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RPVCCA_SR_2013_06_01_02_San_Ramon_InfrastructureCITY OF MEMORANDUM RANCHO PALOS VERDES TO: FROM: DATE: SUBJECT: REVIEWED BY: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL ~ DENNIS McLEAN,DIRECTOR OF FINANCE AND INFORMATIO~ TECHNOLOGY LES JONES,INTERIM DIRECTOR OF PUBLIC WO~ JUNE 1,2013 -V SAN RAMON CANYON PROJECT -FUNDING OPTIONS (Supports City Council 2013 Goal for Public Infrastructure) CAROLYN LEHR,CITY MANAGER ~ Staff Coordinators: RECOMMENDATION Kathryn Downs,Deputy Director of Finance and Information Technology Ron Dragoo,Senior Engineer 1)Receive and file the presentation (provided separately)by the City's Financial Advisor regarding funding options,including debt financing for the San Ramon Canyon Project;and 2)Defer any decision whether or not to use debt financing for the San Ramon Canyon Project until more information is available about the condition of the City's infrastructure based upon the completion of the Infrastructure Report Card in early 2014. BACKGROUND AND DISCUSSION On March 5,2013,a construction contract was formally awarded by City Council to LH Woods and Sons,Inc.for construction of the San Ramon Canyon Project ("San Ramon"). The ground breaking occurred on April 16,2013 and construction is currently underway. The City was awarded a grant from the Disaster Preparedness and Flood Protection Bond Act of 2006 to assist in funding about %of the cost of San Ramon.The maximum dollar amount of reimbursement offered through the State grant was set at $9,464,727;the total cost of the work estimate for the 50/50 cost sharing is $18,929,455.The FY12-13 CIP Budget includes the use of about $8.3 million CIP Reserves to provide interim funding for 2-1 SAN RAMON CANYON PROJECT -FUNDING OPTIONS June 1,2013 Page 2 of 3 the San Ramon Canyon Project until a financing decision is made by the City Council. Should the Council subsequently decide not to finance San Ramon,this interim funding will have effectively become a permanent decision to use CIP Reserves for the project. On August21,2012,the City Council adopted Resolution No.2012-58 declaring the City's intent to reimburse itselffor San Ramon project expenditures from the proceeds of bonds (if any)issued after expenditures are incurred.This resolution did not commit the City to issue bonds. On October 16,2012,Tim Schaefer of Magis Advisors,the City's Financial Advisor,made a presentation to the City Council regarding the steps,timeframes and responsibilities to be used as a general guideline when undertaking debt financing by a public agency.Due to Mr.Schaefer's expertise with debt financing and his existing knowledge of the City,Staff recommen'ded and the City Council retained,Magis Advisors to perform the services associated with the development of the San Ramon Funding Plan (presented in conjunction with this report).Mr.Schaefer has repeatedly advised Staff that this task is related to a "funding"plan,not a "financing"plan,with the distinction being the latter implies the use of debt financing,while the first simply examines whether the resources are available at the times,and in the amounts,needed to both pay for the San Ramon project and carry out other necessary capital projects approved by the Council. On April 30,2013,Staff presented an overview of the proposed Infrastructure Management Plan (referred to as the "IMP"until an appropriate name is established)to the City Council that would provide a long-term road map for the systematic rehabilitation of the City's infrastructure.The initiation of the IMP would begin with the preparation of an infrastructure condition assessment (an Infrastructure "Report Card")by a consultant.The report card will provide a basis for the development of a long-term infrastructure capital maintenance and replacement/rehabilitation plan and funding plan. In contrast,the Five-Year Capital Improvement Plan ("CIP")is a mid-term view of quantified projects and funding sources.Not all infrastructure projects are suitable to be financed with debt;and the urgency of some of those projects may necessitate use of the City's reserves in the short term.Both the Funded and Unfunded lists of the CIP include projects that address safety issues.Prioritization of these projects is a risk management exercise. For example,upsizing a sewer pipeline can reduce the risk of overflow that would result in mandated fines and repairs.Although it is in the City's best interest to mitigate risk,the only projects in the CIP that are legally required are those that improve the City's compliance with the Americans with Disabilities Act (but no legal definition for the level of effort required);and the Storm Water Quality projects as part of the City's MS4 permitting requirements. Both Staff and the City's Financial Advisor believe that the decision to issue debt or draw down CIP Reserves to pay for the City's share of San Ramon Project costs should be based on better data once the Report Card is completed and the IMP is further underway. A funding decision for San Ramon need not await completion ofthe IMP,but would benefit from a more concrete understanding of the condition of the City's infrastructure with known revenue sources available (i.e.transient occupancy tax from Terranea Report). 2-2 SAN RAMON CANYON PROJECT -FUNDING OPTIONS June 1,2013 Page 3 of 3 DECISION ALTERNATIVES IRS regulation 1.150-2 is the guidance referred to in the reimbursement resolution adopted by City Council on August 21,2012.In order to reimburse itself for the costs of the San Ramon project with proceeds of debt,the City must sell the bonds within 18 months of the date that the City pays the first construction invoice.With the first payment likely being made in May 2013,the bonds would have to be sold by November 2014. Moreover,the choice of debt to be issued to finance San Ramon affects the timing.The City's Financial Advisor has discussed with Staff the relative benefits,costs,and disadvantages of the likely sources of debt,should the City elect to incur such debt,for San Ramon.In summary form,the choices for debt require either (a)entering into a "financing lease"that would rely on the City's General Fund for repayment;or (b)issuing a general ob'ligation bond that would impose a tax on real property situated within the City to repay the debt.The second alternative is measurably less expensive than the first,both in terms of interest rate and transaction costs,but requires an affirmative vote of the people. The first alternative is much easier to execute,but would impose a long-term obligation on the City's General Fund,with the possible outcome of limiting the Council's future choices for application of General Fund resources.This decision point is the primary driver for the recommendation to postpone decision-making until the City's future infrastructure needs are better known or quantified. Staff offers the following decision alternatives for consideration by the City Council: 1)Approve Staff's recommendation to defer any decision whether or not to use debt financing for San Ramon until more information is available about the condition of the City's infrastructure based upon the completion of the Infrastructure Report Card in early 2014;or 2)Direct Staff and the City's Financial Advisor to present the San Ramon funding options to the Finance Advisory Committee and/or Oversight Committee and/or an independent citizen advisory committee for review and a recommendation to the City Council upon completion of the Infrastructure Report Card;or 3)Decide whether or not to initiate the process to: a.Enter into a financing lease arrangement to provide financing; i.Use a City asset other than the storm drain improvements to be leased by the City;and ii.Use the General Fund as a resource to make the lease payments;or b.Initiate the process to place a measure before the voters to approve a general obligation bond to finance the portion of San Ramon that is not already funded with grant monies. Attachments A -Magis Advisor's Checklist of Steps in a Debt Financing B -COP Illustration -San Ramon Canyon C -GO Illustration -San Ramon Canyon Staff Report,dated October 16,2012 Staff Report,dated April 30,2013 2-3 CHECKLIST OF STEPS IN A DEBT FINANCING 00116208.DOCX Revised to: July 2011 INTRODUCTION & OVERVIEW This describes the steps, along with their timeframes and responsibilities, which may be used as a general guideline when undertaking a debt financing for a public agency. The information presented here is aimed at issuers who are smaller, access the market infrequently, or are new to the process. The checklist is adapted from the California Debt Issuance Primer, and has been updated to reflect prevailing market customs and practices as of January 2011. As a result, it may differ in significant ways from the Primer, as the Primer was last updated in 2005. The legally required procedural steps vary widely among the different types of public debt financing. For example, some types of debt require voter approval; some require approval by ordinance subject to referendum; while others may be approved by simple resolution of the governing body of the issuer. Some types of debt require action by official bodies other than the issuer and others need only be approved by the issuer. Nevertheless, much of this process is common to virtually all types of public debt. Broadly speaking, the issuer must undertake the following steps to issue debt: A. Determine that the project or program to be financed is necessary or desirable B. Select the financing team C. Structure the financing, meaning designing the repayment terms and patterns D. Obtain formal approval by the legislative or governing body of the issuer E. Market the issue to investors, then close the issue by exchanging bonds for the borrowed funds The issuer also must live with the issue after the closing. The post-closing issuer responsibilities include: F. Making ongoing disclosure of financial and operating data G. Responding to investor inquiries H. Calculating and filing tax returns required by federal tax law I. Administering taxes, revenues, or assessments securing the issue J. Complete any construction or acquisition programs funded from the issue K. Complying with ongoing covenants, including insurance, investment of funds, or repayment provisions Attachment A 2-4 CHECKLIST OF STEPS IN A DEBT FINANCING 00116208.DOCX Revised to: July 2011 1. Establish a process to deal with required amendments or refinancing opportunities These steps are not independent and are not entirely sequential. For example, the legal and financial feasibility of a particular method of securing the bond issue under a proposed financing structure may determine whether the proposed project is feasible, and, therefore, whether the project and financing will be undertaken. The possibility of political controversy or legal action also may play into the feasibility analysis. As a result, a preliminary analysis of the feasibility of each step may be necessary prior to undertaking any of the steps in the proposed financing, and that preliminary analysis may involve informal consultation with experts prior to selection of the project team. Because of the variables which may be present in different financings, the reader should be aware that steps may be accomplished in a different order and, in some cases the time required may be more or less than indicated. The chronology outlined is broadly applicable to financings that are public offerings (not private placements) of debt being issued to finance a governmental project. Although the process for a private placement or for private activity financings is similar, this discussion does not cover steps that may be unique to those types of financings. The description of each step indicates the members of the team commonly responsible for completing the step. Those members are commonly the following (in usual order of engagement, and as applicable): 1. Issuer 2. Bond Counsel 3. Financial Advisor 4. Underwriter 5. Feasibility Consultant(s) 6. Underwriter’s Counsel 7. Disclosure Counsel 8. Investment Advisor 9. Rebate Consultant 10. Trustee/Fiscal Agent The team members that actually perform the steps in any given financing may also vary. For example, if the debt is to be sold at negotiated sale and no financial advisor is engaged by the issuer, the tasks indicated as being performed by the financial advisor will generally be performed by the underwriter. Conversely, in a competitive sale, the tasks performed by the underwriter (except for the actual purchase and distribution of the bonds) will normally be performed by the financial advisor. Also, if disclosure counsel is employed, they may perform many or all of the tasks indicated as being performed by underwriter’s counsel. Attachment A 2-5 CHECKLIST OF STEPS IN A DEBT FINANCING 00116208.DOCX Revised to: July 2011 STEP 1: DETERMINATION THAT A PROJECT (OR PROGRAM) TO BE FINANCED IS NECESSARY OR DESIRABLE (TIME: ONE WEEK TO THREE YEARS) This initial step in the financing process is potentially the most time-consuming because this when many basic business decisions regarding the project—its scope, cost, and the approach to financing—are made. Issuers should carefully consider their own policies and long-range objectives at this early stage, so that during the actual process of preparing, selling, and closing the issue, these policy decisions are firmly in place. It may be appropriate for the issuer to inquire of other agencies that have financed similar projects to get ideas and obtain the benefit of their experience. Similarly, this is the time at which any constituent input—for example, citizen’s advisory committees or neighborhood groups—should be consulted to help shape the decisions being made. Although these activities are listed before Step 2, SELECTION OF THE FINANCING TEAM, it may be necessary or desirable to identify and retain bond counsel, a financial advisor, and/or underwriter to assist with this first step as these team members may be useful in accomplishing the tasks identified below. DEFINING THE BASIC NATURE AND SCOPE OF THE FINANCING REQUIREMENT What? Who?  Technological feasibility Issuer  Financing feasibility Issuer, financial advisor, underwriter  Statutory authorization Bond counsel  Size of debt issue required Financial advisor, underwriter, issuer  Available resources for repayment Issuer, financial advisor, underwriter, bond counsel  Feasibility review of project/program Issuer, financial advisor, underwriter  Need for external credit support Issuer, financial advisor, underwriter  Other required approvals (e.g., permits) Bond counsel  Political environment Issuer, bond counsel, financial advisor, underwriter Attachment A 2-6 CHECKLIST OF STEPS IN A DEBT FINANCING 00116208.DOCX Revised to: July 2011 STEP 2: SELECTION OF THE FINANCING TEAM (TIME: ONE WEEK TO THREE MONTHS) The second step in the financing process is critical to the ultimate success of the project and should be undertaken carefully. At this stage (unless previously done as discussed above), the issuer should decide whether to hire a financial advisor (whether or not a negotiated sale is expected) or rely on an underwriter to help with the initial structuring of the issue, which may depend upon the decision to sell the bonds through a competitive or negotiated sale. In some cases, issuers who have worked with a particular underwriter on prior projects may work with that underwriter at the earliest stages in shaping the transaction. Similarly, a financial advisor is often called upon very early in the process to help anticipate the financing options available. It also may be advantageous to consult with bond counsel early on in the process to determine the legal avenues available for the project and the financing. DETERMINATION OF THE POSITIONS TO BE FILLED (BY THE ISSUER) 1. Will a financial advisor or underwriter be initially retained to assist in structuring the issue? (Issuer) 2. Is the debt to be sold at competitive or negotiated sale? (Issuer, financial advisor, bond counsel) 3. If negotiated, will the separate advice of a financial advisor be necessary or desirable? (Issuer) 4. If negotiated, should a single underwriter be selected or a team of managing underwriters? (Issuer, financial advisor) 5. Will the issuer hire a separate disclosure counsel? (Issuer) 6. Is there a need for varying types of banking expertise? (Issuer, financial advisor) 7. Will a feasibility consultant be necessary to demonstrate the financeability of the project or program? (Issuer, underwriter, financial advisor) 8. If an interest rate swap is used, will a Swap Advisor be utilized? (Issuer, financial advisor, underwriter) 9. Will special tax counsel be necessary or desirable? (Issuer, underwriter, bond counsel) 10. Will a credit enhancement provider be necessary? (Issuer, financial advisor, underwriter) Attachment A 2-7 CHECKLIST OF STEPS IN A DEBT FINANCING 00116208.DOCX Revised to: July 2011 11. Will a trustee, fiscal agent or paying agent be used? (Issuer, bond counsel, financial advisor) 12. Procedural alternatives for selecting each position on the financing team (Issuer) 13. Does a statute or local ordinance require competitive selection? (bond counsel) 14. Reliance upon previously established relationships (Issuer) 15. Use of a request for proposals (Issuer, financial advisor, bond counsel) 16. Competitive sale of bonds? (for selecting underwriter) 17. Continuing disclosure (Issuer, bond counsel, disclosure counsel) 18. Ongoing administration (Issuer, bond counsel, others) 19. Arbitrage rebate compliance services (Issuer, others) Attachment A 2-8 CHECKLIST OF STEPS IN A DEBT FINANCING 00116208.DOCX Revised to: July 2011 STEP 3: STRUCTURING THE FINANCING (TIME: ONE WEEK TO THREE MONTHS) At the third stage in the process, the consultants that have been retained will bring their expertise to bear on the financial and legal structuring issues. Typically, this stage will include several all-hands meetings and discussions as the documentation for the financing takes shape. Issuers need to remain keenly involved in this process so that the structuring alternatives being chosen are well understood and match up as closely as possible with the issuer’s goals and objectives. Issuers should understand why each decision is being made and pay particular attention to the covenants, agreements, security features, and other obligations they are undertaking. Many financial advisors recommend using a “term sheet” to develop the basic provisions of the borrowing expressed in business terms before proceeding to the development of legal documents by bond counsel. Similarly, the issuer should be fully involved in reviewing and evaluating the disclosure being developed. Issuers may not rely entirely on the professionals they hire to ensure that adequate disclosure is provided. Also, provisions in the documents that appear to be “boilerplate,” while often needed and appropriate should not be glossed over by the issuer. If the issuer has concerns over any part of the documents, adequate explanations should be forthcoming from bond counsel and the other team members with respect to the inclusion of each provision being included. 1. Initial organizational meeting (All) 2. Identify security structure alternatives and either select from among them or determine the criteria for selection (All) 3. Determine the approximate size of the issue, taking into account amounts needed for costs of issuance, reserve accounts, and capitalized interest, as well as the project or program being financed (Issuer, financial advisor, underwriter) 4. Is credit enhancement necessary? (Issuer, financial advisor, underwriter) 5. Are supplemental revenue sources necessary or available? (Issuer, financial advisor, underwriter) 6. What should be the terms of any underlying arrangements, including covenants of, and/or security provided by, any governmental entity using the project or any nongovernmental borrower? (Issuer, bond counsel, financial advisor, underwriter) Attachment A 2-9 CHECKLIST OF STEPS IN A DEBT FINANCING 00116208.DOCX Revised to: July 2011 7. Is debt service coverage necessary? If so, how much? (Issuer, financial advisor, underwriter) 8. Is casualty insurance necessary? If so, how much? (Issuer, financial advisor, underwriter) 9. Are other covenants of issuer necessary or desirable? (Issuer, financial advisor, underwriter, bond counsel) 10. Evaluate legal, political, and regulatory constraints (All) 11. How do federal tax laws affect any or all of above? (Bond counsel) 12. How do federal and state securities laws affect any or all of the above? (Bond counsel, underwriter’s counsel, disclosure counsel) 13. Are there state statutory constraints and what legal proceedings will be required? (Bond counsel) 14. Has an environmental review been satisfactorily completed? If not, will one be completed before an “approval” takes place? (Issuer, financial advisor, underwriter, bond counsel, underwriter’s counsel, disclosure counsel) 15. What financial and operating data will be included in the issuer’s annual report under SEC Rule 15c2-12? (Bond counsel, disclosure counsel, financial advisor, underwriter) 16. Will any additional types of listed event notices be required (other than the 11 categories specified in SEC Rule 15c2-12)? (Bond counsel, disclosure counsel, financial advisor, underwriter) 17. Should any steps be taken to resolve or reduce political controversy, or to forestall a possible reverse validation action? (Issuer, bond counsel) 18. Is there a debt policy in place that establishes goals or constraints on the financing? (Issuer, financial advisor) 19. Develop timetable for accomplishing remaining tasks (All) 20. Are any specific filings required? (Issuer, bond counsel) 21. Are approvals necessary other than by issuer (such as private activity bond volume cap)? (Bond counsel) 22. Other time constraints (All)  Construction constraints  Negotiations with other parties, e.g. credit enhancement provider  Refunding date 23. Agree upon allocation of responsibilities for tasks to be accomplished (All) 24. Prepare major legal documents relating to the financing, including indenture (or bond resolution), agreements defining any underlying arrangement (such as loan agreements, lease, or credit enhancement Attachment A 2-10 CHECKLIST OF STEPS IN A DEBT FINANCING 00116208.DOCX Revised to: July 2011 agreement), Official Statement, notice of sale or bond purchase agreement, and Continuing Disclosure Agreement (Bond counsel, financial advisor, underwriter’s (or disclosure) counsel, underwriter) 25. Meeting(s) or conference calls to review and negotiate terms of the major legal documents (All) 26. Due diligence review of all facts material to the investor's decision to buy the bonds (All, but especially underwriter’s counsel or disclosure counsel) 27. Consideration of investment alternatives for bond proceeds. Will a guaranteed investment contract be used? If the issue includes refunding, will the escrow be funded with open market securities or SLGS? (Issuer, financial advisor, underwriter, investment advisor, bond counsel) 28. Credit rating agency review of the major legal documents and other relevant information (Issuer, financial advisor, underwriter) 29. Adoption by the governing body of the necessary resolutions or ordinances authorizing issuance of the bonds and execution of the legal documents either approving the notice of competitive sale or authorizing execution of the bond purchase agreement (Issuer, bond counsel) 30. File a validation action if such is determined to be necessary or appropriate (Issuer, bond counsel, other counsel) 31. Advise CDIAC of proposed sale 30 days in advance of proposed sale date (Issuer, bond counsel) Attachment A 2-11 CHECKLIST OF STEPS IN A DEBT FINANCING 00116208.DOCX Revised to: July 2011 STEP 4: MARKETING AND CLOSING (TIME: ONE WEEK TO THREE MONTHS) At this point, the financing should be completely structured and all parties should be in agreement as to the ultimate terms of the financing (except the pricing or interest rate terms themselves). It is important to have worked out any major structuring issues or document provisions necessary to obtain a satisfactory rating or credit enhancement in advance of this stage, so that the final approvals by rating agencies and credit enhancers can go smoothly and without major revisions to the financing structure or security provisions. Nevertheless, it is possible that as a result of the first few steps outlined below, an issue will surface which requires the team to reassess some of the decisions made in Step 3. Once the rating and/or credit enhancement is in place, it is time to go out into the market and price the issue. At this stage, the final interest rates and other financial terms of the borrowing will be determined. PREPARING FOR MARKETING 1. Provide final information to credit rating agencies (Issuer, financial advisor, underwriter) 2. Obtain the credit rating (Issuer, financial advisor, underwriter, bond counsel) 3. Meet with rating analysts (if necessary or appropriate) (Issuer, financial advisor, bond counsel) 4. Site visit by rating analysts (if necessary or appropriate) (Issuer) 5. Obtain final commitments from credit enhancement provider (if necessary) (Issuer, financial advisor, underwriter) 6. Design the proposed maturity structure and establish redemption features for the bonds (Issuer, financial advisor, underwriter) 7. Final review and approval of Preliminary Official Statement (All) 8. If competitive sale, determine rules for selecting winning bidders (Issuer, financial advisor, bond counsel) 9. If negotiated sale, determine whether syndicate or selling group is appropriate and who should be members (Issuer, underwriter, financial advisor) INVESTMENT PLAN FOR BOND PROCEEDS In the case of a simple investment of funds in a money market fund or in a pooled investment vehicle such as LAIF (the Local Agency Investment Fund of the State of Attachment A 2-12 CHECKLIST OF STEPS IN A DEBT FINANCING 00116208.DOCX Revised to: July 2011 California), this step can easily be accomplished at or shortly after the closing of the issue. On the other hand, if open market treasury securities (especially for a refunding escrow) or a guaranteed investment contract will be used, a bidding procedure like the one outlined below may be required. This should be done in advance of the closing of the issue. 10. Determine appropriate investment vehicles (Issuer, investment advisor, financial advisor, underwriter, bond counsel ) 11. Prepare and circulate for review a request for bids for investments (Investment advisor) 12. Evaluate responses (Investment advisor, bond counsel, financial advisor, underwriter) 13. Negotiate final terms of investment arrangement with winning bidder (Issuer, bond counsel, trustee) MARKETING & PRICING 14. Distribute Preliminary Official Statement to syndicate, selling group members, or potential bidders; and, potential investors (if competitive sale, include Notice of Sale) (Issuer, financial advisor, underwriter) 15. Hold information meetings or teleconferences with investors and dealers, if necessary or appropriate (Issuer, financial advisor, underwriter) 16. Remain prepared to answer any additional questions from analysts for potential bidders. (Issuer, bond counsel, financial advisor, underwriter) 17. For competitive bids: Open bids at time and place specified in Notice of Sale. (Issuer, financial advisor, bond counsel) 18. Determine winning bidder by applying rules specified in Notice of Sale. (Issuer, financial advisor, bond counsel) 19. If winning bid is acceptable, award bonds to winning bidder, creating, in effect, a Bond Purchase Agreement between the issuer and the winning bidder. (Issuer) 20. For negotiated sales: conduct preliminary pricing discussion. (Issuer, underwriter, financial advisor) 21. Finalize proposed pricing scale, release pricing and terms to market to solicit orders from targeted investors. (Underwriter) 22. Reprice if too many or too few orders. (Issuer, underwriter, financial advisor) 23. Agree upon the final rates and prices, then submit firm offer to Issuer. (Issuer, underwriter, Attachment A 2-13 CHECKLIST OF STEPS IN A DEBT FINANCING 00116208.DOCX Revised to: July 2011 financial advisor, underwriter’s counsel) 24. Sign Bond Purchase Agreement. (Issuer, underwriter, underwriter’s counsel) 25. Finalize and print Official Statement, describing final maturity schedule, interest rates, and reoffering prices to the public, as well as conforming descriptions of bonds and project to final design (All) PRE-CLOSING 26. Prepare closing documents, review (usually by phone), and arrange for execution (All, but especially Issuer and bond counsel) 27. Execute and/or authenticate bonds (Issuer, trustee) 28. Final meeting to execute documents and ensure that all required documents are present and in the agreed-upon form (All) CLOSING & DELIVERY OF FUNDS AND EXCHANGE OF BONDS 29. Telephone conference with Depository Trust Company, trustee, bond counsel, and issuer to release bonds to underwriter (as listed) 30. Exchange receipt for bond proceeds and receipt for bonds 31. Execute investment plan for bond proceeds 32. Pay necessary fees or charges, including settlement of bond insurance premiums, initial costs of issuance 33. Recordation of real estate deeds, leases and encumbrances 34. Ensure compliance with MSRB requirements for delivery of final Official Statement, escrow agreements (for refundings), and any other post-issuance filings Attachment A 2-14 CHECKLIST OF STEPS IN A DEBT FINANCING 00116208.DOCX Revised to: July 2011 STEP 5: LIVING WITH THE ISSUE AFTER CLOSING During the busy time of preparing for a bond issue, marketing, and closing, it is easy to forget that the bond issue will usually be in existence for a long period of time. After closing, the issuer and nongovernmental borrower will have to perform many tasks to assure that the financing is ultimately successful. It is important that staff members of the issuer/borrower be designated to take responsibility for the ongoing compliance and monitoring functions described below. During the initial structuring phases described in the previous steps, the post-issuance compliance issues should be kept in mind. Ideally, the people who will be responsible for post-issuance compliance on behalf of the issuer/borrower should be involved in the early phases of the project as well. The issuer/borrower will need to determine what consultants it will hire to perform these tasks and which tasks it will take on itself. Even when consultants (such as rebate compliance providers, continuing disclosure consultants or counsel, investment advisors, and others) are retained, issuers will need to monitor their performance and work product. Ultimately, it is the issuer/borrower who is responsible for adhering to these compliance requirements. 1. Evaluate performance of financing team (Issuer) 2. Monitor the progress of the construction project or lending program (Issuer) 3. Administrative duties of issuer:  Monitor compliance with tax rules for expenditures and use of project  Monitor compliance with program rules for expenditures and use of project.  Provide financial and project reports to investors  Monitor the trustee's performance, including: a) Collection of revenues b) Maintenance of accounts c) Investment of monies 4. Comply with ongoing covenants (Issuer) 5. Monitor interest rates and remain alert to refunding opportunities (Issuer) 6. File Annual financial statements and continuing disclosure information(Issuer) 7. Ensure arbitrage rebate compliance (Issuer) 8. Refinancing or refunding (if needed or appropriate) (Issuer, financial advisor, underwriter) 9. Respond to any inquiries or audits by the Internal Revenue Service or the Securities and Exchange Commission (Issuer, bond counsel, others, as required) Attachment A 2-15 $10,370,000 CITY OF RANCHO PALOS VERDES Certificates of Participation San Ramon Cyn Stabilization Project ILLUSTRATION as of 5/7/13 Sources & Uses Dated 07/01/2013 | Delivered 07/01/2013 Sources Of Funds Par Amount of Bonds $10,370,000.00 Reoffering Premium 238,309.50 Total Sources $10,608,309.50 Uses Of Funds Total Underwriter's Discount (1.400%)145,180.00 Costs of Issuance 160,000.00 Deposit to Debt Service Reserve Fund (DSRF)309,390.36 Deposit to Project Construction Fund 9,992,018.54 Rounding Amount 1,720.60 Total Uses $10,608,309.50 File | 00119000.SF | San Ramon Canyon (COP: 5/ | 5/ 7/2013 | 11:39 AM MAGIS ADVISORS Public Finance Consulting Page 1 Attachment B 2-16 $10,370,000 CITY OF RANCHO PALOS VERDES Certificates of Participation San Ramon Cyn Stabilization Project ILLUSTRATION as of 5/7/13 Pricing Summary Part 1 of 2 Maturity Type of Bond Coupon Yield Maturity Value Price Dollar Price 07/01/2014 Serial Coupon 4.000% 0.500%190,000.00 103.486% 196,623.40 07/01/2015 Serial Coupon 4.000% 0.600%200,000.00 106.749% 213,498.00 07/01/2016 Serial Coupon 4.000% 0.800%210,000.00 109.467% 229,880.70 07/01/2017 Serial Coupon 4.000% 1.100%215,000.00 111.318% 239,333.70 07/01/2018 Serial Coupon 4.000% 1.300%225,000.00 113.029% 254,315.25 07/01/2019 Serial Coupon 4.000% 1.600%235,000.00 113.678% 267,143.30 07/01/2020 Serial Coupon 4.000% 2.000%245,000.00 113.003% 276,857.35 07/01/2021 Serial Coupon 4.000% 2.200%255,000.00 113.138% 288,501.90 07/01/2022 Serial Coupon 4.000% 2.500%265,000.00 112.022% 296,858.30 07/01/2023 Serial Coupon 4.000% 2.700%275,000.00 111.326% 306,146.50 07/01/2024 Serial Coupon 3.500% 2.800%285,000.00 106.068% c 302,293.80 07/01/2025 Serial Coupon 3.000% 3.000%295,000.00 100.000% 295,000.00 07/01/2026 Serial Coupon 3.100% 3.100%305,000.00 100.000% 305,000.00 07/01/2027 Serial Coupon 3.200% 3.200%315,000.00 100.000% 315,000.00 07/01/2028 Serial Coupon 3.300% 3.300%325,000.00 100.000% 325,000.00 07/01/2029 Serial Coupon 3.400% 3.400%335,000.00 100.000% 335,000.00 07/01/2030 Serial Coupon 3.500% 3.500%345,000.00 100.000% 345,000.00 07/01/2031 Serial Coupon 3.500% 3.550%355,000.00 99.339% 352,653.45 07/01/2032 Serial Coupon 3.600% 3.600%370,000.00 100.000% 370,000.00 07/01/2033 Serial Coupon 3.700% 3.700%385,000.00 100.000% 385,000.00 07/01/2034 Serial Coupon 3.700% 3.750%395,000.00 99.277% 392,144.15 07/01/2035 Serial Coupon 3.800% 3.800%410,000.00 100.000% 410,000.00 07/01/2036 Serial Coupon 3.800% 3.850%430,000.00 99.241% 426,736.30 07/01/2037 Serial Coupon 3.875% 3.900%445,000.00 99.612% 443,273.40 07/01/2043 Term 1 Coupon 4.000% 4.043%3,060,000.00 99.250% 3,037,050.00 Total ---$10,370,000.00 --$10,608,309.50 File | 00119000.SF | San Ramon Canyon (COP: 5/ | 5/ 7/2013 | 11:39 AM MAGIS ADVISORS Public Finance Consulting Page 2 Attachment B 2-17 $10,370,000 CITY OF RANCHO PALOS VERDES Certificates of Participation San Ramon Cyn Stabilization Project ILLUSTRATION as of 5/7/13 Pricing Summary Part 2 of 2 Bid Information Par Amount of Bonds $10,370,000.00 Reoffering Premium or (Discount)238,309.50 Gross Production $10,608,309.50 Total Underwriter's Discount (1.400%)$(145,180.00) Bid (100.898%)10,463,129.50 Total Purchase Price $10,463,129.50 Bond Year Dollars $188,160.00 Average Life 18.145 Years Average Coupon 3.7997052% Net Interest Cost (NIC)3.7502103% True Interest Cost (TIC)3.7110222% File | 00119000.SF | San Ramon Canyon (COP: 5/ | 5/ 7/2013 | 11:39 AM MAGIS ADVISORS Public Finance Consulting Page 3 Attachment B 2-18 $10,370,000 CITY OF RANCHO PALOS VERDES Certificates of Participation San Ramon Cyn Stabilization Project ILLUSTRATION as of 5/7/13 Debt Service Schedule Part 1 of 2 Date Principal Coupon Interest Total P+I 07/01/2013 ---- 07/01/2014 190,000.00 4.000%391,318.76 581,318.76 07/01/2015 200,000.00 4.000%383,718.76 583,718.76 07/01/2016 210,000.00 4.000%375,718.76 585,718.76 07/01/2017 215,000.00 4.000%367,318.76 582,318.76 07/01/2018 225,000.00 4.000%358,718.76 583,718.76 07/01/2019 235,000.00 4.000%349,718.76 584,718.76 07/01/2020 245,000.00 4.000%340,318.76 585,318.76 07/01/2021 255,000.00 4.000%330,518.76 585,518.76 07/01/2022 265,000.00 4.000%320,318.76 585,318.76 07/01/2023 275,000.00 4.000%309,718.76 584,718.76 07/01/2024 285,000.00 3.500%298,718.76 583,718.76 07/01/2025 295,000.00 3.000%288,743.76 583,743.76 07/01/2026 305,000.00 3.100%279,893.76 584,893.76 07/01/2027 315,000.00 3.200%270,438.76 585,438.76 07/01/2028 325,000.00 3.300%260,358.76 585,358.76 07/01/2029 335,000.00 3.400%249,633.76 584,633.76 07/01/2030 345,000.00 3.500%238,243.76 583,243.76 07/01/2031 355,000.00 3.500%226,168.76 581,168.76 07/01/2032 370,000.00 3.600%213,743.76 583,743.76 07/01/2033 385,000.00 3.700%200,423.76 585,423.76 07/01/2034 395,000.00 3.700%186,178.76 581,178.76 07/01/2035 410,000.00 3.800%171,563.76 581,563.76 07/01/2036 430,000.00 3.800%155,983.76 585,983.76 07/01/2037 445,000.00 3.875%139,643.76 584,643.76 07/01/2038 460,000.00 4.000%122,400.00 582,400.00 07/01/2039 480,000.00 4.000%104,000.00 584,000.00 07/01/2040 500,000.00 4.000%84,800.00 584,800.00 07/01/2041 520,000.00 4.000%64,800.00 584,800.00 07/01/2042 540,000.00 4.000%44,000.00 584,000.00 07/01/2043 560,000.00 4.000%22,400.00 582,400.00 Total $10,370,000.00 -$7,149,525.24 $17,519,525.24 File | 00119000.SF | San Ramon Canyon (COP: 5/ | 5/ 7/2013 | 11:39 AM MAGIS ADVISORS Public Finance Consulting Page 4 Attachment B 2-19 $10,370,000 CITY OF RANCHO PALOS VERDES Certificates of Participation San Ramon Cyn Stabilization Project ILLUSTRATION as of 5/7/13 Debt Service Schedule Part 2 of 2 Yield Statistics Bond Year Dollars $188,160.00 Average Life 18.145 Years Average Coupon 3.7997052% Net Interest Cost (NIC)3.7502103% True Interest Cost (TIC)3.7110222% Bond Yield for Arbitrage Purposes 3.6005972% All Inclusive Cost (AIC)3.8353826% IRS Form 8038 Net Interest Cost 3.6544655% Weighted Average Maturity 17.827 Years File | 00119000.SF | San Ramon Canyon (COP: 5/ | 5/ 7/2013 | 11:39 AM MAGIS ADVISORS Public Finance Consulting Page 5 Attachment B 2-20 $10,370,000 CITY OF RANCHO PALOS VERDES Certificates of Participation San Ramon Cyn Stabilization Project ILLUSTRATION as of 5/7/13 Operation Of Project Construction Fund Date Principal Rate Interest Zero Coupon Reinvestment Receipts Disbursements Cash Balance 07/01/2013 - ----58.74 -58.74 08/01/2013 500,000.00 ---- 500,000.00 500,000.00 58.74 09/01/2013 500,000.00 ---- 500,000.00 500,000.00 58.74 10/01/2013 1,000,000.00 ---- 1,000,000.00 1,000,000.00 58.74 11/01/2013 1,000,000.00 ---- 1,000,000.00 1,000,000.00 58.74 12/01/2013 1,994,000.00 ---- 1,994,000.00 1,000,000.00 994,058.74 01/01/2014 - - 6,470.63 (994,058.00)994,058.00 6,470.63 1,000,000.00 529.37 02/01/2014 2,000,000.00 --(1,000,529.00)- 999,471.00 1,000,000.00 0.37 03/01/2014 - --- 1,000,529.00 1,000,529.00 1,000,000.00 529.37 04/01/2014 2,500,000.00 --(1,500,529.00)- 999,471.00 1,000,000.00 0.37 05/01/2014 - --- 1,000,000.00 1,000,000.00 1,000,000.00 0.37 06/01/2014 - --- 500,529.00 500,529.00 500,000.00 529.37 07/01/2014 493,000.00 - 6,470.63 -- 499,470.63 500,000.00 - Total $9,987,000.00 -$12,941.26 (3,495,116.00)$3,495,116.00 $10,000,000.00 $10,000,000.00 - Investment Parameters Investment Model [PV, GIC, or Securities]Securities Default investment yield target Unrestricted Cash Deposit 58.74 Cost of Investments Purchased with Bond Proceeds 9,991,959.80 Total Cost of Investments $9,992,018.54 Target Cost of Investments at bond yield $9,808,934.93 Actual positive or (negative) arbitrage (183,083.61) Yield to Receipt 0.1486621% Yield for Arbitrage Purposes 3.6010767% File | 00119000.SF | San Ramon Canyon (COP: 5/ | 5/ 7/2013 | 11:39 AM MAGIS ADVISORS Public Finance Consulting Page 6 Attachment B 2-21 $10,000,000 CITY OF RANCHO PALOS VERDES General Obligation Bonds San Ramon Cyn Stabilization Project ILLUSTRATION as of 5/7/13 Sources & Uses Dated 07/01/2013 | Delivered 07/01/2013 Sources Of Funds Par Amount of Bonds $10,000,000.00 Reoffering Premium 237,667.55 Total Sources $10,237,667.55 Uses Of Funds Total Underwriter's Discount (1.000%)100,000.00 Costs of Issuance 145,000.00 Deposit to Project Construction Fund 9,992,018.54 Rounding Amount 649.01 Total Uses $10,237,667.55 File | 00119000.SF | San Ramon Canyon (GO: 5/7 | 5/ 7/2013 | 11:38 AM MAGIS ADVISORS Public Finance Consulting Page 1 Attachment C 2-22 $10,000,000 CITY OF RANCHO PALOS VERDES General Obligation Bonds San Ramon Cyn Stabilization Project ILLUSTRATION as of 5/7/13 Pricing Summary Part 1 of 2 Maturity Type of Bond Coupon Yield Maturity Value Price Dollar Price 07/01/2014 Serial Coupon 3.500% 0.300%205,000.00 103.192%211,543.60 07/01/2015 Serial Coupon 3.500% 0.400%210,000.00 106.169%222,954.90 07/01/2016 Serial Coupon 3.500% 0.600%220,000.00 108.609%238,939.80 07/01/2017 Serial Coupon 3.500% 0.800%225,000.00 110.608%248,868.00 07/01/2018 Serial Coupon 3.500% 1.000%235,000.00 112.163%263,583.05 07/01/2019 Serial Coupon 3.500% 1.300%240,000.00 112.658%270,379.20 07/01/2020 Serial Coupon 3.500% 1.500%250,000.00 113.243%283,107.50 07/01/2021 Serial Coupon 3.500% 1.800%260,000.00 112.613%292,793.80 07/01/2022 Serial Coupon 3.500% 2.000%265,000.00 112.298%297,589.70 07/01/2023 Serial Coupon 3.500% 2.200%275,000.00 111.612%306,933.00 07/01/2024 Serial Coupon 2.300% 2.300%285,000.00 100.000%285,000.00 07/01/2025 Serial Coupon 2.400% 2.400%295,000.00 100.000%295,000.00 07/01/2026 Serial Coupon 2.600% 2.600%300,000.00 100.000%300,000.00 07/01/2027 Serial Coupon 2.700% 2.700%310,000.00 100.000%310,000.00 07/01/2028 Serial Coupon 2.800% 2.800%315,000.00 100.000%315,000.00 07/01/2029 Serial Coupon 2.900% 2.900%325,000.00 100.000%325,000.00 07/01/2030 Serial Coupon 3.000% 3.000%335,000.00 100.000%335,000.00 07/01/2031 Serial Coupon 3.000% 3.000%345,000.00 100.000%345,000.00 07/01/2032 Serial Coupon 3.100% 3.100%355,000.00 100.000%355,000.00 07/01/2033 Serial Coupon 3.100% 3.100%365,000.00 100.000%365,000.00 07/01/2034 Serial Coupon 3.200% 3.200%375,000.00 100.000%375,000.00 07/01/2035 Serial Coupon 3.200% 3.200%390,000.00 100.000%390,000.00 07/01/2036 Serial Coupon 3.300% 3.300%400,000.00 100.000%400,000.00 07/01/2037 Serial Coupon 3.300% 3.300%415,000.00 100.000%415,000.00 07/01/2043 Term 1 Coupon 3.375% 3.402%2,805,000.00 99.500%2,790,975.00 Total ---$10,000,000.00 -$10,237,667.55 File | 00119000.SF | San Ramon Canyon (GO: 5/7 | 5/ 7/2013 | 11:38 AM MAGIS ADVISORS Public Finance Consulting Page 2 Attachment C 2-23 $10,000,000 CITY OF RANCHO PALOS VERDES General Obligation Bonds San Ramon Cyn Stabilization Project ILLUSTRATION as of 5/7/13 Pricing Summary Part 2 of 2 Bid Information Par Amount of Bonds $10,000,000.00 Reoffering Premium or (Discount)237,667.55 Gross Production $10,237,667.55 Total Underwriter's Discount (1.000%)$(100,000.00) Bid (101.377%)10,137,667.55 Total Purchase Price $10,137,667.55 Bond Year Dollars $177,570.00 Average Life 17.757 Years Average Coupon 3.2123418% Net Interest Cost (NIC)3.1348132% True Interest Cost (TIC)3.0942174% File | 00119000.SF | San Ramon Canyon (GO: 5/7 | 5/ 7/2013 | 11:38 AM MAGIS ADVISORS Public Finance Consulting Page 3 Attachment C 2-24 $10,000,000 CITY OF RANCHO PALOS VERDES General Obligation Bonds San Ramon Cyn Stabilization Project ILLUSTRATION as of 5/7/13 Debt Service Schedule Part 1 of 2 Date Principal Coupon Interest Total P+I 07/01/2013 ---- 07/01/2014 205,000.00 3.500%320,288.76 525,288.76 07/01/2015 210,000.00 3.500%313,113.76 523,113.76 07/01/2016 220,000.00 3.500%305,763.76 525,763.76 07/01/2017 225,000.00 3.500%298,063.76 523,063.76 07/01/2018 235,000.00 3.500%290,188.76 525,188.76 07/01/2019 240,000.00 3.500%281,963.76 521,963.76 07/01/2020 250,000.00 3.500%273,563.76 523,563.76 07/01/2021 260,000.00 3.500%264,813.76 524,813.76 07/01/2022 265,000.00 3.500%255,713.76 520,713.76 07/01/2023 275,000.00 3.500%246,438.76 521,438.76 07/01/2024 285,000.00 2.300%236,813.76 521,813.76 07/01/2025 295,000.00 2.400%230,258.76 525,258.76 07/01/2026 300,000.00 2.600%223,178.76 523,178.76 07/01/2027 310,000.00 2.700%215,378.76 525,378.76 07/01/2028 315,000.00 2.800%207,008.76 522,008.76 07/01/2029 325,000.00 2.900%198,188.76 523,188.76 07/01/2030 335,000.00 3.000%188,763.76 523,763.76 07/01/2031 345,000.00 3.000%178,713.76 523,713.76 07/01/2032 355,000.00 3.100%168,363.76 523,363.76 07/01/2033 365,000.00 3.100%157,358.76 522,358.76 07/01/2034 375,000.00 3.200%146,043.76 521,043.76 07/01/2035 390,000.00 3.200%134,043.76 524,043.76 07/01/2036 400,000.00 3.300%121,563.76 521,563.76 07/01/2037 415,000.00 3.300%108,363.76 523,363.76 07/01/2038 430,000.00 3.375%94,668.76 524,668.76 07/01/2039 445,000.00 3.375%80,156.26 525,156.26 07/01/2040 460,000.00 3.375%65,137.50 525,137.50 07/01/2041 475,000.00 3.375%49,612.50 524,612.50 07/01/2042 490,000.00 3.375%33,581.26 523,581.26 07/01/2043 505,000.00 3.375%17,043.76 522,043.76 Total $10,000,000.00 -$5,704,155.28 $15,704,155.28 File | 00119000.SF | San Ramon Canyon (GO: 5/7 | 5/ 7/2013 | 11:38 AM MAGIS ADVISORS Public Finance Consulting Page 4 Attachment C 2-25 $10,000,000 CITY OF RANCHO PALOS VERDES General Obligation Bonds San Ramon Cyn Stabilization Project ILLUSTRATION as of 5/7/13 Debt Service Schedule Part 2 of 2 Yield Statistics Bond Year Dollars $177,570.00 Average Life 17.757 Years Average Coupon 3.2123418% Net Interest Cost (NIC)3.1348132% True Interest Cost (TIC)3.0942174% Bond Yield for Arbitrage Purposes 3.0183905% All Inclusive Cost (AIC)3.2061279% IRS Form 8038 Net Interest Cost 3.0573253% Weighted Average Maturity 17.465 Years File | 00119000.SF | San Ramon Canyon (GO: 5/7 | 5/ 7/2013 | 11:38 AM MAGIS ADVISORS Public Finance Consulting Page 5 Attachment C 2-26 $10,000,000 CITY OF RANCHO PALOS VERDES General Obligation Bonds San Ramon Cyn Stabilization Project ILLUSTRATION as of 5/7/13 Operation Of Project Construction Fund Date Principal Rate Interest Zero Coupon Reinvestment Receipts Disbursements Cash Balance 07/01/2013 - ----58.74 -58.74 08/01/2013 500,000.00 ---- 500,000.00 500,000.00 58.74 09/01/2013 500,000.00 ---- 500,000.00 500,000.00 58.74 10/01/2013 1,000,000.00 ---- 1,000,000.00 1,000,000.00 58.74 11/01/2013 1,000,000.00 ---- 1,000,000.00 1,000,000.00 58.74 12/01/2013 1,994,000.00 ---- 1,994,000.00 1,000,000.00 994,058.74 01/01/2014 - - 6,470.63 (994,058.00)994,058.00 6,470.63 1,000,000.00 529.37 02/01/2014 2,000,000.00 --(1,000,529.00)- 999,471.00 1,000,000.00 0.37 03/01/2014 - --- 1,000,529.00 1,000,529.00 1,000,000.00 529.37 04/01/2014 2,500,000.00 --(1,500,529.00)- 999,471.00 1,000,000.00 0.37 05/01/2014 - --- 1,000,000.00 1,000,000.00 1,000,000.00 0.37 06/01/2014 - --- 500,529.00 500,529.00 500,000.00 529.37 07/01/2014 493,000.00 - 6,470.63 -- 499,470.63 500,000.00 - Total $9,987,000.00 -$12,941.26 (3,495,116.00)$3,495,116.00 $10,000,000.00 $10,000,000.00 - Investment Parameters Investment Model [PV, GIC, or Securities]Securities Default investment yield target Unrestricted Cash Deposit 58.74 Cost of Investments Purchased with Bond Proceeds 9,991,959.80 Total Cost of Investments $9,992,018.54 Target Cost of Investments at bond yield $9,839,329.74 Actual positive or (negative) arbitrage (152,688.80) Yield to Receipt 0.1486621% Yield for Arbitrage Purposes 3.0181755% File | 00119000.SF | San Ramon Canyon (GO: 5/7 | 5/ 7/2013 | 11:38 AM MAGIS ADVISORS Public Finance Consulting Page 6 Attachment C 2-27 CrTYOF MEMORANDUM RANCHO PALOS VERDES TO: FROM: DATE: SUBJECT: REVIEWED BY: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCILii DENNIS McLEAN,DIRECTOR OF FINANCE AND INFORMATIO TECHNOLOGY OCTOBER 16,2012 SAN RAMON CANYON STABILIZATION PROJECT - FINANCING PLAN (Supports City Council 2012 Goal for Public Infrastructure) CAROLYN LEHR,CITY MANAGE~W ~\..o Staff Coordinator:Kathryn Downs,Deputy Director of Finance and Information Technology \(f) RECOMMENDATION 1.Approve the proposed agreement with Magis Advisors to provide financial advisor services to prepare the financing plan and oversee the sale of debt securities for the San Ramon Canyon Stabilization project,and authorize the City Manager to execute related agreements using fee Option 3 for a maximum commitment of $40,000,which may be applied to the San Ramon Financing Plan or to other projects and services. 2.Determine whether the City is conceptually willing (not an obligation)to: a.Enter into a lease arrangement to provide financing; b.Use a City asset other than the storm drain improvements to be leased by the City;and c.Use the General Fund as a resource to make the lease payments. EXECUTIVE SUMMARY The City Council is being asked to take some of the first decision-making steps towards possibly issuing debt securities to finance all,or a portion of the unfunded balance of the cost of the San Ramon Canyon Stabilization project (the "San Ramon Project"or "Project"). The Project is to be funded in part by the grant from the State in the amount of $9.46 million.The unfunded balance is estimated to be about $10 million.These steps do not obligate the City to issue debt.The City Council will continue to have the discretion to 2-28 SAN RAMON CANYON STABILIZATION PROJECT -FINANCING PLAN October 16,2012 Page 2 of6 modify the funding strategy for the project,including contributions from other agencies and the use of Reserves (the "Funding Plan"). If Magis Advisors is retained,an analysis will be performed that will lead to recommendations about the proposed amount of the use of Reserves and debt,collateral pledged as security and source of repayment of debt.Until that analysis is performed, the City Council will not have sufficient information to make decisions about the form of the debt. BACKGROUND The San Ramon Project is estimated to cost $19.4 million to construct.The Project has received a matching grant in an amount up to $9.46 Million from the State Department of Water Resources Storm Water Flood Management Grant (Prop 1E)program which requires construction to be completed by October 3,2014.Tile balance of about $10 million remains unfunded.Staff and the City Council have publicly discussed debt financing for the unfunded portion of the project. On July 17,2012,the City Council received a status report from Staff for the Project,as well as a Financing Alternatives presentation from the City's Financial Advisor,Tim Schaefer of Magis Advisors.The City Council directed Staff to return with a "reimbursement resolution"for Council's consideration. On August 21,2012,the City Council adopted Resolution No.2012-58 declaring the City's intent to reimburse itself for San Ramon project expenditures from the proceeds of bonds issued after expenditures are incurred.Expenditures may include design services,project management services,permitting,environmental review,and payments to contractors for project construction.This resolution did not commit the City to issue bonds but allows the City to reimburse itself with bond proceeds for expenditures related to the San Ramon Project incurred by the City prior to issuance of the bonds,in the event the City Council determines to issue bonds to finance part of the cost of the Project. DISCUSSION Financial Advisor and Preparation of Financing Plan Mr.Schaefer of Magis Advisors has provided a "Checklist of Steps in a Debt Financing" (see Attachment A).This checklist describes the steps,timeframes and responsibilities to be used as a general guideline when undertaking debt financing by a public agency.Mr. Schaefer will attend the October 16,2012 meeting to walk the City Council through the first steps in the checklist. Due to Mr.Schaefer's expertise with debt financing and his existing knowledge of the City, Staff proposes the City Council retain Magis Advisors to perform the Financial Advisor services associated with the San Ramon Financing Plan.The Magis Advisors proposal with a scope of services,two fee options,and draft agreement is attached (see Attachment B).After negotiation,Magis Advisors agreed to a third fee option,discounting Mr. Schaefer's billing rate from $300 per hour to $166.67 per hour based on a one-year time2-29 SAN RAMON CANYON STABILIZATION PROJECT -FINANCING PLAN October 16,2012 Page 30f6 commitment with a budget of 20 hours per month (see Attachment C).Staff recommends fee Option 3.If the San Ramon Financing Plan requires less than the proposed time commitment,unused hours may be applied to other projects and services (e.g.treasury and investment advisory,financing other facilities,etc.).A summary of all three fee options follows. Discounted Retainer Rate (hourly)167 Retainer Hours per Month 20 Retainer Commitment (in months)6 N/A 12 ~1g,iltg~iJili~ll~Jlili(ill~ii;(mln1IltI!91Mlimiilj!fi!~~lj1:i~~~~ui:¥!li~jf1~11\~~Ii:'~~~III:lIli1j~*[~0i:~i~~t1~i}~~~¥'I]g;~lfll~~J $$$300 Mr.Schaefer proposes a process whereby there will be incremental decision making with "off-ramps"at each point.In general,there are 4 phases of debt financing described below. 1.Planning &Structuring (establish the need and design the credit).This is the most difficult phase in the process,which includes identifying non-quantifiable factors. Quality time must be spent in this phase to ensure that information and options are thoroughly vetted. 2.Credit Evaluation &Presentation.This phase includes obtaining a credit rating from a rating agency such as Standard &Poor's. 3.Marketing &Sale.Phases 1 & 2 must be completed satisfactorily before the City can be ready to "go to market"in Phase 3. 4.'Closing &Settlement.This phase occurs after the bonds are sold and includes administration of debt covenants,required reserves,and reporting;as well as making the payments. Bond Counsel Richards Watson Gershon ("RWG")employs attorneys that specialize in public debt .offerings who have served as Bond Counsel for many other agencies.Utilizing the City Attorney's firm to provide these services saves billable time that would be required by another firm to familiarize themselves ":"lith the Project,as well as the structure and practices of the City.This is especially important for a "first-time"public debt issuer such as the City,as the established relationship will help eliminate unexpected challenges during the process.In addition,the process of selecting another law firm to serve as Bond Counsel would delay the potential financing.The scope of the agreement between the City and RWG includes bond counsel services. Lease-Revenue Bond or Certificate of Participation (COP)Financing On July 17,2012,Mr.Schaefer outlined two types of debt financing for the City Council to 2-30 SAN RAMON CANYON STABILIZATION PROJECT -FINANCING PLAN October 16,2012 Page 4 of 6 consider:1)General Obligation Bonds;and 2)Lease-Revenue Bonds/COP ("Lease Financing").Following is a summary of the differences in debt instruments,as outlined on July 1ih. t"~ffw;j,Yti:t¥#i@rdili'ii%5lfff#&f$ii1lf$.OJBQliaifmw.ti.ff.U'Mlt.iEeatf··);inj"';"cindWi*f#'''"'W'~ZZ''"_"~"'~"""/....",_x..:...._.••.z ...;;'?;.;·,."".-::...."-:':-\:,••*.-:,......,,'Pj•....,...............,.••••••0,',,'••::-:..:i:$.-:v;-,.';.';..,'".':-............•.•..u....,".~'"........·Z-:·"",,:(, Approval Process 2/3 vote of electorate Majority vote of Council Annual appropriations of Ad valorem tax on rental payments + Pledged Security property available reserves Estimated "All-In" Interest Rate 3.18%3.99% Competitive or Underwriting Process Competitive Sale Negotiated Assume lesser of 10%of bonds or 1 year of debt Reserve Requirements None service Insurance Requirement No Yes Typical Repayment Term 30 years (40 max)25-30 years Estimated Annual Debt Service on $10 million $522,133 $596,869 To conduct Lease Financing,the City would form a joint powers authority (JPA)with another entity (e.g.a non-profit corporation)and enter into a financing lease with the JPA. The JPA would sell the bonds to help finance the Project,and lease a selected asset to the City.The City would then make annual lease payments to the JPA in amounts sufficient to repay the JPA's indebtedness for that project only.Note:the bonds issued by the JPA are payable from lease payments to be paid by the City to the JPA.The lease payments paid by the City will be payable from the General Fund. Lease financing is a commonly used financing method in California.Since lease financings are not defined as "debt"in the State Constitution,they can be implemented by a majority vote of the Council without the need to conduct a city-wide vote or a referendum on debt,as would be the case with General Obligation debt.Historical practice has held that the essentiality to the agency of the asset being leased is important to the Financing Plan.For example,a park is less essential to the core operations of a City than the City Hall building.However,rating agencies such as Standard &Poor's and Fitch Ratings are .moving away from placing importance on the essentiality of the leased asset.As a consequence,the selection of the asset to be leased is less rigid than it has been in the past. The asset being leased to the City does not have to be the San Ramon Project improvements.It can be another City asset,such as a park building or the City Hall building,as discussed above.In fact,the City could not make a rental payment unless the City has beneficial use and occupancy of the facility;which could be called into question with regard to "occupancy"of the San Ramon project improvements.The leased asset would need to have a fair market value at least equal to the amount being financed;and the "rent"on the asset would equal the debt service payment for the bonds. Staff requests that the City Council provide direction regarding the following questions:2-31 SAN RAMON CANYON STABILIZATION PROJECT -FINANCING PLAN October 16,2012 Page 5 of 6 1.Is the City willing to enter into Lease Financing? 2.Is the City willing to use another City asset to be leased? 3.Is the City willing to use the General Fund as the resource to make lease payments? Next Steps If the City Council retains Magis Advisors to provide Financial Advisor services,Staff expects that a proposed Financing Plan could be presented to the City Council as early as December 2012,after the Financial Advisor's analysis has been completed.The Financing Plan is the outline of the business deal including: ~Amount of debt v.Reserves; ~Debt repayment schedule; ~Pledged security; ~Source of repayment;and ~Debt covenants. The Financing Plan would be presented in the form of a 2-3 page "Terms Sheet".If the City Council agrees with the terms,then the Terms Sheet is provided to Bond Counsel to create the necessary legal documents.Sufficient City Council meeting time should be dedicated to a careful review of the Terms Sheet.At the same meeting,the City Council would also be asked to provide direction about whether the sale of bond (debt)securities should be conducted competitively or negotiated. Several weeks before selling the debt,the City Council would be asked to approve up to three resolutions that would include the following actions: 1.Adopt the legal documents prepared by Bond Counsel (e.g.lease,assignment of lease,trust agreement); 2.Adopt the financing documents (e.g.Official Statement,notice of sale if using a competitive process,underwriter's contract if using a negotiated process);and 3.Delegate the City Manager to execute the Financing Plan,provided it meets not-to- exceed parameters (e.g.dollar amount of debt,interest rate,dollar amount of rental payments). The City Council will need to conduct a thorough review of the proposed Official Statement (the Prospectus),as individual City Council Members have some exposure under securities law.This document contains everything a potential buyer would need to make an informed investment decision;and each City Council Member will need to be comfortable that the Official Statement is accurate in all material respects and that no material information has been omitted.The City Council's review ofthe Prospectus,which may be accomplished in a workshop format,must be conducted prior to the Regular Meeting held to approve the resolutions and documents described above.As a matter of state law and best practice, these actions should be undertaken as part of Regular Business;and cannot be approved via the Consent Calendar. 2-32 SAN RAMON CANYON STABILIZATION PROJECT -FINANCING PLAN October 16,2012 Page 6 of 6 San Ramon Project Update Final design of the San Ramon Project has been completed and regulatory permits are expected to be approved in the near future.Staff expects that advertising the project to obtain competitive construction bids is imminent,with construction tentatively scheduled to begin by early 2013.The estimated construction cost of the Project is $19.4 million. The current terms of the Prop 1E grant require that construction be completed by October 3,2014.Staff estimates that the project has a construction schedule of about 12 months; which means construction should begin no later than January 2013 and preferably sooner to allow for unforeseen challenges and close out of the project (e.g.confirmation that all required mitigation is met,and state audit of construction records).. Attachments A -Magis Advisors Checklist of Steps in a Debt Financing 8 -Magis Advisors Financial Advisory Service Proposal dated October 8,2012 C -Magis Advisors Addendum to Financial Advisory Service Proposal dated October 8, 2012 2-33 Attachment A CHECKLIST OF STEPS IN A DEBT FINANCING INTRODUCTION &OVERVIEW This describes the steps,along with their timeframes and responsibilities,which may be used as a general guideline when undertaking a debt financing for a public agency. The information presented here is aimed at issuers who are smaller,access the market infrequently,or are new to the process.The checklist is adaptedfrom the California Debt Issuance Primer,and has been updated to reflect prevailing market customs and practices as of January 2011.As a result,it may differ in significant ways from the Primer,as the Primer was last updated in 2005. The legally required procedural steps vary widely among the different types of public debt financing.For example,some types of debt require voter approval;some require approval by ordinance subject to referendum;while others may be approved by simple resolution of the governing body of the issuer.Some types of debt require action by official bodies other than the issuer and others need only be approved by the issuer. Nevertheless,much of this process is common to virtually all types of public debt. Broadly speaking,the issuer must undertake the following steps to issue debt: A.Determine that the project or program to be financed is necessary or desirable B.Select the financing team C.Structure the financing,meaning designing the repayment terms and patterns D.Obtain formal approval by the legislative or governing body of the issuer E.Market the issue to investors,then close the issue by exchanging bonds for the borrowed funds The issuer also must live with the issue after the closing.The post-closing issuer responsibilities include: F.Making ongoing disclosure of financial and operating data G.Responding to investor inquiries H.Calculating and filing tax returns required by federal tax law I.Administering taxes,revenues,or assessments securing the issue 4j MAGIS ADVISORS public finance consulting J.Complete any construction or acquisition programs funded from the issue K.Complying with ongoing covenants,including insurance, investment of funds,or repayment provisions 00116208.DOCX Revised to:July 2011 2-34 Attachment A CHECKLIST OF STEPS IN A DEBT FINANCING 1.Establish a process to deal with required amendments or refinancing opportunities These steps are not independent and are not entirely sequential.For example,the legal and financial feasibility of a particular method of securing the bond issue under a proposed financing structure may determine whether the proposed project is feasible,and,therefore,whether the project and financing will be undertaken.The possibility of political controversy or legal action also may play into the feasibility analysis.As a result,a preliminary analysis of the feasibility of each step may be necesscuy prior to undertaking any of the steps in the proposed financing,and that preliminary analysis may involve informal consultation with experts prior to selection of the project team. Because of the variables which may be present in different financings,the reader should be aware that steps may be accomplished in a different order and,in some cases the time required may be more or less than indicated. The chronology outlined is broadly applicable to financings that are public offerings (not private placements)of debt being issued to finance a governmental project. Although the process for a private placement or for private activity financings is similar,this discussion does not cover steps that may be unique to those types of financings. The description of each step indicates the members of the team commonly responsible for completing the step.Those members are commonly the following (in usual order of engagement,and as applicable): 1. 3. 5. 7. 9. Issuer Financial Advisor Feasibility Consultant(s) Disclosure Counsel Rebate Consultant 2.Bond Counsel 4.Underwriter 6.Underwriter's Counsel 8.Investment Advisor 10.Trustee/Fiscal Agent 00116208.DOCX Revised to:July 2011 The team members that actually perform the steps in any given financing may also vary.For example,if the debt is to be sold at negotiated sale and no financial advisor is engaged by the issuer,the tasks indicated as being performed by the financial advisor will generally be performed by the underwriter.Conversely,in a competitive sale,the tasks performed by the underwriter (except for the actual purchase and distribution of the bonds)will normally be performed by the financial advisor.Also,if disclosure counsel is employed,they may perform many or all of the tasks indicated as being performed by underwriter's counsel. 4J MAGIS ADVISORS public finance cODsuhing 2-35 Attachment A CHECKLIST OF STEPS IN A DEBT FINANCING I STEP 1:DETERMINATION THAT A PROJECT (OR PROGRAM)TO BE FINANCED IS NECESSARY OR DESIRABLE (TIME:ONE WEEK TO THREE YEARS) This initial step in the financing process is potentially the most time-consuming because this when many basic business decisions regarding the project-its scope, cost,and the approach to financing-are made.Issuers should carefully consider their own policies and long-range objectives at this early stage,so that during the actual process of preparing,selling,and closing the issue,these policy decisions are firmly in,place. It may be appropriate for the issuer to inquire of other agencieS'that have financed similar projects to get ideas and obtain the benefit of their experience.Similarly,this is the time at which any constituent input-for example,citizen's advisory committees or neighborhood groups-should be consulted to help shape the decisions being made. Although these activities are listed before Step 2,SELECTION OF THE FINANCING TEAM,it may be necessary or desirable to identify and retain bond counsel,a financial advisor,and/or underwriter to assist with this first step as these team members may be useful in accomplishing the tasks identified below. DEFINING THE BASIC NATURE AND SCOPE OF THE FINANCING REQUIREMENT What? o Technological feasibility o Financing feasibility o Statutory authorization o Size of debt issue required o Available resources for repayment o Feasibility review of project/program o Need for external credit support o Other required approvals (e.g.,pen:iJ.its) o Political environment ,4J MAGIS ADVISORS public finance consulting Who? Issuer Issuer,[mancial advisor,underwriter Bond counsel Financial advisor,underwriter,issuer Issuer,financial advisor,underwriter,bond counsel Issuer,[mancial advisor,underwriter Issuer,[mancial advisor,underwriter Bond counsel Issuer,bond counsel,[mancial advisor, underwriter 00116208.DOCX Revised to:July 2011 2-36 Attachment A CHECKLIST OF STEPS IN A DEBT FINANCING STEP 2:SELECTION OF THE FINANCING TEAM (TIME:ONE WEEK TO THREE MONTHS) The second step in the financing process is critical to the ultimate success of the project and should be undertaken carefully.At this stage (unless previously done as discussed above),the issuer should decide whether to hire a financial advisor (whether or not a negotiated sale is expected)or rely on an underwriter to help with the initial structuring of the issue,which may depend upon the decision to sell the bonds through a competitive or negotiated sale. In some cases,issuers who have worked with a particular underwriter on prior projects may work with that underwriter at the earliest stages in shaping the transaction.Similarly,a financial advisor is often called upon very early in the 'process to help anticipate the financing options available. It also may be advantageous to consult with bond counsel early on in the process to determine the legal avenues available for the project and the financing. Will a feasibility consultant be necessary to demonstrate the financeability of the project or program?(Issuer,underwriter, financial advisor) 7. Is the debt to be sold at competitive or negotiated sale? (Issuer,financial advisor,bond counsel) 2. DETERMINATION OF THE POSITIONS TO BE FILLED (BY THE ISSUER) 1.Will a financial advisor or 6.Is there a need for varying types underwriter be initially retained of banking expertise?(Issuer, to assist in structuring the financial advisor) issue?(Issuer) 3. 4. If negotiated,will the separate advice of a financial advisor be necessary or desirable?(Issuer) If negotiated,should a single underwriter be selected or a team of managing underwriters? (Issuer,financial advisor) 8.If an interest rate swap is used, will a Swap Advisor be utilized? (Issuer,financial advisor, underwriter) 9.Will special tax counsel be necessary or desirable?(Issuer, underwriter,bond counsel) 5.Will the issuer hire a separate disclosure counsel?(Issuer) 10.Will a credit enhancement provider be necessary?(Issuer, financial advisor,underwriter) 4j MAGIS ADVISORS public finance coosuhing 00116208.DOCX Revised to:July 2011 2-37 Attachment A CHECKLIST OF STEPS IN A DEBT FINANCING 11.Will a trustee,fiscal agent or 15.Use of a request for proposals paying agent be used?(Issuer,(Issuer,financial advisor,bond bond counsel,financial counsel) advisor) Competitive sale of bonds?(for16. 12.Procedural alternatives for selecting underwriter) selecting each position on the 17.Continuing disclosure (Issuer,financing team (Issuer) bond counsel,disclosure 13.Does a statute or local ordinance counsel) reR.uire competitive selection? 18.Ongoing administration (Issuer,(bond counsel) bond counsel,others) 14.Reliance upon previously established relationships (Issuer)19.Arbitrage rebate compliance services (Issuer,others) ,,4J MAGIS ADVISORS public finance consuhing 00116208.DOCX Revised to:July 2011 2-38 Attachment A CHECKLIST OF STEPS IN A DEBT FINANCING STEP 3:STRUCTURING THE FINANCING (TIME:ONE WEEK TO THREE MONTHS) At the third stage in the process,the consultants that have been retained will bring their expertise to bear on the financial and legal structuring issues.Typically,this stage will include several all-hands meetings and discussions as the documentation for the financing takes shape. Issuers need to remain keenly involved in this process so that the structuring alternatives being chosen are well understood and match up as closely as possible with the 'issuer's goals and objectives.Issuers should understand why each decision is being made and pay particular attention to the covenants,a~reements,security features,and other obligations they are undertaking.Many financial advisors recommend using a "term sheet"to develop the basic provisions of the borrowing expressed in business terms before proceeding to the development of legal documents by bond counsel.Similarly,the issuer should be fully involved in reviewing and evaluating the disclosure being developed.Issuers may not rely entirely on the professionals they hire to ensure that adequate disclosure is provided. Also,provisions in the documents that appear to be "boilerplate,"while often needed and appropriate should not be glossed over by the issuer.If the issuer has concerns over any part of the documents,adequate explanations should be forthcoming from bond counsel and the other team members with respect to the inclusion of each provision being included. 1.Initial organizational meeting (All) 2.Identify security structure alternatives and either select from among them or determine the criteria for selection (All) 3.Determine the approximate size of the issue,taking into account amounts needed for costs of issuance,reserve accounts,and capitalized interest,as well as the project or program being financed (Issuer,financial advisor,underwriter) 4J MAGIS ADVISORS public finaDce cOAsulting 4.Is credit enhancement necessary?(Issuer,financial advisor,underwriter) 5.Are supplemental revenue sources necessary or available? (Issuer,financial advisor, underwriter) 6.What should be the terms of any underlying arrangements, including covenants of,and/or security provided by,any governmental entity using the project or any nongovernmental borrower?(Issuer,bond counsel,financial advisor, underwriter) 00116208.DOCX Revised to:July 2011 2-39 Attachment A I CHECKLIST OF STEPS IN A DEBT FINANCING 7.Is debt service coverage necessary?If so,how much? (Issuer,financial advisor, underwriter) 8.Is casualty insurance necessary? If so,how much?(Issuer, financial advisor,underwriter) 9.Are other covenants of issuer necessary or desirable?(Issuer, financial advisor,underwriter, bond counsel) 10.Evaluate legal,political,and regulatory constraints (All) 11.How do federal tax laws affect any or all of above?(Bond counsel) 12.How do federal and state securities laws affect any or all of the above?(Bond counsel, underwriter's counsel, disclosure counsel) 13.Are there state statutory constraints and what legal proceedings will be required? (Bond counsel) 14.Has an environmental review been satisfactorily completed?If not,will one be completed before an "approval"takes place? (Issuer,financial advisor, underwriter,bond counsel, underwriter's counsel, disclosure counsel) 15.What financial and operating data will be included in the issuer's annual report under SEC Rule 15c2-12?(Bond counsel,disclosure counsel, financial advisor,underwriter) 4j MAGIS ADVISORS public finance coosult:ing 16.Will any additional types of listed event notices be required (other than the 11 categories specified in SEC Rule 15c2-12)?(Bond counsel,disclosure counsel, financial advisor,underwriter) 17.Should any steps be taken to resolve or reduce political controversy,or to forestall a possible reverse validation action?(Issuer,bond counsel) 18.Is there a.,debt policy in place that establishes goals or constraints on the financing? (Issuer,financial advisor) 19.Develop timetable for accomplishing remaining tasks (All) 20.Are any specific filings required? (Issuer,bond counsel) 21.Are approvals necessary other than by issuer (such as private activity bond volume cap)?(Bond counsel) 22.Other time constraints (All) ./Construction constraints ./Negotiations with other parties,e.g.credit enhancement provider ./Refunding date 23.Agree upon allocation of responsibilities for tasks to be accomplished (All) 24.Prepare major legal documents relating to the financing, including indenture (or bond resolution),agreements defining any underlying arrangement (such as loan agreements,lease, or credit enhancement 00l16208.DOCX Revised to:July 2011 2-40 Attachment A CHECKLIST OF STEPS IN A DEBT FINANCING agreement),Official Statement, notice of sale or bond purchase agreement,and Continuing Disclosure Agreement (Bond counsel,financial advisor, underwriter's (or disclosure) counsel,underwriter) 25.Meeting(s)or conference calls to review and negotiate terms of the major legal documents (All) 26.Due diligence review of all facts material to the investor's decision to buy the bonds (All, but especially underwriter's counselor disclosure counsel) 27.Consideration of investment alternatives for bond proceeds. Will a guaranteed investment contract be used?If the issue includes refunding,will the escrow be funded with open market securities or SLGS? (Issuer,financial advisor, underwriter,investment advisor,bond counsel) 4J MAGIS ADVISORS public finaBce consulting 28.Credit rating agency review of the major legal documents and other relevant information (Issuer,financial advisor, underwriter) 29.Adoption by the governing body of the necessary resolutions or ordinances authorizing issuance of the bonds and execution of the legal documents either approving the notice of competitive sale or authorizing execution of the bond purchase agreement (Issuer,bond counsel) 30.File a validation action if such is determined to be necessary or appropriate (Issuer,bond counsel,other counsel) 31.Advise CDIAC of proposed sale 30 days in advance of proposed sale date (Issuer,bond counsel) 00116208.DOCX Revised to:July 2011 2-41 Attachment A CHECKLIST OF STEPS IN A DEBT FINANCING STEP 4:MARKETING AND CLOSING (TIME:ONE WEEK TO THREE MONTHS) At this point,the financing should be completely structured and all parties should be in agreement as to the ultimate terms of the financing (except the pricing or interest rate terms themselves).It is important to have worked out any major structuring issues or document provisions necessary to obtain a satisfactory rating or credit enhancement in advance of this stage,so that the final approvals by rating agencies and credit enhancers can go smoothly and without major revisions to the financing structury or security provisions.Nevertheless,it is possible that as a result of the first few steps outlined below,an issue will surface which requires the team to reassess some of the decisions made in Step 3. Once the rating and/or credit enhancement is in place,it is time to go out into the market and price the issue.At this stage,the final interest rates and other financial terms of the borrowing will be determined. PREPARING FOR MARKETING 1.Provide final information to credit 6.Design the proposed maturity rating agencies (Issuer,financial structure and establish advisor,underwriter)redemption features for the bonds 2.Obtain the credit rating (Issuer, (Issuer,financial advisor, underwriter) financial advisor,underwriter, bond counsel)7.Final review and approval of 3.Meet with rating analysts (if Preliminary Official Statement (All) necessary or appropriate)(Issuer, financial advisor,bond counsel)8.If competitive sale,determine rules 4.Site visit by rating analysts (if for selecting winning bidders (Issuer,financial advisor,bond necessary or appropriate)(Issuer)counsel) 5.Obtain final commitments from 9.If negotiated sale,determine credit enhancement provider (if whether syndicate or selling group necessary)(Issuer,financial is appropriate and who should be advisor,underwriter)members (Issuer,underwriter, financial advisor) INVESTMENT PLAN FOR BOND PROCEEDS In the case of a simple investment of funds in a money market fund or in a pooled investment vehicle such as LAIF (the Local Agency Investment Fund of the State of 4J MAGIS ADVISORS public finance coonsulting 00116208.DOCX Revised to:July 2011 2-42 Attachment A CHECKLIST OF STEPS IN A DEBT FINANCING California),this step can easily be accomplished at or shortly after the closing of the issue.On the other hand,if open market treasury securities (especially for a refunding escrow)or a guaranteed investment contract will be used,a bidding procedure like the one outlined below may be required.This should be done in advance of the closing of the issue. 10.Determine appropriate 12.Evaluate responses (Investment investment vehicles (Issuer,advisor,bond counsel, investment advisor,financial financial advisor,underwriter) advisor,underwriter,bond c~unsel )13.Negotiate final terms of investment arrangement with 1I.Prepare and circulate for review winning qjdder (Issuer,bond a request for bids for counsel,trustee) investments (Investment advisor) MARKETING &PRICING 14.Distribute Preliminary Official of Sale.(Issuer,financial Statement to syndicate,selling advisor,bond counsel) group members,or potential If winning bid is acceptable,bidders;and,potential investors 19. (if competitive sale,include award bonds to winning bidder, Notice of Sale)(Issuer,financial creating,in effect,a Bond advisor,underwriter)Purchase Agreement between the issuer and the winning bidder. 15.Hold information meetings or (Issuer) teleconferences with investors and dealers,if necessary or 20.For negotiated sales:conduct appropriate (Issuer,financial preliminary pricing discussion. advisor,underwriter)(Issuer,underwriter,financial advisor) 16.Remain prepared to answer any additional questions from 2I.Finalize proposed pricing scale, analysts for potential bidders.release pricing and terms to (Issuer,bond counsel,financial market to solicit orders from advisor,underwriter)targeted investors. (Underwriter) 17.For competitive bids:Open bids at time and place specified in 22.Reprice if too many or too few Notice of Sale.(Issuer,financial orders.(Issuer,underwriter, advisor,bond counsel)financial advisor) 18.Determine winning bidder by 23.Agree upon the final rates and applying rules specified in Notice prices,then submit firm offer to Issuer.(Issuer,underwriter, 4j MAGIS ADVISORS 00116208.DOCX public finance consuhiag Revised to:July 2011 2-43 Attachment A CHECKLIST OF STEPS IN A DEBT FINANCING financial advisor,underwriter's counsel) 24.Sign Bond Purchase Agreement. (Issuer,underwriter, underwriter's counsel) PRE-CLOSING 26.Prepare closing documents, review (usually by phone),and arrange for execution (All,but especially Issuer and bond counsel) 27.Execute and/or authenticate bonds (Issuer,trustee) 25.Finalize and print Official Statement,describing final maturity schedule,interest rates,and reoffering prices to the public,as well as conforming descriptions of bonds and project to final design (All) 28.Final meeting to execute documents and ensure that all required documents are present and in the agreed-upon form (All) CLOSING &DELIVERY OF FUNDS AND EXCHANGE OF BONDS 29.Telephone conference with Depository Trust Company, trustee,bond counsel,and issuer to release bonds to underwriter (as listed) 30.Exchange receipt for bond proceeds and receipt for bonds 31.Execute investment plan for bond proceeds 32.Pay necessary fees or charges, including settlement of bond 4j MAGIS ADVISORS public finance consulting insurance premiums,initial costs of issuance 33.Recordation of real estate deeds, leases and encumbrances 34.Ensure compliance with MSRB requirements for delivery of final Official Statement,escrow agreements (for refundings),and any other post-issuance filings 001l6208.DOCX Revised to:July 2011 2-44 Attachment A I CI-IECKLISrr OF STEPS IN A DEBT FINANCING STEP 5:LIVING WITH THE ISSUE AFfER CLOSING During the busy time of preparing for a bond issue,marketing,and closing,it is easy to forget that the bond issue will usually be in existence for a long period of time. After closing,the issuer and nongovernmental borrower will have to perform many tasks to assure that the financing is ultimately successful.It is important that staff members of the issuer/borrower be designated to take responsibility for the ongoing compliance and monitoring functions described below.During the initial structuring phases described in the previous steps,the post-issuance compliance issues should be kept in mind.Ideally,the people who will be responsible for post-issuance compliance on behalf of the issuer/borrower should be involved,in the early phases of the project as well.The issuer/borrower will need to determifie what consultants it will hire to perform these tasks and which tasks it will take on itself.Even when consultants (such as rebate compliance providers,continuing disclosure consultants or counsel,investment advisors,and others)are retained,is~uers will need to monitor their performance and work product.Ultimately,it is the issuer/borrower who is responsible for adhering to these compliance requirements. 1.Evaluate performance of financing team (Issuer) 2.Monitor the progress of the construction project or lending program (Issuer) 3.Administrative duties of issuer: ./Monitor compliance with tax rules for expenditures and use of project ./Monitor compliance with program rules for expenditures and use of project. ./Provide financial and project reports to investors ./Monitor the trustee's performance,including: a)Collection of revenues b)Maintenance of accounts c)Investment of monies 4j MAGIS ADVISORS public finance consulting 4.Comply with ongoing covenants (Issuer) 5.Monitor interest rates and remain alert to refunding opportunities (Issuer) 6.File Annual financial statements and continuing disclosure information(lssuer) 7.Ensure arbitrage rebate compliance (Issuer) 8.Refinancing or refunding (if needed or appropriate)(Issuer,financial advisor,underwriter) 9.Respond to any inquiries or audits by the Internal Revenue Service or the Securities and Exchange Commission (Issuer,bond counsel,others,as required) 00116208.DOCX Revised to:July 2011 2-45 MAGIS ADVISORS public finance consulting 2-46 4J MAGIS ADVISORS public finance consulting TABLE OF CONTENTS MAGIS (ma-jls)-adverb (Latin): (1)more;(2)to a greater extent "Magis"means more. TRANSMITTAL LETTER FIRM OVERVIEW 1 SERVICES OFFERED 1 CURRENT CUENTS 2 WHY MAGIS?2 EXPERTISE 2 OUR UNDERSTANDING OF THE WORK BEING REQUESTED 3 PERSONNEL &.REFERENCES 4 AssIGNED P·ERSONNEL 4 REFERENCES "••••L 5 OTHER PERSONAL REFERENCES 9 CUENTTESTIMONIALS 9 MARKET &PRICING INFORMATION RESOURCES 10 REGISTRATION AND REGULATORY MATTERS 11 MANAGING POTENTIAL CONFLICTS OF INTEREST 11 COST PROPOSAL 12 OPTION 1:FIXED MONTHLY RETAINER FEE 12 OPTION 2:HOURLY CHARGES,AS INCURRED 12 REIMBURSEMENT OF COSTS &EXPENSES 13 BILLING &PAYMENT TERMS 13 THE MAGIS CUENT SATISFACTION GUARANTEE 13 EXHIBIT 1:ILLUSTRATION OF A $10 MILLION LEASE FINANCING TRANSACTION FOR SAN RAMON CANYON EXHIBIT 2:DETAILED WORK PLAN-BOND FINANCINGS EXHIBIT 3:RESUMES OF ASSIGNED PERSONNEL EXHIBIT 4:TRANSACTION EXPERIENCE (MR.SCHAEFER AND MAGIS COMBINED) EXHIBIT 5:DISCLOSURE STATEMENT ON FEES EXHIBIT 6:PROPOSED FORM OF PROFESSIONAL SERVICES AGREEMENT (ClTV'S FORM) Copyright ©2012 Magis Advisors,Inc.All rights reserved. All copyrights and all other intellectual property rights of whatsoever nature contained herein are and shall remain the sole and exclusive property of Magis Advisors.The Magis Advisors name and Magis Advisors logo are trademarks or registered trademarks of Magis Advisors. 2-47 .Aj MAGIS ADVISORS public finance consulting October 8,2012 Ms.Kathryn Downs Assistant Director,Finance and Infolmation Technology City of Rancho Palos Verdes 30940 Hawthorne Boulevard Rancho Palos Verdes,CA 90275-5391 Subject:Proposal to Provide Financial Advisory Services Dear Ms.Downs: This is a financial advisory service proposal submitted in response to your request for a written proposal in connection with the City's possible financing of certain sto.rm water improvements known commonly as the "San Ramon Canyon Stabilization"project.The terms presented herein are binding for 90 days from the date of this proposal. We understand that the City is seeking assistance with evaluation of a financing plan for the above project,especially the efficacy of drawing against existing teserves as opposed to debt financing it.Ancillary work would likely include development of a financing strategy (If debt fmancing is selected)and in that event,the evaluation and planning of,and project management for, the bond or financing transaction.Magis has broad and deep experience in evaluation of financial plans,the development of long-range financial strategies,and the execution of both new money and refunding transactions,all as discussed in greater detail in the service proposal. Our primary business line is strategic capital planning and tactical debt management services (including issuance advice and transaction management)to municipalities.In addition,we also offer advice related to the investment of capital funds.We specialize in translating complex financial market data into meaningful,actionable information for our clients and their elected policy-makers. I will be the designated project manager on this engagement.I have more than forty years of experience in the municipal finance sector and have been the engagement manager or project manager on more than 200 financial advisory engagements over the past twenty-five years.These assignments have produced more than $30 billion in capital funds,about $6.0 billion of which was long term funding. We have the both the ''know-how''and the disposition to offer creative,practical solutions that will help Rancho Palos Verdes do three things:(1)develop useful strategies at the lowest possible cost and in the least amount of time;(2)design the strategies to avoid future problems with them;and (3)uncover profitable opportunities to improve those strategies. So,why should Rancho Palos Verdes hire Magis instead of another advisor?We think there are four compelling reasons. 1301 Dove Street,Suite 380 Newport Beach,CA 92660 Telephone (949)428-8363 www.magisadvisors.com 2-48 Ms.Kathryn Downs Assistant Director,Finance and Information Technology City of Rancho Palos Verdes October 8,2012 Page 2 First,Magis offers a business philosophy that is quite different from others.Ow:business approach is expressed in ow:name,derived from the Latin word for "more"or "to a greater extent." We look for those situations that others might not see or be too timid to tr;y or lack the enexgy to ~.That may sound subtle,but the manifestation of it isn't.Raising large sums of money, whether in the bond market or through other means,is a complex process and there are few chances for "do-over's."We energetically apply the principle of "magis"to help ow:clients uncover hidden opportunities,and then apply best practices and ow:deep experience to help them design and build sustainable financial strategies. Second,Magis is a company with a large imagination and we are capable of big things.~ desWwd our business to tows gn fewer clients--favoring those clients who are disposed to longer- term relationships,or clients who face prgjg:y t1:}at He more s;ba l1 etWe-.We are handling major assignments for nationally visible clients such as the California State Controller's Office and the Denver (CO)Public School system.We are assisting several communitie~with transactions virtually identical to those being considered by Rancho Palos Verdes. Third,because of Rancho Palos Verdes'statw:e,we expect that its name recognition will hold substantial appeal to retail investors.With that assumption in mind,we strongly believe that a competitive sale of debt will produce results superior to any other approach.However,since Rancho Palos Verdes is a "debut"issuer,accessing the market in these times will require rigorous preparation and close attention to detail.In the first half of calendar 2012,more than 80%of the trade volume in the U.S.municipal secw:ities market was retail buying and selling,with an average ticket size of $100,000 or less.This is the market segment that will offer Rancho Palos Verdes the absolute lowest borrowing rates,when it needs to borrow.We excel in this particular element. Fow:th,accessing this market segment effectively requires an advisor with a deep understanding of the intricacies of Wall Street's retail distribution apparatus.Magis has such an understanding.Prior to entering the financial advisory field more than two decades ago,I worked as part of that retail apparatus-managing a municipal bond trading desk at a major New York City dealer bank.I am the rarest form of municipal advisor-one who has sold municipal bonds to retail and traded them in the primary and secondary market for a living.This expertise and experience can provide substantial financial benefit to the City-a benefit that is a significant multiple of the cost of our services. Energy,imagination,approach,understanding-those are ow:fow:distinguishing featw:es. They are real and measurable.We want to continue contributing to the City of Rancho Palos Verdes'financial success.We appreciate your consideration of us and wish the City every success in its futw:e endeavors. Very truly yaw:s, MAGIS ADVISORS ;~efer Principal Owner 2-49 Financial Advisory Proposal to: CITY OF RANCHO PALOS VERDES FIRM OVERVIEW Magis Advisors,Inc.is an independent public finance consulting firm.We are financial advisors to state and local government.Magis is a California corporation (#3217955,formed August 20,2008).Magis is a federally registered municipal advisor (SEC #866-00026-00 and MSRB #K012S);and,is a state-registered investment advisor (CRD #148720).Magis is a certified small business with the State of California Department of General Services (#62132,current certification expires 1/21/13).The firm is admitted to the California State Treasurer's panel of firms qualified to do business with the State (and we are currently under contract with the State Controller's Office). Our office)s located at 1301 Dove Street,Suite 380,Newport Beach,California 92660.All services will be delivered from this location.The telephone number is (949)428-8363. Services Offered We provide strategic and tactical consulting services to our clients to enable them to design and build sustainable strategies for the planning,evaluation,sale and administration of their municipal debt- bonds,notes (including commercial paper),financing leases,bank loans and private placements.Our specialty is translating credit market data into useful,actionable information for financial managers and policy-makers.We provide services in the following areas and fields of expertise: 4j General obligation debt (planning &sale) 4j Revenue debt (planning &sale)for: Ii'!Water Ii'!Wastewater Ii'!Solid waste Ii'!Transportation Ii'!Electric distribution 4j Financing leases (planning &sale): Ii'!Revenue based Ii'!Certificates of participation 4j Bank/private placements (planning) 4j Development financing: Ii'!Special assessment financing Ii'!Mello-Roos formation and financing 4j Pension-related obligations and funding ©Magis Advisors 2012.All rights reserved 00120540.DOCX 4j Other tax supported debt (planning &sale)supported by: Ii'!Salestax Ii'!Occupancy tax 4j Debt portfolio management: Ii'!Restructuring &refunding Ii'!Tenders &exchanges 4j Financial feasibility reviews: Ii'!Development agreements Ii'!Public/private funding Ii'!Transfers of obligation 4j Capital asset planning 4j Staff training &development 4j Investor relations programs 4j Investment of capital funds 4j Public/private partnership analysis October 8,2012 Pagel 2-50 Financial Advisory Proposal to: CITY OF RANCHO PALOS VERDES Current Clients Our active client list (in addition to the City itself)presently includes the State of California (State Controller's Office),the Denver Public Schools,and the California cities of Belmont,Burlingame, Cupertino,Murrieta,Poway,Rolling Hills Estates,San Luis Obispo,Santa Paula,and Vista.We are presently processing,or have recently closed,transactions for Cupertino,Murrieta,Poway,and Rolling Hills Estates.Of these,the Cupertino,Poway,and Rolling Hills transactions are particularly relevant,as each is similar in character to the likely needs of Rancho Palos Verdes. Why Magis? Among the reasons our past and present clients cite for engaging us in lieu of larger firms are:(1)the opportunity to work with mature,an experienced advisor at reasonable rates;(2)reduced emphasis on transaction fee income (a common condition with most advisors);(3)avoidance of the "consultant of the month"phenomenon that sometimes occurs in many advisory firms;and,(4)the lack of unrealistic quotas or financial expectations required by the overhead of larger organizations. Expertise The founder and principal owner of Magis,Tim Schaefer,has forty years of experience in delivering services equivalent to those needed by Rancho Palos Verdes.Specifically,Schaefer has handled more than 200 financial advisory engagements over the past twenty years,including 189 long-term issues categorized in the table below. Financing lease (COP or lease revenue) Public enterprise revenue bond Conduit revenue bond Limited tax obligation bond Tax allocation bond Special assessment bond Sales tax revenue bond General obligation bond Pooled revenue bonds Grand Total (long-term debt only): $2,275,620,000 40 905,208,256 32 711,828,000 20 667,330,263 29 626,715,000 33 245,464,085 20 218,290,000 2 209,885,000 10 71.055.000 1 $5,931,395,604 189 Before founding Magis,Schaefer was the President and Chief Operating Officer of Fieldman,Rolapp & Associates in Irvine,California.Prior to his tenure with Fieldman,he was the Western Regional Manager for Evensen Dodge,Inc.(since merged with Public Financial Management).Before entering the financial adVisory field,Schaefer managed the national municipal trading desk at Chemical Bank in New York City, and subsequently headed the Public Finance Division of the Bank of America. ©Magis Advisors 2012.All rights reserved 00120540.DOCX October 8,2012 Page 2 2-51 Financial Advisory Proposal to: CITY OF RANCHO PALOS VERDES OUR UNDERSTANDING OF THE WORK BEING REQUESTED The San Ramon Canyon Stabilization project ("San Ramon")is estimated to cost $19.4 million to construct.The project has received a matching grant in an amount up to $9.46 million from the State Department of Water Resources Prop lE program.The balance of about $10 million remains unfunded. The City Council has expressed a desire to explore debt financing for the unfunded portion of the project in addition to the drawing of existing reserves. On July 17,2012,the City Council received a status report from Staff for San Ramon,as well as a presentation from this firm on alternative methods of financing the project.The Ci.ty Council directed Staff to re~urn with a "reimbursement resolution"for Council's consideration. )1- On August 21,2012,the City Council adopted Resolution No.2012-58 declaring the City's intent to reimburse itself for San Ramon project expenditures from the proceeds of bonds issued after expenditures are incurred.Expenditures may include design services,project management services, pe.rmittins,environmental review,and payments to contra.ctors for project construction.The adoption of this resolution was necessary to ensure that the City could issue tax-exempt bonds to fund a portion of the project and use the bond proceeds to reimburse itself for expenditures incurred prior to issuance of the bonds. The decision to issue debt for San Ramon is complex.Because the City has extensive reserves,the initial inclination may be to simply pay cash for the project by drawing asainst these reserves.That oversimplifies the analysis.Cash reserves,once accumulated,can be qu.ite difficult to replenish, especially in uncertain or challenging economic environments.Moreover,the analysis should also consider the structure of the debt and an analysis of the risks associated with incurring it.Such an analysis should consider,among other matters,the expected "value"of the San Ramon Canyon project being constructed,at least in future benefits or avoided costs.A choice or judgment must be made about San Ramon's utility as a public good that will result from its construction.This "sood"must be compared to the potential alternative uses of the City's existing reserves.The first indication is that the proposed project qualifies as a legitimate use of debt,as it is (a)a capital expenditure;(b)expensive;(c) long-lived;and,(d)possesses economic utility both to current and future stakeholders in the community. In addition,the decision to issue debt versus drawing against reserves should consider future entitlements,if any,that are created by the expenditures funded from the debt-financing a new community recreational facility,for example,may create some perceived "right"to recreation facilities where it did not previously exist,by precedent and expectations.That does not appear to be the case with San Ramon,which is best characterized as a public safety project due to the strategic importance of the roadways that will be protected by its completion. ©Magis Advisors 2012.All rights reserved 00120540.DOCX October 8,2012 Page 3 2-52 Financial Advisory Proposal to: CITY OF RANCHO PALOS VERDES PERSONNEL &REFERENCES Assigned Personnel ".':"."...ftr«: We propose to assign a superbly qualified consultant to Rancho Palos Verdes:Tim Schaefer.Mr. Schaefer,will be Rancho Palos Verdes'designated project manager and day-to-day contact person.He will furnish approximately 90%of Magis'work effort.Kathryn Schaefer,who will perform certain administrative and support tasks,will support Mr.Schaefer.Highlights of the expertise and capabilities of the assigned consultant follow;detailed resumes are attached in Exhibit 3. Tim Schaefer-Project Manager &Day-to-Day Contact Schaefer h'as more than forty years of experience in municipal finance,more than twenty years advising California's public agencies,twenty years experience trading and underwritin.g municipal debt securities, and direct,relevant experience in the development and implementation of long-term capital management strategie.s.A complete list of his transaction experience is included Exhibit 4. Schaefer's qualifications include: PROFESSIONAL DESIGNATIONS AND LICENSES V'Certified Independent Public Finance Advisor designation by NAIPFA awarded 1997. V'California registered investment advisor representative,(Uniform Investment Adviser Law, Series 65). V'Qualified as a General Securities Principal (Series 24),General Municipal Securities Principal (Series 53),General Securities Representative (Series 7),and Mu.nicipal Securities Representative (Series 53). MEMBERSHIPS V'Regular member-National Association of Independent Public Finance Advisors. V'Affiliate member-International City Management Association,which prOVides technical assistance,training,and information resources in the areas of performance measurement, community and economic development,and other topics. V'Associate member (non-voting)-Government Finance Officers Association. V'Professional member-Risk Management Association,a member-driven professional association whose purpose is to advance the use of sound lending principles through ongoing training. V'Regular member-California Society of Municipal Analysts,(a constituent society of the National Federation of Municipal Analysts,an organization of nearly 1,000 municipal professionals), whose focus is on providing educational programs for municipal finance professionals. V'Commercial associate member-California Society of Municipal Finance Officers. V'Affiliate member-the Appraisal Institute,the acknowledged worldwide leader in residential and commercial real estate appraisal education with an extensive curriculum of courses and specialty seminars prOViding a well-rounded education in valuation methodology to its members. ©Magis Advisors 2012.All rights reserved 00120540.00CX October 8,2012 Page 4 2-53 Financial Advisory Proposal to: CITY OF RANCHO PALOS VERDES BOARD &COMMITTEE SERVICE;PUBLICATIONS .,Former member of the Technical Assistance Committee to the California Debt and Investment Advisory Commission.(1985 through 2005;3 terms as chair.) .,Former private sector advisor to the GFOA's Standing Committee on Governmental Debt.(2000 through 2003.) .,Co-author of the California Public Fund Investment Primer,published by the California Debt and Investment Advisory Commission.(2005) .,Miscellaneous publications in Public Management magazine,American City &County magazine, and various newsletters and bulletins. References The references listed below can attest to the quality of our work and the energy that we put into it.We encourage you to contact any of them for further information. STATE OF CALIFORNIA CONTROLLER'S OFfiCE MR.COLLIN WONG- MARTINUSEN CHIEF OF STAFF TEL:(916)327-1361 300 Capitol Mall Sacramento,CA 95814 DENVER PUBLIC SCHOOLS Ms.JEANNIE KAPLAN BOARD SECRETARY TEL:(720)423-3210 900 Grant Street Denver,CO 80203 Population:37,000,000;General Fund Revenues:$94 billion. alent of Mr.Schaefer since 1982;of Magis since 2008. Presently,Magis is under contract through 2013 to assist with cash flow planning for the State's General Fund.Notable past experience includes five offerings of short and intermediate term cash flow notes in sizes ranging from $450 million through $7.5 billion,all but one sold competitively.The 1994 offering was for medium term notes and is believed to be the largest competitive sale ever attempted in the U.S. municipal market for such securities.The 2002 offering also required a complex solicitation of credit support from commercial banks.This solicitation totaled $8.5 billion in "stand-alone"credit agreements. Population:600,000;Student Enrollment:80,000; Debt Portfolio:approximately $1.03 billion outstanding. Client of Mr.Schaefer ond Mogls since 2010. Co-financial advisor to the District for a two-series refunding of $750 million of taxable,pension-related debt.The refunded issue consisted of (a)$396.2 million,fixed rate,taxable certificates;and (b)$396.0 million,variable rate,certificates.The variable rate offering included a four-party interest rate swap,creating a synthetic fixed rate obligation. We continue to serve as the Board of Education's "on-call"advisor. ©Magis Advisors 2012.All rights reserved 00120540.DOCX October 8,2012 PageS 2-54 Financial Advisory Proposal to: CITY OF RANCHO PALOS VERDES CITY OF VISTA MR.PATRICK JOHNSON CITY MANAGER TEL:(760)639-6131 MR.DALE NiElSEN FINANCE MANAGER TEL:(760)6~9-6131 200 Civic Center Dr. Vista,CA 92084 CITY OF BELMONT MR.THOMAS Fll FINANCE DIRECTOR TEL:(650)595-7435 One Twin Pines lane Belmont,CA 94002 •CITY OF POWAY MS.PENNY RilEY CITY MANAGER TEL:(858)668-4501 MR.PETER MOOTE ASSISTANT DIRECTOR OF ADMINISTRATIVE SERVICES TEL:(858)668-4414 13325 Civic Center Dr. Poway,CA 92064 Population:96,455;Incorporated:1963;Charter adopted 2007; Debt Portfolio:approximately $200 million outstandinl. aient 01 Mr.SChaefer since 1!J94;01 Masls since 2008. Advisory services for debt issuance,debt management,and capital planning spanning almost two decades. Notable past experience includes 2007 issuance of $117 million COP issue to fund new civic center (supported by local option sales tax)and $24 million issue of taxable BANs in 2010 to finance redevelopment activities. Experience also includes development and long-term maintenance of a multi-year sources and uses of funds'projection for the City's redevelopment agency. Population:26,243;Incorporated:1926 (General Law); Debt Portfolio:approximately $18.0 million outstandlnl. Client 01 Mr.SChaefer since 1995;01 Masis since 2008. Presently engaged for planning and sale of two sewer Issues.These issues would be the fourth and fifth in a series spanning almost fourteen years.Notable experience includes planning and sale of citywide Mello-Roos issue,in which Schaefer also acted as special tax conSUltant.The Mello-Roos issue funded the City's library located on city-owned property adjacent to City Hall. Population:51,322;Incorporated:1980 (Ge.neral Law); Debt Portfolio:approximately $51.6 million (General Fund). Client 01 Mr.Schaeler and Magis since 2010. Magis was engaged in 2010 as the city's general financial advisor after a competitive selection process. We have recently completed a refinancing of a 2003 certificate of participation issue for the City's civic center complex,totaling $14.4 million,which produced more than $4 million overall savings to Poway. ©Magis Advisors 2012.All rights reserved oo120540.o0CX October 8,2012 Page 6 2-55 Financial Advisory Proposal to: CITY OF RANCHO PALOS VERDES CITY OF CUPERTINO Ms.CAROL ATWOOD ADMINISTRATIVE SERVICES DIRECTOR TEL:(408)781-7112 MR.DAVID,WOO FINANCE DIRECTOR TEL:(408)777-3220 10300 Torre Ave. Cupertino,CA 95014 CITY OF SANTA PAULA MR.JAIME FONTES CITY MANAGER TEL:(805)955-4200 970 Ventura St. Santa Paula,CA 93060 Population:58,747;Incorporated:1955 (General Law); Debt portfolio:$44.0 million. aient of Mr.Schaefer and Magis since 2012. Magis was engaged in ea.rly 2012 to assist Cupertino with a refinancing of an outstanding "certificate of participation"that had originally financed its library.This constituted the City's only direct debt and was secured with numerous properties.The original issue,sold in 2002,did not have a debt service reserve fund.As a result,the refinancing issue was required to fund a reserve in order to attain high "investment- grade"ratings. We were successful in helping the City convince Standard &Poor's that a full year's reserve fund was excessive,since the City effectively budgeted annual lease payments one year ahead of debt service.The refunding issue was sold in May 2012 at ·Iess than 3%interest. Population:29,321;Founded 1872,Incorporated:1902 (General Law); Debt portfolio:$148.4 million. Client of Mr.Schaefer and Magis since 2012. Magis was recently engaged to assist Santa Paula with the evaluation of a proposed termination of a "public-private partnership"for a wastewater treatment plant.The City wishes to exercise its buyout option because the treatment standards for the effluent from this facility have changed and the capital needs may be financed less expensively through the use of tax-exempt indebtedness. The "unwind"transaction is expected to close in late 2012. ©Magis Advisors 2012.All rights reserved 00120540.DOO< October 8,2012 Page 7 2-56 Financial Advisory Proposal to: CITY OF RANCHO PALOS VERDES CITY OF ROLLING HILLS ESTATES MR.DOUG PRICHARD CITY MANAGER TEl:(310)377-1577 4045 PALOS VERDES DR.N. Rolling Hills Estates,CA :r~omspo CITY OF SAN LUIS 081P50 MR.MICHAEl CODRON ASSISTANT CITY MANAGER TEL:(80S)781-7112 990 Palm St. San luis Obispo,CA 93401 CITY OF BURLINGAME MR.JESUS NAVA FINANCE DIRECTOR TEl:(G50)558-7222 501 Primrose Rd. Burlingame,CA 94010 Population:8,067;Incorporated:1957 (General Law); Debt portfolio:no prior General Fund Indebtedness. alent ofMr.Schaefer and Magis since 201.1.. MaSis was ensased in 2011 to assist this city with an evaluation of fundins options for an u·nfunded accrued actuarial liability in a CalPERS side fund for its miscellaneous employees.Several funding options were evaluated,including separate sinking funds,use of accumulated reserves and issuance of debt. The City elected to issue a pension debt obligation through a private pla.cement with a commercial bank.The borrowing required a judicial validation process,was placed with a major national bank,and closed in late August 2012. Population:44,697;Incorporated:1856 (Charter adopted 1876); Debt portfolio:$88•.6 million. Client of Mr.Schaefer since 1989;of Magis since 201.1.. Magis was recently engaged to assist San Luis Obispo with the evaluation of a proposed development project sponsored by the Chevron Corporation.The development will revitalize an area of more than 368 acres contained within the City's airport area specific plan. Until recently,the site was used by Chevron as an oil storage and distribution facility.The proposed Chevron develo.pment business pa.rk,manufacturing and commercial uses.Magis is assisting the City with the evaluation of financing options for the requi.red infrastructure to support the development.We are measuring,and then reporting on,the long-term impact ofthe Chevron proposal to the City's General Fund. Population:29,009;Incorporated:1908 (General Law); Debt portfolio:$103.2 million ($32 million governmental &:$68 million,business-type actiVities). alent of Mr.Schaefer and Magis since 201.1.. Magis served as Burlinsame's pricing advisor on an offering of $5.9 million of water and wastewater revenue bonds that were issued in late 2011.We participated in the pricing exercise with the City's underwriter,offered commentary on the proposed pricing,and submitted a post-sale analysis and fairness opinion.Presently,we are under contract with Burlingame to perform similar work on three offerinss that will reach the market between October and December 2012. ©Magis Advisors 2012.All rights reserved 00120540.DOCX October 8,2012 Page 8 2-57 Financial Advisory Proposal to: CITY OF RANCHO PALOS VERDES CITY OF MURRIETA MR.RICK DUDLEY CITY MANAGER TEL:(951)461-6002 Ms.JOY CANFIELD FINANCE DIRECTOR TEL:(951)461-6437 24601 Jefferson Ave. Murrieta,CA 92562 Population:100,835;Incorporated:1991 (General law); Debt portfolio:approximately $68.0 million (General Fund);and, "No-COmmitment Debt"of $145.6 million in 13 Mello-Roos CFDS. alent 01 Mr.SChfllejer fIlnd MfIlgls since 2OOS. We recently (June 2012)assisted the City with the structuring and sale of a consolidated refinancing transaction for six Mello-Roos issues, totaling $53.6 million. We also have assisted the City with a resp.onse to an IRS "letter audit" inquiring about the City's compliance with tax law in the administration of one of its twelve other Mello-Roos dlstrict Issues. Other Personal References Ms.MARY BRADLEY (Past President,CSMFO,1999) (Retired finance director, Cities of Sunnyvale &.Pasadena) BRADLEY CONSULTING Telephone:(408)981-4021 Client Testimonials MR.ROBERT DOTV,ESQ. (Financial advisor &.attorney) AMERICAN GOVERNMENT FINANCIAL SERVICES 1721 Eastern Avenue,Suite 4 Sacramento,CA 95864 Telephone:(916)483-7378 MR.ALlAN D.KOTIN (Economic consultant) ALLAN D.KOTIN &.ASSOCIATES 949 So.Hope Street,Suite 200 los Angeles,CA 90015 Telephone:(213)623-3841 Testimonials from past and present clients support our claim that we provide real,bottom-line value to their financing projects. "1 owe you a debt of gratitude for providing us with help that is above and beyond the call of duty." -Collin Wong Martinusen,Chief of Staff to California State Controller John Chiang "Your professionalism and great sense of humor helped us to keep this project in focus and on track and we truly appreciate it." -John Violet,Elected City Treasurer,City of Belmont "Throughout his activities for the City,Mr.Schaefer consistently demonstrated a strong service orientation towards our needs and sensitivities.His integrity and loyalty to our City agenda were both obvious and genuine." -Morris Vance,Past Mayor and Former City Manager,City of Vista ©Magis Advisors 2012.All rights reserved 00120540.000< October 8,2012 Page 9 2-58 Financial Advisory Proposal to: CITY OF RANCHO PALOS VERDES MARKET &PRICING INFORMATION RESOURCES Fixed income markets are complex.We believe that our ability to understand and comment on the key drivers affecting bond structures and interest rates is of utmost importance to our clients.We have invested considerable effort in developing the resources necessary to provide comprehensive data to our clients to enable them to make informed decisions in this complex environment. We maintain access to both primary and secondary market pricing through Thomson Reuters Municipal Market Monitor (TM3),a data collection and analysis program that provides statistical data and analysis tools for all debt issued by public agencies in the United States.TM3 is the most comprehensive news source dedicated exciusiv$ly to the municipal marketplace.In addition to TM3,we also use Thomson Re ...ters EIKON platform for up-to-the-minute credit market data.The EIKON platform gives users access to hundreds of news sources,research reports and analytical an4 trading tools that brokers, bankers and analysts rely on to weigh investments,assess risk and conduct transactions.It also provides "real time"pricing information on fixed income markets throughout the globe.It is the strongest competitor to Bloomberg yet devised,at a significantly lower price-which reduces our overhead without compromising functionality. For keep.ing up-to-date on credit matters,we subscribe to the complete suite of Standard &Poor's Public Finance reso...rces through their Global Credit Portal.This enables us to bring together credit intelligence with market intelligence and to perform effective,peer grouping and ratio analyses. We actively use the services of M...nicipal Market AdviSOrs,a subscription based service,to analYle interest rates in the primary and secondary market.MMA is the leading independent strategy, research,and advisory firm in the municipal bond ind...stry.MMA provides analysis throughout the trading day,as well as daily and weekly summaries,along with a comprehensive monthly report. Together,these four resources (TM3,EIKON,s&P,and MMA)offer powerful,objective tools to evaluate bond structures and pricing confidently on the strength of verifiable data rather than on unreliable "verbal reports"or anecdotal claims made by bond und$rwriters. Magis uses Munex·(developed by Ferrand Consulting Group)to calculate bond issue sizing,refunding analyses,escrow investments,etc.and model debt service requirements.Munex·allows us to perform sensitivity analyses "on-the-fly"to understand the effect of interest rate changes on the financing transaction.Moreover,Munex·also allows for more efficient refinancing analysis because it enables us to compyte economic efficiencies,by maturity,based on the value to the issuer of the embedded call option.An example ofthe output from the Munex application is presented in Exhibit 1. For analysis of real estate projects,the firm uses ARGUS Developer.....ARGUS Developer is an established real estate pro forma software program in use by thousands of owners,commercial developers,homebuilders,land developers,brokers and financial institutions throughout the world.It is ©Magis Advisors 2012.All rights reserved 00120540.00CX October 8,2012 Page 10 2-59 Financial Advisory Proposal to: CITY OF RANCHO PALOS VERDES designed to work for all forms of real estate,including commercial,single or multifamily residential, retail,office,industrial,land development,and any combination for mixed-use developments.ARGUS Developer is desisned to develop accurate pm formas,including rent roll/tenancy schedules,unit sales, and cost distribution capabilities.This enables us to quickly and accurately analyze real estate transactions,forecast cash flows,calculate investment values and returns,and,summarize complex deal structures to our clients. We subscribe to all major periodicals in the field of municipal finance,including The Bond Buyer,The Wall Street Journal,The Journal of Municipal Finance,The Journal of Flnonce,and numerous periodicals.We maintain online access to databases furnished by Hishbeam Research {financial news, periodicals,out of town newspapers,etc.},The New York nmes (archives).,the National Federation of Municipal Analysts,Nielsen-Claritas,and Rand callforni.a Construction Data,to name but a few. In their entirety,these resources require significant financial commitment from Malis,a prerequisite to establishinl credible,long-term relationships with major clients such as Rancho Palos Verdes. REGISTRATION AND REGULATORY MATTERS There are no past,pending,or threatened regulatory,legal or enforcement actions or investigations affecting Magis,its officers or employees.Magis is required under the recently enacted Dodd-Frank Act to register with the Securities and Exchange Commission and the Municipal Securities Rulemaking Board as a "municipal advisor,«as that term is defined in Dodd-Frank.Our registration number with the SEC is 866..0002.6..00;our registration with the MSRB is#KOl2.5.MaSis is a state-registered investment advisor and we are required to maintain and regu.larly update certain information as a condition of that registration.Additional background information about Magis .nd its employees is also available on the Internet at www.adviserinfo.sec.gov.Once at that site,you can search for more informatio·n about Magis by using a unique identifying number {called a "CRDnumber"}.Magis'CRD number is 148720. MANAGING POTENTIAL CONFLICTS OF INTEREST Neither Magis nor any of its employees,owners,officers or affiliated persons has any known conflicts of interest with Rancho Palos Verdes or any of its constituent agencies.We do not believe that any of our current relationships with other clients present situations where our efforts for such clients are in conflict with Rancho Palos Verdes interests,nor would Rancho Palos Verdes interests conflict with theirs.In addition,compensation arrangements can often present opportunities for conflicts between the client and the advisor.Please see Exhibit 5 for important disclosures in this regard. Upon our founding,we adopted a corporate Code of Conduct.The Code establishes guiding principles for the prevention of conflicts of interest and requires high transparency of our economic interests to our clients.As a result,the firm's owners file california Fair Political Practices Act Form 700,"Statement of Economic Interest,"in all of the jurisdictions we serve.We presently file Form 700 annually with your City Clerk because of the other work we perform for the City. ©Magis Advisors 2012.All rights reserved 00120540.DOCX October 8,2012 Page 11 2-60 Financial Advisory Proposal to: CITY OF RANCHO PALOS VERDES COST PROPOSAL Option 1:Fixed Monthly Retainer Fee We will furnish any requested services for a fixed monthly retainer lee of $3,850,assuming the City makes at least a six-month commitment to our services.Reimbursable expenses are not included in that sum.This cost proposal assumes that the City and we will establish a monthly "budget"of 18 hours of time available to the City.We will charge our time to this budget,and unused time may be rolled over into subsequent months until the end of the contract term.Any time required beyond the budget allowance,after applying unused time "carried forward,"will be charged at our normal hourly rates shown below in Table 1.Please note also that the budget (and the monthly retainer fee)is not exclusive to any project,but may be applied to any services that the City may request,including work already in progress. Financing tran$.diOlJ$,if .nlft qre included in the monthlv retainer qmount.It is our experience that a typical financing transaction will require about 180-200 hours of work effort on our part.Accordingly, if a financing transaction is all that the City requires,the monthly retainer fee will cover a signifi.cant portion of the cost of the transaction.This is usually the most economical way to handle assignments such as the City's,as there are no "transactional"charges beyond the monthly retainer fee and should the City decide to stop the project,there are no further charges beyond the retainer.The primary benefit of this approach is that it represents approximately a 30%discount to our normal hourly rates, assuming the work effort presented in the Work Plan In Exhibit 2. Option 2:Hourly Charges,as Incurred Alternatively,we can provide services for hourly charges at the rates shown below in Table I,as the services are requested and delivered.The requested services would be billed monthly,as used. Alternatively,such services (if requested)can be furnished on an as-quoted basis,using a task order process as the City may wish.In this regard,if the City does not need or request services,then there is no charge for them as in the retainer option discussed above. Table 1.:Hourly Rates PetsQnnel Hourly Rate Principal Owner $300 Vice Presidents 225 Senior Associates 160 Associates 130 Analysts 90 Administrative/clerical 70 ©Magis Advisors 2012.All rights reserved 00120540.DOCX October 8,2012 Page 12 2-61 Financial Advisory Proposal to: CITY OF RANCHO PALOS VERDES Reimbursement of Costs &.Expenses We will also charge separatety for costs incurred by us at your requ,st and on your behatf.Examples of these include,but are not limited to,the following:materials or services you request that are provided by third-party vendors;telephone conference services;out-of-town travel and meals;publication of legal notices;filing oroffieial fees;printing of official documents;and,similar disbursements.In the case of particularly large disbursements ($500 and over),we generally request either your specific approval of the expenditure or an advance for such items. Appligble to ,ither of th,cpst pCQROsals above.we will also add a generaJ allocated expense charle of 6%of the net fee amount billed (When applicable)to cover expenses that are not practical to track on an individual 'basis.These items include,but are not limited to,subscription·based statistics services; access to credit ratinl agency data and reports;volume-based data set'lVieeS;internal printing and photocopyinl costs;long distance telepho.ne calls;records retention and retrieval;and,minor office supplies and materials used in our work on your behalf. It is our experience that reimbursable expenses lenerally add approximately 9-11%of our compensation to the overall cost to the City. Billing &.Payment Terms Relardless of the billing arranlement agreed upon,it is our policy to deliver an itemized invoice showinl all of our charluble time against the matters we have been enlaged to perform.The invoice shows a detailed description of the services provided,the date on which they were delivered,and the names and hourly rates of the individuals whoperforrned such services.BiUinl for the fixed monthly retainer fee arrangement would occur on last day of the month.BiUing for an hourly charges arrangement,if any, also occurs monthly,alaln on the last day of the month. Unless otherwise agreed upon,we expect payment within thIrty days of the invoice date. We offer a 2%discount for payments rtseiv,d within ten days of the invoice date. The Magis Client Satisfaction Guarantee Magis offers a complete satisfaction guarantee to all clients.If,for any reason,the City is not happy with our services,simply return our invoice marked "refused,"and we will waive all Malis charges for that billinl period.Of course,this guarantee cannot apply to disbursements made on the City's behalf or request.41 ©Magis Advisors 2012.All rights reserved 00120540.DOCX October S,2012 Page 13 2-62 Financial Advisory Proposal to: CITY OF RANCHO PALOS VERDES EXHIBIT 1:ILLUSTRATION OF A $10.0 MILLION LEASE FINANCING TRANSACTION FOR SAN RAMON CANYON (USING CURRENT INTEREST RATES) ©Magis Advisors 2012.All rights reserved 00120540.DOO< October 8,2012 Exhibit 1,Page 1 2-63 CITY OF RANCHO PALOS VERDES San Ramon Canyon (LEASE)Rates as of 10/8/12 ILLUSTRATION Sources &Uses Dated 02108120131 Delivered 0210812013 Sources Of Funds Par Amount ofBonds , Other contributions Reoffering Premium Toed Sotn"ces Uses Of Funds Deposit to Project Consttuction Fund Deposit to Debt Service Reserve Fund (DSRF) Costs ofIssuance Total Underwritex's Discount (1.500%) Rounding AmO\!nt Total Uses File I 00119000.SF I San Ramon Canyon (LEASE) MAGIS ADVISORS Public Finance Consulting $10,650,000.00 9,464,727.00 161.161.65 $20,275,888,65 19,443.458.82 490.364.01 180.000.00 159.750.00 2.315.82 $20,275.888.65 2-64 CITY OF RANCHO PALOS VERDES San RamonCanyon (LEASE)Rates as of 10/8/12 ILLUSTRATION Pricing Summary Part 1 of2 Maturity Type of Bond Coupon Yield Maturity Value Price Dollar Price 0210112014 Serial.Coupon 2.000"/0 0.700%415,000.00 101.275%420,29125 02/0112015 Serial Coupon 2.000"/0 0.800%420,000.00 102.359%429,907.80 02/0112016 Serial Coupon 2.000%1.000%430,000.00 102.934%442,616.20 02/0112017 Serial Coupon 2.250%1.200%435,000.00 104.074%452,721.90 0210112018 Serial Coupon 3.000"/0 1.500%445,000.00 107.180%476,951.00 02/0112019 Serial.Coupon 3.000%1.800%460,000.00 106.780%491,188.00 02/0112020 Serial Coupon 3.000%2.000%475,000.00 106.489%505,822.75 02/0112021 Serial Coupon 3,000%2.300%490,000.00 105.080%514,892.00 02/0112022 Serial.Coupon 3.000%2.500%500,000.00 104.001%520,005.00 02/0112023 Serial Coupon 2.600%2.600%515,000.00 99.999%514,994.85 0210112024 Serial Coupon 2.700%2.700%530,000.00 99.999%529,994.70 02/0112025 Serial Coupon 2.800%2.800%545,000.00 99.999%544,994.55 0210112026 Serial.Coupon 2.900%2.900%560,000.00 99.999%559,994.40 02/01/2027 Serial.Coupon 3.000"/0 3.000%575,000.00 99.9990/0 574,99425 02/01/2028 Serial.Coupon 3.000%3.100%595,000.00 98.808%587,907.60 02/0112029 Serial Coupon 3.200%3.200%610,000.00 99.999%609,993.90 0210112030 Serial Coupon 3.250%3.300%630,000.00 99.353%625,923.90 0210112031 Serial.Coupon 3.375%3.400%650,000.00 99.665%647,822.50 02/0112032 Serial Coupon 3.500%3.500%675,000.00 99.999%674,993.25 0210112033 Serial.Coupon 3.500%3.600%695,000.00 98.583%685,151.85 Total $10,650,000.00 $10,811,161.65 File I 00l19000.SF I San Ramon Canyon (LEASE) MAGIS ADVISORS Public Finance Consultmg 2-65 CITY OF RANCHO PALOS VERDES San RamonCanyon (LEASE)Rates as of 10/8/12 ILLUSTRATION Pricing Summary Bid Information Par Amount ofBonds Reoffering Premium or (Discount) Gross Production Total Undenvriter's Discount (1.500%) Bid (100.013%)• T0131 Purchase Price Bond Year Dollars Average Life Avemge Coupon Net Interest Cost (NIC) True Interest Cost mc) File I 00119000.SF I San Ramon Canyon (lEASE) MAGIS ADViSORS Public Finance Consulting Part2of2 $10.650.000.00 161.161.65 $10.811.161.65 $(159.750.00) 10.651.411.65 $10.651.411.65 $12l.S37.08 11.412 Years 3.1044717% 3.1033102% 3.0840940% 2-66 CITY OF RANCHO PALOS VERDES San Ramon Canyon (LEASE)Rates as of 10/8/12 ILLUSTRATION Debt Service Schedule Date 0210112014 0210112015 0210112016 0210112017 0210112018 02101/2019 0210112020 0210112021 0210112022 0210112023 0210112024 02/01/2025 0210112026 0210112027 0210112028 0210112029 0210112030 02101/2031 0210112032 0210112033 Total Yield Statistics Bond Year Dollars Average Life Average Coupon Net Interest Cost (NIC) Twe Interest Cost (TIC) Bond Yield fur Arbi1!age Ptuposes All Inclusive Cost (Ale) IRS Form 8038 Net Interest Cost WeirJrte4 Average M<lturity Principal 415.000.00 420.000.00 430.000.00 435.000.00 445.000.00 460.000.00 475.000.00 490.000.00 500.000.00 515.000.00 530.000.00 545.000.00 560.000.00 575.000.00 595.000.00 610.000.00 630.000.00 650.000.00 675.000.00 695,000.00 $10,650,000.00 Coupon 2.000% 2.000% 2.000% 2.250"10 3.000% 3.000% 3.000% 3.000% 3.000% 2.600"10 2.700% 2.800"10 2.900"10 3.000"10 3.000% 3200"10 3.250"10 3.375% 3.500"10 3.500% Interest 306.059.31 302.070.00 293.670.00 285.070.00 275.282.50 261.932.50 248.132.50 233.8~.5O 219.182.50 204.182.50 190.792.50 176,482.50 161.222.50 144.982.50 127.732.50 109,882.50 90,362.50 69,887.50 47.950.00 24.325.00 53,773,084.31 Total P+I 721.059.31 722.070.00 723.670.00 720.070.00 720.282.50 721.932.50 723.132.50 723.882.50 719.182.50 719.182.50 720.792.50 721.482.50 721.222.50 719.982.50 722.732.50 719.882.50 720,362.50 719.887.50 722,950.00 719,325.00 $14,423,084.31 5121.537.08 11.412 Years 3.1044717% 3.1033102% 3.0840940"10 2.9237076% 3.2689753% 2.9557924% 11.303 Years File I 00ll9000.SF I San Ramon Canyon (LEASE) MAGIS ADVISORS PublIC Finance ConsultIng 2-67 CITY OF RANCHO PALOS VERDES San Ramon Canyon (LEASE)Rates as of 10/8/12 ILLUSTRATION Operation Of Project Construction Fund Date 02/0612013 03/0112013 0410112013 0510112013 06/0112013 07/0112013 0810112013 09/0112013 10/0112013 1110112013 1210112013 01/0112014 02/0112014 03/01/2014 0410112014 Total Principal 1.390,000.00 1.389,485.00 1.389.744.00 1.389.650.00 1.389.448.00 1.389.196.00 1,387.725.00 1,387,627.00 1.388,573.00 1,388,300.00 1,388,123.00 1,387,810.00 1,388,889.00 1,388,888.00 SI9,443,458.oo Rate 0.090% 0.080% 0.080% 0.100% 0.120% 0.130% 0.14()01o 0.140% 0.150% 0.150% 0.160% 0.160% 0.160% Interest 514.68 255.86 350.26 551.97 803.83 2.275.41 2,372.51 1.427.37 1.700.19 1.876.81 2.190.07 1.111.11 1,111.11 SI6,541.18 Receipts 0.82 1,390.000.00 1,389.999.68 1,389.999.86 1.390.000.26 1.389,999.97 1,389,999.83 1.390,000.41 1.389,999.51 1,390,000.37 1,390,000.19 1.389.999.81 1.390,000.07 1.390.000.11 1.389,999.11 $19,460,000.00 Disbursements 1.390.000.00 1.390.000.00 1.390.000.00 1.390.000.00 1.390.000.00 1,390.000.00 1.390.000.00 1,390.000.00 1.390.000.00 1.390.000.00 1.390.000.00 1.390.000.00 1.390.000.00 1,390,000.00 SI9,4f50,000.00 Cash Balance 0.82 0.82 0.50 0.36 0.62 0.59 0.42 0.83 0.34 0.71 0.90 0.71 0.78 0.89 Investment Parameters Investment Model [PV.mc.or Securities] Default investment yield target Cash Deposit Cost ofIn""eStments Pun:based with Bond Proceeds Total Cost ofInvestments Tuget Cost ofInvestments at bond yield Actual positive or (negative)arbitrage Yield to Receipt Yield for Arbitl'age Pw:poses State and Local Government Series (SLOS)rates for File I 00ll9000.SF I San Ramon Canyon (LEASE) MAGIS ADVISORS Public Fmance Consulting Securities Unrestricted 0.82 19,443.458.00 $19.443.458.82 S19,1l8.TI5.18 (324.683.64) 0.1392179% 2.9237076% 10/0312012 2-68 Financial Advisory Proposal to: CITY OF RANCHO PALOS VERDES EXHIBIT 2:DETAILED WORK PLAN-BOND FINANCINGS The following work plan shows the specific tasks,typical deliverable work products,allocation of resources,and estimated work effort for each phase of the debt issuance pro.cess.Each financing project is unique.Not all debt issues require each specific task,nor are the resources or hours devoted to each task uniform across all types of issues.However,this is an excellent representation of a typical financing project.Please note thlat there are parallel tracks for Ph,se 3.$howing activities for either a necotia.ted sale or a competitive sale.depending on the selected market access (negotiated or competitive sale). PHASE 1:PLANNING &STRUCTURING Specific Tasks &Deliverables Task 1.Evaluate po.ssible financinl options and produce cash flowor debt service illustrations showing burdens imposed by preferred option(s). Deliverable(s}:debt Bert/Ice IIlustrDtlons and models. Task 2.Review,evaluate,and comment on sufficiency of projected revenues needed to meet economic targets. Dellverable(s}:memoranda and commentary to City stajJ. Task 3.Re.commend structuring alternatives,based on identified alternatives. Dellllerable(s}:term sheet outlining the desired business arrangementlor the borrowing. Task 4.Assist the City's bond counsel in the development of appropriate financial and non- financial covenants for the financing. DellveTable(s}:revisions to term sheet;written plan 0/finance with supporting cosh flow schedules; specl/lc comments on documents;memoronda or commentary to City stajJ. Task s.Prepare and maintain a financing calendar showing time of performance and assigned responsibilities for all major activities required to complete the financing. Deliverable(s}:Initial projectfinancing schedule and regular updDtes;written or oral reports to City 0/performance measures. Task 6.Attend meeting,with City staff and financing team to discu,s the plan for financing of the project. DelllleTable(s}:attendance at all requested meetings. Time to complete:four to six weeks from notice to proceed. ©Magis Advisors 2012.All rights reserved. 00120540.DOCX October 8,2012 Exhibit 2,Page 1 2-69 Financial Advisory Proposal to: CITY OF RANCHO PALOS VERDES PHASE 2:CREDIT EVALUATION AND PRESENTATION Specific Tasks &Deliverables Task 7.Evalu.ate credit quality and advise the City on seeking credit ratings and/or financial guarantee (bond insurance)ba.sed on established industry standards and published rating criteria. Delil/erab/ets}:credit dewlopment plan and rating package. Task I.Prepare written report and/or oral presentation to the City to support decision to issue the debt and confirm the feasibility of the proposed approach. Delillerab/et$}:written report or oral presentation,as applicable. Task 9..Review and evaluate overaJl credit,present to rating aaencyand/or insu.rer,as reqUired. Delil/erablets}:rel/isions to the rating padcage and pre_nt to rating agency or insurer,in person. Task 10.Attend meetings with City staff and financing team to implement the plan for financing of the project. Delillerablets}:attendance at all requested meetings. Time to complete:six weeks fro·m notice to proceed;typically overlaps planning and structuring by one to two weeks. PHASE 3A:MARKETING &SALE-COMPETITIVE SALE ALTERNATIVE (Choose either this Phase 3A;or,Phase 38,which follows this section) Specific Tasks &Deliverables Task 11.DevelQ.p a ma.rketing plan fM the offerins.taking into account the features and characteristics appropriate to a retail,institutional,or combined offering;identify possible bidders based on primary and secondary market performan.ce with similar issues and issuers. Delil/erablets}:written marketing plan. Task 12.Assist the City with selection of a time and date for the bond sale,taking into consideration such factors as changing economic conditions,current and projected market trends,and convenience to the City. Delillerablets}:01'0101'written recommendation. Task 13.Coordinate with bond counsel the preparation and distribution of the notice of sale, bidding instructions,authorizing resolutions and other documents required to implement the advertised sale. Delll/erablets}:notice ofsale,bid forms,electronic bid platform data,procedure for good faith depo$its,electronic bidding instructions,and related data. ©Magis Advisors 2012.All rights reserved. 00120540.DOO< October 8,2012 Exhibit 2,Page 2 2-70 Financial Advisory Proposal to: CITY OF RANCHO PALOS VERDES Specific Tasks &Deliverables Task 14.Assist in publicizing the issue in advance using mail,electronic delivery,telephonic contact,and distribution of notice of sale,official statement and bidding instructions. Deliwtrable{s):«probable bidders"list;memoronda;oral report to Oty. Task 15.Advertise the bond sale in nationally prominent financial publications in addition to coordinating local publication requirements. Deliverable{s):printed legal notices;display ads,etc. Task 16.Attend the bid opening,receive bids,and evaluate for conformance with established bid parameters. Deliveroble{s):award or reject recommendation., Time to comptete:six to eisht weeks from completion of planning and structuring. PHASE 3s:MARKETtNG &SALE-NEGOTIATED SALE ALTERNATIVE Specific Tasks &Deliverables Talk 11.Pr.pare and distribute a request for proposal for und.rwriting services on behalf of the City;evaluate proposals a:ndrecommend selection of an underwriting firm (or firms)to the City; assist in the sele~ion of co-managers and syndicate members,as appropriate. Delillerable{s):written report andlor recommendation based on objective criteria. Task 12.Advise City on the appropriate terms and conditions proposed by underwriter,such as maturity scheduling,call provisions,and other matters (discount or premium pricing;effect on true interest costs,etc.).Collaborate with bond counsel and the select.d underwriter conc.ming necessary cov.nants and structural features including parity debt provisions,res.rve requirements, sinking fund paym•.nts,opti.onal or mandatory redemption provisions,tax crllldits,etc. Delillerable{s):written or oral communieotlon as neceSSQry. Task 13.Advise th.City on the timing of the bond sale,taking into consideration such factors as changing economic conditions,current and projected market trends,and convenience to the City. Delillerable{s):written or oral communication as necessary. Task 14.Coordinate with bond counsel preparation of authorizing r.solutions and other documents involved in the sale of bonds.Review such documents for conformance with selected financing plan. Delillerable(s):written or oral communieotion os necessary to bond counsel and City. ©Magis Advisors 2012.All rights reserved. 00120540.000< October 8,2012 Exhibit 2,Page 3 2-71 Financial Advisory Proposal to: CITY OF RANCHO PALOS VERDES Specific Tasks &Deliverables Task 15.Advise the City as to the appropriateness of the pricing being proposed by the negotiating underwriter,including interest rate(s),underwriting spread,level of discount,distribution of orders,allocation of spread,and the like. Delit/emble(s):written or oral communication to City with supporting numerical analyses,as required. Task 16.Confirm establishment of order priorities according to MSRB Rule G-ll and verify fair allocation of the bonds following the order period. Delit/erable(s):written or oml communication with the City,as required. Time to complete:four to six weeks from completion of planning and struct\lring. PHASE 4:CLOSING AND SEm.EMENT Specific Tasks &Deliverables Task 17.Direct and coordinate bond closing details including final delivery. Delit/erable(s):closing memorandum showing settlement funds and mot/ement ofmoney at settlement. Task 18.Recommend appropriate investment strategy to maximize earnings on the bond proceeds and solicit bids on investment of proceeds,if required. Dellt/erable(s):written Int/estment plan,as requested or required (except in case of u.s.Treasury «State and Local Government SeriesN ). Task 19.Coordinate the organization of the clos.ing conference call,final numerical proof of borrOWing terms,confirm settlement funds,and prepa.re post-sale analysis. Delit/emble(s):attendance at closing,when required;written post-Stil'e analysis;written or oral communication with the City,when appropriate. Time to complete:ten to fourteen days from sale date. ©Magis Advisors 2012.All rights reserved. 00120540.DOCX October 8,2012 Exhibit 2,Page 4 2-72 Financial Advisory Proposal to: CITY OF RANCHO PALOS VERDES EXHIBIT 3:RESUMES OF AsSIGNED PERSONNEL w fiB T Tim Schaefer is the founder and principal owner of Magis Advisors.He has practiced in the financial advisory business in California for more than twenty vears and has more than forty vears of experience in the municipal securities industry.His experience includes the development and sale of both tax-supported and revenue bonds for public facilities,redevelopment,transcportation projects,and essential service enterprises.A 4o.vear veteran,Schaefer offers experience with a special emphasis in delivering practical,common sense based solutions to California cities. Over the past twenty years,he has been responsible for overse.eing in excess of sao billion in fin.aneing for more than four dozen agencies.Tim has ascsisted numerous state and local government issuers with the strueturinS,sale or adminisctration of their debt.Present cliem inclu~the State of California,the Denver (CO)PubUc School System,and the California cities of Belmont,Cupertino,Menifee,Murrieta, Poway,Rancho Palos Verdes,Rollins Hills Estates,San luis Obispo,Santa Paula,and Vista.Notable past clients include the states of California,Minnesota,Montana,New Ham.pshire,New York,Tennessee and Texas;the cities of los Anseles,San Diego,and San Jose;and,the counties of los Angeles,Orange and Riverside,amons others. Before foundins Magis,he was the President and Chief Operatins Officer of another Southern California· based financial adVisory firm.Prior to entering the financial advisory field,Tim managed the national munIcipal trading desk at Chemical Bank in New York City and subseque.ntlv was the Managins Director of the Public Finance Division of Bank ·of America. He served more than twenty vears on the Technical Assistance Committee to the California Debt and Investment Advisory Commission (including three terms as its chairman)and three vears as a private sector advisor to the Standing Committee on Governmental Debt of the Government Finance Officers Association.Recently,he served on a National League of Cities'task force investigating substitute mechanisms for municipal bond credit substitutions as a consequence of the collapse of the major municipal bond insurers in 2008. He is a co-author of the California Public Funds Investment Primer,published bV the California Debt and Investment AdVisory Commission in 2005,and has authored a number of articles on the field of municipal finance.He is a frequent speaker before groups such as the California Debt and Investment AdVisory Commission,the League of California Cities,the Government Finance Officers Association,and the California Association of Counties. Tim holds the designation of Certified Independent Public Finance Advisor awarded by the National Association of Independent Public Finance Advisors.He is a state·resistered investment advisor representative. Cl Magis Advisors 2012.All rights reserved 00120540.DOCX October 8,2012 Exhibit 3,Page 1 2-73 Financial Advisory Proposal to: CITY OF RANCHO PALOS VERDES fi·:':~····..... .:.~..:~ 'if Kathryn SChaefer,Corporate secretary,has more than eight years of experience in the securities industry.In addition to her corporate duties,she handles the majority of the administrative functions of the firm.Prior to co-founding Magis,she worked for the Investment Securities Division of the Bank of America as the administrative aide to the Division's Operations Officer and for a major brokerage firm. ©Magis Advisors 2012.All rights reserved 00120540.DOCX October 8,2012 Exhibit 3,Page 2 2-74 Financial Advisory Proposal to: CITY OF RANCHO PALOS VERDES --z- :1JJJi!1#- EXHIBIT 4:TRANSACTION EXPERIENCE (MR.SCHAEFER AND MAGIS COMBINED) The following table lists the transaction history for financial advisory engagements of Mr.Schaefer: PRINCIPAL ISSUER SALE DATE DEBT TYPE SALE TYPE A MOUNT Arcadia 5/16/01 General obligation bond Competitive $8,000,0{)0 Arcadia Redevelopment Agency 5/16/01 Tax allocation bond Competitive 11,655,000 Arcadia Redevelopment Agency 5/16/01 Tax allocation bond Competitive 9,240,000 Banning 2/21/97 Financing lease Negotiated 6,810,000 (COP or lease revenue) Banning cm No 86-1 5/15/96 limited tax obligation bond Negotiated 3,810,000 Banning Re~evelopment Agency 2/27/92 Tax allocation bond Competitive 4,130,000 Belmont cm No 2000-1 2/4/04 Limited tax obligation bond Negotiated 8,650,000 "Belmont Joint Powers Financing 12/15/09 Public enterprise revenue bond Competitive 8,500,000 Authority Belmont Joint Powers Financing 2/15/06 Public enterprise revenue bond Competitive 7,500,000 Authority Belmont Joint Powers Financing 12/5/01 Public enterprise revenue bond Competitive 7,500,000 Authority ".. Belmont Redevelopment Agency 11/17/99 Tax allocation bond Competitive 8,725,000 Belmont Redevelopment Agency 11/17/99 Tax allocation bond Competitive 15,490,000 Buena Park Community 6/17/03 Tax allocation bond Competitive 24,055,000 Redevelopment Agency Buena Park Community 1/19/00 Tax allocation bond Competitive 8,265,000 Redevelopment Agency Buena Park Community 11/13/92 Tax allocation bond Competitive 21,515,000 Redevelopment Agency Buena Park Community 11/13/92 Tax allocation bond Negotiated 8,325,000 Redevelopment Agency Burbank 10/17/95 Public enterprise revenue bond N.egotiated 16,800,000 Burbank 10/27/92 Public enterprise revenue bond Competitive 27,165,000 Burbank 6/3/92 Public enterprise revenue bond Negotiated 2,280,000 Burbank 6/3/92 Public enterprise revenue bond Negotiated 7,685,000 Burbank Redevelopment Agency 12/16/94 Tax allocation bond Negotiated 13,295,000 Burbank Redevelopment Agency 5/19/93 Tax allocation bond Negotiated 23,945,000 Burbank Redevelopment Agency 5/12/93 Tax allocation bond Negotiated 69,000,000 Burbank-Glendale-Pasadena 11/6/92 Public enterprise revenue bond Negotiated 23,780,000 Airport Authority Burlingame 11/21/11 Public enterprise revenue bond Negotiated 5,935,000 California Fairs Financing Authority 8/21/91 Public enterprise revenue bond Negotiated 30,865,000 California Infrastructure &9/23/04 Conduit revenue bond Negotiated 48,000,000 Economic Development Bank California Infrastructure &9/23/04 Conduit revenue bond Negotiated 48,000,000 Economic Development Bank ©Magis Advisors 2012.All rights reserved 00120540.000< October 8,2012 Exhibit 4,Page 1 2-75 Financial Advisory Proposal to: CITY OF RANCHO PALOS VERDES PRINCIPAL ISSUER SALE DATE DEBT TYPE SALE TYPE A MOUNT California Infrastructure &5/9/03 Conduit revenue bond Negotiated 275,000,000 Economic Development Bank California Infrastructure &5/9/02 Commercial paper Negotiated 225,000,000 Economic Development Bank California Pollution Control 12/7/95 Conduit revenue bond Negotiated 11,225,000 Financing Authority California Pollution Control 10/27/89 Conduit revenue bond Negotiated 3,100,000 Financing Authority California Special District 8/6/98 Financing lease Negotiated 2,675,000 Association Finance Corporation (COP or lease revenue) California State Controller's Office 7/20/94 Medium term note (>12 mos)Competitive 100,000,000 California State Controller's Office 7/20/94 Medium term note (>12 mos)Competitive 3,900,000,000 California State Controller's Office 2/15/94 Short-term borrowing «13 mas)tompetitive 3,200,000,000 California State Controller's Office 6/16/93 Short-term borrowing «13 mas)Competitive 100,000,000 California State Controller's Office 6/16/93 Short-term borrowing «13 mos)Competitive 1,400,000,000 California State Controller's Office 6/16/93 Short-term borrowing «13 mos)Competitive 100,000,000 California State Controller's Office 6/16/93 Short-term borrowing «13 mos)Competitive 100,000,000 California State Controller's Office 6/16/93 Short-term borrowing «13 mos)Competitive 200,000,000 California State Controller's Office 6/16/93 Short-term borrowing «13 mos)Competitive 100,000,000 California State Controller's Office 6/23/92 Short-term borrOWing «13 mos)Competitive 400,000,000 California State Controller's Office 6/23/92 Short-term borrowing «13 mos)Competitive 75,000,000 California State Public Works 10/15/98 Financing lease Negotiated 32,630,000 Board (COP or lease revenue) California State Public Works 3/25/98 Financing lease Negotiated 102,700,000 Board (COP or lease revenue) California Statewide Communities 5/28/98 Conduit revenue bond Negotiated 179,320,000 Development Authority California Statewide Communities 5/28/98 Conduit revenue bond Negotiated 3,000,000 Development Authority California Trade And Commerce 10/18/94 Public enterprise revenue bond Negotiated 7,000,000 Agency Capitola 12/16/98 Special assessment bond Negotiated 1,539,000 Capitola 12/16/98 Special assessment bond Negotiated 2,389,000 Capitola Financing Authority 9/11/96 Financing lease Negotiated 5,935,000 (COP or lease revenue) Carson 8/22/01 Special assessment bond Negotiated 32,195,000 Carson Redevelopment Agency 6/21/01 Tax allocation bond Negotiated 28,625,000 Cathedral City 8/14/91 Special assessment bond Negotiated 10,725,064 Cathedral City Redevelopment 11/1/89 Tax allocation bond Competitive 3,145,000 Agency Cathedral City Redevelopment 4/12/89 Tax allocation bond Competitive 5,820,000 Agency ©Magis Advisors 2012.All rights reserved 00120540.DOCX October 8,2012 Exhibit 4,Page 2 2-76 Financial Advisory Proposal to: CITY OF RANCHO PALOS VERDES PRINCIPAL ISSUER SALE DATE DEBT TYPE SALE TYPE A MOUNT Cathedral City Redevelopment 4/12/89 Tax allocation bond Competitive 4,910,000 Agency Charleston County (SC)5/5/93 Public enterprise revenue bond Negotiated 28,400,000 Chino Basin Desalter Authority 2/26/02 Public enterprise revenue bond Negotiated 100,000,000 Compton Community 6/21/06 Tax allocation bond Negotiated 51,215,000 Redevelopment Agency Costa Mesa City Hall And Public 10/5/88 Financing lease Competitive 17,000,000 Safety Facilities Inc.(COP or lease revenue) Cupertino 5/9/12 Financing lease Competitive 43,940,000 (COP or lease revenue) Del Mar Race Track Authority 8/29/05 Public enterprise revenue bond Negotiated 49,380,000 Denver Public Schools 4/5/11 Financing lease (fixed),Negotiated 396,235,000 (COP or lease revenue) Denver Public Schools 4/12/11 Financing lease (variable)Negotiated 396,045,000 (COP or lease revenue) Kent County (MI)4/20/95 Public enterprise revenue bond Negotiated 40,000,000 lake Forest 3/9/04 Financing lease Competitive 9,505,000 (COP or lease revenue) lee lake Water District 6/24/03 limited tax obligation bond Negotiated 21,940,000 CFDNo 1 lee lake Water District 7/30/02 limited tax obligation bond Negotiated 6,835,000 CFDNo2 lee lake Water District 2/24/04 limited tax obligation bond Negotiated 27,310,000 CFDNo3 long Beach 6/4/91 Special assessment bond Negotiated 17,440,000 los Angeles 3/23/04 Public enterprise revenue bond Competitive 56,230,000 los Angeles 12/2/03 Public enterprise revenue bond Competitive 61,120,000 los Angeles 4/24/03 Public enterprise revenue bond Competitive 47,825,000 los Angeles CFD No 4 3/12/03 limited tax obligation bond Negotiated 135,000,000 los Angeles County Public Works 11/29/06 Financing lease Negotiated 320,995,000 Financing Authority (COP or lease revenue) los Angeles County Public Works 2/15/05 Financing lease Negotiated 393,315,000 Financing Authority (COP or lease revenue) McFarland Unified School District 7/25/94 General obligation bond Competitive 9,800,000 Modesto 8/4/93 Short-term borrowing (<13 mos)Competitive 5,000,000 Moreno Valley 5/9/95 Financing lease Competitive 10,420,000 (COP or lease revenue) Moreno Valley CFD No 3 3/24/00 limited tax obligation bond Negotiated 8,075,000 Moreno Valley CFD No 5 5/31/07 limited tax obligation bond Negotiated 5,870,000 Moreno Valley Public Financing 6/23/05 Financing lease Negotiated 48,205,000 Authority (COP or lease revenue) Murrieta 7/11/12 limited tax obligation bond Negotiated 53,605,000 Newport Beach 10 No 95-1 7/26/01 limited tax obligation bond Negotiated 15,495,000 (0 Magis Advisors 2012.All rights reserved October 8,2012 00120540.DOCX Exhibit 4,Page 3 2-77 Financial Advisory Proposal to: CITY OF RANCHO PALOS VERDES PRINCIPAL ISSUER SALE DATE DEBT TYPE SALE TYPE A MOUNT Ontario 12/14/95 Special assessment bond Negotiated 15,280,000 Orange County CFD No 88-1 7/15/92 Limited tax obligation bond Negotiated 119,250,000 Orange County CFD No 88-2 6/18/98 Limited tax obligation bond Negotiated 1,775,000 Otay Water District 6/24/98 General obligation bond Competitive 11,835,000 Oxnard 7/14/99 Special assessment bond Competitive 3,545,000 Oxnard 6/5/97 Special assessment bond Negotiated 31,120,000 Oxnard 11/26/96 Special assessment bond Negotiated 8,560,000 Oxnard 1/3/96 Special assessment bond Competitive 7,460,000 Oxnard CFD No 1 12/3/02 Limited tax obligation bond Negotiated 9,740,000 Oxnard Financing Authority 9/7/95 Public enterprise revenue bond Negotiated 25,000,000 Oxnard Financing Authority 12/3/93 Financing lease Negotiated 31,565,000 (COP or lease revenue) Oxnard Financing Authority 11/8/93 Financing lease Negotiated 7,700,000 (COP or lease revenue) Oxnard Financing Authority 7/31/93 Public enterprise revenue bond Negotiated 59,530,000 Oxnard Financing Authority 1/13/93 Public enterprise revenue bond Competitive 4,105,000 Oxnard financing Authority 1/13/93 Public enterprise revenue bond Competitive 5,983,256 Oxnard Redevelopment Agency 4/22/94 Tax allocation bond Negotiated 18,580,000 Poway 10/3/12 Financing lease Competitive 14,350,000 (COP or lease revenue) Riverside 8/26/93 Conduit revenue bond Negotiated 3,060,000 Riverside 12/8/92 Conduit revenue bond Negotiated 540,000 Riverside 12/8/92 Conduit revenue bond Negotiated 435,000 Riverside 12/8/92 Conduit revenue bond Negotiated 7,745,000 Riverside 12/8/92 Conduit revenue bond Negotiated 9,420,000 Riverside 11/5/92 Special assessment bond Negotiated 4,416,947 Riverside 7/30/91 Special assessment bond Negotiated 4,268,565 Riverside 5/9/91 Conduit revenue bond Negotiated 7,515,000 Riverside 7/3/90 Conduit revenue bond Negotiated 6,700,000 Riverside 4/10/90 Financing lease Negotiated 7,500,000 (COP or lease revenue) Riverside 7/7/89 Special assessment bond Negotiated 30,795,000 Riverside CFD No 90-1 3/20/91 Limited tax obligation bond Negotiated 20,400,000 Riverside CFD No 90--2 9/5/91 Limited tax obligation bond Negotiated 8,945,980 Riverside County 12/9/08 Financing lease Negotiated 78,895,000 Asset Leasing Corp (COP or lease revenue) Riverside County Redevelopment 8/28/91 Tax allocation bond Negotiated 11,415,000 Agency Riverside County Redevelopment 5/9/90 Tax allocation bond Negotiated 18,020,000 Agency ©Magis Advisors 2012.All rights reserved October 8,2012 00120540.DOCX Exhibit 4,Page 4 2-78 Financial Advisory Proposal to: CITY OF RANCHO PALOS VERDES PRINCIPAL ISSUER SALE DATE DEBT TYPE SALE TYPE A MOUNT Riverside Unified School District 5/6/08 General obligation bond Negotiated 50,000,000 Riverside Unified School District 4/19/06 General obligation bond Competitive 65,000,000 Rolling Hills Estates 8/24/12 Pension obligation bond Placement 1,786,000 Rosedale Union School District 7/9/91 General obligation bond Competitive 2,480,000 Sacramento Area Flood Agency 2/1/90 Medium term note (>12 mos)Negotiated 11,000,000 San Diego 12/17/03 Special assessment bond Negotiated 5,430,000 San Diego 8/13/03 Special assessment bond Negotiated 8,850,000 San Diego 10/13/93 Conduit revenue bond Negotiated 16,000,000 San Diego 8/20/93 Conduit revenue bond Negotiated 15,700,000 San Diego 7/30/93 Conduit revenue bond Negotiated 3,490,000 San Diego 5/28/92 Special assessment bond Negotiated 2,235,000 San Diego 7/30/91 Financing lease Competitive 11,810,000 (COP or lease revenue) San Diego cm No 1 12/27/95 Limited tax obligation bond Negotiated 20,865,000 San Diego CFO No 1 7/18/91 Limited tax obligation bond Negotiated 35,340,000 San Diego cm No 3 6/29/06 Limited tax obligation bond Negotiated 16,000,000 San Diego County 7/17/91 Special assessment bond Negotiated 28,804,151 San Diego Housing Authority 11/10/93 Conduit revenue bond Negotiated 13,608,000 San Diego Santalul UO No 2 2/11/04 Limited tax obligation bond Negotiated 9,965,000 San Diego Santalul cm No 2 2/11/04 Limited tax obligation bond Negotiated 5,000,000 San Diego Santalul UD No 2 10/18/00 Limited ta.x obligation bond Negotiated 56,020,000 San Diego Santalul cm No 2 10/18/00 Limited tax obligation bond Negotiated 4,350,000 San Francisco Bay Area Rapid 5/17/95 Sales tax revenue bond Negotiated 135,000,000 Transit District San Francisco City &County 12/8/94 Public enterprise revenue bond Competitive 25,000,000 Parking Authority San Jose 7/29/93 Special assessment bond Negotiated 1,494,426 San Jose Financing Authority 11/16/93 Financing lease Negotiated 24,875,000 (COP or lease revenue) San Jose Financing Authority 10/28/93 Financing lease Negotiated 9,000,000 (COP or lease revenue) San luis Obispo 8/8/06 Public enterprise revenue bond Competitive 16,905,000 San luis Obispo 12/11/02 Public enterprise revenue bond Competitive 9,485,000 San luis Obispo 10/5/94 Fina.ncing lease Negotiated 11,780,000 (COP or lease revenue) San luis Obispo 3/17/93 Public enterprise revenue bond Competitive 10,890,000 San luis Obispo 12/13/90 Financing lease Competitive 4,500,000 (COP or lease revenue) San luis Obispo 12/13/88 Financing lease Competitive 5,000,000 (COP or lease revenue) ((;)Magis Advisors 2012.All rights reserved 0012054O.DOO< October 8,2012 Exhibit 4,Page 5 2-79 Financial Advisory Proposal to: CITY OF RANCHO PALOS VERDES PRINCIPAL ISSUER SALE DATE DEBT TYPE SALE TYPE A MOUNT San Luis Obispo Capital 4/12/06 Financing lease Competitive 16,160,000 Improvement Board (COP or lease revenue) San Luis Obispo Capital 4/1/04 Financing lease Competitive 6,700,000 Improvement Board (COP or lease revenue) San Luis Obispo Capital 11/14/01 Financing lease Competitive 12,415,000 Improvement Board (COP or lease revenue) San Luis Obispo Capital 10/27/99 Financing lease Competitive 3,245,000 Improvement Board (COP or lease revenue) San Luis Obispo Capital 10/27/99 Financing lease Competitive 6,745,000 Improvement Board (COP or lease revenue) San Luis Obispo Capital 10/27/99 Financing lease Negotiated 3,105,000 Improveme'nt Board (COP or lease revenue) San Luis Obispo Capital 6/6/96 Financing lease .£ompetitive 7,100,000 Improvement Board (COP or lease revenue) San Luis Obispo County 4/29/99 Special assessment bond Negotiated 2,796,932 San Marcos CFD No 2002-1 7/21/04 Limited tax obligation bond Negotiated 22,500,000 San Marcos CFD No 88-1 8/19/98 Limited tax obligation bond Negotiated 16,535,000 San Marcos CFD No 88-1 8/19/98 Limited tax obligation bond Negotiated 2,705,000 San Marcos CFD No 88-1 8/19/98 Limited tax obligation bond Negotiated 14,320,000 San Marcos Public Facilities 9/15/04 Revenue bond (Pool)Negotiated 3,690,000 Authority San Marcos Public Facilities 9/15/04 Revenue bond (Pool)Negotiated 33,805,000 Authority San Marcos Public Facilities 5/8/03 Tax allocation bond Negotiated 21,360,000 Authority San Marcos Public Facilities 5/8/03 Tax allocation bond Negotiated 69,740,000 Authority San Marcos Public Facilities 12/2/99 Financing lease Competitive 8,350,000 Authority (COP or lease revenue) San Marcos Public Facilities 8/19/98 Revenue bond (Pool)Negotiated 33,560,000 Authority Santa Margarita Water District 3/11/04 General obligation bond Negotiated 1,920,000 Santa Margarita Water District 3/11/04 General obligation bond Negotiated 36,740,000 Santa Margarita Water District 3/11/04 General obligation bond Negotiated 7,755,000 Santa Margarita Water District 3/11/04 General obligation bond Negotiated 16,355,000 Santa Margarita Water District CFD 4/23/03 Limited tax obligation bond Negotiated 33,145,000 No 99-1 Santee Redevelopment Agency 8/24/88 Tax allocation bond Competitive 6,775,000 South Gate Public Financing 11/30/89 Tax allocation bond Negotiated 26,665,000 Authority South Gate Public Financing 11/17/89 Public enterprise revenue bond Negotiated 14,700,000 Authority Southwest Communities Financing 11/19/08 Financing lease Negotiated 15,105,000 Authority (COP or lease revenue) ©Magis Advisors 2012.All rights reserved October 8,2012 00120540.000<Exhibit 4,Page 6 2-80 Financial Advisory Proposal to: CITY OF RANCHO PALOS VERDES PRINCIPAL ISSUER SALE DATE DEBT TYPE SALE TYPE A MOUNT Sparks (NV)7/2/08 Special assessment bond Negotiated 26,120,000 Sparks (NV)6/18/08 Sales tax revenue bond Negotiated 83,290,000 State of California 10/25/07 Short-term borrowing «13 mos)Negotiated 7,000,000,000 State of California 6/18/02 Short-term borrowing «13 mos)Competitive 7,500,000,000 Three Rivers levee Improvement 4/18/07 limited tax obligation bond Negotiated 14,930,382 Authority CFD No 2006-1 Three Rivers levee Improvement 4/18/07 limited tax obligation bond Negotiated 8,663,901 Authority CFD No 2006-2 Three Valleys Municipal Water 10/1/03 Financing lease Negotiated 16,125,000 District (COP or lease revenue) Vista 12/13/07 Financing lease ,Negotiated 116,480,000 (COP or lease revenue) Vista 3/31/99 Conduit revenue bond Negotiated 6,365,000 Vista Community Development 6/17/11 Tax allocation bond Negotiated 15,520,000 Commission Vista Community Development 3/2/10 Tax allocation bond Negotiated 11,410,000 Commission Vista Community Development 3/2/10 Tax allocation bond Negotiated 24,215,000 Commission Vista Community Development 6/7/05 Tax allocation bond Competitive 2,490,000 Commission Vista Community Development 6/7/05 Tax allocation bond Competitive 26,910,000 Commission Vista Community Development 6/13/01 Tax allocation bond Competitive 12,150,000 Commission Vista Community Development 6/26/98 Tax allocation bond Negotiated 14,580,000 Commission Vista Community Development 9/20/95 Tax allocation bond Negotiated 32,550,000 Commission Vista Community Development 7/12/95 Tax allocation bond Negotiated 2,980,000 Commission Vista Joint Powers Financing 12/17/97 Financing lease Negotiated 3,900,000 Authority (COP or lease revenue) Vista Joint Powers Financing 12/17/97 Financing lease Negotiated 1,745,000 Authority (COP or lease revenue) Vista Joint Powers Financing 5/22/97 Financing lease Negotiated 21,130,000 Authority (COP or lease revenue) Washoe County Airport Authority 4/25/96 Public enterprise revenue bond Negotiated 36,095,000 (NV) Washoe County Airport Authority 3/22/93 Public enterprise revenue bond Negotiated 112,020,000 (NV) Washoe County Airport Authority 1/7/93 Public enterprise revenue bond Negotiated 10,000,000 (NV) ©Magis Advisors 2012.All rights reserved 00120540.DOO< October 8,2012 Exhibit 4,Page 7 2-81 Financial Advisory Proposal to: CITY OF RANCHO PALOS VERDES .~ ..... PRINCIPAL ISSUER SALE DATE DEBT TYPE SALE TYPE A MOUNT Washoe County Airport Authority (NV) Yuba County CFD No 2004-1 Yucaipa Public Financing Authority ©Magis Advisors 2012,All rights reserved 00120540.000< 8/20/92 Public enterprise revenue bond 10/6/05 Limited tax obligation bond 4/12/95 Public enterprise revenue bond Negotiated 35,195,000 Negotiated 13,895,000 Negotiated 12,335,000 Total:$30,305,251,604 October 8,2012 Exhibit 4,Page 8 2-82 Financial Advisory Proposal to: CITY OF RANCHO PALOS VERDES EXHIBIT 5:DISCLOSURE STATEMENT ON FEES The recent enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act establishes, for the first time,a "fiduciary duty"on financial advisors.The Municipal Securities Rulemaking Board has been delegated the responsibility to establish certain rules applicable to municipal advisors.In addition to other matters,these rules are deligned to identify business practices that might result in conflicts ofinterest in the municipal advisor/client relationship.Recently,the MS.RB proposed rules that would requires us,as your municipal advisor,to provide written disclosure to you about actual or potential conflicts of interest presented by various forms of compensation.Though the proposed rules are not yet effective,we have elected to provide this disclosure even if you have already chosen a particular form of compensation.You are .encouraged to select a form of compensation that best meets your needs and the agreed upon scop.e of services after a careful revi.ew of the follOWing informa·tion. FORMS OF COMPENSATION &POTENTIAL CONFUCTS The forms of compensation for municipal advisors vary according to the nature of the engagement and requirements of the client,among other factors.Various forms of compensation may present actual or potential conflicts of interest because they may create an incentive for the advisor to recommend one course of action over another if it is more beneficial to the advisor to do so.This document discusses various forms of compensation,the potential conflicts that may be embedded in such compensation, and the timing of payments to the advisor. FIXED FEE,NON-CONTINGENT Under a fixed fee form of compensation,the municipal advisor is paid a fixed amount established at the outset of the transaction.The amount is usually based upon an analysis by the client and the advisor of, among other things,the expected duration and compleXity of the transaction and the agreed-upon scope of work that the advisor will perform.This form of compensation presents a potential conflict of interest because,if the transaction requires more work than originally contemplated,the advisor may suffer a loss.Thus,the advisor may recommend less time-consuming alternatives,or fail to do a thorough analysis of alternatives.There may be additional conflicts of interest if the municipal advisors fee is contingent upo.n the successful completion of a financing,as described below. HOURLY FEE Under an hourly fee form of compensation,the municipal advisor is paid an amount equal to the number of hours worked by the advisor at an agreed-upon ho.urly billing rate.This form of compensation presents a potential conflict of interest if the client and the advisor do not agree on a reasonable maximum amount at the outset of the engagement,because the advisor does not have a financial incentive to recommend alternatives that would result in fewer hours worked.In some cases, an hourly fee may be applied against a retainer (e.g.,a retainer payable monthly),in which case it is payable whether or not a financing closes.Alternatively,it may be contingent upon the successful completion of a financing,in which case there may be additional conflicts of interest,as described below. e Magis Advisors 2012.All rights reserved 00120540.DOCX October 8,2012 Exhibit 5,Page 12-83 Financial Advisory Proposal to: CITY OF RANCHO PALOS VERDES r······························, !llu bi.f\rfd,.-nCJ;iileq{l ~! l~I ::canee e i !..._"t !~~")j t :':.i ._....;...l CONTINGENT FIXED FEE Under a contingent fee form of compensation,payment of an advisor's fee is dependent upon the successful completion of a fina.ncing or other transaction.Although this form of compensation may be customary for the client,it presents a conflict because the advisor may have an incentive to recommend unnecessary financings or financings that are disadvantageous to the client.For example,when facts or circumstances arise that could cause the financing or other transaction to be delayed or fail to close,an advisor may have an incentive to discourage a full consideration of such facts and circumstances,or to discourage consideration of alternatives that may result in the cancellation of the financing or other transaction. RETAINER FEE Under a retainer agreement,fees are paid to a municipal advisor periodically ('.g.,monthly)and are not continlent upon the completion of a financing or other transaction.'ees paid under a retainer agreement may be calculated on a fixed fee basis (e.g.,a fixed fee per month regardless of the number of hours worked)or an hourly basis (e.g.,•minimum monthly payment,with additional amounts payable if a certain number of hours worked is exceeded).A retainer agreement does not present the conflicts associated with a contingent fee .rrangement (described above),and is often the most "conflict free"form of compensation. VOLUME-BASED FEE Under this form of compensation,the municipal advisor's fee is based upo.n a percentage of the principal amount of an issue of securities (e.g.,bonds) or,in the case of a derivative,the present v.lue of,or notional amount and term of the derivative.This form of compensation may present a conflict of Interest because the advisor may have an incentive to advise the client to increase the size of the securities issue or modify the derivative for the purpose of increasing the advisor's compensation.4i. Cl Magis Advisors 2012.All rights reserved 00120540.DOCX October 8,2012 Exhibit 5,Page 22-84 Financial Advisory Proposal to: CITY OF RANCHO PALOS VERDES EXHIBIT 6:PROPOSED FORM OF PROFESSIONAL SERVICES AGREEMENT (CITY'S FORM) ©Magis Advisors 2012.All rights reserved 00120540.DOCX October 8,2012 Exhibit 62-85 Professional Services Agreement for Financial Advisory Services between The City of RANCHO PALOS VERDES & Magis Advisors,Inc. 2-86 THIS AGREEMENT ("Agreement")is made and entered into this day of October,2012 by and between the City of Rancho Palos Verdes (hereinafter referred to as the "CITY")and Magis Advisors,Inc.(a California corporation)(hereafter referred to as "CONSULTANT"). IN CONSIDERATION ofthe covenants hereinaftersetforth,the parties hereto agree as follows: ARTICLE 1 SCOPE OF SERVICES 1.1 Project Description The Project is described as follows:Financial analysis and evaluation of funding and/or financing options for the San Ramon Canyon Stabilization Project,to include debt,draw-down of existing reserves and project management of debt offering,if required. 1.2 Description of Services CONSULTANT shall:provide industry standard financial advisory services as described in the CONSULTANT's Proposal,which is attached hereto as Exhibit "A" and incorporated herein by this reference. 1.3 Schedule of Work Upon receipt of written Notice to Proceed from the CITY,CONSULTANT shall perform with due diligence the services requested by the CITY.Time is of the essence in this Agreement.CONSULTANT shall not be responsible for delay,nor shall CONSULTANT be responsible for damages or be in default or deemed to be in default by reason of strikes, lockouts,accidents,or acts of God,or the failure of CITY to furnish timely information or to approve or disapprove CONSULTANT's work promptly,or delay or faulty performance by CITY,other consultants/contractors,or governmental agencies,or any other delays beyond CONSULTANT's control or without CONSULTANT's fault. ARTICLE 2 COMPENSATION 2.1 Fee CITY agrees to compensate CONSULTANT an amount not to exceed Twenty-five thousand and 00/100 dollars ($25,000)for services as described in Article 1. 2.2 Payment Address R6876-0001\1347704v1.doc Page 1 of 10 Agreement for Design Professional Services 2-87 All payments due CONSULTANT shall be paid to: Magis Advisors,Inc. 1301 Dove St.,Suite 380 Newport Beach,CA 92660 Federal tax ID#26-3221500 2.3 Terms of Compensation CONSULTANT shall submit monthly invoices for the work completed in the previous month.CITY agrees to authorize payment for all undisputed invoice amounts within thirty (30)days of receipt of each invoice.CITY agrees to use its best efforts to notify CONSULTANT of any disputed invoice amounts within ten (10)days of the receipt of each invoice.However,CITY's failure to timely notify CONSULTANT of a disputed amount shall not be deemed a waiver of CITY's right to challenge such amount. Additionally,in the event CITY fails to pay any undisputed amounts due CONSULTANT within forty-five (45)days after invoices are received by CITY then CITY agrees that CONSULTANT shall have the right to consider said default a total breach of this Agreement and be terminated by CONSULTANT without liability to CONSULTANT upon ten (10)working days advance written notice. 2.4 Additional Services CITY may request additional specified work under this Agreement.All such work must be authorized in writing by the CITY's Director of Finance and Information Technology prior to commencement.CONSULTANT shall perform such services,and CITY shall pay for such additional services in accordance with CONSULTANT's Schedule of Hourly Rates,which is within Exhibit "A."The rates in Exhibit "A"shall be in effect through the end of this Agreement. 2.5 Term of Agreement This Agreement shall commence on November 1,2012,and shall terminate on April 30,2013 unless sooner terminated pursuant to Article 4 of this Agreement. Additionally,there shall be one (1)six-month option to renew the Agreement with the mutual written consent of both parties. ARTICLE 3 INDEMNIFICATION AND INSURANCE 3.1 Indemnification,Hold Harmless,and Duty to Defend. (a)Indemnity for Professional Services.In connection with its professional services,CONSULTANT shall hold harmless and indemnify CITY,and its officials,officers,employees,agents and independent contractors serving in the role of R6876-0001 \1347704v1.doc Page 2 of 10 Agreement for Design Professional Services 2-88 CITY officials,and d~signated volunteers (collectively,"Indemnitees"),with respect to any and all claims,demands,causes of action,damages,injuries,liabilities,losses,costs or expenses,including reimbursement of attorneys'fees and costs of defense (collectively, "Claims"hereinafter),including but not limited to Claims relating to death or injury to any person and injury to any property,which arise out of,pertain to,or relate to in whole or in part to the negligence,recklessness,or willful misconduct of CONSULTANT or any of its officers,employees,subcontractors,or agents in the performance of its professional services under this Agreement. (b)Other Indemnities.In connection with any and all claims,demands, causes of action,damages,injuries,liabilities,losses,costs or expenses,including attorneys'fees and costs of defense (collectively,"Damages"hereinafter)not covered by Section 3.1 (a),CONSULTANT shall defend,hold harmless and indemnify the Indemnitees with respect to any and all Damages,including but not limited to,Damages relating to death or injury to any person and injury to any property,which arise out of,pertain to,or relate to the acts or omissions of CONSULTANT or any of,.its officers,employees, subcontractors,or agents in the performance of this Agreement,except for such loss or damage arising from the sole negligence or willful misconduct of the CITY,as determined by final arbitration or court decision or by the agreement of the parties.CONSULTANT shall defend Indemnitees in any action or actions filed in connection with any such Damages with counsel of CITY's choice,and shall pay all costs and expenses,including all attorneys'fees and experts'costs actually incurred in connection with such defense. Consultant's duty to defend pursuant to this Section 3.1 (b)shall apply independent of any prior,concurrent or subsequent misconduct,negligent acts,errors or omissions of Indemnitees. (c)All duties of CONSULTANT under Section 3.1 shall survive termination of this Agreement. 3.2 General Liability CONSULTANT shall at all times during the term of the Agreement carry, maintain,and keep in full force and effect,a policy or policies of Commercial General Liability Insurance,with minimum limits of one million dollars ($1,000,000)for each occurrence and two million dollars ($2,000,000)general aggregate for bodily injury,death, loss or property damage for products or completed operations and any and all other activities undertaken by CONSULTANT in the performance of this Agreement.Said policy .or policies shall be issued by an insurer admitted to do business in the State of California and rated in A.M.Best's Insurance Guide with a rating of A:VII or better. 3.3 Professional Liability CONSULTANT shall at all times during the term of this Agreement,carry, maintain,and keep in full force and effect a policy or policies of professional liability insurance with a minimum limit of one million dollars ($1,000,000)per claim and aggregate for errors and/or omissions of CONSULTANT in the performance ofthis Agreement.Said Page 3 of 10 R6876-0001\1347704v1.doc Agreement for Design Professional Services 2-89 policy or policies shall be issued by an insurer rated in Best's Insurance Guide with a rating of AVII or better.If a "claims made"policy is provided,such policy shall be maintained in effect from the date of performance of work or services on the CITY's behalf until three (3) years after the date of work or services are accepted as completed.Coverage for the post- completion period may be provided by renewal or replacement of the policy for each of the three (3)years or by a three-year extended reporting period endorsement,which reinstates all limits for the extended reporting period.If any such policy and/or policies have a retroactive date,that date shall be no later than the date of first performance of work or services on behalf of the CITY.Renewal or replacement policies shall not allow for any advancement of such retroactive date. 3.4 Automobile Liability CONSULTANT shall at all times during the term of this Agreement obtain, maintain,'and keep in full force and effect,a policy or policies of Automobile Liability Insurance,with minimum of one million dollars ($1,000,000)per.claim and occurrence and two million dollars ($2,000,000)in the aggregate for bodily injuries or death of one person and five hundred thousand dollars ($500,000)for property damage arising from one incident. 3.5 Worker's Compensation CONSULTANT agrees to maintain in force at all times during the performance of work under this Agreement worker's compensation insurance as required by the law.CONSULTANT shall require any subcontractor similarly to provide such compensation insurance for their respective employees. 3.6 Notice of Cancellation (a)All insurance policies shall provide that the insurance coverage shall not be cancelled by the insurance carrier without thirty (30)days prior written notice to CITY,or ten (10)days notice if cancellation is due to nonpayment of premium. CONSULTANT agrees that it will not cancel or reduce said insurance coverage. (b)CONSULTANT agrees that if it does not keep the aforesaid insurance in full force and effect,CITY may either immediately terminate this Agreement or,if insurance is available at a reasonable cost,CITY may take out the necessary insurance "and pay,at CONSULTANT's expense,the premium thereon. 3.7 Certificate of Insurance At all times during the term of this Agreement,CONSULTANT shall maintain on file with the CITY Clerk a certificate of insurance showing that the aforesaid policies are in effect in the required amounts.The commercial general liability policy shall contain endorsements naming the CITY,its officers,agents and employees as additional insureds. R6876-0001\1347704v1.doc Page 4 of 10 Agreement for Design Professional Services 2-90 3.8 Primary Coverage The insurance provided by CONSULTANT shall be primary to any coverage available to CITY.The insurance policies (other than workers compensation and professional liability)shall include provisions for waiver of subrogation. ARTICLE 4 TERMINATION 4.1 Termination of Agreement (a)This Agreement may be terminated at anytime,with or without cause, by the CITY or by CONSULTANT upon thirty (30)days prior written notice.Notice shall be deemed served if completed in compliance with Section 6.14. (b)In the event of termination or cancellation of this Agreement by CONSULTANT or CITY,due to no fault or failure of performance by CONSULTANT, CONSULTANT shall be paid compensation for all services performed by CONSULTANT, in an amount to be determined as follows:for work satisfactorily done in accordance with all of the terms and provisions of this Agreement,CONSULTANT shall be paid an amount equal to the percentage of services performed prior to the effective date of termination or cancellation in accordance with the work items;provided,in no event shall the amount of money paid under the foregoing provisions of this paragraph exceed the amount which would have been paid to CONSULTANT for the full performance of the services described in this Agreement. ARTICLE 5 OWNERSHIP OF DOCUMENTS 5.1 Ownership of Final Documents and Work Product All final documents,plans,specifications,reports,information,data,exhibits, photographs,images,video files and media created or developed by CONSULTANT pursuant to this Agreement ("Written Products")shall be and remain the property of the CITY without restriction or limitation upon its use,duplication or dissemination by the CITY. All Written Products shall be considered "works made for hire,"and all Written Products and any and all intellectual property rights arising from their creation,including,but not 'limited to,all copyrights and other proprietary rights,shall be and remain the property of the CITY without restriction or limitation upon their use,duplication or dissemination by the CITY.CONSULTANT shall not obtain or attempt to obtain copyright protection as to any Written Products. CONSULTANT hereby assigns to the CITY all ownership and any and all intellectual property rights to the Written Products that are not otherwise vested in the CITY pursuant to the paragraph directly above this one. R6876-0001\1347704v1.doc Page 5 of 10 Agreement for Design Professional Services 2-91 CONSULTANT warrants and represents that it has secured all necessary licenses,consents or approvals to use any instrumentality,thing or component as to which any intellectual property right exists,including computer software,used in the rendering of the services and the production of all Written Products produced under this Agreement, and that the CITY has full legal title to and the right to reproduce the Written Products. CONSULTANT shall defend,indemnify and hold the CITY,and its elected officials,officers, employees,servants,attorneys,designated volunteers,and agents serving as independent contractors in the role of CITY officials,harmless from any loss,claim or liability in any way related to a claim that CITY's use of any of the Written Products is violating federal,state or local laws,or any contractual provisions,or any laws relating to trade names,licenses, franchises,copyrights,patents or other means of protecting intellectual property rights and/or interests in products or inventions.CONSULTANT shall bear all costs arising from the use of patented,copyrighted,trade secret or trademarked documents,materials, equipment,devices or processes in connection with its provision of the services and Written Products produced under this Agreement.In the event the use of any of the Written Products or other deliverables hereunder by the CIT¥is held to constitute an infringement and the use of any of the same is enjoined,CONSULTANT,at its expense, shall:(a)secure for CITY the right to continue using the Written Products and other deliverables by suspension of any injunction,or by procuring a license or licenses for CITY; or (b)modify the Written Products and other deliverablesso that they become non- infringing while remaining in compliance with the requirements of this Agreement.This covenant shall survive the termination of this Agreement. Upon termination,abandonment or suspension of the Project,the CONSULTANT shall deliver to the CITY all Written Products and other deliverables related to the Project without additional cost or expense to the CITY.If CONSULTANT prepares a document on a computer,CONSULTANT shall provide CITY with said document both in a printed format and in an electronic format that is acceptable to the CITY. ARTICLE 6 GENERAL PROVISIONS 6.1 Representation The CITY representative shall be the Director of Finance and Information Technology or his or her designee,and CONSULTANT designated representative shall be the CONSULTANTS Principal Owner and President.These individuals shall be the .primary contact persons for the parties regarding performance of this Agreement. 6.2 Fair Employment Practices/Equal Opportunity Acts In the performance of this Agreement,CONSULTANT shall comply with all applicable provisions of the California Fair Employment Practices Act (California Government Code Sections 12940-48),the applicable equal employment provisions of the Civil Rights Act of 1964 (42 U.S.C.200e-217),and the Americans with Disabilities Act of 1992 (42 U.S.C.§11200,et seq.). R6876-0001\1347704v1.doc Page 6 of 10 Agreement for Design Professional Services 2-92 6.3 Personnel CONSULTANT represents that it has,or shall secure at its own expense,all personnel required to perform CONSULTANT's services under this Agreement.Any person who performs services pursuant to this Agreement shall be licensed as required under applicable federal and state law,and shall maintain such licenses in good standing for the duration of this Agreement.CONSULTANT shall make reasonable efforts to maintain the continuity of CONSULTANT's staff who are assigned to perform the services hereunder and shall obtain the approval of the Director of Finance and Information Technology'of all proposed staff members who will perform such services. CONSULTANT may associate with or employ associates or subconsultants in the performance of its services under this Agreement,but at all times shall CONSULTANT be responsible for its associates or subconsultants'services. 6.4 CONSULTANT's Representations CONSULTANT represents,covenants and agrees that:a)CONSULTANT is licensed,qualified,and capable of furnishing the labor,materials,and expertise necessary to perform the services in accordance with the terms and·conditions set forth in this Agreement;b)there are no obligations,commitments,or impediments of any kind that will limit or prevent CONSULTANT's full performance under this Agreement;c)to the extent required by the standard of practice,CONSULTANT has investigated and considered the scope of services performed,has carefully considered how the services should be performed,and understands the facilities,difficulties and restrictions attending performance of the services under this Agreement. 6.5 Conflicts of Interest CONSULTANT agrees not to accept any employment or representation during the term of this Agreement or within twelve (12)months after completion of the work under this Agreement which is or may likely make CONSULTANT "financially interested" (as provided in California Government Code Sections 1090 and 87100)in any decisions made by CITY on any matter in connection with which CONSULTANT has been retained pursuant to this Agreement. 6.6 Legal Action (a)Should either party to this Agreement bring legal action against the other,the validity,interpretation,and performance ofthis Agreement shall be controlled by and construed under the laws of the State of California,excluding California's choice of law rules.Venue for any such action relating to this Agreement shall be in the Los Angeles County Superior Court. (b)If any legal action or other proceeding,including action for declaratory relief,is brought for the enforcement of this Agreement or because of an alleged dispute, Page 7 of 10 R6876-0001\1347704v1.doc Agreement for Design Professional Services 2-93 breach,default or misrepresentation in connection with this Agreement,the prevailing party shall be entitled to recover reasonable attorneys'fees,experts'fees,and other costs,in addition to any other relief to which the party may be entitled. (c)Should any legal action about a project between CITY and a party other than CONSULTANT require the testimony of CONSULTANT when there is no allegation that CONSULTANT was negligent,CITY shall compensate CONSULTANT for its testimony and preparation to testify at the hourly rates in effect at the time of such testimony. 6.7 Assignment Except for compensation earned and invoiced by CONSULTANT,neither this Agreement nor any part thereof shall be assigned by CONSULTANT without the prior written consent of the CITY.Any such purported assignment without written consent shall be null and void,and CONSULTANT shall hold harmless,defend and indemnify the CITY and its officers,officials,employees,agents and representatives with respect to any claim, demand or action arising from any unauthorized assignment. Notwithstanding the above,CONSULTANT may use the services of persons and entities not in CONSULTANT's direct employ,when it is appropriate and customary to do so.Such persons and entities include,but are not necessarily limited to,specialized consultants.CONSULTANT's use of subconsultants for additional services shall not be unreasonably restricted by the CITY provided CONSULTANT notifies the CITY in advance. 6.8 Independent Contractor CONSULTANT is and shall at all times remain,as to the CITY,a wholly independent contractor.Neither the CITY nor any of its agents shall have control over the conduct of CONSULTANT or any of the CONSULTANT's employees, except as herein set forth,and CONSULTANT is free to dispose of all portions of its time and activities which it is not obligated to devote to the CITY in such a manner and to such persons,firms,or corporations as the CONSULTANT wishes except as expressly provided in this Agreement. CONSULTANT shall have no power to incur any debt,obligation,or liability on behalf of the CITY or otherwise act on behalf of the CITY as an agent.CONSULTANT shall not,at any time or in any manner,represent that it or any of its agents,servants or employees,are in any manner agents,servants or employees of CITY.CONSULTANT agrees to pay all 'required taxes on amounts paid to CONSULTANT under this Agreement,and to indemnify and hold the CITY harmless from any and all taxes,assessments,penalties,and interest asserted against the CITY by reason of the independent contractor relationship created by this Agreement.CONSULTANT shall fully comply with the workers'compensation law regarding CONSULTANT and its employees.CONSULTANT further agrees to indemnify and hold the CITY harmless from any failure of CONSULTANT to comply with applicable workers'compensation laws.The CITY shall have the right to offset against the amount of any fees due to CONSULTANT under this Agreement any amount due to the CITY from CONSULTANT as a result of its failure to promptly pay to the CITY any reimbursement or Page 8 of 10 R6876-0001\1347704v1.doc Agreement for Design Professional Services 2-94 indemnification arising under this Article. 6.9 Titles The titles used in this Agreement are for general reference only and are not part of the Agreement. 6.10 Entire Agreement This Agreement,including any other documents incorporated herein by specific reference,represents the entire and integrated agreement between CITY and CONSULTANT and supersedes all prior negotiations,representations or agreements, either written or oral.This Agreement may be modified or amended,or provisions or breach may be waived,only by subsequent written agreement signed by both parties. 6.11 Construction In the event of any asserted ambiguity in,or dispute regarding the interpretation of any matter herein,the interpretation of this Agreement shall not be resolved by any rules of interpretation providing for interpretation against the party who causes the uncertainty to exist or against the party who drafted the Agreement or who drafted that portion of the Agreement. 6.12 Non-Waiver of Terms,Rights and Remedies Waiver by either party of anyone or more of the conditions of performance under this Agreement shall not be a waiver of any other condition of performance under this Agreement.In no event shall the making by the CITY of any payment to CONSULTANT constitute or be construed as a waiver by the CITY of any breach of covenant,or any default which may then exist on the part of CONSULTANT,and the making of any such payment by the CITY shall in no way impair or prejudice any right or remedy available to the CITY with regard to such breach or default. 6.13 Severability If any term or portion of this Agreement is held to be invalid,illegal,or otherwise unenforceable by a court of competent jurisdiction,the remaining provisions of .this Agreement shall continue in full force and effect. 6.14 Notice Except as otherwise required by law,any notice or other communication authorized or required by this Agreement shall be in writing and shall be deemed received on (a)the day of delivery if delivered by hand or overnight courier service during CONSULTANT's or CITY's regular business hours or (b)on the third business day R6876-0001\1347704v1.doc Page 9 of 10 Agreement for Design Professional Services 2-95 following deposit in the United States mail,postage prepaid,to the addresses listed below, or at such other address as one party may notify the other: To CITY: Responsible Person:Kathryn Downs,Assistant Director,Finance & Information Technology City of Rancho Palos Verdes 30940 Hawthorne Blvd. Rancho Palos Verdes,CA 90275 To CONSULTANT: Responsible Person:Timothy J.Schaefer,Principal Owner Magis Advisors,Inc. 1301 Dove St.,Suite 380 Newport Beach,CA 92660 Telephone:(949)428-8363 [Signatures on next page.] R6876-0001 \1347704v1.doc Page 10 of 10 Agreement for Design Professional Services 2-96 IN WITNESS WHEREOF,the parties hereto have executed this Agreement as of the date and year first above written. Dated:_ Dated:_ ATTEST: By:_ City Clerk MAGIS ADVISORS,INC. ("CONSULTANT") By:_ Printed Name:Timothy J.Schaefer Title:President/Principal Owner By:_ Printed Name:Kathryn W.Schaefer Title:Corporate Secretary CITY OF RANCHO PALOS VERDES ("CITY") By:_~--------- Mayor APPROVED AS TO FORM: By:_~--------- City Attorney 2-97 Exhibit "A": Consultant's Proposal 2-98 Attachment C Financial Advisory Proposal to: CITY OF RANCHO PALOS VERDES ADDENDUM TO FINANCIAL ADVISORY SERVICE PROPOSAL DATED 10/8/12. (PLEASE INSERT BETWEEN PAGES 12 AND 13) Option 3:Annual Retainer We will furnish all requested services for an annual retainer fee of $40,000,paya.ble monthly,assuming the City makes at least a one-year commitment to our services.Reimbursable expenses are not included in that sum.This cost proposal assumes that the City and we will establish a monthly "budget" of 20 hours of time available to the City.We will charge our time to this budget,and unused time may be rolled over into subsequent months until the end of the fiscal or calendar year.Any time required beyond the budget allowance,after applying unused time "carried forward,"will be charged at our normal hourly rates shown in Table 1,appearing in Option 2.Please note also that annual retainer fee is not exclusive to any project,but may be applied to any services that thlil City may request,including work already in progress,or the San Ramon Canyon project,as examples. Financing transactions.if anv.are included in the annual retainer amount.It is our experience that a typical financing transaction will require about 180-200 hours of work effort on our part.Accordingly, if a financing transaction is all that the City requires,the annual retainer fee will likely cover the greater part of the cost (or perhaps all)of the transaction.This is usually the most economical way to handle assignments such as the City's,as there are no "transactional"charges beyond the annual retainer fee. The primary benefit of this approach is that it represents approximately a 40%discount to our normal hourly rates,assuming the work effort presented in the Work Plan in Exhibit 2. All other conditions and terms described in the 10/8/12 Financial Advisory Service proposal apply to this option as well,including "REIMBURSEMENT OF COSTS &EXPENSES,"and "THE MAGIS CLIENT SATISFACTION GUARANTEE."The section "BILLING &PAYMENT TERMS"is hereby amended to read as follows: Billing &Payment Terms Regardless of the billing arrangement agreed upon,it is our policy to deliver an itemized invoice showing all of our chargeable time against the matters we have been engaged to perform.The invoice shows a detailed description of the services provided,the date on which they were delivered,and the names and hourly rates of the individuals who performed such services.Billing for the fixed monthly retainer fee arrangement or the annual retainer arrangement would occur on last day of the month.Billing for an hourly charges arrangement,if any,also occurs monthly,again on the last day of the month. Unless otherwise agreed upon,we expect payment within thirty days of the invoice date. We offer a 2%discount for payments received within ten days of the invoice date. ©Magis Advisors 2012.All rights reserved 00120540.DOCX October 8,2012 Page 13 2-99 CITY OF MEMORANDUM 4o RANCHO PALOS VERDES TO: FROM: DATE: SUBJECT: REVIEWED: HONORABLE MAYOR &CITY COUNCIL MEMBERS DENNIS McLEAN,DIRECTOR OF FINANCE &~ INFORMATION TECHNOLOGY APRIL 30,2013 INFRASTRUCTURE MANAGEMENT PLAN CAROLYN LEHR,CITY MANAGER ~ Project Manager:Kathryn Downs,Deputy Director of Finance &Information to Technology RECOMMENDATION Receive and file this report prepared by the City's infrastructure management plan team. BACKGROUND Based upon the recommendation of Tim Schaefer of Magis Advisors,the City's Financial Advisor,the City Council adopted a reimbursement resolution On August 21,2012 which allows the City to reimburse its Reserves in the event the City Council decides to issue debt for the San Ramon Project after construction begins.Subsequently,on December 18, 2012,the City Council approved an agreement with Magis Advisors,to prepare the financing plan for the San Ramon Canyon Stabilization Project. The City's Financial Advisor has encouraged an overall review of infrastructure replacement in conjunction with the City's ability to fund replacement in the future.This overall review includes development of an Infrastructure Management Plan (referred to as the "IMP"until an appropriate name is established)that would provide a long-term road map for the systematic rehabilitation of the City's infrastructure.The initiation of the IMP would begin with the preparation of an infrastructure condition assessment (an Infrastructure "Report Card")by a consultant.The report card will provide a basis for the development of a long-term infrastructure capital maintenance and replacement/rehabilitation plan and funding plan.In contrast,the Five-Year Capital Improvement Plan is a mid-term view of quantified projects and funding sources. The City's Financial Advisor and members of staff in both the Public Works and Finance & IT departments have participated in the kick-off the development of the IMP and this Staff Report.The development of the IMP,a long-term,strategic approach is consistent with a 2-100 INFRASTRUCTURE MANAGEMENT PLAN April 30,2013 Page 2 of 4 "Best Practice"promulgated by the Government Finance Officers Association.In a particular Best Practice most recently revised in 2010,the GFOA recommends,in relevant part: "...that local,state and provincial government establishes a system for assessing their assets and then appropriately plans and budget for any capital maintenance and replacement needs.This includes ...developing a policy to require a complete inventory and periodic measurement of the physical condition of all existing capital assets.The assessment should document the established methods of condition assessment,including any that are used to evaluate below-ground infrastructure." With limited financial resources and other demands,a decision regarding the financing of the San Ramon Project should be made in conjunction with the development of the IMP. The 2012-.13 Work Plan for the Finance Advisory Committee (FAC)includes the task to: "Review the Financing Plan for the San Ramon Canyon Stabilization Project".At its meeting on March 6,2013,the FAC prepared a recommendation that a decision about debt financing the San Ramon Project be postponed until after an IMP is underway. Funding the Rehabilitation of City Infrastructure Any community's capital financing process involves numerous major decisions and making long-term commitments.Such a process is integral to the development of the Capital Improvement Plan,which the City performs annually.However,the CIP does not address long-term strategy-it simply funds those projects that have been identified by other means,leaving the remainder of the infrastructure at risk of having insufficient resources for its replacement.Without a capital financing strategy,some communities may seek to avoid debt altogether in order to avoid associated interest costs.To do so may place the community at risk of having insufficient funds to replace major assets when needed. Thereafter,the use of debt may become the only choice for funding such replacement. Other communities may overly rely on debt to meet their capital needs and by doing so may underestimate the impact of such reliance on the community's future financial resources. An effective capital financing strategy promotes financial strength and flexibility;and,it controls the cost of replacing or acquiring capital assets over time.The development of an effective capital financing strategy starts with a thorough assessment of the physical condition of the community's existing assets and makes realistic projections of the probable replacement costs of those assets.Once those steps are completed,then the problem is "solved"to the best combination of debt and cash funding that is consistent with the community's needs and its available financial resources. The City has recorded $127.8 million of capital assets on its books ($202.4 million of assets,less $74.5 million of depreciation as of June 30,2012).This includes $43.2 million of land and construction in progress,which is not depreciated.Other than land,capital assets fall into 2 categories:equipment and infrastructure.The City provides for replacement of its equipment by maintaining a $1.8 million Equipment Replacement Fund, roughly equivalent to the estimated costs to replace the equipment that has been capitalized (individual items with costs of $5,000 or more). 2-101 INFRASTRUCTURE MANAGEMENT PLAN April 30,2013 Page 3 of 4 The GFOA Best Practice also recommends: "Each government should establish an on-going source of funds in both the capital plan and budget for the repair and renewal needs of its assets consistent with this best practice." There is no such replacement fund for the City's infrastructure.On the City's books, infrastructure is carried at its historical cost of $157.5 million,less $73.2 million of depreciation.About one-quarter of the infrastructure cost was estimated at 1973 value, when the City was incorporated and assets were transferred from the county.Most of the infrastructure has estimated useful life ranging from 30 to 50 years.We can roughly estimate the hypothetical replacement cost of this infrastructure with a simple calculation. If the increase of the Consumer Price Index (CPI)is applied to the historical cost of the assets (average of 3.35%since 1973),then today's estimated replacement cost is about $331 million.If this estimated replacement cost in nominal dollars is evenly distributed over a 50 year period,the rate of infrastructure rehabilitation spending would be about $6.6 million per year (or about 180%of the City's annual transit occupancy tax revenue).The actual replacement cost of the City's infrastructure assets may be greater than this hypothetical estimate.In addition,this hypothetical estimate does not provide for any enhancements of infrastructure,only the rehabilitation of existing infrastructure. Development of the IMP To develop a comprehensive strategy for consideration while making a "debt vs.cash" decision on the San Ramon project,the City may wish to consider the following five elements: 1.Inventory and evaluate the current physical condition of the major components of the City's infrastructure. 2.Estimate the useful life,remaining useful life,and replacement costs ofthose major components. 3.Select and quantify infrastructure components that will ultimately require funding. 4.Project or forecast the current and future funding of the City's reserves to pay for the future repair or replacement requirements of the major components. 5.Establish a funding plan designed to achieve the desired funding levels to offset the anticipated expenditures using accumulated cash,debt or a combination thereof. The first element will be accomplished with the development of the IMP.The second and third are activities which will be analyzed by the Public Works Department as the IMP is refined through the master planning process.The fourth is a combined effort of the Public Works Department and Finance,as priorities,resources and budgetary constraints permit. The fifth element would be a result of deliberation by the City Council,perhaps as a companion to the discussion and adoption of the City's Capital Improvement Plan at each year's budget adoption. The decision to issue debt or draw down reserves for paying the City's share of San Ramon Project costs would be based on better data once the above process is underway. Such a decision need not await completion of the IMP,but would benefit from a more 2-102 INFRASTRUCTURE MANAGEMENT PLAN April 30,2013 Page 4 of 4 concrete understanding of the IMP process and evaluation.Staff expects that the City's Financial Advisor will make a preliminary presentation based upon the initial findings resulting from the IMP in late 2013. Timeline for Development of the IMP and San Ramon Project Financing Decision IRS regulation 1.150-2 is the guidance referred to in the reimbursement resolution adopted by City Council on August 21,2012.In order to reimburse itself for the costs of the San Ramon project with proceedS of debt,the City must sell the bonds within 18 months of the date that the City pays the first construction invoice.Since construction began in April,it seems likely that the first invoice will be paid sometime in May.If that first payment occurs in May 2013,then the bonds would have to be sold by November 2014. Staff expects to recommend a professional services agreement to the City Council on May 21,2013 to retain a consulting firm to develop the Infrastructure Report Card.Staff expects that the initial draft of the IMP could be completed before the end of 2013. Although Staff expects that completion of the IMP would require about two years,we also expect that the City Council could be provided sufficient information to make a decision to issue debt or draw down reserves for paying the City's share of San Ramon Project costs in early 2014.St~ff expects that six to nine months should be sufficient time to issue debt within the rules of IRS regulation 1.150-2,if the City elects to do so. Attachments: GFOA Capital Asset Assessment,Maintenance and Replacement Policy (2007 and 2010) 2-103 BEST PRACTICE Capital Asset Assessment,Maintenance and Replacement Policy (2007 and 2010)(CEDCP) Background.Capital assets include major government facilities,infrastructure,equipment and networks that enable the delivery of public sector services.The performance and continued use of these capital assets is essential to the health,safety,economic development and quality oflife ofthose receiving services. Budgetary pressures often impede capital program expenditures or investments for maintenance and replacement, making it increasingly difficult to sustain the asset in a condition necessary to provide expected service levels. Ultimately,d.eferring essential maintenance or asset replacement could reduce the organization's ability to provide services and could threaten public health,safety and overall quality of life.In addition,as the physical condition of the asset declines,deferring maintenance and/or replacement could increase long-term costs and liabilities. Government entities should therefore establish capital planning,budgeting and reporting practices to encourage adequate capital spending levels.A government's financial and capital improvement plans should address the continuing investment necessary to properly maintain its capital assets.Such practices should include proactive steps to promote adequate investment in capital maintenance and replacement and necessary levels. Recommendation.The Government Finance Officers Association (GFOA)recornmends that local,state and provincial governments establish a system for assessing their assets and then appropriately plan and budget for any capital maintenance and replacement needs.This includes: 1.Developing a policy to require a complete inventory and periodic measurement of the physical condition of all existing capital assets.The assessment should document the established methods of condition assessment,including any that are used to evaluate below-ground infrastructure.This physical condition inventory and measures used should be kept current,with facility condition ratings updated every one to three years.l This inventory should contain essential information,including: a.Engineering description b.Location c.Physical dimensions and condition d."As-built"documents e.Warranties £Maintenance history g.Replacement costs h.Operating cost information i.Usage statistics j.Book value k.Original Useful Life 1.Remaining Useful Life 2.Establishing condition/functional performance standards to be maintained for each type of capital assets. The condition measures and related standards should be understandable and reliable.Such standards may be dictated by mandated safety requirements,federal,state,or provincial funding requirements,or 1 The frequency of physical condition rating and asset inventory updates may vary depending on several factors,including the asset age and type,likelihood of degradation,and ease at which assessments can be conducted. 04/22/13 (00124777.pdf)Page 1 of 3 2-104 applicable engineering and other professional standards,2 including available software models.Use these standards and a current condition assessment as a basis for multi-year capital planning and annual budget funding allocations for capital asset maintenance and replacement.Assets near high risk areas such as hospitals may require a higher standard of performance and require a higher frequency of condition assessment. 3.Evaluating existing assets to detetmine if they still provide the most appropriate method to deliver services.Maintenance and replacement plans for assets should then be prioritized in accordance with overall goals and objectives to maintain expected service levels.Consider developing financial policies that identify and dedicate fees or other revenue sources to help achieve this goal.Also consider a procedure of performing a condition assessment prior to replacing a major asset or acquiring a new asset. 4.Allocating sufficient funds in the multi-year capital plan and annual operations budget for condition assessment,preventative maintenance,repair and replacement of capital assets in order to continue the provision of services that contribute to public health,safety,and quality oflife of the public. Each.government should establish an on-going source of funds in both the capital plan and budget for the repair and renewal needs of its assets consistent with this best practice.The Capital Improvement Program (CIP)should also include projections based on the remaining useful life and replacement costs over the next three to ten years regarding the government's intended future investment in these facilities and the estimated impact of these investments toward achieving the minimum or adequate-performance rating for each asset type or class.If the assets are part ofthe function of an enterprise fund,the rates, fees and charges may need to be adjusted to meet the funding requirements. 5.Monitoring and communicating progress toward stated goals and the overall condition of its capital assets with appropriate controls to ensure the validity and accuracy of the information.This process should describe how actual facility condition and performance compares to the targeted standard for each asset type.Governments should also review and report the operating impacts related to capital investments during project implementation and for a specified time period following project implementation. Governments should likewise monitor and report on the delivery of capital projects by establishing standards for planning,designing and constructing capital projects.3 6.At least every one to three years,providing a "plain language"Report on Capital Facilities to elected officials and made available to the general public that describes: a.Condition ratings jurisdiction-wide compared to established policy standards b.Condition ratings by geographical area,asset class,and other relevant factors c.Indirect condition data (e.g.,water main breaks,sewer back-up complaints) d.Replacement life cycle(s)by infrastructure type e.Funding sources for assets,including any restrictions that might be imposed on use and/or disposal f.Year-to-year changes in net value of assets g.Actual expenditures and performance data on capital maintenance compared to budgeted expenditures performance data (e.g.,budgeted street miles,reconstructed compared to actual) 2 These measures include state govemment-established standards,bridge sufficiency ratings,Pavement Quality Index (PQI) or Pavement Condition Index (PCI),Facility Condition Index (FCI),etc.Indirect measures such a water main breaks,sewage overflows,etc.,are also available for certain asset types. 3 Measures to assess the delivery of capital projects may include budget soft versus hard costs,schedule and budget variations,change orders,quality of construction,and architectural/engineering estimates versus actual delivery. 04/22/13 (00124777.pdf)Page 2 of 3 2-105 h.Long-term trends extending over the prior four to six or more years.Year-to-year expenditure figures are less valuable due to general inflation rates and the changing supply and cost of construction contractors and contract bids over time. Other more "global"measures such as replacement cyc1e,4 year-to-year comparisons of work completed (e.g.,miles of sewers,water mains,street lights,etc.,repaired/replaced),book value, etc.,may also be used.5 References. •GFOA Best Practice,Considerations on the Use ofthe (GASB 34 Reporting Model)Modified Approach to Accountfor Infrastructure Assets,2002. •John Vogt,Capital Budgeting and Finance:A Guide for Local Governments,ICMA,2004. •Nicole Westerman,Managing the Capital Planning Cycle:Best Practice Examples ofCapital Program Management,Government Finance Review,2004. •GFOA Best Practice,Capital Project Budget,2006. •GFOA B'est Practice,Establishing the Estimated Useful Lives ofCapital Assets,2007. •GFOA Best Practice,Capital Project Monitoring and Reporting,2007. •GFOA &National Advisory Council on State and Local Budgeting Best Practices in Public Budgeting (Practice #s 2.2,5.2,6.2,11.5) •EPA,The Clean Water and Drinking Water Gap Analysis,2002. • A WWA,Dawn ofthe Replacement Era:Reinvesting in Drinking Water Irifrastructure,2001. Approved by the GFOA's Executive Board,March 5,2010. 4 "Replacement cycle"means the number of years to replace/reconstruct an entire infrastructure network assuming an average annual level of replacement.Example:500 miles of concrete surface streets in network!10 miles average annual miles of streets replaced equals a 50-year replacement cycle.This can be compared to the engineering estimate of the useful life of the average concrete surfaced street. S Other useful measures of level of effort or condition can be found in internal government database,including department annual reports,fixed asset account records,GIS systems,etc. 04/22/13 (00124777.pdf)Page 3 of 3 2-106