HomeMy WebLinkAbout101-FA Agreement Authorization.pdf
SARATOGA CITY COUNCIL MEETING DATE: January 5, 2011 AGENDA ITEM: DEPARTMENT: Finance & Administrative Services CITY MANAGER: Dave Anderson PREPARED BY: Mary Furey DIRECTOR: Mary Furey
SUBJECT: Financial Advisor Services for refunding the City’s 2001 Series General Obligation Bond RECOMMENDED ACTION: Review report and authorize the City Manager to enter into an agreement
for professional financial advisor services between the City and Public Financial Management, LLC (PFM), for the refunding of the City’s 2001 Series General Obligation Bond. REPORT SUMMARY:
On March 7, 2000, Measure N was approved by the voters of Saratoga to finance the improvement, renovation and expansion of the Saratoga Community Library through the use of General Obligation
(GO) Bonds. GO Bonds are tax-exempt debt obligations, secured by the City’s power and statutory authority to levy ad valorem taxes on real and personal property located within city boundaries
at any rate necessary to collect and pay for principal and interest due. In In 2001, the City of Saratoga issued $15,000,000 of voter-approved General Obligation (GO) Bonds. The bonds
were issued at competitive interest rates at the time; however, with historic lows currently in place, and with the City’s bonds rated very high (Aaa/AAA by Moody’s and S&P), savings
could be maximized. Under the current conditions, a bond refunding is expected to save Saratoga taxpayers between $1 and $2 million over the next twenty years. On August 1, 2010, the
bonds became subject to redemption. Under the bond’s redemption terms, the bonds redemption price includes a 1% premium in addition to the principal and interest accrued to the date
of redemption from August 1, 2010 through July 31, 2011. As of August 1, 2011, the 1% premium is eliminated. However, with the low rates in place currently, it may still be more financially
advantageous to issue a refunding as soon as feasible, without delaying to August 1, 2011. To this end, staff requested the City obtain bond financing experts for both the timing determination
and services required to proceed with bond refunding activities. A Financial Advisor Services ‘Request for Proposals’ (RFP) was issued on October 25, 2010. The selected Finance Advisor
will provide professional services and advice related to proceeding with the structuring and implementing of the bond refunding, acting as the project lead, and supporting the City’s
financial staff and associated financial consultants in completing the refunding transaction. Seven Financial Advisor consulting firms submitted extensive proposals, which were reviewed
by staff and the Council’s Finance Committee. The firms were evaluated on qualifications detailed in their proposal, including:
• Proposal approach and understanding of the City’s refunding needs • Quality and completeness of the proposal • Qualifications of the firm and project staff • Project lead’s experience
with refunding General Obligation Bonds • Cost of proposed services and expenses All of the submitting firms were highly qualified with expert professional staff, requiring several evaluations
of the proposals to come to a decision. The selected firm, Public Financial Management Inc. (PFM), was ultimately selected based on: the Project Manager’s extensive level of experience
in General Obligation Bond refunding; clarity that PFM will act as the lead in the refunding activities with City staff in the support role; that the firm has a large public finance
presence with comprehensive services, including a core service of advising on bond financings; the consultant price was very competitive with a cap on expenses; and the firm’s San Francisco
office was more local to Saratoga than the other highest-ranked proposals. FISCAL IMPACTS: The GO Bond does not impact the General Fund. All GO Bond activities (i.e. property tax levy
revenues and principal and interest payments) are accounted for separately in a Debt Service Fund which the City maintains specifically for administering this debt transaction. In addition,
the fees and expenses associated with the cost of refunding the bond are 1) contingent upon the issuance of the bond, and 2) paid directly out of the bond issuance funding. For financial
advisory services in connection with the City’s refunding transactions, PFM proposed a flat fee of $30,000 which is contingent upon the successful issuance of the bonds. In addition,
they are to be reimbursed for expenses for travel, postage, telephone, copying, meals, outside graphic fees, etc. related to the bond issuance, up to a cap of $1,500. PFM does not charge
for normal secretarial support, word processing, or computer charges. CONSEQUENCES OF NOT FOLLOWING RECOMMENDED ACTION: The GO Bonds would not be refunded, and City taxpayers would not
realize a savings resulting from the decrease in interest rates paid out on the bonds. ALTERNATIVE ACTION: N/A FOLLOW UP ACTION: City Manager to enter into agreement with PFM. ADVERTISING,
NOTICING AND PUBLIC CONTACT: N/A ATTACHMENTS: Attachment A -Financial Advisor Consultant Agreement