OFFICE OF THE CITY ADMINISTRATIVE OFFICER

Transcription

1 REPORT FROM OFFICE OF THE CITY ADMINISTRATIVE OFFICER Date: To: From: Reference: Subject: August 2, 2011 CAO File No Council File No Council District: 9 The City Council The Mayor Miguel A. Santana, City Administrative Office (} -~ PROPOSED DOWNTOWN EVENT CENTER PROJECT ADVISORY SERVICES- SELECTION PROCESS AND COSTS On July 13, 2011, the City Council (Council) authorized the City Administrative Office (CAO) to receive up to $975,000 from AEG to pay for advisory services related to the Proposed Downtown Event Center Project (Event Center Project) pursuant to C.F. No This report is in response to the Council's request for additional information on the selection process and scope of work (Attachments A and B) for advisory services. Audit Services* $ 100,000 Financial Advisors 280,000 Bond Counsel 595,000 TOTAL $ 975,000 *Provided by Controller's Office The CAO retained Public Resources Advisory Group (PRAG) and KNN Public Finance (KNN) as cofinancial advisors (FAs), and Orrick, Herrington, and Sutcliffe (OHS) to serve as bond and tax counsel, to assist the City with negotiating a debt structure that will be used to finance the construction of the New Hall at the Convention Center. OHS was later replaced by Nixon Peabody (Nixon). The FAs and Nixon were selected through a competitive bid process, which was advertised to members of the City's pre-qualified lists for Financial Advisors and Bond Counsels. The pre-qualified lists are prepared every three years. The FA list was recently approved by the Mayor and City Council (C.F ) and the Bond Counsel list was approved in 2009 by the Mayor and City Council (C.F ). Financial Advisors The FA list includes a pool of advisors qualified to provide financial advisory services for projects that entail a bond financing mechanism. A mini Request for Proposal (RFP) was issued to the firms on the approved FA list. Applicants for the Event Center Project for financial advisory services were

2 PAGE 2 scored by the GAO and CLA staff based on the following criteria: (1) Experience related to stadium, professional sports, major market convention or exhibition facility financings including any California experience; (2) A 12-month market outlook on credit facilities; (3) The firm's strategy and proposed financing for debt defeasance; and (4) Proposed fixed-fees for financial advisory services. The City received the following seven responses and selected PRAG as lead advisor and KNN as assisting co-advisor based on the ranking below: (1) Public Resources Advisory Group (2) KNN Public Finance (3) Peralta Garcia Solutions (4) Scott Balice Strategies (5) Acacia Consulting Group (6) Kitahata & Company (7) Columbia Capital Management The breakdown for FA costs is as follows: Public Resources KNN Advisory Group Public Finance Ne_g_otiations $ 70,000 $ 70,000 Bond Structuring 60,000 40,000 Appraisal 0 40,000 SUB-TOTAL $ 130,000 $ 150,000 TOTAL $ 280,000 Bond and Tax Counsel The City issued a second mini-rfp for bond and tax counsel services to four firms. Applicants for the Event Center Project were scored by both the CAO and City Attorney staff based on the following criteria: (1) Experience related to stadium, professional sports, major market convention or exhibition facility financings including any California experience; (2) Experience as it relates to letters of credit, guaranties, debt defeasance and issuance; (3) Response to feasibility of structuring a deal that has minimum to no impact on the City's

3 PAGE 3 balance sheet; (4) Response to potential tax issues as it relates to the use of Stadium admission fees on tickets sold to be used as a source of repayment on the bonds, and; (5) Proposed fixed-fees for financial advisory services. The City received four responses and selected OHS. However OHS was replaced with Nixon Peabody. The firms were ranked in the following order: (1) Orrick, Herrington, and Sutcliffe (2) Nixon Peabody (3) Squire, Sanders and Dempsey (4) Sidley Austin The breakdown in costs for bond and tax counsel services is as follows: Negotiations $ 250,000 Bond Structuring 345,000 TOTAL $ 595,000 Audit Services The GAO has requested that the Controller hire an independent auditor to review and validate Convention Center parking revenues. The City will use the audit results as part of the Event Center Project financing plan. Audit services may cost up to $100,000. RECOMMENDATION The City Council authorized the CAO to receive an amount up to $975,000 from AEG on July 13, 2011 pursuant to C.F. No S5. Recommend that the City Council receive and file the proposed report. FISCAL IMPACT STATEMENT The authority to receive up to $975,000 in advisory services has no impact on the General Fund. ATTACHMENTS MAS:DM:

4 ATTACHMENT A Financial Advisor- Scope of Services The financial advisor services for the Project shall be performed in two phases. Services during the first phase (the "Structuring Phase") shall consist of the following: 1. Participate in all meetings and conference calls of the financing team as required to structure and negotiate a bond financing or financings (together, the "Financing") for the City Project. 2. Assist with the assessment of the proposed financing, which may include assisting with letters of credit, guaranties, finance generation and the development of a financial plan for debt defeasance and issuance. 3. Provide advice in order to structure the Financing as tax-exempt to the maximum extent possible. If the parties determine to proceed with the Project and the Financing at the end of the Structuring Phase, the intention would be to issue bonds (the "Bonds") to implement the Financing, which Bonds may be tax-exempt or taxable or a combination thereof, in one or more series and pursuant to one or more legal structures (including but not limited to lease revenue bonds and Mello-Roos bonds). The Financial Advisors shall assume primary responsibility for coordinating the planning and execution of the Bonds. In that the Financial Advisors will be acting in the best interests of the City, the overall coordination of the financing shall minimize the costs of the transaction while maximizing the City's financing flexibility and capital market access. The financial advisory services during the second phase (the "Bond Issuance Phase") shall consist of the following: 1. Establishment of financing timetable; 2. Monitoring the financing transaction process; 3. Assisting bond counsel and disclosure counsel in the preparation of financing resolutions, the Official Statement, notices and related documents; 4. Determination of the sizing and structure of the financing transaction; 5. Coordination of Rating Agency presentations and investor briefings; 6. Performing market analysis and determining the timing of sale; 7. Organizing bond sales; 8. Procurement of special financing services; and, 9. Evaluation of credit enhancement options. 10. Participate in all meetings and conference calls of the City financing team and assist with preparing closing documents.

5 11. Review and comment on all documents prepared by other parties related to the Financing, such as the ground lease and gap funding agreement.

6 Bond Counsel- Scope of Services ATTACHMENT B The bond counsel services for the Project shall be performed in two phases. Services during the first phase (the "Structuring Phase") shall consist of the following: 1. Participate in all meetings and conference calls of the financing team as required to structure and negotiate a bond financing or financings (together, the "Financing") for the City Project. 2. Provide legal advice related to the requirements of the Internal Revenue Code and Regulations (the "Code") in order to structure the Financing as tax-exempt to the maximum extent possible and cause the Financing and the City Project to comply with all Code requirements. 3. Examine all constitutions, statutes, the City Charter, and other applicable codes and regulations and advise the City to permit any bonds for the Financing to be issued in compliance with the same. If the parties determine to proceed with the Project and the Financing at the end of the Structuring Phase, the intention would be to issue bonds (the "Bonds") to implement the Financing, which Bonds may be tax-exempt or taxable or a combination thereof, in one or more series and pursuant to one or more legal structures (including but not limited to lease revenue bonds and Mello-Roos bonds). The bond counsel services during the second phase (the "Bond Issuance Phase") shall consist of the following: 1. Participate in all meetings and conference calls of the City financing team and prepare all legal documents necessary for the issuance of the bonds, including but not limited to authorizing resolutions, notices, defeasance documents, leases, subleases, agreements, bonds, tax certificates and closing documents. 2. Review and comment on all documents prepared by other parties related to the Financing, such as the ground lease and gap funding agreement. 3. Review the preliminary and final official statements to ensure that the terms of the Financing and Bonds are accurately reflected therein. 4. Render the final legal opinion(s) as to the validity of the Bonds and, to the extent applicable, render an opinion whether interest on the Bonds will be exempt from federal income taxes and whether interest is

7 exempt from personal income taxes of the State of California. 5. Assemble all documents and prepare hard copy and CO-Rom GO transcripts of proceedings in the quantities required by the City. The special tax counsel services related to possible proposals for private management of the Convention Center will be performed in two phases. Services during the first phase ("RFP Review Phase") shall consist of reviewing the request for proposals ("RFP") prepared by the City Administrative Officer ("GAO") prior to submission to Counsel for consideration, to ensure that the RFP complies with the Tax Code and Regulations governing management contracts. If Counsel approves issuance of the RFP and an operator is selected, services during the second phase ("Contract Negotiations Phase") shall consist of advising the city and review and revising the contract with the operator to ensure that the contract complies with the Tax Code and Regulations governing management contract.