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HomeMy WebLinkAboutContracts & Agreements_164-2008AGREEMENT TO FURNISH PROFESSIONAL SERVICES This agreement for professional services ("Agreement") is made and entered into this 7th day of October, 2008 ("Effective Date"), by and between the City of Redlands, a municipal corporation ("City") and Fieldman, Rolapp & Associates ("Consultant") City and Consultant are sometimes individually referred to herein as a "Party" and, together, as the "Parties." follows In consideration of the mutual promises contained herein, City and Consultant agree as ARTICLE 1 - ENGAGEMENT OF CONSULTANT 1 1 City hereby engages Consultant as a financial advisor in connection with the development and implementation of a strategy to finance mayor capital facilities for the City, specifically Utility Water Enterprises within the City (the "Services") The specific Services which Consultant shall perform are more particularly described in Exhibit "A," entitled "Proposed Approach," which is attached hereto and incorporated herein by this reference 1 2 The Services shall be performed by Consultant in a professional manner, and Consultant represents that it has the skill and the professional expertise necessary to provide the Services to City at a level of competency presently maintained by other practicing professional consultants in the industry providing like and similar types of services 1 3 Consultant shall comply with all applicable Federal, State and local laws and regulations in the performance of its obligations under this Agreement including, but not limited to, the Americans with Disabilities Act and the Fair Employment and Housing Act ARTICLE 2 - RESPONSIBILITIES OF CITY 2 1 City shall make available to Consultant information in its possession that may assist Consultant in performing the Services ARTICLE 3 - PAYMENT AND NOTICE 3 1 City shall compensate Consultant for Phase I of the Services on a time and material basis and in accordance with the rates identified in Exhibit "B" which is attached hereto and incorporated herein by this reference, and up to an amount not to exceed the sum of Thirty Thousand Dollars ($30,000) City shall compensate consultant for Phase II of the Services in accordance with the schedule of sales fees identified in Exhibit "B " 3 2 Payments by City to Consultant shall be made within thirty (30) days after receipt and approval by City of Consultant's invoice, by warrant payable to Consultant Invoices shall be sent to City on a monthly basis Consultant's invoices shall include a brief description of the Services performed, the dates the Services were performed, the number of hours spent and by whom, and a description of reimbursable expenses, if any 1 lcaldjmlAgreements\Fieldman Rolapp PSA 10 7 08 doc 1 10/9/2008 9 18 40 AM Expenses to be reimbursed include travel, lodging, subsistence, overnight courier, conference calls, and computer and fax transmission charges 3 3 All notices shall be given in writing by personal delivery or by mail Notices, sent by mail should be addressed as follows City Consultant Tina T Kundig Finance Director/City Treasurer City of Redlands PO Box 3005 Redlands, CA 92373 Robert A Porr Vice President Fieldman, Rolapp & Associates 19900 MacArthur Blvd , Suite 1100 Irvine, CA 92612 When so addressed, such notices shall be deemed given upon deposit in the United States Mail Changes may be made in the names and addresses of the person to who notices and payments are to be given by giving notice pursuant to this section ARTICLE 4 - INSURANCE AND INDEMNIFICATION 4 1 All insurance required by this Agreement shall be maintained by Consultant for the duration of its performance of the Services Consultant shall not perform any Services unless and until all required insurance listed below is obtained by Consultant Consultant shall provide City with certificates of insurance and endorsements evidencing such insurance prior to commencement of the Services 4 2 Workers' Compensation and Employer's Liability Consultant shall secure and maintain Workers' Compensation and Employer's Liability insurance throughout the duration of this Agreement in accordance with the laws of the State of California, with an insurance earner acceptable to City 4 3 Hold Harmless and Indemnification a Consultant shall defend, indemnify and hold harmless City and its elected officials, employees and agents from and against any and all claims, losses or liabihty, including attorney's fees, arising from injury or death to persons or damage to property occasioned by Consultant's and its officers', employees' and agents' sole negligent acts 01 sole negligent omissions in performing the Services 11ca\dim\Agreements\Fieldman Rolapp PSA 10-7 08 doc 2 10/9/2008 9 18 40 AM b City shall defend, indemnify and hold harmless Consultant and its officers, employees and agents from and against any and all claims, losses or liability, including attorney's fees, arising from injury or death to persons or damage to property occasioned by City and its elected officials, employees and agents sole negligent acts or sole negligent omissions 4 4 Assignment Consultant is expressly prohibited from assigning any of the Services without the express prior written consent of City In the event of agreement by the Parties to assign a portion of the Services, Consultant shall add the assignee as an additional insured and provide City with the insurance endorsements required by this Agreement prior to the performance of any Services by the assignee Assignment does not include printing or other customary reimbursable expenses that may be provided for in this Agreement 4 5 Comprehensive General Liability Insurance Consultant shall secure and maintain in force throughout the term of this Agreement comprehensive general liability insurance with carriers acceptable to City Minimum coverage of One Million Dollars ($1,000,000) per occurrence and Two Million Dollars ($2,000,000) aggregate for public liability, property damage and personal injury is required City shall be named as an additional insured Such insurance shall be pnmary and non-contributing to any insurance or self- insurance maintained by City 4 6 Professional Liability Insurance Consultant shall secure and maintain professional liability insurance throughout the term of this Agreement in the amount of One Million Dollars ($1,000,000) per claim made 4 7 Business Auto Liability Insurance Consultant shall have business auto liability coverage, with minimum limits of One Million Dollars ($1,000,000) per occurrence, combined single limit for bodily injury liability and property damage liability This coverage shall include all Consultant owned vehicles used in connection with Consultant's provision of the Services, hired and non -owned vehicles, and employee non- ownership vehicles Such insurance shall be pnmary and non-contributing to any insurance or self insurance maintained by City City shall be named as an additional insured ARTICLE 5 - CONFLICTS OF INTEREST 5 1 Consultant covenants and represents that it does not have any investment or interest in the real property which comprises the subject matter of this agreement and shall not acquire any interest, direct or indirect, in the said area or any other source of income, interest in real property or investment which would be affected in any manner or degree by the performance of Consultant's Services Consultant further covenants and represents that in the performance of its duties hereunder, no person having any such interest shall perform any Services under this Agreement 5 2 Consultant agrees it is not a designated employee within the meaning of the Political Reform Act because Consultant I lcaldjinlAgreesnents\Heldman Rolapp PSA 10-7 08 doc 3 10/9/2008 9 18 40 AM A Does not make or participate in (i) the making or any governmental decisions regarding approval of a rate, rule or regulation, or the adoption or enforcement of laws; (n) the issuance, denial, suspension or revocation of permits, licenses, applications, certifications, approvals, orders or similar authorizations or entitlements, (ni) authorizing City to enter into, modify or renew a contract, (iv) granting City approval to a contract that requires City approval and to which City is a party, or to the specifications for such a contract, (v) granting City approval to a plan, design, report, study or similar item, (vi) Adopting, or granting City approval of, policies, standards or guidelines for City or for any subdivision thereof B Does not serve in a staff capacity with City and in that capacity participate in making a governmental decision or otherwise perform the same or substantially all the same duties for City that would otherwise be performed by an individual holding a position specified in City's Conflict of Interest Code under Government Code section 87302. 5 3 In the event City officially determines that Consultant must disclose its financial interests by completing and filing a Fair Political Practices Commission Form 700, Statement of Economic Interests, Consultant shall file the subject Form 700 with the City Clerk's office pursuant to the written instructions provided by the Office of the City Clerk ARTICLE 6 - GENERAL CONSIDERATIONS 6 1 In the event any action is commenced to enforce or interpret any of the terms or conditions of this Agreement the prevailing Party shall, in addition to any costs and other relief, be entitled to the recovery of its reasonable attorneys' fees, including fees for use of in-house counsel by a Party 6 2 Consultant shall not assign any of the Services to be performed under this Agreement, except with the prior written approval of City and in strict compliance with the terms, provisions and conditions of this Agreement 6 3 All documents, records, drawings, designs, cost estimates, electronic data files, databases, and other documents developed by Consultant pursuant to this Agreement, and any copyright interest in such documents, shall become the property of City and shall be delivered to City upon completion of the Services, or upon the request of City Any reuse of such documents and any use of incomplete documents will be at City's sole risk I lcaldjmlAgreements\Fieldman Rolapp PSA 10 7-08 doc 4 10/9/2008 9 18 40 AM 6 4 Consultant is for all purposes an independent contractor Consultant shall supply all tools and instrumentalities required to perform the Services All personnel employed by Consultant are for its account only, and in no event shall Consultant or any personnel retained by it be deemed to have been employed by City or engaged by City for the account of, or on behalf of City 6 5 Unless earlier terminated, as provided for below, this Agreement shall terminate upon completion and acceptance of the Services by City 6 6 This Agreement may be terminated by either party, in its sole discretion and without cause, by providing thirty (30) business days' pnor written notice to the other party (delivered by certified mail, return receipt requested) of intent to terminate 6 7 If this Agreement is terminated by City, an adjustment to Consultant's compensation shall be made, but (1) no amount shall be allowed for anticipated profit or unperformed services, and (2) any payment due Consultant at the time of termination may be adjusted to the extent of any additional costs to City occasioned by any default by Consultant 6 8 Upon receipt of a termination notice, Consultant shall immediately discontinue all services affected, and within five (5) business days of the date of the termination notice, deliver or otherwise make available to City, copies (in both hard copy and electronic form, where applicable) of any data, design calculations, drawings, specifications, reports, estimates, summaries and such other information and materials as may have been accumulated by Consultant in performing the Services required by this Agreement Consultant shall be compensated on a pro -rata basis for work completed up until notice of termination 6 9 Consultant shall maintain books and accounts of all payroll costs and expenses related to the Services Such books shall be available at all reasonable times for examination by City at the office of Consultant 6 10 This Agreement, including the Exhibits incorporated herein by reference, represents the entire agreement and understanding between the Parties as to the matters contained herein, and any prior negotiations, wntten proposals or verbal agreements relating to such matters are superseded by this Agreement Any amendment to this Agreement shall be in writing, approved by City and signed by City and Consultant 6 11 This Agreement shall be governed by and construed in accordance with the laws of the State of California 6 12 The liability of Consultant (including officers, directors, employees, agents, affiliates, and parent companies) for damages resulting from a breach of Consultant's obligation to perform the Services shall be limited to the amount of fees paid pursuant to City in the calendar year in which the breach occurred 11ca\djmlAgreements\Heldman Rolapp PSA 10-7 08 doc 10/9/2008 9 18 40 AM 5 IN WITNESS WHEREOF, duly authorized representatives of the City and Consultant have signed in confirmation of this Agreement. CITY OF REDLANDS By. ATTEST. ie Poyzer ity Clerk FIELDMAN, ROLAPP & ASSOCIATES R s':.A Porr, •'�•'v� Vice President I IcaldymlAgreements\Fieldman Rolapp PSA 10-7 08 doc 10/7/2008 1 47 13 PM 6 EXHIBIT 'A' D Pr O1'05LD \;'I`p O LC 1 i Warr,.r Enterprise • Tht firm's Unique Strengths Fieldman, Rolapp & Associates is sufficiently large to possess the resources, financing experience and creativity to exceed the City's needs Nevertheless, we are small enough to ensure that our senior professionals are committed to personal service as an effective financing team member for the City While we are skilled in water and wastewater finance, our team members are well versed in other public financing areas We work with eorznplex revenue structures and intricate policy and rating issues in addition to providing transaction and investment advice and their respective execution This diversity of aur practice areas and our ability to elicit creative and practical applications is another feature that will benefit the City Financing Model We will develop a financial model of the City's Water Enterprise financial position, the model will depict revenues and expenses and calculate debt service coverage, cash flow and cash balances fhe initial model will be based upon the most recent audited financial statements of the City \'e will work closely with staff to develop reasonable assumptions for each revenue and expense Irne item With a working model of revenues and expenses we will then overlay the additional debt to finance the acquisition of the water rights and test rates, debt service coverage levels and cash balances The financing model will be updated as audited Financial statements are completed and any form of indebtedness is issued by the City We anticipate the model being done in Microsoft Excel Weighing the Impacts of using Cash versus Issuing Debt Our services would be focused on providing a recommendation to tilt_ City by weighing the anticipated cost of borrowing money to fund projects versus the anticipated rate of rtturn of cash on hand to fund those same projects Issue Lowest -Cost of Debt We will compare the use of fixed rate debt versus floating rate debt, and detail for staff the benefits and drawbacks of each Often floating rate debt offers the lowest cost of capital. We recognize that floating rate debt presents the City Water Enterprise with interest rate exposure Howeticr, we will explore with staff the amount of cash on hand and model its use and project future balances, based upon such we may be able to recommend the use of the Water Enterprise's liquid assets to insulate it from its varnable rate interest exposure • Transection Man,igerricrit A. Organize and Mobilize the Financing Pearl} We will coordinate an organizational meeting where all the critical partes will meet to discuss the City's goals Rultw_zad.s.ananagataaltannent&dgn We will review and comment on lines, insurance policies and other finance related material We will also review engineering studies, and other credit or operational material relevant to the City's financing We will provide the City with memoranda of other analysis relevant to the context B Formulate Financing Plan We will guide the City through the various factors to be examined to come to a decision on whether the bonds should be sold competitively or though negotiation Should the City choose to sell its bonds through negotiation, we will work in cooperation with the investment banking team to develop a financing structure including matunty schedules additional bonds test, redemption features and other covenants, etc We all request from the investment banking team a written marketing plan and review and comment on such The City will receive copies of both the financing and marketing plans We will provide the City with a term sheet detailing the critical terms of the bonds If the City prefers a competitive sale, we will formulate the financing and marketing plan by ourselves We will also develop and deliver to the City a written plan for the Investment of the bond proceeds If the City so chooses, we will prepare and distribute bid specifications for guaranteed investment contracts with respect to any of the bond funds C Preparation of Disclosure Documentation We will assist in the preparation of the Preliminary Official Statement ("POS") by reviewing and providing comments to the finance team We will arrange for and coordinate the printing and distribution of the POS to finance team members and potential bidders (in the case of a competitive sale), or investors (in the case of a negotiated sale) Further, if the sale of bonds is through a competitive process, we will prepare the notice of sale We will assist in revising to render a final Official Statement by reg sewing and providing comments to the finance team D Interface with the Rating Agencies and Municipal Bond Insurers The negative press regarding the bond insurance companies has resulted in investors placing an even greater emphasis on underlying ratings Each issuer and each transaction have their own set of facts, however, in today's market, credit ratings have become even more important The Standard & Poor's ("S&P") rating is important as bond insurers often putt. their Insurance bids based upon the S&P rating We noticed that the. City Water Enterprise is rated "A " from S&P We will take the lead in the preparation of the City's credit presentation, We will coordinate the presentation materials among all City presenters and coach presenters on their specific presentation We often recommend to clients that face to face meetings be held with tilt_ analysts tor each major bond issuance Our presentation will highlight our clients' or erall strong credit features, such as growth in assessed valuation improving cash positions, impros ing senior debt seri ice Leverage., and sound financial management and capital planning We also focus on presenrtng ind highlighting kLy credit benchmarks and financial ratios, based on our exptrience and knowledge of what criteria the ratings agencies typically assess Indeed, over the past 4 years, we have aggressively sought credit rating upgrades or new ratings (often from Fitch Ratings) for our clients Please see Table 2 below for the details of the. 5 rating upgrades and 9 new ratings we have helped our On going water and wastewater clients achieve ose.r this tame period. Additionally, Table 2 shows that many of our clients' credit ratings were affirmed despite the addition of significant new amounts of debt Table 2 Fielc mate, Relapp Ghent Western Municipal Water District Yeas 2002 Rating Context $40m new money Existing Ratings S&P Frtch none none Moostys none Rating Agency Strategy.. Rating Agency Actions , Now ..M Fitch Pursue Fitch rating only Eastern Municipal Water District 2003 Refinancing AA- none Al Add Fitch,eliminate split rating Moody's Upgrade to Aa3, New AA Fitch City of Concord (Wastewater Fund) 2004 313m new money none none none Pursue S&P rating only flew AA S&P Vallecrtos Water District 2005 $86m new money AA none I Add Fitch and not seek Aa2 i Moody's New AA Foch, S&P ,tffmled Rancho California Water District 2005 $70m new money AA- none Add Fitch and eliminate split Al rating New AA ; ,tch, others armed olivenhaln Municipal Water District 2008 Refinancing A none A2 Pursue S&P only for Upgrade S&P Upgrade to kr- positive outlook Azusa Light and Water 2008 354m new money AA- none A2 Seek to eliminate split rating S&P Upgrade to AA, Moody's affirmed Eastern Municipal Water District 2208 $180m new rnoney AA AA Aa3 Affirm existing ratings All ratings affirmed Central Coast Water Authority 2008 Refinancing none none. none Pursue Moody's Rating New A2 Moody's San Luis Obispo jWater Fund) 2008 $18m new money none none none Pursue S&P and Filch Ratings New A+ S&P and New AA- Fitch Elsinore Valley Municipal Water District 2007 $118m new money none A+ A2 Add S&P and upgrade Moody's Moody's Upgrade to Al, New AA S&P City of Concord (Wastewater Fund) 2007 $12m new money AA none none Arfirm S&P rating AA S&P affirmed San Diegutta Water District 2007 $20m new money A none none Pursue S&P upgrade S&P Upgrade to AA Santa Fe irrigation Dialrict 2007 520m new money none none none Pursue S&P rating New nA UP Olivenhain Municipal Water District 2007 Requested Review A+ none none Pursue S&P upgrade S&P Upgrade to AA Castatc Lake Water Agency 2008 Refinancing A+ none none Pursue S&P upgrade & New Fitch S&P Upgrade to AA, new Pitch AA - Eastern Municipal Water District 2008 $140m new money AA- AA Aa3 Pursue S&P upgrade S&P Upgrade to AA Elsinore Valley Municipal Water Distnct 2008 $60m Refinancing AA A+ A2 Pursue S&P upgrade S&P Upgrade to AA Rancho California Water District 2008 345m Refinancing AA AA Al Pursue S&P upgrade S&P Upgrade to AA The professionals assigned to the City worked on rhe fourteen issues listed in Table 2 We will request bids from 111 qualified municipal bond insurers and analyze bids to determine the most cost effective bid and the cost efficiency of municipal bond insurance versus selling the bonds without the insurance We will solicit competitive bids from "•kAA" rated farms that remain With the recent news regarding the potential negative impact to the bond insurers, we have proceeded with caution before recommending buying insurance In at least one case we recommended not purchasing a debt service reserve fund surety policy and in another we recomrnended dropping the lox est bidding insurer for rhe cover bid E. Sale of Bonds For a competitive sale we will tabulate the bids and confirm the gccuracy of the bids We will make n. recommendation to either refect all bids or accept the winning bid For a negotiated sale, we will prepare a list of contemporaneously sold transactions, similar in size, ranng and structure and compare the coupons and yields of such issues with the proposed pricing offered by the underwriter Coe will also provide comparisons of the proposed underwriter's discount with other strnilarly sold transactions On behalf of the Cit) wt. will take the lead to negotiating the pricing of the bonds and the ire:'et-writer's ccerpens it on !(e ' .111 recommend r'S ,he C ?tL whether or not "o pricing F Closing of Transaction, We will participate in the review of the applicable closing and financing documents and provide comments as needed G Post Closing e will always be available to confer with City staff regarding any matter and as directed by City staff we will confer with C it,- officials, members of the public or stakeholders E Innovim c F rn tracing Options Uvsttr Entt.rprise We might suggest the issuance of variable rate debt instead of fixed rated debt as a method of reducing interest expense The Interest rate exposure created by winable rate debt can be hedged by an issuer's vanable rate assets A sensible amount of variable rate debt is determined from the asset side of the balance sheet Exposure to interest rate fluctuations is minimized when variable-rate debt is equal to variable rate assets. Short-term rates were very advantageous from 2002 through most of 2005 and, et en despite 17 straight Federal Reserve rate increases topped out around 3 30-3 70% throughout 2006 and 2007 Interest rate. swaps have become fairly commonplace tools in. the municipal market, particularly for those issuers with sophisticated financial staffs We believe that swaps can be especially useful financial management tools for most enterprise services such as water, wastewater and electricity if the governing body and the staff have taken the desire to understand the structure of the swap, its place in the overall financial picture and the inherent risks The use of financial management tools serve two primary purposes (i) to provide a fixed-rate cost of debt that will likely provide savings compared with tax-exempt, fixed rates bonds of the same maturity and (int) to insulate an issuer from interest-rate exposure Insulanon from interest rate exposure can be accornphshed for simultaneously issued debt or for future floating rate debt issuance sts demonstrated by recent market activity, the swap market tends to be more efficient than the market for municipal bonds For example, recent market indicators provide this snapshot the interest rate for thirty year tax-exempt debt with the highest rating is 4.80% and the swap rate for a corresponduig matunty is 3 87% (a 0 93% differential) that equates to an annual savings of $93,000 on $10 million in debt We can act as both financial advisor 'Ind swap advisor to the District and we can procure swaps arrangements through either a negotiated or compennve process EXHIBIT `B' FEE PRC 7Pr .L OF FTEI Dif lN, ROL \PP & Ass( CT \.TES Water Enterprise Project I Tourlx het Schedule Hourly billing rates will apply to Phase One Planning, Modeling and Policy Development and Phase Three Other Services as Required We will invoice the City for work completed by us in these phases only if related obligations are not sold by December 1, 2009, to a not -to exceed amount of $30,000 HOUR[ Y FEES Effective Januaty 1, 2005 Executive Officer Principal Principal/Senior Vice President Vice President Assistant Vice President Senior Associate Associate $300 Per Hour $290 Per Hour $275 Per Hour $225 Per Hour $195 Per Hour $150 Per Hour $125 Per Hour Analyst $85 Per Hour Administrative Assistant $65 Per Hour Clerical $35 Per Hour fund Issu-ince and (iojnpcttttve Sale Fte' Financial Advisory Services performed related to transaction services, will be billed for at the amounts set forth below Transaction Size Negotiated Competitive Sale Fees Sale Fees ' $1 $20,000,001 $30,000,001 $50,000,001 $70,000,001 to $20,000,000 to $30,000,000 to $40,000,000 to $70,000,000 to $80,000,000 $34,750 $39,500 $44,500 $50,750 $57,750 $39,500 $44,500 $49,500 $55,750 $ 62,750 Payment of fees earned by consultant pursuant to this phase shall be contingent on, and payable at the closing of the debt issue(s) undertaken to finance the Project These fees generally apply to Phase II — Financing and / or Bond Issuance E'penses Expenses to be reimbursed include travel, lodging, subsistence, overnight courier, conference call, computer and fax transmission charges Additionally, a surcharge of 6% of the net hourly and bond issuance fee amount is added for recovery of costs such as telephone, postage, document reproduction and the Tike Travel will only be tmdertaken at the specific request of the City F ce Structure tor G..nnpetitivJ.ly Bidding an InvLsrmL n L r� iilcilt The fee for competitively bidding the selection of an investment agreement would be 5 basis points of par amount, or $3 000, whichever is greater