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Home My WebLink About8.02 DubRanADBondAgmt CITY CLERK File # AGENDA STATEMENT CITY COUNCIL MEETING DATE: August 17, 1999 SUBJECT: Authorization to Engage Bond Underwriter for the Dublin Ranch Assessment District and Negotiate a Contractual Agreement Report Prepared by: Joe Aguilar, Interim Administrative Sem,ices Director EXHIBITS: 1. Resolution 2. Copy of Circulated Request ~'or Qualifications (RFQ) 3. Copy of Response to RFQ by Stone & Youngberg LLC RECOM1VIEND3~TION: ~ Receive Report and adopt attached Resolution. FLN~a2~CIAL STATEMENT: The Underwriter will be compensated on a contingent basis solely from the bond proceeds generated by the issuance of bonds for the Dublin Ranch Assessment District 1999-1 (District). The underwriter fees are subject to parameters to be set forth in bond documents that will be approved by the Ci~ Council in the future. DESCRIPTION: The engagement of Stone & Youngberg LLC as bond underwriter for the Dublin Ranch Asse,ssmgnt District will allow the City to continue with the formation of the District and the issuance of bonds in a timely and efficient manner. The bond underwriter plays in key role in formulating the financing structure and marketing the bonds to be issued by the District. BACKGROUND: The City entered into a development agreement with the Jennifer Lin family for the development of 1,500 acres in the eastern portion of the City. In accordance with that agTeement, and at the request of the Lin family, the City recently initiated proceedings for the formation of an Assessment Dist~c~_Tto_fin~ge public improvements for a portion of their land holdings (approximately 500 acres). The boundaries and the parameters of public improvements needed for the Dislrict are in.~t__he_ process of being determined by Lin family engineers and the City's Public Works Department. The Lin family is also progressing with related planning requirements and approvals related to the subject property. Earlier this year, the City engaged the law firm of Orrick, Herrin~on & Sutcliffe to serve as bond counsel for the District. Staff is in the process of developing the balance of the financing team. The next key member of the financing team proposed is an underwriter. The underwriter needs to.be ~ngaged in order for the City to properly identify the parameters of the appraisal services needed for the prospective bon~ issue. COPIES TO: ~ ITEM NO. G:\C.,C-MTGS~,99-QTR3~.UGUST~g-17-99~agenda undemanblec services.doc PROCESS: ~'~ -'~- ' Last month, Staff circulated a request for qualifications to specific firms WhO have expertise in the issuance of assessment, district bonds. The RFQ contained detailed information about the District including a copy of the report by Public Finance Associates that discusses the various, financing options available for the District. Staff conducted a site tour of the proposed District and provided additional'~ information from the prospective bond underwriting firms. Staff received four proposals and interviewed two firms. After conducting the interviews and checking client references, Staff recommends the hiring of Stone & Youngberg LLC to serve as bond underwriter for the District..Stone& Youngberg appears to the best qualified to serve the needs of the City in completing the prospective' bond. financing. Stone & Youngberg is headquartered in San Francisco and has several experienced individuals available to assist the City. The 68 year old fn-m managed nearly 40 Percent of the assessment district bonds issued in California over the past 15 years. In the past 18 months, Stone & Youngberg have managed 13 new assessment district issues totaling over $215 million in bonds The staff of Stone & Youngberg have demonstrated that they have extensive experience and a good understanding of the current market for assessment district bonds. RECOMMENDATION:. ~ . . _ Adopt the attached Resolution to engage Stone & Youngberg as underwriter for the Dublin Ranch Assessment District and authorize Staff to negotiate a Purchase agreement w/th the underwriter which will be presented to the Council at the time that bonds are ready to be sold. RESOLUTION NO. - 99 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF DUBLIN AUTHORIZING STAFF TO ENGAGE STONE & YOUNGBERG AS BOND UNDERWRITER FOR THE DUBLIN RANCH ASSESSMENT DISTRICT AND TO NEGOTIATE A CONTRACTUAL AGREEMENT FOR SUCH SERVICES WHEREAS, the City recently issued a Request for Qualification (RFQ) for Bond Underwriter Services (Services) for the Dublin Ranch Assessment District to four companies providing such services; and WHEREAS, all four companies responded with proposals to provide the Services as discussed in the City's RFQ; and WHEREAS, Staffreviewed the proposals, interviewed and checked references on two of the firms and determined that the proposal received from Stone & Youngberg LLC best meets the needs of the City in completing the prospective bond financing; and NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Dublin does hereby authorize Staff to engage Stone & Youngberg as underwriter for the Dublin Ranch Assessment District and authorize the City Manager to negotiate a purchase agreement with the underwriter at the time that ~'~ bonds~eto besOla) PASSED, APPROVED AND ADOPTED this 17th day of August, 1999. AYES: NOES: ABSENT: [ABSTAIN: Mayor ATTEST: City Clerk \kDUBLINFS2\ClVlkCC-MTGS\99-QTR3kAUGUSTk8-17-99kreso-underwriter services.doc ~HMENT City of Dublin Request for Qualifications Investment Banking Services July 13, 1999 Dublin Ranch Assessment District 1999-1 Introduction The City of Dublin wishes to pursue the issuance of assessment district bonds in order to finance certain public improvements in the eastern portion of the City known as Dublin Ranch. Please review the attached exhibits for background on the transaction. It is the City's intent to enter into an underwriting services agreement with an investment banking firm in order to execute a negotiated sale of assessment d/strict bonds. The City reserves the right to accept or reject an offering of the bond purchase agreement as it may see fit. The City may terminate the underwriting services agreement without cause at any time. The City is utilizing the firm of Orrick Herrington & Sutctiffe (Sam Sperry) as bond counsel. The request for qualifications, is only being sent to specific firms. In order to have a better understanding of the project, we have organized a tour of the area with our City staff on Tuesday July 20th at 9 a.m. Please confirm your attendance by contacting Joe Aguilar at (925) 833-6654. Please note and observe the limitation on contacting city representatives set forth on page 4, hereof, under the heading "Points of Contact". Background Municipal services are provided within the City of Dublin's boundaries by the City of Dublin and Dublin San Ramon Services District "DSRSD". DSRSD, which is organized under the State of California Community Services District Law, is responsible for providing water, reclaimed water and sewer services. The City provides all other services. In May 1992, the City adopted the Eastern Dublin Specific Plan. The Plan was subjected to an unsuccessful legal challenge and unsuccessful voter referendum. The Specific Plan Area totals 3,302 acres, approximately 2,238 acres of which have already been annexed to the City. In the Specific Plan Area and in the annexed portion of the Specific Plan Area, there are multiple property owners. The two largest property owners in the Specific Plan Area are Chang Su-O-Lin, who owns 1,556 acres in the Specific Plan Area including approximately 1,367 acres within the annexed portion of the Specific Plan Area; and the Alameda County Surplus Property Authority (ACSPA), which owns 700 acres in the annexed portion of the Specific Plan Area. During the past year, the Alameda County Surplus Property .Authority (ACSPA) has been selling and developing portions of its property for industrial, residential and commercial uses. The County has approached financing infrastructure on a pay-as-you-go basis, by installing infrastructure or paying development and impact fees to the City (Traffic Impact Fees, Public Facility Fees, Freeway Interchange Fees and Fire Impact Fees) and utility connection fees to Dublin San Ramon Services Distr/ct. ATTACHMENT 2 City of Dublin Request for Qualifications July 13, 1999 Page 2 Recently, representatives of the largest property owner (Chang Su-O-Lin) have requested that the City establish an assessment district to finance backbone infrastructure for an area encompassing 600 acres of their property holdings. The request includes a list of suggested improvements and proposed boundaries for the assessment district. The City has initiated proceedings for the assessment district formation and is presently reviewing a draft engineer's repOrt for finalizing the district formation. Financing Structure Following is a list of desired goals contemplated by the City in the transaction: · Ability to issue bonds by November 1999 · Maintaining level annual debt service for the life of the bonds, · Final maturity of the bonds not to exceed 25 years, · CombinatiOn of serial and term bonds, if such a feature make the bonds more marketable, · Optional redemption provisions at ten years or sooner. The City may consider other alternatives in the financing structure: however, the selection of the investment banking firm will be based upon. the firm's qualifications and ability to meet the City's desired goals. Other features that may be included by the City are: . · Multiple bond issues · .Phasing of imProvements Over a over a four year period, · Surety bond for replacing the debt service reserve, · Use of credit enhancements, if economically feasible. At minimum, the City intends to utilize a professional firm to serve as the pricing consultant on the transaction. A prospective financial advisor may play a significant role in structuring the transaction. Scope of Services The investment banking firm will perform the following duties: · In conjunction with bond counsel, structure the bond transaction to meet the desired goals of the City and the requirements of financing the assessment district public improvements.; · Address the advantages and disadvantages of multiple bond transactions; · Analyze the projected cash flow from the assessment dislrict and other revenue sources that may constitute security for any debt incurred; ·Work with the City's bond Counsel and City staff in recommending specific terms and conditions affecting the basic security of the debt issue; · Assist the City in selecting and in preparing a list of services required of an appraiser and bank fiscal agent/trustee for the indebtedness; City of Dublin Request for Qualifications July 13, 1999 Page 3 · Coordinate with the City's disclosure counsel, the preparation of the preliminary official statement and the final official statement and the continuing disclosure undertakings. The official statements will include a description of the securities, the City, and pertinent financing and economic data. In the preparation of such official statements, the underwriter will assist the City and its disclosure counsel in the ascertainment of all material facts and circumstances regarding the transaction and in relevant disclosure in the official statements; · Prior to any bond sale, coordinate with the City with regard to a site tour and/or information meetings w/th institutional bond buyers in New York, San Francisco or Los Angeles, if such meetings are necessary or desirable; · Use its best efforts to accomplish the formal marketing of the securities that should be accomplished at the earliest date possible consistent with sound investment banking and underwriting industry standards. It is intended that, once purchased by the underwr/ter, the securities will be re-offered to the public on the basis of an immediate "bona fide public offering". The underwriter may form a ~oup of investment banking firms for the purpose of distributing the securities; · Submit an offer to the City to purchase the securities, subject to pertinent resolutions, the official statements and all other necessary documents, approvals, and proceedings governing such securities having been determined by bond counsel, the City, and the underwriter to be satisfactory in all respect for financing purposes. At least one day prior to the submission of any such formal offer to the City for the purchase of the securities, the underwriter will indicate to the City the interest rates, the purchase price from the City, and public offering price of the securities which the City then expects will be included in such offerl Minimum Qualifications To be considered for selection, proposing firms must possess the following qualifications: · Be a full service investment banking firm; · Have sig-nificant experience and staffin California land secured public finance; · Assign appropriately licensed personnel who are professional investment bankers and willing to serve in the City's best interest and have experience related to the financing. Content of Proposals The proposal must include the following information: · A statement indicating the firm's understanding of the scope of services and its commitment to provide such services; · A profile of the firm and qualifications stating the focus of the firm - local, regional and or national; · The structure of the proposed financing team, including names rifles, and assigned roles in the financing. Please include resumes of key personnel and descriptions of their experience; City of Dublin Request for Qualifications July 13, 1999 . Page 4 ·Profile the firm's experience in completing similar land secured financing transactions Where the firm served as sole or senior manager; · Outline how the firm intends to market the issue; Compensation for Investment Banking Services · Based upon negotiation between the City and the underwriter, compensation of the underwriting services will be derived from the proceeds through the underwriter's discount as determined by the prospective bond purchase agreement. · The underwriter is expected to pay for underwriter's counsel from its bond discount. The underwriter will pay its own out-of-pocket expenses, including the cost of any advertising expenses in connection with the public offering of the bonds and regulatory fees customarily covered by the underwriter. ·Ali compensation for the underwriter will be specified or estimated in writing and disclosed to the City in advance of the bond sale and/or through negotiation with the City's pricing consultant. · The City will pay from the proceeds of the bonds all costs and expenses customarily paid, including the cost of printing the bonds and the official statements, and any other documents. The issuer's cost will also include the fees and expenses of/ts legal counsel, bond counsel, disclosure counsel, pricing cOnSUltant, accountants, architects, engineers, appraisers, rating agencies, bond insurance companies and any other experts or Consultants retained by the City in connection with financing. Points of Contact The City's sole points of contact for this RFQ will be the City Manager, Richard C. Ambrose, Public Works Director, Lee Thompson and the InteriTM Administrative Services Director, Joe Aguilar. Contact with other staff members and City officials, including City Councilmembers, may result in disqualification of the firm in the selection process. Deadline for Proposals Wednesday July 28, 1999, 5 PM (faxes are acceptable with originals following next business day) Deliver Proposals (three copies) to: For additional information, contact: Attention: Joe Aguilar Joe Aguilar (925) 833-6654 City of Dublin Richard Ambrose (925) 833-6650 100 Civic Plaza Lee Thompson (925) 833-6636 Dublin, Ca. 94568 Phone (925) 833-6654 Fax (925) 833-6651 The City Manager and City staff will be interviewing two firms on August 4, 1999. City staff will be making a recommendation for consideratiOn at the August 16, 1999 City Council meeting. Attendance of the recommended firm at the City Council meetfiag is desirable. City of Dublin Request for Qualifications July 13, 1999 Page 5 City of Dublin Request For Qualifications Investment Banking Services Dublin Ranch Assessment District 1999-1 Exhibits Potential List of Public Improvements (Subject to Change) Excerpts from Draft Assessment District 1999-1 Engineer's Report June 24, 1999 City of Dublin ~ Request for Qualifications July 13, 1999 Page 6 City of Dublin Request For Qualifications Investment Banking Services Dublin Ranch Assessment District 1999-1 Exhibits Public Financing Plan For the Proposed Dublin Ranch Assessment District Prepared by Project Finance Associates, Inc. April 9, 1999 City of Dublin Request for Qualifications July 13, 1999 Page 7 City of Dublin Request For Qualifications Investment Banking Services Dublin Ranch Assessment District 1999-1 Exhibits Excerpts From Eastern Dublin Specific Plan .... ' : - -. 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St o n e- & o u n' .... ~.stablrshed _~93~ -- Stone & Youngberg LLC [./'"(J ~ Established ~93~ .- July 28, 1999 . . Mr. Joe Aguilar City of Dublin -- 100 Civic Plaza Dublin, California 94568 -- Regarding: Statement of Qualifications to Provide Investment Banking Services for Dublin Ranch Assessment District 1999-1 Dear Mr. Aguilar: Thank you for the opportunity to present our qualifications to serve as Investment Banker to the City of Dublin for the Dublin Ranch Assessment District 1999-1. As the City is considering a major land- secured financing pro=m-am, it is important that it be assisted by individuals and companies with extensive experience in this highly specialized financing area, Your selection of Sam Sperry as bond _. counsel for the project reflects that level of experience. By selecting Stone & Youngberg as your investment banker, you would be adding to your financing team the underwriting firm that consistently leads both California and the nation in land-secured financings. As evidence of our qualifications for this financing please consider the following along with our proposal which follows: · ' DediCation to Municipal Finance' - stone& y0ungberg has been helping California local governments finance their projects for the past 68 years. We consistently strUCture more i :': California tax-exempt financings for local agencies than any other firm and rank among the top five underwriters in total dollar volume in the State. -'- · Unsurl~assed Land-Secured Financing Experience - Stone & Youngberg's land secured . financing experience surpasses all of our competitors by any measure. Over the last 15 years, we have senior or sole managed nearly 40% of land-secured financings in the State of California. This considerable experience with land-secured bonds will enable us to deliver the most cost-effective financing solution to the Dublin Ranch Assessment District. · Superior Sales and Trading Ca~abilitv - Stone & Youngberg offers one of the most _ effective distribution networks available for municipal bonds in general, and specifically for land-secured debt. Our team of sales professionals focuses on the distribution of local agency municipal bonds. This focus has been a critical component in making Stone & Youngberg the dominant regional firm in the State of California. We would very much appreciate the opportunity of Working with the City on this important project. Please feel free to contact either of us with any questions. Yours very trUly, Edward G. Schilling / Warren Miller Manag-ing Director ?' Managing Director 50 California Street - San Francisco, California 94111 - 41.5/981-1314 CITY OF DUBLIN TABLE OF CONTENTS I. QUALIFICATIONS AND EXPERIENCE ......................................................................................... 1 GENrERAL MUNICIPAL FINANCE EXPERIENCE .............................................................................................. 1 BALANCED SALES DISTRIBUTION ................................................................................................................ 1 MUNICIPAL RESEARCH AND MARKET INFORMATION .................................................................................. 2 INDUSTRY LEADERSHIP ............................................................................................................................... 3 LAND-SECURED FINANCING EXPERIENCE ................................................................................................... 3 II. PROJECT TEAM .............................................................................................................................. 4 III. SCOPE OF SERVICES TO BE PROVIDED ................................................................................. 6 IV. EXPERIENCE WITH SIMILAR FINANCING PROGRAMS .................................................... 8 COMMITMENT TO THE LAND-SECURED MARKETPLACE .............................................................................. 8 SPECIFIC EXAMPLES OF SIMILAR LAND-SECURED FINANCINGS ................................................................... 9 V. MARKETING PLAN ....................................................................................................................... 11 VL ISSUES TO BE ADDRESSED IN DUBLIN RANCH A.D ....................... ' ................................... 12 .~ MULTIPLE BOND ISSUES ............................................................................................................................ 12 DEVELOPER DISCLOSURE .......................................................................................................................... 13 ASSUMPTIONS REGARDING SEWER SERVICE ............................................................................................. ! 3 VI. REFERENCES ................................................................................................................................ 14 APPENDIX A -- LAND SECURED FINANCING EXPERIENCE APPENDIX B -- PRIMER ON APPRAISALS AND VALUE TO LIEN RATIOS APPENDIX C -- BOND BUYER ARTICLES ON STONE & YOUNGBERG - APPENDIX D -- STONE & YOUNGBERG RANKINGS Stone ~ Youngberg LLC CITY OF DUBLIN I. QUALIFICATIONS AND EXPERIENCE General Municipal Finance Experience Stone & Youngberg was founded in 1931 in response to the difficulty confronting ~owing California communities in funding public facilities during the Great Depression. Our mission today remains the same - assisting cities, counties, special districts, and agencies to achieve their economic development and capital financing goals. Over our 69 years, Stone & Youngberg has gown into California's largest regional investment bank devoted to municipal bonds. We are particularly proud to consistently rank as one of the leading underwriters of local government agency issues in California. We have built this record while maintaining ownership amongst the professionals of the firm who are active participants in all aspects of our municipal finance business. Over the past five years, Stone & Youngberg has senior managed more issues for local government agencies in California than any other firm by a wide mar~n. We annually, as senior managing underwriter, underwrite a total of approximately $1 billion. In addition to primary market sales, Stone & Youngberg also annually purchases and sells an additional $1.8-2,0 billion of California local agency municipal bonds in the secondary market. Between 1994 and 1998, Stone & Youngberg underwrote 498 transactions representing nearly $6.2 billion of California local financings in all areas of municipal finance. Tables in Appendix D illustrate Stone & Youngberg's leadership over other firms during this five year period in underwriting services to local government agencies. Balanced Sales Distribution The firm's underwriting stren~h and ability to market and sell municipal bond issues complements Stone Youngberg's ban'king talent in structuring municipal financings. Stone & Youngberg's focus on California municipal issues enables our trading and sales force to concentrate on this segment of the securities market. Our firm distributes securities to a well-balanced market of institutional buyers throughout the United States and to retail investors living primarily in California. Because of Stone & Youngberg's mix of institutional and retail buyers, issuers have the assurance of healthy market demand for their securities. Within the specialty of municipal bonds, Stone & Youngberg has earned a reputation for top quality banking service, and has demonstrated a bond distribution capacity equal to that of larger New York-based organizations. Our investor clients include all of the major institutional bux, ers of municipal bonds. These investors include bond funds, corporations, bank trust departments, casualty insurance companies and other institutional investors. However, the true stren~h of Stone & Youngberg's distribution system is the firm's network of high net worth individuals, or retail investors. These buyers invest in sig-nificant portions of almost every issue the firm underwrites. The ability to market bonds to retail investors benefits the issuer in several ways. By increasing the scope of prospective buyers beyond institutional investors, we can reach a market with less price sensitivity and ~eater variety of purchasing interests. Many of our retail investors are, in fact, Californians with first-hand 'knowledge of the communities served by our issuer clients. Many are long time buyers who have been consistently satisfied with the credit quality of bonds underwritten by Stone & Youngberg. even though the yield is sometimes lower than bonds that competing underwriters offer. 1 Stone & Youngberg LLC CITY OF DUBLIN In addition, these retail investors enable a larger portion of the bond issue to be serialized, taking advantage of the lower rates available in the earlier and middle maturities of the yield curve. This diverse and stable investor client base helps Stone & Youngberg to underwrite municipal issues at favorable yields under a variety of market conditions. This is particularly true for land-secured financings. The chart below illustrates our average distribution in each year of our ag~egate primary and secondary market distribution. Stone & Youngberg's Average Annual Bond Distribution Annual Primary and Secondary Volume of $2.5-3.0 Billion Individual Retail Insurance Cos. Institutions 14.0% Bond Fund., 50.0% Municipal Research and Market Information We attribute part 6f our success in the municipal marketplace to the information we provide to our investor clients. Over the past three years, Stone & Youngberg has distingxtished itself in the area of municipal research and in innovative ways of disseminating market information as described below. · Municipal Research. The firm's credit analysts undertake independent research on most credits the firm underwrites, including those purchased in the competitive market and those purchased through negotiated sale. These analytical reports are provided to the sales staff and to investors both at the time of an initial offering of the bonds and subsequently, when a sig-nificant development affecting the credit occurs. We have found that our initial underwriting efforts are more successful (i.e., lower yield for our issuer clients) because investors know we maintain up-to-date information on our underwritings and an active secondary market for the securities that they purchase. Our Research Department is also useful in helping our issuer clients meet their ongoing disclosure requirements under SEC rule 15c(2)12. Our municipal research effort has been headed by Ron Mintz. Ron's efforts have garnered Stone & Youngberg considerable credibility among domestic and international banks providing letters of credit. Most recently, Ron was recognized as an "ail-star" municipal analyst in the area of Special Assessment District & Mello-Roos financings by Smith's Research and Ratings Review -- an industry publication serving investment analysts. 2 Stone ~ Youngberg LLC CITY OF DUBLIN Weekly Market Update. As a leader in California municipal finance, Stone & Youngberg plays an active role in monitoring and disseminating information about the marketplace. The firm's Weekly Market Update is delivered weekly by e-mail to more than 800 subscribers made up of local government officials, institutional and retail investors, rating agencies and insurance companies, other bond industry professionals, the media and academia. Stone & Youngberg's taxable fixed income ~oup prepares and distributes by e-mail a weekly high yield market report, as well. Inter'net Presence. The firm has been quick to adopt new methods of tapping the market and serving both our issuer and investor clients, as well. Stone & Youngberg was one of the first California firms to embrace an internet-based marketing interface through its website, located at http://www.stvo.com. Each morning, Stone & Youngberg posts its inventory of available municipal and corporate bonds on the site. A searchable library of municipal and corporate bond research and a wide array of links relevant to municipal finance are also available on the site. Industry Leadership Stone & Youngberg's commitment to and leadership position in the municipal finance industry is illustrated by the fact that senior members of the firm hold prominent positions in the most senior levels of the industry's reg'ulatory and trade organizations. Scott Sollers, head of Stone & Youngberg's Public Finance Department, is currently serving as the Chair of the Municipal Securities Rulemaking Board (MSRB). In this role, Scott and his MSRB colleagues are responsible for developing the rules that govern the municipal bond industry. Concurrently, Steve Heaney, a Mana~ng Director in the firm's Los Angeles Office, is Chair of the California Public Securities Association, the State's municipal industry trade organization. Land-Secured Financing Experience California's tremendous ~owth over the past several decades has put an unprecedented demand on local agencies to finance the infrastructure requirements for such ~owth. Over the years, assessment districts and community facilities district financing vehicles have been an invaluable tool for local agencies to support economic ~owth. As a result, land secured finance has been and continues to be one of the main business practices of Stone & Youngberg. Land based financing is one of the more complicated areas of municipal finance requiring a focused and broadly experienced staff to identify and capitalize on the individual stren~hs of each financing. Furthermore, as the leading underwriter of this type of land- secured debt, we have developed large investor bases with the appetite for land-secured bonds - both insured and non-rated. This large universe of investors wilt increase demand for the bonds, which results in lower borrowing costs. The firm's expertise in assessment district and community facilities district market in California is discussed in further detail in section IV of this Statement of Qualifications. 3 Stone &; Youngberg LLC CITY OF DUBLIN II. PROJECT TEAM Stone & Youngberg has assembled a team that is qualified by experience, technical expertise, and a proven track record. In addition to the personnel assi~-med to this project, the City and its staff have access, any time, to all of the professionals at Stone & Youngberg -- from our managing underwriters to government bond traders to municipal research analysts. The project team will include Scott Sollers, Warren Miller and Ed Schilling, all Mana~ng Directors of the firm. They will be assisted by Eileen Gallagher, an Associate. Mr. Miller and Mr. Schilling will both be available for day-to-day contact with the City and will assume responsibility for developing and executing the financing plan, including financial analyses, interaction with finance team and the development of the official statement, if needed. Mr. Sollers will ensure that sufficient resources are available for the City's pro,am and provide assistance on elements of the financing plan. On the following pages we have provided the City with brief bio~aphies on our proposed team. Scott Sollers Scott C. Sollers, Managing Director and Manager of the Public Finance Managing Director in Department, has overall responsibility for the firm's public finance charge of Public Finance activities and has been actively involved in structuring California local Department agency financing pro,ams since 1976. Mr. So!lers joined Stone & Youngberg in 1981 following five years at a national investment Role: banking firm and has served as Chairman of the firm's Executive Team Leader Committee since January 1, I991. He has directed over $6.0 billion in public offerings including lease revenue, general and limited obligation, Phone: 415-981-13t4 tax allocation, mortgage revenue, Mello Roos and Mar'ks Roos bond Fax: 415-397-9592 issues. Mr. Sollers is currently serving as the Chairman of the Email: .~soller~@svllc.com Municipal Securities Rulemaking Board. 50California St., 35thv--']oor Mr. Sollers received a Bachelor of ,tuts and a Master's De~ee in San Francisco, CA 94111 ~ Regional Planning from the University of Pennsylvania. Warren Miller Mr. Miller came to the Public Finance Department of Stone & Managing Director Youngberg in 1982 after several years as a Vice President at a national investment banking firm. Prior to that, Mr. Miller practiced law for Role: Co-Project Leader over five years with Orrick, Herrin~on & Sutcliffe. Mr. Miller has extensive experience in a broad range of tax-exempt financings and has Phone: 415-445-2328 participated in public offerings in excess of $3 billion. Fax: 415445-2395 Email: wmiller@svlle.com Mr. Miller ~aduated from Georgetown Law School and holds a de~ee in electrical engineering 'from Lehigh University; he is a member of the 50 California St.. 35th Floor San Francisco. CA 94111 Washington, D.C., and California Bar Associations. 4 Stone gc Youngberg LLC CITY OF DUBLIN Ed Schilling Mr. Schilling joined Stone & Youngberg in .1988 bringing with him Managing Director fifteen years of experience in municipal management and finance administration. Mr. Schillingts government positions have included Role: Co-ProjectLeader being Deputy County Manager/Assistant Redevelopment Agency Director and Director of Finance in San Jose, City Manager in Phone: 415-445-2326 Campbell, and Assistant City Manager in Livermore. Since joining Fax: 415-445-2395 ~ Email: eschilling@syllc.corn 'Stone & Youngberg he has completed over 75 financings including revenue bonds, assessment district bonds, Mello-Roos bonds, certificates of particiPation and tax allocation bonds. Current or recent clients include the Livermore-Amador Valley Water Management Agency, the Contra Costa County Redevelopment Agency, Sacramento County and the cities of Sacramento, Palo Alto, San Jose, Salinas and South Tahoe. Mr. Schilling earned Doctorate in Public Administration with a concentration in public finance from the University of Southern California, a Masters De~ee in Public Administration from California State University - Hayward, and a Bachelors De~ee in Journalism from the University of Missouri. He currently teaches public finance and governmental budgeting at USC and Cal State Hayward. Mr. Schilling is a Full Member of the International City and County Management Association, Treasurer of the Institute for a Better California and a Director of the California City Management Foundation. Eileen Gallagher Since joining Stone & Youngberg in 1998, Ms. Gallagher has worked Associate on a number of local agency financings, providing strong financial and quantitative analysis as well as general support. Prior to joining the Role: Project Support firm, Ms. Gallagher had five years of experience working with California state and local agencies on housing, transportation and Phone: 415-445-2311 infrastructure projects and previous public finance experience working Fax: 415-445-2395 at a Wall Street investment banking firm. Emait: egallagher @syllc.com Ms Gallagher earned a Bachelor of Arts in Cognitive Science from Brown University in 1988 and an MBA from Northwestern University's_ Kellogg Graduate School of Management in 1996. 5 Stone & Youngberg L-LC CITY OF DUBLIN III. SCOPE OF SERVICES TO BE PROVIDED A sound financing plan starts with the fundamentals. Stone & Youngberg's approach to any project finance task is to first analyze and evaluate the underlying need to borrow, the promise to repay and the source of repayment. We would classify our services for this financing into four broad categories: (i) Financing Plan Preparation, (ii) Execution of Financing Plan and Preparation for Market, (iii) Pre- MarketinffSales and Underwriting and (iv) Coordination of Closing/Follow-Up. Financing Plan Preparation For a land-secured financing, the first critical steps are the selection of and direction to an appraiser. We would be pleased to provide the City with a list of MAI appraisers in Northern California who are experienced in preparing appraisals for land-secured financing pro,ams, and, if requested, to assist with the development of a request for proposals for that service. Upon selection of an appraiser, we believe it would be useful to meet with them to ensure that their approach to the valuation is consistent with the City's requirements and industry standards. Upon submission of the draft appraisal, we would review the report and ask those questions necessary to ensure that it addresses satisfactorily any unusual aspects of the property and the proposed project. The appraisal is such an important part of the land-secured financing process that our firm has developed a "Primer on Appraisals and Value to Lien Ratios" that is included as an appendix in most of our land- secured financing official statements. Warren Miller, as the author of this tract, is particularly well- qualified to assist his clients in directing the preparation of the appraisal in a manner that will satisfy both legal and marketing concerns. A copy of Stone & Youngberg's "Primer" is enclosed as an appendix to this Statement of Qualifications. For some large scale, complex projects in areas which have little development history, it is desirable to secure the services of an economist to prepare an absorption analysis. We have suggested the names of several economic consulting firms to the City. Given the nature of the Dublin Ranch project and the demonstrated demand for housing and commercial uses in the area, we are not certain that an absorption study is required. During the City's interviews with appraisers, it may wish to ask their opinion on whether an absorption analysis would be helpful to determining the market value of the Dublin Ranch land. Such a study could be subcontracted through the appraiser to ensure coordination of these critical efforts. Other issues that would be addressed at this stage include the following: · optimal debt authorization for the assessment district; desirability of multiple, phased bond issuances; feasibility of credit enhancement; · development of workable continuing disclosure requirements; · costs and benefits associated with alternative financing approaches; · optimal timing of bond sales; development of flexible foreclosure covenants for single family residential properties; o optional call protection that balances market pricing with adequate refunding flexibility. 6 Stone gc Youngberg LLC CITY OF DUBLIN Execution of Financing plan and Prepartm'on for Market Stone & Youngberg would coordinate the financing team and guide the execution of the financing plan. We would set' schedules in conjunction with other team members, organize working ~oup meetings, arrange for on-site credit presentations to prospective institutional investors, present the financing plan to the City Council, review legal and financing documents, interpret the marketplace and suggest "market acceptable" structuring features and assist in the preparation of the preliminary and final official statements. We would further provide technical support to the City's Finance Department to facilitate compliance with relevant tax-exempt securities practices for accounting, administration and disclosure. Pre-Marketing/Sales and Underwriting Stone & Youngberg begins marketing each of our underwritings weeks before they actually come to market. Our credit department reviews all unrated financings and, working with a senior underwriting committee, determines what kind of investors should be offered the bonds. We hold regular institutional and retail sales meetings to explain the structure and credit of upcoming financings and thus enable our sales staff to generate advance market interest among appropriate investors. Once the Preliminary Official Statement is published, our investors have been primed for the credit and are'ready to place their orders on the day that we choose to price the bonds. On the day prior to the pricing, we would schedule a call with you to discuss the market, propose interest rates for the issue and compare these rates to recent, similar financings by other issuers. Early the next morning, we would contact (or re-contact) all of the clients that we believe might be interested in the · Bonds. Our Sales executives point Out the salient features of the BOnds andattemPt a sale When the Bond meets the investor's requirements. Our bankers often are very involved with this effort - especially when speaking to the institutional investors which typically place large orders for a portion of the term bonds. Coordination of CloSing~Follow-Up Finally, Stone & Youngberg provides extensive involvement in the coordination of the closing of the transaction and follow-up thereafter. We produce a closing memorandum which details all aspects of the pricing of the bonds and lays out the final steps needed to be taken by everyone for a successful closing. Because we underwrite approximately 100 bond issues annually, we believe that our expertise in structuring, pricing and closing our issues is second to none. Following the Bond sale, Stone & Youngberg will maintain a secondary market for the BOnds, guaranteeing investors that their securities are Iiquid and will be fairly priced if they decide to sell them prior to maturity. This is extremely important to institutional buyers because of their need to actively manage their portfolios, but it is also important to retail investors who want to 'know that their bonds are as good as cash, if needed. 7 Stone & Youngberg LLC CITY OF DUBLIN IV. EXPERIENCE WITH SIMILAR FINANCING PROGRAMS Stone & Youngberg has long been a dominant force in structuring and underwriting land-secured financings in California and the West. Over the last five years, Stone & Youngberg has led the land- secured market both in dollar volume and number of issues underwritten. Land Secur~ Experience (1994-98) Between 1994 and 1998, Stone & Youngberg underwrote 102 Assessment District Mello-~x~s Market _Amessmorrt District Market financings, totalling $763 million. This · 70financin~ undervmtten · 102financir~ underwritten represents four times as many issues as any · Nearly three times number · Four times the number of any other underwriter and approximately 33% of and amount as any other firm other firm o Distribution of $1.29 billion of oD/stfibutionofS763millionof the $2.3 billion Assessment District bonds bm0s bonOs sold over that period. In Mello Roos finance, · Mar~share:4~% · Markets hare: 33% tOO, Stone & Youngberg has led the market, underwriting $1.29 billion, or roughly 46% of the Mello Roos market. No other firm has the [ ~ ~ _ .sy~.a- m~.'n~ an~ .~ ex~ mat ~ [ experience, expertise and excl usi ve m~ruoamore~iaenttinancantjforStor~&¥o~dient~I commitment to serving the needs of public agencies issuing land-secured debt that Stone & Youngberg brings to these complicated issues. Appendix A provides a more comprehensive Iisting of the firm's land-secured financing exper/ence. Commitment to the Land-Secured Marketplace Given the number of land-secured financings that Stone & Youngberg underwrites, it is inevitable that some of its financings (and those of other firms') have run into trouble. While this is not a pleasant experience for issuers or investors, our firm has consistently offered its assistance to help "work-out" these problem financings. While such offers have not always been accepted, in many cases they have and the firm has recorded several sig-nificant work-outs that left both issuers and investors with a sense of fair treatment and resolution. Bill Huck, a member of the Firm's Executive Committee, has been at the forefront of this effort working with jurisdictions such as the City of San Diego (Mission Valley) and Fontana (Hunter's Ridge). BilI was recently hired by Nevada County to ~ssist them in working out the infamous Wildwood Estates defaulted assessment district (See the enclosed Bond Buyer article included in Appendix Cf. We see nothing in the proposed Dublin Ranch Assessment District 1999-1 that suggests a work-out effort will be required, but we think that these efforts reflect how seriously Stone & Youngberg rakes its position as California's land-secured financing leader. 8 Stone & Youngberg %LC CITY OF DUBLIN Specific Examples of Similar Land-secured Financings Stone & Youngberg has underwritten numerous assessment district and Mello Ro°s bonds for large- scale, multi-use projects. Recent examples include a series of financings for the newly developing North Natomas area of the City of Sacramento, and financings for the City of Roseville and the City of Alameda. As a matter of historical interest Recent Land Secured Financing Examples only, Stone & Youngberg underwrote the · $20,175,000 City of Sacramento 1997 North ori~nal assessment district bonds for the Natomas Drainage CFD Bonds North Pleasanton Improvement Area * $7,905,000 1998 Sacramento Financing Authority including the Hacienda Business Park in the North Natomas CFD No. 2 mid-1980's ($105,996,679 Assessment · $I 6,215,000 1999 Sacramento City Financing District No 1986-7, Series A), at the time, Authority North Natomas CFD No. 4 the largest assessment district bond ever · $20,135,000 1998 City of Roseville North Roseville sold. While each of these bond issues CFDNo. 1 Bonds feature a structure different from the · $27,775,000 City of Alameda 1998 Revenue Bonds assessment district bonds being (Harbor Bay Business Park Assessment District contemplated for the Dublin Ranch project, Bond Refinancing) they share several common features. North Natomas Area Sacramento's North Natomas Planning Area consists of 55,000 acres in the northwest portion of the City bounded by the American and Sacramento Rivers. Development of the area has been dependent upon completion of various flood control and drainage improvements, portions of which have been financed with assessment district and community facilities district bonds. The first of these was a $38,446,534 Assessment District Bond No. 88-03 underwritten by Stone & Youngberg in 1988. The three CFD financings completed since 1997 have also been required to finance drainage channels, detention basins and other flood control related improvements, all as anticipated in the 1994 North Natomas Financing Plan which covers 6,900 acres of developable land in the area. This very complicated financing plan anticipates that backbone infrastructure will be financed in large part by land-secured financings on a basin-by-basin basis to allow development to proceed as demand requires. The scope of this development and financing pro,am has been one of the most comprehensive and complex ever undertaken with land-secured bonds. North Roseville CFD No. 1 The North Roseville CFD No. 1 Bonds are much more similar in scope and scale to the Dublin financing. The North Roseville Specific Plan covers a total of 1,388 acres, but only Phase I consisting of approximately 734 acres was included in the financing district. There are four owners of the Phase I land with ownership ranging from 52 to 308 acres. Each of the properties in the financing district will be used for residential development, and two of the properties also anticipate commercial development. The total district development costs to complete basic infrastructure total $22.4 million of which $17.9 million is to be completed with Bond proceeds. The balance of $4.5 million will be provided by contributions from the developers in the form of either cash or developer-funded construction. The challenge of this approach was to provide certainty to the City and bondowners that the non-bond funded proceeds required for completion of the project will be, in fact, available when required, or to disclose accurately to bondowners the risk that such funds may not be provided. The Official Statement thus includes a 4 page section dealing with "gap" financing plans provided by each of the four property owners. 9 Stone & Youngberg LLC CITY OF DUBLIN Alameda Assessment District Refunding The 1998 Alameda Revenue Bond financing was, in fact, an assessment district refinancing that utilized a "purchase in lieu of redemption" approach. A refunding of this type uses proceeds of the refunding bonds to purchase the outstanding bonds. Then, instead of redeeming those original bonds, the Financing Authority retains the bonds and uses payments on those bonds to secure the 1999 Revenue Bonds. The debt service payments on the old bonds is higher than the debt service on the new bonds, and the difference is capitalized to provide additional funds for the Authorityi In this case the Authority capitalized $1.4 million of new money that was used to make improvements to public facilities within the assessment district. While this financing structure is not relevant to the Dublin Ranch Assessment District, the issues of appraisal methodology, development risk and concentration of assessments are quite similar to issues that will be faced by the City of Dublin and its financing team in structuring the Dublin Ranch Assessment District. 10 Stone ~ ¥oungberg LLC CITY OF DUBLIN V. MARKETING PLAN A real marketing plan for the Dublin Assessment District Bonds cannot be developed until the appraisal and the financing plan have been completed. Only .at that time will the underwriter 'know which kinds of investors are appropriate purchasers of the District's Bonds. However, making several assumptions based on the Public Financing Plan dated April 9, 1999, we anticipate that the Dublin Ranch Bonds would have a minimum 34o-1 value-to-lien ratio with no obvious credit problems other than the concentration of ownership. Because Dublin is in an area with tremendous development demand, we would anticipate interest in the Bonds from certain high net worth individual investors, various bond funds, and insurance companies who can benefit from tax-exempt income. We expect that approximately 30% to 40% of the Bonds would be sold to individual investors and that the balance would go to Bond funds. It is possible, but not necessarily probable, that certain bond insurance companies could purchase $2 to $4 million of the Bonds. Based on an estimated $30 million par amount for the Bond issue (as indicated in the Plan of Finance), we would expect to complete a successful pricing period with all term bonds sold and an unsold inventory of as much as $5 million in serial bonds that would be sold off to retail customers over a period of 5 to 10 days. Because we expect sig-nificant participation in the issue by institutional investors, we would prepare, with assistance from the City and the developer, an on-site briefing for interested institutional analysts. This should be completed one to two weeks in advance of bond pricing. 11 Stone &; Youngberg I_LC CITY OF DUBLIN VI. ISSUES TO BE ADDRESSED IN DUBLIN RANCH A.D. Based on the City's stated objectives in structuring the Dublin Ranch Assessment District Financing Pro.am, we have identified the following issues that will require particular care and attention from the Financing Team. Multiple Bond Issues A phased financing approach involving several Bond issues appears to be the best way of maintaining a reasonable relationship between the the amount of bonds outstanding and a development pro.am that will unfold over a minimum of four to five years. The City has stated its interest in moving ahead with development of Phase I of the District consisting of the western centrally located part of the property. A $30 million bond sale is estimated to be needed for the first phase of development to proceed. A second bond sale of approximately $36.5 million would be required to complete the bond funded improvements required for the full District. The use of multiple series of assessment district bonds presents some challenges. Assuming that all of the Bonds are secured by the entire District, the purchasers of the initial series of bonds will expect certain thresholds be achieved before a subsequent series of bonds is sold diluting their security. These thresholds or "additional bonds tests" often require that certain minimum vacant land values be achieved prior to the sale of any subsequent bonds secured by the same land that secures the initial series. Generally, the City would be asked to ensure that the value to Iien ratio on the first and second series of bonds combined be equal to the value to lien ratio on the initial series of bonds. This test is most appropriately applied to remaining undeveloped land instead of against the entire District since the assessment liens are fixed on individual properties regardless of their development stage. This is a problem when certain improvements are needed to complete the District infrastructure before the undeveloped land has gained sufficient value to meet the additional bonds test. This problem can sometimes be addressed through requiring the developer to cover any value shortfall with a Letter of Credit (LOC) equal to the amount of bonds that are required to be sold that exceeds the bonds that can be supported with a 3~to-1 value to lien ratio. Another problem associated with multiple series of assessment district bonds on the same properties is that the property owners, including individual homeowners, may experience an increas_e in their assessments a year or more after they have moved into a home. This problem is generally avoided with Mello-Roos financing pro,ams by taxing completed units at the maximum tax, but there is no easy answer for assessment districts unless undeveloped property values are high enough that each series of bonds can be secured only by the property that will be developed with proceeds of that series of bonds. Another approach would be to use capitalized interest to delay the initial assessment until both series of bonds had been sold. A third approach to structuring multiple bond sales would be to create two benefit areas within the District, and provide for different liens in the two areas. The Phase I area would initially receive the maximum lien it was planned to receive subject to the constraint of meeting value to lien. Whatever additional amount of Bonds are required to complete the Phase I improvements would be levied against the second benefit area consistent with its more conservatively estimated value. When the Phase I1 development is ready to be~n, the additional liens would be placed against any remaining capacity in benefit area 1 and benefit area 2, again subject both to the limits of lien authority and the constraints of 12 Stone gc Youngberg LLC CITY OF DUBLIN meeting the City's required value to lien ratios. This approach would require evidence that improvements completed with each series of bonds demonstrate benefit to the respective benefit areas. This is not an impossible problem, and many jurisdictions have successfully dealt with it. However, it is an issue that should be considered by the finance team early in the process. Developer Disclosure Developer Disclosure is perceived by the City and its ori~nal financial advisor as a potentially significant problem. While the SEC and most municipal analysts prefer a full description of the developer and its financial assets, what is really critical to a financing pro,am (in addition to the appraisal) is the developer;s financial pro-forma for the project and their development plan. Under most circumstances this information has been made available for use in the Official Statement. The continuing disclosure reports, by concept, should repeat and update information included in the official statement, particularly as changes occur in implementation of the financing plan and the development plan. The ori~nal developer would no longer be required to provide continuing disclosure once its ownership drops below 10 to 20% of the undeveloped land. However, as the ori~nal developer sells large parcels of land (over the 10 to 20% threshold) to merchant builders or other developers, the continuing disclosure requirement generally is assumed by the new owner. The city's obligation for continuing disclosure continues as long as the bonds are outstanding. As underwriter of the Bonds, we would also need to conduct a "due diligence" review regarding the developer's liquidity and financial capability. If, for some reason, the developer were unwilling to even provide information on its development and financing plans for the official statement, it might be possible to use an LOC equal to the amount of the Bonds to substitute for such disclosure. This would be quite unusual and expensive. The LOC could be reduced as properties were sold and the amount of developer responsibility for payment' of the Bonds was reduced. Assumptions Regarding Sewer Service The biggest problem we know of that the District may face is the availability of sewer service adequate to serve the project. Limitations on DSRSD's ability to dispose of more treated effluent through the Livermore Amador Valley Water Management Agency export pipeline could threaten the viability of near-term development in Dublin and Pleasanton. While LAVWMA has desig-ned and approved an expansion to the export pipeline in concept, and has contracted for additional disposal capacity through the East Bay Dischargers Authority, final approval of the financing progam is being impeded by the politics of ~owth management initiatives in the cities of Pleasanton and Livermore. The LAVWMA financing pro,am may have to be clarified before bonds could be sold for the Dublin Ranch project. A disposal effluent solution must also be developed before DSRSD can build a required expansion to its sewage treatment plant. The appraiser will need to be ~ven direction regarding assumptions for adequacy of sewerage and water permits to allow the District's development. Even if DSRSD has sufficient permits available and is willing to sell them or otherwise guarantee them to the developer for Phase I, the problem of sewerage service to the Phase II properties remains as a sig-nificant part of the appraisal question.' Ideally, there would be enough value in the property to be developed as Phase I to provide sufficient security for Phase I Bonds. Uncertainty of this type will require the appraiser and the underwriter to assume a more conservative land value for those properties that do not have sewer hookups guaranteed. 13 Stone & Youngberg LLC CITY OF DUBLIN VI. REFERENCES ,~ You are encouraged to contact the following client references to discuss Stone & Youngberg's performance on similarly structured issues which we have underwritten. Mr. Bob Davison Public Works Agency COUNTY OF SACRAMENTO 827 Seventh Street, Room 304 Sacramento, CA 95814 (916) 874-7968 (Ed Schilling) Ms. J. Zenda James Director of Finance CITY OF ALAMEDA 2250 Central Avenue Alameda, CA 94501 (510) 748-4560 (Warren Miller) Mr. Tom Friery City Treasurer CITY OF SACRAMENTO 926 J Street, Suite 300 Sacramento, CA 95814 (916) 264-5168 (Ed Schilling & Warren Miller) Mr. Zane Johnston Finance Director CITY OF TRACY - 325 E. Tenth Sn'eet Tracy, CA 95376 (209) 8314100 (Warren Miller) 14 Stone 5~ Youngberg L-LC CITY OF DUBLIN APPENDIX A -- STONE & YOUNGBERG LAND SECURED FINANCINGS SINCE 1997 ISSUER/NAME OF ISSUE DATE TYPE PAR VALUE ROLE OF RATING OR S&Y INSURANCE Fontana CFD No. 3 (Hunters Ridge) Sr Lien Jul-99 M-R $ 21 ,100,000 Sole-UW AA.adAaa [FSA] Fontana CFD No. 3 (Hunters Ridge) Jr Lien Jul-99 M-R 7,645,000 Sole-UW NR City of Rocklin Granite Drive Series 1999 Jul-99 AD 4,315,000 Co-M~ I~rR Corona CFD 86-2 (Woodlake) Series 1999 Jul-99 M-R 22,580,000 Sole-krW AAA/Aaa [Ambac] San Francisco RDA CFD No. 1 (S.Beach) Jul-99 M-R 3,635,000 Sole-UW NR Tracy Operating Partnership 1999A Sr Lien Jul-99 AD 10,955,000 Sole-UW AAA/Aaa [Ambac] Tracy Operating Partnership 1999B Jr Lien Jul-99 AD 545,000 Sole-UW NR S. Orange County PFA Series 99A Jul-99 M-R 75,920,000 Co-M~ AAA/Aaa [FSA] Chula Vista CFD 97-3 (Otay Ranch) Jul-99 M-R 11,825,000 SoIe-UW NR Rancho Cucamonga PFA Series A Senior Jul-99 M-R 14,260,000 Sole-UW AAA [MBIA] Rancho Cucamonga PFA Series B Sub Jul-99 M-R 6,200,000 Sole-UW NR Richmond JPFA Rev.Rfdng 1999 Series A Jun-99 AD 7,310,000 Sole-U'W NR Emeryville PFA 1999 Revenue AD Rfdng Jun-99 AD 14,420,000 Sole-UW NR Chuta Vista AD 97-2 Jun-99 AD 12,430,000 Co-M~ NR Riverside USD CED #6 1999 Sp Tax Bonds Jun-99 M-R 2,185,000 Sole-UW NR San Clemente AD 85-1 Jun-99 AD 7,935~000 Sole-UW INrR San Clemente AD 98-1 Jun-99 AD 15,355,000 Sole-UW NR Riverside USD CFD #2 1999 Sp Tax Bonds Jun-99 M-R 9,375,000 Sole-UW AAA [FSA] Imperial Cnty CFD 98-I Los Alamos Sp Tx Jun-99 M-R 8,360,000 Sole-UW NR Manteca USD CFD 1989-1 Weston Ranch Jun-99 M-R 4,000,000 Sole-UW NR N. Central Roseville CFD #1 Sp Tax Rfdg May-99 M-R 58,660,000 Co-M~ NR Corona PFA Rev Bnds Series 1999A Senior May-99 M-R 25,755,000 Sole-U'W AAA [FSA] Lien Corona PFA Rev Bnds Series 1999B Sub. May-99 M-R I0,255,000 Sole-UW NR Lien Murrieta Valley US-D CFD ~'q:98-2 May-99 M-R 2,600,000 Sole-LrW NR Capistrano USD CFD 98-2 1999 Special Tx Apr-99 M-R 105,330,000 Sole-UW NR Murrieta Valley Unified School District Apr-99 M-R 5,290,000 Sole-UW NR Manteca Unified School District Mar-99 M-R 7,250,000 Sole-UW 1NrR Henderson, City of Mar-99 AD 5,540,000 Sole-UW NR Henderson, City of Mar-99 AD 18,760,000 Sole-UW NR Henderson, City of Mar-99 AD 19,540,000 Sole-UW Aaa/AAA San Marcos Unified School District Feb-99 M-R 12,950,000 NR Sacramento No. Natomas Drainage CFD 4 Feb-99 M-R 16,215,000 Sole-UW NR Fontana CFD No. I 1 Jan-99 M-R 15,500,000 Sole-UW NR Lake Etsinore School Financing Authority Dec-98 Rev 31,180,000 SoIe-UW Iq'R SaddlebaCk Valley Unified School District Dec-98 Rev 13,705,000 Sole-UW Aaa/AAA La Verne, City of Dec-98 M-R 7,200,000 Sole-UW N-R Jumpa Community ServiCes District Dec-98 M-R 39,695,000 Sole-UW Aaa/AAA Sacramento CiD' Financing Authority Dec-98 M-R 7,905,000 Sole-UW NR Stone & Youngberg LIzC CITY OF DUBLIN ISSUER/NAME OF ISSUE DATE TYPE PAR ROLE RATING OR VALUE OF S&Y INSURANCE Whittier, City of Dec-98 M-R $ 6,285,000 Sole-UW NR Industry, City of Dec-98 AD 6,735,000 Sole-UW NR Murrieta, City of Dec-98 AD 5,034.760 Sole-UW NR Alameda, City of Dec-98 AD 27.775,000 Sole-UW NR Clovis, City of Dec-98 AD 5,025,000 Sole-UW NR Clovis. City of Dec-98 AD 1,621.333 Sole-UW NR South Poway Nov-98 M-R 17,415,1300 Aaa/AAA MBIA South Poway Nov-98 M-R 8,675,000 NR Corona, City of Nov-98 M-R 19.505.000 NR Evergreen School District Nov-98 M-R 7,755.000 Lead-M~ Aaa/AAA Ambac Etiwanda School District Nov-98 M-R 3,440.000 NR Salinas, City of Nov-98 AD 6.301,570 Sole-UW NR Elk Grove Unified School District Oct-98 M-R 3.620,000 FA Aaa/AAA MBLa. EIk Grove Unified School District Oct-98 M-R 25,334.336 FA Aaa/AAA MBIA Rocktin Unified School District Oct-98 M-R 13,781,144 Sole-UW Aaa/AAA MBIA RNR School Financing Authority Oct-98 M-R 11.995,000 Sole-UW Aaa/AAA Rosevilte Sep-98 M-R 20.135,000 Sole-UW NR Mountain View School District Sep-98 M-R 955,000 Sole-UW NR Cartsbad. City of Sep-98 AD 19,600.000 Sole-UW NR Whittier. City of Aug-98 M-R 5,470.000 Sole-UW NR Sacramento Aug-98 M-R 2,515,000 Sole-LrW NR Sacramento Aug-98 M-R 2.515,000 Sole-UW 'NR Brea, City of Aug-98 M-R 7,000,000 Sole-UW N'R Fontana, City of Aug-98 M-R 62.215.000 Sole-UW Aaa/AAA Series A (MBIA) Series B NR Series C NR Fairfield Public Financing Authority Aug-98 Marks- 12.300,000 Sole-UW NR Roos Orange County Aug-98 AD 26,629,212 Sole-UW Escondido, City of Aug-98 AD 5.105,000 -Sole~UW NR Winchbster Hills Financing Authority Jul-98 M-R 12,255,000 NA Encinitas, City of Jut-98 M-R 39,590,000 Sole-UW NR Capistrano Unified School District JuI-98 · M-R 31.360,000 Sole-UW Aaa/AAA MBIA Henderson, Nevada Jul-98 AD 50,000,000 Sole-UW NR Simi Valley Jul-98 AD 2.010,000 Sole-UW NR Mountain View School District Jun-98 M-R 11,450,000 Sole-UW Aaa/AAA Newport-Mesa Unified School District Jun-98 M-R 20.735.000 NA Temecula Jun-98 M-R 18,690.000 Sole-UW NR SantaAna Jun-98 Marks- 8,100,000 Sole-UW BBB Roos Santa Ana Jun-98 Marks- 65,330,000 Sole-UW Aaa/AAA Roos Santa Ana Jun-98 Marks- 11,485,000 Sole-UW Aaa/AAA Roos La Mesa. City of Jun-98 AD 6.825,000 Co--M~ NR Santa Rosa Jun-98 AD 6,460,000 Sole-UW NR Stone ~ Youngberg LLC CITY OF DUBLIN ISSUER/NAME OF ISSUE DATE' TYpE PAR ' ROLE RATING O'R VALUE OF S&Y INSURANCE Poway, City of May-98 M-R $ 35,445,000 Sote-UW NR Rancho Santa Margarita Apr-98 M-R 10,975,000 Co~Mgr NR Fresno, City of Apr-98 M-R 18,-180,000 Sole-UW AAA Santa Rosa Apr-98 AD 7,340,000 Sole-UW NR Rancho Santa Margarita Mar-98 M-R 8,500,000 Sole-UW NR Woodland / Gibson Ranch Mar-98 M-R 6,480,000 Sole-UW NR Union City Mar-98 M-R 8,000,000 Sole-UW NR Palm Springs Financing Authority Mar-98 AD 3,725,000 Sole-UW N'R Tracy Bridle Creek / Laurel Brook Mar-98 AD 2,425,351 SoIe-UW NR Davis Joint Unified SchoOl District Bldg. Feb-98 M-R 7,290,000 Sole-UW Aaa AMBAC Corp. Salinas Harden Ranch AD No. 90-1 Feb-98 AD 5,360,000 Sote-UW NR Poway Unified School District Jan-98 M-R 80,000,000 Sole-UW Aaa/AAA MBIA Corona CFD No. 90-1 Jan-98 M-R 62,845,000 Sole-UW Aaa/AAA MBIA Brea, City of Dec-97 M-R 3,235,000 Sole-M~. NR Salida Area Public Facilities Financing Dec-97 M-R 29,225,000 S01e-UW Aaa/AAA Agency Mountain View School District CFD No. Dec-97 M-R 1,315,000 Sole-M~. NR 97-1 Laguna Beach Dec-97 AD 714,514 Sole-UW NR Tracy LTD Obligation Imp. AD No. Dec-97 AD 1,599,042 Sole-M~. N-R Pasadena CFD No. 1 Nov-97 M-R 13,290,668 Sole-M~. Aaa/AAA FSA Satida Area Public Facilities Financing Nov-97 M-R 29,225,000 Sole-M~. Aaa/AAA FSA Agency Washoe County NY Special A.D. No. 23 Nov-97 AD 12,825,000 Sole-M~. NR Las Vegas, Nevada SID Oct-97 AD 20,710,000 Lead-UW Aaa/AAA (FSA) Los Angeles Sep-97 M-R 11,750,000 Lead-UW NR Sacramento No. Natomas Drainage CFD Sep-97 M-R 20,175,000 Sote-UW NR Coacbella Valley Water District Sep-97 AD 454,753 Sole-UW N'R Stockton AUg-97 M-R 32,320,000 Lead-UW NR Davis, City of Aug-97 M-R 31,000,000 Sole-UW N-R Orange County Aug-97 AD 3,590,419 Sole-UW N-R Ontario, City of Jul-97 M-R 11,275,000 Sole-UW NR Long Beach Bond Finance Authority .Jut-97 AD 5,900,000 Sole-UW NR Fresno County Jul-97 AD 5,391,563 Sole-UW NR ~alinas, City of - -Jut-97 AD 2,440,000 Sole-UW NR Rancho Cucamonga Jul-97 AD 2,990,000 Sole-UW N'R San Diego County Jul-97 AD 21,755,000 LeadM~. N'R Laguna Beach Jul-97 AD 1,505,781 Sole-UW NR Olivenhain Municipal Water Dislrict Jul-97 AD 22,530,000 Lead Aaa/AAA M~m-. MBIA Sacramento, Yv'illoWcreek A.D. 96-01 Jul-97 AD 14,248,542 Sole-UW NR Tracy Operating Partnership JPA Jun-97 AD 4,980,000 Sole-UW Aaa/AAA MBIA Larkspur, City of Jun-97 M-R 2,890,000 Sole-UW NR Orange County Jun-97 M-R 10,815,000 Sole-UW Aaa/AAA Antioch Area Public Financing Agency JUn-97 M-R 18,820,000 Co-Mgr Aaa/AAA MBIA Ladera Recreation District Jun-97 AD 451,836 Sole-UW NR Oxnard, City of Jun-97 AD 31,120,000 S°Ie-UW N-R Indian Wells Jun-97 AD 7,040,000 Sole-UW NR Stone ~ Youngberg ELC CITY OF DUBLIN ISSUER/NAME OF ISSUE DATE TYPE PAR ROLE RATING OR VALUE OF S&Y INSURANCE Rancho Mirage Jun-97 AD $11,305,000 Co-Mgr NR Newport Beach Jun-97 AD 9,335,000 Sole-UW NR Rocklin CFD No. 4 (Southeast Rocklin) May-97 M-R 3,605,000 Lead NR Mgr. Clark County, Nevada May-97 AD 37,000,000 Lead- NR Mgr. Laguna Beach May~97 AD 534,964 Sole-UW NR Alameda Public Financing Authority Apr-97 Revenu 37,850,000 Sole-UW NR la-vine School District Apr-97 M-R 74,230,000 Co-Mgr Aaa/AAA AMBAC Richmond, City of Apr-97 AD 15,705,000 Lead- NR Mgr. Rio Vista, City of Apr-97 AD 2,000,0® Sole-LIW NR San Lorenzo Valley Unified School District Feb-97 AD 1,750,000 Sole-UW NR/A Capistrano Unified School District CFD 92- Jan-97 M-R 12.500,000 Sole-UW N'R I (Las Flores) Series 1997 Saddleback Valley Unified School District Jan-97 M-R 29,484,917 Sole-UW Aaa/AAAFSA Public Finance Authority Stone & Youngberg LLC CITY OF DUBLI~I APPENDIX B -- PRIMER ON APPRAISALS AND VALUE TO LIEN RATIOS Stone & Youngberg L-LC PRIMER ON APPRAISALS AND VALUE TO LIEN RATIOS By STONE & YOUNGBERG LLC Introduction Value to lien ratios have traditionally been used in land-secured bond issues as a measure of the "collateral" supporting the willingness of property owners to pay their special taxes and assessments (and, in effect, their general property taxes as well). The value to lien ratio is mathematically a fraction, the numerator of which is the value of the property (usually a market value as determined by an appraiser) and the denominator of which is the "lien" of the assessments or special taxes. The derivation of the numerator and the denominator for the value to lien ratio is not always straightforward and is not always consistently determined. This "PRIMER ON APPRAISALS AND VALUE TO LIEN RAT/OS" addresses some of the issues involved in evaluating value to lien ratios (as well as their t~vo components - market value and lien) so that potential investors of land-secured bond issues can better analyze the "collateral" supporting each bond issue. A value to lien ratio is, however, only one measure of credit quality in land-secured bond issues and may not even be the most significant indication of credit quality. Other factors of credit quality include the location of the district, experience of developers, size of project, length of absorption period, foreclosure covenants, status of development, size of reserve fund, land uses, private debt holders and credit enhancements such as letters of credit. Appraisers Appraisers with an MAI designation are members of the Appraisal Institute, an industry sponsored organization. The Appraisal Institute requires appraisals to be prepared in conformity with the Uniform Standards of Professional Appraisal Practice ("USPAP"). The Appraisal Institute also requires MAI appraisers to conform to its Standards of Professional Practice and Code of Ethics.- Appraisers can also be credentialed by the State of California Office of Real Estate Appraisers but are not otherwise regulated or licensed by the State of Califomia or the United States of America. A reader of an appraisal should ascertain the appraiser's qualifications and credentials, if any. As a gener~l rule, the appraiser should have an MAI designation. Salient Features of Aopraisals Appraisals generally express the appraiser's opinion as to the market value of an interest in real estate. As such, most appraisals have the following features: · The market value set forth in an appraisal is an opinion of the appraiser; it is not a consensus of market value by multiple appraisers. Accordingly, different appraisers could conclude substantially different values of the same property as of the same date. © 1999 by Stone & Youngberg LLC. No reproduction is permitted in whole or in part without the express consent of Stone & Youngberg LLC. · An appraisal speaks only as ora specific date, the date of value. Accordingly, there is no representation by the appraiser that the market value expressed in the appraisal may not increase or decrease subsequent to the date of value expressed in the appraisal; in fact, changes in market value should be expected to occur over time. · An appraisal states a market value, that is, a value derived in an open market assuming a willing buyer and seller. Some real estate sales occur under "non- open market" conditions, for example, a sale where the seller is under financial stress and makes price concessions to complete the sale or a forced sale such as a judicial foreclosure. Since a judicial foreclosure sale is no/an open market sale, an appraised market value of a property is generally not an indication of the price at which that property would sell at a judicial foreclosure. · An appraisal is always subject, to assumptions and certain limitations. If one of the appraiser's underlying assumptions is wrong, the appraised value could substantially differ from actual market value; for example, most appraisers assume there are no toxic contaminations of the appraised real estate but generally make no representation that there are no toxics. Valuation Methodologies Most appraisers employ one or more of three recognized valuation methodologies: (1) the income approach, (2) the replacement cost approach, and (3)the comparable sales approach. Each of these methodologies may or may not be appropriate in a particular situation. As a general rule, the only one of these three methodologies by xvhich an appraiser can directly value non-income producing vacant land, the subject of many land-secured financings, is the comparable sales approach. However, the number of available comparable sales for large tracts of undeveloped property is usually insufficient to determine market value by using this methodology alone. Retail and Bulk Sale Values With fully improved and occupied properties, appraisers can generally derive a market value using one or more of the valuation methodologies. This value is frequently referred to as a retail value since it is an estimate of what an end user would pay for a finished property under open market conditions. For various reasons, a retail value may not be the most appropriate value to use for large tracts of undeveloped property. Such property can be in different development states and have different levels of land use approval ranging from "raw" land without entitlements or zoning, to tentatively mapped land or to final mapped land with some improvements in place. Consequently, before it can be sold at retail value, such land is subject to an "absorption period" reflecting both the time required for development and marketing to the ultimate end users. Typically, large tracts of SUch undeveloped land under a single ownership © 1999 by Stone & Youngberg LLC. No reproduction is permitted in whole or in part without the express consent of Stone & Youngberg LLC. would be sold to another single ownership (or a small number of ownerships) which would accept the financial risks of the "absorption period" and develop the property so it could be sold to end users. Accordingly, such land usually should be appraised using a bulk sale value, which assumes a sale to a single buyer (or limited number of buyers) and is generally defined as: The most probable price, in a sale of all parcels within a tract or development project, to a single purchaser or sales to multiple buyers, over a reasonable absorption period discounted to present value, as of a specified date, in cash, or in terms equivalent to cash, for which the property rights should sell after reasonable exposure, in a competitive market under all conditions requisite to a fair sale, with buyer and seller each acting prudently, knowledgeably, and with self-interest, and assuming that neither is under undue stress. Such bulk sale value is typically derived by discounting retail values of the property, if developed to an assumed finished state, such as finished lots, to present value by an appropriate discount rate. In a typical development case the retail values used are either finished lots (on the assumption these are sold to merchant builders or contractors) or the finished product such as houses or buildings. This valuation approach is generally referred to as a discounted cash flow analysis, a subdivision development analysis, or a residual land x'alue analysis (hereinafter, a "discounted cash flow analysis"). A discounted cash flow analysis is determined by discounting the retail values over the projected absorption period, with appropriate deductions for the costs of sales, holding costs and entrepreneurial profit. This analysis requires the appraiser to make certain assumptions regarding the costs of sales, absorption rate, profit, discount rate and inflation. Some land-secured issues set forth a value to lien ratio for the district in the ag~egate and, in addition, for each parcel within the district. Conceptually, such a parcel by parcel value to lien ratio requires a market value for each parcel. A bulk sale value of a district may include many parcels and, by definition, the value is of all the parcels if sold to a single buyer. Therefore, one must be very careful in trying to extrapolate from a bulk sale value to individual parcel values. Since any foreclosure action by the issuer of a land-secured debt issue must occur on a per parcel basis, this lack ora pet parcel valuation may be the major disadvantage of a discounted cash flow analysis. Implicit in the discounted cash flow analysis is the notion that each parcel will be sold at retail value throughout the absorption period. Therefore, one would expect developable parcels sold shortly after the date of value of a bulk sale appraisal to sell at the retail value, not that parcel's pro rata share of the bulk sale value. Moreover, a single bulk sale value of a mixed use project can be misleading if the components of the project are expected to absorb at substantially different rates, for example, where the residential component is expected to absorb over five years and the commercial component over ten years. In this situation it may be best to develop separate bulk sale values for each land use component. Property Riahts Appraised In land-secured bond issues, appraisers generally appraise the property on the assumption that the improvements which are being "bond-financed" are in place. In addition, appraisers have © 1999 by Stone & Youngberg LLC. No reproduction is permitted in whole or in part without the express consent of Stone & Youngberg LLC. traditionally appraised the "fee simple estate" of the property. By definition, a "fee simple estate" ignOres assessment liens and special tax burdens. In May, 1994, the California Debt and Investment Advisory Commission, chaired by the State Treasurer, published "Appraisal Standards for Land-Secured Financings" (the "Standards"). The Standards were intended to be guidelines to municipal entities issuing Special Tax Bonds. The Standards indicate that in the opinion of the Commission the real estate interest that should be appraised in land-secured issues is generally the "fee simple estate, subject to special tax and special assessment liens". When appraising this interest in real estate, the Standards suggest that the appraiser adjust the market value of the "fee simple estate" by the market value of the special tax and special assessment liens to account for the buyer's assumption of these obligations. Since such a value is reflective of the actual cash which a seller would receive if the buyer assumes the assessment liens and the special tax burdens, some appraisers refer to this value as the "net realizable value". The Standards are not binding on issuers of Special Tax Bonds, may not apply to issuers of Assessment Bonds and are in no way binding upon MAI appraisers, who are subject to the USPAP, which generally permit either the "fee simple estate" or the "fee simple estate, subject to special tax and special assessment liens" interest in real estate to be valued. It should be noted that both interests in real estate meet the definition of market value, which is generally defined as: The most probable price in cash or in terms equivalent to cash for which the specified property rights should sell after reasonable exposure in a competitive market under ali conditions requisite to fair sale, with the buyer and seller each acting prudently, knOWledgeably, and for self-interest, and assuming that neither is under undue stress. Accordingly, appraisers in land-secured financings could value either of these interests in real estate, that is, either the market value of the "fee simple estate" or the "net realizable value" (the fee simple estate adjusted to reflect the market value of the assessment liens or the special tax burden). Moreover, these market values could differ substantially. Consequently, the reader of an appraisal should ascertain which interest in real estate is appraised. Value to Lien Ratios Value to lien ratios traditionally have been used in assessment district bonds as a measure of bond holder security. The value to lien ratio is mathematically a fraction, the numerator of which is the market value derived by the appraiser and the denominator of which is the amount of the fixed assessment lien. Therefore, a key consideration in discussing the meaning of the ratio is to determine the basis of the appraised value. Is it retail or bulk? Does it value the "fee simple estate" or is it "net realizable value" or something in between? The ratio could vary substantially depending upon which of those values is used. In addition, even though no frxed lien actually exists with regard to community facilities districts (other than the lien for the annual taxes actually levied), the value to lien concept has been "grafted" onto Special Tax Bonds by generally using the principal mount of bonds as the hypothetical "lien". For this reason, the ratio is sometimes referred to as a "value to special tax burden" ratio. © 1999 by Stone & Youngberg LLC. No reproduction is permitted in whole or in part without the express consent of Stone & Youngberg LLC. Moreover, if the property for a land-secured bond issue is in more than a single assessment or community facilities district, the lien used in the value to lien ratio should not be just the lien for a single district but the total lien for all the assessment or community facilities districts which overlap the subject property. Sometimes in such a case, the issuer xvill provide two value to lien ratios:' one for the land-secured bonds to be sold and an aggregate ratio for all the overlapping districts. Since the issuer for each district would typically have the right to foreclose upon the property (i.e., the property is "collateral" for more than one bond issue), the value to lien ratio based upon the aggregate lien of all the districts is the most relevant ratio for the measuring of credit quality of the bonds supported by that property. It should be emphasized that value to lien ratios are only one measure of credit quality in land- secured bond issues and may not even be the most significant indication of credit quality. Other factors of credit quality include the location of the district, experience of developers, size of project, length of absorption period, foreclosure covenants, status of development, size of reserve fund, land uses, private debt holders and credit enhancements such as letters of credit. Application of Value to Lien Ratios Value to lien ratios are used in land-secured issues as a measure of credit quality by indicating the "collateral" supporting the willingness of property owners to pay their special taxes and assessments. But how dOes it measure credit quality and this "collateral"? Value to lien ratios may address three salient bond holder questions: (1) will the property owner be motivated to pay its taxes; (2) if the property owner undergoes financial stress, how much price flexibility (above and beyond the burden of the lien) does the property owner have to sell the property; and (3) if the property goes to foreclosure, is it probable that the property will have a bidder? The value to lien ratio may provide useful information to address the first two questions. If the value to lien ratio is 3 to 1 based upon a "fee simple estate" value, then based upon the conservative assumption that the market value of the lien is equal to the amount of the lien, 1/3 of the value represents the Iien and the remaining 2/3 of the value represents the ':equity" of the property owner and is a measure of its loss should the property owner not pay taxes and thus allows the issuer to foreclose upon the property. The term "equity" as used here is not intended to mean equity in the sense of the amount of cash that the property owner actually has in the property. Moreover, the "equity" is not necessarily all attributable to the property owner because it could be shared with a lender if the property owner has a loan on the property. Additionally, this same amount of "equity" is a measure of the price concessions available to the property owner in order to achieve a quick sale if the property owner has financial difficulties. If the value to lien ratio is based upon "net realizable value", a similar analysis can also be made. The "net realizable value" (without adjustment for the Iien since the appraiser has already adjusted for the market value of the lien) represents the "equity" of the property owner. Accordingly, the "net realizable value" is a direct measure of the property owner's loss if it allows the issuer to foreclose and is also a measure of the price concessions available to the property, owner. © 1999 by Stone & Youngberg LLC. No reproduction is permitted in whole or in part without the express consent of Stone & Youngberg LLC. With regard to the third question: "if the property goes to foreclosure, is it probable that the pro~e~ Wil1 ha~,e a bidder,,, the situation is VerY'different. I£the "equity" 0i'Ve ProPerty owner implicit in the value to lien ratio is significant, it may be unlikely that a property owner will become delinquent and allow foreclosure unless there has been a decline in market value subsequent to the date of the appraisal. Moreover, once a delinquency occurs, the lien actually increases by the amount of the delinquency plus interest and penalties. The amount of such increase depends upon when the foreclosure is initiated by the issuer and how long the legal process takes before a sale can occur; this time is usually substantial and may extend to four and five years, particularly if the landowner has filed for bankruptcy proteCtion. Finally, by definition, a foreclosure sale is not a market sale and bidders will likely discount their offering price below actual market (and must also take the property subject to outstanding general property taxes). This discount is sometimes referred to as the "foreclosure discount". Therefore, the success of a foreclosure sale is dependent upon at least four variables: (1) the magnitude of the decline in market values from the date of the appraisaI; (2) the length of time of the foreclosure process; (3) the amount of the increased lien resulting from continued delinquencies, interest and penalties, and (4) the "foreclosure discount". The appraisal would rarely address any of these four variables. Accordingly, the value to lien ratio, by itself, may not be a good indication of whether the foreclosure process wiI1 result in a successful sale. The effects of these four variables are illustrated in the table below entitled "Estimated Bid at Foreclosure Sale" (based upon certain arbitrary assumptions with regard to these four variables). This table sets forth a hypothetical property valued at $100,000 for its "fee simple estate" with a $25,000 Iien at bond sale, It also assumes that the appraised "net realizable value" for this property is $75,000. Estimated Bid at Foreclosure Sale Fee Simple Estate Value(1) Net Realizable Value(1) Facts at Bond Sale: Value at AppraisaI's Date of Value $100,000 $75,000(2) (fee simple estate value) (net realizable value) Liens at Bond Sale 5;25,000 $25,000 Value to Lien Ratio at Bond Sale 4 to I 3 to 1 Assumptions after Bond Sale: Assumed Value Decline (50% of fee simple estate value) ($50,000) ($50,000) Assumed Lien Increase (Represents the net increase in the lien after principal amortization and delinquencies, interest and penalties) ($5,000) ($5,000) Assumed Foreclosure Discount (including court costs and issuer's foreclosure attorney's fees) ($15,000) (5;15,000) T0tal: ~ · ~ ($70,000) ($70,000) Anticipated Bid at Foreclosure: (Bidder takes property subject to lien) $5,000(3) $5,000(4) © 1999 by Stone & Youngberg LLC. No reproduction is permitted in whole or in part without the express consent of Stone & Youngberg LLC. (I) See "Property Rights Appraised" above. Usually only one of these values would be available from the appraisal. (2) This table assumes that the $25,000 lien on the property will have a $25,000 reduction to the "fee simple estate" value in determining the "net realizable value". This assumption will not necessarily be true in all cases and it is within the appraiser's responsibility to value the market value of the lien on the property in deriving the "net realizable value". (3) $100,000 minus ($25,000 plus $70,000) equals $5,000. (4) $75,000 minus $70,000 equals $5,000. If one were to agree that the arbitrary assumptions used in the above table were realistic in a particular example, one could say that with a 4 to 1 value to lien ratio based upon "fee simple estate value" or a 3 to 1 value to lien ratio based upon "net realizable value", the property could experience a 50% decline in "fee simple estate" market value and still successfully produce a modest bid of $5,000 at foreclosure.' Such a conclusion, however, is driven more by the assumptions used with regard to the fot{r variables than by the value to lien ratio. The Lien Problem Pursuant to assessment procedures a "fixed lien" is placed upon the assessed property. The total lien of an assessment district is the sum of all the individual liens in the district; the total lien of the district should be very close to the amount of outstanding bonds. The amount of the outstanding assessment bonds is, therefore, generally used as the lien in the value to lien ratio. On the other hand, with regard to the value denominator of the value to lien ratio, if an appraiser were to value the property on a "net realizable value" basis, the adjustment in market value of the lien should be no greater than the amount required to pay off the lien, which would generally reflect a reserve fund credit and a cai1 premium and would be therefore slightly less than the lien. The adjustment should also include other factors such as the interest rate on the lien which is usually below conventional interest rates. Accordingly, the adjustment made by the appraiser could result in a market value xvhich is greater than the fee simple estate value minus the amount of the lien. Although determining the lien in an assessment situation is fairly straightforward, liens in the community facilities district ("CFD") situation can be very difficult. First of all, no fixed lien actually exists with CFDs (other than the lien for the annual special taxes acthally levied but unpaid). MoreOver, the possibility of prepayment of special ta~_es varies from CFD to CFD; some permit no prepayments, some allow prepayments after all bonds are sold, and some permit prepayments in a manner similar to assessments. In addition, special taxes can be levied without bonds being issued, for example, for pay-as-you-go projects. Thus, in some CFDs, special tax revenues may have two purposes: (1) to pay debt service and (2) to fund pay-as-you-go projects. Therefore, it's possible to have Special Tax Bonds with substantial debt service coverage where the special taxes are actually levied and collected at a rate substantially more than necessary to pay debt service. In such a situation, is the "lien" the principal amount of bonds outstanding or is it the present value of the special taxes discounted at the bond rate or some other amount? Moreover, what drives the adjustment that the appraiser should make to reach a "net realizable" value? Is it the burden of the bonds or the burden of the special taxes? These questions are made more difficult since the issuer's foreclosure covenants extend only to bond holders and, therefore, © 1999 by Stone & Youngberg LLC. No reproduction is permitted in whole or in part without the express consent of Stone & Youngberg LLC. only to the debt service portion of the special taxes. Moreover, the levy of special taxes beyond that necessary to pay debt service is not mandatory and the issuer can reduce or eliminate that levy for one or more years. In CFDs it is also common to have tiered special tax formulas. The most common tiering would first tax developed property and then undeveloped property. This tiering means that after a certain amount of development, the undeveloped land may not be taxed at ail unless the developed properties do not generate sufficient revenues to pay debt service. After this level of development is achieved, what is the lien on the undeveloped property? Does the developed property carry the full lien? Hoxv does one deal with the potential to tax the undeveloped property? Because of the "fixed lien" in assessment districts, these questions of shifting or mobile liens do not arise in the analysis of assessment districts but they may be a factor in the analysis of CFDs. Sumlllalw Value to lien ratios may be used as an indication of bond holder security in land-secured bonds. However, neither the numerator nor the denominator of the value to lien ratio is always objectively determined or uniformly applied. The value amount is generally an opinion expressed by an appraiser who may use one or more of several methodologies to determine value. Moreover, the lien amount, especially in connection with Special Tax Bonds, can be calculated in different ways. Accordingly, the reader is cautioned to understand these variations and to ascertain the actual methods used for a particular bond issue. Finally, it may be inappropriate to compare the Credit quality of different bond issues on the basis of value to lien ratios unless the ratios were developed by employing the same or similar methodologies. © 1999 by Stone & Youngberg LLC. No reproduction is permitted in whole or in part without the express consent of Stone & Youngberg LLC. CITer OF DUBLIN APPEN~DIX C -- BOND BUYER ARTICLES ON STONE & YOUNGBERG '~ Stone & Youngberg L_LC Reprinted frown THE BOND BUYER THE DAILY NEWSPAPER OF pUBLIC FINANCE Thursday. February 11' 1999 Reading the Market Stone & Youngberg a Long-Term Player By Michael B. Marois able products now account for one-third banks in California and one of the best- of sales by the firm's 24 retail brokers, known regional fzrms in the nation. SAN FRANCISCO ~ When Stone & "Part of our long-range plan here is to Youngberg announced in early 1996 that continue to develop a retail sales force, and BY it would expand into taxable fixed-income to do that, we felt that being a monoline products, the San Francisco-based broker product firm -- which we really were prior The firm got its start in 1931 when was reacting in part to the ~0wing chorus to that time ~ was going to hold us back. founders Daniel Stone and Carl of politicians calling for a Youngberg saw a poten- federal flat tax that might rial market in the ~ow- eliminate the tax advan- ing volume of defaulted rage that makes munici- assessment district bonds pals unique, in California. The two ,.~, "It wasn't so much the men formed the compa- 'flat tax, but the Prefer- ny and bought huge ence that municipal chunks of the debt at bonds' interest holds over prices as low as 10 cents other fixed-income prod- on the dollar. ucts," said president and In those days, each bond chief executive officer represented a single par- Ken Williams. "We were cel of land. The company concerned that that could actually hired a banker to go away at some time." go out into those districts But in addition to to see what parcels were adding taxable yields, the developed ~ and there- firm began offering .............. fore held value. uncommon investment Stone & Youngberg's Scott Sollers, left, and Ken Williams say The banker would take products -- such as step- Clients t~xtst they know the Califontia mar[ret becattse of the fi~xn's the bonds for the undevel- up bonds and monthly roots and history in the state, oped properties into town pay bonds -- targeted at to sell to a local buyer. He a middle market the company said is often We know we can do that with the addition would then drive back to San Francisco neglected by larger investment finns, of the taxable fzxed-income product as part with the remaining bonds, where they Monthly pay bonds pay investors of the product line," Williams said. were locked up in the fn-rn's vault. monthly, rather than quarterly, and "It's had kind of a dual purpose," he Later, when the defaults were cured -- require a lower initial investment than added. "We want to make sure that we are often in part with the help of financial other types of ~2xed-income. Step-up in the room, if for some reason the tax engineering and restructuring by Stone & bonds, with a $1,000 principal value and break on municipals goes away, as well Youngberg -- the fm-n would sell the a semiannual interest payout, have a long as keep our salespeople that we have bonds at a profit. , maturity but a short call feature, competitive, and at the same time provide "They've always been specialists," said i While tax reform remains on the draw- an opportunity for business ~owth." Dennis Ciocca, a banker with SuRer lng board, the taxable product desk at It is that type of ability- and willing- Securities Inc., whose first job in the Stone & Youngberg has become an ness ~ to read the market and change industry back in 1964 was working for important source of revenue for the 68- that has helped Stone & Youngberg Stone & Youngberg. "They've really year-old fn-rn. In fact, fixed-income tax- become one of the leading public finance ?mown their markets." Dealer Profile 68-Year-Old Stone & Youngberg Goes Beyond Monolin EXPANSION WOES negotiation, so there just wasn't that much of negotiated bond deals available for of an incentive to have bankers on staff to Stone & Youngberg. That year, California Stone & Youngberg has been under- try to pursue transactions," he said. lawmakers passed the Mello-Roos writing and trading local California financing act, which was followed by the municipal bonds ever since. In fact, fol- MAKING A COMEBACK Marks-Roos act in ~985. lowing the Great Depression, the firm The land-based financings that those helped finance many of the irrigation pro- However, when the federal government laws established are sold almost exclusive- jects that quenched the thirst of authorized municipalities to sell mort- ly through negotiation, allowing the firm California agricultural land that today gage revenue bonds just before the no- to use its name recognition and reputation provides rice, vegetables, fruits, and nuts compete clause ended the negotiated to win business from existing clients. to much of the nation, volume in the state began to rise. "One of the reasons that we've been so However, the fn-m has gone through its So when the no-compete clause successful and have maintained and built share of difficulties. By 1974, the compa- expired in 1980, the firm quickly hired the reputation that we have today is that ny had expanded into equities and was a Sollers to build up a public finance we certainly are well lmown within the full-service stock brokerage. But when department and capitalize on that ~owth. California issuer community," Williams that business faltered, the equity division "Stone has been able to adjust itself to said. "On the buy side, when our sales was closed, cuffing the firm's staff in half these changing conditions in the market staff calls a buyer today, they know it's from a high of more than 150 people, between then and now," Ciocca said. "But about something in Califomia; they 'know In 1970, the firm had sold off its they really went back to their roots after it's about something that we know a fair municipal financial consulting business going through a very rough financial time amount about." to a company called American in the late '60s. They really went fight Appraisal for $1 million. American back to their roots and stuck exactly to LOCAL GOVERNMENI FOCUS Appraisal later sold that business to a what they were good at doing." predecessor of Dain Rauscher Inc., In 1982, another new law, this time on Stone & Youngberg's municipal today one of Stone & Youngberg's largest the local level, helped boost the amount ness is split into a public finance division competitors for FA business. Included in that deal was a 10-year no- compete clause that forbid Stone & Stone & Youngberg (in ANYcapacity) Youngberg from financial advisory work Sectors of business 1994- 1998 for public agencies until Jan. 1, 1980. Excludes notes, private placements & non-profits The fern continued to underwrite many different types of bonds in Califomia, Category Amount Issues mostly through competitive sales, as well AiEports 723 9 as structuring assessment district debt Combined Utilities 0.7 through negotiation. Economic Development 251 6.8 1 09 The moratorium did not prohibit the Education 3351.9 209 firm from underwriting securities, but Health Care ]45.5 2 because assessment distric~ bonds were Industrial Development 70.6 5 one of the few types of debt that could be Multi Family Housing_ 239.5 25 sold through negotiation at the time, the .Nursin~ Homes/Life Care 5 company's publ~c finance section was almost completely gutted. Other Miscellaneous 7642.1 24] "It marketed and underwrote a whole Pollution Control ] 58.2 7 lot of different 'kinds of bonds during that Public Power 228.9 3 time, but didn't structure them because Single Family Housin9 32 3 they didn't have a public finance depart- 5olid Waste/Resource Rec 87.4 4 ment anymore," said Stone & Youngberg .Transportation 1 919.9 37 chairman Scott Sollers, who is also the Water, Sewer & Gas 1980.8 70 current chairman of the Municipal Waterfront/Seaports 200 2 Securities Rulemaking Board. ' "In the '70s, there really weren't that Dollar amounts are in millions Source: Securities Data C many bond issues that were sold through and a sales and trading desk, bUt also ~:~ includes investment management and lease financing. The firm's clients include corporations, insurance companies, regional banks, municipalities, and high- net-worth retail buyers. Its sales and trading desk is split, with about 75% of its sales to institutional buy- ers, and the remaining quarter to mostly wealthy individUals. The taxable fixed- income department is a full-service trad- ing desk concentrating on the distribution of corporate, agency, government, and asset-backed debt. Williams said the firm carries an average daily inventory of about $35 million to $40 million. "We think that for a f'n'm our size, that's an appropriate amount considering the amount of business that we do," Williams said. "~rhile we don't haVe large numbers of retail salespeople, the clientele that we are dealing with by and large has larger holdings than the average wire house has, and as a result our averaoe ticket size is a little bit larger." "Part of our long-rtmge plan here is to continue to develop a retail sales force, The public finance division concen- land to do that, we felt that being a monoline productfirm ... was going to hold · } ffat~s on lOcal government .debt, special- us back," says president and CEO Ken Williams, cente~. izing in land-secured and special-assess- ment bonds, as well as capital infrasumc- ture finance for sewer treatment facilities, public. Although the firm does not make a Florida and Hawaii is that aspect of our roads, schools, housing developments, lot of money as a financial adviser, it business dealing with land-based financ- airports, and parks, often a~ees to serve as FA when asked, to ing," Sollers said. "At this point, we really The firm has ranked within the top 10 build and maintain relationships with don't have any expectations to do any other senior managers of California debt each local school districts that might later sell type of banking in those communities.'' year for the last 10 years, based on hum- negotiated deals, Sollers said. "It's difficult to establish a beach front her of deals rather than dollar volume, in those communities without haVing had according to Securities Data Co. BEYONB CALIFORNIA some his'tory there and name reco~°'nifion, "They've got their investment banking the sort of things we have [in California]," tentacles in all the small communities In addition to diversifying its product he said. "The reason that we feel we've around the state," said one Iongtime base, Stone & yoUngberg has moved to -got a chance to be successful in those California banker, diversify geo~aphically. In the last two communities is because of our credibility Stone & Youngberg's is the state's years, the fh-m has taken steps, to increase and relationships with developers in those largest underwriter of local debt, and its business outside of California, mainly communities." because of that, the f'n-rn's business con- in land-secured infrastructure financings, centration from year to year reflects the made possible because of the f'nma's close BACK TO ITS ROOTS priorities of local governments. Local ties to developers in California who are government dictates the direction of the central to land-secured financing. Another ~owth area of the fh-m is its firm's business, capital, and human This past summer, the fn-m helped write "troubled transactions" ~oup, which is resources, a joint proposal, along with A.G. headed by lead banker Bill l-luck in San For example, in 1998, the fn:m saw an Edwards & Sons Inc. to underwrite the Diego and concentrates almost exclusive- ~{~..~.increase in its financial advisory business, first-ever community facilities district ly on troubled land-secured transactions. It assisted on 15 deals in California last debt in Hawaii. In February 1997, the Land-secured debt has been a corner- year, up from six the previous year. fnma opened an office in Orlando to focus stone of infrastructure financing in The reason, Sollers said, is that more on infrastructure financings in Florida California ever since state voters imposed and more school districts are selling debt and other Southeastern states, curbs on the ability of local governments because education is a top concern of the "The common denominator between to authorize tax-supported debt. In fact, was hired by Nevada County, Calif., to work out its troubled and infan' Stone & Youngberg Mello-Roos district. Sectors of business, any capacity: 1994-98 "They have a reputation for working on these kind of failed issues and we felt the ' Multifamily need for that kind of expertise to help us," Housing said county administrator David Brennan. $239.5 "There was this general willingness to help, Airports Public Power $723 $228.9 to look at it and make an assessment with- ] out obligation. Their approach was very Transportation acceptable to us. The board [of supervisors] $1919.9 appreciated the opportunity to get some · : expertise without having to pay for it." CREATIVE FINANCINGS Water, Sewer & Gas And the firm isn't afraid to venture into $1980.8~ creative and complex financings. For example, in December, the firm under- wrote a $40.3 million, 30-year floating- to-fixed swap done by the Westminster, Calif., Redevelopment Agency. Economic By issuing var/able-rate tax increment Development S2516.8 refunding debt and swapping back to a fixed rate of 4.97%, including liquidity and remarketing costs, Westminster was able to shave 26 to 38 basis points Dollars in millions bonds' interest rate. Source: Securities Data C0. Under the terms of the deal, Ambac Financial Group Inc. pays the Redevel~ during the last 12 years, the annual vol- AUgust, Stone & Youngberg structured a opment Agency the actual floating rate on ume of so-called dirt bonds in California three-tranche, $62.5 million Mello-Roos the bonds and the agency pays Ambac the has topped $1 billion on average, refinancing for Fontana, Calif., as the fixed rate. Ambac insures both the swap Yet the property that secures the bonds first step in a complex workout designed and the debt-service payments, and guar- is also its nemesis. If the real estate mar- to head off a default, antees liquidity for the 30-year term of the ket is down, it is more likely that proper- Stone & Youngberg used a technique it bonds. ty owners will be unable or unwilling to helped develop, carving out a new CFD "I think another thing we need to be pay the special property taxes that are from the troubled one, in essence segre- sure of as we grow is that no matter-what used to cover debt service, gating troubled parcels from the success- we do that we are adding value to the Already, the group has helped to fut portion of the development, clients we represent or do business with," resolve several high-profile defaults. Last In September, Stone & Youngberg Williams said. THE BOND' BUYER ~/oL$27 NO. 30~97 NewVork, N.Y. .THE.'DAI'LY NEWSPAPER OF PUBLIC FINANCE. Friday, Marbh12,1999 - CALIFORNIA· .. Mello Roos ProposalS· Stone &' Youngberg on Tuesday went before the Nevada CountY. Board of Supervisors to suggest ways to bring the county's infamous Mello-Roos bond issue' ~ out of default. ' ' -' Nex~ada County sold $9.1 million of Mello- Roos bonds in 1990 to finance basic publi¢ infrastructure for a pfi~ate real estate devel- opment- The debt was Underwritten by Fh'st California Capital Mfirkets Group Inc. "' The county defaulted on the deb[ in 1994, when the developer left the'projec~ unfinished and fled from state prosecution on unrelated charges. Shnce.then, the property has become , encumbered with back taxes, late fees, and its use as security on develoPer loans. " The default prompted a'high-profile probe by the Securities and Exchange Commission into the deal.-The SEC has accused First California of securities fraud ,. and in May settled disclosure-violation at- ~ legations with the county. Stone & Youngberg Tuesday proposed several'solutions to the default, including .·.... canceling back taxes on the property and restructuring the debt to make the proper7 ty more attractive to developers. The main points of the re~tmcmring are: ' to gain control of the delinquent property from the current property owners, to buy a controlling interest in the outstanding bonds, to rest?ucture the debt, and to add value to the property. The San Francisco-based public finance firm also suggested a partnership with LaSalle Partners Inc., one of the nation's ': largest real estate developers. LaSalle would team up with a division, of Stone & Youngberg to buy the property once the · delinquent taxes are reduced .enough to. · make the property marketable. '~' The Board of Supervisors gave county Staff the go-ahead to .work ~vith Stone & Youngberg to gather more specific details -.. on how the plan would work.. ' ' Michael B. Marois :- CITY OF DUBLIN APPENDIX D -- STONE & YOUNGBERG RANKINGS Stone & Youngberg _LLC California Long-Term Local Municipal Issues Lead Managed Underwrifings 1994 - !998 Ranking based on Number of Issues S~one & Youngberg LLC ........... I' _ ......... BankofAmerica ' ... · ~ . . . $9.g33 $6,16 PaineWebber I~ ...... '. ~- $11,4 3 Salomon Smith Barney Holdings '::i ................ i" "-,' ;,' ....................... i .;:7' ~" '~ $12,024 Miller & Schroeder __~ ........ .,-. ~ ... : ....... 7 ...... . .... 'i ".i ......... ~] $2,1o9 ~d~sbyB~dror~ .?.:17 ...... '"" ~'~'~ $1,057 Sutro & Co. " ............ "~' "~'~'¢ $2,075 Piper, Jaffray Inc. ,, : ¢ $1.04. Merrill Lynch ~'., , ..... , .- ¢ $8,872' Newman&Associates "']~7]v''. .........;. : ~$1,259 DainRauscherlnc, r']'"'::~'.771"']''71'':71'"'~[ $8g0 Morgan Stanley Dean V¢itter , . . $3,! '15 o,coa, or & co. ~. ~,'.' ':~ ', i!"" '~ i~ ' ~ ! Top 25 Underwriting Firms active in Lehman Brothers ~ $7,1 Il _ ~ i California Local Municipal Issues ~"::: ::72Y"":': '"i~ $1.5 ~s Prodergial ~curities . Seidter-Fitz~eraid Public Finance ,. Goidma~Sachs ~ ';'"i'i ~ $5,194 Kin~R, O'Neal, Newcomb & De Dios ' ]': ii ~ $494 Sutter Securities $ [02 Bear, Stearns & Co. ~' '~ .~ $2,137 Dollar Volume - ~ ~ ($ Millions) J.P. Morgan Securities 5:1" '¢ $2,~07 BT Alex Brown [~. ¢ $852 -k~ $891 CS F'n-st Boston M.R. Beal & Co. ~ ~ $526 t I i? .... > ..... : .....I I ' " "1" 0 50 100 150 200 250 300 350 400 450 500 Source: Securities Data Company California Local Assessment District Issues Lead Managed Underwritings 1994 to 1998 Ranking based on Number of Issues PaineWebber Inc. t ' ' ' - .... f ~ $456 Westhofl; Cone & Holmstedt :.. $101 Miller& Schroeder ,..' . I $126 Sutro & Co. [~ $73 Mark Pressman , . ~ ~60 NLL Stern & Co., Inc. ~ $59 Piper, ,laffray Inc. ~ $69 First Calfornia :~ $22 Salomon Smith Barney Holdings ~ $77 Henderson Capital Partners ' · ~ $24 Redwood Securities Group · ~ $90 ?ruaential Securmes--'i ~ $54 Top 25 Underwriting Firms active in California Local Assessment District Issues Wedbush Morgan ~ $13 Prager, McCarthy & Semy ~ $102 O'Connor & Co. Securities ~ $21 Morgan Stanley Dean ~itter ~ $36 Seidler-Fitzger~ld ~ $26 Merrill Lynch & Co. ~ $40 Dollar Volume ($ Millions) Altm'a, Nelson & Co. ~ $16 Grigsby Brandford & Co. ~ $19 - -E.J. De l~ Rosa & Co. ~] $13 F_. Wa~er & ~soeiate~ ~] $21 Fiaelity CapitalMarkets ~ $13 Union Bank of Califomia ~ $12 20 40 60 80 100 Source: Securities Data Company California Local Mello-Roos Issues Lead Managed Underwritings 1994 to 1998 Ranking based on Number of Issues Stone & Youngberg ~ **~ , ~ , Westhoff, Co~e & Ho~t .... .::'. '...: :.:' '",:-:' ~ ' . ~ ~232 $1,285 ~omoa S~th ~y Hoid~ ~ < "'"~ · ~ 222 O'Connor & Comfy ~fifi~ ~'?.~.~ ~ ~'2 "~~ ..... ~ $1~ 9 P~er, M~v & ~ t vi~.J~m. ~-- ~' ~.~" :~ $29 Top 22 Unde~fifing Fires active in ~ C~ifomia ~c~ Melio-Roos ~sues ~kofAmed~&gA I~'~ ~ $51 : Mesh ~vnch & Co. ~ $30 ~ ~her ~ $52 ~kp~ $7 ~ifom~ Capitol Bmnce ~ $12 ~ ~. Dollar Volume ~&c~ ~ $5 ($ ~lions) ~. ~ ~ Rom & Co. $7 Fi~t C~ifo~ ~p~ ~rke~ ~ $2 ~'hipple, ~H & Co-, ~ ~ S14 O'N~ N~mb & ~ Dim ~= ~ . ,/ f' / ' r' / / ' ~1"' 0 10 20 30 40 50 60 70 Source: Securities Data Company