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HomeMy WebLinkAboutResolutions - 1989.04.27 - 16945Miscellaneous Resolution 89081 March 23, 1989 BY: PLANNING AND BUILDING COMMITTEE - Anne M. Hobart, Chairperson SOLID WASTE UNIT-AMENDMENT TO CONTRACT FOR FINANCIAL IN RE: ADVISORY SERVICES FOR SOLID WASTE PROGRAM IMPLEMENTATION: PUBLIC FINANCIAL MANAGEMENT, INC._ TO THE OAKLAND COUNTY BOARD OF COMMISSIONERS Ladies and Gentlemen: WHEREAS Oakland County is in the process of implementing a countywide solid waste management program consisting oT waste -to-energy facilities, recycling centers, composting and landfills; and WHEREAS Oakland County entered into a contract, Miscellaneous Resolution 88-269 dated October 13, 1988, with Public Financial Management, Inc. (PFM) to provide financial advisory service with respect to the planning and financing of the countywide solid waste program; and WHEREAS Oakland County is requesting expanded scope of services of PFM beyond the scope of services outlined in said contract. NOW THEREFORE BE IT RESOLVED that the Oakland County Board of Commissioners does hereby authorize its Chairperson to execute the attached amendments which outlines the expanded scope of services which are required for the implementation of the countywide solid waste program to Public Financial Management, Inc.'s contract (Miscellaneous Resolution 88-269, October 13, 1988). BE IT FURTHER RESOLVED that in addition to the services with respect to the first waste-to-energy facility, which has been authorized, that the services required for the planning and financing of a countywide recycling program be included as part of the contract amount and such contract services shall be . increased but not exceed Mr. Chairperson, on behalf of the Planning and Building Committee, I move the adoption of the foregoing resolution. $400,000 PLANNING & BUILDING COMMITTEE '1AR 13 '89 15:25 P F M PHIL A F.4/11 AMENDMENT TO F1N4NCTAL ADVISORY AGREEMENT This Amendment made and entered into as of , 1989 by and between the Board of County Commissioners of Oakland, Michigan (hereinafter called the "County") and Public Financial Management, Inc. (hereinafter called the °Company") shall amend the Financial Advisory Agreement (the "Agreement") dated August 19, 1988 that is attached hereto and made a part hereof. PURPOSE WHEREAS, pursuant to the terms of the Agreement, the County has retained the services of the Company as financial advisor in connection with the review, evaluation and analysis of various planning, procurement and financing alternatives with respect to a refuse disposal system including landfills, transfer stations, waste-to-energy and recycling facilities; and WHEREAS, the Company is engaged in providing financial advisory services to municipalities and counties and has experience and skill in municipal financing and can provide consulting services relating to planning, preparing, marketing, and distributing tax-exempt bond issues and notes; and WHEREAS, the County is desireous of retaining the services of the Company to implement future financing of these facilities; and April 27, 1989 FISCAL NOTE BY: FINANCE COMMITTEE, DR. G. WILLIAM CADDETT,, CHAIRPERSON IN RE: SOLID WASTE UNIT - A1NDHENT TO CONTRACT FOR SOLID WASTE PROGRAM IMPTFMENTATION: PUBLIC FINANCIAL MANAGEMENT, INC. MISCETTANEOUS RESOLUTION #89081 TO THE OAKLAND COUNTY BOARD OF COMMISSIONERS Mr. Chairperson, Ladies and Gentlemen: Pursuant to Rule XI-G of this Board, the Finance Committee has reviewed Miscellaneous Resolution #89081 and finds: 1) This contract expands the scope of work from the previous contract,by including services related to the pricing of a bond issue and for services required for planning and financing a countywide recycling program; 2) The contract can be cancelled at any time by either party; , 3) This contract has been referred to Corporation Counsel, for his written recommendation to the Board, indicating that Counsel has reviewed the contract and approves it for Board approval. ; 4) Page 6 item a. of the Revised Contract dated April 19 be amended to delete "For transactions of less than $200 mil.lion" and page 7 "item b. for transaction in excess of $200 million - $0.20/$1,000 to a maximum of $40,000". 5) The estimated cost for the additional financial consulting services is $150,000 for a total of $400,000 which includes the previous authorization of $250,000. 6) The amount for consulting services cannot exceed $400,000 without approval from the Board of Commissioners; 7) Funds are available in a special contingency line item and the Finance Committee recommends the 1989 budget be amended as follows: 1989 Budget Amendment 4-10100-901-01-00-9912 Special Contingency $(150,000) 4-10100-141-15-00-3218 S.W. Prof. Services 150,000 $ -0- 8) These costs are reimbursable from the sale of bonds; FINANCE COMMITTEE RESOLUTION # 89081 APRIL 27, 1989 Moved by Hobart supported by Oaks the resolution (with a positive Fiscal Note attached) be adopted. Moved by Caddell supported by Ferrens the resolution be amended to be consistent with the Fiscal Note. A sufficient majority having voted therefor, the amendment carried. Vote on resolution as amended: AYES: Gosling, Hobart, Jensen, Johnson, R. Kuhn,, S. Kuhn, Law, Luxon, McConnell, McCulloch, McPherson, Moffitt, Oaks, Olsen, Pernick, Price, Rewold, Skarritt, Wolf, Aaron, Bishop, Caddell, Chester, Crake, Ferrens. (25) NAYS: None. (0) A sufficient majority having voted therefor, the resolution, as amended, was adopted. STATE OF MICHIGAN) COUNTY OF OAKLAND) I, Lynn D. Allen, Clerk of the County of Oakland and having a seal, do hereby certify that I have compared the annexed copy of the attached resolution, adopted by the Oakland County Board of Commissioners at their regular meeting held on April 27, , 19 89 with the original record thereof now remaining on file in my office, and that it is a true and correct transcript therefrom, and of the whole thereof. In Testimony Whereof, I have hereunto set my hand and affixed the seal of said County at Pontiac,Michigan this 27thday of April , 1989 , (t..---„,/....,:, --=-- I --- LYN D. r ALLEN, County Clerk Re ister of Deeds Deputy -Clerk mw, 13 '89152 F F M - P.5/11 WHEREAS, the Company has indicated its desire to serve as the County's financial advisor in connection with the proposed issuance of bonds, notes, certificates or other appropriate debt instruments for capital improvements associated with the County's Solid Waste Disposal System; and WHEREAS, the Company represents that it is capable of providing such necessary financial consulting services and is willing to provide them from time to time as requested by the County; and WHEREAS, the County is a corporate body politic of the State of Michigan and is authorized to enter into professional services agreements in order to implement financing for the County. II. SCOPE OF SERVICES NOW, THEREFORE, in consideration of the premises and of the mutual conven.ants contained herein and other good and valuable consideration, the parties hereto agree that as requested by the County, in addition to the services described in Exhibit A of the Agreement, the Company will provide financial advisory services as described in Exhibit B attached hereto. Managing Director Senior Managing Consultant Managing Consultant Consultant Financial Analyst Hourly Fee $175.00 $160.00 $150.00 $125.00 $110.00 MAR 13 '89 15:26 P F M PHIL A P.6/11 III. PERSONNEL TO BE ASSIGNED The Company shall assign the following individuals to perform the Scope of Services outlined in Appendices A and B: - Engagement Manager - Barbara Bisgaler, Managing Director - Co-Project Manager - Nancy Winkler, Senior Managing Consultant - Co-Project Manager - June Matte, Managing Consultant - Project Review - Jeffrey C. Heckman, Managing Consultant - Project Support and Financial Analysis - Rick Patterson, Consultant - Financial Analysis/Computer - Eric Manley and David Miller, Financial Analysts The County and the Company shall mutually agree to any changes in the individuals identified above. IV. COMPENSATION For services related to tasks as outlined in Exhibit B, except for those tasks excluded as set forth below, the Company shall be compensated for services based upon the hourly rates listed below. MOP 'qg 1 i fl F F M - FIHILp These rates shall not be adjusted until January 1, 1990. Thereafter, the County and the Company may negotiate adjustments to these rates. The parties hereby agree that the hourly fees and related expenses for the work associated with the financing of reeyling facilities and the first waste-to- energy facility shall not exceed $400,000 unless otherwise approved by the County. The Company shall give the County notice when such cumulative fees and expenses are equal to $300,000. The Company shall not be obligated to perform services or incur expenses that would cause the total hourly fees and expenses to exceed $400,000. Exception: For work associated with the pricing of any bond issue; the negotiations with the underwriter of sale terms; recommendation for award; preparation of the Financial Advisors Memorandum and assistance with closing (Tasks VII V, W & X of Appendix B) the Company shall be compensated as set forth below payable contingent upon the closing of the bond issue: a. For transactions of less than $200 million the company shall be compensated on the basis of the following scale, but the fee shall not exceed $40,000. First $10 Minion Second $10 million $20-$50 million . over $50 million $1.50/$1,000 of bonds issued $1.00/$1,000 of bonds issued .50/$1,000 of bonds issued .20/$1,000 of bonds issued b. For transaction in excess of $200 million - $0.20/$1.000 In addition to the fees for services described above, the County will reimburse the Company at cost for actual expenses associated with the project for travel, meals, lodging, computer, graphics, document MAR 13 '89 15:26 P F M PHIL P.8•11 reproduction, long-distance telephone, postage and/or express mail charges. All hourly fees and expenses will be billed on a monthly basis. Appropriate documentation and third party receipts will be provided with each invoice. Invoices shall include hours expended by task and by classification as described above. Invoices shall be submitted to the County's designated representative or his designee. NOTICES Any notice required or committed to be given shall be sent by certified mail, return receipt requested, to the Company at the following address: Ms. Barbara C. Bisgaier Public Financial Management, Inc. 2000 Walnut Street Philadelphia, PA 19103 and to the County: Oakland County Executive with copy to: H. Lawrence Fox Bishop, Cook, Purcell & Reynolds 1400 L Street, N.W. Washington, DC 20005-5502 MAR 13 '89 15:27 P F M PHILA P.10/11 By: y \ . Oakland County Executive IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written. OAKLAND COUNTY, MICHIGAN ATTEST: to the Oakland County Commission Date: '0,'i.i..EREAS, the Company represents that it is capable of providing such necessary financial consulting serric,es and is willing to provide them from time to time as requested by the Coun ty; and WHEREAS, the County is a corporate body politic of the State of Michigan and is authorized to enter into professional services agreements in order to implement financing for the County. IL SCOPE OF SERVICES 1-40 VI, • THEREFORE, in consideration of Om' premises and of the mutual convenants contained herein and other good and valuable consideration, the parties hereto agree that as requested by the County, the Company will provide financial advisory services as described in Exhibit A attached hereto. IIL PERSONNEL TO BE ASSIGNED The Company shall assign the following individuals to perform the Scope of Services outlined in Exhibit A: - Engagement Manager - Barbara Bisgaier, Managing Director - Project Manager - Nancy Winkler, Senior Managing Consultant - Project Review - Jeffrey C. Heckman, Managing Consultant MAR 13 '89 15:27 P F M PHIL VI. ENTIRE AGREEMENT The Agreement and its appendices and the A.mrnendment and its appendi constitute the entire agreement between the parties pertaining to th subject matter hereof. Should a conflict arise between the Agreeme n t Sn the Amendment, the language in the Amendment shall 'prevail, supplement, modification, waiver or termination of this Amendment, or an; provisions hereof, shall be binding unless executed in writing by th, parties, No waiver of any of the provisions of this Amendment shai constitute a waiver of any other provisions, nor shall such waive: constitute a continuing waiver unless so expressly provided. VII. AMENDMENT This Amendment may be amended only upon the written agreement of th parties hereto. to FINANCIAL ADVISORY AGREEMENT This Agreement; made and entered into as of August 19, 1988 by and between the Board of County Commissioners of Oakland, Michigan (hereinafter called the 'County") and Public Financial Management, Inc. (hereinafter called the "Company"). PURPOSE WHEREAS, the Company is engaged in providing financial advisory services to municipalities and counties and has experience and skill in municipal financing and can provide consulting services relating to planning, preparing, marketing, and distributing tax- exempt bond issues and notes; and WHEREAS, the Company has indicated its desire to serve as the County's financial advisor in connection with the proposed issuance of bonds, notes, certificates or other appropriate debt instruments for capital improvements associated with the County's Solid Waste Disposal System; and WHEREAS, the County is desirous of retaining the services of the Company as financial advisor in connection with the review, evaluation and analysis of various planning and financing alternatives with respect to a refuse disposal system including landfills, transfer stations, waste-to-energy and recycling facilities and is desirous of using the Company to implement the procurement and future financing of these facilities; and The County and the Company shall mutually agree to any changes in the individuals identified above. IV. COMPENSATION For services related to tasks as outlined in Exhibit A, except for those tasks excluded as set forth below, the Company shall be compensated for services based upon the hourly rates listed • below. Hourly Fee Managing Director 175M Senior Managing Consultant S160.00 Managing Consultant S150.00 Consultant S125.00 Analyst S110.1}0 These rates shall not be adjusted until January 1, 1990. Thereafter, the County and the Company may negotiate adjustments to these rates. The parties hereby agree that the hourly fees and related expenses for the work associated with the planning, procurement and financing of the first waste-toznerg facility shall not exceed S250,1)00 unless otherwise approved by the County. The Company shall give the County notice when such cumulative fees and expenses are equal to S200,000. The Company shall not be ob4ated to perform services or incur expenses that would cause the total hourly fees and expenses to exceed S250,00(1 :Exception: For work associated with the pricing of any bond issue; the negotiations with the underwriter of sale terms; recommendation for award; preparation of the Financial Advisors Memorandum and assistance with closing (Task VII V, W & X) the Company shall be compensated S.20 per thousand of bonds issued, payable contengent upon the closing of the bond issue. If the County wishes to retain the Company for investment management services, compensation for these services will be negotiated. In addition to the fees for services described above, the County will reimburse the Company at cost for actual expenses associated with the project for travel, meals, lodging, computer, graphics, document reproduction, long-distance telephone, postage arid/or express mail charges. All hourly fees and expenses will be baled on a monthly basis. Appropriate documentation and third party receipts will be provided with each invoice, invoices shall include hours expended by task and by classification as d es cribed above. Invoices shall be submitted to the County's designated representative or his designee. V. NOTICES Any notice repired or committed to be given shall be sent by certified mail, return receipt requested, to the Company at the following addrftss: Ms. Barbara C. Bisgaier Public Financial Management, Inc. 2000 Walnut Street Philadelphia, PA 19103 and to the County: Oakland County Executive with copy to: H. Lawrence Fox Bishop, Cook, Purcell & Reynolds 1400 L Street, NW Washington, D.C. 20005-3502 VI. ENTIRE AGREEMENT This Agreement and its appendices constitutes the entire agreement between the parties pertaining to the subject matter hereof. No supplement, modification, waiver or termination of this Agreement, or any provisions hereof, shall be binding unless executed in writing by the parties. No waiver of any of the provisions of this Agreement shall constitute a waiver of any other provisions, nor shall such waiver constitute a continuing waiver unless so expressly provided. VII. AMENDMENT This Agreement may be amended only upon the written agreement of the parties hereto. VIII. TERMS OF CONTRACT/TERMINATION This Agreement may be terminated by either party on 30 days written notice to the other party. Work performed pp to and _including that date shall be due and payable. IX. CONFLICT OF INTEREST During the terms of this Agreement, the Company shall not perform similar services for persons, firms or entities which has the potential to create a conflict of interest with its services to be performed under this Agreement unless this is disclosed to and approved by the County. X. EQUAL EMPLOYMENT OPPORTUNITY The Company shall not refuse to hire, discharge, or promote and will not discriminate against any person otherwise qualified solely because of race, creed, sex, color, national origin or ancestry, age, marital status, mental or physical 'handicap, or political affiliation or belief. XI. CONTRACT MANAGEMENT Annual Budget Within 30 days of a request from the County, the Company will provide a written statement of its estimate of its anticipated professional fees and out-of-pocket expenses for the coming 12 month period. XII. DESIGNATED REPRESENTATIVE The Oakland County Executive or H. Lawrence Fox, unless the County Executive designates otherwise, shall act as the County's contract manager for ouroosPs of this Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written. OAKLAND COUNTY, MICHIGAN Chairman, Board of Oakland County Commissioners ATTEST: to the Oakland County Commission By: Date: APPENDIX A SCOPE OF SERVICES The following presents a comprehensive Scope of Services; all work will be performed as requested by the County. L DEVELOPMENT OF INTEGRATED FINANCIAL AND TIPPING FEE MODEL Evaluation of Project Economic Feasibility PPM will work closely with the technical team in the structuring and implementation of project economic feasibility analysis. The project economic feasibility analysis will involve three steps: The first step will be to identify all of the scenarios to be evaluated and to define all of the life cycle assumptions to be included in the economic feasibility analysis for each scenario. These will be developed on a team basis with the County staff and other consultants. The major assumptions to be considered are set forth below; however, any additional assumptions that the County wishes to add to the annh-sis can be incorporated: o Definition of Scenarios to be Evaluated Base case structure Alternatives Sensitivity analyses o Review of Waste Projections Flow control Waste projections Amount to be landfilled Amount to be processed integration with recycling o Development of Financial Assumptions Project ownership Define tax law requirements Inflation rates Debt structure (variable, fixed rate) Discount rate Dates Bond interest rates Debt service coverage requirement Investment rates Amortization period Energy rates Need for partial taxable financing o Review of Estimated Project Costs Inclusion of all project cost elements Reasonableness of estimates Impact of recycling Adequacy of reserve allowances A. o Review of Estimated Project Revenues Identification of all proposed sources and uses of revenues Analyze energy market options Energy rates Analyze recycling revenue projections The second step in the analysis would be to input the defined assumptions for each scenario into PFNI-ARRM, PFM's proprietary integrated resource recovery model. For each scenario that is evaluated, PFM-ARRM will produce a series of outputs that includes: o Optimal allocation of taxable and tax-exempt debt o Bond sizings for tax-exempt and taxable bond issues including sources and uses of funds, application of con_struction and capitali7ed interest fund, debt service schedules and analysis of conversion from variable rate to fixed rate if applicable; o For private ownership scenarios, the calculation of the value of tax benefits, vendor return on equity, requirements and resulting lease payments; o Pro-forma twenty-year life-cycle cost projections of disposal under each alternative; and • Graphs of life-cycle cost results. In step three, the results of the alternative life cycle analysis will be consolidated into a draft report to be made available to the project team for review. Once the cOmments are received, the report will be made final and presented to the appropriate public 1.Wy for review. Project feasibility analysis is a critical element of resource recovery development that must be continually reviewed and updated throughout the project planning and implementation phases to permit public officials to make informed de,c -isitms. Throngli sensitivity analysis using a life cycle model, the effect of changing financial, economic, technical, legal, tax and regulatory circumstances can be determined. This level of diligence is requisite to assure the continued consistency between stated policy goals and project objectives and final project structure and performance. PFIYI will coordinate financial advice with technical and legal advisors to provide recommendations on the project's overall feasibility from a financing perspivc. Comp.“.:.hen sive review will foster informed decision making about necessary project restructuring or the delay or termination of implementation. II. FINANCIAL FEASIBILITY ANALYSIS _ A. ReAcw of Alternative Sec-urityires From the perspective of County credit encumbrance, security structures for debt financing will fall into one of three broad categories: traditional tax supported general obligation, stand-alone project revenue and double-barrel, which is a project revenue pled v.ed backed b5-, either a limited or full general obligation pledge. Recognizing that current law authorizes revenue bond financing without referendum and requires a referendum for general obligation financing, PFIYI will provide an analysis of the impact of alternative security structures on the credit quality and structural requirements of the bonds, as well as assessing the affect this debt vnii have on the County's credit. The viability of revenue-based alternatives will also be jj-,t; potential benefits of credit enhancement to attempt to balance the desires of low cost financing and structural flexibility with credit impact on the County. The conclusions drawn from these efforts will be a key element in the formation of the financial plan. Institutional Analysis in conjunction with the legal team, PFM will prepare, an institutional/financial analysis of alternative project structures which will address the appropriate institutional structure for the financing of the project including recommendation as to the appropriate issuer of the bonds, either the county or an authority. The analysis will include waste flow control, alternative project credit and financing structure, including system versus project financings and acquisition of waste streams by source, ht conjunction with legal counsel, PFM will review the legal considerations, constraints and appropriate legislation and statutes for the purpose of clearly delineating the existing options, obstacles and powers regarding the County's capital financing objectives. If new legislation is necessary to complete a financing, we will assist in the development and review of legislation. C. Evaluation of Requirements and Effect of The Tax Reform Act of 1986 PPM will r c.tview and summarize the implications of The Tax Reform Act of 1986 on the structuring and financing of the proposed project and municipal waste-to-energy projects in general. The review will analyze the criteria for determining the tax-exempt status of a project and the classification for financing as private activity bonds. We will review the Statewide Private Activity Bond Cap and any applicable allocation procedures. The review will explain the impact of qualified versus unqualified cost classification requirements and the impact of the insubstantial portion rule on project costs eligible for tax-exempt financing. We will also analyze the project's eligibility under The Tax Reform Act of 1986 for transition rule consideration. Additionally, the impact of current tax law on equity contributions, availability of Private Activity Bond allocation, interest rates and risk allocation will be assessed.. Finally, this review will discuss the effects of certain provisions of the new tax rule on competitive versus negotiated placement for financing such facilities. This analysis will impact the ownership and energy sale decisions, among others. DEVELOPMENT OF PRELIMINARY PLAN OF FINANCE A. Review of Alternative Financing Methods PFIvi will describe, review and evaluate all reasonable financing methods, including tax-exempt debt, taxable debt and non-debt, or a combination thereof, for providing for the capital funding of the proposed projects. Alternative methods will be evaluated in terms of their overall consistency with the financing objectives and policy goals of the County, state legislative and administrative provisions, political considerations and legal and financial constraints. In connection with the idontifieztion of the financing requirements, we will evaluate the array of alternative financing vehicles to be considered for financing some or all of the project costs. Of primary consideration in this review of financing alternatives will be: (i) capital market accessibility of each financing alternative, (ii) real and perceived risk exposure considerations to the County, (iii) capital market risks, (iv) impacts on the County's credit, (y) effects, if any, on other ongoing and contemplated financing programs, (vi) inherent practicality of an approach and (vii) constraints imposed by each particular financing option. B. Develop Financial Screening Criteria PPM will work with the consulting engineer and County staff to develop a set of financial screening criteria to be used in the evaluation of "short-list alternatives and the development of a recommendation for project implementation. Criteria to be considered include, but are not limited (i).County's financing objectives and policy goals, (ii) risk allocation and public agency risk posture, (iii) credit factors such as the effect of project financing on the County's credit ratings, (iv) effects on the County's other capital program plans or projects and (v) project financial feasibility incorporating separate related criteria, as discussed in the follow -ing task. C. Develop Preliminary Financial Plan Assuming project feasibility is determined and a recommendation to proceed with project implementation is made, PFM will prepare a Preliminary Project Financial Plan. The Preliminary Financial Plan will review the analyses of the underlying project structure and feasibility, summarizing public policy and goals, ownership and operation options, institutional alternatives and alternative financings methods, as well as delineating the recommended approach to each of these elements for the preferred project alternative. The plan will also include detailed recommendations for the financing structure, including project capital fn riding, financing terms and conditions, financial and economic assumptions and project structure and security provisions, and will discuss the key financing issues associated with project implementation and bond placement methods. After recommending a structure, a recommendation, undertaken in conjunction with a legal review, will be made of the appropriate governmental body to issue the bonds and to contract with the various parties to the project. Incorporated in this recommendation will be the identification of potential security structures and reflection of the credit impact of each on both the County and the project. To provide g -uidance in monitoring the progress of the project, the plan will present a detailed list financing implementation milestones and a financing timetable.. IV. SlItvilvfARY OF PROJECT RISKS A. Evaluation Risk Assignmentand_Descriptiono[Appropriate Guarantees of Each Proiect Participant Upon completion of the previously described tasks, PFM will summarize the various forms of project risk inherent throughout the development, financing, construction, ownership and operation of a waste disposal system (including a waste-to-energy facility), and will discuss how the allocation of such risks is affected by alternative financing arrangements and project structures.. We will also discuss the most recent revisions to the rating criteria for resource recovery financings used by the two major credit rating agencies and how the current status of the rating approach will affect project structuring and the risk allocation process. B. De-velopment of Project Insurance Structure PFM will assist the County in evaluating and acquiring various project insurance coverages necessitated by bond marketing and rating considerations, contractual provisions of engineering, construction, energy, or operating contracts and risk management considerations, To ensure that any such insurance is economically acquired, we will assist in developing RFI's for the project insurance underwriter proposals and provide input to the County and the prospective insurance underwriters concerning financial issues related to the acquisition of necessary insurance. cover-ages. V. VENDOR SELECTION PROCESS A. Review of Alternative Procurement Approaches PF7vI will work with the technical team to develop and evaluate from a financing perspective the various procurement options available for the proposed project or its various components. We will identify the he financing considerations associated with such options including guarantees, warranties, security provisions (such as performance bonds or letter of credit) and appropriate invohement of contractors in project operation and training as perceived by rating agency and financial market analysts. Relmer After the form of ownership, operation and basic financial structure have been determined, a request for qualifications (RFQ) for the appropriate construction and operating specifications will be developed. PPM will work in conjunction with legal and engineering consultants, as well as the County staff to draft the RFQ. PFM's specific areas of responsibility will be to develop minimum financial criteria for the vetidorS and defining key risk allocation and business terms. We will then partictpatc in he evaluation of the vendors' responses, focusing primarily on the financial characteristics of the vendors and the responses to the risk allocation/business terms sections of the RE() response. From this process, a list of several, pre-qualified firms, from whom requests for proposals will be solicited, will be developed. C. Draft Reo nest for Proposals PPM will work closely with the County, staff, attorney and consulting engineer to prepare the request for proposals (RFP). We will draft the financial and business sections of the RFP and will review the entire document If it is determined that preliminary meetings with vendors would be productive, we will participate in such meetings to review' the terms and conditions specified in a draft RFP. Based on these meetings and arty other project modifications, we will incorporate any appropriate changes into the financial sections of the RFT' and prepare a final version for distribution. D. Vendor Negotiations . . PENA will participate in vendor contract negotiations. Specifically, we will assist in negotiating financial and business terms of the full service contract. 'While the negotiations are taking place, we will analyze the financial aspects of the contractual provisions and the options under considrration. While PFIN1 can be available for all of the negotiations, it is often possible to strile111K", the negotiations so that we do not need to be present every day. E. EV-ablation of Vendor Proposals PPM will participate in the evaluation of final vendor proposals and work closely with all participants to select the firm (or firms) that offers the most viable teehnolog, the greatest financial security, and the lowest cost - calculated as present value cost over the useful life of the facility. To accomplish this, PPM will use PFM-ARRM as the basis for a vendor evaluation. The vendor evaluation model can be structured to consider a series of sensitivity analyses that will be assigned probabilitic.s to determine a weighted net present value cost for each vendor. VI. EVALUATION OF ENERGY SALES CONTR.L',C.71 -,=i1 PF1s4 will review draft energy sales contracts :sad tranieinate.in the r.egotiation and evaluation of an energy sales contract. We will assess the imt-,..a:et ef the cop:tract ano the credit quality of the energy purchaser on the credit quality of long term f anein end on risrs. :.:1oca titan, Based on our review, we will recommend modifications to the of the proposed contract. We will also participate in the negotiations of different evaluating, with the use of PFM-ARRM, the impact on capital and opernii.n.g ceo ri;--ifferent energy price proposals. VII. IMPLEMENTATION OF PLAN OF FIN] CJNC AND BOND SALE A. Analysis of Financial Conditions and Financir PEN will monitor and provide analyses and advice corit-}_tmft :g changes in financial market conditions, rating considerations, economic 11:7 -tors, regirlatciv Inairf.rs, and federal stare tax laws that affect project financial feasibility and bed naerkeabiliq We will review key assumptions used in structuring project financing and projecting project finaty..:-..ial performance for consistency with current economic and financial market conditions. As neovistated by changing economic and financial conditions and as requested, we will. assist the Coitrq and their other consultants in updating the Preliminary Financial Plan, financial projections and project financing structure. B. Replatory and Legislative Analysis PEIvi will consider the solutions, to and opfiohal .,::")°J73,..'-,`5. of p.tlion which develop concerning problems posed by federal and state regulations, virs 2rd legislation and develop reasonable alternatives. We will recommend courses of for de, tL:rotef:. Idianci , which will maintain financial feasibility and the viability of proje -I: interest cost, bond rating). will assist the County staff an ;, - special legislation to facilitate financing and implementation of the .7reposed . nsult with the County staff, other advisors and governmental agencies - as necess,ary concerain regalatory and legislative issues. PFM will prepare memorandum as ref v md analyzing the effect of solutions and options" concerning regulatory and legislative issues on project finAucial feasibility and marketability of bonds and outlining recommended courses of aetic...-!„ C. Assistance with Project Permitting PFIYI will assist the County and other project consultant. . with financial advice as necessary in obtaining permits and approvals necessary for -3rojec..:, r...mplerr.,t-mtation, We will evaluate the financial impact of issues affecting project fircair!..ag -,:--clated to requisition of remaining permits and approvals. D. FeeleraLud State Tax Issues Analysis Throughout the planning and implementation status of current federal and state tax legislation, regulations, and polio-, of proposed changes in tax law that may affect project financial feasibilit3 cr tao Nat P ti of :'a tOCt financing (e.g., its tax:. exempt status). We will consult with the C().:.:-7 .---.--•..stritants and advisors, and governmental agencies as necessary tonally, we will prepare memoranda as requested analyzing the effect of d.evr;icvitir,..),Iu: vi ':.ckr-rt:. and state tax laws on project financial feasibility and marketability o;.. octh .lk:g n-x_nrrimancicd courses of action. kgal Documentation Review B. FFM will review and assist bond counsel and the County's counsel with any preliminary preparation of leases, resolutions, contracts, and other legal documents necessary to the development and financing of the proposed facility. As issues arise, we will provide advice and recommendations concerning issues related to project financing and marketability of bonds. F. General Consultation PFM will respond on an as requested basis to various other issues which may arise affecting project financing, financial feasibility or marketability, such as implementation of institutional recommendations for the project, project site acquisitions or transfers, land acquisitions and transfers, citi25ii coordination and media contact. G. Debt Transaction Services In its capacity as the County's financial advisor, PFM will assume primary responsibility for coordinating the planning and execution of the debt transaction. Insofar as PFM is representing solely the interests of the County, the overall coordination of work product and timetable adherence will be structured to minimize the costs of the transaction coincident with maximizing the County's financing fieribility and capital market access. H. Prepare Application For Private Activity Bond Allocation If private ov,.tiership is selected. PFM will assist in the application for the Private Activity Bond Allocation. PI:TM will prepare the financial discussion in the application and will be available to meet with State Agency Officials to discuss the application. I.R eC0111 Men dia_g_Compet live verisnsr,....Lz...7...otiated Sale One of the most critical decisions in the bond sale planning process will be choosing between competitive (public), negotiated (private) sale and private placement. The choice between the three hinges on questions of the costs of the sale process, the type of security being sold, the marketability of the security and market conditions at the time of the sale. Private placement would only be recommended in very special circumstances, which are unlikely to occur with a large credit- worthy project. PENA will analyze the costs of each option as they relate to each of the various kinds of tax-exempt and tremble instruments to be sold. In addition, we will enumerate any strategy or legislative constraints that may impact on the method of sale. The following factors will receive particular attention in our consideration of competitive or negotiated sales: protectina Elected or Appointed Officials - The competitive sale is almost perfect protection against charges of collusion or favoritism that can be leveled at elected officials. In a negotiated sale, the opinion of the financial advisor is the best "comfort". o ILw.thg- Public competitive sale advertising requirements have traditionally dictated the precise time an issue will come to market. However, PFM has developed two strategies, one known as a "shelf-sale" or 'short-notice" competitive sale and the other known as an 'invited bid" that allows for a much more flexible competitive placement process; such strategies would require the review of bond counsel. In a negotiated sale, flex ibility is achieved., so that advancing or delaying the sale within the final few days is always possible. Discount and Spread - Because underwriters have no involvement in the planning or pre-sale preparation of an issue, the discount or spread will typically be lower in a competitive sale than in a negotiated sale. Data taken from the Public Securities Association files have been tabulated and iedicates that spreads in negotiated transactions are higher. However, the negotiated transaettens tend to be substantially more complex and difficult to market. o Interest Rate - No studies have come to our attention that conclusively demonstrate the benefit of one type of sale versus another in regard to interest rates. If bids from a number of competing syndicates can be simulated, the competitive rate will probably be lower than that achieved in nevotiD tion. If only one or two syndicates bid, the interest cost may well be higher. o Setting Terms of Sale - A competitive sale allows the issuer to set stringent. requirements for call provisions, term and matitritiee„ good faith deposits, investment of funds an other items. If the market understands these terms,. they may he well received. In a negotiated sal; the final sizing and configuration of the issue can be adjusted to meet the needs of particular purchasers. J.Seleciinci the Underwriter (Negotiated Bond Sales) Should the County decide to negotiate the. sale of the its bends, the process of selecting an investment banker will require careful attention. We will assist in establishing the criteria against which private investment banking proposals can be evaluated. Among the factors that will be analyzed are the financial strength of the firm, the national distribution network, the strength in institutional and retail marketing, the experience in marketing issues of the types being offered, the ability to commit personnel, and the successful completion of transactions in a timely manner. Specific underwriting fees and expenses may also be included_ We will prepare the initial letters requesting underwriter proposals and clearly setting forth the issues and concerns which each firm should address in the proposal. Upon receipt of responses, we will summarize this material and prepare a set of follow-up questions to be asked of the banking representatives at private interviews. All of this materiel will then be synthesized for review by the County for final selection of the unclem.'fitt-,r. If desired, we will make recommendations of both the firms to be short-listed based on the initial proposals, and the selection of a management team. K. Establishment of Financing Timetable At the outset of the debt transaction process, we will review the financing plan and in conjunction with the County, outline the magnitude of the debt transaction to be undertaken and its proposed form. Having outlined the magnitude and method of financing, a successful financing pro cram will require further close coordination between the County, financial icivisor, the managing underwriters (as appropriate), legal counsel, feasibility consul tants and ether financial Considt3nts, We will prepare a schedule and detailed description of the interconnected responsibilities of each team member and update this schedule, with refinements as necessary, as the work progresses. Included in the schedule will be the major decision points for approval by the County, integrated as closely as possible with standing or planned Board meetings. L. Monitorinz the Debt Transaction Process We will have primary responsibility for the successful implemt.'.c,:ation of the financing strategy and timetable that is adopted. We will coordinate and assist in a pet!.r ration of the legal and disclosure documents and will monitor the progress of all activities leachiez to the sale. We will prepare the timetables and work schedules necessary to achieve this end in a t.imehe efficient and costeeffective M. Development of Business Terms Memorandum Following completion of the financing timetable, we will prepare a Business Terms Memorandum. This memorandum will set forth, in detail, the fundamental business terms to be incorporated into the documents supporting the financing transaction. Specific characteristics of the financing transaction including the nature of the pledge, the structure of the security provisions, flow of funds, reserve re:vitt:me:its, parity debt requirements and the types of resolutions needed to effect the transaction will be delineated as agreed upon by the County and its financing team. N. I7,2eyelt.:62mcrit.of Disc-1(3'11u; Requirenlents We are committed to full disclosure of all relevant financial, economic and legal information with respect ko the County and the financing transaction. In accordance with SEC, MSRB and GFOA guidelines, this disclosure ensures that potential investors have sufficient data to analyze the proposed financing. A high quality and thorough presentation increases credibility and marketability of the underlying securities. This will be particularly important if the bonds do not have the full general obligation pledge of the County. The factors and issues around which the disclosures are structured are the following: o Legal basis for issuing debt o Security for the debt o Restrictions on additional debt o Purpose and allocation of debt o Governmental system o Financial management system o Revenue sources: historic, current and projected o Outstanding indebtedness o Planned future indebtedness o Labor relations arid retirement systems o Economic base o Annual financial statements o Legal opinions regarding tax exemption o Solid waste disposal plan o Project structure o Project feasibility analysis o Vendor credit strength and capability o Flow Control o Other terms or conditions Once all disclosure elements are identified and developed, we will prepare a detailed outline of the Official Statement, O. Official Statement Preparation We will assume the responsibility of coordinating the preparation of the Official Statement. The importattc.e of the Official Statement .cannot be overstated. It not only serves as the primary marketing and promotional tool for the issue, but also as the vehicle for disclosure. Therefore, the clarity of both the summary and technical explanations as well as the comprehensiveness of the documentation must be assured. It becomes the public document of record for the financing, will receive wiricsprerid distribution and scrutiny during the financing and will be referenced in future years as not only a vehicle of credit review but also a 'sales tool" in the remarketing of the underlying securities. P. Review and Comment on Ennineers.„FeasibilitStudv PFtvi will review and comment on the engineers feasibility study for its inclusion in the Official Statement. PFM will aggressively seek to assure that all of the feasibility concerns of the financial markets and rating agencies are addressed. The Feasibility Study is one of the most critical documents in the rating agencies' credit analysis. PFM is familiar with, all of the rating anency concerns which must be addressed, including waste flow control and waste projections, technical feasibility, operating cost and revenue projections, and sensitivity analysis, Arrange Printing_.and Distribution We will act as the County's agent in procuring the services of -financial pint-nits for the Official Statement and related bidding docitments (as appropriate), will arrange for the printing of the bonds and for the placement of sale advertisements. See the caption 'Special Financial Services Procurement", R. Preparation of Debt Resolutions and Related Doct,irrrEts Simultaneous with the preparation of the Official Statement, we will assist the managing underwriters (as appropriate), bond counsel and other legal advisors in the drafting of the respective debt resolutions and other legal documents. Specifically, we will monitor document preparation for a consistent and accurate presentation of the recommended business terms and financing structure. If the transaction is undertaken as a competitive sale, we will evaluate alternative bidding structures and assist in the development of a notice of sale and bid form that optimizes the benefit to the County. S. Sizirigand Structuring of Bond Issues The sizing, structure and repayment provisions of a debt transaction are among the most important facets of a debt issue. We will work with the County staff to design a debt structure that is sensitive to the County budgetary and fiscal position, that dovetails and coordinates this transaction with that of outstanding debt issues and that is sensitive to current conditions in the tax-exempt and taxable capital markets. As market conditions change, we may recommend changes in the debt structure. T. Rating Agency Presentation and Bond 1\ larketin g We will develop a strategy for presenting the financing program to the rating agencies and the investment community. We will develop a bond marketing program to assure that the investment community is familiar with the project's financing stmcmre and the County's credit. We will schedule the rating agency visits to assure the appropriate and most knowledgeable rating agency personnel are available for the presentation and will develop presentation materials and assist the County's staff and officials in preparing for the presentations. The rating ancricy meetings are a crucial point in any public financing. In advance of the meetings we will discuss with rat ing agency personnel their concerns and requirements. Specifically, we will dkruss any information requests the rating agencies may have, identify the people who will attend the meetings and compile the materials that will be provided beforehand. Additionally, we will attempt to identify any concerns that they may have, so that a response or program modification can be developed.. In some cases, we may recommend a meeting with the rating agencies in advance of the formal presentation that is done at the time of the rating request. U. Bond Market Analysis and Timing- of Sale WM. 0. We will provide regular summaries of current municipal market conditions, trends in the market and how these may favorably or unfavorably affect the County's proposed financing. This analysis Yews. r" 174 N WV 0, and presentation will become more frequent as the actual date of sale approaches and will view markets from both a national and regional perspective. The state of the market at the time of sale is not the only timing consideration in achieving the lowest possible interest cost. It is also important to know when similar issues are comin g to market. Competition from such issues for investor interest can result in significantl y higher interest costs to the issuer. Therefore, we closely monitor the municipal underwriting calendar to see when comparable credits are scheduled to come to market_ V. Nmojiatirtn of Sale:Terms Nonotiated Sale) For a negotiated financing, we will serve as the County's a gent with respect to the pricing of the bonds. We will work with the County to establish the pricing parameters for the gross spread and the debt structure and tar get interest rates. We will actively monitor the sale of the debt durin g the order period and make recommendations to the County regarding repricing of all or a part of the debt structure based on preliminary orders and municipal and government market movemen ts over the course of the order period. W. Recommendation for Award We will perform a thorough evaluation of market conditions and will examine bids on comparable issues preceding the receipt of bids (competitive sale) or the bond purchase agreement (negotiated sale). For a competitive sale, we will confirm interest rates, NIC and TIC for each bid using PFM's in-house computer capabilities which allow for immediate confirmation of the bids. PFItel will provide a Financial Advisor's Memorandum evaluating debt ne gotiations, interest rates, issue structure, and gross spread and a firm recommendation on acceptance or rejection of the offer to purchase. This memorandum will review the following areas: o A review of the size of financing o Sources and uses of funds o Term and maturities of the issue o Review of the rating application process o Proposed plan for investment o Review of the bids (competitive) o Comparison of rate and discount with comparable issues (negotiated) o Summary of debt service repayment schedule o Recommend.ation for award X. Closing Prepa ration and Related Services We will assist in arranging for the closing of each financin g. We will assume responsibility for such arrangements as are required, including bond printing, signing and final delivery of the Bonds. VIII. ASSISTANCE WITH SPECIAL, FINANCIAL SERVICES PROCUREMENT We will assist the County, as needed, in identifying and procuring special financial related services that May be needed over the course of its financing programs. Some of th ese services are generic to any financin g alternative, while others May or may not be required depending on the financing vehicle chosen and the capabilities of the Count y personnel. Services as may be required are listed below; o Bond Counsel o Tax. Counsel o Financial Printing o Underwriter Selection o Trustee Selection o Paying Agent Selection o Feasibility Consultants o Special Credit Facilities (includes such items as letters of credit or bond insurance) At each point where a special service is required, we will research and develop a set of bid specifications for the desired service, develop a distribution list and supervise the circulation of the requests for proposals. In selected areas, such as printing services for documents related to the financing (official statements, trust indentures, notices of sale, bid forms, blue sky memoranda and certain resolutions), PFM has pioneered in the area of cost control over these otherwise loosely monitored and expensive adjuncts to a financing by controlling the document preparation to the extent possible and soliciting firm, "not to exceed" pricing from respected financial printing houses. We will analyze and summarize bid responses and outline the advantages and disadvantages of each response to assist the County in its review process. We will present specific recommendotions based upon quantitative, and qualitative analyses of each respondent's bid recognizing: o Price: Not only can we advise on the pricing of each bid with respect to the others but also the pricing with respect to similar costs of financings concurrently in the capital markets. o - Credit Impact: If opinions are being solicited as opposed to tangible products or services, we can advise on the relative merits of opinions, as perceived by the financial markets, which may affect marketability or pricing in a financing. o Expertise: Notwithstanding other factors, certain firms are more experienced than others in specific areas such as economic forecasting, furnishing letters of credit or financial structuring of a particular financing alternative. We can advise the County of these 51171S, especially as this may relate to capital market acceptance of the underlying securities being issued. o Distribution: Certain financing vehicles are better suited for sale in institutional markets, while others are more appropriate for retail markets, We can advise as to which banking firms are better suited to successfully market each typo of security. This can be particularly important in a negotiated offering when the senior manager and balance of an underwriting syndicate is chosen. IX_ SPECIAL EVALUATION Depending on the final financing plan chosen, certain eA-Ttluaticms of competitive procurements of services need to be performed with an accuracy and speed beyond the ability of the issuer itself. For example as the period of lime from bid opening to award of a competitive Ei -iancing is usually a matter of hours, verification of the lowest bid yield needs to he pet-Tr ran tad accurately and with great. dispatch_ This becomes especially true when a "True Interest Cost' method of evaluating bids on a complex transaction is employed. PFM has the computer capability and market lolowledge to perform these evaluations within the required time frame and to furnish the County with a written recommendation for action. X. ASSIST THE COUNTY IN DEL ERMINLNG INVESTMENT S'ERN EGEES PFM is actively involved in the management of investments for our clients. Currently, we have in excess of S3 billion of assets under management. Prior to bond closing, we will work with the County to develop an overall investment objective. Based on this stated objective, we will recommend alternative investment vehicles for the initial irrtest::-,..c.at of the bond proceeds that will reflect the estimated draw requirements and cash flows for the fif , prouatit, APPENDIX B (Continuation of Services from Appendix A) VII, IMPLEMENTATION OF PLAN OF FINANCING AND BOND SALE A. Analysis of Financial Conditions and Financing Assumptions PFivi will monitor and provide analyses and advice concerning changes in financial market conditions, rating considerations, economic factors, regulatory matters, and federal state tax laws that affect project financial feasibility and bond marketability, We will review key assumptions used in structuring project financing and projecting project financial performance for consistency with current economic and financial market conditions. As necessitated by changing economic and financial conditions and as requested, we will assist the County and their other consultants in updating the Preliminary Financial Plan, financial projections and project financing structure. B. ktgulatury and Legislative Analysis PRA will consider the solutions to and optional courses of action which develop concerning problems posed by federal and state regulations, policy, and legislation and develop reasonable alternatives. We will recommend courses of action for the project financing which will maintain financial feasibility and the viability of project financing (i.e., marketability, interest cost, bond rating). We will assist the County staff and legal counsel in preparing special legislation to facilitate financing and implementation of the proposed project. We will consult with the County staff, other advisors and governmental agencies as necessary concerning regulatory and legislative issues. PFM will prepare memorandum as requested analyzing the effect of solutions and options concerning regulatory and legislative issues on project financial feasibility and marketability of bonds and outlining recommended courses of action. C. Assistance with Pro'ect Perrnittin! PFM will assist the County and other project consultants with financial advice as necessary in obtaining permits and approvals necessary for project implementation. We will evaluate the financial impact of issues affecting project financing related to acquisition of remaining permits and approvals. D. Federal and State Tax Issues Analysis Throughout the planning and implementation process, PFM will monitor status of current federal and state tax legislation, regulations, and policy, and the development of proposed changes in tax law that may affect project financial feasibility or the viability of project financing (e.g., its tax-exempt status). We will consult with the County staff, other consultants and advisors, and governmental agencies as necessary concerning tax issues. Additionally, we will prepare memoranda as requested analyzing the effect of developments in federal and state tax laws on project financial feasibility and marketability of bonds and outlining recommended courses of action. E. Lsgal Documentation Revie_w PFM will review and assist bond counsel and the County's counsel with any preliminary preparation of leases, resolutions, contracts, and other legal documents necessary to the development and financing of ihe proposed f acility. As issues arise, we will provide advice and recommendations concerning issues related to project financing and marketability of bonds. F. General Consultation PFM will respond on an as requested basis to various other issues which may arise affecting project financing, financial feasibility or marketability, such as implementation of institutional recommendations for the project, project site acquisitions or transfers, land acquisitions and 'transfers, citizen coordination and media contact. G. Debt Transaction Services In its capacity as the County's financial advisor, PFM will assume primary responsibility for coordinating the planning and execution of the debt transaction. Insofar as PFM is representing solely the interests of the County, the overall coordination of work product and timetable adherence will be structured to minimize the costs of the transaction coincident with maximizing the County's financing flexibility and capital market access. H. Prepare Application For Private Activity Bond Allocation If private ownership is selected, PFM will assist in the application for the Private Activity Bond Allocation. PFM will prepare the financial discussion in the application and will be available to meet with State Agency Officials to discuss the application. I. Recommending Competitive versus Negptiated Sale One of the most critical decisions in the bond sale planning process will be choosing between competitive (public), negotiated (private) sale and private placement. The choice between the three hinges on questions of the costs of the sale process, the type of security being sold, the marketability of the security and market conditions at the time of the sale. Private placement would only be recommended in very Special circumstances, which are unlikely to occur with a large credit-worthy project. PFM will analyze the costs of each option as they relate to each of the various kinds of tax-exempt and taxable instruments to be sold. In addition, we will enumerate any strategy or legislative constraints that may impact on the method of sale. The following factors will receive particular attention in our consideration of competitive or negotiated sales; o Protecting Elected or Appointed Officials - The competitive sale is almost perfect protection against charges of collusion or favoritism that can be leveled at elected officials. In a negotiated sale, the opinion of the financia advisor is the best "coinfo rt". o T:intin2 - Public competitive sale advertising requirements have traditionally dictated the precise time an issue will come to market. However, PFM has developed two strategies, one known as a "shelf-sale" or "short-notice" competitive sale and the other known as an "invited bid" that allows for a much more flexible competitive placement process; such strategies would require the review of bond counsel. In a negotiated sale, flexibility is achieved, so that advancing or delaying the sale within the final few days is always possible. • Uqssouitt and Spread - Because underwriters have DO involvement in the planning or pre-sale preparation of an issue, the discount or spread will typically be lower in a competitive sale than in a negotiated sale. Data taken from the Public Securities Association files have been tabulated and indicates that spreads in negotiated transactions are higher. However, the negotiated transactions tend to be substantially more 'complex and difficult to market, o lutelest Rate - No studies have come to our attention that conclusively demonstrate the benefit of one type of sale versus another in regard to interest rates. If bids from a number of competing syndicates can be simulated, the competitive rate will probably be lower than that achieved in negotiation. If only one or two syndicates bid, the interest cost may well be higher. Setting Terms . of Sale - A competitive sale allows the issuer to set stringent requirements for call provisions, term and maturities, good faith deposits, investment of funds an other items. If the market understands these terms, they may be well received. In a negotiated sale, the final sizing and configuration of the issue can be adjusted to meet the needs of particular purchasers. J. Selecting_the Underwriter _(Ne.ntiated Bond Sales) Should the County decide to negotiate the sale of the its bonds, the process of selecting an investment banker will require careful attention. We will assist in establishing the criteria against which private investment banking proposals can be evaluated. Among the factors that will be analyzed are the financial strength of the firm, the national distribution network, the strength in institutional and retail marketing, the experience in marketing issues of the types being offered, the ability to commit personnel, and the successful completion of transactions in a timely manner. Specific underwriting fees and expenses may also be included. We will prepare the initial letters requesting underwriter proposals and clearly setting forth the issues and concerns which each firm should address in the proposal. Upon receipt of responses, we will summarize this material and prepare a set of follow-up questions to be asked of the banking representatives at private interviews. All of this material will then be synthesized for review by the County for final selection of the underwriter. If desired, we will make recommendations of both the firms to be short-listed based on the initial proposals, and the selection of a management team. K. Establishment of Financing Timetable At the outset of the debt transaction process, we will review the Financing plan and in conjunction with the County, outline the magnitude of the debt transaction to be undertaken and its proposed form. Haying outlined the magnitude and method of financing, a successful financing program will require further close coordination between the County, financial advisor, the managing underwriters (as appropriate), legal counsel, feasibility consultants and other financial consultants. We will prepare a schedule and detailed description of the interconnected responsibilities of each team member and update this schedule, with refinements as necessary, as the work progresses. Included in the schedule will be the major decision points for approval by the County, integrated as closely as possible with standing or planned Board meetings. Monitoring the Debt Transaction Process We will have primary responsibility for the successful implementation of the financing strategy and timetable that is adopted. We will coordinate and assist in a preparation of the legal and disclosure documents and will monitor the progress of all activities leading to the sale. We will prepare the timetables and work schedules necessary to achieve this end in a timely, efficient and cost- effective manner. I\1. Development of Business Terms Memorandum Following completion of the financing timetable, we will prepare a Business Terms Memorandum. This memorandum will set forth, in detail, the fundamental business terms to be incorporated into the documents supporting the financing transaction. Specific characteristics of the financing transaction including the nature of the pledge, the structure of the security provisions, flow of funds, reserve requirements, parity debt requirements and the types of resolutions needed to effect the transaction will be delineated as agreed upon by the County and its financing team. N. Development of Disclosure Requirement.; We are committed to full disclosure of all relevant financial, economic and legal information with respect to the County and the financing transaction. In accordance with SEC, NISRB and GFOA guidelines, this disclosure ensures that potential investors have sufficient data to analyze the proposed financing. A high quality and thorough presentation increases credibility and marketability of the underlying securities. This will be particularly important if the bonds do not have the full general obligation pledge of the County. The factors and issues around which the disclosures are structured are the following: o Legal basis for issuing debt o Security for the debt o Restrictions on additional debt o Purpose and allocation of debt o Governmental system o Financial management system o Revenue sources: historic, current and projected a Outstanding indebtedness o Planned future indebtedness a Labor relations and retirement systems o Economic base a Annual financial statements a Legal opinions regarding tax exemption a Solid waste disposal plan a Project structure a Project feasibility analysis o Vendor credit strength and capability o Flow Control . o Other terms or conditions Once all disclosure elements are identified and developed, we will prepare a detailed outline of the Official Statement. 0, Qf St:ai?ment Pren,gration We will assume the responsibility of coordinating the preparation of the Official Statement. The importance of the Official Statement cannot be overstated. It not only serves as the primary marketing and promotional tool for the issue, but also as the vehicle for disclosure. Therefore, the clarity of both the summary and technical explanations as well as the comprehensiveness, of the documentation must be assured, It becomes the public document of record for the financing, will receive widespread distribution and scrutiny during the financing and will be referenced in future years as not only a vehicle of credit review but also a "sales tool" in the remarketing of the underlying securities. P. Review and Comment on En?ineers Feasibility Study PFI'vl will review and comment an the engineers feasibility study for its inclusion in the Official Statement. PFM will aggressively seek to assure that all of the feasibility concerns of the financial markets and rating agencies are addressed. The Feasibility Study is one of the most critical documents in the rating agencies' credit analysis. PFM is familiar with all of the rating agency concerns which must be addressed, including waste flow control and waste projections, technical feasibility, operating cost and revenue projections, and sensitivity analysis. Q. Arrange Printing_and Distribution We will act as the County's agent in procuring the services of financial printers for the Official Statement and related bidding documents (as appropriate), will arrange for the printing of the bonds and for the placement of sale advertisements. See the caption "Special Financial Services Procurement". R. Preparation of Debt Resolutions and Related Documents Simultaneous with the preparation of the Official Statement, we will assist the managing underwriters (as appropriate), bond counsel and other legal advisors in the drafting of the respective debt resolutions and other legal documents. Specifically, we will monitor document preparation for a consistent and accurate presentation of the recommended business terms and financing structure, if the transaction is undertaken as a. competitive sale, we will evaluate alternative bidding structures and assist in the development of a notice of sale and bid form that optimizes the benefit to the County. S. Sizing and Structuring of Bond Issues The sizing, structure and repayment provisions of a debt transaction are among the most important facets of a debt issue. We will work with the County staff to design a debt structure that is sensitive to the County budgetary and fiscal position, that dovetails and coordinates this transaction with that of outstanding debt issues and that is sensitive to current conditions in the tax- exempt and taxable capital markets. As market conditions change, we may recommend changes in the debt structure. T. Rating Agency Presentation and Bond Niarke,tina We will develop a strategy for presenting the financing program to the rating agencies and the investment community. We will develop a bond marketing program to assure that the investment community is familiar with the project's financing structure and the County's credit. We will schedule the rating agency visits to assure the appropriate and most knowledgeable rating agency personnel are available, for the presentation and will develop presentation materials and assist the County's staff and officials in oreparing for the presentations. The rating agency meetings are a crucial point in any public financing. In advance of the meetings we will discuss with rating agency personnel their concerns and requirements. Specifically, we will discuss any information requests the rating agencies may have, identify the people who will attend the meetinns and compile the materials that will be provided beforehand. Additionally, we will attempt to identify any concerns that they may have, so that a response or program modification can be developed. In some cases, we may recommend a meeting with the rating agencies in advance of the formal presentation that is done at the time of the rating request. U. Bond Market Analysis and Titninct of Sale We will provide regular summaries of current municipal market conditions, trends in the market and how these may favorably or unfavorably affect the County's proposed financing. This analysis and presentation will become more frequent as the actual date of sale approaches and will view markets from both a national and regional perspective. The state of the market at the time of sale is not the only timing consideration in achieving the lowest possible interest cost. It is also important to know when similar issues are coming to market. Competition from such issues for investor interest can result in significantly higher interest costs to the issuer. Therefore, we closely monitor the municipal underwriting calendar to see when comparable credits are scheduled to come to market. V. Negotiation of Sale TerrnsiNegotiated Sale). For a negotiated financing, we will serve as the County's agent with respect to the pricing of the bonds. We will work with the County to establish the pricing parameters for the gross spread and the debt structure and target interest rates. We will actively monitor the sale of the dc,lat during the order period and make recommendations to the County regarding repricing of all or a part of the debt structure based on preliminary orders and municipal and government market movements over the course of the order period. W. Recommendation for Award We will perform a thorough evaluation of market conditions and will examine bids on comparable issues preceding the receipt of bids (competitive sale) or the bond purchase agr eement (negotiated sale). For a competitive sale, we will confirm interest rates, NIC and TIC for each bid using PFM's in-house computer capabilities which allow for immediate confirmation of the bids. PFM will provide a Financial Advisor's Memorandum evaluating debt negotiations, interest rates, issue structure, and gross spread and a firm recommendation on acceptance or rejection of the offer to purchase. This memorandum will review the following areas: o A review of the size of financing o Sources and uses of funds o Term and maturities of the issue O Review of the rating application process o Proposed plan for investment o Review of the bids (competitive) o Comparison of rate and discount With comparable issues (negotiated) O Summary of debt service repayment schedule o Recommendation for award X. ClosingL Preparation and Related Services We will assist in arranging for the closing of each financing. We will assume responsibility for such arrangements as are required, including bond printing, signing and final delivery of the Bonds, VIM ASSISTANCE WITH SPECIAL FINANCIAL SERVICES PROCUREMENT We will assist the County, as needed, in identifying and procuring special financial related services that may be needed over the course of its financing programs. Some of these services are generic to any financing alternative while others may or may not be required depending on the financing vehicle chosen and the capabilities of the County personnel. While each of PFM's investment management engagements is tailored to the needs of a specific client, generally public funds management has as its objectives to: Preserve Capital - Investment guidelines should assure that funds are investment with minimal risk to principal. Maximize Earnings - The program should be designed to obtain the highest possible yield, consistent with the preserving principal. To achieve this objeetive, PFM will assist in developing procedures to: o Track cash availability and cash flow and report them regularly to cash managers; o Provide an array of investment alternatives to take advantage of market disparities; and o Monitor performance .against standards for the investment of comparable funds by others. Provide flexibility - The investment program should be responsive to changes in money market conditions, emerging investment strategies and the changing nature of investment risk_ Overall program planning, design and administration should be responsive to investment opportunities so that as these changes are analyzed, the results will he factored into the ongoing planning effort Public funds management is a 'fishbowl', and unless the manag.cr is conscious of this, the results can be devastating. In 1985, a number of communities invested money in repurchase agreements with two securities brokers that went bankrupt. While PFM had no involvement in these investments and specifically advised several clients not to make such investments, after the bankunipteies we were asked to assist a County and a City in Pennsylvania that did lose money in overhauling their investment policies and attempting to recoup losses. The lesson of these bankruptcies is that in many ways the standards applied to managing funds for governmental entities are higher than those applied to corporations and financial institutions. Higher yield is no excuse for taking risk. Investment Management Tasks PFM believes that the key to successful investment management is a program with the following elements: o Investment policy development o Portfolio management o Coordination The services we propose to provide in each area should result in an efficient, comprehensive approach to investment management which meets the basic objectives of preserving principal, maintaining liquidity and maximizing yield, and is also responsive to particular requirements and policies of the County. Following closing, PFM will monitor the value of the securities. We will identify opportunities to reoptomize the portfolio and recommend a plan for such reinvestment. On a periodic basis, we will provide. the County with updates as to performance and other investment alternatives. The provisions in The Tax Reform Act of 1986 regarding arbitrage rebate will impose numerous reporting and record keeping requirements on the County. The necessary information systems are expensive to put in place and to maintain over time. PFM will provid.e the required record keeping and market bidding practices which the Act mandates. In this regard, the County can comply with the arbitrage rebate requirements and at the same. time maximize the yield on its investments and avoid the costs of the staff and management systems that otherwise would be. required. PEA would ic,spectfully suggest that a more active role of the Financial Advisors in the, area of the County's investment management could yield substantial financial benefits. The County's request for proposal service requirements do not, in our opinion, create a role which can achieve the maximum economic benefit that could be derived from aggressive bond proceeds' portfolio management Accordingly, we would make the following points in the interest of stimulating further discussion on the expanded role. which we might play. By employing a skilled investment manager with fiduciary responsibility, the County should be able to improve substantially the return on assets and reduce the risks that assets and liabilities are mismatched At the same time, the County can be assured that its funds are being managed in accordance; with the requirements of the Federal Tax Code. Managing public funds requires unique skills and sensitivities, since statutes closely regulate permitted investments, and public officials are ultimately responsible for the results. An investment manager will be able to interpret monetary and fiscal trends, and monitor constantly the status of funds and investments. At a time when interest rates are volatile, and credit matters are subject to sudden change, a manager whose sole responsibility is to minimize risk and maximize earnings will return many times over the modest cost of servic,es.