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HomeMy WebLinkAbout10/21/2003, C5 - RENEWAL OF AGREEMENTS FOR FINANCIAL ADVISOR AND BOND COUNSEL SERVICES i council M.fimD.oc 10-21-03 j acEnaa REpout 1�N.6. es CITY OF SAN LU I S O B I S P O FROM: Bill Statler, Director of Finance & Information Technology n SUBJECT: RENEWAL OF AGREEMENTS FOR FINANCIAL ADVISOR AND BOND COUNSEL SERVICES RECOMMENDATION Amend the agreements with Fieldman Rolapp & Associates for financial advisor services and with Jones Hall for bond counsel services to extend the term for an additional two years. DISCUSSION Overview There are a number of public finance specialists that the City relies upon in prudently using debt financing in funding high-priority, long-term capital improvement projects. Among the most important of these are the financial advisor and bond counsel. The specific services they each provide are detailed in Attachments 1 and 2 (excerpts from current service agreements), summarized as follows: 1. On-going advice and assistance on the best approach in meeting the City's capital financing needs. This assistance is particularly beneficial to the.City in preparing early assessments of our financing options. 2. Specific assistance on a case-by-case basis for project financings. These require specific marketing and technical skills (financial advisor) and legal advice (bond counsel) that cannot reasonably be provided by staff. As reflected above, an essential part of these services is to provide us with ongoing advice. This is especially important, since it can take several years between when a candidate project is fust proposed for bond financing, and when we are ready to actually issue bonds. For this reason, it is important to develop long-term (but not indefinite) relationships with them. As discussed below, our current agreements for these services will expire in November 2003. Due to the status of several projects, most notably the Prado Road interchange, Palm-Morro parking/office building and Airport/Margarita Area Specific Plans, we recommend amending our current agreements with them to extend the term for another two years. Background Based on a competitive, request for proposal (RFP) process, in November 1997 the Council approved multi-year agreements with both Fieldman Rolapp for financial advisor services, and with Jones Hall for bond counsel services. The initial term of both agreements was for three years, at which time upon mutual agreement, the contract could be extended by the City i Renewal of Agreements for Financial Advisor and Bond Counsel Services Page 2 Administrative Officer (CAO) for another three years. The CAO subsequently approved this extension, and as such, both agreements expire on November 4, 2003. Extending the Term of the Agreements We recommend amending the current agreements to extend their term by another two years in order to allow for continued continuity on several projects, where significant evaluation and analysis is already underway, including: 1. Prado Road interchange financing (most likely formation of a Mello-Roos district). 2. Palm-Morro parking/office building (most likely issuance of lease-revenue bonds). 3. Airport/Margarita area infrastructure financing (several options are currently under consideration). 4. Refinancings of two current bond issues: 1994 and 1996 lease revenue bonds (while the analysis is still underway, the potential exists for significant debt service savings in both the General Fund and Parking Fund). In short, given the "mid-stream" status of these projects, we believe that maintaining continuity is important. On the other hand, these relationships should not be indefinite: they should be subject to periodic open competition by other qualified professionals. As such, we recommend issuing RFP's at the end of the extended term (November 2005). FISCAL IMPACT There are no direct fiscal impacts to amending these agreements: compensation is contingent on the completion of a debt issuance and is payable solely from the proceeds of the issuance. Only the term of the agreements will be extended: the current compensation structure and all other conditions will remain in place. The following summarizes the compensation structure for general obligation bonds, lease revenue bonds, certificates of participation or refinancings: Fieldman Rolapp Jones Hall Par Value of Issue Financial Advisor Bond Counsel $3,000,000 or Less $19,500 $25,000 $3,000,001 to$10,000,000 $23,500 $37,500 $10,000,001 to$15,000,000 $26,000 $43,750 $15,000;001 to$20,000,000 $28,500 $50,000 $20,000,001 to$25,000,000 $31,000 $56,250 ATTACHMENTS 1. Summary of financial advisor services 2. Summary of bond counsel services 3. Agreement amendment with Fieldman Rolapp for financial advisor services 4. Agreement Amendment with Jones Hall for bond counsel services G:Financial Advisor and Bond Counsel Agreements/Agreement Renewals,2003/Council Agenda Report Attachment 1 Financial Advisor A. Planning and Development Services 1. Providing advice to the City on an ongoing basis regarding our capital financing needs. 2. Providing research and advice on aspects of tax exemption and arbitrage in cooperation with the City's Legal Counsel and Bond Counsel as well as assistance in obtaining Internal Revenue Service rulings as deemed necessary. 3. Preparing financing plans and assisting in the preparation and review of preliminary feasibility studies in cooperation with City officials and administrative staff, bond attorneys, accountants, architects and engineers as requested by the City. These studies outline the project costs, funding alternatives and sources,existing debt;future financing,and cash flow considerations. 4. Analyzing the financing to determine methods of strengthening its marketability and to recommend the best method of marketing consistent with current economic and market conditions and increasingly stringent rating agency criteria. 5. Reviewing City plans for all financings during the calendar year to determine whether the financing will be bank eligible under the $10 million small issue exemption and whether the City will be exempt from arbitrage rebate requirements under the$5 million annual volume exemption. 6. Performing a comprehensive analysis to determine the best possible plan of finance, including a test to determine its marketability as well as assistance in determining competitive vs. negotiated sale of bonds or notes. 7. Consulting with established rating agencies regarding the proposed financing; assisting the City in obtaining the most favorable rating possible; and providing assistance and recommendations regarding the selection of registrar/paying agent agencies. 8. Acting as liaison with Bond Counsel and coordinating with other individuals providing information in connection with the proposed financing. 9. Preparing a timetable of events for all concerned leading to the sale and delivery of an offering. 10. Providing general assistance and advice to the City on plans and methods of financing its capital improvement plans and cash flow needs. 11. Attending all meetings requested by City staff to discuss the financing of the project or at which official action will be taken by the City Council on the debt financing. B. Marketing Services for Competitive Issues 1. Advising on the appropriate terms and conditions of the sale, such as maturity scheduling and other requirements (discount, par; premium,net interest cost,true interest costs, etc.). In conjunction with the above, consulting with the City and advising Bond Counsel concerning necessary covenants, and advising on advantageous features such as panty provisions, reserve requirements, sinking fund payments,redemption provisions,etc. 2. Advising on the timing of the bond sale, taking into consideration such factors as changing economic conditions,current and projected market trends and convenience to the City. �s—_3 Attachment.l Financial A. 3. Coordinating with Bond Counsel regarding the preparation of amendments and distribution of the necessary contracts, authorizing resolutions and other documents involved in the sale of bonds or other methods of financing. 4. Assisting in publicizing the issue in advance with an Official Statement, Notice of Sale, Bid Forms and such other means necessary and advisable to develop nationwide public and institutional interest. 5. Assisting the City in meeting full disclosure requirements and conforming to suggested guidelines when preparing the Official Statement. 6. Distributing of the Official Statement to potential purchasers of the City's securities across the nation; directly contacting those lead underwriters most likely to be syndicate managers; and maximizing efforts to market the City's debt issuance most effectively. 7. Explaining the issue to potential investors by developing a comprehensive list of potential purchasers of the bonds, ensuring that each potential purchaser receives copies of all relevant financial documents,and providing information about the issue. 8. Advertising the bond.sale in nationally prominent financial publications in addition to coordinating local publication requirements. 9. Attending the bid opening to assist with the evaluation of bids, and recommending the most favorable bid for award. C. Advisory Services for Negotiated Sales 1. Advising on the appropriate terms and conditions of the sale, such as maturity scheduling and other requirements (discount,par,premium,net interest cost,true interest costs, etc.). In conjunction with the above, consulting with the City and advising Bond Counsel concerning necessary covenants, and advising on advantageous features such as parity provisions,reserve requirements, sinking fund payments,redemption provisions,etc. 2. Advising on the timing of the bond sale, taking into consideration such factors as changing economic conditions,current and projected market trends and convenience to the City. 3. Coordinating with Bond Counsel regarding the preparation of amendments and distribution of the necessary contracts, authorizing resolutions and other documents involved in the sale of bonds or other methods of financing. 4. Assisting in publicizing the issue in advance with an Official Statement, Notice of Sale, Bid Forms and such other means necessary and advisable to develop nationwide public and institutional interest. 5. Assisting the City in meeting full disclosure requirements and conforming to suggested guidelines when preparing the Official Statement. 6. Advising the City as to the appropriateness of the pricing being proposed by the negotiating underwriter, including interest rate(s), underwriting spread, level of discount, distribution of orders, allocation of spread and the like. es-y Attachment 1 Anancial Advisor 7. Assisting in selection of co-managers, and syndicated members and establishments of order priorities according to MSRB Rule G-11. D. Bond Closing Services 1. Directing, coordinating and supervising bond-closing details including proofing bond printing, registration and delivery in the shortest possible time. 2. Furnishing a prompt, complete reinvestment analysis so that top earnings will result from investing bond proceeds in addition to assisting City staff and the architect/engineer in the drawdown of any funds held in escrow accounts. 3. Directing, coordinating and supervising the organization of the transcript and provision of bond and interest records to the City showing required.semi-annual payments and other useful information. 4. Soliciting bids on investment of idle funds,if necessary. E. Final Work Products for Each Financing 1. Sale analysis. 2. Offering statement. 3. Two bound volumes of bond issue proceedings and closing documents (if not furnished by bond counsel). 4. Other analyses, including but not limited to an analysis of funding alternatives, cash flow projections, and materials necessary for financial planning and bond sale purposes. i Attachment 2 • • Counsel A. Providing ongoing legal advice to the City regarding our capital financing needs. B. Examining the applicable law relating to the financing to be accomplished from the proceeds of the financing (Bonds). C. Preparing all legal proceedings deemed necessary or advisable for the authorization and delivery of the Bonds and related documentation, including but not limited to preparing: 1. Any necessary site lease, lease agreement, trust agreement and assignment agreement (collectively, the "Financing Agreements"). 2. All resolutions adopting and authorizing the execution of the Financing Agreements and the execution, sale and delivery of the Bonds. 3. Necessary notices of the sale of the Bonds required in connection with any competitive sale thereof. 4. All necessary California Debt Advisory Commission filings and other reports and documents required to be filed by the City in connection with the financing of the project. 5. All documentation initially required to organize any authority required to be formed in connection with the financing. 6. All certification, deeds, requisitions, receipts and other documents required in connection with the delivery of the Bonds to the original purchaser thereof. 7. All other proceedings of the City incidental to or in connection with the issuance, sale and delivery of the Bonds. D. Attending all meetings requested by City staff to discuss the financing of the project or at which official action will be taken by the City Council on the debt financing. E. Applying to the Internal Revenue Service for any rulings deemed necessary by bond counsel (but only following consultation with and approval by the City) to assure tax-exempt status of the interest represented by the Bonds. F. Advising the City as to the need to register the Bonds under applicable federal securities laws or to obtain a permit to deliver the Bonds under applicable State of California securities laws, or to obtain no-action letters or similar determinations from the Securities Exchange Commission or California Corporations Commission. G. Examining any Official Statement or other offering document prepared by an underwriter or financial advisor selected by the City, but only as to the sufficient description therein of the Bonds and the financing documents. Bond counsel has no responsibility to undertake any independent investigation with respect to other matters described in such official statement or offering document. e G Attachment 2 • • Counsel H. Subject to the completion of proceedings to the satisfaction of bond counsel, providing a legal opinion approving the validity of the Financing Agreements and the execution and delivery of the Bonds, and stating that interest represented by the Bonds is exempt from federal and State of California personal income taxation. Such opinion will be addressed to the City but will inure to the benefit of the owners of the Bonds, and bond counsel may execute letters to other interested parties entitling such parties to rely upon such opinion. In addition, subject to the completion of proceedings to the satisfaction of bond counsel, they shall provide such additional legal opinions to the City, the original purchaser of the Bonds and other interested parties as shall be requested of and deemed appropriate by bond counsel. Any opinion delivered by bond counsel in connection with the financing of the project may be subject to such qualifications as may be customary or required by applicable federal or State of California law. I. Advising the City concerning the Financing Agreements, the Bonds and any resolutions, certificates, agreements and other documents relating to the authorization and delivery of the Bonds at any time following original delivery of the Bonds. J. Providing such other services as are customarily performed by special legal counsel on similar tax-exempt financings. C'S"-7 Attachment 3 AMENDMENT TO AGREEMENT THIS AMENDMENT TO AGREEMENT is made and entered in the City of San Luis Obispo on October 21, 2003, by and between the CITY OF SAN LUIS OBISPO, a municipal corporation, herein after referred to as City,and FIELDMAN ROLAPP&ASSOCIATES,hereinafter referred to as Financial Advisor. WITNESSETH: WHEREAS, on November 4, 1997, the City entered into an Agreement with Financial Advisor for financial advisor services per Specification No.98-71;and WHEREAS,under the terms of this Agreement,it will expire on November 4,2003;and WHEREAS, the City desires to extend the term of the Agreement for two years in order to maintain continuity in the evaluation and analysis of several projects already underway, including the Prado Road interchange, Palm-Morro parking/office building, Airport/Margarita area infrastructure financing plans and possible refinancing of the 1994 and 1999 lease revenue bonds. NOW THEREFORE, in consideration of their mutual promises, obligations and covenants hereinafter contained,the parties hereto agree as follows: 1. The term of the Agreement is hereby extended by two years to November 4,2005. 2. All other terms and conditions of the Agreement remain in full force and effect. IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed the day and year first written above. ATTEST: CITY OF SAN LUIS OBISPO By: City Clerk Mayor APPROVED AS TO FORM: FINANCIAL ADVISOR By: Cit mey ' 1 1 Attachment 4 AMENDMENT TO AGREEMENT THIS AMENDMENT TO AGREEMENT is made and entered in the City of San Luis Obispo on October 21, 2003, by and between the CITY OF SAN LUIS OBISPO, a municipal corporation, herein after referred to as City,and JONES HALL,hereinafter referred to as Bond Counsel. WITNESSETH:. WHEREAS, on November 4, 1997, the City entered into an Agreement with Bond Counsel for Bond Counsel services per Specification No.98-72;and WHEREAS,under the terms of this Agreement;it will expire on November 4,2003;and WHEREAS, the City desires to extend the term of the Agreement for two years in order to maintain continuity in the evaluation and analysis of several projects already underway, including the Prado Road interchange, Palm-Morro parking/office building, Airport/Margarita area infrastructure financing plans and possible refinancing of the 1994 and 1999 lease revenue bonds. NOW THEREFORE, in consideration of their mutual promises, obligations and covenants hereinafter contained,the parties hereto agree as follows: 1. The term of the Agreement is hereby extended by two years to November 4,2005. 2. All other terms and conditions of the Agreement remain in full force and effect. IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed the day and year first written above. ATTEST: CITY OF SAN LUIS OBISPO By:. City Clerk Mayor APPROVED AS TO FORM: BOND COUNSEL By: Ci A mey C� � 1