TO:
Honorable Mayor and Members of the City Council
THROUGH:
Mark Danaj, City Manager
FROM:
Bruce Moe, Finance Director
SUBJECT:Title
Approve Contract with KNN Public Finance for Financial Advisory Services (Finance Director Moe)
APPROVE
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Recommended Action
RECOMMENDATION:
Staff recommends that the City Council approve a contract with KNN Public Finance for financial advisory services.
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FISCAL IMPLICATIONS:
There are no fiscal implications associated with the approval of this contract. Typically, compensation for these services is contingent upon the successful issuance of debt by the public agency; there is no fee until and unless debt is issued. The amount to be paid for these services is approved by the City Council in advance of the issuance of debt.
BACKGROUND:
The City has utilized a financial advisory firm since the late 1990’s to assist in analyzing financing options, and where appropriate, the issuance of debt. The financial advisor (FA) was instrumental in the City obtaining our Triple-A credit ratings, and the successful issuance of debt for the Police/Fire facility, Metlox, Marine Avenue Sports Fields, South Bay Regional Public Communications Authority, Water/Wastewater, and numerous underground utility districts.
DISCUSSION:
As the City Council contemplates various high-priority capital improvements, a corresponding funding plan needs to be developed. While some smaller projects may be funded with existing resources, larger, more costly and significant projects may require the issuance of debt in order to spread the costs over multiple years for affordability.
As the City prepares for potential projects and financing options, it is prudent to begin assembling the financing team which will help guide the funding options and decisions. The professional services needed for this endeavor include a Financial Analyst, Bond Counsel, Underwriter, and Trustee among others. As a result, at this time, staff recommends retaining the services of the FA and Bond Counsel to get started. The contract for each service is presented separately on tonight’s agenda.
The FA provides the following services:
• Develop and recommend strategies to maintain credit ratings.
• Assist in evaluating financial proposals, economic influences, governmental actions affecting financial objectives of the City.
• Assist in preparing materials for rating agencies presentations and other members of the financial community.
• Evaluate existing financial plans, cash flows and their fundamental objectives, recommending timing and financial requirements.
• Provide advice as to the effect of current and proposed state legislation, assist in the identification of financing alternatives and recommend adjustments where appropriate.
• Evaluate bond proceeds reinvestment procedures to help ensure optimal yields and funding needs.
• Provide advice as to the effect of federal tax legislation on the City.
• Provide advice and expertise in liability management.
• Provide advice and expertise in the analysis of existing and prospective joint ventures. Evaluate the transactions of these organizations with respect to the effect on the City.
• Provide an assessment of the relevant bond market trends, develop appropriate timetables and work schedules for the successful marketing, sale, and issuance of bonds.
• Analyze costs, financial impacts and risks of financing or investment structures.
• Assist bond counsel and staff in all aspects of the bond issuance process.
• Provide and interpret current information on financial trends in the municipal debt markets.
• Act as an expert witness or spokesperson before governmental bodies, organizations or public forums.
• Provide financial advice as needed and requested by the City.
• Review of revenue structure, capital plans, and revenue enhancement mechanisms as directed.
The City has utilized the services of Mr. Mark Young as our Financial Advisor for the past 15 years. During that time, Mr. Young assisted the City with the successful issuances of debt for the Police/Fire Facility, the Metlox Project, Marine Avenue Sports Fields, the City’s portion of the South Bay Regional Public Communications Authority, numerous underground assessment districts, pension obligation bonds, and refinancing of several of these issues at or near historically low interest rates.
Having worked with the City for over 15 years, Mr. Young is keenly aware of the City’s financial position, history, policies, activities and goals. Further, Mr. Young was instrumental in the City obtaining Triple-A ratings from all three major credit rating agencies. Additionally, he has been an invaluable resource irrespective of debt issuance when the City has contemplated financial decisions and options, including the recent analysis of the renewal of the Letter of Credit/Variable Rate Debt for Marine Avenue Sports Fields. Mr. Young has provided such review and support free of charge outside the debt issuance cycle.
Mr. Young is currently employed with KNN Financial (a division of Zion’s Bank). This is a different firm then the last time we formally contracted for his services (he was previously with Gardner, Underwood & Bacon, and Loop Capital). As a result, staff recommends that the City Council approve a new contract for Mr. Young’s services with KNN Public Finance. The contract is attached and has been approved as to form by the City Attorney.