Item 14 - Approval of Agreement for Svs of Financial Advisor ~. AGENDA. REPO~dll ~a~ ~
O: Honorable Mayor and Members of the City Council
FROM: James L. Bowersox, City ManaX8~i;~
INITIATEDB¥: John D. Fitch, Assistant City Manager~}[~
Peggy A. Stewart, Director of AdministWative Servic se(~
DATE: April 4, 1995
SUBJECT: Approval of Agreement for Services of Financial Advisor
ABSTRACT
The City desires to engage the services of a financial advisor to assist in the
development of financing alternatives for a variety of projects. The attached report
approves entering into an agreement with Public Financial Management to provide
services to the City on bond sales, refunding of bond issues, and any related
activities.
ENWIRONMEN~rALREVIEW
This agenda item is not subject to CEQA review.
FISCAL IMPACT
Fees for services would be paid as part of the cost of issuance for bonds.
ADDITIONAL PUBLIC NOTIFICATIONAND CORRESPONDENCE
None
RECOMMENDATION
It is recommended that the City Council authorize entering into an agreement with
Public Financial Management Services for the provision of financial advisor services to
the City and authorize the City Manager to execute the document.
ACTION
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- AGENDA REPOR'.
CITY OF POWAY
This report is included on the Consent Calendar. There will be no separate discussion of the report prior to approval by the
City Council unless members of the Council staff or public request it to be removed from the Consent Calendar and
discussed separately, if you wish to have this report pulled for discussion, please fill out a slip indicating the report number
and give Jt to the City Cierk pdor to the beginning of the City Council meeting
TO: Honorable Mayor and Members of the City Council
FROM: James L. Bowersox, City Mana~
A
INITIATED BY: John D. Fitch, Assistant CityManagerC~¥ /w
Peggy A. Stewart, Director ofAdmi~ist~L~tive Service
DATE: April 4, 1995
SUBJECT: Approval of Agreement for Services of Financial Advisor
BACKGROUND
The City of Poway has issued a number of bond issues since incorporation. These
issues have been done utilizing the services of bond counsel and an investment
banker. As the City's bond transactions have become more sophisticated and
complicated, it is advisable to add the services of a financial advisor. Financial
advisor services would assist the City in overall financial planning in determining
the financial impacts of bonds, advising the City on the best way to structure a
bond issue, and assisting in the negotiation of underwriter fees.
FINDINGS
In November of 1994, the City issued a request for proposal for financial advisor
services, anticipating the issuance of bonds for the improvements to the Water
Treatment Plant, for construction of a Sheriff's substation, and restructuring of
the Poway Royal bond issue. Nine firms responded to that request for proposal. It
is recommended that the City enter into an agreement with Public Financial
Management Services, Inc. to provide the following financial advisor services to the
City:
· Financing the Sheriff's substation as a stand-alone financing: $20,000.
Should be done as a municipal lease: $10,000.
· Financing the Water Treatment Plant: $20,000 for a stand-alone financing and
$10,000 if the facility is financed through the Water Reuse Finance
Corporation. Any compensation due from Water Reuse for this transation would
be waived.
ACTION:
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Agenda Report
April 4, 1995
Page 2
· If both the Sheriff's substation and the water project are combined in a
single transaction, a joint fee of $40,000 would be charged.
· For the evaluation of options related to the Mello-Roos districts, an hourly
arrangement is proposed using the hourly rates in the proposal. The agreement
would be to cap that cost at $35,000. Any hourly fees paid will be fully
credited against a transaction fee of $35,000 should a financing result from
the analysis.
· For all transactions, reimbursement would be made for actual out-of-pocket
expenses related to travel, telephone, express mail, fax, and duplication. It
is expected that these expenses would not exceed $2,000 per transaction.
An additional area in which cities use financial advisor services is to explore
other opportunities to save money in debt service payments or to free up additional
funds from previous bond issues. One strategy proposed during the interview process
was the replacement of bond reserve funds with a surety policy, thereby freeing up
bond reserve monies to be used for capital construction purposes. The 1993 tax
allocation bond issue of $104 million currently has an $8.5 million reserve fund
requirement. An additional item added to PFM's scope of work is to pursue that
option for the City. For services related to the competitive selection of a debt
service reserve surety for existing bond issues, PFM would charge a flat fee of
$4,500.
For all of the services outlined above, fees are paid only if the financing is
completed, except as stated for the Mello-Roos districts.
ENVIRONMENTAL REVIEW
This agenda item is not subject to CEQA review.
FISCAL IMPACT
Fees for services would be paid as part of the cost of issuance for bonds.
ADDITIONAL PUBLIC NOTIFICATION AND CORRESPONDENCE
None
RECOMMENDATION
It is recommended that the City Council authorize entering into an agreement with
Public Financial Management Services for financial advisor services to the City and
authorize the City Manager to execute the document.
JDF:PAS:eg
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