8.E.
City Council Meeting - FINAL (AMENDED)
- Meeting Date:
- 06/02/2020
- From:
- Rick Tadder, Management Services Director
Information
TITLE:
Consideration and Approval of Contract: Cooperative Purchase Contract with Greenberg Traurig, LLP to provide Bond Counsel services for issuing Certificate of Participation debt in an amount not to exceed $125,000.
STAFF RECOMMENDED ACTION:
- Approve the cooperative purchase contract for Bond Counsel services through Greenburg Traurig LLP for a fee of $1.00 per $1,000 of bond par issuance and an amount not to exceed $125,000 utilizing a cooperative purchase agreement through the Chandler Unified School District #80, RFP #01-18-022; and
- Authorize the City Manager to execute the necessary documents.
Executive Summary:
The City of Flagstaff is anticipating issuing approximately $125 million in Certificate of Participation Bonds, Series 2020 in August 2020. When issuing bonds of this type, it is not only considered customary but in the best interest of the agency issuing the bonds to contract with a Bond Counsel firm, such as Greenberg Traurig, LLP ("Bond Counsel" or "Greenberg"). A bond counsel attorney is an essential member of a governmental issuers bond financing team. Bond Counsel renders an opinion on the validity of the bond offering, the security for the offering, and whether to and to what extent interest on the bonds are exempt from income and other taxation. The opinion of Bond Counsel provides assurance to both issuers and to investors, who purchase the bonds, that all legal and tax requirements relevant to the matters covered by the opinion are met.
Financial Impact:
Fees paid to bond counsel firm for services rendered are often based on the value of each bond issuance. Given the anticipated bond issuance of approximately $125 million, in Certificate of Participation Bonds, the bond counsel fee is approximately $125,000. This is the maximum amount. Should the city issue more debt, it will remain at $125,000, and should the city issue less debt the fee would be reduced.
Per the Cooperative Purchase Contract, the fees set forth in the procurement would have been estimated at $1.50 per $1,000 of bond par issuance which would have been an estimated cost of $187,500. Staff negotiated the fees for the services with Greenberg and will be saving approximately $62,500.
Per the Cooperative Purchase Contract, the fees set forth in the procurement would have been estimated at $1.50 per $1,000 of bond par issuance which would have been an estimated cost of $187,500. Staff negotiated the fees for the services with Greenberg and will be saving approximately $62,500.
Policy Impact:
None.
Connection to Council Goal, Regional Plan, CAAP, and/or Strategic Plan:
Council Goals:
- Personnel: Attract and retain quality staff - Evaluate ways to pay down unfunded pension liabilities in a quick manner
- Invest in Our People
- Foster a Resilient and Economically Prosperous City
Has There Been Previous Council Decision on This:
No.
Options and Alternatives:
- Approve cooperative purchase contract as recommended,
- Conduct our own City procurement process. This will substantially delay the timing of issuing debt to pay down our pension liability.
- Not approve this cooperative purchase contract. This will shift the responsibility in-house for our legal staff and potentially delay the issuing debt to pay down our pension liability.
Background and History:
The City of Flagstaff has been seeing a continual increase in our Unfunded Actuarial Accrued Liability (UAAL). Since June 30, 2002, the UAAL has increase to a June 30, 2019, UAAL of $111,827,764. There have been administrating policy to help address the annual growth. For the fiscal year 2020, the Council adopted its first pension policy.
During this fiscal year, there have been several Council discussions about the PSPRS UAAL and Council sought staff recommendations to address the UAAL. Staff introduced Pension Bonds opportunities as part of the potential 2020 Ballot Measures. Since that point, staff has worked with Greenberg and PSPRS Administration to discuss how Pension Bonds could address the UAAL. Staff came forward at the April Budget Retreat and provided the option of issuing Pension Bonds in the form of a Certificate of Participation debt. Staff received direction from Council to bring forward an ordinance to issue Certificate of Participation debt to address our UAAL with the potential of having both Fire and Police plans move from less than 40% funded to 100% funded.
Issuing contracts for an Underwriter Services and for Bond Counsel like Greenberg is the first step to move forward.
During this fiscal year, there have been several Council discussions about the PSPRS UAAL and Council sought staff recommendations to address the UAAL. Staff introduced Pension Bonds opportunities as part of the potential 2020 Ballot Measures. Since that point, staff has worked with Greenberg and PSPRS Administration to discuss how Pension Bonds could address the UAAL. Staff came forward at the April Budget Retreat and provided the option of issuing Pension Bonds in the form of a Certificate of Participation debt. Staff received direction from Council to bring forward an ordinance to issue Certificate of Participation debt to address our UAAL with the potential of having both Fire and Police plans move from less than 40% funded to 100% funded.
Issuing contracts for an Underwriter Services and for Bond Counsel like Greenberg is the first step to move forward.
Community Benefits and Considerations:
Staff worked with Greenberg and negotiated a fee for this debt issuance. Per the Cooperative Purchase Contract, the fees set forth are $1.50 per $1,000 of bond par issuance which would have been an estimated cost of $187,500 based on $125 million of par bonds issued. Staff negotiated the fees for the services and will be saving $62,500 based on the $125 million of par bonds issued and there is a not to exceed cost of $125,000.
Community Involvement:
By utilizing businesses that have great knowledge in debt issuance within the State of Arizona, the city benefits by having the assurance that the transactions are completed with the highest legal assurances and the documents are completed accurately.
By issuing pension bond debt the City is able to address the PSPRS UAAL and provide level debt service payments. Without the pension bonds, the City could see the UAAL continue to increase, and the annual required minimum payment increase.
By issuing pension bond debt the City is able to address the PSPRS UAAL and provide level debt service payments. Without the pension bonds, the City could see the UAAL continue to increase, and the annual required minimum payment increase.
Expanded Options and Alternatives:
Inform.