City of Newark Investor Presentation Draft #1 · August 3, 2020 Newark Investor Presentation...

$: City of Newark Investor Presentation Draft #1 · August 3, 2020 Newark Investor Presentation v1.pptx\01 JUN 2016\1:22 PM\1 * Preliminary, subject to change . Disclaimer This investor$
The City of Newark in the County of Essex, State of New Jersey

$105,855,000* General Obligation Refunding Bonds, Series 2020$75,535,000* Qualified General Improvement Refunding Bonds, Series 2020A

$26,345,000* Qualified School Refunding Bonds, Series 2020B

$3,975,000* Qualified Water Utility Refunding Bonds, Series 2020C

Investor Presentation

August 3, 2020

Newark Investor Presentation v1.pptx\01 JUN 2016\1:22 PM\1

* Preliminary, subject to change

Disclaimer

This investor presentation that you are about to view is provided as of August 3, 2020 for a proposed offering by the City of Newark’s (the“City”) General Obligation Refunding Bonds, Series 2020A, Series 2020B, and Series 2020C (collectively, the “Bonds”).

This presentation has been prepared for information purposes only and for your sole and exclusive use in connection with the proposedtransaction. The information contained herein is subject to completion and amendment. Any offer or solicitation with respect to the Bondswill be made by means of a final official statement. If you are viewing this investor presentation after the date stated above, events may haveoccurred that have a material adverse effect on the financial information presented. Capitalized terms used, but not otherwise defined in thispresentation, have the meanings provided to them in the Preliminary Official Statement, dated August 3, 2020, relating to the Bonds.

This presentation does not constitute nor does it form part of an offer to sell or purchase, or the solicitation of an offer to sell or purchase, anysecurities or an offer or recommendation to enter into any transaction described herein nor does this presentation constitute an offer,commitment or obligation on the part of the City, NW Financial Group LLC or PFM Financial Advisors LLC (“the Municipal Advisors”),Siebert Williams Shank & Co., LLC, (“the Representative”), or any of its affiliates to provide, issue, arrange or underwrite any financing orenter into any other transaction. You will be responsible for making your own independent investigation and appraisal of the risks, benefits,appropriateness and suitability of the proposed transaction and any other transactions contemplated by this presentation and neither the City,the Municipal Advisors, nor the Representative is making any recommendation (personal or otherwise) or giving any investment advice andwill have no liability with respect thereto.

Neither the City, the Municipal Advisors nor the Representative makes any representation or warranty as to the (i) accuracy, adequacy orcompleteness of any information in this investor presentation or (ii) legal, tax or accounting treatment of any purchase of the Bonds by you orany other effects such purchase may have on you and your affiliates. This investor presentation contains “forward-looking” statements thatinvolve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results maydiffer materially from those expressed or implied by such forward-looking statements. Accordingly, you are cautioned not to place unduereliance on these statements. All statements other than the statements of historical fact could be deemed forward-looking. All opinions,estimates, projections, forecasts and valuations are preliminary, indicative and are subject to change without notice.

THE PRINTING, DUPLICATING, DOWNLOADING, SCREEN CAPTURING, ELECTRONIC STORING, RECORDING, PUBLISHING OR

DISTRIBUTING OF THIS INVESTOR PRESENTATION IN ANY MANNER IS STRICTLY PROHIBITED.

By viewing this investor presentation you acknowledge that you understand and agree to the provisions of this page.

Issuer: The City of Newark (the “City”)

Par Amount*:

$105,855,000 General Obligation Refunding Bonds, Series 2020 (the “Bonds”), consisting of ▪ $75,535,000 Qualified General Improvement Refunding Bonds, Series 2020A ▪ $26,345,000 Qualified School Refunding Bonds, Series 2020B ▪ $3,975,000 Qualified Water Utility Refunding Bonds, Series 2020C

Tax Status: Tax-Exempt

Security: Unlimited tax general obligation pledge with additional benefits provided by the Municipal Qualified Bond Act for the Series 2020A and 2020C Bonds; the Series 2020B Bonds are secured by a reserve established by the School Bond Reserve Act

Use of Proceeds: To refund all of the City’s callable and outstanding Qualified General Improvement Bonds, Series 2010A, Qualified School Bonds, Series 2010C, and Qualified Water Utility Bonds, Series 2010D

Structure*: Serial Bonds: October 1, 2021 – October 2039

Optional Redemption*: To be determined

Interest Payment Dates: April 1 and October 1, beginning October 1, 2020

Credit Rating (Moody’s): Series 2020A and Series 2020C: Baa1 (Municipal Qualified Bond Act) Series 2020B: A3 (School Bond Reserve Act)

Credit Enhancement: Assured Guaranty

Senior Manager: Siebert Williams Shank & Co., LLC

Financial Advisors: PFM Financial Advisors, LLC and NW Financial Group, LLC

Pricing*: Thursday, August 13, 2020

Closing*: Thursday, August 27, 2020


1

Transaction Overview

Security Features


✓ Unlimited tax general obligation pledge

Unless paid from other sources, the City is authorized and required by law to levy ad valorem taxes, if

necessary, on all property taxable within the City for the payment of the principal of and interest on the Bonds

without limitation as to rate or amount

✓ The Bonds also benefit from the provisions of the Municipal Qualified Bond Act (the “Act”), Title 40A of the State of

New Jersey (the “State”)

– The Bonds issued under the Act are called “Qualified Bonds”

─ The Act authorizes:

▪ The creation of a dedicated debt service account held by the paying agent

▪ The State Treasurer to withhold a portion of certain State aid allocated to the City in amounts sufficient to

pay debt service on Qualified Bonds

▪ The deposit of the withheld fund into the dedicated debt service account held by the Paying Agent on or

before debt service due date of the Qualified Bonds

▪ The withheld State aid are deemed to be held in trust and exempt from being levied upon, taken,

sequestered, and can only be used to pay debt service on any such Qualified Bonds of the City

─ The Act does not contain a pledge or guarantee that any amounts payable to the Paying Agent will, in fact, be

made or continued

✓ The Series 2020B Bonds are additionally secured pursuant to the provisions of the State’s School Bond Reserve

Act (the “School Bond Reserve Act”)

─ The School Bond Reserve Act established a school bond reserve, which is pledged to secure payments of debt

service due on school bonds in the event of funding shortfall

2

The City’s Characteristics


✓ The City has the largest population in the State

✓ The City covers a land area of 24.14 square miles in the southeastern

section of the County of Essex, and is located eight miles west of the City

of New York and 80 miles northeast of the City of Philadelphia

✓ The City’s 2010 census population was 277,410, an increase of 15,520

since the 2000 census

✓ The City is a large, vibrant city at the hub of New Jersey industry,

transportation, education and commerce:

─ Newark is the transportation capital of the State and is the

headquarters for New Jersey Transit (“NJT”), the State’s rail and bus

transportation operating agency

─ The City is the insurance, finance, and banking capital of the State

with an ongoing presence of Wells Fargo Bank, TD Bank, Bank of

America, JP Morgan Chase Bank, and PNC Bank

─ The largest employers in the City are: Prudential Insurance Company

of America, Public Service Electric and Gas Company, Anheuser

Busch Brewing Company, Verizon, and Blue Cross/Blue Shield of NJ

─ The City also serves as the County seat for Essex County, with

County, State, and Federal courts and governmental offices attracting

large numbers of law firms to the City’s central business district

3

City Budget (FY 2019 and FY 2020)


✓ The City’s 2019 budget was introduced by the Municipal

Council on June 11, 2019 and adopted on September 24, 2019

✓ The City’s adopted budget included an approximate 2.83%

increase in the municipal purpose tax levy, and no Transitional

Aid was received from the State for the 2019 budget

✓ The City’s 2020 budget is expected to be introduced on August

5, 2020, including the following:

─ $26.9 million (3.7%) reduction in anticipated revenues

primarily due to the COVID-19 induced economic slow

down, including:

▪ $14.2 million (15.4%) reduction in City Special Tax

revenue

▪ $7.9 million (5.6%) reduction in local revenues

▪ $700,000 (13.1%) reduction in Uniform Construction

Code Fee revenue

✓ The City’s 2020 budget addresses these shortfalls through:

─ $4.6 million (3.1%) reduction in the Police budget

─ $6.7 million in CARES Act and FEMA Reimbursements

─ 3% increase in the City’s local purpose tax rate,

equal to an approximate $11.9 million increase in the

City’s local purpose tax levy

4


✓ The Municipal Council adopted a $75 million water utility bond ordinance to finance the replacement of lead service lines in

the City

✓ The Local Finance Board approved the bond ordinance under the Municipal Qualified Bond Act

✓ The approved replacement project was contemplated to occur in approximately 10 phases over a period of 8 years

– Due to certain health emergency associated with elevated lead level in some homes with water filters, the City

determined to:

▪ Expedite the replacement project for phases 3 through 10 over a period of 2 years

▪ Finance a portion of phases 3 through 10 of the replacement program through the Essex County Improvement

Authority (the “Authority”), while retaining eligibility to finance a portion of the project through the NJ Infrastructure

Bank (“NJIB”)

▪ The City is expected to incur a $40 million of interim construction financing program loan through the NJIB in the

summer of 2020 and fund a portion of the remaining costs relating to phases 5 through 9 of the replacement

program

Lead Line Financing and Replacement Program

August 18, 2019:

The Authority and the City filed a joint

application with the Local Finance Board

for the bond resolution and project note

resolution for the issuance of max. $120

million revenue bonds and/or project

notes.

September 11, 2019:

The Local Finance Board

issued positive findings on

the Authority financing and

Essex County’s guarantee

August 27, 2019:

The City adopted an Emergency

Temporary Appropriation resolution

of $120 million in order to finance

replacing approximately 15,000 lead

service lines within the City

November 7, 2019:

Phase 2 of the lead service

lines replacement project is

financed through the NJIB

through maximum $13.5

million short term construction

financing loan notes

May 20, 2019:

The City entered an interim construction

financing program loan of $12.3 million

with the NJIB on May 20, 2019 to

provide for Phase 1 of the replacement

project

July 2, 2020:

The City reported lead levels

below the U.S. Environmental

Protection Agency’s allowable

trace lead presence

July 21, 2020:

Mayor Baraka reported that the City is

ahead of schedule and that crews

have completed approximately 13,084

lead service line replacements, and

are replacing about 75 lines a day

throughout the COVID-19 pandemic

5

The Impact of the COVID-19 Pandemic on the City


✓ On March 9, 2020, Governor Philip Murphy of the State

instituted mandatory measures via various executive

orders to contain the spread of the coronavirus, including

closing schools and nonessential businesses, limiting

social gatherings, and prohibiting non-essential travel

✓ The economic impact of the pandemic for the City is

significant.

‒ To address revenue shortfall, the City has

implemented various cost savings measures, such as

departmental cuts, vacancy reductions, voluntary

incentive program reductions and other cost savings

✓ The pandemic has impacted the collection rate of two of

the City’s revenue generators of Special Taxes (payroll,

parking, and hotel) and Property Taxes.

As of July 25, 2020:

─ Special Taxes decreased by $10.0 million vs. 2019

─ Property Taxes declined by $2.2 million vs. 2019

✓ Although some of the restrictive measures are being

removed or loosened, the spread of COVID-19 in New

Jersey is expected to continue

✓ The City expects that the COVID-19 Crisis will likely have a

material adverse impact on the City and its finances while

its potential impact cannot be fully quantified at this time

6

Collection of Special and Property Taxes ($mm)

$56.6

$212.2

$46.6

$210.0

$0

$40

$80

$120

$160

$200

$240

Special Taxes Property Taxes

2019 2020

Source: 2020 Proposed Budget

The City’s Improved Financial Position


Tax Collection Rate (%)

Source: 2015-2018 Audit Reports

* 2019 Annual Financial Statement (Unaudited)

98.0%97.3%

97.7%

95.9%

97.6%

90.0%

92.0%

94.0%

96.0%

98.0%

2015 2016 2017 2018 2019*

Year-End General Fund Balance ($mm)

$0.0

$29.7

$40.3

$58.1

$69.4$62.8

$0.0

$15.0

$30.0

$45.0

$60.0

$75.0

2014 2015 2016 2017 2018 2019*

Local Purpose Property Tax Levy ($mm)

$201.9

$222.8

$226.2

$230.4 $231.6

$200.0

$207.0

$214.0

$221.0

$228.0

$235.0

2015 2016 2017 2018 2019*

✓ Since 2015, the City has grown its general fund balance by 112%, a marked improvement considering its zero-

fund balance in 2014

✓ Additionally since 2015, the local purpose property tax levy has increased by approximately 15%

7

The City’s Comprehensive Projects


✓ In furthering the City’s economic development objectives, the City has completed 12 projects with a total project

investment of $676.4 million over the past few years

─ This private sector investment is a result of coordination by the City’s Department of Economic and Housing

Development, the Housing Authority, and other municipal planning and development agencies

✓ Currently, the City is working to construct 9 projects with an aggregate project investment of $274.2 million

Summary of Completed Project Project Investment ($mm)

The Hahne Project $175.0

Teachers Village 159.0

One Theatre Square 110.0

36-54 Rector Urban Renewal (Market Rate Housing) 64.0

Montgomery II 45.0

New Horizon 35.0

Riverside Arms Apartments 24.0

999 Broad Street Phase 1 20.4

East Park Street Hospitality Urban Renewal (Tryp Hotel) 15.0

Aero Farms At The 212 Rome Site 14.0

Cherry Park Apartments 12.0

Hampton Valley Apartments 3.0

Total $676.4

Summary of Project Under Construction Project Investment ($mm)

540 Broad Street $107.0

155 Washington Street (1) 54.2

Newark Makerhoods (2) 30.0

Carrino Plaza Apartments 26.0

579 Broad Street 17.0

Hari Newark Urban Renewal (Homewood Suites Hotel) 14.0

Scattered Sites Housing Projects 10.0

Tuckerview Redevelopment 10.0

Lofts At Lincoln Park Condominiums 6.0

Total $274.2

(1) Will close in summer 2020

(2) Closed on June 23, 20208


Preliminary Financing Structure


✓ The proceeds of the $105.9 million of the Bonds

will be used to refund all or a portion of the City’s

callable and outstanding bonds as follows:

─ Qualified General Improvement Bonds,

Series 2010A

─ Qualified School Bonds, Series 2010C

─ Qualified Water Utility Bonds, Series 2010D

✓ The Bonds will be insured by Assured Guaranty

✓ The Bonds are expected to amortize from 2021

through 2039

9

Preliminary Principal Amortization*

Maturity

(Oct. 1)

Qualified General

Improvement

Refunding Bonds,

Series 2020A

Qualified School

Refunding Bonds,

Series 2020B

Qualified Water

Utility Refunding

Bonds,

Series 2020C

2021 $5,595,000 $3,880,000 $120,000

2022 9,440,000 5,160,000 130,000

2023 10,510,000 5,450,000 135,000

2024 10,600,000 5,760,000 145,000

2025 8,990,000 6,095,000 150,000

2026 9,540,000 - 160,000

2027 10,125,000 - 170,000

2028 10,735,000 - 180,000

2029 - - 190,000

2030 - - 200,000

2031 - - 215,000

2032 - - 220,000

2033 - - 235,000

2034 - - 250,000

2035 - - 260,000

2036 - - 280,000

2037 - - 295,000

2038 - - 310,000

2039 - - 330,000

Total: $75,535,000 $26,345,000 $3,975,000


Financing Schedule*

Event Date

Posting POS and Investor Presentation: Monday, August 3, 2020

Pricing: Thursday, August 13, 2020

Closing Thursday, August 27, 2020

August 2020

S M T W T F S

1

2 3 4 5 6 7 8

9 10 11 12 13 14 15

16 17 18 19 20 21 22

23 24 25 26 27 28 29

30 31

Pricing

Closing

* Preliminary, subject to change 10

Everett Johnson, Esq.

Wilentz, Goldman & Spitzer, P.A.

(732) 855-6149

[email protected]

Derek McNeil,Managing Director and Head of Mid-Atlantic Region

Siebert Williams Shank & Co., LLC

(646) 775-4848

[email protected]

Robert Rodriguez, Director

PFM Financial Advisors, LLC

(646) 561-0710

[email protected]

Cheryl Oberdorf, Esq.

DeCotiis, FitzPatrick, Cole & Giblin, LLP

(201) 347-2171

[email protected]

Financial Advisors:

Book-Running Senior Manager: Underwriter’s Counsel:

Bond Counsel:

Danielle SmithChief Financial Officer

(973) 733-6415

[email protected]

City of Newark

Timothy Eismeier,Managing Director,

NW Financial Group, LLC

(201) 656-0115

[email protected]

Contact Information

11

mailto:[email protected]






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