HomeMy WebLinkAbout09/06/2005, C5 - FINANCIAL ADVISOR AND BOND COUNSEL SERVICES council Mam4Du .9-6-2005
j aGEnaa Report N
CITY OF SAN LUIS OBIS 0 O
FROM: Bill Statler,Director of Finance&Information Technology
Carolyn Dominguez,Finance ManagerCtf
SUBJECT: FINANCIAL ADVISOR AND BOND COUNSEL.SERVICES
CAO RECOMMENDATION
1. Extend current agreements with the City's financial advisor (Fieldman Rolapp) and bond
counsel (Jones Hall)until the completion of the 919 Palm parking/office project financing.
2. Authorize the CAO to issue requests for proposal
s (RFP) for financial advisor and bond
counsel services upon completion of the 919 Palm parking/office project financing, and to
award contracts to the best overall proposers.
DISCUSSION
Background
There are two key functions in managing debt financings where the City needs expert advice due to
their complexity:
1. Financial Advisor. Develops the financing plan and terms to ensure the lowest possible cost
consistent with the City's project goals and markets the issue (whether through a competitive or
negotiated sale).
2. Bond Counsel Prepares the financing documents and assures that they meet extensive legal
requirements for tax-exempt issues.
For both services, it is in the City's best interest to establish an ongoing relationship, under which
advice is available at all times as needed. However, it is typical to compensate for both services on
a contingency basis from the proceeds from specific debt issuances, under an agreed upon fee
structure.
Agreement Extensions for 919 Palm Parking/Offices Project
In November 1997, the City awarded contracts to Fieldman Rolapp for financial advisor services
and to Jones Hall for bond counsel services. The agreements were extended by the Council for
another two years in November 2003. As such, the contracts for these services will expire in
November 2005. However, as key membersof our financing team, both firms have been deeply
involved with the anticipated debt financing for the 919 Palm parking/office project. Due to the
importance of continuity on this project, we recommend extending the agreements with both firms
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Financial Advisor and Bond Counsel Services Page 2
until the completion of the financing for this project (Attachments 1 and 2), which is likely to occur
in April 2006.
Issuance of RFP for New Agreements
After this debt financing is accomplished, we recommend issuing RFP's for these services, with a
term for each of three years (with an option to renew for another three years), and authorizing the
CAO to award the contracts to the best overall proposers. The workscope for each service is
provided in Attachments 3 and 4.
Contract Award Criteria. The contract award will not be based solely on price, although it will be
one of many factors that will be considered by the CAO in awarding the contracts as summarized
below:
1. Understanding of the work required by the City..
2. Quality,clarity and responsiveness of the proposal.
3. Demonstrated competence and professional qualifications necessary for successfully
performing the work required by the City.
4. Recent experience in successfully performing similar services.
5: Proposed approach in completing the work.
6. References.
7. Background and related experience of the specific individuals to be assigned to this work.
8. Proposed compensation.
Excellent Performance of Current Firms. It should be noted that we have been very satisfied with
the services provided to us by both Fieldman Rolapp and Jones Hall. And as discussed above, we
believe that it is important to establish long-term relationships with these key members of the City's
financing team. On the other hand, long-term does not mean forever, and while their services have
been outstanding, we should periodically seek formal proposals in ensuring that we continue to
receive quality professional services at the best competitive price. The expiration of the contract
terms (after the recommended extension for work in progress) provides an excellent opportunity to
do so.
FISCAL IMPACT
1. Agreement Extensions. There are no direct fiscal impacts to extending these agreements;
compensation is contingent on the completion of a project financing and is payable solely from
the proceeds of the issuance. Only the term of the agreements will be modified; the current
compensation structure and all other conditions will remain in place..
2. RFP Issuance and New Agreements. As discussed above, there is no direct fiscal impact in '
awarding contracts for these services, as compensation is contingent on the completion of a
project.financing and payment is made solely from the proceeds of the issuance.
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Financial Advisor and Bond Counsel Services Page 3
ALTERNATIVES
1. Do not extend the agreements and issue RFP's now. We could discontinue working with
our current financing team on the 919 Palm parking/office project and issue RFP's now,
resulting in the potential for change in our advisors "mid-stream." However, a significant
amount of research and assistance has already been provided by the current financial advisor
and Bond counsel on this project. Moreover, given the "mid-stream" status of this project, we
believe that maintaining continuity is extremely important for an efficient and timely financing.
2. Extend the current agreements for a longer term. Although.we are very satisfied with the
services provided by our current financial advisor and bond counsel, we do not recommend this
alternative. It is prudent for the City to periodically seek formal proposals for these services in
order to ensure competitive pricing and services. However, as noted above, both Fieldman
Rolapp and Jones Hall have provided outstanding services to the City, and we will invite them
to submit a proposal as part of the selection process.
ATTACHMENTS
1. Amendment to Agreement with Fieldman,Rolapp&Associates
2. Amendment to Agreement with Jones Hall
3. RFP workscope for financial advisor services
4. RFP workscope for bond counsel services
G:Financial Advisor and Bond Counsel/AExtension/Council Agenda Report 9.6.05
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Aftachment-A-Z.-
AMENDMENT TO AGREEMENT NO. 2
THIS AMENDMENT TO AGREEMENT is made and entered in the City of San Luis Obispo on
September 9, 2005, 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 Contractor.
WITNESSETH:
WHEREAS,on November 4, 1997 the City entered into an Agreement with Contractcir for financial advisor
services per Specification No.98-71;and on October 21,2003 extended that agreement for another two years;and
WHEREAS,under the terms of the extended Agreement it will expire on November 4,2005;and
WHEREAS, the City desires to further extend the term of the Agreement until the debt financing for the
919 Palm parkingtoffice project is complete.
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 until the debt financing of the 919 Palm
pgkingloffice project is complete.
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: CONTRACTOR
By:
Ci ly AtpWne
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_ Attachment
AMENDMENT TO AGREEMENT NO.2
THIS AMENDMENT TO AGREEMENT is made and entered in the City of San Luis Obispo on
September 9, 2005, 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 Contractor.
WITNESSETH:
WHEREAS, on November 4, 1997 the City entered into an Agreement with Contractor for bond counsel
services per Specification No.98-72;and on October 21,2003 extended that,agreement for another two years;and
WHEREAS,under the terms of the extended Agreement it will expire on November 4,2005;and
WHEREAS, the City desires to further extend the term of the Agreement until the debt financing for the
919 Palm parkingloffice project is complete.
NOW THEREFORE, in consideration of their mutual promises, obligations and covenants hereinafter
contained,the parties hereto agree as follows:
I. The term of the .Agreement is hereby extended until ,the debt financing of the 919 Palm
parking/office project is complete.
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: CONTRACTOR
- By -— -- -
L
Cityey
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Financial Advisor Services Attachment 3
DES-GRIPTION OF WORK
BACKGROUND
The City is requesting proposals to provide financial advisor services for three years, with an option to
renew for another three years.. Financings which are likely during the next three years include:
1. Public Safety Dispatch Center. Constructing a new dispatch center at Fire Station No. 1 will cost$2.9
million. Of this amount,$2.5 million will be debt financed in.2006.
2. Radio System Improvements. Replacing the City's radio system with a digital system will cost$4.1
million. Of this amount,$3.9 million will.be debt financed in 2006.
3. Palm-Nipomo Parking Structure.. Our 2005-07 Financial Plan projects$12 million for constructing a
parking structure to be funded through debt financing in 2009.
4. Water Treatment Plant Up
,grades. of improvements recommended in the Water Master
Plan are expected to cost$8.0 million. Of this amount, $6.2 million is projected to be debt financed in
2008.
5. Water Reclamation Facility Upgrade. The City has plans to debt finance $6.6 million of
infrastructure improvements in 2007.
FINANCIAL ADVISOR SERVICES
The financial advisor services requested include the following:
1. Planning and Development Services
a. Providing advice to the City on an ongoing basis regarding our capital financing needs.
b. 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.,
c. 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.
d. 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.
e. 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.
f. Performing a comprehensive analysis to determine the best possible plan of finance,in a test
to determine its marketability as well as assistance in determining competitive vs..negotiated.sale of
bonds or notes.
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Financial Advisor Services: Description of Work Attachment 3
g. 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.
h. Acting as liaison with Bond Counsel and coordinating with other individuals providing information
in connection with the proposed financing.
i. Preparing a timetable of events for all concerned leading to the sale and delivery of an offering.
j. Providing general assistance and advice to the City on plans and methods of financing its capital
improvement plans and cash flow needs.
k. 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.
1. Reviewing the City's fiscal plans and policies,and making recommendations as appropriate.
m. Other services as needed in effectively planning for debt issues.
2. Marketing Services for Competitive Issues
a. 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.
b. 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.
c. 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.
d. Preparing the Official Statement, if this service is not provided by Bond Counsel or Disclosure
Counsel.
e. 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.
f. Assisting the City in meeting full disclosure requirements and conforming to suggested guidelines.
when preparing the Official Statement.
g. Distributing 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.
h. 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.
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Financial Advisor Services: Description of Work Attachment:3
i. Advertising the bond sale in nationally prominent financial publications in addition to coordinating
local publication requirements..
j. Attending the bid opening to assist with the evaluation of bids, and recommending the most
favorable bid for award.
k. Other services as needed in effectively marketing competitive issues.
3. Advisory Services for Negotiated Sales
a. 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.
b. 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.
c. Coordinating with Bond Counsel regarding the preparation of amendments and distribution of the
necessarycontracts, authorizing resolutions and other documents involved in the sale of bonds or
other methods of financing.
d. Preparing the Official Statement, if this service is not provided by Bond Counsel, Disclosure
Counsel or the Underwriter.
e. 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.
f. Assisting the City in meeting full disclosure requirements and conforming to suggested guidelines
when preparing the Official Statement.
g. 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.
h. Assisting in selection of co-managers, and syndicated members and establishments of order
priorities according to MSRB Rule G41.
L Other services as needed in effectively managing negotiated sales.
4. Bond Closing Services
a. Directing, coordinating, and supervising bond closing details including proofing bond printing,
registration,and delivery in the shortest possible time.
b. 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 draw-down of any
funds held in escrow accounts.
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Financial Advisor Services: Description of Work Attachment 3
c. 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 info on.
d. Soliciting bids on investment of idle funds,if necessary.
e. Final work products relating to each financing,including but not limited to proposing the following:
f. Sale analysis.
g. Offering statement.
h. Two bound volumes of bond issue proceedings and closing docurrients (if not furnished by bond
counsel).
i. Other analyses, including but not limited to an analysis of funding alternatives, cash how
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projections,and materials necessary for financial planning and bond sale purposes,
The Financial advisor has no responsibility to advise the City with respect to legal requirements applicable
to the construction of I any project,including but not limited to compliance
with public bidding requirements,
payment of prevailing wages and other matters incident to the contract for such construction, which matters
shall be exclusively the responsibility of the City Attorney or other counsel to the City.
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Bond Counsel Services Attachment 4
DESCRIPTION OF • '
BACKGROUND
The City is requesting proposals to provide bond counsel services for the next three years,with an option to
renew for another three years. Financings that are likely during the next three years include:.
L. Public Safety Dispatch Center. Constructing a new dispatch center at Fire Station No. 1 will cost$2.9
million. Of this amount,$2.5 million will be debt financed in 2006.
2. Radio System Improvements. Replacing the City's radio system with a digital system will cost $4.1
million. Of this amount,$3.9 million will be debt financed in 2006.
3.. Palm-Nipomo Parldng Structure. Our 2005-07 Financial Plan projects$12 million for constructing a
parking structure to be funded through debt financing in 2009.
4. Water Treatment Plant Upgrades. Construction of improvements recommended in the Water.Master
Plan are expected to cost $8.0 million. Of this amount, $6.2 million is projected to be debt financed in
2008.
5. Water Reclamation Facility Upgrade. The City has plans to debt finance $6.6 million of
infrastructure improvements in 2007.
BOND COUNSEL SERVICES
The.bond counsel services include but are not limited to the following:
1. Providing ongoing legal advice to the City regarding our capital financing needs.
a. Examining the applicable law relating to the financing to be accomplished from the proceeds of the
financing(Bonds).
b. Preparing all legal proceedings deemed necessary or advisable by Attorneys for the authorization
and delivery of the Bonds and related documentation,including but not limited to preparing:
c. Any necessary site lease, lease agreement, trust agreement, assignment agreement and similar
financing documents and agreements(Financing Agreements).
d All resolutions adopting and authorizing the execution of the Financing Agreements and the
execution;sale and delivery of the Bonds.
e. Necessary notices of the sale of the Bonds required in connection with any competitive sale thereof.
f. 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.
g. All documentation initially required to organize any authority required to be formed in connection
with the financing.
h. All certification, deeds, requisitions, receipts and other documents required in connection with the
delivery of the Bonds to the original purchaser thereof.
Bond Counsel Services: Description of Work Attachment 4
is All other proceedings of the City incidental to or in connection with the issuance, sale and delivery
of the Bonds.
2. 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.
3. 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.
4. 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.
5. 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. In this case, Bond counsel has no responsibility to undertake any independent
investigation with respect to other matters described in such official statement or offering document.
6. Preparing the Official Statement, if this service is not provided by the Financial Advisor or separate
Disclosure Counsel.
7. 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.
8. 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..
9. Providing such other services as are customarily performed by special legal counsel on similar tax-
exempt financings.
Bond counsel has no responsibility to advise the City with respect to legal requirements applicable to the
construction of any project, including but not limited to compliance with public bidding requirements,
payment of prevailing wages and other matters incident to the contract for such construction,which matters
shall be exclusively the responsibility of the City Attorney or other counsel to the City.
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AMENDMENT TO AGREEMENT NO.2
THIS AMENDMENT TO AGREEMENT is made and entered in the City of San Luis Obispo on
September 9, 2005, 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 Contractor.
WITNESSETH:
WHEREAS, on November=4, 1997 the City entered into an Agreement with Contractor for financial
advisor services per Specification No. 98-71;and on October 21, 2003,extended that agreement for another two
years;and
WHEREAS,under the terms of the extended Agreement it will expire on November 4,2005;and
WHEREAS„the City desires to further extend the term of the Agreement until the debt financing for the
919 Palm parking/office project is complete.
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 until the debt financing of the 919 Palm
parking/office.project is complete.
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: CONTRACTOR
/--�—�—� —�-2 By:
Ci.iyA e
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