HomeMy WebLinkAboutContract - HJ Umbaugh & Assoc. - Municipal Advisory Services with Respect to the 2016 Waterworks Bonds Refunding1316 COUNTY -CITY BUILDING
227 W. JEFFERSON BOULEVARD
SOUTH BEND. INDIANA 46601-1830
CITY OF SOUTH BEND PETE BUTTIGIEG, MAYOR
BOARD OF PUBLIC WORKS
November 8, 2016
John Julien
H.J. Umbaugh & Associates
112 IronWorks Avenue
Suite C
Mishawaka, IN 46544
PHONE 574/235-9251
FAx 574/235-9171
RE: Contract — Municipal Advisory Services with Respect to the 2016 Waterworks Bond
Refunding
Dear Mr. Julien:
The Board of Public Works, at its meeting held on November 8, 2016, approved the above
referenced contract covering Articles No. I to IV in the amount of $35,500.
Enclosed please find a copy of the agreement for your records.
If you have any further questions regarding this matter, please call this office at (574) 235-
9251.
Sincerely,
LindaM. Martin, Clerk
Enclosure
c: John Murphy, Finance
Eric Horvath, Public Works
GARY A. GILOT SUZANNA M. FRITZBERG ELIZABETH A. MARADIK JAMES A. MUELLER THERESE J. DORAU
UMBAUGH
H.1. Umbaugh & Associates
Certified Public Accountantr, LLP
1121 ronWcrks Avenue
sane c October 26, 2016
Mishawaka, IN 46544
Phone: 574-9355178
Far. 574 935-5928
w.vw.um5au�h.cum
Mr. Eric C. Horvath, Director
Department of Public Works
City of South Bend
227 West Jefferson Boulevard, Suite 1300 N
South Bend, Indiana 46601
Re: South Bend (Indiana) Municipal Water Utility - Municipal Advisory Services —
Proposed Refunding Bonds of 2016
Dear Eric:
You have requested that H. J. Umbaugh & Associates, Certified Public Accountants, LLP (the "Firm")
provide to the City of South Bend (the "Client') those services more fully set forth in Exhibit A hereto
(the "Services").
Fees and Costs
Fees charged for work performed are generally based on hourly rates, as set forth in Exhibit B, for the
time expended, a fixed amount or other arrangement as mutually agreed upon as more appropriate for a
particular matter. Hourly rates for work performed by our professionals vary by individual and reflect the
complexity of the engagement.
Disclosure of Conflicts of Interest with Various Forms of Compensation
The Municipal Securities Rulemaking Board (MSRB) is expected to require us, as your municipal
advisor, to provide written disclosure to you about the actual or potential conflicts of interest presented by
various forms of compensation. Exhibit C sets forth the potential conflicts of interest associated with
various forms of compensation. By signing this letter of engagement, the signee acknowledges that
he/she has received Exhibit C and that he/she has been given the opportunity to raise questions and
discuss the matters contained within the exhibit with the municipal advisor.
Billing Procedures
Normally, you will receive a monthly statement showing fees and costs incurred in the prior month.
Occasionally, we may bill on a less frequent basis if the time involved in the prior month was minimal or
if arrangements are made for the payment of fees from bond proceeds. The account balance is due and
payable on receipt of the statement and we reserve the right to charge 1% interest per month for
outstanding unpaid balances over thirty (30) days from the date of billing. Once our representation has
been concluded or terminated, a final billing will be sent to you. If requested to provide an estimate of
our fees for a given matter, we will endeavor in good faith to provide our best estimate, but unless there is
a mutual agreement to a fixed fee, the actual fees incurred on any project may be less than or exceed the
estimate. Any questions or errors in any fee statement should be brought to our attention in writing
within sixty (60) days of the billing date.
Termination
Both the Client and the Firm have the right to terminate the engagement at any time after reasonable
advance written notice. On termination, all fees and charges incurred prior to termination shall be paid
promptly. Unless otherwise agreed to by the Client and the Firm, this engagement will terminate 60 days
after completion of the scope of services as outlined in Exhibit A.
Mr. Eric C. Horvath, Director, Department of Public Works
Re: South Bend (Indiana) Municipal Water Utility - Municipal Advisory Services —
Proposed Refunding Bonds of 2016
October 26, 2016
Page 2
Accountants' Opinion
In performing our engagement, we will be relying on the accuracy and reliability of information provided
by Client personnel. We will not audit, review, or examine the information. Please also note that our
engagement cannot be relied on to disclose errors, fraud, or other illegal acts that may exist. However, we
will inform you of any material errors and any evidence or information that comes to our attention during
the performance of our procedures that fraud may have occurred. In addition, we will report to you any
evidence or information that comes to our attention during the performance of our procedures regarding
illegal acts that may have occurred, unless they are clearly inconsequential. We have no responsibility to
identify and communicate significant deficiencies or material weaknesses in your internal control as part
of this engagement.
The responsibility for auditing the records of the Client rests with the Indiana State Board of Accounts
and the work performed by the Firm shall not include an audit or review of the records or the expression
of an opinion on financial data.
Client Responsibilities
It is understood that the Firm will serve in an advisory capacity with the Client. The Client is responsible
for management decisions and functions, and for designating an individual with suitable skill, knowledge
or experience to oversee the services we provide. The Client is responsible for evaluating adequacy and
results of the services performed and accepting responsibility for such services. The Client is responsible
for establishing and maintaining internal controls, including monitoring ongoing activities.
Additional Services
Exhibit A sets forth the scope of the Services to be provided by the Firm. From time to time, additional
services may be requested by the Client beyond the scope of Exhibit A. The Firm may provide these
additional services and be paid at the Finn's customary fees and costs for such services. In the
alternative, the Firm and the Client may complete a revised and supplemented Exhibit A to set forth the
additional services (including revised fees and costs, as needed) to be provided. In either event, the terns
and conditions of this letter shall remain in effect.
E-Verify Program
The Firm participates in the E-Verify program. For the purpose of this paragraph, the E-Verify program
means the electronic verification of the work authorization program of the Illegal Immigration Reform
and Immigration Responsibility Act of 1996 (P.L. 104-208), Division C, Title IV, s.401(a), as amended,
operated by the United States Department of Homeland Security or a successor work authorization
program designated by the United States Department of Homeland Security or other federal agency
authorized to verify the work authorization status of newly hired employees under the Immigration
Reform and Control Act of 1986 (P.L. 99-603). The Firm does not employ any "unauthorized aliens" as
that term is defined in 8 U.S.C. 1324a(h)(3).
Investments
The Firm certifies that pursuant to Indiana Code 5-22-16.5 et seq. the Firm is not now engaged in
investment activities in Iran. The Firm understands that providing a false certification could result in the
fines, penalties, and civil action listed in I.C. 5-22-16.5-14.
EXHIBIT A
Services Provided
Scope of Services
The Firm agrees to furnish and perform the following services with respect to the refunding and legal
defeasance of the South Bend, Indiana, Waterworks Revenue Bonds of 2000 and 2006 (the "Outstanding
Bonds") from the proceeds of a refunding bond issue (the "Refunding Bonds").
Article I. Financial Advisory Services
A. Obtain information from the bond ordinance and other legal documents.
B. Determine the amount of funds necessary to refund the Outstanding Bonds, taking
into consideration the principal outstanding, accrued interest, redemption premium,
and bond issuance costs.
C. Suggest for consideration by the Client, sources of refunding the Outstanding Bonds,
including such sources as available funds on hand and Refunding Bonds.
D. Recommend a financial plan or plans in connection with the refunding of the
Outstanding Bonds, the market conditions of tax-exempt bonds, and other
considerations.
E. Compare the annual principal and interest requirements of the proposed Refunding
Bonds with annual principal and interest requirements of the Outstanding Bonds and
determine the gross savings and net present value savings to the Client.
F. Suggest terms and conditions of borrowing, such as redemption provisions.
G. Provide financial information to the Client's bond counsel for preparation of legal
documents.
H. Advise the Client on methods and procedures relative to the offering of the
Refunding Bonds.
J. Provide a bond amortization schedule resulting from the sale of the Refunding
Bonds.
Article H. Disclosure Services
A. Assist the Client in connection with the preparation and composition of both a
preliminary and a final Official Statement of the type and nature generally prepared
in connection with the sale of securities such as the Refunding Bonds, which will
disclose technical data, demographic information and financial schedules relating to
the Client and the Refunding Bonds.
B. On behalf of the Client, distribute the Official Statement to the underwriter in
connection with the offering of the proposed Refunding Bonds.
C. Provide information to S&P Global Ratings for a rating on the proposed Refunding
Bonds, if deemed necessary.
D. Prepare instructions related to closing and delivery of the Refunding Bonds including
distribution of proceeds, flow of funds, and procedures for refunding of the
Outstanding Bonds.
E. Prepare and file Gateway information as required by the DLGF following the sale of
Refunding Bonds.
Article M. Escrow Verification Report
A. Test the mathematical accuracy of the Placement Agent's or Underwriter's
calculations regarding the sufficiency of the cash and investments to be deposited
into the escrow account to meet the principal and interest requirements and call
premium for the Outstanding Bonds.
B. Provide an Escrow Verification Report at the closing of the Refunding Bonds.
Article IV. Parity Report
A. Determine the provisions of the Bond Ordinance of the now outstanding Bonds
which govern the issuance of the subsequent debt debentures on parity with the
existing Bonds.
B. Advise the Client of the requirements necessary for meeting the parity provisions of
the above documents.
C. Conduct such test, if eligible, of the utility's records as are necessary for the issuance
of the proposed Bonds on parity with the now outstanding Bonds.
D. Prepare a written report of the above tests for submission to the Client's attorneys for
the inclusion in official transcripts of the proceedings in connection with the issuance
of the Bonds.
Article V. Continuing Disclosure
If the Client selected `Yes' in the Engagement Letter above, the Firm will assist the Client
with the annual preparation of materials required for compliance with SEC Rule 15c2-12
as described within the Continuing Disclosure Undertaking Agreement for the Bonds. On
an annual basis, the Firm will provide a separate Continuing Disclosure Engagement Letter
for those services.
Article VI. Arbitrase Rebate Services
Section 148 of the Internal Revenue Code requires issuers of tax-exempt bonds that meet
certain criteria to have arbitrage rebate computations performed on a periodic basis. Our
services will be limited to utilizing available information to calculate the arbitrage yield on
the bond issues, the yield on non -purpose investments, the amount of excess earnings, if
any, of the non -purpose investments at the calculated arbitrage yield, and the rebatable
arbitrage, if any, due as of the five-year anniversary date or more frequently as necessary. If
eligible, we will prepare spend -down calculations in lieu of rebate calculations. Our
services for the arbitrage rebate computations include:
A. Obtaining information from bond offering documents, information returns Fled upon
issuance (Form 8038 and 8038 G), arbitrage certificate, legal documents and
statements or summaries of transactions for the funds subject to rebate defined in the
documents.
B. Providing a report which will be addressed to the Client. The report will summarize
the results of the calculations performed.
C. Assistance in preparing the IRS from 8038-T, if necessary.
Calculation and payment of any arbitrage rebate due is the responsibility of the Client. The
Client is responsible for notifying the Firm of any additional or subsequent bond issues that
would require arbitrage rebate services. Our engagement will not include verifying that:
proceeds were used for purpose expenditures; investments were purchased at market price;
no amounts were paid to any party in order to reduce the yield on any investment; the bond
issue was appropriately structured or qualified as a tax-exempt offering; or information
provided to us is complete and accurate.
Fees
For services provided as set forth in Exhibit A, the Firm's fees will be:
A. For services provided as set forth in Articles I and II, fees shall be Twenty -Seven
Thousand Five Hundred Dollars ($27,500).
B. For services provided as set forth in Article III, fees shall be Four Thousand
Dollars ($4,000).
C. For services provided as set forth in Article IV, fees shall be Four Thousand
Dollars ($4,000).
D. If requested, fees for services provided as set forth in Article V shall be Two
Thousand Dollars ($2,000).
E. For services provided as set forth in Article VI, fees shall be billed at the
Firm's standard billing rates based upon the actual time and expenses incurred, as
per the schedule below.
Standard Hourly Rates by Job Classification
O1/01/2016
Partners / Principals
$230.00
to
$450.00
Managers
$175.00
to
$325.00
Consultants
$95.00
to
$250.00
Municipal Bond Disclosure Specialist
$85.00
to
$180,00
Support Personnel
$75.00
to
$135.00
• Billing rates are subject to change periodically due to changing requirements and
economic conditions. Actual fees will be based upon experience of the staff assigned
and the complexity of the engagement.
The above fees shall include all expenses incurred by the Firm with the exception of expenses incurred
for travel, if any, outside the State of Indiana. No such expenses will be incurred without the prior
authorization of the Client. The fees do not include the charges of other entities such as rating agencies,
bond and official statement printers, couriers, newspapers, bond insurance companies, bond counsel and
local counsel, and electronic bidding services, including Parity®. Coordination of the printing and
distribution of Official Statements or any other Offering Document are to be reimbursed by the Client
based upon the time and expense for such services.
EXMIT C
Disclosure Statement of Municipal Advisor
PART A — Disclosures of Conflicts of Interest
MSRB Rule G-42 requires that municipal advisors provide to their clients disclosures relating to any
actual or potential material conflicts of interest, including certain categories of potential conflicts of
interest identified in Rule G-42, if applicable. If no such material conflicts of interest are known to exist
based on the exercise of reasonable diligence by the municipal advisor, municipal advisors are required to
provide a written statement to that effect.
Material Conflicts ofinterest — The Firm makes the disclosures set forth below with respect to material
conflicts of interest in connection with the Scope of Services under this Agreement, together with
explanations of how the Firm addresses or intends to manage or mitigate each conflict.
General Mitigations — As general mitigations of the Firm's conflicts, with respect to all of the conflicts
disclosed below, the Firm mitigates such conflicts through its adherence to its fiduciary duty to Client,
which includes a duty of loyalty to Client in performing all municipal advisory activities for Client. This
duty of loyalty obligates the Firm to deal honestly and with the utmost good faith with Client and to act in
Client's best interests without regard to the Firm's financial or other interests. The disclosures below
describe, as applicable, any additional mitigations that may be relevant with respect to any specific
conflict disclosed below.
I. Affiliate Conflict. UCAS, an affiliate of the Firm (the "Affiliate'), has or is expected to provide
certain advice to or on behalf of Client that is directly related to the Finn's activities within the Scope of
Services under this Agreement. In particular, providing advice to Client regarding investment of bond
proceeds. The Affiliate's business with Client could create an incentive for the Finn to recommend to
Client a course of action designed to increase the level of Client's business activities with the Affiliate or
to recommend against a course of action that would reduce or eliminate Client's business activities with
the Affiliate. Furthermore, this potential conflict is mitigated by the fact that the Affiliate is subject to its
own comprehensive regulatory regime as a registered investment adviser with the Securities and
Exchange Commission under the federal Investment Advisers Act.
H. Compensation -Based Conflicts. The fees due under this Agreement are in a fixed amount
established at the outset of the Agreement. The amount is usually based upon an analysis by Client and
the Firm of, among other things, the expected duration and complexity of the transaction and the Scope of
Services to be performed by the Firm. This form of compensation presents a potential conflict of interest
because, if the transaction requires more work than originally contemplated, the Firm may suffer a loss.
Thus, the Firm may recommend less time-consuming alternatives, or fail to do a thorough analysis of
alternatives. This conflict of interest is mitigated by the general mitigations described above.
The fees due under this Agreement are based on hourly fees of the Firm's personnel, with the aggregate
amount equaling the number of hours worked by such personnel times an agreed -upon hourly billing rate.
This form of compensation presents a potential conflict of interest if Client and the Firm do not agree on a
reasonable maximum amount at the outset of the engagement, because the Firm does not have a financial
incentive to recommend alternatives that would result in fewer hours worked. This conflict of interest is
mitigated by the general mitigations described above.
EXHIBIT C
(Cont'd.)
Disclosure Statement of Municipal Advisor
III. Other Municipal Advisor Relationships. The Firm serves a wide variety of other clients that may
from time to time have interests that could have a direct or indirect impact on the interests of Client. For
example, the Firm serves as municipal advisor to other municipal advisory clients and, in such cases,
owes a regulatory duty to such other clients just as it does to Client under this Agreement. These other
clients may, from time to time and depending on the specific circumstances, have competing interests,
such as accessing the new issue market with the most advantageous timing and with limited competition
at the time of the offering. In acting in the interests of its various clients, the Firm could potentially face a
conflict of interest arising from these competing client interests. This conflict of interest is mitigated by
the general mitigations described above.
PART B — Disclosures of Information Regarding Legal Events and Disciplinary Histo
MSRB Rule 0-42 requires that municipal advisors provide to their clients certain disclosures of legal or
disciplinary events material to its client's evaluation of the municipal advisor or the integrity of the
municipal advisor's management or advisory personnel.
Accordingly, the Firm sets out below required disclosures and related information in connection with
such disclosures.
I. Material Legal or Disciplinary Event. There are no legal or disciplinary events that are material
to Client's evaluation of the Firm or the integrity of the Firm's management or advisory personnel
disclosed, or that should be disclosed, on any Form MA or Form MA-1 filed with the SEC.
II. How to Access Form MA and Form MA-1 Filings. The Firm's most recent Form MA and each
most recent Form MA-1 filed with the SEC are available on the SEC's EDGAR system at
http://www sec gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001610268.
III. Most Recent Change in Legal or Disciplinary Event Disclosure, The Firm has not made any
material legal or disciplinary event disclosures on Fong MA or any Form MA -I filed with the SEC.
PART C—Future Supplemental Disclosures
As required by MSRB Rule G-42, this Disclosure Statement may be supplemented or amended, from time
to time as needed, to reflect changed circumstances resulting in new conflicts of interest or changes in the
conflicts of interest described above, or to provide updated information with regard to any legal or
disciplinary events of the Firm. The Firm will provide Client with any such supplement or amendment as
it becomes available throughout the term of the Agreement.
Mr. Eric C. Horvath, Director, Department of Public Works
Re: South Bend (Indiana) Municipal Water Utility - Municipal Advisory Services —
Proposed Refunding Bonds of 2016
October 26, 2016
Page 3
Municipal Advisor Registration
The Firm is a Municipal Advisor registered with the Securities and Exchange Commission and the
Municipal Securities Rulemaking Board. As such, the Firm is providing certain specific municipal
advisory services to the Client. The Firm is neither a placement agent to the Client nor a broker/dealer.
The offer and sale of any Bonds shall be made by the Client, in the sole discretion of the Client, and under
its control and supervision. The Client agrees that the Firm does not undertake to sell or attempt to sell the
Bonds, and will take no part in the sale thereof.
Other Financial Industry Activities and Affiliations
Umbaugh Cash Advisory Services, LLC ("UCAS") is a wholly -owned subsidiary of the Firm. UCAS is
registered as an investment adviser with the Securities and Exchange Commission under the federal
Investment Advisers Act. UCAS provides non -discretionary investment advice with the purpose of
helping clients create and maintain a disciplined approach to investing their funds prudently and
effectively. UCAS may provide advisory services to the clients of the Firm.
UCAS has no other activities or arrangements that are material to its advisory business or its clients with
a related person who is a broker -dealer, an investment company, other investment adviser or financial
planner, bank, law firm or other financial entity.
If the foregoing accurately represents the basis upon which we may provide Services to the Client, we ask
that you execute this letter, in the space provided below setting forth your agreement. Execution of this
letter can be performed in counterparts each of which will be deemed an original and all of which together
will constitute the same document.
If you have any questions, please let us know. We appreciate this opportunity to be of service to you and
the City.
Very truly yours,
H.J. Umbaugh & Associates
The Client requests that the Finn assist the Client in meeting its requirements to comply with SEC Rule
I5c2-12: Continuing Disclosure as referenced in Exhibit A.
Please initial by your selection: Yes_ No
The undersigned hereby acknowledges and agrees to the foregoing letter of engagement.
City of South Bend, Indiana APPROVE])
t3oard of Public Works
Date: By:
BOARD OF PUBLIC WORKS
AGENDA ITEM REVIEW REQUEST FORM
Date 10/29/16
Department Adm/Finance & Public
Name John Murphy/Eric Horvath Works
BPW Date 11/8/16 w r'\
Phone Extension 7678
Re wired Prior to Submittal to Board
Legal ® Attorney Name Michael Schmidt
Controller ® Controller review is required for all Contracts $5,000.00 or more and
greater than one year in length per the City Purchasing Policy
Purchasing ® George King
Check the Appropriate Item Type — Required forAii Submissions
® Agreement ® Contract ❑ Proposal ❑ Addendum
❑ Professional Services ❑ Resolution
❑ Bid Opening ❑ Bid Award
Opening ❑ Req. to Advertise ❑Title Sheet
❑ Quote O
P g ❑ Quote Award
❑ Change Order No. ❑ C/O & PCA No. ❑ PCA
❑ Ease/Encroach. ❑ Traffic Control
❑ Other:
Required Information
Company or
New Vendor
MBE/WBE Contractor
Project Name
Project Number
Funding Source
Account No.
Amount
Terms of Contract
Purpose/Description
Amount of
Umbaugh
Yes ® No ❑ If Yes, Approved by Purchasing
MBE F-1 WBE
2016 Waterworks Bond Refunding Financial Advisor
None
2016 Waterworks Bond Refunding Proceeds
None. Will be paid at closing from bond proceeds.
$ 35,500.00 - Articles No. I to IV
Municipal Advisory Services with respect to the 2016 Waterworks Bond
Refunding. Fees set forth in Exhibit B. Articles No. I, II, III, and IV.
Excludes Articles No. V and VI.
❑ Required Contractor's Certification Form Attached (Non -
Collusion, Non -Discrimination. Nan-DPharmPnt PA/Prifv Iran atr
Increase
Previous Amount
Current Percent of Change:
New Amount
Total Percent of Change:
Copy
Original
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❑
Change Orders
"/o
Dispersal After Approval