TRAVERSE CITY — More than 400 pages of documents and communications shed light on recent questions about the relationship between Traverse City Area Public Schools, its former superintendent and Raymond James Financial Services.
Timeline concerns arose in the public after a Sept. 30 announcement former TCAPS Superintendent Paul Soma was hired as a senior vice president of public finance at Raymond James and would work out of Traverse City serving K-12 school districts, community colleges and local governments in Michigan.
Soma announced his retirement from the district in December 2018.
TCAPS approved using Raymond James as the lead underwriter in the sale of nearly $35 million in capital bonds in March.
The move led some to speculate that an agreement existed for the financial institution to hire Soma after his July 31 retirement if Raymond James was awarded the underwriting contract.
Both parties have said that is not true.
Although Raymond James officials declined to allow Soma or Gavin Murrey, executive vice president and head of public finance and debt investment banking at Raymond James, to speak on the record, Steve Hollister, Raymond James vice president of public communications, said discussions about hiring Soma did not begin until June.
Raymond James closed on the first sale of bonds May 16 at an issuance cost of $133,493.55 to TCAPS and has had no further business with the school district since.
Hollister said Raymond James officials believe there was no conflict of interest in hiring Soma and that such moves are fairly commonplace.
“Financial services and investment firms routinely hire professionals with expertise and experience in their fields so we may offer the most sophisticated and informed advice and service possible to our clients,” Hollister said.
Documents and communications obtained through a Freedom of Information Act request to TCAPS show Soma steered questions regarding the bond sale to TCAPS Associate Superintendent of Finance and Operations Christine Thomas-Hill early in the process. Thomas-Hill said she sees Soma’s hiring as “a non-story.”
“What I see is a registered CPA with 30-plus years experience in school finance getting a job with one of the 14 entities we work with,” Thomas-Hill said. “We probably work with 14 or 15 different financial institutions, so would it have been the same if he had gone to Huntington or somewhere else other than Raymond James? Experience within the school system and being able to talk to other entities is what is attractive to companies to hire former superintendents — because they speak the language.”
Thomas-Hill estimated Raymond James Financial Adviser David Schweitzer made about $2,500 in the bond sale, and she said it was a “one-time deal” that is done and not ongoing.
Schweitzer, who works in Traverse City, as well as Elizabeth Hennessy, the managing director of public finance for Raymond James, sent congratulatory emails to Soma and Thomas-Hill on Aug. 8, 2018 — the day after the district’s $107-million bond proposal was passed by voters. Hennessy sent a follow-up email Aug. 16 to Soma and Thomas-Hill comparing competitive and negotiated bond sales.
Hennessy reached out again Nov. 5, 2018, and told Soma and Thomas-Hill via email that Raymond James is “ready to work with you, your financial adviser and the local community on the sale of the bonds with the intent to get them into the hands of local investors.”
Schweitzer contacted Soma two months later to see if TCAPS still had interest in using Raymond James’ services as an underwriter. Soma, in the Jan. 2 correspondence, replied that no decision regarding an underwriter had been made yet and that Thomas-Hill was making the case for a negotiated sale.
“I think there is opportunity for RJ (Raymond James) both as a lead underwriter and also perhaps as part of a syndicate,” Soma wrote.
TCAPS put out a request for proposals from companies seeking to underwrite the bonds in early 2019.
Hilltop Securities had the lowest bid of $71,545, but Paul Stauder, TCAPS financial adviser, said in a Feb. 20 email to Thomas-Hill and TCAPS Director of Business Services Wes Souden that Hilltop does not have an office or brokers locally to support retail sales efforts. Stauder also expressed concern about the price quote and if it was “adequate to get the job done right.”
Raymond James provided the next lowest bid at $86,603, followed by Stifel, Nicolaus and Company at $87,250 and JP Morgan Chase at $105,379.
Stauder told Thomas-Hill and Souden that Raymond James was best suited for TCAPS because the company had “30 sales reps in your area to market to retail.”
Hennessy said in a Feb. 22 email to Soma and Thomas-Hill that she was “thrilled” Raymond James was selected as the underwriter. The TCAPS Board of Education approved the agreement at its March 11 meeting and brought on Stifel as co-manager of the underwriting process.
TCAPS trustees approved selling the bonds in a negotiated sale instead of a competitive sale for the first time in the district’s history at Thomas-Hill’s recommendation, supported by Soma.
Thomas-Hill said a negotiated sale gave local investors first crack at buying the bonds and was done as “our way of saying thank you to the community for passing the bond.”
Thomas-Hill asked all of the firms submitting proposals to break down the differences in a negotiated and competitive sale and said she found the costs and interest rates were not much different.
TCAPS will sell the next portion of the $107 million in capital bonds in 2021. Thomas-Hill said no determination has been made regarding what company will serve as the underwriter. The district’s debt service on the May bond sale runs through 2029 and totals $38,851,566.