NAPA COUNTY BOARD OF SUPERVISORS Board Agenda Letter

Transcription

1 Agenda Date: 2/11/2014 Agenda Placement: 9C Set Time: 2:00 PM Estimated Report Time: 15 minutes NAPA COUNTY BOARD OF SUPERVISORS Board Agenda Letter TO: FROM: Board of Supervisors Leanne Link for Nancy Watt - County Executive Officer County Executive Office REPORT BY: Pamela Kindig, County Executive Office SUBJECT: Approval of Agreements relating to the issance of the 2014 Certificates of Participation RECOMMENDATION County Executive Officer requests approval of and authorization for the Chairman to sign the following agreements for the term of February 11, 2014 through June 30, 2014, with a provision for automatic renewal, related to the possible issuance of 2014 Certificates of Participation: 1. Agreement with KNN Public Finance, a Division of Zion's First National Bank, for a maximum amount of $115,000 for financial advisor services; and 2. Agreement with Jones Hall, a Professional Law Corporation, for a maximum amount of $75,000 for bond and disclosure counsel services. EXECUTIVE SUMMARY On October 15, 2013, staff and the County's financial advisor, David Leifer of KNN Public Finance (KNN) presented a potential financing plan relating to future capital projects. Your Board gave direction to staff to pursue issuing Certificates of Participation (COPs) to fund the remodel of the Mylan property and the purchase of the new jail site property located just south of Napa. Staff is proposing that the County contract with KNN to act as financial advisor and the Jones Hall law firm to act as bond and disclosure counsel for COPs that could possibly be issued in The COPs would be used to fund approximately $16 million of the $23 million needed to complete the remodel of the Mylan property and the purchase of the jail site. Financial advisors play a critical role in issuing COPs. KNN is a firm that specializes in municipal finance and has been ranked as one of the leading financial advisory firms in California based on the total number of municipal financings. KNN was the financial advisor for the County's 2003 COPs, the County's 2005 Refunding COPs, and

2 Page 2 the County's 2012 Refunding COPs. Under the proposed agreement, the maximum cost to the County for basic financial advisory services related to the potential 2014 COPs would be $115,000, to be paid from the proceeds of the sale of the COPs. If the COPs are not issued, KNN would not be paid. Bond counsel and disclosure counsel services are required in order to issue COPs. Jones Hall is a law firm that specializes in municipal finance and is one of the most active bond counsel firms in California. Jones Hall previously acted as bond counsel for Napa County's COPs issued in 1987, 1990, 1993, 2003, 2005, and Under the proposed agreement, the maximum cost to the County for bond and disclosure counsel services for the proposed 2014 COPs would be a maximum of $75,000 to be paid from the proceeds from the sale of the 2014 COPs. Neither KNN nor Jones Hall are local vendors and they were not selected through a competitive process. As permitted by the County's purchasing rules, staff has determined that sole source contracts would be in the best interest of the County because: The potential for varying interest rates makes it critical that the County be prepared to issue COPs as soon as possible to achieve maximum benefits; Jones Hall as the County's bond counsel and KNN as the County's financial advisor have both worked for the County on other COP issues including, most recently, the 2012 Refunding COPs. As a result, they are familiar with the County and its current issues, which will limit the amount of time that would otherwise be involved in getting other firms up to speed; Because of past associations, staff is familiar with the quality of work performed by KNN and Jones Hall and their performance has been excellent. PROCEDURAL REQUIREMENTS 1. Staff reports. 2. Public comments. 3. Motion, second, discussion and vote on the item. FISCAL IMPACT Is there a Fiscal Impact? Is it currently budgeted? What is the revenue source? Is it Mandatory or Discretionary? Discretionary Justification: Yes No If 2014 COPs are issued, the cost of the financial advisor, bond counsel and disclosure counsel services would be paid out of the proceeds of the issuance. Costs of any special services requested by the County would be paid from an appropriate source, including, potentially, the General Fund. Discretionary By issuing the new 2014 COPs, the County will be able to minimize the use of available cash to complete the remodel of the Mylan property and purchase the future jail site. In addition, the County is scheduled to prepay the debt service on the 2005 COPs in February. This prepayment and the issuance of the new 2014 COPs will enable the County to maintain level debt service lease payments for the next ten years. It is also anticipated that potential lease revenue of Buildings 1a and 3 on the Mylan property will offset future debt costs. Financial advisor, bond counsel and disclosure counsel services

3 Page 3 are required to issue new COPs. Is the general fund affected? Future fiscal impact: Consequences if not approved: Additional Information: Yes There is likely no direct impact from hiring a financial advisor, bond counsel and disclosure counsel. However, if the 2014 COPs are issued, annual debt service payments will be included in the budgets for the General Fund and HHSA Special Revenue Fund. If a financial advisor, bond counsel and disclosure counsel are not hired, then the County cannot finance the 2014 COPs and thus would forego the possibility of securing the necessary financing to remodel the Mylan property and purchase the new jail site parcel. There are other firms besides KNN and Jones Hall that could act as financial advisor and bond or disclosure counsel on this issue. However, it would take some time to select and negotiate an agreement with another firm and for that firm to get up to speed on the County and this issue. Thus, an opportunity might be lost to issue COPs in a timley manner. ENVIRONMENTAL IMPACT ENVIRONMENTAL DETERMINATION: The proposed action is not a project as defined by 14 California Code of Regulations (State CEQA Guidelines) and therefore CEQA is not applicable. BACKGROUND AND DISCUSSION On October 15, 2013, staff and the County's financial advisor, David Leifer of KNN Public Finance (KNN) presented a potential financing plan relating to future capital projects. Your Board directed staff to pursue issuing Certificates of Participation (COPs) to fund the purchase of the new jail site property located just south of Napa and to partially fund the remodel of the Mylan property to house Health and Human Services. COPs are a form of debt issued by local governments in California to finance the acquisition and/or construction of capital projects. The debt service on COPs is typically funded out of the general revenues of the local government. Whenever the County issues COPs, or other debt, it is necessary to contract with certain consultants, law firms and other firms to assist in issuing and managing the debt issuance. Financial advisor, bond counsel and disclosure counsel are three of the services that play a critical role in issuing COPs. Financial advisory services are provided by firms with specialized expertise in municipal debt issuance. The services financial advisors provide include analyzing the financial markets and making recommendations regarding pricing and timing of sale, preparing debt service analysis and assisting in structuring the financing and obtaining bond ratings and insurance, if appropriate. Bond and disclosure counsel services are provided by law firms with specialized expertise in these areas. The services bond and disclosure counsels provide include offering legal opinions concerning the tax exempt status of the debt and the legality of the proceedings and preparing various documents including the Official Statement, trust agreement, lease agreements and required resolutions. At this time, staff is recommending that the County retain KNN to act as financial advisor and Jones Hall to act as bond counsel and disclosure counsel for the potential issuance of the 2014 COPs that would fund approximately $16 million of the combined $23 million required to complete the remodel of the Mylan property and the purchase of the jail site.

4 Page 4 KNN, a division of Zion's National Bank, is a full service municipal finance advisory firm based in Oakland. Since its inception in 1982, KNN has been ranked as one of the leading financial advisory firms in California based on the total number of municipal financings. Even though KNN has an exclusive California presence, in 2013 KNN was ranked 8th nationally based on par. KNN was the financial advisor for the County's 2003 COPs, the 2005 refunding COPs, and the 2012 refunding COPs.Under the terms of the proposed agreement, KNN would be paid a fee of $110,000 plus expenses, not to exceed total of $115,000, to act as financial advisor for the potential 2014 COPs. As is typically the case in these matters, the agreement provides that KNN will be paid this fee and other expenses from the proceeds of the new COPs. The County is not obligated to issue the COPs and will make that determination based on market conditions and potential cost savings at any particular point in time. Formed in 1978, San Francisco-based Jones Hall has 16 attorneys and is devoted exclusively to the practice of municipal bond law in the State of California, acting as bond counsel, disclosure counsel and special tax counsel. For the decade ending in 2010, Jones Hall was the second most active bond counsel firm in California and the most active disclosure counsel firm. Jones Hall acted as bond counsel for Napa County COPs issued in 1987, 1990, 1993, 2003, 2005, and Under the terms of the proposed agreement, Jones Hall would be paid $25,000 to act as disclosure counsel and a fee based on the amount of the new COPs issue to act as bond counsel. That fee would be set as follows: 1.0% of the first $1 million of principal amount; 0.5% of the next $4 million; 0.125% of the next $10 million; % of any amount over $15 million. The maximum fee paid to Jones Hall to act as bond counsel and disclosure counsel would be $75,000. As with KNN, the agreement with Jones Hall provides that the firm will only be paid for bond counsel and disclosure counsel services on the 2014 COPs from the proceeds of the COPs. The County is not obligated to issue the COPs and will make that determination based on market conditions and potential cost savings at any particular point in time. The proposed agreements with KNN and Jones Hall are for the period beginning on February 11, 2014 through June 30, 2014; however, both agreements include provisions that will allow for automatic extension from year to year unless termination is given by either party. This is to provide flexibility in the event that it is not prudent for the County to issue the COPs in the next four and a half months. Neither KNN nor Jones Hall are local vendors and they were not selected through a competitive process. As permitted by the County's purchasing rules, staff has determined that sole source contracts would be in the best interest of the County because: The potential for varying interest rates makes it critical that the County be prepared to issue COPs as soon as possible to achieve maximum benefits; Jones Hall as the County's bond counsel and KNN as the County's financial advisor have worked for the County on other COP issues including, most recently, the 2012 Refunding COPs. As a result, they are familiar with the County and its current issues, which will limit the amount of time that would otherwise be involved in getting other firms up to speed; Because of past associations, staff is familiar with the quality of work performed by KNN and Jones Hall and their performance has been excellent. SUPPORTING DOCUMENTS

5 Page 5 None CEO Recommendation: Approve Reviewed By: Helene Franchi