Consideration and Approval of Cooperative Contract:   Enter into a contract with RBC Capital Markets, LLC of Phoenix, Arizona to purchase Bond Underwriting Services.

The City of Flagstaff is anticipating issuing approximately $18.2 million in General Obligation Bonds, series 2016 and approximately $10 million in Pledged Revenue Obligations, series 2016 in July of 2016.  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 an Underwriting firm.  

The scope of services to be rendered to the City, by a managing underwriter firm typically includes, but not limited to, the following:

1.  Review and comment on the projected financing schedule as it relates to the proposed transaction;
2.  Develop financing alternative structures, couponing and call features;
3.  Assist, as directed, in the review of preliminary and final official statements and appropriate legal documents for the financing;
4.  Prepare a marketing plan for selling the bonds and act as a principal in the underwriting or distribution of such bonds; and
5.  Provide such other related services as may be necessary or deemed desirable by the City and assist the City, the Financial Advisor and Bond Counsel in other matters as necessary to ensure the successful marketing of the debt obligations.

Fees paid to an underwriter firm for services rendered are based on the value of each bond issuance.  These fees are allocated to the specific projects that the bonds are issued for.  Given the anticipated bond issuance of approximately $18.2 million, in General Obligation Bonds and approximately $10 million in Pledged Revenue Obligations, the total fee paid to RBC is projected to be approximately $100,088.

COUNCIL GOALS
2) Ensure Flagstaff has a long-term water supply for current and future needs
3) Provide sustainable and equitable public facilities, services, and infrastructure systems in an efficient and effective manner to serve all population areas and demographics
6) Provide a well-managed transportation system
11) Ensure that we are as prepared as possible for extreme weather events

REGIONAL PLAN:
Goal OS.1.  The region has a system of open lands, such as undeveloped natural areas, wildlife corridors and habitat areas, trails, access to public lands, and greenways to support the natural environment that sustains our quality of life, cultural heritage, and ecosystem health.
Goal WR.6.  Protect, preserve, and improve the quality of surface water, groundwater, and reclaimed water in the region.
Goal LU.7. Provide for public services and infrastructure.
Goal T.4.  Promote transportation infrastructure and services that enhance the quality of life of the communities within the region.
Goal REC.1.  Maintain and grow the region’s healthy system of convenient and accessible parks, recreation facilities, and trails.
 

No.

1.  Approve contract as recommended;
2.  Conduct our own competitive City RFP process; or
3.  Not approve this contract and not purchase Underwriting Services. 

The City currently has outstanding authorization of voter approved debt.  As the City projects incur expenses that are debt eligible, the City will have a need to issue bonds for this authorized debt.  The City will need to issue revenue bonds for the Road Repair and Street Safety projects and general obligation bonds for the Core Facility, Open Space, and Watershed Protection projects. 

When issuing debt, the City will contract with an Underwriting firm to provide services such as developing financing structures, timing of issuance, marketing plans, and distribution of the bonds.  With the assistance of our Financial Advisor, Stifel, Nicolaus & Company, we reviewed the State Contract cooperative purchase agreement options and due to the multiple firms on State Contract, we developed a formal Request for Information (RFI) process in an effort  to make more of an informed decision on our selection.  We delivered the RFI to all eleven (11) firms on State Contract and received a total of five (5) responses back.  The review team consisted of our Financial Advisors, Rick Compau, Purchasing Director, and Rick Tadder, Management Services Director.  RBC Capital Markets (RBC) provided the highest ranking responses for all three reviewers.  The City has contracted with RBC for several past transactions in the Underwriter role.  RBC has consistently provided an excellent level of service. 

The City will be considering the issuance of $10,000,000 in Revenue Bonds for the Road Repair and Street Safety projects and $18,200,200 in General Obligation Bonds for the Core Facility, Open Space and Watershed Protection projects.  Firms responding to the RFI were asked to provide quotes for services that could include services for each bond offering individually or if the firm is selected to provide services for both bond offerings.  Costs are reduced when a firm assists with multiple offerings.  RBC's offer to issue individually was $49,370 for the Revenue Bonds and $71,053 for the General Obligation Bonds for a total cost of $120,423.  By issuing both bonds, RBC's offer was discounted to $100,088 for a savings of $20,335.  The cost to issue bonds are allocated to the specific projects that the bonds are issued for.

Involve - Bonded debt is a result of prior voter approval.