CITY OF GLENDALE, CALIFORNIA REPORT TO THE:

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1 CITY OF GLENDALE, CALIFORNIA REPORT TO THE: Joint D City Council D Housing Authority D Successor Agency ~ Oversight Board D June 11, 2013 AGENDA ITEM Report: Professional Service Agreements for Financial Advisory, Bond and Disclosure Counsel Services in connection with the Successor Agency's Bond Refunding Program 1) Motion Authorizing the Executive Director to Negotiate and Enter Into a Professional Service Agreement with Harrell & Company Advisors to Provide Financial Advisory Services in an amount not to exceed $86,500 for the Refunding of 2002, 2003 and 2010 Tax Allocation Bonds 2) Motion Authorizing the Executive Director to Negotiate and Enter Into a Professional Service Agreement with Jones Hall to Act as Bond Counsel in an amount not to exceed $85,000 for the Refunding of 2002, 2003 and 2010 Tax Allocation Bonds 3) Motion Authorizing the Executive Director to Negotiate and Enter Into a Professional Service Agreement with Quint & Thimmig to Act as Disclosure Counsel in an amount not to exceed $35,000 for the Refunding of 2002, 2003 and 2010 Tax Allocation Bonds COUNCIL ACTION Public Hearing D Ordinance D Consent Calendar D Action Item ~ Report Only D Approved for F II) ZO '? calendar ADMINISTRATIVE ACTION Submitted by: PhilipS. Lanzafame, Executive Officer of Economic Development And Asset Management Prepared by: Elena Bolbolian, Principal Administrative Officer Approved by: Scott Ochoa, City Manager Reviewed by: Michael J. Garcia, City Attorney.2 I

2 RECOMMENDATION Staff recommends that the Agency authorize the Executive Director to negotiate and enter into three professional services agreements with: 1) Harrell & Company Advisors for financial advisory services, 2) Jones Hall for bond counsel services, and 3) Quint & Thimmig for bond disclosure services to assist the Agency with refunding bonds. BACKGROUND/ANALYSIS The former redevelopment agency issued $48,015,000 in 2002 Tax Allocation Bonds (2002 Bonds) to fund, among other things, public improvements relating to the Americana project. The following year, the Agency issued $58,880,000 in 2003 Tax Allocation Refunding Bonds (2003 Bonds) to refinance bonds issued in In December 2010, the former agency issued $26,970,000 in Tax Allocation Bonds (201 0 Bonds) for several public facility and infrastructure improvements including the Adult Recreation Center, the Central Library Renovation, the Brand Blvd. Paseo to Central Park/Lot 10 Parking Lot Rehab and the reconstruction of Central Avenue. The Dissolution Act permits successor agencies to refund bonds of the former redevelopment agencies assuming they do not add cost or increase the principal amount of outstanding bonds. On April 23, 2013, the Agency directed staff to seek approval from the Oversight Board to move forward with a refunding of these three issues resulting in a significant savings in debt service payments. On May 1, 2013, the Oversight Board approved a resolution directing the Successor Agency to refund the 2002, 2003 and 2010 bonds. Refunding the bonds and reducing the cost of debt service is consistent with the goals and objectives of the Dissolution Act by reducing the costs of the Agency, retiring enforceable obligations more quickly and generating immediate additional funds for the taxing entities. In order to move forward, the Agency will require the professional services of a financial advisor, bond and disclosure counsels. During the Agency's last competitive selection process for Financial Advisor and Bond Counsel in 2008, both Harrell & Company and Jones Hall established themselves as the preferred consultant for their respective services. Out of 10 respondents, Harrell & Company was selected for their in-depth knowledge of redevelopment financings, practical experience, demonstrated quality of work, knowledge of the project areas and competitive cost. Jones Hall was selected over eight other firms for its extensive experience in public finance and tax allocation bonds, familiarity with Glendale issues and competitive cost. Both Harrell & Company and Jones Hall worked on the original issues and have provided excellent representation not only in the activities leading up to the sale of the bonds but also in meeting ongoing requirements and providing expert post-sale advice. In the past, the Agency utilized Jones Hall to provide both bond and disclosure counsel services; however, given refinancing former redevelopment agency debt by the successor agency is a relatively new concept and the complexity involved with analyzing three separate bond issuances, staff believes it more beneficial to have two legal firms reviewing the documents. As a result, staff is recommending retaining separate bond and disclosure counsel. Staff is recommending the firm of Quint & Thimmig for disclosure counsel. Quint & Thimmig has acted as bond counsel, disclosure counsel or underwriter's counsel for over 1,500 long-term bond issues (including tax allocation bonds) and over 300 short-term note financings since The firm's practice is limited exclusively to the area of municipal finance, including taxable and tax-exempt issues, Page 2 of 4

3 for local government entities. During the Agency's last competitive selection process, staff was impressed with Quint & Thimmig's qualifications and had them finishing just behind Jones Hall in the competition for legal services. At this time, staff is requesting Agency approval to allow the Executive Director to negotiate and enter into agreements with Harrell & Company Advisors, Jones Hall and Quint & Thimmig. The schedule for issuing the refunding bonds is especially tight given the added layers of gaining approval from the Oversight Board and the Department of Finance at each step and the need to refund the current bonds in December Because of the tight time frame, staff is not proposing to issue an RFP. The listed firms have provided excellent service on prior issues and or are recognized as experts in their field; Quint & Thimmig is being recommended based on their performance in our last RFP process. All three have proposed reasonable and appropriate fees. Upon Agency approval, the professional service agreements will be considered by the Oversight Board at its July 3 rd meeting. Staff anticipates a July Successor Agency meeting to approve the documents, with the sale projected in September and closing in October FISCAL IMPACT The anticipated bond size is expected to be between $81 million and $86 million. As is the industry standard, the quoted fees are based on an estimated par value of bonds. The total cost for financial advisory services is $86,500, bond counsel is $85,000 and disclosure counsel is $35,000, for a total of $206,500. These costs will be funded directly through proceeds at the close of the bond sale. Working with the Agency's Financial Advisor (Harrell & Company), staff estimates that refinancing the 2002 Bonds and 2003 Bonds will reduce debt service by approximately $875,000-$925,000 annually through These savings will increase the amount of residual property tax (or tax increment) available to be redistributed to taxing entities, including the City of Glendale. Further, if the Successor Agency is successful in reinstating its loan to the City, half of the increase in the residual will be available to repay the City loan, thereby paying off the loan at a faster pace. CAMPAIGN DISCLOSURE In accordance with the adopted City Campaign Finance Ordinance #57 44, the names and business addresses of the members of the board of directors, the chairperson, CEO, COO, CFO, subcontractors and any person or entity with 1 o<vo interest or more in the company proposed for contract in this Agenda Item Report is included below: Contractor Business A:Ciaress City State Zip Harrell & Company Advisors; 333 City Boulevard West, Orange CA Suzanne Harrell, Director Suite 1430 Jones Hall, A P.L.C. 650 California Street, 18 1 n San Francisco CA Floor Quint & Thimmig LLP 575 Market St., Suite 3600 San Francisco CA Brian D. Quint 575 Market St., Suite 3600 San Francisco CA Paul J. Thimmig 575 Market St., Suite 3600 San Francisco CA Page 3 of 4

4 ALTERNATIVES Alternative 1: The Successor Agency approves the motions authorizing the Executive Director to Negotiate and Enter Into Professional Service Agreements with three consultants for Refunding Bonds. This will allow the refunding to move forward as quickly as possible using proven consultant advisors. Alternative 2: The Successor Agency may choose not to approve the motion authorizing the Executive Director to Negotiate and Enter Into Professional Service Agreements with three consultants for Refunding Bonds. This leads to two further options: A. Issue a RFP for consulting services. This will delay the issuance of bonds to early 2014 thereby missing the "call date" of December 2013 when the bonds can be refunded. The Agency will have to wait until December 2014 when they are next able to refund the bonds. The delay will cost at least one year's debt service savings ($875,000). Interest rates are more difficult to predict one year from now; savings on debt service may change. B. Halt the bond refunding effort. In this option, the Agency will not be able to lower the cost of debt service associated with the Agency's bonds. There is also a ripple effect in that it will not allow for additional residual increment to be funneled back to the City as a taxing entity. Alternative 3: The Successor Agency may consider other alternatives not included by staff. EXHIBITS None Page 4 of 4

5 MOTION Moved by Successor Agency member, seconded by Successor Agency member that the Executive Director is hereby authorized to negotiate and enter into a professional services agreement with Harrell & Company Advisors in an amount not to exceed $86,500, to provide financial advisory services to assist staff in completing the refunding of the former redevelopment agency's 2002, 2003 and 2010 tax allocation bonds pursuant to Health & Safety Code section The Executive Director is hereby authorized to execute a professional services agreement with Harrell & Company Advisors, subject to approval by counsel for the Successor Agency. Votes as follow: Ayes: Noes: Absent: Abstain: ATTORNEY /5 J:\Fn.P.S\DOCI'ILESIMTN\PSA - Harrell & Co Financial Advisor- bond refi- SA mtn.wpd.2 I

6 MOTION Moved by Successor Agency member, ' seconded by Successor Agency member ' that the Executive Director is hereby authorized to negotiate and enter into a professional services agreement with Jones Hall in an amount not to exceed $85,000, to provide bond counsel services to assist staff in completing the refunding of the former redevelopment agency's 2002, 2003 and 2010 tax allocation bonds pursuant to Health & Safety Code section The Executive Director is hereby authorized to execute a professional services agreement with Jones Hall, subject to approval by counsel for the Successor Agency. Votes as follow: Ayes: Noes: Absent: Abstain: J:\FILES\DOCI'IT.ES\MTN\PSA Jones Hall Rond Counsel - SA mh1.wpd.2 B I

7 MOTION Moved by Successor Agency member, --- Successor Agency member ' seconded by, that the Executive Director is hereby authorized to negotiate and enter into a professional services agreement with the law firm of Quint & Thimmig in an amount not to exceed $35,000, to act as disclosure counsel in connection with completing the refunding of the former redevelopment agency's 2002, 2003 and 2010 tax allocation bonds pursuant to Health & Safety Code section The Executive Director is hereby authorized to execute a professional services agreement with Quint & Thimmig, subject to approval by counsel for the Successor Agency. Votes as follow: Ayes: Noes: Absent: Abstain: J:\FILES\DOCFTLES\MTN\PSA-Quint & Thimmig - Disclosure Counsel - bond refi- SA mtn.wpd c I