HomeMy WebLinkAbout6B(1) /W Department of
PEACE
Community Investment
1865
Memorandum
December 22, 2014
TO: Redevelopment Commission
FROM: Scott Ford, David Relos OV/
SUBJECT: 2015 Infrastructure Bond Professional Services Agreements
Faegre Baker Daniels and H.J. Umbaugh &Associates
These professional services agreements are for consulting and financial analysis for the
proposed TIF backed-bond to fund infrastructure improvements as part of the City's
overall Smart Streets initiative, including the south and west side's corridors. Standard
procedure is to have bond issuance fees be paid from bond proceeds, so these initial fees
will not have a direct out of pocket cost.
This bond is consistent with the inter-related aims of: Fiscal stewardship; Economic
development; and, a Plan-driven redevelopment agenda, and will allow the City to
strategically focus its resources on current priorities.
The Umbaugh proposal contains three Scope of Services. They are:
• Article I: initial analysis through bond issuance and sale
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o $75,000
• Article II: annual preparation of materials required by SEC Rule 15(c)2-12
o $5,500 per year
• Article III: arbitrage rebate services as required by Section 148 of the Internal
Revenue Code; due on 5 year anniversary date (Umbaugh to track)
o $6,000 every 5 years
The Faegre Baker Daniels proposal is for legal counsel necessary for the bond issuance
and sale, and is $63,500. Additionally, filing fees, printing costs, etc. would be billed at
their actual or indirect cost.
Based on a preliminary schedule, it is anticipated that the bond sale would occur in the
third week of March, with their closing the first to second week of April.
Staff requests Commission approval for the engagement of these two firms to assist
throughout the bond issuance AM and sales process.
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227 W.JEFFERSON BLVD. SOUTH BEND, IN 46601 1 P: 574-235-9371 1 FAX: 574-235-9021 1 SOUTHBENDIN.GOV
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FaegreBD.com FAEGRE RWER USA UK CHINA
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Richard L,Hill Faegre Baker Daniels LLP
Partner 202 South Michigan Street.Suite 1400
richard,hill @FaegreBD,com South Bend.Indiana 46601-2020
Direct+1574 239 1937 Phone+1574 234 4149
Fax+1574 239 1900
December 4, 2014
< VIA ELECTRONIC MAIL: SFORDASOUTHBENDIN.GOV
Scott Ford
City of South Bend
227 West Jefferson Boulevard, Suite 1400 S
t South Bend, IN 46601
Re: Engagement Letter to Serve as Bond Counsel for Proposed TIF Infrastructure Bond
Dear Scott:
We appreciate the opportunity to represent the South Bend Redevelopment Authority (the "Authority")
as bond counsel in connection with the proposed issuance of its lease rental revenue bonds (the 'Bonds")
for the proposed infrastructure project (the "Project"). By this letter, we confirm various matters
concerning our engagement.
1. As you requested, we will serve as bond counsel in connection with the issuance of the Bonds
and such other matters as we may accept at your request from time to time. As part of our
responsibilities as bond counsel, we will take all steps necessary to prepare or assist in the preparation of
the required legal documents related to the issuance of the Bonds, including the lease with the
Redevelopment Commission and the necessary approvals thereof, review certified proceedings of the
Commission and the Authority, and prepare all closing documents, certificates and instruments,
including our legal opinion with regard to the authorization and validity of the Bonds and the exclusion
or exemption of interest on the Bonds from gross income for purposes of federal and Indiana taxation,
We also will perform such additional tasks as we deem necessary in order to render our opinion as bond
counsel. Our standard activities as bond counsel generally do not include any post-closing compliance
under federal tax laws or under federal securities laws regarding continuing disclosure.
2. From time to time, in the exercise of our professional judgment, we may conclude that it is
"t desirable to share confidential information concerning your representation with professionals and other
service providers outside the firm whom we have engaged to assist in representing you or with personnel
of our consulting groups (some of whom may be designated as paralegals to directly assist in providing
legal services to you). We will take appropriate steps to preserve the confidentiality of such information
and this confirms your consent to our sharing such information.
US.55314761.01
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Scott Ford -2- December 4, 2014
3. Our fees will be based principally on the experience of the people providing services to you, and
the actual hours worked. In light of (i) our understanding of the structure and complexity of the
financing; (ii)the duties we will undertake pursuant to this engagement letter; (iii)the amount of
attorney time we anticipate will be devoted for the financing; and (iv)the legal responsibilities that we
will assume,we agree to provide services as bond counsel with respect to the issuance of the Bonds for a
fee of not to exceed $63,500. In the event that circumstances so significantly change that we do not
believe it possible to complete our services at such a fee amount, we will, of course, discuss an alternate
fee arrangement with you before proceeding.
4. Various costs--for example, international long-distance telephone charges, certain copying and
printing costs (at $0.15 per page), filing fees, and an allocation of our costs for certain computerized
research--will be billed to your account in addition to our fees for services. The amounts we charge
generally reflect our actual direct and indirect costs, but some amounts may be more or less than our
actual costs.
5. We agree not to seek payment for our fees and expenses until the later of the bond closing or it is
determined that the financing will not proceed. In addition, if our engagement is terminated by either
one of us for any reason, you will, of course, remain obligated to pay us all fees and other charges up to
the termination date. Our invoices are due on receipt. Please contact me if you have questions about
any of them.
6. This conf i-ns our agreement with you that either you or we may terminate this engagement at
any time, with or without cause, and without further obligation by either you or us (other than our
obligation to return to you any unused retainer balance, if any, and any of your documents or other
property then in our possession and, if we are then representing you in any litigation, any obligation that
1 may be imposed by rules of the court in which such litigation is then pending, and your obligation to pay
us the unpaid balance of any billed or unbilled fees and costs that are then accrued). This engagement
will also terminate upon completion of the matters for which we have been engaged.
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7. Unless you request in writing that we deliver files for a matter to you (or transfer the files to
other counsel)within ten years after our involvement in the matter has ended,we will have no obligation
to retain the files, and we may destroy them without further notice to you.
r Thank you again for selecting us to represent you. We look forward to working with you.
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Sincerely,
FAEGRE BAKER DANIELS LLP
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Richard L. Hill
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US.55314761.01
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UMBAUGH
H.J.Umbeugh&Associates
Certified Publk Acwuntants,LLP
122 I=Works Avenue
Suite C
Mishawaka IN46544
Phone;574-935-5278
Fax:574 935-5428 December 1, 2014
www.umtlaup.com
Mr. Scott Ford, Executive Director
Department of Community Investment
City of South Bend
227 West Jefferson Blvd, Suite 1400 S
South Bend, IN 46601
Re: Proposed Financial Advisory Services
Dear Mr. Ford:
You have requested that H.J. Umbaugh & Associates, Certified Public Accountants, LLP (the "Firm")
provide to the City of South Bend Redevelopment Commission (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.
In addition to fees, we also charge for various ancillary services, for which you will be invoiced. Such
charges may include long distance telephone charges, photocopying, facsimile transmission, computer
research, mileage,travel expenses and other similar charges specifically applicable to 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. 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.
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Mr. Scott Ford, Executive Director
Department of Community Investment
Proposed Financial Advisory Services
December 1,2014
Page 2
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.
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.
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Additional Services
1 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.
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
s 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).
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Mr. Scott Ford, Executive Director
Department of Community Investment
Proposed Financial Advisory Services
December 1, 2014
Page 3
Investments
The Firm certifies that pursuant to Indiana Code 5-2246.5 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.
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.
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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.
` Very truly yours,
H.J. Umbaugh & Associates
Certified Public Accountants, LLP
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To A. Samuelson, Partner
The undersigned hereby acknowledges and agrees to the foregoing letter of engagement.
City of South Bend Redevelopment Commission
Date: By:
Marcia I. Jones, President
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EXHIBIT A
Services Provided
Scone of Services
Article I. The Firm agrees to furnish and perform planning and development services as follows:
A. Feasibility Analysis
1. Obtain real and depreciable personal property (if applicable)assessed value
information from the County Auditor's office for the purpose of estimating
the amount of tax increment ("TIF") revenues to be generated from
existing development.
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2. Obtain estimates of real property investment from Client representatives
for the purpose of estimating the amount of TIF revenues to be generated
from any proposed developments.
3. Estimate the amount of bonds that might be supported by the estimated
annual TIF revenues, assuming a property tax backup as a credit
enhancement.
4. Develop funding options for the financing of all proposed projects.
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B. Proposed Bond Structure, Terms and Conditions
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1. Establish in conjunction with the Client and their representatives, legal
counsel and other professionals a budget of project costs.
I 2. Discuss financing options with respect to bond financings or lease
financings, sources of repayment and explore options for securing the
bonds such as tax increment or property taxes as well as bond structuring
options.
3. Prepare preliminary financing schedules and financial analysis, showing
the financial feasibility of issuing bonds payable from the estimated TIF
revenues and/or property taxes.
4. Assist in the determination of the par amount of the Bonds to be issued,the
length of the amortization period of the bonds, estimated capitalized
interest, bond coverage, additional bonds tests and parity conditions, bond
redemption privileges, debt service reserve requirements, estimated interest
earnings, and other bond terms.
5. Provide attorneys with financial information and bond terms needed in the
preparation of the bond ordinance, TIF pledge resolution, trust indenture
and other legal documents required for the projects and the bonds.
6. Attend such meetings of the working group, Client and their attorneys,
advisors, and bond counsel as may be required to discuss and explain the
financing of the projects and obtain bond approvals.
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C. Assist with the Marketing,and Sale of the Bonds
1. Advise the Client and their attorneys as to the terms and conditions for best
meeting the bond market requirements for a successful sale of the bonds.
Prepare a bond financing term sheet to use in preliminary discussions with
potential banks and underwriters.
2. Provide an accounting report relating to the financing of the projects,
including all funds on hand or available for the Projects, terms and
conditions of borrowing, bond amortization schedules, revenue projections,
flow of funds statements, interest earnings calculations, and other data
t needed in the evaluation of financial planning by bond rating agencies,
bond underwriters, and bond purchasers.
3. Prepare and distribute, on behalf of the Client, bond disclosure documents
for marketing the bonds. Depending on the security and type of Bonds
being offered, this will entail preparation of a Preliminary and Final
Official Statement, a Private Placement Memorandum, or a Special
Purpose Report.
4. If applicable, provide information to bond rating agencies such as Moody's
Investors Service and/or Standard & Poor's, and to bond insurance
companies as may be necessary for the establishment of a rating and
determination of qualification for insurance on the bonds.
5. If applicable, provide additional information to underwriters or others as
i may be needed throughout the period between advertising and sale of the
bonds.
6. Conduct the Bond sale, receiving competitive bids from banks and
underwriters, make computations as to the bid with the lowest net interest
cost and recommend such bid for acceptance by the Client. In the
alternative, assist the Client with the selection of a bond underwriter or
bond placement agent, and assist with the negotiation of bond pricing and
final bond terms.
7. Prepare instructions related to closing and delivery of the bonds including
distribution of proceeds, flow of funds, and procedures for repayment of
the bonds.
8. As needed, provide a Parity Report in the form generally prepared for the
issuance of Bonds, on a par with outstanding bonds.
Article II. Continuing Disclosure
If the Bonds and any outstanding bonds are not exempt from requirements of SEC Rule
15(c)2-12, the Firm, if so desired by the Client, will assist the Client with the annual
preparation of materials required for compliance with the Securities and Exchange
Commission Rule 15(c)2-12 as described within a Continuing Disclosure Undertaking
Agreement, including:
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A. Compiling operating data of the type included within the Official Statement and
described within the Continuing Disclosure Undertaking Agreement.
a B. Providing the above-described data to the nationally recognized municipal
securities information repositories, and state repository (if established).
C. Assisting the Client in the monitoring of material events as described within the
Continuing Disclosure Undertaking Agreement by semiannually compiling such
required information from questionnaires to be completed by the Client.
Article III. Arbitrage 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. Obtain information from bond offering documents, information returns filed
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.
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B. We will render 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
,I 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.
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EXHIBIT B
Fees
The Firm's fees for services set forth in Exhibit A shall be billed at the Firm's standard billing rates, as
follows:
A. For services provided as set forth in Article I, fees shall not exceed Seventy Five
Thousand Dollars ($75,000)without further authorization by the Client.
B. For services provided as set forth in Article II, the fees shall not exceed Five
Thousand Five Hundred Dollars($5,500)per year, as applicable.
C. For services provided as set forth in Article III, the fees shall not exceed Six
;l Thousand Dollars($6,000)per applicable bond issue calculation.
The above fees shall include all expenses incurred by the Firm with the exception of expenses incurred
for out of state travel. 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 of Conflicts of Interest with Various Forms of Compensation
The forms of compensation for municipal advisors vary according to the nature of the engagement and
requirements of the client, among other factors. Various forms of compensation present actual or
potential conflicts of interest because they may create an incentive for an advisor to recommend one
course of action over another if it is more beneficial to the advisor to do so. This exhibit discusses
various forms of compensation and the timing of payments to the advisors.
Fixed fee. Under a fixed fee form of compensation, the municipal advisor is paid a fixed amount
established at the outset of the transaction. The amount is usually based upon an analysis by the client and
the advisor of, among other things, the expected duration and complexity of the transaction and the
agreed-upon scope of work that the advisor will perform. This form of compensation presents a potential
conflict of interest because, if the transaction requires more work than originally contemplated, the
advisor may suffer a loss. Thus, the advisor may recommend less time-consuming alternatives, or fail to
do a thorough analysis of alternatives. There may be additional conflicts of interest if the municipal
advisor's fee is contingent upon the successful completion of a financing, as described below.
Hourly fee. Under an hourly fee form of compensation, the municipal advisor is paid an amount equal to
the number of hours worked by the advisor times an agreed-upon hourly billing rate. This form of
compensation presents a potential conflict of interest if the client and the advisor do not agree on a
reasonable maximum amount at the outset of the engagement, because the advisor does not have a
financial incentive to recommend alternatives that would result in fewer hours worked. In some cases, an
hourly fee may be applied against a retainer(e.g., a retainer payable monthly), in which case it is payable
whether or not a financing closes. Alternatively, it may be contingent upon the successful completion of a
financing, in which case there may be additional conflicts of interest, as described below.
Fee contingent upon the completion of a financing or other transaction. Under a contingent fee form
of compensation, payment of an advisor's fee is dependent upon the successful completion of a financing
or other transaction. This form of compensation presents a conflict because the advisor may have an
incentive to recommend unnecessary financings or financings that are disadvantageous to the client. For
example, when facts or circumstances arise that could cause the financing or other transaction to be
delayed or fail to close, an advisor may have an incentive to discourage a full consideration of such facts
and circumstances, or to discourage consideration of alternatives that may result in the cancellation of the
financing or other transaction.
Fee paid under a retainer agreement. Under a retainer agreement, fees are paid to a municipal advisor
periodically (e.g., monthly) and are not contingent upon the completion of a financing or other
transaction. Fees paid under a retainer agreement may be calculated on a fixed fee basis (e.g., a fixed fee
per month regardless of the number of hours worked) or an hourly basis (e.g., a minimum monthly
payment, with additional amounts payable if a certain number of hours worked is exceeded). A retainer
agreement does not present the conflicts associated with a contingent fee arrangement(described above).
Fee based upon principal or notional amount and term of transaction. Under this form of
compensation, the municipal advisor's fee is based upon a percentage of the principal amount of an issue
of securities (e.g., bonds) or, in the case of a derivative, the present value of or notional amount and term
of the derivative. This form of compensation presents a conflict of interest because the advisor may have
an incentive to advise the client to increase the size of the securities issue or modify the derivative for the
'1 purpose of increasing the advisor's compensation.
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