REQUEST FOR FINANCIAL ADVISORY SERVICES PROPOSAL The City of Monterey ("City") seeks proposals from qualified firms to provide financial advisory services. July 13, 2012 City of Monterey Proposal Submittal Deadline: August 1, 2012 735 Pacific Street, Monterey CA 93940
Overview of request for Proposal The City is seeking the following financial services for a contract term of three years, with two one year options, which may be exercised at the City s discretion. The City intends to select one firm to serve as its Financial Advisor, though may select multiple firms depending on the responses to the RFP. The City may entertain joint proposals. Requested financial advisory services may include, but are not limited to, assisting the City to: General Financial Advisory Services Develop and recommend strategies to maintain credit rating. 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. Provide as needed financial advice regarding marketing conditions and trends, financial products, credit and credit analysis, third party alternative financing and special facility financing for outstanding bonds and construction loans. Review the City s long range financing strategy plan, with respect to existing bond debt and current investments. Analyze costs, financial impacts and risks taking in to account the City s current investment policy. Assist City Staff with potential refunding and new money issues, including but not limited to analyses and evaluations of underwriting proposals, financing structure, pricing rating and insurance proposals, reserve fund (re)investment, assistance with preparation and review of related documents, and coordination of financing schedules. Provide other financial services as requested which may include bond debt refinancing (e.g. 2002 Sports Center bond), debt refinancing for a major renewal of the Monterey Conference Center and other planning efforts (see Major Initiatives later in this RFP), and assistance with the possible refunding of the City s CalPERS safety side fund. The Finance Director will assign the work to be performed by the selected firm.
City Background General Information about the City Las Bahia de los Pinos (Bay of Pines) was first discovered by Juan Rodriguez Cabrillo on November 17, 1542. This Spanish claim to California was reaffirmed in December, 1602, when Sebastian Viscaino officially named the port Monterey in honor of the Viceroy of New Spain who had ordered the expedition. Founded on June 3, 1770 when Spanish soldiers claimed the land for King Charles III of Spain, the City was officially incorporated on May 30, 1850. The City's historic Colton Hall was the site of California's first constitutional convention where our state's constitution was signed in 1849. The natural beauty, mild climate and unique attractions of Monterey draw an estimated 4 million visitors each year making our City one of the most popular destinations in the country. The Monterey Bay Aquarium, Old Fisherman's Wharf and Cannery Row are among the many interesting places to visit in Monterey. The City is also home to the Army s Defense Language Institute and Naval Postgraduate School. Local Economy Unlike more volatile previous years, the local economy seemed to stabilize to some degree in the last two fiscal years. The City s top revenue, Transient Occupancy Tax (TOT), which was projected to decline 2.6% in fiscal year 2010/2011, instead declined by only about.3%,. Though still a downturn from the previous year, TOT ended a little stronger than anticipated, which is a good fiscal sign. In 2011/2012, TOT receipts exceeded expectations significantly. We originally anticipated an increase in TOT over the past of about 4%. However, TOT has been coming in at the much more robust pace of over 11% through the reporting period ended April 2012. This is evidence that the local tourism market continues to mend. Real property values in the City of Monterey continue to be soft. Though Monterey has, so far, escaped the very sharp declines seen elsewhere, property tax receipts have been negatively impacted by the sluggish real estate market. Property tax revenue decreased in FY 2010/11 by 1.6% from the prior year. However, for fiscal year 2011/12 property tax receipts are expected to have increased 1.2%. Receipts from sales tax had a strong showing in 2010/11 coming in almost 11% higher than the previous year and 1% above projections. Drivers of this growth include restaurants and some individual businesses. Sales tax estimates for 2011/2012 are expected to have grown by 5%, though the quarter ended in December was up almost 9% over the same period in the previous year.
Infrastructure Challenges Despite the brightening economic news noted above, we are still under-funding some key infrastructure reserves. Additional funding for streets, storm drains and building facilities, for example, will need to be identified in the near future as there is not enough funding to adequately care for the City s infrastructure and facilities over the long run. Regarding the City s sewer system, in August 2011 the City Council approved a rate increase in order to finance the debt service on a $16.8 million loan from the State of California to rehabilitate much of the City s aging system. However, the City does not currently have a funding source to care for most other facility and infrastructure needs. Balanced Budget Due to the prudent fiscal management and foresight of the City s Council and management team, and the cooperation of all City employee groups and unions, the City s current 2011/2012 budget is balanced. This is no small feat in today s economic environment but one the City of Monterey takes very seriously. It was clear to the City Council and staff that a thoughtful, measured program for defining City values, programs and priorities was necessary to deal with the long-term structural general fund imbalance that was estimated to be approximately $5 million. In order to correct this structural imbalance the City launched a Priority-based Budgeting system in the fall of 2010 that elicited input from citizens to better identify and prioritize the various City programs. The outcome of this program provided the City Council and the community with better information than they have had in the past that was used to make more informed program reduction decisions during the 2011/2012 budget season last spring. In addition, the budget just passed in June 2012 for the 2012/2013 fiscal year was also in balance and status quo. Long-term financial planning Revenue estimates for the City General Fund s largest revenue source, Transient Occupancy Tax (TOT), are expected to grow in the out-years, though at a slower rate than in the past. Historic growth patterns have shown a 4% increase annually over time, and after what is turning out to be a robust year for TOT in 2011/2012, we expect growth to move to a more modest rate of about 3% annually after that. The City of Monterey currently has $1.4 million in its capital renewal reserves for the following facilities: public safety buildings, Conference Center, Sports Center, Library, Recreation Centers, City Hall and the wharves. These reserves will be used to fund capital replacement and renewal for these facilities in the future as needed. Current City policy is to use budget surpluses that are projected to occur during the current 5-year General Fund financial forecast to augment these capital reserves in order to maintain City facilities and infrastructure. However, as noted about, aside from projected General Fund surpluses in the years ahead, there is no dedicated funding stream for infrastructure improvements at this time. Major Initiatives Business District Planning In an effort to retool and revitalize several of the City s business districts a number of planning efforts are underway to determine what can be
done to bring more business to the area. Significant public outreach and planning efforts are underway for the City s waterfront, downtown core, Lighthouse Avenue and North Fremont Avenue. A significant component of the downtown and waterfront planning involves the potential rehabilitation of the Monterey Conference Center. This facility was built in 1977 and is in need of significant upgrading in order to remain competitive in the market for conference and group meeting events. To date a study has been performed to provide the City Council and community with several options for how to proceed with such a project, if the decision is ultimately made to move forward. A financial consulting firm (Willdan) has analyzed potential funding sources for the proposed project and this information will be brought to the City Council in August. Financial Information City of Monterey's Summary of Revenues & Expenses Governmental Activities Business-Type Activities Total FY 2011 FY 2010 FY 2011 FY 2010 FY 2011 FY 2010 Revenues: Program Revenues: Charges for services $ 20,552,496 $ 22,631,158 $ 24,818,414 $ 20,368,984 $ 45,370,910 $ 43,000,142 Operating grants & contributions 947,647 1,304,197 - - 947,647 1,304,197 Capital grants & contributions 1,661,932 1,280,919 - - 1,661,932 1,280,919 General Revenues: Transient occupancy tax 14,655,418 14,702,871 - - 14,655,418 14,702,871 Property tax 12,247,862 12,440,413 - - 12,247,862 12,440,413 Sales tax 5,257,314 4,882,921 - - 5,257,314 4,882,921 In-lieu sales taxes 1,792,836 1,479,545 - - 1,792,836 1,479,545 Other taxes 5,635,273 5,240,940 - - 5,635,273 5,240,940 Investment income 4,647,197 5,032,549 230,896 352,887.00 4,878,093 5,385,436 Motor vehicle in lieu 140,274 89,870 - - 140,274 89,870 In-lieu VLF 2,250,982 2,304,895 - - 2,250,982 2,304,895 Other revenues 249,936 194,625 - - 249,936 194,625 Total revenues 70,039,167 71,584,903 25,049,310 20,721,871 95,088,477 92,306,774 Expenses: General government 7,674,774 9,513,915 - - 7,674,774 9,513,915 Public safety 24,479,714 25,348,522 - - 24,479,714 25,348,522 Public works 19,706,824 20,876,964 - - 19,706,824 20,876,964 Community development 1,857,119 1,634,501 - - 1,857,119 1,634,501 Recreation and community service 8,454,787 8,401,272 - - 8,454,787 8,401,272 Library 3,251,530 3,515,397 - - 3,251,530 3,515,397 Public facilities 4,574,830 4,599,164 - - 4,574,830 4,599,164 Nondepartmental - - - - - - Interest and fiscal charges 471,315 498,238 - - 471,315 498,238 Marina - - 2,047,929 1,887,048 2,047,929 1,887,048 Parking - - 6,836,439 6,491,294 6,836,439 6,491,294 Presidio of Monterey Public Works - - 13,712,889 10,630,416 13,712,889 10,630,416 Other Business-type activities - - 901,748 970,701 901,748 970,701 Total Expenses 70,470,893 74,387,973 23,499,005 19,979,459 93,969,898 94,367,432 Change in net assets before transfers (431,726) (2,803,070) 1,550,305 742,412 1,118,579 (2,060,658) Transfers 244,433 737,759 (244,433) (737,759) - - Change in net assets (187,293) (2,065,311) 1,305,872 4,653 1,118,579 (2,060,658) Net assets- Beginning 196,766,639 198,831,950 9,357,068 9,352,415 206,123,707 208,184,365 Net assets- Ending $ 196,579,346 $ 196,766,639 $ 10,662,940 $ 9,357,068 $ 207,242,286 $ 206,123,707
Proposal Due Date Sealed proposals including three (3) complete copies will be received by the Finance Director no later than Wednesday, August 1, 2012 unless time is extended by written addendum issued by the City before that date. Late proposals will not be accepted. Postmarks will not be accepted as the submitted date. Proposals shall be addressed as follows: Don Rhoads Finance Director 735 Pacific Street Monterey, CA 93940 Submitted envelopes should be marked Request for Proposal for Financial Advisory Services [Firm Name(s)]. Submission of Proposals Request for additional Information By submitting proposal, the proposer agrees to furnish such additional information as the City may reasonably require. This includes information which indicates financial resources as well as the ability to provide the services. To the extent there are any revisions or additions to the information provided or requested in this RFP, an addendum will be sent to all firms who received the RFP. The City reserves the right to make such investigations of the qualifications of the proposer as it deems appropriate. Proposal Binding All proposals submitted shall be binding on proposers for one hundred twenty (120) calendar days following opening of the proposals. Incurred Expenses The City is not responsible for any cost incurred by a firm in either responding to this RFP, or in participating in oral presentation or meetings with the City. Proprietary Information In accordance with applicable Public Records Act and except as otherwise may be provided by applicable State and Federal law, all proposers should be aware that the RFP s and responses thereto are a public record. Proposals received in response to this RFP will become the property of the City and will not be returned to the proposers. In the event of contract reward, all documentation produced as part of the contract will become the exclusive property of the City. Interviews The City reserves the right to interview some, all, or none of the firms responding to the RFP based solely on the City s judgment as to the firm s qualifications and capabilities.
Acceptance/Rejection/Modifications to Proposals The City reserves the right to accept or reject any or all proposals, negotiate modifications to proposals that it deems acceptable, to request and consider additional information from any proposer and to waive minor irregularities and technical defects in the proposal process. The city reserves the right to seek new proposals when it determines that it is in the best interest to do so. The City also reserves the right not to pursue any specific financing products discussed in the RFP. Evaluation Criteria and Selection Process Evaluation Criteria Firms will be evaluated on a combination of responsiveness, organization and clarity of proposal related to the scope of work, agreement to meet the City s general terms and conditions, fees, firm experience, qualifications and experience of assigned personnel, and responses of references. Selection Process The Review Committee may schedule interviews and/or presentations with short-listed proposers. Based on the outcome of the Review Committee s evaluation of proposals, a recommendation will be submitted to the City Council for consideration of award. An award of contract occurs when the contract is approved by the Monterey City Council. Selection of a proposer with whom the City enters into contract negotiations with or a recommendation of an award by the Committee or any other party does not constitute an award of contract. The City expects, but does not guarantee, that the decision on selection of a firm will be made by the Monterey City Council on the date indicated below. Tentative Schedule Deadline for return of proposal August 1, 2012 by 5:00 p.m. Evaluations, Reviews and Interviews/Presentations August 1, 2012 thru August 8, 2012 Recommendation submitted to City Council for approval August 21, 2012 Format and Content of RFP Title Page Show the name of proposer s agency/firm, address, telephone number, and name of contact person, date and the subject: REQUEST FOR PROPOSAL FOR FINANCIAL ADVISORY SERVICES (FIRM)
Table of Contents Include a clear identification of the material by section and by page number. Cover Letter and Executive Summary This letter should be signed by the person in your firm who is authorized to negotiate terms, render binding decisions and commit the firm s resources. Summarize the proposer s understanding of the work to be done and make positive commitment to perform the work in accordance with the terms of the proposal being submitted. This section should summarize the key points of your submittal. In addition, you must include a statement that your firm understands that if selected as financial advisor, your firm is prohibited from proposing any financial transactions or serving as underwriter or swap counterparty for ant City/Agency financing for the duration of the contract and may not terminate the contract to do so. Limit to one or two pages Firm Overview Provide a brief description of how your firm is organized, including the businesses in which it is engaged, the location of offices, number of public finance professionals in each office, and the role of the municipal bond industry and comment on any recent significant changes in your organization. Include a discussion of the specific expertise and services that distinguish your firm. Include your firm s understanding of the work to be performed. In addition, state why your firm believes it is the best qualified to perform the services requested. Personnel and References Provide the names, proposed roles, background and experience, office location and availability of the personnel that work on the City s account, and specifically identify the primary person(s) who will be responsible for managing the relationship with the City. Identify who will provide any computer financial analysis services. For the proposed personnel, provide a list of five clients worked with in the last 36 months; a brief description of the type and size of transaction and the services you provided; and the names, titles, addresses and telephone numbers of the government officials primarily responsible for the transactions. You should list clients and transactions which are similar to financing contemplated by the City (i.e, taxable or tax-exempt new money issues, variable rate financings, refunding, etc). Also provide three additional client references for your firm. Long-term Strategic Financial Planning Experience Provide a description of your proposed personnel s relevant experience over the last three years. Include three case studies, if available, that illustrate your experience with
relevant long-term strategic financial planning experience involving transactions where the proposed personnel have served as a financial advisor. New Money (Taxable and Non-Taxable) Experience Provide a description of your proposed personnel s relevant experience over the last three years. Include three case studies, if available, that illustrate your experience with relevant new money transactions that involve Taxable and Non-Taxable bond transactions where the proposed personnel have served as a financial advisor. Advance and current refunding Experience Provide a description of your proposed personnel s relevant experience over the last three years. Include three case studies, if available, that illustrate your experience with relevant bond refunding services where the proposed personnel have served as a financial advisor. Market and Pricing information Describe your firm s knowledge, experience and resources in tracking and monitoring the tax-exempt and taxable bond markets, including fixed rate, variable rate, swaps and other products, and the government securities market. Include a discussion of your firm s participation in underwriting tax-exempt and taxable bonds, acting as a principal in swap transactions, and providing investment services. Also discuss your process for ensuring that the City receives the best price for any bonds, financing involving swaps and other products, and any securities as part of any refunding. Include a discussion of how you evaluate the success of any pricing. Disciplinary Action List any and all disciplinary action, administrative proceeding, malpractice claim or other like proceedings against your firm or any of its personnel relating to your firm s services as financial advisor current, pending or occurring in the last five (5) years. Cost Proposal and Reimbursement for Out-of Pocket Expenses Cost Proposal Present a concise list of the scope of services and the work products that your firm proposes to provide. Given your proposed scope of services and work products, discuss your proposed scope of services and work products, discuss your proposed fee arrangement based on each of the following alternatives: Compensation on a fixed annual cost, payable monthly Compensation on a time and expense basis, with a list of hourly billing rates for the proposed personnel and any proposed increases in such rates during the term of the contract, and the types of reimbursable expenses with proposed charges. Compensation on a cents-per-bond or per $1,000 of notional amount basis to be paid on a contingent basis for specific financing issues.
Fees will be subject to adjustment based upon assignment by the Finance Director of more than one firm in a single project. Expenses such as travel, postage, reproduction and related costs necessarily incurred as Financial Advisor are to be reflected in item Cost Proposal. Such expenses will not be eligible for reimbursement unless otherwise determined by the Finance Director and approved by the City in advance. Any costs incurred by Financial Advisor which are not specifically provided for herein shall be the expense of the Financial Advisor. Any omissions or ambiguities will be construed most favorable to the City. Potential Conflict of Interest You should advise the City of any potential conflicts know by your firm and discuss how, if selected, your firm would address any concerns raised by such a dual representation. You should identify all the clients that you are currently representing that are also consultants to the city and you must notify the city when you enter into any new contracts with consultants of the city. Business Relationships with Other Entities Disclose all compensation/fee arrangements (formal or informal) that your firm, its related entities or any proposed personnel currently has or within the past twelve months has had, with any other potential parties to contemplated financing in which your firm was engaged in any capacity. Such parties include, but are not limited to, swap providers, verification agents, financial advisory firms, investment banking firms, any other consultants or financial institutions, and law firms. Terms of Agreement The Agreement to be entered into with the successful proposer will include, but not be limited to, the following terms and conditions: Professional Service Agreement attached. Additional Information is Available on the City s Website: www.monterey.org