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HomeMy WebLinkAbout1997-10-27 City Council (26)City of Palo Alto C ty Manager’s Report 3 TO:HONORABLE CITY COUNCIL FROM:CITY MANAGER DEPARTMENT: ADMINISTRATIVE SERVICES DATE:OCTOBER 27, 1997 CMR:425:97 SUBJECT:APPROVAL OF CONSULTANT AGREEMENT WITH STONE & YOUNGBERG FOR PROFESSIONAL FINANCIAL ADVISORY SERVICES; APPROVAL OF BUDGET AMENDMENT ORDINANCE RECOMMENDATIONS Staff recommends that Council: 1)Approve and authorize the Mayor to execute the attached agreement with Stone & Youngberg for professional financial advisory services for an initial one-year term, with the City’s option to renew the agreement for two additional years. Stone & Youngberg will provide all financial advisory services required by the City of Palo Alto over the term of this agreement up to the point at which a determination is made to issue debt for any particular project. Stone & Youngberg will be paid an amount not-to-exceed $30,000 annually. The City will be billed on an hourly compensation basis. Payments to Stone & Youngberg will be made periodically, only as services are actually used. 2)Approve the attached Budget Amendment.Ordinance for $30,000. Funds will initially come out of the General Fund Budget Stabilization Reserve (BSR). If any potential projects are later approved by Council to go forward to debt fmancing, the respective financial advisory costs would be reimbursed out of bond proceeds. To this end, detailed billings by project will be provided to the City, as services are used. POLICY IMPLICATIONS This report is consistent with existing City policies. CMR:425:97 Page 1 of 5 BACKGROUND In its review on the next steps for proceeding with downtown parking structure financing (CMR:308:97), Council approved staff’s recommendation regarding securing professional services necessary to proceed with the parking structure project, including the services of a fmancial advisor. In addition, staff advised the Finance and Policy and Services Committees of the need for a financial advisor in CMR:290:97, "Selection of Fiscal Year 1997-98 Consultant Agreements Over $25,000 for Council Committee Participation." The Committees did not elect to review the scope of services for this project. Several projects are being considered, or will soon be reviewed by the Council that may require debt financing in the future. They include: the General Fund infrastructure improvements, construction of a new public safety building, a joint City/Palo Alto Unified School District library at Gunn High School, rehabilitation of incinerators at the Water Quality Control Plant, and site acquisition and development of the former Los Altos Treatment Plant site for a garbage hauler corporate yard. Staff believes it is appropriate, therefore, to retain the assistance of a professional financial advisory firm, not only for the parking structure project but also to provide advice on the other potential financing projects that are at various stages of consideration. The purpose of securing a financial advisor at this stage is purely to obtain expert financial advice, and to explore financing options available. It does not commit the City to taking further actions on any potential debt financings. Any future decision to issue debt will be made explicitly by the Council. DISCUSSION Consultant Services Description Stone & Youngberg will provide ongoing financial advisor services over the term of this agreement. These services would include providing general and specific financing advice for the projects currently being considered 15y the City and other projects that may arise over the term of this agreement. Services to be provided include any fmancial advisory activities up to the decision by Council to approve the issuance of debt, including: o providing assistance with capital planning; financial modeling and presentation of altemative financial features and strategies; CMR:425:97 Page 2 of $ O analysis of market and other factors to be considered in preparing efficient financing structures, and the likely impact on potential bond ratings; 0 general timing advice for debt issuance for financing projects that may arise over the term of this agreement; o attending meetings with City staff, City senior management, legal counsel, and presentations to the City Council. Staff believes that because several significant potentiaI debt financing projects are being considered, it would be optimal for the City to work with one financial consultant over the next three years. This will allow for consistency in approach, will ensure the options for debt versus pay-as-you-go financing are considered appropriately given the full mix of projects the City is considering, will be simpler for staff to administer, and will allow the consultant to build on any interrelationships of the various projects as financings are being considered. Since the City is considering a variety of diverse projects that may require debt financing, integrating approved projects together into fmancing packages would be advantageous to the City. For example, site acquisition and development of the former Los Altos Treatment Plant site and the General Fund infrastructure projects will proceed independently of each other as far as project approval from Council. However, if both are approved, it is possible that each could be funded with the same type of debt, and perhaps in the same package to save issuance costs. Having one overall fmancial advisor who is aware of all the projects the City is considering will help to avoid inefficient or redundant financing packages, thereby reducing the overall debt issuance costs for the City. Obtaining financial advisory services does not commit the City to obtaining debt financing for any capital project. As a separate scope of work, the Council may direct staff in the future to seek additional services if any fmancing projects eventually move forward to the debt issuance stage. Such services would include: assisting with rating agency presentations, structuring the bonds for sale, and the preparation of the Official Statement. If any debt financing projects were approved by Council, staff may elect to negotiate a contract amendment with Stone & Youngberg for additional services. This would likely be the most cost effective option, since Stone &Youngberg would already have a detailed background and understanding of the project being financed. However, staff would always have the option of issuing an additional Request for Proposals (RFP) to obtain such services. In any case, staff would return to Council for approval of the necessary contract or contract amendment(s) if any projects proceed to this stage. CMR:425:97 Page 3 of 5 Selection Process RFPs were sent to 18 firms on July 25, 1997. Six firms submitted responses by the August 19, 1997, closing date. Three firms were interviewed by a staff selection committee consisting of staff from the Administrative Services, Public Works, and Planning Departments. The three firms interviewed were Stone &Youngberg, Public Financial Management (PFM), and Kelling, Northcross & Nobriga (KNN). They were evaluated on the following criteria: o technical expertise with assessment district, wastewater and solid waste financings; o previous experience in assisting a City put together a capital plan consisting of both debt and pay-as-you-go components; o knowledge of the City ofPalo Alto’s budget and financing history; o breadth of experience of staff available for this assignment; o prior experience working with a City that has a very active public review process; O effective presentation skills, particularly before City management and the City Council. Two of the three firms interviewed were ranked by the selection Committee as extremely qualified in all the criteria listed above. Besides Stone &Youngberg, the other highly ranked firrn was PFM, which has done an outstanding job working with City staff over the past year on the golf course financing project. Both firms were rated highly by the selection committee on technical and staffing expertise. Stone &Youngberg was judged slightly stronger by a majority of the committee for its sophisticated understanding of the City of Palo Alto, its presentation.skills, as well as its prior involvement in public processes such as Palo Alto’s. Of the six firms that submitted proposals, the three fwrns not interviewed proposed amounts ranging from $45,000 to $75,000 annually. Of the three firms that were interviewed, one firm, KNN, quoted a lower amount than Stone &Youngberg, at $15,000 annually. However, the interview committee did not believe that KNN demonstrated enough experience working with a city with such an extensive public review process as Palo Alto’s. Finally, in the unanimous opinion of the selection committee, while KNN’s staff were outstanding, the relatively small size of the firm and resulting lack of a broader expertise base available for this project resulted in a lower ranking than Stone & Youngberg or PFM. CMR:425:97 Page 4 of 5 FISCAL IMPACT Funding for this contract will initially come out of the General Fund Budget Stabilization Reserve (BSR). If any projects eventually go forward to financing, their respective financial advisory costs may be reimbursed out of bond proceeds. Detailed billings by project will be provided to the City as services are used to facilitate potential bond reimbursements later. Staff will include funds in the upcoming budgets for the second and third year funding for financial advisory services. ENVIRONMENTAL ASSESSMENT These services do not constitute a project for the purposes of the California Environmental Quality Act. ATTACHMENTS/EXHIBITS Exhibit A- Agreement Exhibit B- Budget Amendment Ordinance PREPARED BY: Jim Steele, Manager of Investments and Debt DEPARTMENT HEAD APPROVAL: "))-v":>4x~-,~ - Melissa Cavallo Acting Director Administrative Services CITY MANAGER APPROVAL: Assistant City Manager CC:n/a CMR:425:97 Page 5 of 5 EXHIBIT A AGREEMENT BY AND BETWEEN THE CITY OF PALOALTO AND STONE & YOUNGBERG FOR FINANCIAL ADVISORY SERVICES THIS AGREEMENT ("Agreement"), made this day of , 1997, by and between the City of Palo Alto, a chartered municipal corporation of the State of California (the "City") and Stone & Youngberg, LLC, 50 California Street, San Francisco, CA 94111, Tax ID No. 94-1052545 (S&Y). WITNES SETH : WHEREAS, the City desires the services of a financial advisor to advise it with respect to various financing projects, in accordance with Section 53691 of the California Government Code; and WHEREAS, S&Y represents that it is experienced and qualified to perform said services. NOW, THEREFORE, IN CONSIDERATION of the mutual covenants and promises of the parties herein contained, the parties hereto agree as follows: i.S&Y’s Services. S&Y shall furnish those services ("Services") described in Exhibit "A," attached hereto and incorporated herein by reference. 2.Compensation. The City shall pay S&Y for the Services described in paragraph i, the following compensation: Fee. The City shall pay S&Y an annual fee, including expenses, at S&Y’s hourly rates, in a total amount not to exceed $30,000. Allowable out- of-pocket expenses shall include out of state travel and lodging for any out of state rating presentations; communications and freight; reproduction; graphics and other mutually agreed upon costs directly related to its performance of the Agreement. 971021 bdc 0031861 S&Y’s hourly rates Agreement shall be: during the term of this Managing Director Senior Managing Consultant Consultant $240.00 $180.00 $140.00 ’Payment. The compensation payable under this paragraph shall be payable upon receipt, no more often than monthly, of a detailed invoice showing hours and services, listed by financing project. The value of services shall be calculated in accordance with the fee schedule set forth in subparagraph 2a. In no event shall payment in the case of such termination exceed those amounts set forth in subparagraph 2a. 3.Term. This Agreement shall be in effect from the date first set forth above through and including November 30, 1998. The Agreement may be renewed at the mutual consent of the parties, at the rates set forth herein, for two additional one year terms, i.e., through November 30, 2000. 4.Standard of Performance. S&Y warrants to the City that the Services shall be performed as expeditiously as possible, and with the degree of skill and care that is required by current, good, and sound professional procedures and practices. S&Y further warrants that the Services shall be provided in conformance with generally accepted professional standards prevailing at the time work is performed, so as to ensure that the Services performed are correct and appropriate for the purposes contemplated in the Agreement. 5.Performance by S&Y. S&Y shall not employ other consultants or contractors without the prior written approval of the City. S&Y hereby designates the S&Y Representative, Edward Schilling, as the person primarily responsible for the day-to-day performance of S&Y’s work under this Agreement. S&Y shall not change the S&Y Representative without the prior consent of the City. Unless otherwise expressly agreed by the City, S&Y’s Representative shall remain responsible for the quality and timeliness of performance of the Services, notwithstanding any permitted or approved delegation hereunder. 6.Confidentiality. General. S&Y agrees not to disclose any data submitted to S&Y by the City or obtained without the prior approval of the City, provided, however, that S&Y shall not be required to keep confidential 971021 bdc 0031861 2 any information that is (i) publicly available from other sources, or (ii) required to be disclosed to government authorities. Public Statements. S&Y shall not issue nor cause the issuance of any public statement in any way regarding the Services without the City’s prior approval. Public Release of Information. S&Y shall not release any information concerning the Services or the City without the City’s prior approval. S&Y shall provide for the City’s approval of both the material sought to be released and the identity of the publisher of such material. Survival. The provisions of this Agreement governing the confidentiality of material delivered to or generated by S&Y during the Term of this Agreement shall survive the termination or cancellation of this Agreement, subject to Section 7. 7.Termination. Either the City or S&Y may terminate this Agreement for any reason upon thirty (30) days written notice to the other party+ provided, however, that the City may cancel the Agreement upon five (5) days written notice if S&Y breaches this Agreement. In the event of termination, the City will pay S&Y in accordance with subparagraph 2b, provided, that in the event of termination on account of a breach of this Agreement by S&Y, City will be obligated to compensate $&Y only for that portion of S&Y’s services which are of direct and immediate benefit to the City as determined by the City Manager in the reasonable exercise of her discretion. Any reports or other written, recorded, photographic, computer, or visual materials and other deliverables prepared for the City prior to the effective date of such cancellation shall be promptly delivered to the City by S&Y. 8.Independent Contractor. In assuming and performing the Services, S&Y is an independent contractor and shall not be eligible for any benefits which the City may provide its employees, except as expressly provided for in the Agreement. All persons, if any, hired by S&Y shall be employees or subcontractors of S&Y and shall not be construed as employees or agents of the City in any respect. 9.Compliance with Laws. $&Y shall comply with all applicable federal, State of California, and local laws, rules, and regulations and shall obtain 971021 bdc 0031861 all applicable licenses and. permits for the conduct of its business and the performance of the Services. I0.Choice of Laws. This Agreement shall be construed and interpreted in accordance with the laws of the State of California, excluding any choice of law rules which may direct the application of the laws of another jurisdiction. ii. Non-Waiver. The waiver by either party of any breach of any term, covenant, or condition contained in the Agreement, or any default in their performance of any obligations under the Agreement shall not be deemed to be a waiver of any other breach or default of the same or any other term, covenant, condition, or obligation, nor shall any waiver of any incident of breach of default constitute a continuing waiver of same. 12. Enforceability. In the event that any of the provisions or portions of application of any of the provisions of the Agreement are held to be illegal or invalid by a court of competent jurisdiction, the City and S&Y shall negotiate an equitable adjustment in the provisions of the Agreement with a view toward effecting the purpose of the Agreement. The illegality or invalidity of any of the provisions or portions of application of any of the provisions of the Agreement shall not affect the legality or enforceability of the remaining provisions or portions of application of any of the provisions of the Agreement. 13.Successors and AssiqnSo The City and $&Y, respectively, bind themselves, their successors, assigns, and legal representatives. S&Y shall not assign or transfer any interest in the Agreement without the City’s prior written consent, which consent shall be in the City’s sole discretion. Any attempted assignment or transfer in breach of this provision shall be void. 14. Indemnity. S&Y shall protect, indemnify, defend and hold harmless City , its officers, agents and employees from any and all demands, claims or liability of any nature, including wrongful death, caused by or arising out of S&Y’s, its officers’ agents’ or employees’ negligent acts, errors or omissions, or willful misconduct, or conduct for which the law may impose strict liability on S&Y in the performance or nonperformance of this Agreement. 971021 bdc 0031861 4 15.Attorney’s Fees. In the event of litigation between the parties hereto over the terms or performance of any provisions of this Agreement, the prevailing party shall be entitled to its reasonable attorney’s fees and costs. 16. Miscellaneous.. Upon termination of this Agreement, the City shall be under no further obligation to S&Y hereunder. 17.. Underwriter Services. It is the City’s intent to acquire any underwriter services for the duration of this Agreement through a competitive bid process whenever possible. In any such potential competitive underwriting bid processes over the duration of this Agreement, S&Y shall not submit or allow to be submitted a bid on any City bonds as the lead agency or the senior manager. 18. Additional Terms and Conditions. The terms and conditions set forth in Part II, Special Conditions, to Part III Instructions and Forms, of the City’s Request for Proposal issued July 25, 1997, are incorporated by reference in this Agreement as if fully set out in full; provided, that, to the extent of any conflict between the Special Conditions and the terms set out in paragraphs 1 through 17 of this Agreement, the language in paragraphs I through 17 shall control. 19. Notices. All notices required hereunder shall be in writing and mailed postage prepaid by certified or registered mail, return receipt requested, or by personal delivery to the City’s address as shown below, or such other places as the City or S&Y may, from time to time, respectively, designate in a written notice given to the Qther. Notice shall be deemed given on date of the mailing thereof or upon personal delivery. To City: Office of the City Clerk City of Palo Alto P. O. Box 10250 Palo Alto, CA 94303 Or by personal delivery to 250 Hamilton Avenue 7th Floor Palo Alto, CA 94301 To S&Y Representative: Edward Schilling, Principal Stone & Youngberg LLC 50 California Street, 35th Floor San Francisco, CA 94111 -- Phone: (415) 981-1314 Fax: (415) 445-2395 971021 bdc 0031861 5 With a copy to: Mr. Jim Steele Manager of Investments & Debt Administrative Services Dept. City of Palo Alto, 4th Floor 250 Hamilton Avenue Palo Alto, CA 94301 Phone: (650) 329-2574 Fax: (650) 323-8356 IN WITNESS WHEREOF, the parties have executed this Agreement in one (i) or more copies as of the date and year first above written. ATTEST:CITY OF PALO ALTO City Clerk Mayor APPROVED AS TO FORM:STONE & YOUNGBERG, LLC Senior Asst. City Attorney APPROVED: Assistant City Manager By: Edward Its: Senior Managing Consultant Taxpayer’s I.D. No.94-I052545 Acting Director, Administrative Services 971021 bdc 0031861 6 CERTIFXCATE OF ACKNOWLEDGMENT (Civil Code § 1189) STATE OF COUNTY I <-,"i,I’On -~ --1997, before me, / ’,,-:.,.~ ~i "~ a notary ~ublic in and for said County and State, personally appeared :- > .... : ,~ ?’ ~-personally knOwn to me Dr, pro~ve~ to me on the basis of satisfactory evidence) to be the pe~son(~) wh6se name(s$.-~siare subscribed to the within instrument, :and acknowledged to m%- that ~h~/she/they- executed the same in his/her!.their authorized capacmty(ies), and that bytes/he./their ~ignaturel~) on the instrument the person(s), or th~--entity upon behalf of which the person(s0 acted, executed the instrument. WITNESS my~hand ’and official ~seal. "- Signature of Notary Public 971021 5dc 0031861 ~ART II - INSURANCE REQUIREMENTS SECTION 650 Insurance Requirements for Contractors CONTRACTOR: PROJECT MANAGER:JIM STEELE CONTRACT NAME:PROJECT TITLE: FINANCIAL ADVISOR SERVICES GENERAL TERMS AND INSTRUCTIONS THIS INSTRUCTION SHEET SHOULD BE GIVEN TO YOUR INSURANCE AGENT/BROKER. CONTRACTORSTO THE CITY OF PALO ALTO, AT THEIR SOLE EXPENSE SHALL OBTAIN AND MAINTAIN INSURANCE FOR THE TERM OF THE CONTRACT CONTRACTORS WILL BE REQUIREDTO PROVDE A CERTIFICATE EVIDENCING THE INSURANCE AND NAMING THE CITY AS AN ADDITIONAL INSURED ALL INSURANCE COVERAGE REQUIRED SHALL BE PROVIDED THROUGH CARRIERS WITH A BEST RATING OF A: X OR HIGHER THAT ARE ADMITTED TO DO BUSINESS IN THE STATE OF CALIFORNIA. THE CERTIFICATEOF INSURANCEMUST BE COMPLETEDAND EXECUTEDBYAN AUTHORIZED REPRESENTATIVE OF THE COMPANY PROVIDING INSURANCE, FILED W1TH THE CITY, AND APPROVED BY THE CITY BEFORE CONTRACT VVILL BE CONSIDERED COMPLETE AS RESPECTS INSURANCERETURN THE COMPLETED CERTIFICATE TO THE CITY OF PALO ALTO, PURCHASING & CONTRACT ADMINISTRATION,250 HAMILTON AVENUE, PALO ALTO 94301. THE INSURANCE REQUIREMENTS CHECKED BELOW ARE REQUIRED FOR THIS CONTRACT. TYPE OF COVERAGE REQUIREMENT Worker’s Compensation 13~Automobile Liability ~/’,Comprehensive General Liability: INCLUDING: ¯PERSONAL INJURY ¯BROAD FORM PROPERTY DAMAGE ¯BLANKET CONTRACTUAL ¯FIRE LEGAL LIABILITY [~Compr~hensive Automobile Liability: INCLUDING:¯OWNED ¯HIRED ¯NON-OWNED E~Professional Liability: INCLUDING: ¯ERRORS AND OMISSIONS ¯MALPRACTICE (If Applicable) ¯NEGLIGENT PERFORMANCE LONG FORM (Minimum Limits) EACH OCCURRENCE AGGREGATE Statutory ¯BODILY INJURY $1,000,000 $1,000,000 PROPERTY DAMAGE $1,000,000 $1,000,000 BODILY INJURY & PROPERTY DAMAGE COMBINED BODILY INJURY (Each Person) ¯ BODILY INJURY (E=~ O~curr~) PROPERTY DAMAGE BODILY INJURY & PROPERTY DAMAGE COMBINED ALL DAMAGES I~*THE CITY OF PALO ALTO IS TO BE NAMED AS AN ADDITIONAL INsuRED $1,000,000 A.The City of Palo Alto, its officers, agents and employees are named as additional insured, but only as to work performed under contract. Said coverage as to the City of Palo Alto, etc., shall be pdmary coverage, without offset against City’s existing insurance and any other . insurance carried by the City being excess insurance only. B.Where the work involves grading, paving, excavating, ddlling or other underground work, the policy includes destruction of wires, conduits, pipes, mains, or other similar property or any apparatus in connection therewith below the surface of the ground whether owned by third parties or the City of Palo Alto. C.Where the work involves excavating, collapse coverage is provided in the amounts above. D.The policy includes a "Severability of Interest" provision. E.Deductibles over $5,000 must be indicated and are subject to approval. F.If such policies are canceled or changed during the period of coverage as stated herein, in such a manner as to affect the Certificate, thirty (30) days written notice will be mailed to the City of Palo Alto, Contract Administration, P.O. Box 10250, 94303 G.The liability insurance policy includes a contractual liability endorsement providing insurance coverage for Contractor’s agreement to indemnify the City. H.The coverage afforded under the policies is subject to all terms ofJ, he policies designated herein and meets all of the provisions called for herein. ’~/ DATE: -.,.~W-2.Sj.~2~ CONTRACT MANAGER: ...-.~.~-,~,~/_ Fernando V~lz (415) 329-2460 ALL INSURANCE COVERAGE REQUIRED SHALL BE PROVIDED THROUGH CARRIERS WITH A J~ST RATING OF A: X OR HIGHER THAT ARE ADMITTED TO DO BUSINESS IN THE STATE OF CALIFORNIA. END OF SECTION ’CITY OF PALO ALTO: INSURANCE REQUIREMENTS IFB 99268 "SECTION 00650 EXHIBIT B ORDINANCE NO. ORDINANCE OF THE COUNCIL OF THE CITY OF PALO ALTO AMENDING THE BUDGET FOR THE FISCAL YEAR 1997-98 TO PROVIDE AN ADDITIONAL APPROPRIATION FOR PROFESSIONAL FINANCIAL ADVISOR SERVICES WHEREAS, pursuant to the provisions of Section 12 of Article III of the Charter of the City of Palo Alto, the Council on June 23, 1997 did adopt a budget for fiscal year 1997-98; and WHEREAS, there are a number of potential debt financing projects that may be undertaken over the next 2-3 years; and WHEREAS, it would be optimal to plan for these potential projects by using: the most cost effective financing mechanisms; knowledge of the financial markets; and an in-depth understanding of Palo Alto’s financia! planning needs; and WHEREAS, professional financial advisoryservices would support cost effective debt and financial planning; and WHEREAS, the City proposes to retain the firm of Stone and Youngberg to provide for as-needed financial advisory services at a cost not to exceed $30,000 annually; and WHEREAS, the budget must be amended to provide additional funds for these services; and WHEREAS, City Council authorization is needed to amend the 1997-98 budget as hereinafter set forth. NOW, THEREFORE, the Council of the City of Palo Alto does ORDAIN as follows: SECTION i. The sum of Thirty Thousand Dollars ($30,000) is hereby appropriated to non-salary expenses in the Functional Area "Money Management" in the Administrative Services Department, and the Budget Stabilization Reserve is correspondingly reduced. SECTION 2. This transaction will reduce the Stabilization Reserve from $25,479,446 to $25,449,446. Budget SECTION 3. As specified in Section 2.28.080(a) of the Palo Alto Municipal Code, a two-thirds vote of the City Council is required to adopt this ordinance. SECTION 4. The Council of the City of Palo Alto hereby finds that the enactment of this ordinance is not a project under the California Environmental Quality Act and, therefore, no environmental impact assessment is necessary. SECTION 5. As provided in Section 2.04.350 of the P~lo Alto Municipal Code, this ordinance shall become effective upon adoption. INTRODUCED AND PASSED: AYES: NOES: ABSTENTIONS: ABSENT: ATTEST:APPROVED: City Clerk Mayor APPROVED AS TO FORM:City Manager Senior Asst. City Attorney Acting Director, Administrative Services Department