Agenda Item No. 7
CITY COUNCIL STAFF REPORT
TO: Honorable Mayor and City Council DATE: September 25, 2023 FROM: Matthew Bronson, City Manager
PREPARED BY: Deanne Purcell, Administrative Services Director SUBJECT: Resolution to Proceed with Planning for the Issuance of Central Coast Blue Project Financing and Directing the City Manager to Enter into an Agreement for the Financing Team
RECOMMENDATION
Adopt a resolution to authorize staff to proceed with planning for the issuance of an Environmental Protection Agency (EPA) Water Infrastructure Finance and Innovation Act (WIFIA) Loan and/or other financing through the State Revolving Loan Fund or Tax-Exempt Financing and direct the City Manager to enter into agreements for the Financing Team.
BACKGROUND
In prior meetings with the Council and the Central Coast Blue Regional Recycled Water Joint Powers Authority (CCBJPA) Board, it was determined that the Central Coast Blue (CCB) project would best be financed through a WIFIA Loan. On July 24, 2023, Council authorized staff to proceed with the WIFIA Loan application and pay fees associated with the application. In addition, Council authorized fees for the Standard & Poor’s (S&P) Rating Evaluation Service (RES) required for the application. On August 10, the WIFIA Loan application was filed and the associated fee was paid. On September 5, staff presented the findings and recommendations from the Utility Rate Study to the Council including recommended water rate increases to pay for the City’s portion of Central Coast Blue costs. The Council subsequently directed staff to prepare an agenda item on September 25 to implement the Proposition 218 noticing process tied to a public hearing to consider the proposed water and wastewater rates.
The next steps in completing the WIFIA Loan application are to respond to additional requests from the EPA and to provide the EPA with the rating indicator for this application from S&P. S&P specifically requested that the City not start the RES process until the utility rate study was completed and the Proposition 218 noticing process was close to starting. Pending Council approval of this noticing process, the City will begin the S&P RES process in the next two weeks.
It is expected that S&P can provide the City with the rating indicator in October that can then be provided to the EPA. This Resolution for authorization to proceed with Central Coasts Blue project financing includes additional authorization to proceed with other financing such as the State Revolving Loan financing or tax-exempt financing in the event there are circumstances that would justify alternate financing sources. Approval of this authorization would enhance the project schedule and preclude a delay in establishing financing by not requiring additional public meetings.
Staff have been working with consultants Albert Peché of A. M. Peché & Associates LLC and Albert Reyes of Kutak Rock LLP on an hourly basis to complete the WIFIA Loan application.
These consultants have assisted the City previously in the issuance of several General Obligation Bonds, Water Revenue Bonds, Continuing Disclosure Reporting, and other matters. Their Staff Report: Direction to proceed with the WIFIA Loan Issuance Page 2 September 25, 2023
experience has been invaluable in the WIFIA Loan application process. Now that the application process is nearing completion, the City needs to engage these consultants for issuance of the WIFIA Loan. Staff is recommending the Council give direction to the City Manager to negotiate relevant agreements and engage their respective services. Draft agreements are shown as Attachment 2 for the Council’s information. The fees associated with the WIFIA Loan issuance will be contingent, and payable from the WIFIA Loan proceeds. Legal documentation, and information on costs of issuance for the WIFIA Loan will be brought back to Council for approval along with the WIFIA financing agreement in early 2024.
FISCAL IMPACT
The fees for A. M. Peché & Associates LLC and Kutak Rock LLP (the “Financing Team”) are approximately $85,000 for each firm given their respective work but are contingent upon closing and payable from the WIFIA Loan and/or other financing through the State Revolving Loan Fund or Tax-Exempt Financing. Therefore, if the Loan does not close the City will not need to pay this amount. Directing the City Manager to engage the Financing Team will allow our consultants to begin working with the EPA and its legal team to prepare the legal documentation necessary for the WIFIA Loan and/or other financing through the State Revolving Loan Fund or Tax-Exempt Financing. .
ALTERNATIVES
The Council has the following alternatives to consider:
1. Adopt a resolution to authorize staff to proceed with planning for the issuance of an Environmental Protection Agency (EPA) Water Infrastructure Finance and Innovation Act (WIFIA) Loan and/or other financing through the State Revolving Loan Fund or Tax-Exempt Financing and direct the City Manager to enter into agreements for the Financing Team; or
2. Do not adopt a Resolution authorizing staff to proceed; or
3. Provide staff with alternative direction.
PUBLIC NOTIFICATION
The agenda was posted in accordance with the Brown Act.
Attachments
1. Resolution
2. Draft Financing Team Agreements
RESOLUTION NO. 23-
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF GROVER BEACH,
CALIFORNIA, DIRECTING STAFF TO PROCEED WITH PLANNING FOR THE
ISSUANCE OF CERTAIN OBLIGATIONS TO FINANCE THE CENTRAL COAST
BLUE PROJECT AND DIRECTING THE CITY MANAGER TO ENGAGE A
FINANCING TEAM IN CONNECTION THEREWITH
WHEREAS, the City of Grover Beach (the “City”) is a municipal corporation duly organized and existing under the laws of the State of California; and WHEREAS, the City proposes to participate in the Central Coast Blue Project with the City of Arroyo Grande and City of Pismo Beach to construct a regional recycled water project that will enhance supply reliability by injecting advanced purified water into the Northern Cities Management Area of the Santa Maria Groundwater Basin (“Project”); and WHEREAS, the City has expressed interest in the issuance of obligations, such as a financing through the State Water Resources Control Board’s Clean Water State Revolving Fund program and the United States Environmental Protection Agency’s Water Infrastructure Finance and Innovation Act program, an installment purchase agreement, revenue bonds and/or certificates of participation (the “Obligations”) to finance the Project on either a private placement or public offering basis; and
WHEREAS, the City Council of the City desires to direct staff to pursue the steps necessary to issue the Obligations, to appoint A. M. Peché & Associates LLC, as municipal advisor, and Kutak Rock LLP, as bond counsel and disclosure counsel (if the Obligations are issued on a public offering basis), for the issuance of the Obligations.
NOW, THERFORE, BE IT RESOLVED that the City Council of the City of Grover Beach, California, does hereby :
SECTION 1. Direction to Staff. The City Manager and all other employees of City are hereby authorized and directed to take such actions as are necessary or appropriate to provide for the issuance of the Obligations on either a private placement or public offering basis, and, at such time as determined appropriate, to present to this City Council all resolutions and documents necessary in connection therewith. Nothing in this Resolution shall in any way commit the City to issue the Obligations, and the City is under no obligation to go forward with issuance of the Obligations unless satisfactory terms are presented to the City.
SECTION 2. Approval of Consultants. The City Council hereby appoints the firms of A.
M. Peché & Associates LLC, as municipal advisor, and Kutak Rock LLP, as bond counsel and disclosure counsel (if the Obligations are issued on a public offering basis), in connection with the proposed issuance of the Obligations. The City Council hereby authorizes and directs the City Manager to execute and deliver an agreement with said firms for their respective services.
Payment of fees and expenses with respect to such agreements shall be contingent upon the issuance of the Obligations.
Attachment 1
Resolution No. 23- Page 2
SECTION 3. Other Acts. The officers and staff of the City are hereby authorized and directed, jointly and severally, to do any and all things, to execute and deliver any and all documents, which in consultation with the City Attorney and Kutak Rock LLP, bond counsel, they may deem necessary or advisable in order to effectuate the purposes of this Resolution, and any and all such actions previously taken by such Officers or staff members are hereby ratified and confirmed.
SECTION 4. Effective Date. This Resolution shall take effect upon adoption.
On motion by Council Member _____, seconded by Council Member ____, and on the following roll-call vote, to wit:
AYES: Council Members –
NOES: Council Members –
ABSENT: Council Members –
ABSTAIN: Council Members –
RECUSED: Council Members –
the foregoing Resolution was PASSED, APPROVED, and ADOPTED at a regular meeting of the City Council of the City of Grover Beach, California this 25th day of September 2023.
KAREN BRIGHT, MAYOR
Attest:
WENDI B. SIMS, CITY CLERK
**DRAFT**
1 CONSULTING SERVICES AGREEMENT
This CONSULTING SERVICES AGREEMENT (the "Agreement") is made and entered into as of the 25th day of September, 2023, ("Effective Date"), by and between the Grover Beach (the “City” or “Issuer") and A. M. Peché & Associates LLC (“Consultant" or “Peché & Associates LLC”) in regards to financing of the City’s portion of the Central Coast Blue Project (the “Obligations”).
1. Employment. The Issuer hereby employs Peché & Associates LLC to perform, upon request of the Issuer, services set forth in the Scope of Services attached hereto.
2. Representations of Peché & Associates LLC. Peché & Associates LLC hereby represents the following:
A. Peché & Associates LLC has no interest, whether direct, indirect or contingent, in any property or contract arising from or affected by the issuance and sale of the Obligations, except as financial advisor to the Issuer under this Agreement. Peché & Associates LLC will not receive a fee from any source other than the Issuer for services connected with the actual issuance of the Obligations, except as may be disclosed in writing, and has no arrangement with respect thereto with any party other than the Issuer.
B. Peché & Associates LLC is an independent private business and is not a department or agency of the federal or California State governments or any other governmental entity.
Peché & Associates LLC is not an investment banker, investment advisor, underwriter, remarketing agent, broker or dealer in securities, or legal counsel, and will not function in any of those capacities hereunder.
3. Agreements of Peché & Associates LLC. Peché & Associates LLC hereby agrees as follows:
A. Peché & Associates LLC will provide, as requested by the Issuer, the services set forth in the Scope of Services attached hereto.
B. In providing such services, Peché & Associates LLC will make available the experience of its organization so as to represent the Issuer effectively.
4. Obligations Terms. The Obligations sale shall be subject to rates, terms, conditions and arrangements mutually agreeable to and negotiated between the Issuer and the buyer of the Obligations.
5. Compensation. The Issuer shall pay Peché & Associates LLC an amount of $85,000 upon the closing of the sale of Obligations. In addition, the Issuer shall reimburse Peché & Associates LLC’s actual and reasonable expenses for couriers, mailing, telephone, travel, data and research information, copying, conference call charges, and other out-of-pocket expenses incurred by or for Peché & Associates LLC in performance of its services hereunder since the start of work for this engagement. Expenses will include $75 per month beginning in the first month of the first meeting date during the course of this engagement to and including for the month of the closing of the Obligations. Mileage expenses will be billed at .655 per mile or the current prevailing IRS allowable reimbursement rate. However, no fee shall be payable to Peché & Associates LLC if the sale of the Obligations are not closed successfully; provided that, if the sale of the Obligations is terminated due to an exercise of early termination under Section 8 based upon the Issuer’s discretion, or based upon a decision to use other funding, Peché & Attachment 2
Agreement for Services
2 Associates LLC shall be paid all expenses incurred and a fee proportionate to the work performed to the date of that determination.
6. Assignment. Peché & Associates LLC may assign this Agreement to a successor firm upon mutual agreement of Peché & Associates LLC and the City Manager. Peché & Associates LLC agrees to give notice of assignment to Issuer and upon receipt of such notice Issuer agrees to make all payments to the assignee designed in the assignment.
7. Entire Agreement; Amendments. All discussions, negotiations and prior agreements between the Issuer and Peché & Associates LLC are merged into this Agreement. This Agreement is the entire agreement between the parties respecting the subject matter hereof. This Agreement may be amended only in writing.
8. Term. This Agreement shall continue from month to month for the period reasonably necessary for the performance of the sale of the Obligations; provided, that either party hereto may terminate this Agreement for cause upon 15 day’s written notice to the other party.
9. Government Code. Peché & Associates LLC and its representatives are not public officials or participating in governmental decisions, as those terms are used in Section 87100 of the California Government Code. No actions or opinions necessary for the performance of Peché & Associates LLC’s duties under this Agreement will cause Peché & Associates LLC to be a “public official” or “participating in a governmental decision,” as those terms are used in Section 87100 of the California Government Code.
10. Information. The Issuer, its officials and staff, bond/special counsel, fiscal consultant, placement agent and others will be providing to Peché & Associates LLC various data, records, studies, computer printouts and other information and representations as to the facts relating to the Issuer and the Obligations. Peché & Associates LLC will be using and relying upon such data, records, studies, computer printouts and other information in the preparation of Peché & Associates LLC’s work products. Peché & Associates LLC shall not be obligated to establish or verify the accuracy or completeness of the information furnished to Peché & Associates LLC.
11. Standards. Peché & Associates LLC shall perform its services pursuant hereto in accordance with competent professional standards. The liability of Peché & Associates LLC to the Issuer for any breach of those professional standards arising out of or related to this Agreement or the services performed hereunder shall not exceed the fees paid or payable under this Agreement.
12. Insurance Requirement.
(a) Consultant shall obtain and maintain during the performance of any services under this Agreement the following insurance coverage issued by a company satisfactory to the City, unless the Chief Financial Officer, waives in writing, the requirement that Consultant obtain and maintain such insurance coverage.
1. Commercial general liability insurance including a contractual liability endorsement in an amount not less than $1,000,000 per occurrence limit and no less than $2,000,000 in the aggregate for bodily injury and property damage for each claimant for general liability;
2. Business automobile liability insurance in an amount not less than $1,000,000 combined single limit for bodily injury and property damage for each claimant for automobile liability; Agreement for Services
3 3. Errors and omissions insurance to a minimum coverage of $1,000,000, with neither Consultant nor listed sub-consultants having less than $1,000,000 individually;
4. In the event that Consultant has any employees, Worker’s compensation insurance in compliance with the laws of the State of California, including employer’s liability insurance in an amount not less than $1,000,000 per claimant.
(b) Consultant shall, prior to performance of any services, file with the City a certificate of insurance, on an City approved form, certifying that the above insurance coverages shall remain in effect at all times during the term of this Agreement, or any extension thereof. (c) Consultant agrees that all insurance coverages shall be provided by a California admitted insurance carrier with an A.M. Best rating of A-7 or better and shall bear endorsements providing that the policies may not be canceled or modified without thirty (30) days’ prior written notice to the City.
City shall not approve or accept any endorsement if the endorsement contains “best effort” modifiers or if the insurer is relieved from the responsibility to give such notice. (d) Consultant agrees that the commercial general liability and business automobile liability insurance policies shall be endorsed to name City, its City Board, officers, and employees as additional insured and to provide that the coverage’s provided to City shall be primary and not contributing to or in excess of any existing City insurance coverage’s.
(e) All insurance standards applicable to Consultant shall also be applicable to Consultant’s subcontractors. Consultant may utilize subcontractors to prepare reports. Consultant agrees to maintain appropriate agreements with subcontractors and to provide proper evidence of coverage upon receipt of a written request from the City.
13. Governing Law. This Agreement shall be construed in accordance with the laws of the State of California.
14. Independent Contractor. Peché & Associates LLC’s relationship to Issuer is that of an independent contractor.
15. Additional Disclosures. Additional Disclosures required by Municipal Advisors are listed after the Scope of Services at the end of this Agreement and are part of this Agreement. As described in the Additional Disclosures, Consultant may utilize Del Rio Advisors, LLC as a subcontractor (the “Subcontractor”) from time to time for work performed under this Agreement and compensation for this firm will be paid for by the Consultant. Subcontractor is registered as a Municipal Advisor with the SEC and the MSRB and will provide additional disclosures, if any, to the City when required.
Agreement for Services
4 IN WITNESS WHEREOF, this Agreement has been executed and delivered for and in the names and on behalf of the City and Peché & Associates LLC as of the date set forth below.
DATED: September 25, 2023
CITY OF GROVER BEACH
By:
Name: Matthew Bronson
Title: City Manager
CITY OF GROVER BEACH
By:
Name: David Hale
Title: City Attorney
A. M. PECHÉ & ASSOCIATES LLC
Albert M. Peché, Manager
Agreement for Financial Advisory Services
1 Grover Beach/A. M. Peché & Associates LLC
AGREEMENT FOR SERVICES
SCOPE OF SERVICES
In performing under this Agreement, Peché & Associates LLC shall, as and when requested by City, perform the following services.
When requested, Peché & Associates LLC will provide the following:
1. Review and discuss financing options, methods of sale and strategies with the Issuer’s officials and staff including the EPA’s WIFIA Loan, State Revolving Fund Loan, or tax-exempt financing.
2. Participate in calls between City staff, bond counsel, EPA staff and EPA attorneys. Organize calls with participants when requested.
3. Assist in the selection of a bond rating agency.
4. Assist the City in developing a Financing Proforma that can be used by the EPA staff and the rating agency reflecting the Water Enterprise Revenues as security for a WIFIA Loan.
5. Assist in the rating process with S&P. This includes preliminary calls with S&P to discuss information required, rating process, and timing to get a rating. Review and gather information to provide to S&P required for the rating.
6. Develop a transactional budget with the Issuer.
7. Review the term sheet and legal documentation prepared by bond counsel and EPA attorneys.
8. Meet with the Issuer’s governing body and Issuer committees, officers, professional staff and employees in authorizing and reviewing the structure of the Obligations, so as to achieve an effective result consistent with the policies, goals and objectives established by the Issuer.
9. Review of the Issuer’s Debt Management Policy as it relates to the issuance of the Obligations.
10. Review financial and quantitative analyses provided by the City, the EPA and other participants.
11. Discuss with the Issuer’s officials and staff the maturity and amortization schedules, redemption features, covenants, debt service reserve fund, and timing of the proposed offering and sales of the Obligations to assist in determining desirable results.
12. Advise the Issuer as to market conditions and State and Local Government Securities rates.
Agreement for Financial Advisory Services
2 MUNICIPAL ADVISOR ADDITIONAL DISCLOSURES
Fiduciary Duty
Consultant is registered as a Municipal Advisor with the SEC and Municipal Securities Rulemaking Board (“MSRB”). As such, Consultant has a Fiduciary duty to the Issuer and must provide both a Duty of Care and Loyalty that entail the following:
Duty of Care
a) exercise due care in performing its municipal advisory activities; b) possess the degree of knowledge and expertise needed to provide the Issuer with informed advice;
c) make a reasonable inquiry as to the facts that are relevant to Issuer’s determination as to whether to proceed with a course of action or that form the basis for any advice provided to Issuer; and
d) undertake a reasonable investigation to determine that Consultant is not forming any recommendation on materially inaccurate or incomplete information; Consultant must have a reasonable basis for:
i. any advice provided to or on behalf of Issuer;
ii. any representations made in a certificate that it signs that will be reasonably foreseeably relied upon by Issuer, any other party involved in the municipal securities transaction or municipal financial product, or investors in the Issuer securities; and iii. any information provided to the Issuer or other parties involved in the municipal securities transaction when participating in the preparation of an official statement.
Duty of Loyalty
Consultant must deal honestly and with the utmost good faith with Issuer and act in Issuer’s best interests without regard to the financial or other interests of Consultant. Consultant will eliminate or provide full and fair disclosure (included herein) to Issuer about each material conflict of interest (as applicable). Consultant will not engage in municipal advisory activities with Issuer as a municipal entity, if it cannot manage or mitigate its conflicts in a manner that will permit it to act in Issuer’s best interests.
Conflicts of Interest and Other Matters Requiring Disclosures:
• As of the date of the Contract, there are no actual or potential conflicts of interest that Consultant is aware of that might impair its ability to render unbiased and competent advice or to fulfill its fiduciary duty. If Consultant becomes aware of any potential conflict of interest that arises after this disclosure, Consultant will disclose the detailed information in writing to Issuer in a timely manner.
16. The fee paid to Consultant increases the cost of investment to Issuer. The increased cost occurs from compensating Consultant for municipal advisory services provided.
Agreement for Financial Advisory Services
3 17. Consultant may utilize Del Rio Advisors, LLC as a subcontractor (the “Subcontractor”) from time to time for work performed under this Agreement and compensation for this firm will be paid for by the Consultant. Subcontractor is registered as a Municipal Advisor with the SEC and the MSRB and will provide additional disclosures, if any, to the City when required.
18. Consultant does not act as principal in any of the transaction(s) related to this Contract.
19. During the term of the municipal advisory relationship, this Contract will be promptly amended or supplemented to reflect any material changes in or additions to the terms or information within this Contract and the revised writing will be promptly delivered to Issuer. • Consultant does not have any affiliate that provides any advice, service, or product to or on behalf of the client that is directly or indirectly related to the municipal advisory activities to be performed by Consultant;
• Consultant has not made any payments directly or indirectly to obtain or retain Issuer’s municipal advisory business;
• Consultant has not received any payments from third parties to enlist Consultant’s recommendation to Issuer of its services, any municipal securities transaction or any municipal finance product; • Consultant has not engaged in any fee-splitting arrangements involving Consultant and any provider of investments or services to Issuer;
• Consultant has a conflict of interest from compensation for municipal advisory activities to be performed, that is contingent on the size or closing of any transactions as to which Consultant is providing advice;
• Consultant does not have any other engagements or relationships that might impair Consultant ability either to render unbiased and competent advice to or on behalf of Issuer or to fulfill its fiduciary duty to Issuer, as applicable; and
• Consultant does not have any legal or disciplinary events that are material to Issuer’s evaluation of the municipal advisory or the integrity of its management or advisory personnel.
Legal Events and Disciplinary History
Consultant does not have any legal events and disciplinary history on their Form MA and Form MA-I, which includes information about any criminal actions, regulatory actions, investigations, terminations, judgments, liens, civil judicial actions, customer complaints, arbitrations and civil litigation. Issuer may electronically access Consultant’s most recent Forms MA and each most recent Forms MA-I filed with the Commission at the following website: www.sec.gov/edgar/searchedgar/companysearch.html.
There have been no material changes to a legal or disciplinary event disclosure on any Form MA or Form MA-I filed with the SEC.
Agreement for Financial Advisory Services
4 Registration and Customer Complaints
Pursuant to Municipal Securities Rulemaking Board Rule G-10, on Investor and Municipal Advisory Client Education and Protection, Municipal Advisors are required to provide certain written information to their municipal entity and obligated person clients which include the following:
Consultant is currently registered as a Municipal Advisor with the U.S. Securities and Exchange Commission and the Municipal Securities Rulemaking Board.
Within the Municipal Securities Rulemaking Board (“MSRB”) website at www.msrb.org, Issuer may obtain the Municipal Advisory client brochure that is posted on the MSRB website. The brochure describes the protections that may be provided by the MSRB Rules along with how to file a complaint with financial regulatory authorities
Recommendations
If Consultant makes a recommendation of a municipal securities transaction or municipal financial product or if the review of a recommendation of another party is requested in writing by Issuer and is within the scope of the engagement, Consultant will determine, based on the information obtained through reasonable diligence of Consultant whether a municipal securities transaction or municipal financial product is suitable for Issuer. In addition, Consultant will inform Issuer of:
• the evaluation of the material risks, potential benefits, structure, and other characteristics of the recommendation;
• the basis upon which Consultant reasonably believes that the recommended municipal securities transaction or municipal financial product is, or is not, suitable for Issuer; and • whether Consultant has investigated or considered other reasonably feasible alternatives to the recommendation that might also or alternatively serve Issuer’s objectives.
If Issuer elects a course of action that is independent of or contrary to the advice provided by Consultant, Consultant is not required on that basis to disengage from Issuer.
Record Retention
Effective July 1, 2014, pursuant to the Securities and Exchange Commission (SEC) record retention regulations, Consultant are required to maintain in writing, all communication and created documents between Consultant and Issuer for five (5) years.
1 AGREEMENT FOR BOND AND DISCLOSURE COUNSEL SERVICES
THIS AGREEMENT (the “Agreement”) is made and entered into this __ day of ______, 2023, between the City of Grover Beach, whose address is 154 S. Eighth Street, Grover Beach, CA 93433 (the “City”) and Kutak Rock LLP (“Kutak”) whose address is 5 Park Plaza, Ste. 1500, Irvine, California 92614.
W I T N E S S E T H:
WHEREAS, the City proposes to participate in the Central Coast Blue Project with the City of Arroyo Grande and City of Pismo Beach to construct a regional recycled water project that will enhance supply reliability by injecting advanced purified water into the Northern Cities Management Area of the Santa Maria Groundwater Basin (“Project”); and WHEREAS, the City has expressed interest in the issuance of obligations, such as a financing through the State Water Resources Control Board’s Clean Water State Revolving Fund program and the United States Environmental Protection Agency’s Water Infrastructure Finance and Innovation Act program, an installment purchase agreement, revenue bonds and/or certificates of participation (the “Obligations”) to finance the Project on either a private placement or public offering basis; and
WHEREAS, Kutak is specifically trained and experienced in the conduct of proceedings for accomplishing the financing of the Project through the preparation, sale and delivery of the Obligations; and
NOW, THEREFORE, in consideration of the covenants and premises herein contained and other good and valuable consideration, the parties hereto agree as follows:
1. Duties. Kutak shall provide legal services in connection with the authorization, issuance and delivery of the Obligations (the “Transaction”). Such services shall include, but not be limited to, the following:
a. Reviewing California State law regarding the authority for the City to authorize and issue the Obligations.
b. Conferring and consulting with the City, the officers, administrative staff, financial advisor, underwriter and other representatives of the City in connection with the preparation and formulation of the Transaction.
c. Preparation of the Resolution of Issuance, security documents and all other resolutions, agreements, notices and other documents necessary for the proper conduct and consummation of the Transaction.
d. A review of all financial documents for legal sufficiency. e. If necessary, preparation of the official statement or disclosure document in connection with the Transaction to assure the disclosure of all material facts within the knowledge of the City.
2 f. Preparation of an incumbency certificate and any and all other closing documents required of the City to accompany delivery of the financing documents. g. Preparation of documentation and assistance in obtaining credit enhancement and/or a rating on the Obligations if such credit enhancement and/or a rating is sought.
h. Attendance at and supervision of the closing, and issuing the legal opinion of Kutak stating that the interest payments with respect to the Obligations is exempt from present federal incomes taxes and is exempt from State income taxes and approving in all respects the legality of all proceedings for the authorization, issuance, sale and delivery of the Obligations and other agreements relating to the Transaction. i. Preparation of a transcript of the closing of the Transaction. j. Conferring and consulting with City officials and agents with regard to any problems which may arise prior to the maturity of the Obligations. k. Providing any other necessary services, including ongoing monitoring of the Transaction after the sale of the Obligations and assistance to the City regarding the Transaction, generally expected of Kutak not listed above.
2. Compensation. For provision of the services to be rendered pursuant to this Agreement related to the execution and delivery or issuance of the Obligations, the City shall pay Kutak a fee of $85,000, which fee shall include any out-of-pocket expenses incurred by it in the course of this engagement, such as reproduction and printing costs, word processing time, long distance telephone calls and similar items (excluding any publication costs or fees incurred for information included in the official statement). Said fee is payable only upon issuance of the Obligations and shall be paid from proceeds thereof; provided however, if the City elects to terminate this Agreement prior to the issuance of the Obligations, the City agrees to pay Kutak all out-of-pocket expenses incurred by it in the course of this engagement and a fee proportionate to the services Kutak has performed commencing on the date of this Agreement to the date of termination of this Agreement. Such fee shall be determined by multiplying the number of hours Kutak actually and reasonably expends in completing the services outlined in this Agreement at the hourly rate of the attorney performing such services.
In the event Kutak is requested to perform additional work outside of its normal and customary services as bond counsel or disclosure counsel, such as litigation, Kutak will be paid additional compensation therefor following the submission of monthly, itemized bills at the hourly rate of the attorney performing such services; provided, however, there shall be no additional compensation due Kutak under the paragraph without the prior approval of the City.
3. Assignment. This Agreement may be assigned by the City to any other issuer of the securities as may be necessary to consummate the Transaction, without the consent of but with notice to Kutak.
4. No Guarantees; Entire Agreement. Nothing in this Agreement and nothing in our statements to you should be construed as a guarantee or promise about the outcome of the Transaction or any phase thereof. We make no such guarantees or promises. 3 Comments about the course or outcome of the Transaction or any phase thereof which we may make from time to time are expressions of opinion only. The written Agreement constitutes the entire Agreement between the parties hereto with respect to Kutak services and neither party has been induced to make or enter into this Agreement by reason or promise, agreement, representation, statement or warranty other than as herein contained.
5. Other Representation. Kutak may, from time to time, have clients with interests which may be potentially adverse to the City. Kutak reserves the right to represent said clients except on matters directly relating to the issuance and sale of the Obligations. We will disclose any such potential conflict to you and will seek a waiver of that conflict. We will of course work with you and our other clients to construct an appropriate ethical wall to protect the confidences of all of our clients and to clearly separate our work in any such case. Although we are not asking for a waiver now since these conflicts may not emerge, we ask that you agree to give good faith consideration to our requests for any such waivers in the future. This will allow us to better serve all of our clients.
6. Work Product. Our files developed in the course of work undertaken pursuant to this Agreement are your property. We will release those files to you or to anyone else you designate upon your written request delivered to the attorney in charge of this matter.
However, such a request will signify the end of this engagement if it is then still ongoing. You agree that we may, in our sole discretion, copy all or any portion of such files at your expense and retain such copies, and that we may have a reasonable period of time before releasing the documents to you or your designee in order to make the copies. We will from time to time send portions of your files that are not currently needed to an off-site storage facility. The cost of using this facility will be our sole expense. However, we are not the guarantor of the security of any off-site storage facility. Accordingly, you agree that the firm will not be responsible for any damages which may occur as a result of the loss of any of your files which we store at an off-site storage facility. You also agree that we may, after the passage of two years without our having performed any work for you pursuant to this engagement, destroy the files of this engagement without further notice to you unless you have previously provided us with written instructions to forward the files to you or to another person you designate.
7. Insurance. We carry professional liability insurance which would cover the services we will be providing under the terms of this Agreement. That insurance is subject to a self-insured retention.
8. Litigation. If an action or proceeding is commenced to enforce this Agreement or any provision hereof, the prevailing party in such an action or proceeding shall be entitled to recover the reasonable amount of his, her or its fees and costs thereof, in addition to compensatory damages. For the purposes of enforcing this Agreement only, and as otherwise required by law, you agree that this Agreement may be disclosed to a court.
9. Notices. All notices, demands, requests, consents and approvals given, required or permitted to be given hereunder, shall be contained in writing and shall be deemed sufficiently given if sent by express delivery service or by registered or certified mail, postage prepaid and return receipt requested, addressed to the parties at the addresses set forth above or on any addendum or counterpart to this Agreement, or to such other address as the recipient shall have notified the sender of in writing. You agree to keep us currently informed of any change in 4 your address or telephone numbers so that we may effectively communicate with you. We will also advise you promptly of any change in the firm's business address, electronic mail address, telephone or facsimile numbers.
10. California Law. This Agreement is made under and shall be construed in accordance with the substantive laws of the State of California.
11. Counterparts. This Agreement may be executed in counterparts each of which shall be deemed an original but all of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers and representatives thereto duly authorized, all as of the day and year first above written.
CITY OF GROVER BEACH
By: ______________________________
Authorized Representative
KUTAK ROCK LLP
By: ______________________________
Albert R. Reyes, a Partner