Raymond James Hires Take Aim at California School Finance
LOS ANGELES – Infrastructure needs are expected to drive steady borrowing by California school districts, and Raymond James wants to be a part of it.
With that in mind, the national-broker added several bankers in recent months to grow the education side of its public finance practice in California.
"It is a sector in California that has ongoing financing needs," said Parker Colvin, managing director and head of underwriting for Raymond James' Western region.
The state has more than 1,000 school districts and many need financing for new facilities and improvements to existing facilities, said Colvin, who was hired in December 2013 as part of the firm's Western expansion.
"There is an ongoing need for school facilities construction statewide," said Dave Walrath, president of Murdoch, Walrath & Holmes, a Sacramento-based lobbying firm that specializes in California public education.
A report from Bill Savidge, a former assistant executive officer for the state allocation board, placed K-12 construction needs over the next 10 years at $18 billion. Walrath described that number as conservative, because it doesn't consider items like performing arts centers, library expansions, or other needs that aren't eligible for state matching funds.
Since 2001, California voters have approved 911 local school bond measures, giving 642 school and college districts authority to borrow a total of $110.4 billion, according to a report from the Orange County-based California Policy think tank.
"Given the demographics in the state – of a large and growing population – we expect those financing needs to continue," said Rob Larkins, a Raymond James managing director and the firm's public finance manager for the western region.
The firm has hired six new people in California over the past two months.
The firm also has six public finance bankers in its northern California office that work with cities, counties and special districts.
Raymond James is a relative newcomer to public finance underwriting in California. That business was launched in 2011 when Larkins was hired.
Vice President John Nguyen joined the firm's public finance leadership team in San Francisco in 2012.
But the company has been in the state on the sales side covering local banks, munis and high-net individuals for many years, Colvin said.
"The timing of these hires has everything to do with the availability of the right people," Colvin said. "The firm has wanted to grow West, but it has a long term view."
KNN Public Finance, ranked third among financial advisor firms in California, also has been growing its presence in the education sector. It brought on four new senior financial advisors that specialize in education in 2014. KNN also hired Joanna Bowes in January as managing director in its Oakland, Calif. office to run the firm's education practice.
"KNN has always had a large commitment to the education sector – and we continue to have that commitment," said David Leifer, a senior managing director of KNN, a division of Zions First National Bank.
KNN is a financial advisor, but Leifer said he has noticed firms on the broker-dealer side have been committing a lot of resources to the education sector in the state.
California has a lot of school districts that issue bonds frequently, and many have aging infrastructures and large funding needs, Leifer said.
The state's reluctance to replenish its own bonding authority for K-12 schools has also meant that school districts are issuing their own general obligation bonds and voters have generally been supportive of school bond measures, he said.
"With the regulatory environment, more schools districts are using MA's, which is a good thing for us, though I'm not sure that applies to broker-dealers," Leifer said.
Voters have approved $35 billion in statewide general obligation bonds for K-12 schools and community colleges since 1998, but all but $286 million of that authorization was exhausted as of November 2014, according to a July report from the state Legislative Analyst's Office.
The California Division of the State Architect reports that it has a backlog of $2 billion in requests for matching state funds for school construction projects, Walrath said.
Walrath is a consultant for the California Coalition for Adequate School Housing, which was part of a campaign that succeeded in getting a $9 billion school bond placed on the November 2016 ballot.
Backers of the state school bond measure used a petition drive as an end-run around Gov. Jerry Brown's opposition to such a measure. Brown has opposed replenishing bonding authority at the state level saying that the state needs to look at whether funding should come from the state or local school district level. State bonds typically act as matching funds to money allocated by school districts.
Colvin said the education sector aligns well with Raymond James' retail distribution network, which comprises roughly 6,600 financial advisors in more than 2,700 locations throughout the United States, Canada and overseas.
The firm has 180 public finance professionals in 25 offices across the country.
Veteran education banker Charlie Feinstein was among the new hires. He started work in November as a managing director in the broker-dealer's San Francisco office. Feinstein most recently worked at Morgan Stanley & Co.
Un Chu Reardon, a senior vice president, also was hired in November to work in the San Francisco office. Colvin and Reardon had worked together when they were at Stone & Youngberg LLC. Reardon left a position at Keygent LLC as a financial advisor to join Raymond James.
"Un Chu and I have worked together going back 15 years," Colvin said.
She has extensive experience with schools districts and brings with her significant client relationships, he said.
A team comprising public finance bankers Randy Merritt and Alexzis Fuke , analyst Brett Lee and Laurie Miller, an executive assistant, came over from George K. Baum & Co. last week.
That team is opening a new southern California office in San Clemente soon, Larkins said.
The location isn't strategic, Larkins said, because bankers are supposed to be in front of clients, so he expects them to be on the road a lot.
"We are pretty flexible in terms of location," Larkins said. "We just try to hire people with top tier reputations and experience."
The broker dealer "doesn't have a quota of people to hire, but has been patient and waited for the right folks to come together," Colvin said.
Raymond James hasn't set a dollar figure or rankings goal for its California public finance practice.
"We want to be profitable, but the road is littered with firms that are chasing a one, two or three ranking," Larkins said. "We want to serve our clients and chasing league ranks and market share doesn't end up well for our employees."
In the first nine months of the year, the firm ranked ninth nationally as a senior manager on 650 bond issues with par value of $13.47 billion, according to Thomson Reuters.
Larkins emphasized that the firm and its new hires are playing a long game.
"This is a strategic long-term investment by the firm and by all of us bankers," Larkins said. "We all decided this is where we want to build our careers and we want to build a go-to practice."
Larkins believes "everyone who has joined expects to finish their careers here."