Loading...
Item 8B~.. CITY OF ATLANTIC BEACH ~" CITY COMMISSION MEETING STAFF REPORT AGENDA ITEM #8B APRIL 12, 2004 AGENDA ITEM: Contract with the City's Financial Advisors Dunlap and Associates, for a Proposed Issuance of Utilities System Revenue Refunding Bonds, Series 2004 DATE: Apri15, 2004 SUBMITTED BY: Nelson Van Liere, Finance Director BACKGROUND: Due to current market conditions, the prospect of refinancing the City's Utility Revenue Bonds, Series 1996 has become attractive. It is in the best interest of the City to prepare the necessary documents in order to enable us to move quickly when and if interest rates are low enough to achieve a worthwhile savings. The Government Finance Officer's Association recommends that a refinancing is worthwhile when at least a 3% savings can be achieved. Figures run on March 16, 2004 revealed that a 4.66% present value savings could be attainable. Figures run on Apri15, 2004 reveal a savings of just 1.725%. The volatility of the market means that the City should be ready to sell bonds as soon as the rates meet our criteria. It is our intent to enter into an agreement with our Financial Advisor, Craig Dunlap of Dunlap and Associates, Inc. He is requesting $1.00 per $1,000 of bonds issued and a minimum fee of $17,500 plus no more than $1,000 in incidental expenses. This fee is contingent on the refunding taking place and is to be paid from the proceeds. If the issue does not take place then the only costs the City would have are those for incidentals. The contract attached is a draft outlining the typical services to be provided. The city manager will, if authorized, negotiate a final version and authorize the financial advisor to proceed with the necessary refunding process. Dunlap & Associates was the financial advisor for the City with our last refunding issue and has since been monitoring ~. AGENDA ITEM #8B APRIL 12, 2004 our utility revenue bonds for the optimal time to refund them. The services that Dunlap and Associates are to perform are included on the attached contract. RECOMMENDATION: To authorize the City Manager to work out the minor details and sign an agreement with Dunlap & Associates for financial services in conjunction with the proposed issuance of refunding utility revenue bonds ATTACHMENTS: Agreement with Dunlap and Associates, Inc. for Financial Consulting Services Y CITY MANAGER: REVIEWED B _~~ AGENDA ITEM #8B APRIL 12, 2004 AGREEMENT WITH DUNLAP ~ ASSOCIATES, INC. FOR FINANCIAL CONSULTING SERVICES THIS AGREEMENT, entered into this day of , 2004, by and between the City of Atlantic Beach, Florida, hereinafter referred to as "Client", and Dunlap & ~,,, Associates, Inc., hereinafter referred to as "Financial Advisor". WHEREAS, the Client desires assistance in providing financial consulting in relation to issuance of utilities system revenue refunding bonds to refund the Series 1996 Bonds and other debt ,~„ related issues and to advise in other areas of financial and debt planning and management. WHEREAS, the Financial Advisor is experienced and qualified in providing said services under the terms and conditions hereinafter set forth: "" NOW, THEREFORE, the Client hereby retains the Financial Advisor to provide financial consulting services for water and sewer as well as for general obligation, capital improvement, tax increment, community redevelopment and other financing requirements for the capital ~. improvement plan, as well as related financial management matters, and in consideration of the covenants and conditions hereinafter contained, the parties hereto agree as follows: 1. SERVICES TO BE PERFORMED BY FINANCIAL ADVISOR A. Debt Issue Develoament and Sales Services. The Financial Advisor shall perform the following services for a debt offering (bond issue) when authorized by the Client. 1. Planning and Development Phase a. Research and advise on aspects of tax exemption and arbitrage in ~,,, cooperation with the Client's legal counsel and bond counsel. Assist in obtaining Internal Revenue Service rulings, if necessary. b. If necessary, assist in the preparation and analysis of feasibility studies in ~" cooperation with Client's officials and administrative staff, bond attorneys, accountants, architects, engineers and other professionals as requested by the Client. c. Carefully analyze the financing to determine the best methods of strengthening its marketability consistent with current economic and capital market conditions and increasingly stringent rating agency criteria. This may involve the use of municipal bond insurance, surety bonds, letters of credit, underlying ratings, rating upgrades or other credit enhancement devices. A more thorough discussion of the Financial Advisor's credit enhancement services is presented later in this section. d. Perform a comprehensive analysis to determine the best possible plan of finance. Each bond issue will be analyzed on its merits, including a market """' test to determine its marketability. Assist in determination of method of sale. Coordinate selection of an underwriter, if a negotiated sale is selected. Page I AGENDA ITEM #8B APRIL 12, 2004 e. Consult with the rating agencies, Moody's, Standard & Poor's and/or Fitch Investors Service with regard to the proposed financing and assist in obtaining the most favorable credit rating possible. Prepare Client thoroughly for all credit rating presentations and participate in those meetings. f. Provide assistance and recommendations with the selection of ancillary service providers such as underwriters, registrar, trustee and printer. g. Act as liaison with bond counsel and coordinate other professionals providing information in connection with the proposed financing. h. Prepare a timetable of events for all concerned leading to the successful sale and delivery of an offering. i. Testify at validation hearings, as requested. 2. Marketing Phase a. Advise on the appropriate terms and conditions of the sale, including maturity schedule, underwriter discount, redemption provisions, interest rate bidding requirements and basis for award. b. Advise on the timing of the bond sale, taking into consideration such factors as changing economic conditions, current and projected market trends and specific requirements to the Client. c. Coordinate with bond counsel the preparation of authorizing ordinances and resolutions and other documents involved in the sale of bonds or other methods of financing. The Financial Advisor will also assist 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. d. Assist the Client in meeting full disclosure requirements and conforming to suggested guidelines when preparing the Official Statement either as an advisor or principal author. e. Distribute the Official Statement to potential purchasers of the Client's securities. Directly contact those lead undewriters most likely to be ~,,, syndicate managers. Maximize efforts to market the Client's debt issuance most effectively. f. Conduct informational meetings with the investment community, including *• investment bankers (dealers and dealer banks) and institutional investors (banks, bank holding companies, and insurance companies) in New York and elsewhere, if necessary, to establish bidding interest on this offering. ~. g. If the financing is sold competitively, advertise the bond sale in nationally prominent financial publications, in addition to coordinating local publication requirements. Page 2 t~ AGENDA ITEM #8B APRIL 12, 2004 h. For competitively sold bond issues, verify the bid opening to assist with the verification and evaluation of bids and recommend the most favorable bid for award. 3. Bond Closing Phase a. Direct bond closing details, including coordination with bond counsel, printer, underwriter and insurance companies to promptly execute the closing of the financing. b. Furnish reinvestment analysis to maximize earnings from investing bond proceeds. Assisting staff and the architect/engineer in matching construction draw-down of funds with investment contracts: c. Direct, coordinate and supervise preparation of the transcript and provide the Client with .bond and interest debt service schedules showing required semi-annual payments and other information relevant to the completed financing. d. Solicit bids on investment of idle funds, if requested. B. General Services 1. Facilitate the Client on any required bond and loan coverage tests, anti-dilution test as required by loan documents or as requested by rating agencies. 2. In addition, the Financial Advisor will attend periodic meetings as requested by Client for items that result in a financing. C. Work Products. The Financial Advisor or Disclosure Counsel shall provide the following work products for each competitive and negotiated debt offering. 1. Preliminary Official Statement 2. Final Official Statement 3. Official Notice of Bond Sale (Competitively Sold Issues) 4. Estimated Timetable 5. Rating Agency Presentation Outlines 6. Such other analyses, cash flow projections and materials necessary for financial planning and bond sale purposes. 7. Bond refinancing sensitivity analyses. The Financial Advisor shall also provide the following work products outside the scope of competitive and negotiated debt offerings. D. Special Services 1. Assist the Client in updating its investment and debt policies in accordance with State statutes, bond resolutions, rating agencies' criteria and the Client's particular needs. 2. Provide, if requested, quarterly performance evaluation for each investment portfolio to assist the Client in monitoring its investment performance against appropriate indices. """ Page 3 ~* ~. AGENDA ITEM #8B APRIL 12, 2004 3. Serve as Agent in bidding of any interest rate hedges, including interest rate swaps. 4. Assist in the selection of ongoing disclosure agents. 5. Assist the Client in meeting arbitrage regulations, including preparation of arbitrage rebate calculations. 6. Other consulting services related to financial and institutional strengthening as deemed appropriate by the Client and Financial Advisor. Il. FEES FOR SERVICES PERFORMED A. Fees for all services: For the performance of services in Sections I.A., I.B. and I.C., the Financial Advisor shall be compensated on the basis of the fee schedule shown in Appendix A. 1. Printing Costs. The fee schedule in Appendix A does not include printing of Official Statements and bond certificates. 2. Out-of-Pocket Expenses. The fee schedule in Appendix A does cover miscellaneous issuance costs and financial advisor out-of-pocket expenses related to bond issues. B. Payment Due 1. The Financial Advisor's fee and any reimbursement for out-of pocket issuance costs shall be due and payable 30 days after receipt by the Client of the invoice. C. Negotiation of Fee. Any specific arrangements regarding .fees not covered by this agreement may be negotiated by the Client and Financial Advisor. Ill. ASSIGNMENT OF FINANCIAL ADVISOR PERSONNEL A. The services to be provided by the Financial Advisor shall be provided by J. Craig ~• Dunlap, President and Sylvia S. Dunlap, Senior Vice President of Dunlap & Associates, Inc. and will be assisted by Pam Gilleland, who may, however, ask other financial advisor personnel employed by the Client to assist them in the performance of the services. B. Changes in Staff. The Financial Advisor will advise the Client not less than thirty (30) days in advance of any proposed changes in the Financial Advisor's staff assignment to enable the Client opportunity to discuss such proposed changes with the Financial Advisor. The Financial Advisor shalt agree to assign staff satisfactory to the Client. In the event that after discussion of such proposed changes in staff, the Client determines that the changes are not acceptable, the agreement may be terminated by thirty (30) days written notice by the Client. ~"' Page 4 IV, INDEMNITY AGENDA ITEM #8B APRIL 12, 2004 Financial Advisor agrees to defend, indemnity, save and hold harmless the Client, its officers, agents and employees from any claim, demand, suit, loss, cost or expense for any damages which may be asserted, claimed or recovered against or from Client, its officers, agents, or employees by reason of any damage to property or personal injury, including death and which damage, injury or death arises out of or is incidental to or in any way connected with Financial Advisor's performance of services. This indemnification includes, but is not limited to, the performance of this Agreement by Financial Advisor or any act or omission of Financial Advisor, their agents, servants, contractors, patrons, guests or invitees and includes any costs, attorneys' fees, expenses and liabilities incurred in the defense of any such claims or the investigation thereof. V. NOTICES Any notices required to be given by either party to the other shall be provided to the following address: City of Atlantic Beach, Florida Dunlap & Associates, Inc. Director of Finance 2898 Wild Ginger Court ~ 800 Seminole Road Winter Park, FL 32792 Atlantic Beach, FL 32233-5445 VI. TERM OF AGREEMENT ~,,, This agreement shall be ongoing commencing on the date of its execution. Modification shall be by mutual consent and termination shall be sixty (60) day written notice by either party. The Client shall not be obligated to pay for any services provided by Financial Advisor after Financial Advisor has received notice of termination. The Client's performance and obligation to pay under this agreement is contingent upon an annual appropriation by the City Council. ~„ During the term of this agreement, the Client may terminate this agreement for cause after first giving the Financial Advisor (30) days notice of default and opportunity to cure the default within the thirty day period. In the event the acts constituting default are a violation of law, the Financial Advisor will be subject to immediate termination of agreement. Vll. OTHER TERMS AND CONDITIONS The Financial Advisor will provide a certificate of insurance for a minimum of $1,000,000 professional liability coverage, and the Client shall be additional named insured. This agreement shall be governed by the laws of the State of Florida. The Financial Advisor agrees to follow all Federal, State and local Laws including, but not limited to, Public Records Laws. It is agreed the Financial Advisor presently has no interest, and shall not acquire any interest, direct or indirect, which would conflict in any manner or degree with the ~"' Page 5 AGENDA ITEM #8B APRIL 12, 2004 performance of the Financial Advisor's services under this agreement. It is further agreed that in the performance of this agreement, the Financial Advisor shall employ no person having any such interest. IN WITNESS WHEREOF, the parties have signed this contract as of the day and the year above written. THE CITY OF ATLANTIC BEACH, FLORIDA DUNLAP 8~ ASSOCIATES, INC. By: By: City Manager President By: By: City Clerk Senior Vice President Page 6 AGENDA ITEM #8B APRIL 12, 2004 APPENDIX A FEE SCHEDULE 1. Upon completion of a bond financing, a bond fee payable to the Financial Advisor would be as follows: $1.00/$1, 000 A minimum fee of $17,500 would be charged for each bond financing; a maximum fee of $10,000 for any bank loans. This fee schedule would apply to all types of financing arrangements sold at either competitive or negotiated sale, based upon our proposal to provide a full range of consulting services under all financing scenarios. 3. Reimbursable expenses -Out-of-pocket expenses for communications, Federal Express, computer and copying will be billed at cost; however, these expenses will not exceed $1,000 in any fiscal year. This amount excludes mileage within Florida and travel time. This limitation does not apply. to bond related out-of-state travel. Costs associated with out-of-state travel will be billed additionally. • For investment services, the Financial Advisor will arrange for the competitive bidding of bond proceeds and will be compensated by the successful bidder in an amount consistent with Federal tax regulations. • The present value of 5 basis points per year on the notional amount for the average life of the swap will apply for any interest rate hedging products, including interest rate swaps in our role as Agent in these transactions. • Quarterly Investment Performance. Evaluation Reports will be provided at 10 basis points per year on the outstanding balance of the portfolio payable quarterly in arrears. • .For escrow restructurings and any additional services, the fees will be negotiated on an hourly basis or on a case by case basis.