{{section.number}}c
CITY OF GLENDALE, CALIFORNIA
REPORT TO THE CITY COUNCIL
AGENDA ITEM
Report: Authorization to enter into a Legal Services Agreements with Norton Rose Fulbright US LLP and Authorization to Enter into a Professional Services Agreement with Public Financial Management Financial Advisors, LLC.
1. Motion authorizing the City Manager, or his designee, to enter into and execute a Legal Services Agreement (LSA) with Norton Rose Fulbright US LLP (Norton) to include funds for the payment of fees for past services in the amount of $11,913 and fees for three future bond issuances in fiscal years 2024, 2025 and 2026 totaling $425,000 for a total contract amount not to exceed the amount of $436,913.
2. Motion authorizing the City Manager, or his designee, to enter into and execute a Professional Services Agreement (PSA) with Public Financial Management Financial Advisors, LLC (PFM) to include funds for the payment of fees for past services in the amount of $25,000 and fees for three future bond issuances in fiscal years 2024, 2025 and 2026 totaling $275,000 for a total contract not-to-exceed amount of $300,000.
3. Resolution of Appropriation
COUNCIL ACTION
Item Type: Action
Approved for January 23, 2024 calendar
EXECUTIVE SUMMARY
Glendale Water and Power (GWP) seeks to establish a Legal Services Agreement (LSA) with Norton, and a Professional Services Agreement (PSA) with PFM to cover bond/disclosure counsel services and financial advisor services, respectively. These services are necessary to assist with the three future bond issuances in fiscal years 2024, 2025, and 2026 for the purpose of primarily funding the Grayson Repower project and, in part, the Scholl Canyon Biogas project and other critical capital projects.
Included in the cost for these respective agreements are additional fees accrued for past counsel and financial analysis dating back to 2016. These efforts were associated with potential bond issuances for versions of the Grayson Repower Project and various clean energy initiatives such as distributed energy resources. It is common practice for Norton and PFM to be paid from the bond proceeds when the bond transactions close.
Since the bond transactions did not go forward, Norton and PFM have outstanding fees owed.
2{{section.number}}d
4 8
7 3
RECOMMENDATION
Authorize the City Manager to execute the Legal Services Agreement with Norton for $436,913 through December 31, 2026, to provide bond counsel and disclosure counsel services, and the Professional Services Agreement with PFM for $300,000 through December 31, 2026, is to provide financial advisor services.
BACKGROUND
GWP’s critical capital improvement projects including the Grayson Repower that cannot be funded through operations, and therefore, proposes to issue debt in the form of electric revenue bonds. In order to issue these bonds, GWP must provide financial information that will be used by rating agencies and potential investors. By utilizing the expertise of a financial advisor, GWP will substantially enhance the quality of the offering. The services of bond counsel and disclosure counsel will ensure that all legal requirements are met.
In 2019, GWP issued a Request For Proposals (RFP) for financial advisor services and bond counsel and bond disclosure services, and three firms responded: Fieldman Rolapp & Associates, Harrell & Company Advisors, LLC. and PFM Financial Advisors, LLC. PFM submitted the lowest bid as shown in the table below.
FIRM FEE
PFM $ 50,000
Fieldman Rolapp $ 68,500
Harrel & Company $ 60,000
Based on qualifications and fees, PFM offered the best value. PFM’s experience, familiarity with Glendale (PFM acted in this capacity for GWP Electrical Services for bonds issued in 2003, 2006 and the 2020 Water Revenue Bonds, Refunding Series with excellent results) and proven track record are very advantageous. PFM’s dedicated municipal utility group has significant expertise in electric utility finances, bringing added credibility with rating agencies, credit enhancement providers, and investors.
With respect to bond counsel and disclosure counsel services, two firms responded to the RFP, Orrick and Norton Rose Fulbright.
FIRM FEE
Norton Rose Fulbright $ 110,000
Orrick $ 135,000
After evaluating each firm, GWP staff recommends Norton to serve as bond counsel. In addition to submitting the lowest fee proposal to provide the services, Norton served in this capacity for GWP Electrical Services for bonds issued in 2003, 2006, 2013, and 2016, and consistently provided competent, timely, and reliable services. 3{{section.number}}d
4 8
7 3
As clarified above, Norton has initiated multiple preliminary official statements, and PFM has created bond scenarios for proposed bond issuances corresponding with various projects that were ultimately not realized due to a lack of approval by the City Council.
As such, fees for their collective efforts were accrued. It is common practice for Norton and PFM to be paid from the bond proceeds when the bond transactions close. Since the bond transactions did not go forward, Norton and PFM have outstanding fees owed.
ANALYSIS
The electric utility seeks to construct the Grayson Repowering Project, the Scholl Canyon Landfill Biogas Renewable Generation Project, and to acquire and/or construct as necessary certain improvements to the City’s public utility, such as 4kv to 12kv feeder upgrades; solar generation facilities installed on city properties; substation improvements, meter upgrades; vault replacement, and transmission and distribution improvements and pole replacements. As GWP does not have unrestricted cash reserves to fund these efforts and they cannot be funded through operations alone, GWP proposes to issue debt in the form of electric revenue bonds. GWP intends to issue approximately $500 million of revenue bonds over the next three years. In order to issue the bonds the utility needs the assistance of a financial advisor and bond counsel to complete the transactions.
The services of PFM will include financial planning; detailed financial modeling; market understanding and financing considerations that will directly benefit GWP; develop overall credit strategy; prepare the presentation for rating agencies; evaluate and assist in the selection of an underwriter, verify results of competitive bidding process and assist in the closing of the bonds, including issuing wire instructions to arrange for the transfer and investment of funds.
The services of Norton will include preparation of all legal documents needed to issue bonds, preparation of all documents to bid the bonds on a competitive basis, preparation of all necessary closing documents and providing all necessary and customary legal opinions relating to the tax exemption of interest on the bonds. In addition, Norton will prepare the Preliminary Official Statement and the final Official Statement and will deliver the Disclosure Counsel opinion.
Staff has confirmed with both Norton and PFM that their fees, while having increased due to inflation since the submittal of their proposals, are still competitive and in the best interests of the City. Both Norton and PFM were retained pursuant to a competitive selection process. Since then both Norton and PFM have assisted GWP continuously and competently with the required services related to bond financing. Both Norton and PFM have been and are currently assisting with the issuance of the 2024, 2025 and 2026 bonds. To preserve consistency and continuity of services, staff recommends that the City Council authorize the LSA with Norton, and the PSA with PFM.
STAKEHOLDERS/OUTREACH
N/A
4{{section.number}}d
4 8
7 3
FISCAL IMPACT
The approval of the contracts and amendments will increase cost in fiscal year 2024 approximately $250,000. Therefore, staff is requesting an appropriation of $250,000 from the Electric Surplus Fund balance. Future expenses will be requested as part of the annual budget process.
Requesting Appropriation
Amount From (Account String) To (Account String) Funding Source $250,000 GL: 27900-5810-GWP-
0000
GL: 43110-5820-
GWP-4505-P0000-
Net Position, Electric
Surplus Fund Balance
ENVIRONMENTAL REVIEW
The action herein is not subject to the California Environmental Quality Act (“CEQA”) and, therefore, an environmental review is not required pursuant to Sections 15378, and 15061 of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3.
CAMPAIGN DISCLOSURE
In accordance with the City Campaign Finance Ordinance No. 5744, the Campaign Disclosures including the names and business addresses of the members of the board of directors, the chairperson, CEO, COO, CFO, subcontractors, and any person or entity with more than ten percent interest in the company are attached as follows:
Exhibit 1: Norton Rose Fulbright US, LLP
Exhibit 2: Public Financial Management Financial Advisors, LLC
ALTERNATIVES
Alternative 1: Not to authorize the actions requested and recommended in this report.
Alternative 2: Consider any other alternative not proposed by staff.
ADMINISTRATIVE ACTION
Submitted by:
Mark Young, General Manager - Glendale Water and Power
Prepared by:
Scott Mellon, Assistant General Manager - Power Management David Davis – Utility Finance Manager
Approved by:
Roubik R. Golanian, P.E., City Manager
EXHIBITS / ATTACHMENTS
Exhibit 1: Campaign Finance Disclosure for Norton Rose Fulbright US, LLP Exhibit 2: Campaign Finance Disclosure for Public Financial Management Financial Advisors, LLC