HomeMy WebLinkAboutMunicipal Advisory Services - H.J. Umbaugh & Assoc - Financial Advisory Services for LTCP1316 COUNTY -CITY BUILDING
227 W. JEFFERSON BOULEVARD
SOUTH BEND. INDIANA 46601-1930
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CITY OF SOUTH BEND PETE BUTTIGIEG, MAYOR
BOARD OF PUBLIC WORKS
December 11, 2018
John Julien
H.J. Umbaugh & Associates
112 IronWorks Avenue, Suite C
Mishawaka, IN 46544
RE: Municipal Advisory Services
Dear Mr. Julien:
PHONE 574/ 235-9251
FAx 574/ 235-9171
The Board of Public Works, at its meeting held on December 11, 2018, approved the above
referenced agreement regarding financial advisory services for the Long Term Control Plan
Capital Funding Plan in the amount of $25,000.
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,
Fy
Linda M. Martin. Clerk
Enclosure
GARY A. GILOT SUZANNAM.FRITZBERG ELIZABi-.-,"rt-iA.MARAD1K JAMES A. MUELLER THERESE J. DoRAu
H. J. Umbaugh & Associates
Certified Public Accountants, LLP
112 Iron Works Avenue
Suite C
Mishawaka, IN 46544
Phone: 574-935-5178
Fax: 574-935-5928 November 21, 2018
www.umbaugh.com
Mr. Kieran Fahey, Director Long -Term Control Plan
Department of Public Works
City of South Bend
227 W Jefferson Blvd, Suite 1316
South Bend, IN 46601
Re: South Bend (Indiana) Municipal Sewage Works — Proposed Municipal Advisory Services
— Preliminary Rate Study and Capital Funding Plan
Dear Mr. Fahey:
Thank you for requesting that H.J. Umbaugh & Associates, Certified Public Accountants, LLP (the "Firm")
provide to the City of South Bend, Indiana (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) requires 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.
13ifli� lragedtim
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. 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, the scope of services provided in Exhibit A will
terminate 60 days after completion of the services in each Article.
Mr. Kieran Fahey, Director Long -Term Control Plan
Department of Public Works
City of South Bend
Re: South Bend (Indiana) Municipal Sewage Works — Proposed Municipal Advisory Services
— Preliminary Rate Study and Capital Funding Plan
November 21, 2018
Page 2
Accountants' Opinm� p
In performing our engagement, we will be relying on the accuracy and reliability of information provided
by Client personnel. The services provided may include financial advisory services, consulting services,
and accounting report services such as compilation, preparation, and agreed upon procedures reports.
Please see Exhibit A and Exhibit D. 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 procedures we perform in our engagement will be heavily influenced by the representations that we
receive from Client personnel. Accordingly, false representations could cause material errors to go
undetected. The Client, therefore, agrees to indemnify and hold us harmless for any liability and all
reasonable costs (including legal fees) that we may incur in connection with claims based upon our failure
to detect material errors resulting from false representations made to us by any Client personnel and our
failure to provide an acceptable level of service due to those false representations.
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 Firm'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 terms and
conditions of this letter shall remain in effect.
1...VerifyProgram
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).
Mr. Kieran Fahey, Director Long -Term Control Plan
Department of Public Works
City of South Bend
Re: South Bend (Indiana) Municipal Sewage Works — Proposed Municipal Advisory Services
— Preliminary Rate Study and Capital Funding Plan
November 21, 2018
Page 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.
ugicipa Advisor Re&)j (rjation
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.
Mediation Provision
The Client and the Firm agree that if any dispute (other than our efforts to collect any outstanding invoice(s))
arises out of or relates to this engagement, or any prior engagement we may have performed for you, and
if the dispute cannot be settled through informal negotiation, the parties agree first to try in good faith to
settle the dispute by mediation administered by the American Arbitration Association under its Commercial
Mediation Procedures (or such other administrator or rules as the parties may mutually agree) before
resorting to litigation. The parties agree to engage in the mediation process in good faith once a written
request to mediate has been given by any party to the engagement. Any mediation initiated as a result of
this engagement shall take place in Mishawaka, Indiana, or such other location as the parties may mutually
agree. If the parties are unable to mutually agree on the selection of a mediator, the mediator shall be
determined in accordance with the American Arbitration Association's Commercial Mediation Procedures.
The results of any such mediation shall be binding only upon a written settlement agreement executed by
each party to be bound. Each party shall bear its own costs and fees, including attorneys' fees and expenses,
in connection with the mediation. The costs of the mediation, including without limitation the mediator's
fees and expenses, shall be shared equally by the participating parties. Any ensuing litigation shall be
initiated and maintained exclusively before any state or federal court having appropriate subject matter
jurisdiction located in Mishawaka, Indiana.
Other Financial lnduu�Il _ c.t.Ivurtie 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.
Mr. Kieran Fahey, Director Long -Term Control Plan
Department of Public Works
City of South Bend
Re: South Bend (Indiana) Municipal Sewage Works — Proposed Municipal Advisory Services
— Preliminary Rate Study and Capital Funding Plan
November 21, 2018
Page 4
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 of South Bend, Indiana.
Very truly yours,
H.J. Umbaugh & Associates
Certified Public AccouaAts, LLP
ulien, Partner
The undersigned hereby acknowledges andree to the going letter of engagement..
City of South Bend, Indiana
Date: By: A.111040V&D
EC I z3ol a
Exhibit A
Services Provided
Stove of Services
The Firm agrees to furnish and perform the following services with respect to the preparation of
the preliminary rate study for the Client.
Article I. Preliminar late Study and Capital Funding Plan (Compilation Accountid
and Municil2al AdvisoEy Services
A. Compile from available records, historical balance sheets and/or historical
recorded financial information for the most recent twelve (12) month period
(the "test year").
B. Detail from available records a schedule of flow of funds for the test year for
the purpose of determining trends, amounts of revenue, operation and
maintenance expenses, debt service requirements and expenditures for
improvements to the utility property and plant.
C. From representatives of the Utility obtain information related to the proposed
capital projects including estimated construction costs and estimate impacts
on operation and maintenance expenses.
D. Prepare estimated debt service requirements for the proposed capital projects
assuming open market financing and the various financing options offered by
the State Revolving Fund Loan Program.
E. Using the analysis developed above prepare:
1. The calculated adjustment to rates and charges needed to fund the
utility's revenue requirements.
2. To the extent the impact to rates calculated above exceeds the Client's
proposed thresholds assist with the development of modifications to
the capital improvement plan that might reduce the expected rate
impact to meet the Client's targeted rates.
F. During development of and upon completion of the study, attend meetings with the
Client to discuss findings and recommendations.
Exhibit B
Fees
The Firm's fees for services set forth in Exhibit A will be billed at the Firm's standard billing rates based
upon the actual time and expenses incurred and will not exceed Twenty Five Thousand Dollars ($25,000)
without further authorization from the Client.
Standard Hourly Rates by Job Ciassifiication,
1/l/2018
Partners / Principals $240.00 to $550.00
Managers $200.00 to $325.00
Senior Consultants $150.00 to $250.00
Consultants $135.00 to $200.00
Municipal Bond Disclosure Specialists $120.00 to $190.00
Support Personnel $110.00 to $150.00
Interns $90.00 to $110.00
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
mileage which will be billed on a separate line item. 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.
Exhibit 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 of Interest — 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.
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 Firm'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 Firm 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.
II. Compensation -Based Conflicts. 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.
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.
Exhibit C
Disclosure Statement of Municipal Advisor cont'd
PART 13 — Disclosures of Information Re ardint .Legal Events and Discinlinary Histor
MSRB Rule G-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 -I filed with the SEC.
II. How to Access Form MA and Form MA -I Film. The Firm's most recent Form MA and each most
recent Form MA -I filed with the SEC are available on the SEC's EDGAR system at
NiItjL4 ^ wjy:s c. v/ t-bin/bro.wK.s -_edwk°? t%o cc n Baia &CjK=0001610268.
III. Most Recent Change in Legal or Disciplinary,Event Disclosure. The Firm has not made any material
legal or disciplinary event disclosures on Form MA or any Form MA -I filed with the SEC.
PART C -- Future Su alernental '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.
PART D —Rule G-10: Investor and Municipal Advisory Client Education and Protection
MSRB Rule G-10 requires that municipal advisors to notify their clients of the availability of a client
brochure on the MSRB's website that provides information on the processes for filing a client complaint.
Accordingly, the Firm sets out below the required information.
I. The Firm is registered as a Municipal Advisor with the Securities and Exchange Commission (867-
00278) and the Municipal Securities Rulemaking Board (K0171).
II. The website address for the Municipal Securities Rulemaking Board is www.msrb.org.
III. The website for the Municipal Securities Rulemaking Board has a link to a brochure that describes (i)
the protections that may be provided by the Municipal Securities Rulemaking Board rules and (ii)
describes how to file a complaint with an appropriate regulatory authority.
Exhibit D
Compilation r g
*Darn a�l�ation Accounting Services
Compilation of Historical Financial Statements
Our Resoonsibilities:
The objective of our engagement is to apply accounting and financial reporting expertise to assist you in
the presentation of financial statements without undertaking to obtain or provide any assurance that there
are no material modifications that should be made to the financial statements in order for them to be in
accordance with accounting principles generally accepted in the United States of America or the cash basis
pf accounting based on information provided by you.
We will conduct our compilation engagement in accordance with the Statements on Standards for
Accounting and Review Services (SSARS) promulgated by the Accounting and Review Services
Committee of the AICPA and comply with the AICPA's Code of Professional Conduct, including the ethical
principles of integrity, objectivity, professional competence, and due care when performing the compilation
engagement.
We are not required to, and will not, verify the accuracy or completeness of the information you will provide
to us for the engagement or otherwise gather evidence for the purpose of expressing an opinion or a
conclusion. Accordingly, we will not express an opinion or a conclusion nor provide any assurance on the
financial statements.
Our engagement cannot be relied upon to identify or disclose any financial statement misstatements,
including those caused by fraud or error, or to identify or disclose any wrongdoing within the entity or
noncompliance with laws and regulations.
We in our sole professional judgement, reserve the right to refuse any procedure or take any action that
could be construed as assuming management responsibilities.
Your Responsibilities:
The engagement to be performed is conducted on the basis that you acknowledge and understand that our
role is to assist you in the presentation of the financial statements in accordance with accounting principles
generally accepted in the United States of America or with the cash basis of accounting. You have the
following overall responsibilities that are fundamental to our undertaking the engagement in accordance
with SSARS:
l . The selection of the cash basis of accounting or accounting principles generally accepted in the
United States of America as the financial reporting framework to be applied in the preparation
of the financial statements.
I The preparation and fair presentation of financial statements in accordance with the cash basis
of accounting or accounting principles generally accepted in the United States of America.
I The election to omit substantially all disclosures normally included in the financial statements
in accordance with the cash basis of accounting or accounting principles generally accepted in
the United States of America.
Exhibit D
Compilation Accounting Services_(con 1d)
4. The design, implementation, and maintenance of internal control relevant to the preparation
and fair presentation of the financial statements.
5. The prevention and detection of fraud.
6. To ensure that the Client complies with the laws and regulations applicable to its activities.
7. The accuracy and completeness of the records, documents, explanations, and other information,
including significant judgments, you provide to us for the engagement.
8. To provide us with —
access to all information of which you are aware is relevant to the preparation and fair
presentation of the financial statements, such as records, documentation, and other
matters.
additional information that we may request from you for the purpose of the compilation
engagement.
+� unrestricted access to persons within the Client of whom we determine it necessary to
make inquiries.
You are also responsible for all management decisions and responsibilities and for designating an individual
with suitable skills, knowledge, and experience to oversee our compilation of your financial statements.
You are also responsible for evaluating the adequacy and results of the services performed and accepting
responsibility for such services.
Camp• l epoft:
As part of our engagement, we will issue a report that will state that we did not audit or review the financial
statements and that, accordingly, we do not express an opinion, a conclusion, nor provide any assurance on
them. If, for any reason, we are unable to complete the compilation of your financial statements, we will
not issue a report on such statements as a result of this engagement.
You agree to include our accountant's compilation report in any document containing financial statements
that indicates that we have performed a compilation engagement on such financial statements and, prior to
the inclusion of the report, to ask our permission to do so.
BOARD OF PUBLIC WORKS
AGENDA ITEM REVIEW REQUEST FORM
Date
Name
12/03/2018
Kieran Fa
Department Public Works
BPW Date 12/11/2018 Phone Extension 5993
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___�,.,�..._._...._ required Prior to Submittal to Board_
_.._.. Legal ® Attorney Name Clara McDaniels
Controller ❑I Controller review is required for all Contracts $5,000.00 or more anc
greater than one year in length per the City Purchasing Policy
Purchasing
Check the
H Agreement
Professional Services
E] Bid Opening
El Quote Opening
❑] Change Order No. _
El Ease/Encroach.
E] Other:
.........................................
ariate Item Tie
Contract
Resolution
F] Bid Award
❑ Quote Award
❑ C/O &PCANo.
❑ Traffic Control
Company or Vendor Name: Umbaugh
for All Submissions
1 Proposal Addendum
❑'' Req. to Advertise ❑ Title Sheet
uired Information
❑ PCA
New Vendor ❑ Yes ® No ❑ If Yes, Approved by Purchasing
MBE/WBE Contractor ❑ MBE ❑ WBE
MBE/MBE Contractor Requested ® No ❑ Yes Name of Company
Project Name LTCP capital funding Ian
Project Number NA
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Funding Source Wastewater (LTCP)_mmmm mmm�
Account No. 641-0630-793-31-02
Amount
$ 25,000
Terms of Contract
Purpose/Description
Financial advisory services
❑ Required Contractor's Certification Form Attached (Non -
Collusion, Non -Discrimination„ Non -Debarment, E-Verify, Iran, etc.
f!g iredfor Cam Orders Only �.mm ....._....
Amount of � Increase
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New Amount
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Dispersal After Approval
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