miramar, Florida I $51,000,000 Taxable Special Obligation Revenue Refunding Bonds, Series 2021 ■ On June 30th, 2021 SWS served as bookrunning senior manager for the City of Miramar, Florida's (the "City") Taxable Special Obligation Refunding Revenue Bonds, Series 2021 (the "Series 2021 Bonds") Page 12 Siebert ii Williams 4Shank City of Miami, Florida Request for Proposals • Given investor feedback after the pre -marketing period, coupled with factors such as volatility in the Treasury market during the month of June and a number of larger deals looking to price prior to the July 4" weekend, SWS suggested going out in the 101 period at the same levels as that of the pre -marketing period to build the order book. Following the second 101 period, all of the maturities were subscribed. • The transaction was 2.2x times oversubscribed on aggregate and generated more than $113 million of orders; all of the orders were submitted by SWS. The transaction received strong interest, including orders from 17 investors; over half of these investors were those who did not participate in the City's prior offerings • Given the strong book of orders, a few short-term maturities were tightened by 5 bps, and the 2026 maturity was tightened by 3 bps during price guidance - Spreads were further tightened following Launch, with the 2023 — 2032 maturities receiving an additional 3 bps bump • The transaction resulted in $8.376 million of net present value savings, or 17.5% of the refunded par -amount, and achieved an all -in TIC of 2.35% SUMMARY OF INSTITUTIONAL AND PROFESSIONAL RETAIL DISTRIBUTION CAPABILITY. SWS has distribution channels that reach both the institutional and professional retail investor markets, a valuable tool that can help the City maximize investor participation when pricing the Bonds. We actively market to over 1,500 of the top tier institutional buyers nationally including many of the largest mutual funds, insurance companies, corporations, trust departments, commercial bank trust departments, "cross -over" buyers, and investment advisors — buyers that comprise more than 90% of the municipal market. In addition to SWS actively covering the largest "Tier 1" institutional investors, our sales force has also long focused on cultivating relationships through our secondary market activity with second- and third -tier institutional buyers, including "retail conduits" or Separately Managed Accounts ("SMA") that have historically been under -serviced by larger firms. SWS's coverage of and relationship with SMAs is one of the firm's competitive advantages, setting us apart from many other leading national firms — nearly 50% of our trades in the secondary market are with SMAs. These relationships allow SWS to generate qualifying retail orders, contributing to the success of our transactions as they comprise the bulk of the retail market. RECOMMENDED MARKETING STRATEGY & APPROACH. Market volatility and rate uncertainty continue to be a concern amongst market participants. As such, the firm believes that the key to any successful sales and marketing effort is flexibility, particularly with the timing, structure, and couponing of the transaction. To successfully market the sale of the Bonds, SWS would deploy its three -pronged strategy to coordinate research and communication between bankers, sales personnel, and investors. Step 1: Our experienced professionals craft a compelling credit narrative for rating agencies and investors and establish the optimal structure and timing of the issuance. For the latter, SWS utilizes proprietary tools to identify target investors — those with the highest potential cash flow to reinvest and top holders of similar types of bonds. In the City's case, SWS would identify top holders of peer credits, constituting similarly rated credits in the Florida region. As seen below, we've identified several target investors by analyzing their holdings of these peer credits, and further break it down by maturity buckets — an extremely valuable tool when pricing in current market conditions and an inverted MMD curve. Bondholder Summary Table Firm # of Credits Held Grand Total ($) City of Miami Special Obligation (AGM) Broward County School Board COP Miami -Dade County School Board COP Miami -Dade County Special Obligation Palm Beach County School Board COP Vanguard Fidelity Blackrock Thornburg Inv. Mgmt. T Rowe Price JP Morgan Western Asset Dimensional Fund Wellington Nuveen 5 362,165,000 3 343,014,000 4 90,152,000 3 82,170,000 3 52,805,000 4 32,886,000 2 28,210,000 3 22,200,000 3 21,217,000 4 20,705,000 36,145,000 1,000,000 85,365,000 78,636,000 18,550,000 38,130,000 20,306,000 3,919,000 27,210,000 15,898,000 11,401,000 11,695,000 100,335,000 149,026,000 40,306,000 27,350,000 7,891,000 11,466,000 3,972,000 8,760,000 100,000 36,575,000 103,745,000 115,352,000 6,690,000 24,606,000 16,690,000 24,608,000 175,000 17,326,000 2,330,000 1,056,000 730,000 8,180,000 Bondholder Summary Table — Breakdown by Maturity 1-5 Years 6-10 Years 11-15 Years 16-20 Years 21+ Years Fidelity Vanguard Thornburg Goldman Sachs Nuveen Fidelity JP Morgan Vanguard Blackrock DWS Inv. M mt. Vanguard Dimensional Fund T Rowe Price Wellington Mgmt. BNY Mellon Blackrock Fidelity T Rowe Price Vanguard Southern Farm Bureau Vanguard Invesco Advisers MacKay Shields Nuveen Blackrock Step 2: The finance team then communicates critical information to our sales force when the transaction is publicly announced via a report that details the structure, covenants, disclosures, ratings, and preliminary investor details. Considering the current market environment, we recommend the early release of the EMMA notice, POS, and investor presentation so that we may price a transaction sooner than expected if a window of opportunity is presented. Page 1 3 Siebert ii Williams 4Shank City of Miami, Florida Request for Proposals Step 3: Our salesforce builds upon the bankers' information by adding proprietary sales and trading analysis before disseminating their unique "New Issue Package" to targeted buyers of our issuers' bonds. This package includes structure wires, ratings reports, investor presentations, among other relevant information. In addition to the steps mentioned above, SWS recommends that the City consider the following: Specific Bond Issuance Process Recommendations Flexible Authorizing Documents To the extent possible, SWS recommends that the City include flexible provisions in its bond resolution. Given the uncertainty in the market, having a wider range of timing and structuring parameters (final maturity, maximum interest rate, couponing etc.) will be to the City's advantage as it will be able to flexibly adjust to meet investor demand. Day -to -Day Pricing Approach If the primary market is volatile after the POS is released, SWS recommends that Miami remain flexible to accelerate or delay pricing based on daily feedback from its underwriting syndicate and investors. Voluntary Press Release to Engage with Investors Prior to posting the POS, SWS recommends that the City issue a voluntary press release either through EMMA or Bloomberg that announces the transaction. The City could post this information for marketing purposes at least 4 to 6 weeks ahead of the POS. By placing a voluntary notice, the transaction becomes fully public information and places it on investors' radars. It also allows the syndicate to raise awareness about the deal so that investors allocate cash early for the City's Bonds. RECOMMENDED RATING AGENCY APPROACH. The City currently possesses an underlying rating of Aa2 / AA / AA by Moody's, S&P, and Fitch, respectively. As the City is aware, S&P upgraded many of the City's obligations from AA- to AA on May 17, 2023, including its non -ad valorem revenue -backed bonds, citing "Miami's economic growth and income improvement, coupled with moderation of debt." Considering S&P's recent upgrade and positive forward -looking view on the City's local economy, we would recommend obtaining a rating from S&P, anticipating the Bonds will be rated AA. For certain issuers, such as those that issue frequently, are in the high AA or AAA category, and/or those that have ratings with relative unanimity across its credits, we may suggest going to market with the one higher rating in the event that a split rating may be expected. However, given that the S&P upgrade is recent, and because some of the City's other credits do possess lower ratings, we would recommend going to market with a rating from an additional rating agency in order to generate interest from a wider universe of investors. While they have implemented some changes to their rating methodology, the process may be more nuanced with Moody's based on the manner in which they have viewed the City's Special Obligation credit in the past. Moody's recently updated their methodology to reflect a more comprehensive view of an issuer's financial position when reviewing the issuer's non -ad valorem -backed obligations. This new methodology initially places non -ad valorem backed -debt at the same rating as the underlying rating of the issuer, then adjusts the rating based on the pledged revenues an issuer intends to appropriate. We believe it is possible for the obligations to obtain a rating equal to that of the City's, contingent upon several factors. If the City's definition of "pledged revenues" encompasses all revenues within the general fund, this would be viewed favorably by the agency and would likely result in the Aa2 rating. With respect to Fitch, their rating methodology continues to penalize non -ad valorem -backed debt by at least one notch below the respective issuer's underlying rating, citing that their methodology "reflects the statutory priority of the payment to essential government services over debt service". For Fitch's ratings to be equal to S&P or potentially Moody's, this would require the current underlying issuer rating of AA to be upgraded by at least one notch, above the latest AA from S&P. Drawing from our experience with Florida issuers and non -ad valorem revenue transactions, as well as for the reasons mentioned above, we recommend obtaining ratings from S&P and Moody's for the Bonds. Additionally, considering the City's credit strengths bode well with the new methodology, we would recommend drafting a rating agency presentation highlighting these key features, such as its strong cash position and growing economy. Key Credit Features Strengths Considerations Strong financial position with sizeable unrestricted cash balance Elevated pension liabilities vs Aa2 rated peers Growing tax base and local economy Weak ESG factors may impact long term view by the Agencies PROPOSED SYNDICATE SIZE, COMPOSITION, AND DESIGNATION POLICY. We would recommend a syndicate of six (6) firms consisting of a senior book runner, one co -senior, and 4 co -managers, with liabilities of 60%, 20%, and 5% for each co- manager, respectively. "Group Net" allows the entire team to receive some level of compensation while "Net Designated" provides an opportunity and incentive for firms to reach out to their client base and solicit orders. For the City's proposed bond issuance, we believe that utilizing Net Designation would incentivize all members of the syndicate to actively participate, maximize distribution potential, and ultimately would achieve the best results for the City. Below, we provide a sample designation policy to ensure equitable distribution between all parties involved. Sample Designation Policy: (1) At least 4 firms must be named (2) No firm may receive more than 60% of any designation (3) Minimum designation per firm of 10% (4) Co -senior must be designated. While we would not recommend a separate retail order period, there may value for the City in implementing an individual and professional retail priority. We would review these alternatives closer to the pricing for the Bonds. Page 14 Siebert ii Williams 4Shank City of Miami, Florida Request for Proposals Structure Ideas and City Experience (3-page limit) RECOMMENDED STRUCTURING FOR THE BONDS. The City desires a level annual debt service structure with a 30-year final maturity for its Bonds, however, given that the City is anticipating paying off a portion of the Bonds with funds that are expected to be received from the sale of the existing site of the MRC, SWS recommends structuring the Bonds with 2 series where (i) $160-$170 million of the Bonds are issued fixed rate with a conventional 9 or 10-year par call option, and (ii) $60-$70 million of the Bonds are issued with an alternative structure that would provide the City with the flexibility to repay these series of Bonds once the funds are received from the sale. (Note that a 4-year o 16 -, , ,� - D p 0 r, call results in a significant pricing penalty so the � � � F f m:: s- �II #01 � best way to mitigate that is to have a shorted call ^1111111111111 12 r m �-�'�' apply to a subset of the series of bonds and not 10 the issuance as a whole.) Each series would be 8 structured with level annual debt service so that 6 when the one series is retired with the 4 anticipated cash, the remaining debt service will 2 still be level. ° Vl lD I' 00 Ql O rn N M V ill cn Nm 00 Ql O �--� N M ul lD n 00 Ol O a-1 N M Variable rate products such as floating rate o00000000000000000000000000000 N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N notes ("FRNs") as well as variable rate demand bonds ("VRDBs") that can mirror the structure of • Series 1 DS Series 2 DS Until Call/Put Series 2 DS Reduced after Call/Put and act as a long-term financing, are viable options for the second component — the former is generally accompanied with a short mandatory tender date and/or a call date, and the latter is callable at any time. However, both FRNs and VRDBs have been costly in the current interest rate environment where rates have risen significantly in general and the yield curve has become inverted — in fact, more recently, we have witnessed issuer clients show an interest in fixing out their outstanding variable rate obligations. Further, given the volatility that the market has continued to witness since 2022, FRNs and VRDBs would make it difficult for the City to plan for debt service payments. These market conditions may change by the time the City is ready to access the market, however as alternatives, below we outline fixed-rate structures for the second component of the financing that SWS believes could be suitable for the Bonds, as it would provide the City with the flexibility to retire the smaller component with the anticipated funds at a fixed rate. ALTERNATIVE STRUCTURING SOLUTION 1: PUT BONDS. Put bonds are obligations with a fixed interest rate for, and priced to, the "put" date; many put bonds are also structured with a call option six months to a year prior. Historically, put bonds have been characterized with lower rates than long-dated fixed rate bonds, and while subject to a stepped rate, the issuer will not be in default if the obligations are not successfully refinanced at the put date. Given that the City has an estimated timing as well as the amount of funds that will become available, a three or four-year put bond could provide Miami with the flexibility to retire the component with the anticipated funds, in addition to maintaining a level annual debt service structure before and after the retirement, with a relatively low cost of capital. ALTERNATIVE STRUCTURING SOLUTION 2: SHORT CALL. The City could also elect to issue the second component of the transaction with a short 4 or 5 year call date. However, short calls are trading much cheaper than more conventional calls due to the current interest rate environment and the inverted yield curve. OTHER CONSIDERATIONS: CASH DEFEASANCE IN YEAR 3 OR 4. Issuing the entirety of the Bonds with a 10-year par call would result in the lowest nominal cost of capital for the City — Miami could elect to issue the Bonds in such manner and utilize the funds that become available in year 3 or 4 to legally cash defease the $60-$70 million portion of the Bonds. Alternatively, it may prove more economical for the City to utilize the cash to defease a portion of the Special Obligation Bonds that were issued in 2018, or any of the other obligations that the City has issued in the past, as opposed to repaying the Bonds. However, the market conditions in three to four years are unknown. Depending on the yield of the government securities that are available and selected for the escrow at the time, this option may ultimately be more costly than the put bond or short call options, where the cost of repayment for the second component of the Bonds will be known at issuance. Level Debt Service (30 Years) 10-year Par Call 4-year Put (Solution 1) (u 4-year Par Call (Solution 2) (1) Delivery Date 7/21/2023 7/21/2023 7/21/2023 Call Date 3/1/2033 Series A: 3/1/2033 Series B: 9/1/2026 _ Series A: 3/1/2033 Series B: 3/1/2027 Par ($) 230 ,000,000 Series A: 170,000,000 Series B: 60,000,000 Series A: 170,000,000 Series B: 60,000,000 Premium ($) 16,614,822 15,289,213 = 14,135,550 Total Proceeds ($) 246,614,822 245,289,213 _ 244,135,550 All -in TIC 4.23% 4.18% 4.37% Average Life (yrs.) 18.74 14.79 18.74 Total Interest ($) 204,920,711 162,289,722 207,691,722 Total Debt Service ($) Max. Annual Debt Service ($) 434,920,711 392,289,722 437,691,722 14,690,200 73,857,834 (Mandatory Put) 14,781,334 1) Assumes the Bonds retired at the put or call date; economics will differ if the Bonds are rolled (for the put) or not called on the call date Page 15 Iktil Siebert Williams M991 Shank W51.14/110111.1.1.16C1.3.£ COMPANY City of Miami, Florida Request for Proposals PRICING LEVELS. As requested, below we provide SWS's indicative pricing levels for the various structuring alternatives discussed above, assuming market conditions as of COB Friday, June 2, 2023 and Aa2/AA ratings. While the indicative spreads take into consideration typical metrics such as recent transactions by similarly -rated issuers, other non -ad valorem special obligation transactions, and issuances within Florida, they are also reflective of current market volatility and experience gleaned from our senior -managed transactions in the last few months. The market continues to witness significant volatility since the beginning of 2022 with both US Treasury rates and MMD yields experiencing considerable swings. In recent weeks, the municipal market has continued to see weakness with sizeable MMD cuts across most of the curve, particularly in the short end, where the deepest inversion is happening. These MMD movements have translated into most transactions entering the market wider than premarketing levels and certain transactions changed to day-to-day in an attempt to avoid pricing during a volatile day. We provide this information to say spreads may seem wider when compared to similar offerings of its peers over the past couple of years as investors are now requiring wider spreads and/or alternative coupon structures for participation. To ensure investor participation, we recommend initial offers start wider in order to build a book of orders especially in the current market, which, contingent upon subscription levels, will allow for repricing and a tightening of spreads. Factors that could impact our view include unexpected news from the FOMC meeting in June and/or July (assuming a late June or July pricing/July closing), or any other general macroeconomic data that would suggest considerable changes to the consensus view on the path of interest rates. As the market tone continues to evolve week -over -week in this challenging environment, issuers continue to re-evaluate methods of best -execution of transactions - as mentioned previously, flexibility continues to be extremely valuable. In the current market, we believe that the indicative scales below would generate the most interest. Please note that the scale presented within Exhibit A is representative of that of the 10-Year Par Call Scale. F- City of Miami Non -Ad Valorem Special Obligation Bonds, Series 2023 As of June 2, 2023 Maturity MMD 6/2/23 3/1/2024 3/1/2025 3/1/2026 3/1/2027 3/1/2028 3/1/2029 3/1/2030 3/1/2031 3/1/2032 3/1/2033 3/1/2034 3/1/2035 3/1/2036 3/1/2037 3/1/2038 3/1/2039 3/1/2040 3/1/2041 3/1/2042 3/1/2043 3.15% 3.04% 2.86% 2.74% 2.67% 2.64% 2.57% 2.55% 2.54% 2.58% 2.62% 2.73% 2.87% 3.03% 3.12% 3.16% 3.20% 3.23% 3.26% 3.28% 10 Year Par Ca Spread Coupon (bps) Yield 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 17 22 27 30 32 34 36 38 40 42 45 47 48 48 48 50 52 53 53 53 3.32% 3.26% 3.13% 3.04% 2.99% 2.98% 2.93% 2.93% 2.94% 3.00% 3.07% 3.20% 3.35% 3.51% 3.60% 3.66% 3.72% 3.76% 3.79% 3.81% 4 Year Par Ca Coupon Spread (bps) Yield 5.00% 17 5.00% 22 5.00% 27 5.00% 30 5.00% 50 5.00% 64 5.00% 72 5.00% 78 5.00% 80 5.00% 82 5.00% 85 5.00% 87 5.00% 87 5.00% 85 5.00% 82 5.00% 82 5.00% 82 5.00% 83 5.00% 83 5.00% 83 3.32% 3.26% 3.13% 3.04% 3.17% 3.28% 3.29% 3.33% 3.34% 3.40% 3.47% 3.60% 3.74% 3.88% 3.94% 3.98% 4.02% 4.06% 4.09% 4.11% 3/1/2044 3.32% 3/1/2045 3.34% 3/1/2046 3.39% 3/1/2047 3.42% 3/1/2048 3.45% 5.25% 55 4.00% 5.00% 90 4.35% 3/1/2049 3.46% I m° 3/1/2050 3.47% 3/1/2051 3.48% a`, 3/1/2052 3.49% 3/1/2053 3.50% 4.25% 95 4.45% 5.00% 93 4.43% 3&4Year Put Bon .s Spread Coupon (bps) 5.00% 50 3.24% L 5.00% _ 55 _ 3.29% -o I i o Q I MAINTAINING FLEXIBILITY WITHIN OFFERING DOCUMENTS. As forementioned, in the current volatile market flexibility continues to be valuable, and we would suggest the same approach be taken for the Preliminary Official Statement in order to allow for the City to adapt to information that may become available during the marketing period. For example, leaving the timeframe to which a portion of or all of the Bonds would become eligible for optional redemption or a put provision Page 16 Siebert ii Williams 4Shank City of Miami, Florida Request for Proposals (depending on the structure that the City elects to execute) would allow for the City and its financing team to conduct reverse inquiries to investors during the marketing period to gauge what the investors find palatable. Call Option Sample Prepayment Language The Bonds maturing on or before , 20 * are not subject to optional redemption prior to maturity. The Bonds maturing on or after , 20_* , will be subject to optional redemption prior to maturity at the sole option of the Issuer, in whole or in part, at any time on and after , 20_ , at a redemption price equal to par plus interest accrued thereon to the date fixed for redemption. Put Bonds with a Call Option During the initial Long -Term Rate Period, the Bonds are subject to redemption prior to maturity at the election of the Issuer, in whole or in part, on any Business Day on or after , 20_* (the Call Protection Date for the initial Long -Term Rate Period), at a redemption price equal to one hundred percent (100%) of the principal amount of each Bond or portion thereof to be redeemed, plus accrued interest to the redemption date. Put Bonds with a Call Option The Put Bonds are subject to redemption at the option of the Issuer, in whole or in part, on any Business Day on or after 20_*, the First Call Date, at a redemption price equal to one hundred percent (100%) of the principal amount of the Put Bonds to be redeemed, plus accrued interest to the redemption date, without premium. WILLINGNESS To COMMIT CAPITAL. Municipal finance is and has always been the firm's core business - the firm frequently risks its capital in the primary market to ensure pricing integrity for our clients, seamlessly providing the underwriting commitment necessary to underwrite unsold balances in our senior managed transactions when and if necessary. SWS is able to quickly allocate resources to support our senior managed transactions, mainly due to our size and focus. SWS has consistently demonstrated willingness to take bonds into inventory to support an issuer's pricing levels. In the event that there are unsold balances, Gary Hall, SWS' President & Head of Infrastructure and Public Finance, is readily accessible to make quick decisions as it relates to committing our capital to underwrite bonds for our clients. Given the current market environments discussed above, this commitment is a major factor that the City may want to consider when selecting underwriters for the Bonds. Below we provide recent examples in which SWS committed its capital to support the financing. Select Examples of SWS's Recent Capital Commitments Issuer Sale Date Par ($mm) SWS Inventory ($mm) (%) Rhode Island Health and Educational Building Corporation State of Wisconsin (Master Lease Certificates Participation) City of New York Spring Independent School District Pflugerville Independent School District Great Lakes Water Authority City of San Antonio New York Triborough Bridge and Tunnel Authority The Regents of the University of Michigan Michigan Strategic Fund (Taxable) Los Angeles World Airports 5/13/2023 5/16/2023 2/21/2023 1/26/2023 1/24/2023 8/30/2022 8/9/2022 5/5/2022 3/11/2022 3/3/2022 1/6/2022 15.44 19.29 688.32 293.46 337.20 417.60 285.94 928.00 55.78 82.72 505.04 2.00 0.46 23.56 18.00 57.00 37.05 17.20 35.05 0.47 2.27 17.26 12.92 2.36 3.42 6.13 16.90 8.80 6.02 3.78 0.84 2.74 3.41 Below we provide a case study for SWS's senior -managed Pflugerville Independent School District transaction from January 2023, which highlights the circumstances of the offering and our willingness to commit capital. $337,300,000 Pflugerville Independent School District I Unlimited Tax School Building Bonds, Series 2023A & Taxable Series 2023B • SWS served as book -running senior manager on Pflugerville Independent School District's $293,350,000 Unlimited Tax School Building Bonds, Series 2023A and $43,850,000 U/L Tax School Building Bonds, Taxable Series 2023B which priced in the market on Tuesday, January 24, 2023. • In preparation, the District, Financial Advisor and SWS prepared a very early EMMA notice of sale in December alerting investors of the upcoming pricing. - SWS also prepared an investor roadshow to highlight the District's strengths, viewed by 27 institutional investors • The Series 2023A bonds were structured with three call dates, providing the District maximum future financing flexibility. • In the Holiday -shortened weeks ofJanuary, over $3.5Bn had already been issued on behalf of Texas School Districts, including $1.2Bn the week of pricing. • Notably in 2023, Texas K-12 debt has been issued without the ubiquitous Permanent School Fund guarantee (PSF), a phenomenon not seen since 2008 after having reached the federally allowed leverage limit against the trust instrument securing PSF bonds. • Investors seemed to hit the pause button the week of the District's pricing which was the first week of the first slate of sizeable school districts transactions without PSF wrapping and sub -AAA rating Texas ISD paper. The market also witnessed unfavorable MMD:UST ratios and a pending FOMC rate decision. • As a result, maturities 2034-2035, 2040, 2045, and 2048 were substantially undersubscribed - with subscription levels ranging from as low as 5% (2045) to 60% (2048). Nevertheless, the SWS-led syndicate garnered $370 MM of orders across all maturities on the Series A bonds, achieving 1.3x oversubscription on the series as a whole, and $265 MM for the Series B bonds (6.1x oversubscription) • Despite the transaction having a balance of unsold bonds on the Series 2023A bonds, the SWS underwriting desk worked diligently to develop a plan to reprice the bonds with yields on four maturities being lowered and five maturities increasing, while maintaining three call dates, including a 6-year call date on the term bond. To ensure the integrity of the bonds, SWS underwrote $57.2 million of bonds. • In addition, SWS repriced two maturities to change select coupons from 5% to 4%, beneficing the district's All -In TIC resulting in an All -In TIC of 3.93% for the District. Page 1 7 Siebert ii Williams 4Shank City of Miami, Florida Request for Proposals Appendix A: Exhibit A — Fee Proposal A EXHIBIT A Underwriting Fees FEE PROPOSAL(1) $230,000,000* Non Ad Valorem Special Obligation Bonds, Series 2023 $$ Per Bond Underwriters Expense 63.565 .2764 Estimated takedown 402,500 1.7500 Total Not -To -Exceed Compensation $ 466,065 2.0264 Underwriter Expense Components Communications Clearance CUSIP DTC Fed Funds MSRB Travel & Closing (Local closing Syndication* Underwriter's Counsel Other, specify** Total Not -To -Exceed Expenses $ 0 $0 0 0 1,280 0.0056 800 0.0035 7,036 0.0306 0 0 0 _0_ 22,949 0.0994 30 000 0.1279 1,500 0 0064 $ 63,565 0.2732 *Syndication includes IPREO's Base Fee, Wire System, Flat Fee, and Gameday **Other, specify includes DAC Compliance Review and Miscellaneous (Contingency) fees (1): Please note that fees are based on a offering size of $230,000,000 as indicated in Exhibit A page 1 which is slightly different than the total par in the amortization provided in Exhibit A (cont'd). * 11CI1f 61AI 11 &1 0 R EXHIBIT A (cont'd) Maturity Date Amortization Takedown Spread to MMD (MMD as of June 2, 2023) 03/01/2024 3,465,000 1.75 17 03/01/2025 3,940,000 1.75 22 03/01/2026 4,120,000 1.75 27 03/01/2027 4,315,000 1.75 30 03/01/2028 4,505,000 1.75 32 03/01/2029 4,715,000 1.75 34 03/01/2030 4,935,000 1.75 36 03/01/2031 5,155,000 1.75 38 03/01/2032 5,400,000 1.75 40 03/01/2033 5,645,000 1.75 42 03/01/2034 5,910,000 1.75 45 03/01/2035 6,180,000 1.75 47 03/01/2036 6,465,000 1.75 48 03/01/2037 6,765,000 1.75 48 03/01/2038 7,080,000 1.75 48 03/01/2039 7,410,000 1.75 50 03/01/2040 7,755,000 1.75 52 03/01/2041 8,110,000 1.75 53 03/01/2042 8,490,000 1.75 53 03/01/2043 8,890,000 1.75 53 03/01/2044* 9,300,000 1.75 55 03/01/2045* 9,735,000 1.75 55 03/01/2046* 10,195,000 1.75 55 03/01/2047* 10,665,000 1.75 55 03/01/2048* 11,170,000 1.75 55 03/01/2049** 11,690,000 1.75 95 03/01 /2050 ** 12,240,000 1.75 95 03/01 /2051 ** 12,820,000 1.75 95 03/01/2052** 13,420,000 1.75 95 03/01 /2053 ** 14,055,000 1.75 95 * Term Bonds comprised of the 2044-2048 maturities **Term Bonds comprised of the 2049-2053 maturities; discount bonds with a 4.25% coupon and 4.45% yield City of Miami, Florida Request for Proposals Appendix B: Resumes B City of Miami, Florida Request for Proposals FINANCE TEAM Finance Team Resume Jonathan Kirn Senior Managing Director Project Oversight 1025 Connecticut Ave NW, Suite 509 Washington D.C. 20036 Phone: (202) 872-8056 Email: ikirn@siebertwilliams.com ■ Mr. Kirn has over 30 years of municipal finance and financial analysis experience and has been actively involved in the Florida municipal market since 1993. ■ He has served as the primary contact on over $50 billion in financings serving in the capacity of senior, co -senior and co -managing underwriter. Mr. Kirn has worked on senior managed transactions for Florida issuers including Miami -Dade County, Broward County, City of Miramar, City of Orlando, and City of West Palm Beach among others. ■ He also has worked on numerous senior -managed transactions for special obligation and Certificates of Participation ("COP") issuers, including the City of Hartford, State of Connecticut's Special Tax Obligation credit, Prince George County's COPs, and the very first COP transaction for the State of Maryland. ■ Mr. Kirn graduated Highest Honors from Bentley University in Waltham, Massachusetts in 1984 with a Bachelor of Science degree in Management and a concentration in Computer Science/Systems Analysis. He holds Series 7, 50, 53, 63, and 79 FINRA securities licenses. Robert Cox Senior Vice President Day -to -Day Coverage 100 S. Ashley Drive, Suite 600 Tampa, FL 33602 Phone: (813) 675-3600 Email: rcox@siebertwilliams.com ■ Mr. Cox leads the firm's Tampa office and has over two decades of professional experience. ■ Over his 15 years in the public finance industry, he has served as a senior banker on municipal financings totaling approximately $12 billion in par amount. ■ As a native Floridian, Mr. Cox serves as a primary member of the firm's Florida banking team and has served as lead or senior banker for transactions with the City of Miramar, Broward County, City of Tampa, and Palm Beach County Schools . ■ He received his B.A. in International Affairs (1999) from the Florida State University (FSU) and his J.D. (2002) from the FSU College of Law. He is a former member of the FSU Alumni Association's National Board of Directors, serving two consecutive terms as treasurer. He holds Series 7, 53, 54, and 63 FINRA securities licenses in addition to maintaining an active law license. Naomi Rinaldi Vice President Quantitative & Banking Support 1025 Connecticut Ave NW, Suite 509 Washington D.C. 20036 Phone: (202) 872-8056 Email: nrinaldi@siebertwilliams.com ■ Ms. Rinaldi joined SWS in 2020 and provides banking and quantitative support to issuers, primarily to those in the southeast. ■ Prior to joining SWS, Ms. Rinaldi spent over four years serving issuers on the municipal advisory side at Prager & Co., LLC and Public Resources Advisory Group (PRAG). ■ Financial advisory and senior managed transactions combined, Ms. Rinaldi has nearly $12 billion in negotiated, competitive, and direct placement transaction experience. Her recent Florida experiences include the firm's senior -managed transactions for Broward County and the City of Miramar. ■ She holds a Bachelor of Arts in Economics and in Political Science (2013) from UC San Diego and a Masters of Business Administration in Finance and Strategy (2016) from the Drucker School of Management. She holds Series 7, 50, 52, 63, and 79 FINRA securities licenses. Agustin Benitez Analyst Banking Support 625 N. Michigan Ave. Suite 2350 Chicago, IL 60611 Phone: (312) 985-1961 Email: abenitez@siebertwilliams.com ■ Mr. Benitez joined SWS in 2022 and provides credit and banking support to issuers in the Southeast region. ■ Prior to joining SWS, Mr. Benitez spent nearly 2 years as a municipal credit research analyst at Allstate Investments, where he performed extensive credit analysis and provided investment recommendations on municipal debt across all sectors and regions. ■ Mr. Benitez holds a Bachelor of Business Administration in Finance and Information Technology Management (2020) from the University of Wisconsin — Milwaukee, in addition to a Certificate in Investment Management. He holds Series 52 and 63 FINRA securities licenses. City of Miami, Florida Request for Proposals UNDERWRITING TEAM Underwriting Team Resume Drew Gurley Managing Director Underwriter 100 Wall Street, 18th FI New York, NY 10005 Phone: (646) 775-4872 Email: agurlev@siebertwilliams.com ■ A 30-year veteran in municipal securities, Mr. Gurley began his career at Matthews & Wright in 1985 and worked at UBS Securities LLC for 20 years. Prior to joining Siebert Williams Shank in October 2010, Mr. Gurley served as Senior Vice President in municipal underwriting for First Southwest Co. ■ As the firm's lead East Coast underwriter, Mr. Gurley has had extensive experience serving as a senior underwriter for a wide variety of clients, including the recent senior managed transactions for Broward County and the City of Miramar. ■ Mr. Gurley is a graduate from the University of Vermont with a Bachelor of Science (1985) in Finance. He holds Series 7, 53, and 63 FINRA securities licenses. Cindy Ashmore Managing Director Underwriter 100 Wall Street, 18th Floor New York, NY 10005 Phone: (212) 373-4276 Email:cashmore@siebertwilliams.com ■ Ms. Ashmore joined SWS following the firm's merger with Williams Capital in 2019. Prior to joining Williams, she served over eight years with Jefferies LLC as a senior vice president/underwriter. In this capacity, she structured and priced over $30 billion in primary market municipal bonds across a variety of sectors as book -running underwriter. ■ Ms. Ashmore started her career 20 years ago in the municipal derivatives department at Bear, Stearns & Co. Inc. where she structured and priced various derivative products including interest rate swaps, repurchase agreements and debt service reserve fund agreements ■ Ms. Ashmore earned a Diploma in Paralegal Studies from New York University, and a Bachelor of Arts (1998) in History from the State University of New York at Oneonta. She holds Series 7 and 63 FINRA securities licenses.