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HomeMy WebLinkAbout07-15-2014 C9 Bond and Disclosure Counsel ServicesCity of San Luis Obispo, Council Agenda Report, Meeting Date, Item Number FROM: Wayne Padilla, Finance Director SUBJECT: AWARD OF CONTRACT FOR BOND AND DISCLOSURE COUNSEL SERVICES RECOMMENDATION Approve the agreement with Orrick, Herrington & Sutcliffe LLP for bond counsel and disclosure counsel services and authorize the City Manager to execute the agreement and subsequent amendments. DISCUSSION Background Following an extensive request for proposals (RFP) process in 2006, a contract was awarded on December 6, 2006 to Jones Hall for bond counsel and disclosure counsel services. As set forth in the original agreement, the term was for three years, with an option to renew for another three years. Based on the quality of work performed, the City Manager approved a three-year contract extension on May 26, 2010. On January 22, 2013, the City Council approved an additional 1 year extension to the agreement in order to provide continuity of services in light of the upcoming financing proposed in the Fall of 2013 to finance a portion of the cost for the Water Resource Recovery Facilities’ energy improvement project. Following the completion of that financing, the City Council approved the release of a Request for Proposal document (RFP) on October 15, 2013. In response to the RFP there were 9 responses. After reviewing the responses, staff found that 6 failed to provide all of the required documentation, which was established in the RFP as a means for disqualification since it was evidence that directions were not being followed. The remaining 3 firms that responded and provided the required documentation were invited to interviews on June 16th and June 23rd. These firms were Orrick, Herrington & Sutcliffe LLP, Quint & Thimmig LLP, and Hawkins Delafield & Wood LLP. The interview panel consisted of City Manager Katie Lichtig, City Attorney Christine Dietrick and Finance Director Wayne Padilla. Based on the responses received to interview questions and on the basis of the proposals received and reference checks, the panel is recommending the City should enter into an agreement with Orrick, Herrington & Sutcliffe to serve as both bond counsel and disclosure counsel for the City during the negotiation and settlement of financing transactions. They have the in-house resources to assist the City with a wide range of financing alternatives, including the formation of special districts should the need arise. In its role as bond counsel, the law firm drafts the legal documents necessary to issue and secure the bonds, and advises the City regarding state law and federal tax issues. The law firm also gives the legal opinion delivered with the bonds confirming that the bonds are valid and binding obligations and that interest on the bonds is exempt from federal and state income taxes. 7/15/14 C9 C9 - 1 AWARD OF CONTRACT FOR BOND AND DISCLOSURE COUNSEL SERVICES Page 2 In its role as disclosure counsel, the law firm drafts the disclosure document (known as the “Official Statement”) used to market the bonds to investors as well as the City’s continuing disclosure agreement under which it provides annual disclosures to the secondary market regarding its outstanding bonds. The firm also advises the City on securities law issues as they arise. Each financing transaction is unique and the exact scope of work is determined by the nature of the financing transaction’s structure. Additionally, the law firm will provide on-going advice and assistance on the best approach in the meeting the City’s capital financing needs. This assistance is particularly beneficial to the City in preparing early assessments of financing options. The proposed agreement provides for a term of 5 years with the option to extend for not more than three (3) additional one year periods with the approval of the City Manager. FISCAL IMPACT The agreement provides that compensation will be funded solely from, and will be solely contingent upon, the proceeds from specific bond issues. Fees will be related to the size of the issue. If a transaction is started but not closed, the City is not obligated to pay any fees to the law firm. Orrick, Herrington’s fee proposal provides for an indexed fee based on the principal amount of the bonds issued as shown below. • Minimum fee: $35,000 • ½% of principal amount in excess of $5,000,000 and up to $10,000,000 plus • ¼% of principal amount in excess of $10,000,000 and up to $20,000,000 plus • 1/8% of principal amount in excess of $20,000,000 Orrick has also proposed to allow their fee to be negotiated at the start of each financing transaction in order to best match the cost with the complexity of the transaction, potentially saving the City money when a simple, yet high value transaction would cost more based on the indexed fee schedule. This condition is built into the terms of the proposed agreement. ALTERNATIVE Do not approve the agreement. This option may be selected and a runner-up firm can be asked to negotiate an agreement with the City. Orrick, Herrington was recommended based on their responsiveness and depth of resources in light of the City’s current and future financing needs. The other firms are capable of handling the City’s financing needs but aren’t as well prepared to offer the depth of service that the City may require in the future. ATTACHMENTS 1. Draft Bond Counsel Agreement t:\council agenda reports\2014\2014-07-15\bond counsel agreement (padilla)\bond counsel agreement car.docx C9 - 2 THIS AGREEMENT is made and entered into in the City of San Luis Obispo on July 16, 2014, by and between the CITY OF SAN LUIS OBISPO, a municipal corporation, hereinafter referred to as City, and Orrick, Herrington & Sutcliffe, LLP, hereinafter referred to as Orrick. W I T N E S S E T H: WHEREAS, on October 16, 2013, City requested proposals for bond counsel services per Specification No. 91270. WHEREAS, pursuant to said request, bond counsel submitted a proposal, which was accepted by City for said services. NOW THEREFORE, in consideration of their mutual promises, obligations, and covenants hereinafter contained, the parties hereto agree as follows: 1. SCOPE OF SERVICES. Orrick shall perform the legal services described in Specification 91270 and as set forth below: Bond Counsel Services (a) In consultation with City and its advisors, underwriters, and other interested parties, provide consultation with respect to legal issues related to proposed debt issuance transactions in order to establish the proper legal basis for creating new debt. (b) Prepare all documents required to be issued for each new debt transaction and as needed for any past debt transactions. (c) Provide all required review and commentary on material prepared by others related to each new or existing debt. (d) Attend meetings or hearings of the City Council in person, as directed by City; attend City staff working meetings and other presentations in person or via conference calls as directed by City. Attachment 1 C9 - 3 (e) Provide the customary summary and transcripts of all legal documents related to each new financing transaction upon completion of the transaction. Disclosure Counsel Services (f) Assist with the negotiation and preparation of any required Continuing Disclosure Agreements or Certificates pursuant to Securities and Exchange Commission Rule 15c2-12 and any additional regulations that may apply from time to time to a debt transaction. (g) Prepare the Bond Purchase Agreement between City and the underwriter. (h) Prepare the Preliminary and Final Official Statement as required for a debt transaction. All table and financial information required for inclusion in the Official Statement shall be provided by City or its various consultants and advisors and Orrick shall not be responsible for confirming the accuracy of such information. (i) Render all required legal opinions and prepare any additional documents required but not previously described. 2. TERM. The term of this Agreement shall be five (5) years from the date this Agreement is made and entered, as first written above. This Agreement may be extended for not more than three (3) additional one (1) year periods upon mutual, written consent of both parties. 3. NATURE OF ENGAGEMENT; RELATIONSHIPS WITH OTHER PARTIES. The role of bond counsel, generally, is to prepare or review the procedures for issuance of the bonds, notes or other evidence of indebtedness and to provide an expert legal opinion with respect to the validity thereof and other subjects addressed by the opinion. The role of disclosure counsel, generally, is to assist in the preparation and review of the Official Statement and debt documentation as the City’s counsel and to render a third-party legal opinion to the underwriter pursuant to the Bond Purchase Agreement as described above. Consistent with the historical origin and unique role of such counsel, and reliance thereon by the public finance market, Orrick's role as bond and disclosure counsel under this Agreement is to provide an opinion and related legal services that represent an objective judgment on the matters addressed rather than the partisan position of an advocate. C9 - 4 (a) City acknowledges that Orrick regularly performs legal services for many private and public entities in connection with a wide variety of matters. For example, Orrick has represented, is representing or may in the future represent other public entities, underwriters, trustees, rating agencies, insurers, credit enhancement providers, lenders, contractors, suppliers, financial and other consultants/advisors, accountants, investment providers/brokers, providers/brokers of derivative products and others who may have a role or interest in the debt financing or that may be involved with or adverse to City in this or some other matter. Orrick agrees not to represent any such entity in connection with the debt financing, during the term of this Agreement, without the consent of City. 4. ASSIGNMENT OF AGREEMENT. Orrick may not assign its obligations under this Agreement without written consent of City except to a successor partnership or corporation to which all or substantially all of the assets and operations of Orrick are transferred. All references to Orrick in this Agreement shall be deemed to refer to any such successor of Orrick and shall bind and inure to the benefit of such successor and assignee whether so expressed or not. 5. INCORPORATION BY REFERENCE. City Specification No. 91270 and bond counsel’s proposal dated November 15, 2013, are hereby incorporated into and made a part of this Agreement. 6. COMPENSATION AND REIMBURSEMENTS. (a) For all services called for under this agreement, Orrick shall be paid a fee that will be negotiated in advance of each proposed financing transaction as indicated in Exhibit 4 from Orrick’s proposal to City Specification No. 91270. (b) Fees and expenses shall be payable by City upon the issuance of the debt and from available debt proceeds. Payment of all fees and expenses hereunder shall be entirely contingent upon issuance of the debt. 7. AMENDMENTS. Any amendment, modification, or variation from the terms of this Agreement shall be in writing and shall be effective only upon approval by the City Manager of the City. 8. INDEMNIFICATION FOR PROFESSIONAL LIABILITY. Paragraph 28 of Section B of Specification No. 91270 shall be modified to read as follows: Orrick C9 - 5 agrees to indemnify and hold City harmless from and against any and all third party claims, suits and actions, and all associated damages, settlements, losses, liabilities, costs, and expenses, including without limitation reasonable attorneys’ fees, to the extent finally determined to have resulted from Orrick’s negligent performance of the services set forth in this agreement, or as otherwise agreed to in settlement between the parties. 9. INSURANCE. Coverage shall be at least as broad as: (a). Insurance Services Office Commercial General Liability coverage (occurrence form CG 0001). (b) Insurance Services Office form number CA 0001 (Ed. 1/87) covering Automobile Liability, code 1 (any auto). (c) Workers' Compensation insurance as required by the State of California and Employer's Liability Insurance. (d) Errors and Omissions Liability insurance as appropriate to the consultant's profession. Minimum Limits of Insurance. Contractor shall maintain limits no less than: (e) General Liability: $1,000,000 per occurrence for bodily injury, personal injury and property damage. If Commercial General Liability or other form with a general aggregate limit is used, either the general aggregate limit shall apply separately to this project/location or the general aggregate limit shall be twice the required occurrence limit. (f) Automobile Liability: $1,000,000 per accident for bodily injury and property damage. (g) Employer's Liability: $1,000,000 per accident for bodily injury or disease. (h) Errors and Omissions Liability: $2,000,000 per occurrence. Deductibles and Self-Insured Retentions. Any deductibles or self-insured retentions must be declared to and approved by the City. At the option of the City, either: the insurer shall reduce or eliminate such deductibles or self-insured retentions as respects the City, its officers, officials, employees and volunteers; or the Contractor shall procure a bond guaranteeing payment of losses and related investigations, claim administration and defense expenses. Other Insurance Provisions. The general liability and automobile liability policies are to contain, or be endorsed to contain, the following provisions: (i) The City, its officers, officials, employees, agents and volunteers are to be covered as insureds as respects: liability arising out of activities performed by or on behalf of the Contractor; products and completed operations of the Contractor; premises owned, occupied or used by the Contractor; or automobiles owned, leased, hired or borrowed by the Contractor. The C9 - 6 coverage shall contain no special limitations on the scope of protection afforded to the City, its officers, official, employees, agents or volunteers. (j) For any claims related to this project, the Contractor's insurance coverage shall be primary insurance as respects the City, its officers, officials, employees, agents and volunteers. Any insurance or self-insurance maintained by the City, its officers, officials, employees, agents or volunteers shall be excess of the Contractor's insurance and shall not contribute with it. (k) The Contractor's insurance shall apply separately to each insured against whom claim is made or suit is brought, except with respect to the limits of the insurer's liability. (l) Each insurance policy required by this clause shall be endorsed to state that coverage shall not be suspended, voided, canceled by either party, reduced in coverage or in limits except after thirty (30) days' prior written notice by certified mail, return receipt requested, has been given to the City. Acceptability of Insurers. Insurance is to be placed with insurers with a current A.M. Best's rating of no less than A:VII. Verification of Coverage. Contractor shall furnish the City with a certificate of insurance showing maintenance of the required insurance coverage. Original endorsements effecting general liability and automobile liability coverage required by this clause must also be provided. The endorsements are to be signed by a person authorized by that insurer to bind coverage on its behalf. All endorsements are to be received and approved by the City before work commences. 9. COMPLETE AGREEMENT. This written Agreement, including all writings specifically incorporated herein by reference, shall constitute the complete agreement between the parties hereto. No oral agreement, understanding, or representation not reduced to writing and specifically incorporated herein shall be of any force or effect, nor shall any such oral agreement, understanding, or representation be binding upon the parties hereto. 10. NOTICE. All written notices to the parties hereto shall be sent by United States mail, postage prepaid by registered or certified mail addressed as follows: City City Clerk City of San Luis Obispo 990 Palm Street San Luis Obispo, CA 93401 C9 - 7 Bond Counsel John Knox Orrick, Herrington & Sutcliffe LLP The Orrick Building 405 Howard Street San Francisco, Ca. 94105 11. AUTHORITY TO EXECUTE AGREEMENT. Both City and Orrick do covenant that each individual executing this agreement on behalf of each party is a person duly authorized and empowered to execute Agreements for such party. IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed the day and year first above written. ATTEST: CITY OF SAN LUIS OBISPO, A Municipal Corporation By: City Clerk City Manager APPROVED AS TO FORM: Bond Counsel By: City Attorney C9 - 8