NOVEMBER 13,
2023
REQUEST FOR PROPOSAL FOR FINANCIAL
ADVISORY SERVICES – NHA ADVISORS, LLC
Address: 4040 Civic Center Drive, Suite 200
San Rafael, CA 94903
Phone: (415) 785-2025
Contact Person: Eric Scriven, Principal
REQUEST FOR PROPOSAL FOR FINANCIAL ADVISORY SERVICES – NHA ADVISORS, LLC
TABLE OF CONTENTS
C. COVER LETTER AND EXECUTIVE SUMMARY .................................................................................................... 1 D. FIRM OVERVIEW ....................................................................................................................................... 3 E. PERSONNEL AND REFERENCES ................................................................................................................... 11 F. LONG-TERM STRATEGIC FINANCIAL PLANNING EXPERIENCE............................................................................ 16 G. NEW MONEY (TAXABLE AND NON-TAXABLE) EXPERIENCE ............................................................................. 22 H. ADVANCE AND CURRENT REFUNDING EXPERIENCE ........................................................................................ 29 I. MARKET AND PRICING INFORMATION ......................................................................................................... 33 J. DISCIPLINARY ACTION .............................................................................................................................. 39 K. COST PROPOSAL AND REIMBURSEMENT FOR “OUT-OF-POCKET” EXPENSES ...................................................... 40 L. POTENTIAL CONFLICT OF INTEREST ............................................................................................................. 44 M. BUSINESS RELATIONSHIPS WITH OTHER ENTITIES .......................................................................................... 45 N. EXCEPTIONS TO PROFESSIONAL SERVICES AGREEMENT .................................................................................. 46 O. SIGNATURE SHEET ................................................................................................................................... 46 APPENDIX A: SIGNATURE SHEET
APPENDIX B: COST PROPOSAL
APPENDIX C: CITY OF RIVERSIDE 2020 POB CREDIT PRESENTATION APPENDIX D: CITY OF EL CENTRO 2023 LRBS CREDIT PRESENTATION APPENDIX E: CITY OF LANCASTER 2019 REVENUE BONDS CREDIT PRESENTATION APPENDIX F: PROVPORT 2023 COPS CREDIT PRESENTATION
APPENDIX G: TDVA 2020 STATELINE REVENUE BONDS INVESTOR PRESENTATION APPENDIX H: NHA HOLISTIC FUNDING PRESENTATION
APPENDIX I: NHA RESUMES
APPENDIX J: NHA’S REQUIRED DISCLOSURES
REQUEST FOR PROPOSAL FOR FINANCIAL ADVISORY SERVICES – NHA ADVISORS, LLC
C. COVER LETTER AND EXECUTIVE SUMMARY
November 13, 2023
Office of the City Clerk
Lancaster City Hall
44933 Fern Avenue
Lancaster, CA 93534
RE: RFP NO. 805-24 for Financial Advisory Services
To whom it may concern,
NHA Advisors, LLC (“NHA”) is pleased to submit our proposal to provide financial consulting and municipal advisory services to the City of Lancaster (the “City”) in response to the City’s RFP 805 -24 for Financial Advisory Services. In this cover memo and in the body of this proposal, it is our intention to succinctly state the core attributes that NHA will add to the City’s current and future financing projects – most particularly the upcoming Event Center, Public Safety Operations Facility , and repurposing the Jets Stadium from baseball to soccer as a primary use.
NHA’s value proposition to the City is direct and simple -- we will strive to be your trusted advisor by bringing our fiduciary ethos to every municipal bond offering AND educational and advisory engagement we work on . Period. This means that we are NOT transaction-driven (we are process -driven). NHA’s process is always to conduct the deepest due diligence, make sure decision -makers understand ALL the options, and translate complex financing structures in an objective way to allow for a thorough, client - specific decision-making process. For the City, we believe that this approach starts with a comprehensive view and understanding of your long-term financial position, objectives and constraints. Then, we would listen closely to gain an even more detailed understanding with respect to specific situations and opportunities by conducting a thorough investigation of all facts and options to develop a comprehensive plan of finance from which the City can direct its municipal advisor to execute.
NHA appreciates the City’s well known entrepreneurial spirit and has experience working closely with other California cities that also think creatively to execute / implement innovative projects and programs.
We are proud to support and serve cities like Pittsburg, Industry, Chula Vista, Oxnard, Riverside, Torrance, Martinez, Berkeley, and even smaller towns like Gonzales (Monterey County), whose elected officials and staff think big and are continuously striving to make positive changes in their communiti es. We like to think that, through our fiduciary ethos, our decades of experience and our best -in-class level of service, NHA assists our clients to make dreams turn into reality while always being mindful that preservation of a city’s financial foundation is required to ensure that city stakeholders are provided with the high level of services and facilities that they require and deserve.
As we will demonstrate in the body of this proposal, NHA possesses the wide range of expertise and depth of experiences that a city such as Lancaster requires from its trusted financial advisor. We have executed upon all types of tax- or revenue-backed bond structures such as voter-supported bonds (GO or sales tax bonds), utility (power, water, sewer, solid waste) revenue bonds, lease revenue bonds, land secured (CFD or AD) bonds, pension obligation bonds, and RDA/SA bonds. According to data published by the California State Treasurer’s office, NHA is the #1 municipal advisor, by number of unique bond transactions, for REQUEST FOR PROPOSAL FOR FINANCIAL ADVISORY SERVICES – NHA ADVISORS, LLC
California cities since 2020 (source: California State Treasurer CDIAC data as of October 19, 2023; excludes conduit financings).
But, as noted above, achieving our objective of becoming the City’s trusted advisor is a much higher bar to meet, in our opinion, than just executing bond transactions when called upon to do so. As we will illustrate in this proposal, NHA works continuously to bring a range of services and ideas that a re useful to our clients. Many of these ideas have no relationship to a bond transaction. As will be shown and discussed, NHA formed 8 practice groups to address areas that our clients had told us mattered to them.
NHA has made it our business to become expert in areas such a climate change impacts (i.e., wildfire risks, rising sea levels), pensions, renewable power, P3/economic development negotiations , and continuing disclosure to provide meaningful ideas and advice to our clients when those issues arise and we are called upon to contribute.
Additionally, we believe that when called upon to execute upon a consulting or financing project for our clients, it is imperative that NHA, as your consultant/advisor, “leans in” on all aspects of said project. As is evident in our past work with Lancaste r and robust scope of tasks/services to serving our clients prior to being directed to execute upon the preferred plan of finance method, NHA assumes an active project management role. As such, we become our client ’s agent throughout the process and, inst ead of just passively providing coordination of the process, in all respects we energetically advocate and prosecute the interests and objectives of our client. We believe that NHA’s essential role is to be the “quarterback” of a project and to be responsible and accountable to our client for realization of their objectives.
Finally, if a bond transaction does occur, we note two examples where NHA distinguishes itself compared to our competitors: First, NHA excels in the credit rating process . As the City of Lancaster knows firsthand, NHA takes a hands-on approach to putting together a comprehensive rating presentation and prepares our clients to deliver their “story .” Several examples of this credit work are provided as attachments to this proposal (see Appendices C-G). We also encourage you to reach out to our references to gain a better understanding of how we helped them put their best foot forward in those meetings.
Second, NHA excels in underwriter management during the bond sale process . NHA employs prior underwriters (including myself) as part of its professional staff. As such, NHA intimately understands municipal bond market dynamics, the underwriting process and how best to time going to market and structure a deal to secure the optimal rates and terms for our clients.
This proposal represents the terms for NHA to serve as the municipal financial advisor to the City. Eric Scriven shall be the day -to-day NHA contact for the City. He is authorized to bind the firm. NHA understands that if selected as a financial advisor, NHA is prohibited from proposing any financing transactions or serving as an underwriter or swap counterparty for any City/Agency financing for the duration of the contract and may not terminate the contract to do so. Thank you for inviting NHA to submit a statement of our credentials to the City. We stand ready to answer any questions. Thank you for your consideration.
Sincerely,
Eric Scriven, Principal (Day-to-Day Contact /Authorized Representative) [email protected] | 415.785.2025 x2003
REQUEST FOR PROPOSAL FOR FINANCIAL ADVISORY SERVICES – NHA ADVISORS, LLC
D. FIRM OVERVIEW
NHA Advisors, LLC (“NHA”), a California limited liability company, is an Independent Registered Municipal Advisor registered with the SEC and MSRB and headquartered in San Rafael, California. The firm has been in existence since 1996 with two name changes over the last 20 years. Our first name change came in 2000, when we became Northcross Hill & Ach, Inc. In 2011, we then became NHA Advisors, LLC. Since 2012, NHA has provided comprehensive financial and consulting services to over 170 public agencies throughout California , with a focus on California Cities . NHA’s bond and consulting groups are currently working with 74 public agencies to develop project funding solutions, financial policies, pension liability strategies, and compliance requirements.
Our experience with California cities spans from rural, small cities to major metropolitan agencies, which provides us with the greatest exposure to problems fac ing public agencies across the State. This allows NHA to bring creative examples and solutions to our diverse public agencies. We understand the time and staff resource constraints required to develop funding strategies and financing plans and believe our holistic approach allows us to be an “extension of staff” that will integrate with City staff to provide the best solution and process for projects.
NHA’s municipal department is the sole
department of the firm. NHA’s entire
professional team of 10 registered
municipal advisors is dedicated to
California cities and special districts. All
10 NHA professionals are
headquartered in one office in San
Rafael and work remotely from various
locations. NHA is led by Principals Craig
Hill, Eric Scriven, and Mark Northcross ,
each of whom have 30+ years of public
finance experience. The Principals are
supported by three Vice Presidents
(each with nearly two decade s of
experience), an Assistant Vice
President, Associate, Senior Analyst, and Analyst. All 10 NHA professionals maintain their Series 50 License. Principal Eric Scriven maintains his Series 54 License.
NHA’s commitment to the municipal industry can be summarized by the growth in the number of municipal advisors at the firm. Since 201 4, NHA has grown from 3 advisors to 10 advisors, which represents our firm’s commitment to providing California public agencies expertise and excellent service for bond financing and consulting projects.
NHA Clients Served*
*Dots represent client engagements from 2012 - Present
Craig Hill
Managing Principal
Mark Northcross
Principal
Eric Scriven
Principal
Rob Schmidt
Vice President
Mike Meyer
Vice President
Christian Sprunger
Assistant VP
Roy Kim
Associate
Matt DeFilippis
Senior Analyst
Leslie Bloom
Vice President
NHA Advisors, LLC
Adrian Gonzalez
Analyst
REQUEST FOR PROPOSAL FOR FINANCIAL ADVISORY SERVICES – NHA ADVISORS, LLC
NHA is proud to have served as the City of Lancaster’s Municipal Advisor for multiple financings and on- call consulting projects, including most recently the City’s 2021 Lease Revenue Refunding Bonds and the Lancaster Power Authority’s 2021 Taxable Revenue Refunding Bonds for the solar renewable energy program. Our experience working on these projects has allowed us to develop familiarity with the City’s financials, and we plan to leverage this experience to hit the ground running on future projects.
In addition to working with the City, NHA has worked with many of the City’s Southern California neighbors, including El Monte, Hermosa Beach, Hidden Hills, Huntington Park, Industry, Oxnard, Palmdale Water District, Palos Verdes Library District, Riverside, Rialto, Banning, Santa Paula, South Pasadena, Torrance, Ventura, and others.
Expertise
NHA’s expertise on
California cities is a
distinguishing factor
for our firm. Based on
data from the
California State
Treasurer’s office,
NHA is ranked as the
#1 municipal advisor,
by number of u nique
bond transactions,
for California cities
since 2020. N HA has
served as municipal
advisor on general
fund (lease, TRAN,
pension, golf course,
judgment), utility
revenue (sewer,
water, storm water,
parking, electric,
etc.), tax-backed (general obligation, sales tax), and land secured (assessment, special tax) transactions.
Financing amounts have ranged from below $1,000,000 to over $400,000,000 and have included all methods of sale (competitive sale, negotiated sale, and private placement).
Beyond bond financings, m any clients rely on NHA for strategic financial planning, policy advice, cross - collaboration with other consultants and general support to staff on a wide range of issues. NHA formed 8 practice groups to address areas that our clients had told us mattered to them. We have made it our business to become an expert in areas such as climate change impacts (i.e., wildfire risks, rising sea levels), pensions, P3/economic development negotiations, and continuing disclosure to provide meaningful ideas and advice to our clients when those issues arise. Since 2018, NHA staff has completed over 290 advisory projects, many of which did not result in a financing. Our “extension of staff” style has become a core part of our services and a critical benefit to many of our public agency clients.
Move our logo to the appropriate column before copying chart. 1 Source: California State Treasurer as of October 19, 2023 (excludes conduit financings) 82 71
54 52
29 NHA
Advisors
Urban
Futures
Fieldman
Rolapp
PRAG KNN
Public Finance
MUNICIPAL ADVISOR RANKINGS FOR CALIFORNIA CITIES
Unique Transactions (January 2020 - Present)¹
REQUEST FOR PROPOSAL FOR FINANCIAL ADVISORY SERVICES – NHA ADVISORS, LLC
Details on NHA’s expertise with preparation of finance plans, voter -approved revenue measures, pensions, policy development, and energy & climate change is included in the following sections.
Preparation of Finance Plans
Being an active municipal advisor for a
variety of public agencies in California
means that NHA has experience
preparing finance plans for projects of
all sizes and credits. If the City is
looking to finance capital projects,
NHA’s methodology for developing a
funding strategy starts with a
comprehensive impact analysis that
incorporates long -term revenue and
expenditure projections, anticipated
one-time costs and any other items
that may a ffect the overall cash flows
of the City. Understanding the
structural financial strength prior to
developing a financing plan is critical to
the viability of any plan that will
become the working document going forward for 5-10 years as capital projects and future financings are implemented. Early on in project discussions, we also evaluate the universe of potential funding sources in order to create a holistic financing plan. The adjacent graphic illustrates the relative value of a comprehensive approach to addressing capital funding needs. While a municipal advisor shou ld always seek to save a client interest cost on a financing through advocating for a rating upgrade or negotiation with bond underwriters, the potential amount saved through this approach often pales in comparison to the potential impact from pursuing a holistic funding approach for capital projects.
For a sample presentation highlighting NHA’s approach to a holistic funding solution, please see Appendix H.
REQUEST FOR PROPOSAL FOR FINANCIAL ADVISORY SERVICES – NHA ADVISORS, LLC
Once the baseline analysis is developed, NHA focuses on the identified capital projects, timing, cash flow needs and potential external funding resources. This subset will be incorporated into the analysis to calculate the cash flow impact on the overall City financials. Our modeling is dynamic and will adjust for various assumption changes (budget, project costs, etc.).
In addition, prior to any recommendation on a financial plan, NHA will review historical staff reports, presentations, or other information to help frame ancillary concerns or impacts. Often, as part of this approach, other needs or issues get incorporated into the financial solution. Maximizing the benefits of any funding strategy by solving multiple “issues” is a win-win result.
NHA also believes that any analysis must be done at both a detailed technical level as well as at a decision-making, policy level . While the financing structure may determine that the City can afford to make debt service payments given current projected revenue levels, it is critical for the City Council to understand that any long-term financial commitment will require “back-up” plans in the event there is a significant change in revenues (or expenses). Understanding what programs or services might be impacted in the event of a financial change is important and necessary as part of any planning or recommendation.
Developing Financial Plans for Revenue Measure-Supported Bonds NHA has worked with public agencies throughout California to maximize the benefits of supplemental revenue measures. Depending on the prioritization between capital projects or services, our approach to developing funding plans adjusts accordingly.
With existing revenue measure success, it is critical to maximize the impact of the new revenue source to meet community expectations in a timely manner. As an example, excluding service enhancements or other operational needs, if there are capital projects to be funded from the new revenue source, a funding analysis plan is critical to solving for the optimal cash flow strategy. While it may be prudent to fund the capital projects from incoming revenues to avoid financing costs (interest, transaction cos ts), the risk of waiting to build the project (inflation, changing objectives) while accumulating sufficient funds to pay for the project may have negative effects (both financially and politically if it takes too long to get built). NHA has worked through this scenario many times and understands the strategies to solve for the best solution (whether it is accumulating cash and paying for the project at some point in the future or financing the project and using the future revenues to make debt service payments).
In addition to identifying the best financial plan for new revenues, NHA has an extensive experience list of cities that we helped to achieve successful election results necessary to secure transaction and use tax increases (sales tax), ad valorem taxes (f or General Obligation Bond authorizations), special tax or assessments (for public safety services, road enhancements, library services, and general services). Our deep quantitative skills allow us to analyze the property demographics of each community an d understand the equitable distribution of any potential new tax measure. Identifying this data point is critical in developing a successful revenue measure campaign. NHA has worked with most of the polling consultants, campaign strategists and other election professionals and complements their work with our analytical approach.
NHA’s Pension Expertise
NHA has worked with over 85 California public agencies, the majority being cities, on consulting projects related to CalPERS cost management strategies since 2014. These assignments have included stakeholder education, trend analysis/modeling, cost management strategy evaluation and implementation, risk REQUEST FOR PROPOSAL FOR FINANCIAL ADVISORY SERVICES – NHA ADVISORS, LLC
assessment, pension funding policy development, and UAL restructurings (pension bonds). NHA’s Pension and Fiscal Sustainability Group is considered a national expert in this space and is often invited to speak at various industry forums, including the August 2023 CDIAC webinars on An Integrated Approach to Strategic Pension Liability Management, as well as various pension webinars for CSMFO, GovInvest, and FDAC. The table below highlights agencies NHA has recently worked with, and the type of services requested. Our expertise and services include delivering information in a digestible way for staff, electeds and other stakeholders and transparently exploring all options, including the benefits and risks of each.
NHA’s ability to translate complex information and be agile in meeting our clients’ needs is one of our strongest attributes.
REQUEST FOR PROPOSAL FOR FINANCIAL ADVISORY SERVICES – NHA ADVISORS, LLC
NHA’s Expertise with Financial Management Policies
As part of our holistic “extension -of-staff” services, we often assist our clients with a reviewing and preparing holistic policies covering all finance obligations, not only to ensure compliance with California Government Code Sections 5922 and 53601 et s eq., but also to optimize those policies in advance of a close review by rating agencies. Most recently, we assisted Pajaro Valley Water Management Agency in CalPERS Education /
Budget Workshops
NHA Pension Report (8-
Page Report Distilling
Historical Actuarial
Report Trends)
Cost Management Strategy
Evaluation Process /
Workshops (Section 115
Trust, ADPs)
POB Workshops /
Evaluation Process
(Pros/Cons, Options and
Risks) POB (UAL Restructuring)
Alameda, City of
Arcata, City of
Auburn, City of
Belmont, City of
Calaveras Cnty. Water Dist.
Carmel-by-the-Sea, City of
Chico, City of
Chula Vista, City of
Corcoran, City of
Corte Madera, Town of
El Cerrito, City of
El Monte, City of
Farmersville, City of
Fort Bragg, City of
Gilroy, City of
Grass Valley, City of
Grover Beach, City of
Hanford, City of
Hayward, City of
Lakeport, City of
Lancaster, City of
Lompoc, City of
Mammoth Lakes FPD
Martinez, City of
Monterey, City of
Morro Bay, City of
National City, City of
Newark, City of
North County Fire Prot. Dist.
Novato Sanitary District
Oroville, City of
Oxnard, City of
Palmdale Water District
Palos Verdes Library District
Paso Robles, City of
Pittsburg, City of
Rialto, City of
Richmond, City of
Riverbank, City of
Riverside, City of
Salinas, City of
San Carlos, City of
San Miguel FPD
Sausalito, City of
Scotts Valley, City of
Seaside, City of
Sebastopol, City of
Selma, City of
Sonoma County FD
Stanislaus Consolidated FPD
Torrance, City of
Ukiah, City of
West Covina, City of
Winters, City of
NHA Pension Group Recent Experience
REQUEST FOR PROPOSAL FOR FINANCIAL ADVISORY SERVICES – NHA ADVISORS, LLC
optimizing their investment policy ahead of a bond/WIFIA loan financing for a $160 million aquifer recharge and recovery project.
NHA has worked with numerous public agencies to develop custom debt reserve policies (including pension cost management strategies). In addition, for clients issuing General Fund debt or debt instruments for pensions, NHA has recommended and assisted in th e formation of pension funding policies to support long -term fiscal sustainability. Credit rating agencies such as S&P Global have noted that many public agencies have a very weak debt and contingent liability profile characterized by large pension and OPEB liabilities. Formalized policy outlining a strategy to address rising pension costs are both a positive for fiscal sustainability and credit enhancement.
The “NHA Way” – Our Approach to Serving Clients
The “NHA Way” is one more way we distinguish ourselves from other firms. The “NHA Way” is our methodology for delivering services through a comprehensive yet efficient process which begins by (i) listening to understand the City’s goals, (ii) conducting robust due diligence, (iii) developing and presenting a comprehensive set of options, (iv) dist illing complex financial subject matter in an understandable way, and (v) executing on the approved option. This process can be applied to any project the City bri ngs us. The graphic below illustrates how various municipal advisory services align with the NHA Way.
REQUEST FOR PROPOSAL FOR FINANCIAL ADVISORY SERVICES – NHA ADVISORS, LLC
Listen to
Understand
Robust Due
Diligence
Options
Translate
and Educate
Execute
THE
“NHA WAY”
Key Services
✓ Review Long-Range Financing
Needs (CIP)
✓ Debt Management Strategies
✓ Present Alternative Funding
Strategies
✓ Analyze and Interpret Legislation
for impacts to City
✓ Review Business Plans and
Financial Proposals
✓ Financing Plans
✓ Debt Issuance Process
Optimization
✓ Market Analysis
✓ Assisting and Preparing Requests
for Proposals
✓ Credit Rating / Debt Covenant
Education and Surveillance
✓ Coordinating Competitive Sales
✓ Negotiating Terms in Negotiated
Sales
✓ Post-sale advice on proceeds
✓ Transparent and Digestible
Stakeholder Education
✓ Ad-Hoc Financial Analysis
✓ Reinvestment Strategies
✓ Pension Education + Cost
Management Strategy Evaluation
✓ Revenue Enhancement Modeling
✓ Risk Assessment and General
Fiscal Sustainability Analysis
✓ Staff Reports/Presentations
MUNICIPAL ADVISORY
SERVICES
✓ Project Manager and Quarter-Back
for ALL Debt Issuance Activities
✓ Structuring, Modeling
✓ Underwriter Management
✓ Lead Credit Presentation
✓ Comprehensive Compliance and
CD Services
Patiently listening to gain clarity as
to our clients’ goals, opportunities
and constraints is a necessary
starting point.
Combining our decades of
experience and expertise with
extensive due diligence effort
ensures that a multi-faceted
solution set is being investigated for
client consideration.
Development and presentation of
the most comprehensive set of
alternatives is a hallmark of the
NHA Way. As a fiduciary, sometimes
our duty to client entails advising
that “the best deal is no deal.”
Distilling complexity into simplicity.
Honest discussions of the pros/cons
and risks of alternatives. Ensuring
client decision-makers have their
own clarity to make the best
decisions for their public agency and
its stakeholders.
Client decides and then client
directs staff and NHA to implement.
As client’s “go-to” representative
and Quarterback to secure most
effective, efficient effort is
undertaken to ensure client’s
interests are served and objectives
are met.
REQUEST FOR PROPOSAL FOR FINANCIAL ADVISORY SERVICES – NHA ADVISORS, LLC
E. PERSONNEL AND REFERENCES
Proposed Day-to-Day Team
NHA will designate Eric Scriven (Principal) as the day-to-day point of contact and primary person responsible for managing the relationship with the City. All ten NHA team members will be available to execute assignments on behalf of the City depending upon the project scope, timing and required deliverables. All assigned team members will be committed to providing the City with rapid response, full attention and comprehensive service. NHA will designate Matt DeFilippis, Roy Kim, Christian Sprunger, and Leslie Bloom to provide any computer financial analysi s services. Summaries of title, role, qualifications, certifications, and relevant technical experience for each team member are below. Full resumes for NHA’s team can be found in Appendix I.
Eric Scriven, Principal. Role: Day-to-day contact & Relationship Manager Mr. Scriven will be the City’s day -to-day contact and relationship manager. His career serving California public agencies began in 1990. As a generalist, he has expertise in all facets of local government operations and finance. Recent projects have included (i) CFD formation project management and development terms negotiation, (ii) water enterprise capital planning, (iii) pension cost management education, (iv) financial forecast development, and (v) evaluation of energy efficiency project proposals. Mr. Scriven holds an MBA, from Haas School of Business, and a B.S. in Urban Land Economics and Finance from the University of California, Berkeley. He maintains his MSRB Series 50 and Series 54 License.
Mark Northcross, Principal. Role: Resource/Practice Area Expert Mr. Northcross has more than 40 years of public finance experience in California.
He is a leading advisor on climate change infrastructure and leads NHA’s alternative financing practice that focuses on “holistic” funding solutions, with special emphasis on SRF, WIFIA, Federal and State grants. When it comes to utility expertise, Mr. Northcross has successfully delivered funding to California utilities facing the challenges of drought, earthquake, flooding, and Prop 218 litigation. His first utility revenue bond issue was for the San Bernardino Valley Municipal Water District in 1983. Outside of the utility space, Mr. Northcross has also managed the formation of CFD’s for P3’s throughout the State since 1987. He holds a B.A. in Social Sciences from the University of California, Irvine. He maintains his MSRB Series 50 License.
Craig Hill, Managing Principal. Role: Resource/Practice Area Expert Mr. Hill’s career serving California public agencies began in 1989. Mr. Hill currently manages NHA’s day-to-day operations as well as NHA’s Voter Approved Revenue Measure Group. Mr. Hill has extensive experience with financing infrastructure for local agen cies, and focused expertise in voter -approved initiatives, budget and financial projections analysis, and public policy consulting. Mr. Hill holds a B.S. in Managerial Economics and a B.S. in Agricultural Economics, from the University of California, Davis. He maintains his MSRB Series 50 License.
REQUEST FOR PROPOSAL FOR FINANCIAL ADVISORY SERVICES – NHA ADVISORS, LLC
Leslie Bloom, Vice President. Role: Quantitative/Project Lead Ms. Bloom has 20 years of experience in accounting and financial analysis, with 16 years dedicated to public finance. Prior to joining NHA in 2021, Ms. Bloom worked in Public Finance Debt Investment Banking, most recently with Raymond James, where she completed over 250 senior managed and private placement financings totaling more than $3.5 billion. Ms. Bloom brings to NHA clients her exceptional due diligence, credit analysis, and project management skills to ensure optimal analysis and results are secured for both consulting and financing assignments . Ms. Bloom’s experience includes general fund lease, tax allocation, land secured, utility (water and wastewater), sales tax, general obligation, pension obligation, and short -term notes. Ms. Bloom holds a B.S. in Acc ounting and Finance from the University of Arizona. She maintains her MSRB Series 50 License.
Christian Sprunger, Assistant Vice President. Role: Quantitative/Project Lead Mr. Sprunger has worked in public finance since 2016, during which time he has worked on over one hundred financings for California municipal issuers, totaling over $2.2 billion. While he is an experienced generalist, Mr. Sprunger has honed his skill in th e utility space with his experience with WIFIA loans and enterprise fund cashflows and coverage modeling. Mr. Sprunger is also NHA’s lead when it comes to equipment leasing. Mr. Sprunger holds a M.S. in Finance, from Indiana University, and a B.S. in Biolo gical Sciences, from Biola University. He maintains his MSRB Series 50 License.
Roy Kim, Associate. Role: Quantitative/Project Support
Mr. Kim will be available to provide support to the assigned team. Mr. Kim has provided municipal advisory and consulting services to numerous California public agencies since 2018, totaling $2.0 billion in financings. He supports NHA’s Vice Presidents and Principals on General Fund and pension cost management engagements, including through developing general fund forecasts, drafting credit rating presentations, analyzing pension plan payments strategies, researching debt refinancing opportunities and assisting in the general management of a debt issu ance process. Mr. Kim holds an M.S. in Finance, from Johns Hopkins University, and a B.A. in Global Studies, from the University of California, Santa Barbara. He maintains his MSRB Series 50 License.
Matt DeFilippis, Senior Analyst. Role: Quantitative/Project Support Mr. DeFilippis will be available to provide support, as needed, to the assigned team.
Mr. DeFilippis began working in public finance in 2021 when he joined NHA. Since then, he has provided project management and deal support on a variety of California financings totaling over $450 million in par. Mr. DeFilippis’ recent projects have included educational workshops on pension cost management, general fund forecasting, and credit rating analysis. Mr. DeFilippis holds a B.A. in Applied Mathematics, from the University of California, Berkeley. He maintains his MSRB Series 50 License.
REQUEST FOR PROPOSAL FOR FINANCIAL ADVISORY SERVICES – NHA ADVISORS, LLC
Additional NHA Resources
Rob Schmidt, Vice President. Mr. Schmidt’s career serving California public agencies began in 2004, including several years as a special tax consultant. Mr. Schmidt leads NHA’s Continuing Disclosure Compliance Practice along with supporting the Land - Secured & Development Practices. Mr. Schmidt has extensive experience evaluating and implementing a variety of revenue measures (general obligation, parcel tax, sales tax, etc.) and financing structures (special tax and assessment bonds, general fund lease obligations, utility revenue bonds, general obligation bonds, short -term notes, tax allocation bonds, etc.). His experience also includes state and federal loan and tax credit programs. Mr. Schmidt holds a B.A. in Economics with a Specialization in Computing from the University of California, Los Angeles. He maintains his MSRB Series 50 License.
Mike Meyer, Vice President. Mr. Meyer’s career serving California public agencies began in 2003, with half of this time spent as a banker. Mr. Meyer manages NHA’s Pension and Fiscal Sustainability Group and has analyzed pensions and POB structuring solutions since 2006. He has worked on each of the firm’s pension consulting (85+) and POB (20+ / $2.0 billion) engagements since 2014. Mike is also an experienced generalist, having completed over 200 bond financings using all types of structures, including uti lity revenue, lease revenue, sales tax and transportation revenue, TABs, and land secured. Mr. Meyer holds a B.S. in Management Science, from the University of California, San Diego. He maintains his MSRB Series 50 License.
Adrian Gonzalez, Analyst. Mr. Gonzalez will be available to provide support, as needed, to the assigned team. Mr. Gonzalez has worked in public finance since 2022, when he joined NHA. Since then, he has provided support on various consulting assignments and transactions for Califor nia public agencies. Mr.
Gonzalez’s recent projects have included pension cost analysis, lease revenue bond transactions, and utility coverage analysis. Mr. Gonzalez holds a B.B.A . in Finance from the University of Texas, El Paso. He maintains his MSRB Series 50 License.
Recent Clients of Proposed Personnel
ProvPort, Inc (Port of Providence Public-Private Partnership) Address: 35 Terminal Rd., Providence, RI 02905
Contact Name, Title Phone Email
Ray Meador, Founder & CFO (ret.) (415) 456-7521 [email protected]
Project Description:
• Financing for Capital Improvements (including credit presentation development), Negotiation support, continuing disclosure services.
Description of Services Provided:
• In 1994, after years of neglect by the City of Providence and a significant buildup of deferred maintenance at its City -owned Marine Terminal and Port, the City issued a n RFP to secure a P3 partner. The successful responder formed ProvPort, Inc . and took ownership of the Port’s
REQUEST FOR PROPOSAL FOR FINANCIAL ADVISORY SERVICES – NHA ADVISORS, LLC
facilities and responsibility for its operations and maintenance. ProvPort, with close cooperation and oversight from the City and its redevelopment agency, has transformed the Port’s facilities and operations such that it now produces significant revenues available for Port improvements, disbursements to the City and surrounding community, as well as provides for stable well-paying union jobs. This public-private partnership is a model for how a City can transfer operations and maintenance risks for large, non-essential capital projects/facilities while maintaining this type of asset’s contributions to its finances and ancillary benefits for economic development, jobs, and other community contributions. Key financial considerations such as how capital financing debt should be secured and structured, as well as how to arrange for management agreements and flow of funds are critical to create a long -lasting and mutually b eneficial partnership. NHA has served directly as ProvPort’s municipal advisor during the past 2 years on an ongoing $13 million financing for capital improvements. NHA’s Eric Scriven is familiar with the origination of the P3 between the City and ProvPort since its inception in 1994. Please see Appendix F for the credit presentation NHA worked on as part of ProvPort’s financing.
Tahoe Douglas Visitors Authority
Address: 169 Highway 50/ PO Box 5878, Stateline, NV 89449 Contact Name, Title Phone Email
Carol Chaplin, President & CEO (775) 588-5900 x302 [email protected]
Project:
• Tahoe South Events Center Financing
Description of Services Provided:
• NHA advised the Tahoe Douglas Visitors Authority for the issuance of $112 million in bonds to finance the construction of the $100M Tahoe South Events Center (TSEC). The TSEC is a 138,000 square foot, 6000-seat, multi-use facility to host conventions, conferences, sporting events, trade shows, performing arts, and musical concerts. A couple of NHA’s key contributions were project management and negotiation role for passage of new surcharge bill (SB 461) and tax increment pledge.
A complete case study can be found in the New Money (Taxable and Non-Taxable) Experience section of the proposal.
City of Gilroy
Address: 7351 Rosanna Street, Gilroy, CA 95020
Contact Name, Title Phone Email
Jimmy Forbis, City Administrator (408) 846-0250 [email protected] Harjot Sangha, Finance Director (408) 846-0294 [email protected]
Project:
• Ice Rink Recreation Facility Project
Description of Services Provided:
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• The City of Gilroy is partnering with the San Jose Sharks to develop a dual rink facility on their City Sports Complex (soccer, baseball, and softball fields). The ice rink will be a public facility, but the programming and operations will be managed by the Sharks organization and will include youth hockey leagues as well as recreational skating. The facility will include seating for 1,200 people to handle tournaments or exhibitions. The City anticipates financing the facility through the issuance of lease revenue bonds, paid from the City's general fund bu t paid from net revenues from the operations of the ice programs. As additional security, the Sharks organization anticipates maintaining a line of credit to cover the debt service payments in the event net revenues fall short in any year. The project is in design and anticipated to be under construction in late 2024.
City of Gonzales
Address: 147 Fourth St., Gonzales, CA 93926
Contact Name, Title Phone Email
Carmen Gil, City Manager (831) 675-5000 [email protected] Patrick Dobbins, Public Works Director (831) 675-5000 [email protected]
Project Description:
• Funding for Community Center Complex (Interim in 2024, USDA in 2026) Description of Services Provided:
• NHA has worked with the City to identify and secure multiple, alternative funding sources for the City’s Community Center Complex. The financing plan aimed to acquire grants and below-market rate loans in order for the City to afford the $25.8 million firs t phase of the project. NHA project managed the financing process, generating multiple funding and cashflow scenarios to determine the City’s ability to afford the project, as well as assisted the City with a lengthy USDA application process, involving community economic reports, financial feasibility, modeling, and projections.
NHA also created a comprehensive funding and construction draw-down schedule that will enable the City to identify the funding source to each project component.
A complete case study can be found in the New Money (Taxable and Non-Taxable) Experience section of the proposal.
City of Pittsburg
Address: 65 Civic Avenue, Pittsburg, CA 94565
Contact Name, Title Phone Email
Garrett Evans, City Manager (925) 252-4034 [email protected] Paul Rodrigues, Finance Director (925) 252-4848 [email protected]
Project Description:
• Water Rate Study evaluation, 2022 Water Revenue Bonds, hotel development negotiation support, power company negotiation support, broadband development proposal evaluation and general fund financial forecast, among several others.
Description of Services Provided:
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• NHA has provided a wide range of municipal advisory and consulting services to City of Pittsburg, including serving as the municipal advisor on the 2022 Water Revenue Bonds, and then developing a 20 -year General Fund Forecast later that same year. The Water Revenue Bonds provided $45.8 million in project funds for water treatment plant projects. The debt service on the Water Revenue Bonds was strategically structured to “wrap” around the debt service of Pittsburg’s existing 2014 IBank loan and 2016 Water Revenue Bonds. The financing received a “AA-” credit rating, which was then enhanced to an “AA” rating with bond insurance. The City achieved an all-in interest cost of 4.43% when the Bonds priced in May 2022. • Later that year, in October, NHA began assisting Pittsburg with updating the 20-year General Fund forecast. NHA ultimately built an interactive and streamlined model that was more accessible for staff use. A complete case study can be found in the Long-Term Strategic Financial Planning Experience section of the proposal.
Three Additional Client References
Reference #1: City of El Centro
Contact: Cedric Ceseña, City Manager
Karla Chaparro, Finance Director
Contact Address: 1275 Main Street, El Centro, CA 92243 Contact Phone & Email Address: Cedric: (760) 336-1085 | [email protected] Karla: (760) 337-4564 | [email protected]
Reference #2: City of Riverside
Contact: Edward Enriquez, Assistant City Manager/CFO
Contact Address: 3900 Main St, Riverside, CA 92522
Contact Phone & Email Address: (951) 826-5660 | [email protected]
Reference #3: City of Ukiah
Contact: Dan Buffalo, Finance Director
Contact Address: 300 Seminary Avenue, Ukiah, CA 95482
Contact Phone & Email Address: (707) 463-6220 | [email protected]
F. LONG-TERM STRATEGIC FINANCIAL PLANNING EXPERIENCE
NHA’s team has provided long -term strategic planning services for more than a decade. This expertise grew out of our continued discussions with public agencies as it related to issuing debt for projects and the need to look beyond the next few years to better unders tand the needs and financial impact s over time. Our work has included everything from quantitative modeling/forecasting to extensive policy recommendations to maintain certain reserve levels or allocation of revenues for future capital projects to avoid the need to incur debt. NHA develops long -term strategic plans based on priorities set by each public agency. No two are alike and our expertise allows us to design a plan specific to the city, situation, and project.
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NHA believes that every capital project should start with some form of long -term strategic financial plan. If a project can be funded from reserves or cash flow, it alleviates the need to incur debt and make interest payments. Without the financial plan, NHA believes that a public agency does not have a good understanding of all options for funding any capital project.
Case Study: City of Sebastopol Fiscal Assessment Project In 2022, NHA Advisors was hired by the City of Sebastopol to evaluate the current fiscal condition of the City, including reviewing past trends and building out a projection model to forecast future scenarios based on different economic assumptions. As par t of this process, NHA helped the City identify and analyze the largest potential challenges the City is facing, including rising CalPERS pension costs, inflation/labor costs, capital funding needs and potential legislative changes that could impacted sales tax revenue. After several meetings with staff and the City’s budget committee over a 6-month period, NHA performed extensive analysis related to strategies that City and its Council could consider in order to close the widening structural deficit. Some of these strategies included various revenue measures (Sales Tax, Parcel Tax, GO Bond, TOT, UUT, Cannabis) as well as cost containment strategies, such as utilizing a Section 115 Trust to help smooth impending mountain peak in CalPERS UAL payments. • The full Fiscal Assessment Presentation can be found here. • A video of NHA’s public meeting with Sebastopol’s Budget Committee on 4/5/2023 can be found here. • A video of NHA’s presentation to the Sebastopol City Council can be found here (please see timestamp 43:36 for the beginning of the presentation).
16.5% 3.1%
-16.3%
-28.4%
-41.0%
-55.4%
-71.6%
($12.0)
($10.0)
($8.0)
($6.0)
($4.0)
($2.0)
$0.0
$2.0
$4.0
$6.0
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$12.0
$14.0
$16.0
FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 Millions
Unassigned Reserves Balance Total Resources Available:
(Revenues & Transfers In)
Total Resources Used:
(Departmental, Other Expenditures & Transfers Out)
Policy Reserve Level (15%)
$2.1M $0.4M
($2.2M)
($3.9M)
($5.8M)
($8.3M)
($11.3M)
Additional Revenue to Maintain 15% Reserve Policy
$1.6M $2.7M $1.7M $2.0M $2.6M $3.1M
REQUEST FOR PROPOSAL FOR FINANCIAL ADVISORY SERVICES – NHA ADVISORS, LLC
Case Study: City of Pittsburg 20-Year General Fund Forecast In October 2022, NHA began assisting the City of Pittsburg with updating the City’s 20-year General Fund forecast. The City’s existing model was effective but was lacking user accessibility and the ability to easily model and display the effects of various assumptions. NHA’s goal was to keep the same familiar structure of revenues and expenditures for City staff but streamline the model so that it would be more accessible for staff use and be dynamic enough to model various scenarios and assumptions. NHA ultimately built a 20-year forecast model with a “front end” and “back end”. The front end contained charts and tables that displayed key revenue, expenditure, and reserve balances, as well as the ability to plug in growth rates on revenue and expenditure items, which would dynamically change the charts and tables. The front end also contained a table that the City pa stes into its annual budget. The back end shows detailed revenue and expenditure line items and all the assumptions used to calculate the revenues, expenditures, and general fund reserve balance. There is more detail in the back end than the front end, but the back end remains interactive, and users can modify assumptions for numerous items, such as CalPERS pension expenses, additional development, new debt, annual revenue and expenditure growth rate, and more.
Case Study: City of El Monte General Fund Financial Forecasting In 2020, NHA was engaged by the City of El Monte to evaluate options for restructuring its CalPERS and PARS pension obligations. Unique to the city and approximately 20 other California public agencies is the existence of a property tax override that can b e levied to pay for eligible, defined portions of the city’s CalPERS expenses related to pension benefits in place prior to the adoption of Proposition 13 in 1978. In the process of assisting the City with dual -tracked bond restructurings via taxable pensi on obligation bonds (CalPERS) and lease revenue bonds (PARS), NHA worked with staff to produce a detailed 10 -year financial forecast model, specifically comparing projected General Fund expenditures prior to and post pension bond restructurings.
Total Revenues vs. Total Expenses vs. General Fund Reserve Balance $0.0
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General Fund Reserve Balance (Incl. BSF) Total Revenues Total Expenses Minimum General Fund Cash Requirement
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In light of the parameters of the pension property tax override, the estimated pension bond savings attributable to the General Fund differed from those estimated solely from comparing the pension obligation bond debt service to the city’s outstanding pension unfunded liability payments. NHA’s forecast model incorporated this nuance to more concretely demonstrate the impact of both restructurings to the General Fund and the scale of cash flow benefit to the city.
Assessment of the City’s Pension Costs & Cost Management Strategies for Consideration
Like many CalPERS member agencies, the City’s pension unfunded accrued liability (“UAL”) is the single largest liability on its balance sheet. While the City’s UAL is always a moving target based on investment performance, the past few years have been exceptionally volatile. The City’s UAL had decreased from $69 million to $50 million as of 6/30/2021 on the back of strong FY 2021 CalPERS returns of 21.3%, but poor investment performance from CalPERS in FY 2022 of -7.5% offset the investment gains achieved i n FY 2021. The City’s UAL rose to $81 million as of 6/30/2022 as a result of the -7.5% investment returns. Note that this is the amount that is currently seen in the City’s latest CalPERS actuarial valuation report.
For FY 2023, CalPERS announced it achieved preliminary investment returns of 5.8%, which is below their target returns of 6.8%. As a result, the City’s UAL balance is projected to increase to $82 million. The chart below depicts the City’s historical and projected payments on its UAL. The UAL payments are projected to decline slightly in FY 2024 to $5.4 million because of the strong FY 2021 returns but will ramp up starting in FY 2025 and potentially peak at $9.3 million in 2031. Compared to FY 2024 levels, this represents a 71% increase in payments. While strong returns in the future can mitigate the steepness of the curve, the current trend of rising UAL payments over the next decade presents a challenge for the City and other public agencies across the state.
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Cost Management Strategies for Consideration
UAL Restructuring/Pension Bonds – High interest rates have changed the risk/reward calculus compared to a couple years ago, and therefore pension bonds are currently not recommended. NHA actively monitors the markets and could update the City periodically in the future if the City was ever interested in pension bonds. Pension bonds carry significant risks and NHA would recommend conducting a robust “stress testing/risk assessment” process to illuminate the potential downside risks of UAL restructurings should the City ever be interested.
Additional Discretionary Payments (ADPs) and Section 115 Trusts – ADPs represent payments made to CalPERS above and beyond the City’s required annual contributions to proactively pay down its UAL balance. An alternate option for utilizing set -aside reserves for pension is to contribute them toward a Section 115 Trust (potential strategies detailed below). The Section 115 Trust is a vehicle that can only be used for pension and OPEB costs, however it grants access to more flexible investment options than those restricted by the California Government Code. The City currently has a Section 115 Trust with Shuster Advisory Group, LLC.
A Section 115 Trust, among other strategies, can be a strong tool for managing pension costs as part of a holistic approach for enhancing Citywide fiscal sustainability. The City can make deposits into the Trust City of Lancaster
Historical and Projected CalPERS UAL
Source: CalPERS Pension Outlook Tool & Actuarial Valuation Reports UAL
Balance
(FYE):
2023:
$81.8M
2022:
$80.6M
2020:
$68.7M
$0.0
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2020
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4.7% 21.3% -7.5% 5.8%Returns:
UAL Payments (6/30/2022
Actuarial Valuation)
New UAL Payments from
5.8% FY 2022-23 Returns
Historical UAL
Payments
2021:
$50.2M
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(generating investment returns) and, in the future, use the balance generated to help pay down its CalPERS costs.
One option the City can consider for flexibly leveraging Section 115 Trust funds is effectuating a “payment smoothing strategy” by funding the Trust to desired levels in the near term and then implementing a strategic drawdown on the Section 115 Trust over time such that the net impact to the General Fund each year is more manageable and predictable. Other options for utilizing a Section 115 Trust can include additional discretionary payments (“ADPs”) and growing the fund balance to pay down a more significant UAL balance in the future.
Illustrated below is a hypothetical smoothing approach that would create a reduction in the projected peak in UAL payments while providing the City the flexibility to directly manage these payment levels.
Assuming approximately $ 4.1 million in total contributions from FY 2024 to FY 2027 (deposits shown below in teal bars) and 4.5% investment earnings, the City could lower the projected peak to $7.8 million and smooth out net contributions from FY 2028 to FY 2032 (shown below in orange dotted line), resulting in $1.1 million in net savings. Note that this is a hypothetical scenario and NHA would work with the City to refine this analysis based on several factors, including the target investment returns of the City’s Section 115 Trust portfolio with Shuster, as well as existing Trust balances and any scheduled deposits and withdrawals in the future.
Pension Funding Policies – In our experience (and also a positive for the City’s credit rating!), having a strong pension funding policy to memorialize the City’s long -term plan of attack for pension is crucial.
Notably, identifying the various cost management tools the City will consider – and when, and under what
*Uses assumptions from the City’s 6/30/2022 CalPERS Actuarial Valuation $-
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Total UAL Payments* Deposits to Trust Net Payments (Incl. Deposits & Withdrawals) $1.1 million in savings
(Net of Deposits)
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conditions – is very important. Secondly, most strategies aside from a pension bond require additional funds to be used to effectuate the strategy. In order to raise and garner support to set aside these funds, a policy will often set a protocol for how a nnual surplus and/or one -time revenues can be allocated between various funds/priorities, including the pension funding strategy. NHA maintains dozens of sample policies from other cities that we have helped develop and would welcome the opportunity to help the City implement one, or refine one (if needed), that already exists.
Being mindful to how rating agencies such as S&P are evaluating the credit position of public agencies, we would encourage the City to evaluate a multitude of pension cost management options (Fresh Start, ADPs, 115 Trust, POBs, etc.) to determine an approa ch that best meets the City’s immediate and long -term objectives.
G. NEW MONEY (TAXABLE AND NON-TAXABLE) EXPERIENCE
The following case studies present some of NHA ’s experience in the last 3 years with new money financings.
Case Study: Tahoe Douglas Visitors Authority – Tahoe South Events Center Financing NHA advised the Tahoe Douglas Visitors Authority for the issuance of $112 million in bonds to finance the construction of the $100M Tahoe South Events Center (TSEC). The TSEC is a 138,000 square foot, 6000 - seat, multi-use facility to host conventions, conferences, sporting events, trade shows, performing arts, and musical concerts. The project is the realization of over two decades of work in the Tahoe basin for creating such a facility.
NHA worked with the Authority’s financing
and lobbying team to successfully secure the
legislative approval of a new $5/night
transient lodging surcharge on the Nevada
side of South Lake Tahoe. In addition, NHA
worked with the Authority’s financing team
to formalize a pledge from Douglas County,
Nevada, to convey a portion of tax increment
revenues from the local redevelopment
project area toward debt service payments
on the bonds.
Due to the highly volatile nature of the pledged revenues (primarily hotel tax revenues), NHA worked with the Authority’s financing team to help create an innovative structure that utilized a “revenue stabilization fund” as a secondary reserve while providing a secondary source of operating revenues for the Authority.
The Authority sold their unrated bonds on October 26, 2020 and the bonds were over 7x oversubscribed, receiving broad market demand, a testament to the innovative structure and strong performance of the Authority through the COVID-19 pandemic.
A couple of NHA’s key contributions were project management and negotiation role for passage of new surcharge bill (SB 461) and tax increment pledge. NHA was deeply involved with crafting the message and preparing presentations to both the Nevada state leg islature and to Douglas County elected officials regarding these revenue streams.
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NHA worked closely with Authority finance staff to help create a cashflow projection model that tied to the Authority’s budget and projected Authority cash balances on an annual basis through 2051 and on a monthly basis through the projected completion of the TSEC.
Please see Appendix G for the investor presentation that NHA assisted on for the financing.
Case Study: City of El Centro - Planning and Execution for Sales Tax Financing for a Police/Fire Station and Library Leveraging New Voter Approved Revenue Stream In 2017, NHA was engaged by the City of El Centro to serve as their municipal advisor and to provide financing options for a sales tax measure (Measure P) that voters approved in November 2016. These funds were earmarked for construction of a public safety building (Police/Fire) and a new city library.
Prior to issuing bonds to fund the library (lease bonds issued in 2021) and the police station (lease bonds issued in 2023), NHA worked with city staff and the city council to develop an optimal Plan of Finance to ensure that these critical
projects could get funded while
not over leveraging the
Measure P revenue stream.
NHA’s analysis incorporated the
city’s pension costs in modeling
a multi -staged financing
strategy that combined pay -as-
you-go financing and a reserve
fund release (represented by
the blue bars in the graphic). A
hallmark of NHA’s work product
is detail -oriented analysis
presented in a way that makes
the content relatable for city
staff and understandable for
elected officials.
After development of a sustainable Plan of Finance, NHA led the city through two bond financings, one for the $20 million new library in 2021, and one in early 2023 for the new $40 million police station. NHA led the credit rating efforts to help obtain a strong “A” lease revenue bond rating as well as manage the competitive underwriter selection process.
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
Sales Tax Revenues/Uses of Funds
Fiscal Year Ending
$31M SERIES A ANNUAL DEBT SERVICE:
$2.0M THRU 2037, $3.2M THEREAFTER
$89M-$192M OF SURPLUS SALES
TAX REVENUES
PROJECTED
MEASURE P
REVENUES
USE $9M OF
MEASURE P AS
PAY-AS-YOU-GO
$3.0M AND $2.0M RESERVE FUND RELEASES
(UPON PROJECT COMPLETION)
RESIDUAL MEASURE P REVENUES USED TO
ELIMINATE $2MM STRUCTURAL DEFICIT
$40M SERIES B ANNUAL DEBT SERVICE:
$1.3M THRU 2037, $2.3M THEREAFTER
ESTIMATED PENSION INCREASE
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Case Study: City of Gonzales Funding for 2023 Community Center Complex The City of Gonzales is a vibrant and diverse community, with a rich agricultural heritage in the Salinas Valley. It is home to many regional, national, and international agri -businesses, and most jobs in and around Gonzales are in growing, processing, and packing.
Due to strong population growth the City had experienced by the turn of the millennium, it was clear that the community needed improved and expanded services. A 2002 study found a severe shortage of recreation opportunities and proposed a 20,000 square foo t community center. Ten years later, a series of environmental, engineering, and design studies resulted in an updated vision of a community center that would include a new branch library. The vision of a joint recreation center -library complex was reconfirmed and updated in 2019 and 2020 through a design process that included extensive community engagement. In November 2020, the Gonzales community approved Measure X, which extended the term and increased the rate of a 2014 sales tax measure to generate funding for the project.
The Community Center Complex will include
diverse meeting, multipurpose, and
performance spaces; a technology -rich teen
innovation center; and a new branch of the
Monterey County Free Libraries system,
bringing a new level of service and vibrancy to
the community of 8,000.
NHA has worked with the City over the past two
years to identify and secure multiple,
alternative funding sources for the City’s
Community Center Complex. The financing plan
aimed to acquire grants and below-market rate
loans in order for the City to afford the $25.8
million first phase of the project.
Given that the City is designated a
“Disadvantaged Community” due to its median
income and poverty rates in a heavily
agricultural community, the City qualified to
apply for a loan from the USDA rural
development program. The final funding package was a combination of grant funding, City accumulated funds, USDA loan and a community capital fundraising campaign. The City’s Measure X sales tax will be used towards repayment of the USDA loan. Successfull y securing the multiple sources for the project funding enabled the City to move forward with the first phase of the project.
Over the two-year period, NHA project managed the financing process, generating multiple funding and cashflow scenarios to determine the City’s ability to afford the project, as well as assisted the City with a lengthy USDA application process, involving community economic reports, financial feasibility, modeling and projections. In addition, NHA created a comprehensive funding and construction draw-down schedule that will enable the City to identify the funding source for each project component. NHA also presented at several city council meetings to keep stakeholders informed of the Community Center Complex funding process and USDA application process.
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The second phase of the funding will begin in early 2024, securing interim construction funding that the USDA loan will take out upon completion of the construction.
Preliminary Thoughts on a Comprehensive “Funding Plan” for the City’s Upcoming Capital Improvement Plans (i.e., Events Center, Public Safety Operations Facility, Stadium Conversion)
Through NHA’s recent work with ProvPort,
Tahoe Douglas Visitors Authority (TDVA),
Gilroy/San Jose Sharks, Gonzales, El Centro,
and Lancaster; as well as many decades of
additional experience working for public
agency (i.e., city and RDA) clients (see Potential
Conflict of Interest section), our team brings a
wealth of knowledge to bear on critical aspects
of bringing general public facilities out of the
ground. Additionally, and very specifically,
with respect to likely P3 arrangements that will
be structured on the City’s new Events Center
and repurposing the existing, City -owned
baseball stadium towards accommodating a
professional soccer team, these recent NHA
project experiences will generate meaningful
NHA contributions to the City’s meeting its
objectives of efficient funding
planning/execution and financial and
operational risk mitigation to the City’s
General Fund. Some initial thoughts provide
insight on how NHA would assist and advise
the City:
• Are there alternative lump -sum or annual revenue sources for the funding plan? Public or Private?
o Tahoe Blue was about working with a variety of alternative revenue sources to craft a Funding Plan for the project. Lancaster ’s Event Center could be similar – find a way to fund their event center at minimum financial risk to the City’s General Fund. o Gonzales secured a state earmark for its Teen Innovation Center, as well as several smaller pots of money for certain complimentary uses that were integrated into the project (i.e., Library, charging stations); Also, a robust community fundraising campaign has secured significant funding for the project. Given there is a dedicated annual revenue source to pay debt service, any fundraising can offset bond requirements and free up add itional annual revenues for operations and maintenance.
• Design Matters.
o The sizing and design of Tahoe Blue was totally unique for the Tahoe market. TDVA spent years fine tuning the design. The private company that operates Tahoe Blue and books events was brought in early to help with design. Lancaster may wish to consider this – First, a word about use of “Funding Plan”
terminology versus just saying “financing ”. In order
to “walk the talk” about NHA serving as a fiduciary
(the “NHA Way”), we strongly believe that thorough
due diligence is needed to uncover all ideas/options
that might create a more optimal plan of finance.
These options can sometimes include s tate and
federal subsided grant/loan programs, use of
reserves, restructuring of existing debt, community
fundraising, partnerships (public and private) and,
finally, tax -exempt or taxable municipal financing
through either a public offering or a direct placement
with a financial intermediary. To our way of thinking, the City’s elected officials, its staff and their financial advisor owes it to the community to optimize the
funding plan to reduce costs, increase flexibility and
reduce/eliminate risks (“Black Swan” or otherwise).
Simply proceeding towards a bond issue ( i.e., “a
financing”) is the easy approach and may be
executed when all other options have been
reviewed.
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find a booking agent/operator who believes the Lancaster market has potential, and design the center around the kind of events that the operator thinks will work in that market. NHA can craft a limited RFP for such an operator and do outreach to secure initial interest and responses. For such a facility in Lancaster’s location, NHA advises that this input is invaluable earlier in the project’s development, not once it is under construction. o With respect to converting/designing a specialized sports venue like the Jets ballpark, engaging the incoming professional soccer franchise to design the facility (based on prior experience with similar facilities) is essential (Gilroy has made use of San Jose Sharks’ expertise for its new facility design).
▪ Sharks will also manage operation and programming for the facility once it is open. There will be a management fee but no profit sharing. • Committed, Financially Sound Partner Matters.
o Gaining early commitment on design can also mean that a private partner may be willing to shoulder additional risk for operations and facility costs (including debt service) in return for a higher share of the profit. Special care must be undertaken to evaluate the pros/cons for this to structure an operating agreement. To the extent that a longer term and higher profit share is required for the private party commitment, then taxable and ostensibly non-recourse debt may be the required and preferred financing structure. o For Tahoe Blue, tax -exempt debt was issued; however, the critical planning for this occurred well in advance of construction and bonds being sold. o For Gilroy Ice Arena (which will serve as Sharks practice facility), Sharks will be responsible for managing the construction of facility.
▪ While City will fund the project from lease revenue bond proceeds, Sharks will guarantee debt service payments through a LOC (24 month rolling line). • Public Safety Matters.
o Event center operators have learned that public safety in the parking lot can be a strong asset. Perhaps there is a potential “win -win” with respect to two (or all three?) of the City’s core near-term capital facilities’ plan?
• Flow of Funds Matters.
o To preserve City’s controlling position in these essential assets, care must be undertaken to design a proper flow of funds that may incorporate “lock -box” structures to ensure that the assets are maintained, debt service is paid and the City gains the benefit of the P3 bargain it has struck.
• Funding Plan Security Matters.
o While the Public Safety Operations Facility, as an essential City asset, likely qualifies for a strong lease/appropriations credit rating (~A+) and a municipal bond insurance REQUEST FOR PROPOSAL FOR FINANCIAL ADVISORY SERVICES – NHA ADVISORS, LLC
commitment, it is very important that the City consider if there are other assets that may be utilized in a lease transaction that are essentially non -recourse. Recent transactions where such assets were used were Ukiah (Streets), West Covina (Streets), T orrance (Streets), Lancaster (Wastewater assets). Additionally, while a revenue only pledge would certainly carry a higher rate, that rate premium, if such a deal is available, may be worth considering in terms of reducing financial risks. A recent NHA B erkeley parking revenue bond transaction proved this point when the bonds had greatly reduced revenues to cover debt service during the pandemic, yet there was no recourse to the City’s general fund or a taking of the parking structure asset.
o Understanding that the Event Center and Stadium conversion projects could each catapult their respective neighboring land values and economic activity ( i.e., property, TOT, and sales tax increment), it may be wise to consider installing an enhanced infrastructure financing district (EIFD) to capture an additional revenue source to dedicate to the success of each of those projects. NHA believes that for an EIFD to be a valuable addition to the funding plan, the City should attempt to secure some participati on from the County with respect to pledging of the incremental revenues derived from growth.
NHA enthusiastically applauds the City’s ambitious capital facilities objectives as a means to improve the quality of life for its residents. As noted above, our team has significant expertise representing our public agency clients uncover opportunities and threats to ensure that the vision that City Council and staff have creates the intended outcomes without subjecting the City to uncovered and/or undue financial peril.
Preliminary Analysis of the Events Center Financing:
The City estimates the new Event Center facility to cost approximately $96 million, and that approximately half of the funds are provided by other sources, leaving about $48 million to be financed. If the City were to issue Lease Revenue Bonds to fund the $48 million, the annual debt service for a 30 -year term may range from approximately $4.2 million for a tax-exempt financing to $5.7 million for a taxable financing1.
Although the taxable financing results in higher borrowing costs, it may be worth considering a taxable option to have more flexibility to create specific terms of the event center operating agreement. As mentioned, to the extent that a longer term and h igher profit share is required for the private party operator, then taxable debt may be the required and/or preferred financing structure.
In the event that the City is able to further lower the cost of the Event Center facility with additional grants, free/cheap money, City cash, future EIFD funding, private-party contributions or other means, the annual debt service cost will decrease. If we were to assume the City came up with another $12 million to lower the project cost to approximately $36 million, the annual debt service for a 30-year term may range from approximately $3.2 million for a tax-exempt financing to $4.3 million for a taxable financing2.
1 Assumes 30-year term and $48 million project fund for both the tax-exempt and taxable debt. Assumes 5% interest rate on the tax-exempt debt and 7% interest rate on the taxable debt. Assumes three years of capitalized interest. Assumes cash- funded debt service reserve. Assumes no insurance or surety. 2 Assumes 30-year term and $36 million project fund for both the tax-exempt and taxable debt. Assumes 5% interest rate on the tax-exempt debt and 7% interest rate on the taxable debt. Assumes three years of capitalized interest. Assumes cash- funded debt service reserve. Assumes no insurance or surety.
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H. ADVANCE AND CURRENT REFUNDING EXPERIENCE
NHA maintains comprehensive debt profiles for its clients, which allows us to keep track of each client’s outstanding debt and any upcoming refinancing opportunities. Knowing a client’s complete debt picture also allows us to strategically advise on future debt issuances, such as structuring new debt within the covenants of old debt.
NHA’s recent refunding experience has ranged from vanilla ref undings to uniquely structured deals tailored specifically to the needs of that public agency. One such example of a uniquely structured deal is the “Cinderella Bond” NHA worked on for the City of Gilroy in 2022 (see full case study below). A “Cinderella Bond”, also known as a convertible bond, is a bond that begins as taxable and then converts to tax-exempt. The Tax Cuts and Jobs Act (TCJA) repealed the exclusion from gross income for interest on bonds issued to advance refund another bond. In other words, tax -exempt advance refundings are no longer allowed. Prior to this Act, NHA completed numerous current and advance tax-exempt refundings.
Since the Act, we have done several taxable advance refundings.
Over the last two years, there has been a significant rise in interest rates (due to Fed rate increases), causing a decrease in refinancings. In the current market environment, running an advance refunding on a taxable basis typically does not result in sufficient savings to justify the refinancing. For this reason, NHA anticipates that most of the “vanilla” refinancings will only pencil when done as a current refunding (less than 90 days in escrow).
The following case studies present some of NHA’s experience in the last 3 years with advance and current refunding deals.
Case Study: City of Lancaster Refundings – Summer 2021 General Fund Private Placement and Fall 2021 Power Public Offering
NHA assisted the City of Lancaster in Summer/Fall 2021 with two refinancing transactions to save the City over $3.5 million in present value terms through a reduction in annual debt service payments. Each of these refunding projects had unique objectives and illustrates NHA’s approach to private placements and public offerings.
In summer of 2021, NHA assisted the city with a private placement refinancing of the 2010 Lease Revenue Bonds. The 2010 bonds had an outstanding par just above $4 million and an average interest rate of 5.81%. This refinancing had three distinct objectives: first, to generate savings for the General Fund, second to downsize the debt, and third to release the City’s Performing Arts Center from serving as security for the bonds.
The debt service for the prior 2010 Bonds was being itemized each year on the City’s ROPs, but NHA worked with the City’s bond counsel to determine that 100% of the savings from the refunding would go to the City’s General Fund, which provided the path forward for this refunding.
NHA structured the refunding to encumber the Eastside Pool Building, releasing the Performing Arts Center (>$18 million insured valued). The release of the Performing Arts Center freed up the General Fund’s capacity for future borrowings.
Summer 2021
Refinancing
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Finally, the sale of the bonds directly to a bank through a private placement allowed the City’s financing team to negotiate for the refunding bonds to not utilize a cash funded reserve fund as security. This release of the prior 2010 Bonds’ debt service reserve fund allowed us to downsize the issue by $412,000.
In the end, NHA assisted the City to achieve all three objectives on this private placement refunding and secured just under $1 million in net present value savings to the General Fund (over 24% of refunded par)! Summer and Fall of 2021 was a time of historically low interest rates and NHA assisted the City to capitalize on fortuitous market timing with a second refinancing in Fall 2021.
The Fall 2021 project refinanced the 2012 Lancaster Power Authority Revenue Bonds for over $2.5 million in present value savings. The original 2012 Bonds had ascending debt service at 3% per year. NHA explored many different financing structures, but in the end, we structured the refinancing to retain the ascending structure since we wanted to keep the primary security for the bonds the solar power sales revenues from the Lancaster School District and the Eastside Union School District (the “School Districts”).
The City also desired to bolster the Lancaster Power Authority’s reserves, so we structured savings in the first four years to net the City $400,000 per year, generating an infusion of $1.6M into reserves.
For this public offering, we took the City through a full rating process with S&P and spent considerable time clarifying the unique security structure - the refunding was secured by solar revenues from the Power Sales Agreements with the School Districts, with the General Fund providing a backstop in the event of insufficient solar revenues.
Each district also maintained a performance guarantee from Tesla Energy to approximately 85% of the system’s aggregate expected annual energy output. Performance guarantee revenues are only realized if production is below the minimum. These performance gua rantees essentially ensure a minimum cumulative coverage of 125% on the debt going forward. NHA assisted the City with an affirmation of the “A” underlying rating on the City’s appropriation-backed debt.
Because this transaction used the General Fund as a backstop, we were required to use a real City property for the lease payment portion of the debt service security. We used the City’s Sewer System (pipes, etc.) as the leased asset to keep City buildings unencumbered.
The Fall 2021 refinancing was sold in late September 2021 (during a time of historically low interest rates) and resulted in net present value savings of over $2.5 million.
Both of these financings attempted to pave the way for future General Fund borrowings by reducing the General Fund’s annual debt service payments and also by ensuring that key city assets remain ed un- encumbered and available to serve as security on future city borrowings.
Fall 2021
Refinancing
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Summer & Fall 2021 Refunding Transactions: Capitalizing on Historically Low Interest Rates to Net the City Over $3.5 million in Savings
Summer 2021 Refinancing
Refunding 2010 Lease Revenue
Bonds
Fall 2021 Refinancing
Refunding 2012 Power
Authority Bonds
Tax Status Tax Exempt Taxable
Refunding Type Current Refunding Current Refunding
Method of Sale Private Placement (Negotiated) Public Offering (Negotiated) Prior Bonds Avg Coupon 5.81% 4.25%
Refunding TIC 2.10% 2.53%
NPV Savings ($) $971,176 $2,569,420
NPV Savings (% of Refunded Par) 24.07% 12.43%
Case Study: Gilroy 2022A Convertible Lease Revenue Refunding Bonds NHA worked with the City of Gilroy Public Financing Authority on their 2022A Convertible Lease Revenue Refunding Bonds to refund the 2013 Refunding Lease Revenue Bonds. Current tax law does not allow for an advance tax-exempt refunding. However, a City can issue taxable refunding bonds that convert to tax- exempt bonds once the bonds are within the 90 -day redemption window. This is often referred to as a “convertible” or “Cinderella” structure.
NHA led and facilitated the negotiations and discussions of the deal, including the RFP process to choose a Purchaser (ultimately awarded to Wells Fargo), to get the City the best deal possible while addressing the tax implications of a conversion. The fin ancing closed in December 2022 as a taxable financing. The original conversion date was set to be in August 2023. However, to capture positive arbitrage, the conversion date was pushed back to November 1, 2023 (the first optional call date). The SLGS (State and Local Government Series) securities in escrow were earning about 4.73%, which was higher than the tax- exempt conversion rate of 3.66%. By pushing back the conversion date to the call date, keeping the bonds taxable until then, the City was able to ca pture all of the positive arbitrage without having to pay the earned interest to the IRS.
Case Study: City of Chula Vista 2021 Pension Obligation Bond NHA was hired by the City of Chula Vista to manage the issuance of a pension obligation bond that would refinance Chula Vista’s CalPERS UAL . Over the course of the engagement, NHA analyzed over a dozen pension obligation bond structures for staff to review, including various sizes, repayment shapes and sensitivity analyses using different interest rate levels. Ultimately, a 24-year option that escalated at 1% annually (including other General Fund debt) was determined to be the most opt imal structure – maximizing savings while also creating enough capacity to absorb any future “shocks” by CalPERS. In order to test each structure’s resilience to future negative investment returns by CalPERS, NHA teamed with a 3rd party actuary to conduct robust stress testing analysis. The stress testing included looking at the impact of another “2008 -like” recession, sustained underperformance by CalPERS, and an immediate stock market crash worse than 2008.
In conjunction with the pension obligation bond, NHA worked with staff to create a robust pension funding policy. This was a critical objective of the Chula Vista City Council to provide a roadmap to leveraging future pension obligation bond savings to bolster 6 distinct reserves. The pension funding policy was also an important piece of the credit rating process. NHA put together a comprehensive credit rating presentation, which led to a “AA” rating and stable outlook. The depth of stress testing and level of REQUEST FOR PROPOSAL FOR FINANCIAL ADVISORY SERVICES – NHA ADVISORS, LLC
detail incorporated into the pension funding policy was noted by S&P as being one of the best they have seen in the nation.
NHA also assisted with educating stakeholders about pension obligation bonds. One piece of this education process was creating a website for Chula Vista to address key questions/concerns being asked by stakeholders: https://www.chulavistaca.gov/departments/finance/pension-obligation-bonds.
When it came time for pricing, NHA played a very active role in managing the underwriting process, having daily calls with the underwriter to ask the right questions and help position Chula Vista to obtain the most aggressive interest rates possible. Chula Vista achieved a 2.54% all in interest rate for a 24-year maturity, the lowest rate obtained for a pension obligation bond of that term, to our knowledge. This pricing success was a testament to the work NHA does, in collaboration with the underwriters we work with, to evaluate the bond market ahead of pricing and do the best job to time the market and deliver a strong pricing result.
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Prior General Fund Payments vs. New Payments After UAL Restructuring UAL Payments
General Fund Lease Bond Debt Service
1% Escalating General Fund Debt (24-Year)
* Projected savings assumes CalPERS earns 7.0% investment earnings; green line represents combined other General Fund debt service + POB debt service Metrics Statistics*
All-In Interest Cost 2.54%
Final Maturity 2045
Est. Present Value Savings $158.6 Million
Est. Cumulative Savings $177.5 Million
Avg. Annual Savings thru 2036 $14.9 Million
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City’s Debt Profile and Refinancing Opportunities
To the right is a graphic summarizing the
composition of the City’s debt, categorized
by Governmental and Business -Type
Activities as of 6/30/2023. The City’s
outstanding debt primarily consists of
Governmental Activities with most of the
outstanding debt being the 2019 Lease
Revenue Bonds, which amount to
$44,695,000 in outstanding par. Most of the
Business-Type Activities’ Debt is comprised
of the 2021 Taxable Revenue Refunding
Bonds with $17,940,000 in outstanding par,
as of 6/30/2023.
NHA also recognizes that the Lancaster
Redevelopment Agency has outstanding
bond and note indebtedness totaling
$127,700,000, as of 6/30/2023.
After reviewing the City’s debt profile, NHA analyzed existing debt for potential economic savings above the industry standard 3% net present value savings threshold.
We assessed refunding opportunities for the City’s outstanding debt obligations based on their proximity to a par call date, coupon range, and outstanding par amounts. At this time, we do not anticipate any attractive refinancing opportunities for the City given that market rates are currently at elevated levels.
We note that a few of the City’s debt obligations (2016 Assessment Revenue Bonds, 2018 Lease Revenue Bonds, and 2019 Lease Revenue Bonds) have outstanding coupon ranges that reach as high as 4% or 5%.
These bonds maintain first optional redemption features in 2026, 2028, and 2029, respectively. Given today’s elevated rate environment, a taxable advance refunding does not seem to pencil as an opportunity at this time.
Under the City’s Successor Agency, we note that the 2015 Tax Allocation Refunding Bonds (Housing Programs) maintains a first optional redemption feature on August 1, 2024. However, even despite the earlier call date, the current market environment is not conducive for generating 3% net present value savings.
Given the current uncertainty in the market environment relating to the Federal Reserve’s interest rate policy, it is unclear how rates may trend over the next year, but should market rates decline significantly, refunding opportunities for these issues could surface, barring non-economic considerations.
I. MARKET AND PRICING INFORMATION
NHA is constantly monitoring the pulse of the municipal market, relaying this information to our clients, and ultimately helping our clients identify potential opportunities and assess financing costs based on the most accurate assumptions. In addition to the market intelligence gained from our diverse financing experience (all credit types, structures, public issuances, private placements, competitive offerings, overnmental
Ac vi es
usiness Type
Ac vi es
Outstanding Debt as of 6/30/2023
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negotiated offerings, Federal/State grants, etc.), NHA also maintains a comprehensive database of every relevant California city bond issue that prices in the market. This database tracks details of each financing, including the coupons, yields, call featu res, amortization structures, credit ratings, credit enhancement, and underwriting information. NHA also has constant conversations with the major underwriters in the California market who can provide additional, more nuanced, “color” on the market due to their daily investor contact.
Debt Profile Monitoring - NHA maintains
a comprehensive debt profile for all our
clients that is periodically updated and
delivered to clients. In addition to serving
as a key debt management tool that can
be used by the City, we are reviewing
these profiles regularly to identify any
potential refinancing opportunities.
While NHA will never “push” a financing
or refinancing, our goal is to keep the City
abreast of all its immediate and future
options. Early identification of these
opportunities allows us to work with our
clients to establish objectives and
evaluate the benefits and risks of each
option. Early identification also allows
NHA the opportunity to assist staff and
effectively educate city councils.
Modeling Capabilities - NHA primarily
uses Munex software to model financing
cash flows and also uses proprietary Excel models for more unique situations where additional customization is needed. Each of NHA’s advisors, from the analytical staff to the senior partners, is highly experienced at “running numbers.”
Interest Rate Derivatives and Non -Traditional Financing - NHA’s experience working on variable rate transactions, including those with interest rate derivatives and other non-traditional financings goes back several years. One example was the City of Gilroy 2013 Lease Revenue Bond restructuring. The bonds were originally issued in 2003 as auction rate notes (ARN). With the collapse of the ARN market during the 2007 -2009 economic downturn, NHA worked with Gilroy to convert the ARN to a 1 -year Bond Anticipation Note (BAN) to allow time to evaluate restructuring options. Ultimately, given the declining interest rate environment, multiple short-term notes were rolled until the Gilroy city council determined it was appropriate to lock in long-term rates with 50% portions issued in 2010 and 2013.
NHA also worked with the City of Oxnard on the 2018 Remarketing of their 2004 Variable Rate Demand Offering Wastewater Revenue Bonds, and a fixed-rate restructuring of Oxnard’s 2003 and 2006 Variable Rate Lease Revenue Bonds. These bonds were synthetically fixed with a swap agreement. NHA determined that current market conditions provided an opportunity to refinance these variable rate bonds as fixed rate bonds and use interest rate savings to pay the swap termination fees. The net savings after terminating the swap and paying costs of issuance was approximately $1 million and removed future interest rate and letter of credit renewal risks.
Market Intelligence
and Identifyiing
Opportunties
Dynamic
Debt Profile
Internal
Database
Underwriter
& Investor
Dialogue
Modeling
Capabilties
Constant
Market
Activity
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In 2016, NHA worked with the City of Corcoran to develop a multipronged solution to the financial pressures facing the city’s water system. The city had issued variable rate debt in 2007, but subsequent changes in the variable rates had led to a large swap termina tion payment. The city’s water utility also had challenges renewing an expiring letter of credit securing the bonds. NHA worked to negotiate a short- term extension on the letter of credit while simultaneously pursuing a fixed -rate refinancing of th e variable debt. The savings from the refinancing were applied toward the swap termination payment, helping the City of Corcoran eliminate their variable interest rate and swap-related risks.
In 2022, NHA worked with the City of Richmond to restructure and refinance multiple series of pension obligation bonds and terminate variable rate swaps associated with those bonds. At the time, the state auditor’s office had conducted an audit on the city , noting that its long -term financial stability was uncertain. NHA worked closely with staff and the financing team to develop a plan that achieved multiple objectives of the city: 1) eliminate the city’s exposure to credit derivatives, 2) restructure the city’s prior pension obligation bonds to better match the term of its existing CalPERS pension obligations, 3) optimize savings for the General Fund with careful consideration of the city’s pension property tax override, and 4) enhance the city’s debt administration process by consolidating and simplifying the requirements of prior bond administration with a singular refunding bond issue. At closing, the city was successful in de-risking its exposure to variable rate cred it derivatives, improving its debt a dministration process and strengthening its long-term fiscal outlook.
Method of Sale Evaluation
As the City’s municipal advisor, NHA will evaluate public offering (competitive sale and negotiated sale) and private placement sale strategies for any future debt issuances, which can play a role in achieving lower borrowing costs for the City.
Public Offering vs. Private Placement
In the preliminary stages of a potential debt issuance, NHA evaluates whether the debt will be best sold through a public offering or a private placement. While a private placement generally requires less staff time (due to no credit rating process and pre paration of disclosure documents), is a quicker financing process, and has lower fixed costs of issuance than a public offering, a private placement may have a higher cost of borrowing and less flexibility on term (25 -30 year term won’t have as many intere sted lenders). A private placement generally also is associated with a smaller par amount, as the debt is placed with a single bank rather than several investors like in a public offering. The constraint on par amount and term, as well as potentially highe r borrowing costs, are often reasons why a public offering is pursued.
The public offering financing process will take longer and require more staff time, but the issuer will benefit from longer -termed options and the ability to issue the amount of debt ne cessary to fund its projects.
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Negotiated Sale vs. Competitive Sale
If it is decided that
the debt will be sold
as a public offering,
the next decision is
whether the sale
will be negotiated or
competitive. The
Government
Finance Officers
Association (GFOA)
recommends the
use of a competitive
sale whenever
feasible. Below we
discuss some of the
key considerations
for deciding on a
competitive v ersus
negotiated sale and provide insight into our role as municipal advisor for either sale method. Our independent due diligence of the competitive sale market often places us at the cutting edge – as evidenced by the city of Berkeley’s 2020 Housing GO Bonds that was the first California competitive GO Bond sale in the wake of the COVID-19 pandemic shut down in March 2020.
Credit Rating: An “A+/AA-” category credit rating is typically seen as the inflection point between leaning towards a negotiated sale and leaning towards a competitive sal e, absent other concerns that call of a more hands-on underwriting approach.
Simplicity of the Credit vs Story Bonds: A general rule in the markets is that for “every additional sentence required to explain the credit of the bond issue to investors, you can add 0.1% (10 basis points) to the yields. ” Typically, credits that require a detailed explanation benefit from having a dedicated underwriting sales force that comes with a negotiated sale. A “simple” credit (such as a general obligation bond or simple water revenue bond) is often the ideal candidate for a competitive sale. The structure of the bonds is another aspect to consider regarding the method of sale – a strict level amortization being more conducive to a competitive sale while a wrap solution would point toward a negotiated sale.
Frequency of Issuance: Some of our clients are frequent issuers (e.g., City of San Francisco and City of Berkeley), but many of our clients do not issue debt as frequently. Typically, the frequency with which an issuer goes to market is a good proxy for the name recognition that the issuer has with bond investors.
However, it is worth noting that even frequent issuers utilize a negotiated method of sale at times, depending on the type of bond. Conversely, we would expect a top -rated issuer with a strong rev enue stream and vanilla structure to draw enough attention to make up for the infrequency of previous issuance. As the saying goes in bond trading - “size draws eyes.” Market Volatility: During periods of market volatility, the competitive market can slow down, and issuers often delay or transition deals over to a negotiated public offering or a private placement. A negotiated public offering can benefit during times of volatility because the issuer will be able to tap into the Competitive Sale
1) Highly Rated Credit (“A” category or
higher)
2) Strong/Known Revenue Stream (GO,
utility, etc.)
3) “Vanilla” Structure
4) Well-Known, Regular Issuer
Negotiated Sale
1) Poor Credit (lower than “A” category)
2) Credit Enhancement is Unavailable or
Not Cost-Effective
3) Complex Structure
4) Market Volatility
5) Remarketing Agent or Dealer is
Required
6) Issuer Desires Underwriting
Participation of Disadvantaged Business
Enterprises or Local Firms
7) Refunding Transaction Dependent on
Market Conditions and/or Other
Structure Considerations
8) Other Factors, in Consultation with its
Municipal Advisor
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underwriting firm’s sales and trading desk to help move the bonds. Competitive desks often go “day to day” when market volatility hits – which can make it difficult to have assurances of obtaining at least three bids on pricing day. This dynamic is difficu lt to predict and the NHA team will continue to assess market volatility up until pricing day.
Competitive sales typically require a higher level of service from the municipal advisor to manage the bond sales process and interact directly with investors in the bonds. NHA typically reaches out to competitive underwriting desks in the lead up to a competitive sale to prepare a list of confirmed bidders, answer any questions those bidders have, and make sure that the client’s bond issue is receiving adequate attention in crowded markets. For a negotiated sale, this role is filled by the underwriter who uses their in-house sales staff to reach out to investors and gauge their willingness to buy. NHA performs a thorough review of disclosure and legal documents leading up to the bond sale, but one key aspect we find that is often “missing” during the compet itive sale process is the extra set of eyes and double checks that an underwriter often provides during the preparation of the legal and disclosure documents.
On a negotiated transaction, the municipal advisor’s role during the actual sale process includes assessing the underwriter’s performance and offered yields and verifying that the terms and structure of the bond issue are competitive relative to other recent bond issuers. Regardless of the method of sale, NHA will ensure that the structure and terms are optimized to balance preservation with future flexibility on the debt with present day benefits.
Credit Rating Process & Surveillance
NHA takes an active role in the credit rating process of a bond transaction , including leading the due diligence review and crafting the credit presentation. NHA understands that a portion of the rating criteria is outside of the City’s control, such as economic indicators and demographics. However, a large element of the rating is controllable, and NHA has a strong record of executing a multi-pronged approach to ensure our clients obtain the highest rating possible. Achieving just a one notch increase in rating (e.g., “A” to “A+”) can result in significant interest rate savings.
As the graphic below indicates, NHA equips our clients and enables them to tell their story. Our goal in the credit rating process is to ensure that the rating analysts are educated and supported with critical and key information to defend and advocate the City’s position and make positive rating recommendations to their committees.
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Note that NHA has gone through the credit rating process with City of Lancaster, and the City achieved a strong result. An example of the credit presentation that NHA put together as part of the credit process for the City’s 2019 Revenue Bonds (Measure M & R) can be found in Appendix E. If you are interested in an additional example of NHA’s active role in the credit rating process, please see the City of El Centro case study below that demonstrates how NHA explores different financing options and stays nimble so that the best pricing can be achieved for our clients.
Case Study: City of El Centro Overcoming Credit Rating Concerns to Issue Bonds for Critical Infrastructure
NHA has served as the City of El Centro’s municipal advisor since 2017, including for two recent financings that leveraged their 2016-approved Measure P sales tax to fund a brand new $20M library and most recently a new $40M police station project. In the midst of the police station financing process in early 2023, it came to light that significant financial difficulties were being faced by the City’s largest employer, the El Centro Regional Medical Center, which created uncertainty that threatened to derai l the City’s ability to obtain a strong credit rating and access timely financing from potential bond investors.
While the City’s General Fund was not a legal obligor to pay debt service on the Medical Center’s outstanding debt in default, the fact that the Medical Center’s bonds were in default, that the Medical Center’s finances are reported in the City’s annual audit and that the City Council of El Centro committed to take over temporary oversight duties of the Medical Center raised significant concerns of potential spillover effects to the City, putting the financing of the City’s high priority police station in jeopardy.
NHA assisted the City with navigating two parallel tracks: one for a publicly issued bond, and one for a private placement with a financial institution. With the financial outlook for the Medical Center evolving constantly given numerous changes occurring with hospital staffing/management and business arrangements with other consultants and hospitals, NHA remained nimble and continued to pursue both avenues for our client – preparing a comprehensive credit rating presentation and thorough disclosure strategy for both, while continuing to provide strategic advice to the City as needed through their deliberations with the Medical Center. When the financial prospects for the Medical Center improved (via positive new business arrangements made and reduced risk of bankruptcy), NHA recommended that the City quickly pursue the public offering route to obtain the lowest possible interest rates and immediately scheduled the credit rating process with S&P. While addressing concerns regarding the Medical Center, the City was able to showcase its strong credit features and maintained its strong “A” Lease Revenue Bonds rating with a “Stable” outlook reaffirmed. The City's 2023A Lease Revenue Bonds priced the week of May 8th at long-term interest rates under 4.40% (over 1.50% lower than what the City had anticipated early on in the process) and on schedule based on the City Council’s goals and objectives for this crucial infrastructure project.
Evaluating Success of a Pricing and Strategies for Getting the Best Price NHA utilizes TM3 and EMMA to maintain a database of bond market data, including all deals that have priced (detailing coupons, yields, take-downs, etc.), general interest rate data like MMD and U.S. Treasury data, and general market supply/demand informati on. For every public offering, NHA develops comparable scales and analyzes the proposed underwriter pricing scales to ensure that our client is receiving the most aggressive pricing (lowest interest rates and yields).
REQUEST FOR PROPOSAL FOR FINANCIAL ADVISORY SERVICES – NHA ADVISORS, LLC
We consider a pricing successful when the City secures borrowing at the lowest possible cost of funds. For a public offering, we evaluate the underwriter’s proposed scales and pricing activities considering this objective. We actively verify the underwriter’s comparable scales and assumptions with our own assessment of municipal markets during a pre-pricing call (usually the day before the bonds price). For a private placement, we ensure a wide distribution of investor solicitations and monitor investor bids relative to recently placed bonds to ensure reasonable rates. NHA takes an active role in discussing the City’s credit with potential investors to ensure that key credit strengths are clearly communicated to those parties.
As a fiduciary to the City, NHA does not underwrite bonds and has no affiliations with underwriters. While NHA is also not an investment advisor, as the financial advisor on a transaction, NHA will work with the bond trustee to ensure that the reserve fund is invested in either Open Market Securities (“OMS”) or Treasury Securities (“SLGS”) to ensure the lowest possible cost of borrowing on a net basis.
After pricing, often one additional step NHA will take to evaluate the success of a pricing is to compare the pricing results to the hypothetical results if the pricing actually occurred at a different date in the future. NHA clients have particularly been interested in this comparison when the pricing occurred in a volatile interest rate environment. No one has a crystal ball to say when it is the perfect time to go to market, so looking back at the pricing with hindsight provides some transparency on how well the market was timed. One example of this was in February 2022, when the City of Ukiah was preparing to price Lease Revenue Bonds. At the time, the finance director was concerned whether it was the correct time to price given the higher than normal interest rates. He was wondering if waiting to price would produce a better outcome for the City. Ultimately the City decided to price the Lease Revenue Bonds as scheduled in February 2022, and two months later, in April, the finance director asked for a hyp othetical comparison of the borrowing costs if the City had held off pricing until April. NHA prepared the table below comparing the results of the hypothetical April pricing. In summary, the total debt service would have been approximately $3.5 million higher had the bond sale been delayed until April.
Streets Utility Corp Yard
Aggregate
Savings
Avg. Annual Increase $78,000 $43,000 $64,000 N/A
Total Increase $779,000 $861,000 $1,932,000 $3,572,000
Note that while this example shows that the financing team and City got the timing right, NHA will prepare a comparison analysis for our clients regardless of what the results look like. NHA is transparent about the pricing outcome for our clients.
J. DISCIPLINARY ACTION
NHA certifies that there has never been any disciplinary action, administrative proceeding, malpractice claim, or other like proceeding against NHA or any of our personnel relating to NHA’s services as financial advisor current, pending, or occurring in the last five (5) years.
REQUEST FOR PROPOSAL FOR FINANCIAL ADVISORY SERVICES – NHA ADVISORS, LLC
K. COST PROPOSAL AND REIMBURSEMENT FOR “OUT-OF-POCKET” EXPENSES NHA commits to delivering the highest standard of
municipal advisory work product. We understand
and are mindful that our proposed fees must
reflect the value we deliver. Our goal is not to be
the low-cost provider of financial advisory services.
Our fee levels are indicative of the amount of
professional resources and skill applied to the City’s
projects. We recognize the importance that fee
containment has for clients and are willing to
negotiate our fees with the City.
NHA believes that fee levels are a function of the
scope and effort provided by different firms. Many advisors will limit their work to managing the process, coordinating calls, and delegating to other financing team members. We take a comprehensive and active approach, whereby we ensure that all aspects of the financing process are completed to the highest standard, which directly impacts the credit and best interest rates for the City. Managing the credit rating documents allows NHA and the City to deliver a comprehensive and insightful information package to the rating agencies. This benefits the City, financing and stakeholders through a higher rating report and lower interest rates. Again, we encourage you to confirm this statement with the references provided.
As a fiduciary, we put our clients' interests before ours.
We approach each project objectively and with the primary purpose of delivering agnostic options and alternatives. We believe that it is important to have no “vested interest” in advocating for a bond solution to guarantee a financing fee for the consulta nt. By keeping the initial work independent of the implementation of a financing solution, NHA can avoid conflicts generated by suggesting a bond financing to secure a financing fee. We believe the initial phase of work should be focused on providing alternatives that may or may not include a bond financing. Since this investigative process can greatly vary in time, we recommend it be segregated from the financing scope and subject to hourly efforts. The City controls the time and the process to avoid unforeseen costs.
NHA proposes a two -phase compensation structure, which breaks our work into a Task 1 (On Call General Municipal Advisory Services) and a Task 2 (Financing Execution). Details and rationale for each Task are found below.
Time and Expense
Compensation on a time and expense basis, with a list of hourly billing rates for the proposed personnel, any proposed increases in such rates during the contract term, and the types of reimbursable expenses with proposed charges.
Task 1: Hourly, On Call Financial Consulting and Municipal Advisory Services NHA believes that to provide objective advice when delivering funding strategies, including scenarios that suggest not moving forward on a financing, this work must not be based on the ultimate compensation structure to the advisor. We believe that an objective, research -based work product requires compensation on a non -contingent fee basis. In our experience, sometimes information comes to light during our diligence that necessitates a decision that the “best deal is no deal” and it is incumbent upon NHA, as a fiduciary, to give that advice.
Staff
Allocation
Hourly
Rate
Principal $350
Director / Senior Vice President $325
Vice President $300
Assist. Vice President / Sr. Associate $275
Associate $250
Senior Analyst $225
Analyst $200
Administrative $100
REQUEST FOR PROPOSAL FOR FINANCIAL ADVISORY SERVICES – NHA ADVISORS, LLC
Therefore, NHA prefers a two -phase compensation structure that separates general advisory and initial work on a potential transaction into a Task 1 which includes hourly compensation (subject to rate structure above which shall remain the same for the contract term). Many cities that NHA works with prefer to structure Task 1 contract services with a per fiscal year not-to-exceed amount per City Manager’s signing authority . However, NHA is open to discussing what amount is the right figure given the anticipated amount of time of the engagement.
Expenses (Out-of-Pocket)
All expenses will be billed directly at cost to the City. Expenses will be limited to those necessary for completion of the project. California travel expenses will not be reimbursable to NHA. Third -party expenses paid by NHA at direction of City, in writing, shall be a reimbursable expense.
A sample of services generally associated with Task 1 are identified below:
Task 1 - General Financial Advisory Services
✓ AS THE CITY’S MUNICPAL ADVISOR AND FIDICIARY, CONDUCT ALL DUE DILI ENCE, ANALYSIS, AND PRESENT ALL OPTIONS TO CONSIDER TO MEET OBJECTIVES; GENERALLY, PROVIDE ADVICE
AND SERVICES TO FACILITATE A SOLID FINANCIAL FOUNDATION ✓ Interview City to establish clear objectives, initiate due diligence process to uncover challenges and opportunities
✓ Provide information/updates as requested on economic, capital market conditions ✓ Assist City staff (upon request) in reviewing and/or analyzing legislation that may have a financial impact on the City
✓ Develop options: provide independent research/validate feasibility and practicality of potential financing options inclusive of market rate (bonds, loans, etc), “free and cheap money” (grants, subsidized loans) and other more creative approaches (i.e. partnerships) as directed and feasible ✓ Review City’s financial status, recommend optimal programs ✓ Assist in appropriate disclosure for annual financial reporting ✓ Upon request, assist the City in developing and maintaining distribution channels for financial statements (primarily through EMMA)
✓ Review City’s debt portfolio; provide recommendation on refinancing opportunities ✓ Review City’s “suite” of financial and operational policies in place, provide recommendations and samples, as required, to ensure best-practices and / or regulatory requirements are met ✓ Evaluate, provide recommendations on City’s credit rating posture ✓ Review, evaluate City’s investor disclosure compliance; provide recommendations, as required, for remediation of deficiencies
✓ Review and advise, as requested, City’s bond’s arbitrage reports REQUEST FOR PROPOSAL FOR FINANCIAL ADVISORY SERVICES – NHA ADVISORS, LLC
✓ Prepare written memoranda or easy to understand presentation materials outlining options with clear discussion of advantages and disadvantages to each alternative; Typically, there is a “feedback loop” inherent in this process necessitating review and revisions and repeating this process to ensure common understanding and concurrence on option(s) selected to present to elected decision-makers that can meet the goals established ✓ Lead discussions with all necessary City stakeholders, including executive staff and elected decision-makers and, as required, community groups, bargaining unit leaders, developers, property owners, etc.
✓ As requested, provide formal advice and recommendations on issuance of bonds and project financing programs
✓ As directed, prepare (or review) and present (in-person or virtual), all materials, including staff reports and presentations for elected body review and decision-making / approval of financing options
Fixed, Contingency Financing Fee
Compensation on a cents-per-bond or per $5,000 notional amount to be paid contingent on specific financing issues. proposed under this contract.
Task 2: Bond Financing
As noted in numerous instances within this proposal, NHA “walks the talk” with respect to its fiduciary duty (i.e., the “NHA Way”). This means abiding by the SEC dictated “Duty of Care” (i.e., have the expertise to do the job for the client) and “Duty of Loyalty” ( i.e., placing client interests in front of one’s own / avoiding conflicts). While NHA can confidently state that it avoids the obvious conflict inherent in a contingent transaction fee by providing hourly, non -contingent advice prior to a client’ s “go -no go” direction on a bond deal, there is no such conflict mitigating ability if compensation is based upon the size of a deal. In fact, SEC requires registered municipal advisors to charge reasonable and fair fees (i.e., “not excessive”) to its clients. A fee based upon the size of a transaction incentivizes all members of the financing team, including the municipal advisor if they charge on size, to increase the size of the deal to increase the compensation received. In NHA’s opinion, to abide by the spirit of the SEC direction to not charge excessive fees to our clients, we must use concrete and discernable metrics such as firm resources utilized, complexity of a deal, risks associated with transaction not closing, among other factors.
Upon the City’s decision (either at staff or Council level) to implement a financing strategy, NHA will pivot to Task 2 services. This work would be structured on a contingent basis (paid from bond proceeds at the time of closing). For potential bond financing(s), we propose a contingent fixed fee ranging from $29,500 to $87,500 depending on the financing structure, complexity, method of sale of the financing, the extent of NHA’s tasking and, generally, how much time it will take to complete the financing . Expenses such as California travel will not be expensed. All project-related expenses, if paid by NHA upon written direction of City, will be invoiced at cost (and typically paid from proceeds of the financing).
For example, a simple private placement transaction would take less time to execute and would be on the lower end of the range shown above. Contrasting that, a complex pension obligation bond that might require a lengthy or extensive process which involves time to educate stakeholders, detailed analysis and REQUEST FOR PROPOSAL FOR FINANCIAL ADVISORY SERVICES – NHA ADVISORS, LLC
stress testing, RFP process for underwriters or other consultants may be on the higher end of the range shown.
While this range of fees for executing a funding plan or bond financing is broad, so too is the possible breadth and depth of services that might be required for NHA to successfully execute upon the desired objectives to secure the preferred outcomes of the City. NHA would be glad to provide a more detailed cost proposal for a specific project if clear (or assumed) parameters on current status, timelines, deliverables and expected NHA contributions are given.
Expenses (Out-of-Pocket)
All expenses will be billed directly at cost to the City. Expenses will be limited to those necessary for completion of the project. California travel expenses will not be reimbursable to NHA. Third-party expenses paid by NHA at direction of City, in writing, shall be a reimbursable expense.
A sample of services generally associated with Task 2 are identified below:
Task 2 - Bond Issuance Municipal Advisory Services
✓ AS THE CITY’S MUNICPAL ADVISOR AND FIDICIARY, MANA E ALL ASPECTS OF, AND REPRESENT CITY’S INTEREST IN, OND FINANCIN PROCESS
✓ Establish and manage finance team distribution listing, financing schedule, due diligence data needs and task list; allocate tasks and duties for efficient and effective project execution ✓ Work cooperatively with assembled team (i.e., underwriter or broker-dealer) to develop detailed numerical analysis of financing options; independently verify all numerical options ✓ Work cooperatively with assembled team (i.e., bond counsel) to develop bond legal documentation; provide detailed review and commentary
✓ Work cooperatively with assembled team (i.e., disclosure counsel) to develop bond investor disclosure documentation (e.g. preliminary official statement); provide detailed review and commentary
✓ Lead and manage the development of credit rating strategy, documentation and presentation materials
✓ Review, prepare and “coach”, as required, City personnel for credit rating presentation ✓ Review and provide comment on draft financial and rating agency reports prior to publication ✓ Lead and manage, if applicable, solicitation and negotiation of bond insurance / reserve surety; provide independent cost-benefit analysis of same
✓ As directed, prepare, issue, manage RFP process for selection of financing participants (trustee, legal, specialized consulting needs, verification agents, etc.) ✓ For Competitive sale: verify bids, restructure as necessary REQUEST FOR PROPOSAL FOR FINANCIAL ADVISORY SERVICES – NHA ADVISORS, LLC
✓ For Negotiated sale: as directed, manage RFP for Underwriter, negotiate pricing structures, act as liaison and advocate/fiduciary for City’s interests
✓ For Negotiated sale and underwriter due diligence questionnaire – discussion, advise and prepare City for accurate and appropriate responses
✓ During negotiated bond sale process, provide City independent analysis of comparable transactions and proposed bond structure and interest rates ✓ During negotiated bond sale process, in real time as required, provide City with clarification and explanation of bond terminology presented bond numerical analyses ✓ During negotiated bond sale process, negotiate and/or advise, on behalf of and in the interests of City, with underwriter on desired improvements to bond structure and interest rates/yields ✓ Arrange for investment of escrow (if applicable), including analysis of SLGS vs OMS ✓ Assist City in negotiation of contracts, such as investment agreements, for bond proceeds, if applicable
✓ Review, on behalf of City, bond purchase contract for accuracy of bond sale figures and acceptable terms; advise City of our recommendation to sign this document if approved ✓ Review final legal, disclosure and closing documents for accuracy prior to City execution ✓ Develop and distribute Closing Flow of Funds memorandum guiding all parties as to how bond monies will be transferred—and in what sequence—on the day of closing. ✓ As requested, prepare and present to City’s elected governing body, a presentation outlining the results of the financing
L. POTENTIAL CONFLICT OF INTEREST
NHA, per its fiduciary duty as a SEC-Registered Municipal Advisor, must deal honestly and with the utmost good faith with the City and act in the City’s best interests without regard to the financial or other interests of NHA. NHA will eliminate or provide full and fair disclosure (included herein) to the City about each material conflict of interest (as applicable). NHA will not engage in municipal advisory activities with the City if it cannot manage or mitigate its conflicts in a manner that will permit it to act in the City’s best interests.
As a general statement, NHA represents that in connection with the issuance of municipal securities, NHA may receive compensation from the City for services rendered. If this compensation is contingent upon the successful closing of a transaction and/or is based on the size of a transaction then, consistent with the requirements of MSRB Rule G -42, NHA hereby discloses that such contingent and/or bond size - determined transactional compensation may present a potential conflict of interest regarding NHA’s ability to provide unbiased advice to City to enter into such transaction. This conflict of interest will not impair NHA’s ability to render unbiased and competent advice or to fulfill its fiduciary duty to the City. If NHA becomes aware of any additional potential or actual conflict of interest after this disclosure, NHA will disclose the detailed information in writing to the City in a timely manner. NHA will never be compensated based upon the size of a transaction. NHA has a duty to reasonably establish its fees in relation to metrics that are fair and understandable to our clients such as amount of firm resources deployed, complexity of REQUEST FOR PROPOSAL FOR FINANCIAL ADVISORY SERVICES – NHA ADVISORS, LLC
the deal, breadth of services rendered, risks associated with completion, among many other considerations (see Cost Proposal in previous section).
Additionally, NHA’s professional practice focusses upon serving California cities and special districts.
Unlike many of our competitors, NHA does not serve school districts or county governments (with a couple of exceptions that do not present a conflict with the City). This point, in particular, is germane to the City with respect to the recent transaction executed to refinance the energy generation equipment residing on school district property, as well as possible future negotiations that may occur with the County of Los Angeles regarding certain jointly held financial assets.
Finally, NHA does not know of any potential conflicts of interest with the City and does not have any of the City’s consultants as our current clients.
M. BUSINESS RELATIONSHIPS WITH OTHER ENTITIES
NHA has no (formal or informal) affiliation, ownership or relationship with any broker -dealer, municipal advisor or other consulting firm, with the exception that Craig Hill serves on the board of directors for HdL Companies.
NHA abides by all rules required of Independent Registered Municipal Advisors, which includes not allowing for finder’s fees, fee splitting, payments to consultants, or other contractual arrangements that present either a real or perceived conflict of inte rest. NHA, per SEC rules, must report all political donations made by each of its registered municipal advisors. NHA affirms that no political donations that would create a conflict with the City, its elected officials or staff have been made in the past two years (or ever).
NHA takes this a step further: NHA does not jointly market any type of financing program with other professional firms. Examples of such programs are CSCDA’s SCIP, CMFA’s BOLD, CAL MUNI PFA (where the municipal advisor and bond counsel firm have a common owner) and CEDA BAND (https://ceda.caled.org/band-financing-program/). Note: The new CEDA BAND program has two registered municipal advisors (one serving as municipal advisor, one serving as special tax consultant) jointly marketing, and informally associated with, two bond counsel firms and one underwriting firm.
Further, NHA has one business: providing financial consulting and municipal advisory services—primarily to California cities and special districts. NHA does not provide an umbrella of other services that serve both public and private entities, sometimes which may have interests within the same public jurisdiction and most of which do not require a SEC Series 50 registration and fiduciary duty. All ten of NHA’s employees are registered municipal advisors and must abide by the SEC rules prescribing a fiduciary duty on all efforts on behalf of our public agency clients.
Finally, NHA certifies that the firm will not participate in any activities that directly pertain to the underwriting or, purchasing of any financing debt or bonds issued by the City or its affiliates, while contracted for services as a Municipal Advisor by the City.
REQUEST FOR PROPOSAL FOR FINANCIAL ADVISORY SERVICES – NHA ADVISORS, LLC
N. EXCEPTIONS TO PROFESSIONAL SERVICES AGREEMENT
NHA has reviewed the City’s Professional Services Agreement and insurance requirements and takes no exception to the conditions therein. NHA’s insurance policies meet the requirements outlined in the City’s Professional Services Agreement.
O. SIGNATURE SHEET
Please see Appendix A of this proposal for a completed Signature Sheet.
REQUEST FOR PROPOSAL FOR FINANCIAL ADVISORY SERVICES – NHA ADVISORS, LLC
APPENDIX A: SIGNATURE SHEET
11 SIGNATURE SHEET
My signature certifies that the proposal as submitted complies with all terms and conditions as set forth in RFP No. 805-24.
My signature certifies that this firm has no business or personal relationships with any other companies or person that could be considered a conflict of interest, or potential conflict of interest to the City of Lancaster, pertaining to any and all work or services to be performed as a result of this request and any resulting Contract with the City.
The Vendor hereby certifies that it has:
Read each and every clause of this RFP and addenda, including Addendum # ___________.
Included all costs necessary to complete the specified work in its proposed prices.
Agreed that if it is awarded the Contract, it will make no claim against the City based upon misunderstanding of any provision of the Agreement. Should conditions turn out otherwise than anticipated by it, the Vendor agrees to assume all risks incident thereto.
I hereby certify that I am authorized to sign as a Representative for the Firm:
Name of Firm: ___________________________________________________________________________ Address: ___________________________________________________________________________ Fed ID No: ___________________________ DIR # (if applicable): ___________________________ Name (print): ___________________________________________________________________________ Title: _________________________________________________________________________________
Telephone: ___________________________ Fax: _______________________________________
Email: _________________________________ Date: _______________________________________
*To receive consideration for award, this signature sheet must be returned with the Proposal.* Name (sign): ___________________________________________________________________________ REQUEST FOR PROPOSAL FOR FINANCIAL ADVISORY SERVICES – NHA ADVISORS, LLC
APPENDIX B: COST PROPOSAL
16 EXHIBIT "B"
Cost Proposal
Please complete the information below for each of the alternatives mentioned in the proposal.
□ Compensation on a time and expense basis with hourly billing rates
Insert Hourly Rate Schedule Here
Staff
Allocation
Hourly
Rate
Principal $350
Director / Senior Vice President $325
Vice President $300
Assist. Vice President / Sr. Associate $275
Associate $250
Senior Analyst $225
Analyst $200
Administrative $100
□ Compensation on a cents‐per‐bond (per $5,000 notional amount) to be paid contingent on specific financing issues.
Cents Per Bond: N/A
While NHA can confidently state that it avoids the obvious conflict inherent in a contingent transaction fee by providing hourly, non- contingent advice prior to a client’s “go-no go” direction on a bond deal, there is no such conflict mitigating ability if compensation is based upon the size of a deal. In fact, SEC requires registered municipal advisors to charge reasonable and fair fees (i.e. “not excessive”) to its clients. A fee based upon the size of a transaction incentivizes all members of the financing team, including the municipal advisor if they charge on size, to increase the size of the deal to inc rease the compensation received. In NHA’s opinion, to abide by the spirit of the SEC direction to not charge excessive fees to our client s, we must use concrete and discernable metrics such a expected firm resources utilized, breadth of the services provided, complexity of a deal, risk’s associated with transaction not closing, am ong other factors. Therefore, NHA will never propose or accept a contingent financing fee based upon the size of the transaction.
NHA’s bond financing work usually is structured on a contingent basis (paid from bond proceeds at the time of closing). For potential bond financing(s), we propose a contingent fixed fee ranging fr om $29,500 to $87,500 depending on the financing structure, complexity, method of sale of the financing, the extent of NHA’ s tasking and, generally, how much time it will take to complet e the financing. Expenses such as California travel will not be expensed. All project-related expenses, if paid by NHA upon written direction of City, will be invoiced at cost (and typically paid from proceeds of the financing).
For example, a simple private placement transaction would take less time to execute and would be on the lower end of the range shown above. Contrasting that, a complex pension obligation bond tha t might require a lengthy or extensive process which involves t ime to educate stakeholders, detailed analysis and stress testing, RFP process for underwriters or other consultants may be on the higher end of the range shown. Using the Event Center funding plan as another example, and given the likely length of time to put all of the pieces of that funding plan in place, NHA would estimate that the contingent fee would also be on the higher end of the range.
While this range of fees for executing a Funding Plan or bond f inancing is broad, so too is the possible breadth and depth of services that might be required for NHA to successfully execute upon the desired objectives to secure the preferred outcomes of the City. NHA would be glad provide a more detailed cost proposal for a specific project if clear (or assumed) parameters on current status, timelines, deliverables and expected NHA contributions are given.
REQUEST FOR PROPOSAL FOR FINANCIAL ADVISORY SERVICES – NHA ADVISORS, LLC
APPENDIX C: CITY OF RIVERSIDE 2020 POB CREDIT PRESENTATION 11/9/2023
1 Rating Presentation
City of Riverside
2020A Taxable Pension Obligation Bonds
May 14, 2020
Presentation Team
City of Riverside NHA Advisors
Municipal Advisor
Edward Enriquez
CFO/Treasurer
Carlie Myers
Deputy City Manager
Stradling Yocca Carlson & Rauth
Bond & Disclosure Counsel
Brian Forbath
Shareholder
Reed Glyer
Shareholder
2 Issuer
Mike Meyer
Vice President
Mark Northcross
Principal
Eric Scriven
Principal
Heidi Schrader
Debt & Treasury
Manager
Raymond James
Underwriter
Robert Larkins
Sr. Managing Director
Jose Vera
Managing Director
Rosemary Koo
Sr. Deputy City
Attorney
Susan Wilson
Assistant City Attorney
BofA Securities
Underwriter
Bradford Walker
Director
Jorge Rodriguez
Managing Director
Bradley Gewehr
Sr. Vice President
Table of Contents
I. Executive Summary
II. Economic Information
III. Management, Budget and Operations
IV. 2020 POBs – Strategy and Structure
V. Conclusion
3 EXECUTIVE SUMMARY
Executive Summary
City of Riverside will issue approximately $432.3 million of POBs to fund 64% of its Miscellaneous Plan UAL and 70% of its Safety Plan UAL with CalPERS Enhanced payment affordability/smoothing, higher funding ratios $160M of anticipated total cash flow savings ($121M PV, or 28.0% of refunded UAL) including $7M in FY 2021 for budget flexibility
Credit Highlights and Trends
Decisive COVID-19 response using a balanced financial strategy that does NOT anticipate use of General Fund reserves for Fiscal Years 2020 and 2021 Significant budgetary flexibility based upon annually available discretionary revenues AND liquid reserves
$85M+ of General Fund/Measure Z reserves (25% of operating budget) $600M Citywide investment portfolio
Proactive management team, supportive / disciplined City Council, and robust financial policies are the foundation for an extremely strong financial position Thoughtful, strategic approach to managing rising pension costs through CalPERS Challenge process (Section 115, Pension Funding Policy, 2020 POBs) Large and growing, yet diverse economic base built upon unique combination of public amenities and assets (governmental, educational, health care, transportation, cultural)
5 Addressing COVID-19: Operational
6 Temporary closure of all non-essential City services No impact to Public Safety and City Utilities
Emergency Operation Center (EOC) is fully operational at a level 2 status City declared state of emergency on March 17, 2020
EOC fully staffed by key City officials addressing the daily COVID-19 issues Keeping staffing at a minimum (essential staff only)
Re-localization of staffing by enhancing capabilities to provide services via remote working
Continuity of service deployment/maintenance and pr otection of staff providing first response & priority capabilities
“One Stop Shop” services moved online, allowing for permitting and bill paying (see slide 15)
On March 17, 2020, City Council authorized the susp ension of utility shutoffs and deferred city and utility fee collection until April 30, 2020 (now extended to May 31, 2020)
1 2
3 4
5 6
11/9/2023
2 Addressing COVID-19: Financial
7* $2.25M of $7.2M in projected losses comprises sales tax deferrals anticipated to be recouped in FY 2021. ** Projected sales tax losses do not reflect potential impacts on Measure Z Transaction and Use Tax. City is continuing to monitor and assess COVID-19 f iscal impacts Property Taxes and Sales Tax each comprise about 25% of General Fund operating revenues
Property Tax: No projected negative impacts for FY 2020 and 2021 based on current information; Teeter Plan mitigates delinquency risk General Fund Sales Tax revenue losses projected to be $7.2M* for FY 2019/20 and $7.8M for FY 2020/21**
TOT comprises less than 3% of GF operating revenues
City is modifying its FY 2020/21 budgetary process
Emergency 1-year budget in lieu of 2-year budget; to be adopted in June City is projecting $11.9M overall impact for FY 2019/20 and planning for $28.1M impact for FY 2020/21 (10% decline based on trends experienced during 2008-2010 Great Recession)
Multi-pronged strategy detailed on following slide
Addressing COVID-19: Solutions and Resources
8 City has identified several primary resources/strategies to address COVID-19 impacts; many other secondary resources available if needed FY 2019/20
Solutions/Resources: $11.9M+ Projected Revenue Impacts: $11.9M - Suspend new recruitment (100+ GF positions previously budgeted) $7.2M: Sales Tax (includes $2.2M deferral) - Conduct only essential spending $2.2M: TOT
- Diligent efforts to seek and qualify for FEMA and other reimbursements $1.6M: Business License Tax $800K: Transfers In
FY 2020/21
Solutions/Resources: $39.6M+ Projected Revenue Impacts: $28.1M - $6M: Measure Z Contingency Planning for 10% Revenue Reduction + Reductions to Essential Spending Generating Budgetary Savings - $6.5M: Restore $18M transfer in from Measure Z (vs. $11.5M planned) - $7M: POB vs. UAL savings
- $4.35M: Section 115 Trust ($9M available)
- $15.7M: Suspension of Recruitment
Other Available Strategies If Needed:
2) Increase POB savings to $15M for FY 2021 (not anti cipated) 1) Sale of City-owned property (in discussion) 4) Utilize GF reserves or additional Measure Z reser ves (not anticipated) 3) Eliminating positions (not anticipated) 5) Leverage $600M Citywide investment portfolio (not anticipated) Addressing COVID-19: Measure Z
9* $2.25M of $9.1M in projected losses comprises sales tax deferrals anticipated to be recouped in FY 2021. City is projecting Measure Z revenue declines of $9.1M* for FY 2020 and $5.1M for FY 2021
City’s General Fund operating budget flexibility is greatly enhanced from mostly discretionary and scalable Measure Z revenues
Only about 25% ($15M) of Measure Z is used for dire ct personnel expenses About 30% ($18M) is budgeted for Transfer-In to General Fund for FY 2020/21
Remainder ($25M) is for various new capital improvement projects and programs
Library, Museum, Police HQ, Streets, Parking Garage, tree trimming, building improvements, pool, equipment and technology improvements, etc. Revenue declines caused by COVID-19 will dictate necessary deferrals of many discretionary capital projects and programs
budgeted/approved through 5-Year Measure Z Spending Plan
ECONOMIC INFORMATION
City’s Underlying Fundamentals Provide a Strong /
Resilient Foundation to Weather the COVID-19 Storm
11 * As of November 2019, unemployment rate in California was 3.9% and 3.5% nationally *
Dynamic and Stable Local Employment Base
The City is the political, cultural and economic center of the Inland Empire Net importer of jobs
Home to four universities and colleges that support more than 50,000 students Stable employment base: Riverside’s top 10 employers are primarily government agencies, educational institutions, and hospitals 12 Employees Industry Employer Rank
22,000 Government Offices County of Riverside 1
8,735 Education University of California, Riverside 2
7,000 Military March Air Force Reserve 3
4,346 Healthcare Kaiser Permanente 4
4,313 Education Riverside Unified School District 5
2,485 Government Offices City of Riverside 6
2,200 Healthcare Riverside Community Hospital 7
2,100 Education Riverside Community College District 8
1,898 Education Alvord Unified School District 9
1,442 Education Cal Baptist University 10
1,100 Healthcare Parkview Community Hospital 11
1,027 Aircraft Components Manufacturing Collins Aerospace Systems 12 970 Healthcare Riverside Medical Clinic 13
790 Grocery Stores Stater Bros 14
700 Automotive Parts K&N Engineering 15
688 Department Stores Walmart Supercenter 16
650 Bottle Manufacturing Pepsi Bottling Company 17
600 Hotels & Motels Mission Inn Hotel and Spa 18
600 Masonry Contractors J Ginger Masonry 19
580 Department Stores Target 20
550 Ambulance Service AMR Medical Response 21
550 Security Guard Contractors G4S Secure Solutions 22
507 Bussing Riverside Transit Agency 23
460 Government Offices California Air Resources Board 24 450 Cosmetics Manufacturing 220 Laboratories 25
Source: City of Riverside, May 2020
7 8
9 10
11 12
11/9/2023
3 AV History and Real Estate Market
13 Building permit valuations totaled $283M in
2018 (Construction Industry Research Board);
$375M in 2019 according to City data
Taxable AV of $21.7B in FY 2020
Compound annual average growth of 4.3% from 2014 -
2020
Top 10 property taxpayers account for 4.7% of total AV New and existing home prices in the County
continue to rise but remain significantly more
affordable than most Southern California
counties
$-
$50
$100
$150
$200
$250
$300
2014 2015 2016 2017 2018
Millions
City of Riverside Building Permit Valuations
Residential Non-residential
Source: United States Census Bureau, American Community Survey Table DP04 $-
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
2012 2013 2014 2015 2016 2017 2018
Comparison of Median Housing Prices
City of San Bernardino City of Riverside California City of Los Angeles Continued New Development in the City
14 HOUSING HEALTHCARE/EDUCATION
PUBLIC FACILITIES HOTELS
INNOVATION DISTRICT 14
“Streamline Riverside” & “One Stop Shop” Programs
Streamline Riverside
Collaboration of City departments and key
stakeholders to facilitate the development review
process
Program has significantly reduced entitlement &
building permit review times and costs
Beneficiaries include property & business owners,
developers, design professionals and contractors One Stop Shop City has combined onto one floor key
departments involved in the development
process in order to streamline permits and
approvals process
Allows for enhanced data collection procedures
Demonstrates City’s commitment to innovation
and excellence in municipal service
Award-winning program; well-received by customers
In light of COVID-19 challenges, the City has
moved One Stop Shop services online
15 MANAGEMENT , B UDGET AND OPERATIONS
•Ensures issuance and
administration of City debt in
compliance with State laws
and City Charter. In alignment
with the City’s strategic goals,
including providing
transparency of the City’s debt
practices and obligations
Debt Policy
•Established Pension
Stabilization Fund (PSF) and
Section 115 Trust and
developed guidelines around
funding PSF using annual
surplus and monies previously
allocated to prior debt service
Pension Funding
Policy
•Projects >$20,000 and useful
life of > 10 years; identifies
projects, funding source and
effect of the plan on key
financial variables
Multi-Year Capital
Planning and
Fiscal Policy
•Minimum of 15% of General
Fund operating budget with
goal of 20%. Surplus moved to
Section 115 Trust.
Reserve Policy
•Mandate to preserve principal,
ensure sufficient liquidity, and
generate a market rate of
return (updated as of 4/21/20)
Investment Policy
•Ensures adequate cash flow
and liquidity for City
operations and minimizes idle
cash for investment in City
portfolio
Cash
Management
Policy
•Finance Department updates
the City Council, management
and public through monthly
and quarterly investment and
debt reports
Financial
Reporting
•City is working with Consultant
to develop new tool for use by
anyone (released Summer
2020)
10-Year Dynamic
Forecasting Tool
Robust and Sound Financial Policies/Practices
Provide Foundation for Improved Financial Position
17 All Policies can be accessed here: https://riversideca.gov/finance/Fiscal-Policies.asp General Fund Reserves Provide Substantial
Liquidity to Weather the COVID-19 Crisis
General Fund ending
reserves ($59.7M)
represent 21.1% of
following fiscal year
expenditures
Per reserve policy, surplus GF
reserves exceeding 20% of
expenses are committed to
City’s Section 115 Trust
$56.0M maintained as
economic contingency reserves
≈$4M unassigned reserves
moved to Section 115
Measure Z total fund
balance grew to $42.5
million in FY 2019
$5.0M reserve (committed)
$20.2M unassigned balance
18 16.4%
17.2% 17.8%
16.9%
15.7% 15.2%
11.1%
13.7%
20.0%
21.1%
0%
5%
10%
15%
20%
25%
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Millions
General Fund & Measure Z Ending Reserves
Measure Z Ending Reserves
General Fund Ending Reserves
Ending Reserves as % of Following Fiscal Year Expenditures 13 14
15 16
17 18
11/9/2023
4 $600M of Liquid Citywide Resources
19 General Fund
10%
RPU
56%
Sewer
12%
Non-Major
Enterprise
2%
Capital Projects
6%
Other (Agency,
Internal Service,
Special Revenue)
14%
FY 2019 tax revenues
represented 89% of
General Fund revenues
Property taxes grew at a
compound average
annual 7.6% rate over FY
2015-2019
FY 2019 growth of 9.1%
Sales & Use taxes grew
at a compound average
annual 4.1% rate over FY
2015-2019
FY 2019 growth of 6.7%
General Fund Revenues by Source
20 2019 2018 2017 2016 2015 (Amounts in Millions)
$69.3 $63.5 $59.5 $55.5 $54.9 Property Taxes
68.4 64.1 63.3 61.0 59.4 Sales & Use Taxes
28.0 27.5 28.0 27.8 28.1 Utility Users Taxes
12.4 11.8 11.4 11.8 10.8 Other Taxes 1
16.3 17.4 31.4 26.4 24.7 Charges for Services
23.1 30.8 31.8 31.5 35.4 Other Revenues 2
13.2 20.5 9.5 0.0 0.0 Transfers from Measure Z
$230.8 $235.6 $234.9 $214.1 $213.4 Total
1 Other taxes include franchise and transient occupancy taxes. 2 Other revenues include licenses and permits, intergovernmental revenues, rental & investment income, fines & forfeitures, special assessments and miscellaneous revenue. $-
$50
$100
$150
$200
$250
2015 2016 2017 2018 2019
Millions
General Fund Revenues
Property Taxes Sales & Use Taxes Utility Users Taxes
Other Taxes Charges for Services Other Revenues
Transfers from Measure Z
Conservative Budgeting: 2019 Budget vs Actuals
FY 2018/19 revenues
came in $10M higher
than budgeted
Expenses lower by $31M
due to:
Unspent appropriations
for grants, capital projects
and other special
programs not completed
during FY 2019
Cost saving efforts by City
Ending fund balance
$43M higher than
budgeted ($78M to
$121M)
21 General Fund Budget Versus Actuals (Amounts Express ed in Thousands) Variance 2018-19
Actual
2018-19
Final Budget
Revenues
$8,198 $240,416 $232,218 Taxes
169 10,357 10,188 Licenses and permits
(188) 3,466 3,654 Intergovernmental
(260) 16,291 16,551 Charges for services
869 2,078 1,209 Fines and forfeitures
30 535 505 Special assessments
1,689 3,389 1,700 Rental and investment income
(512) 3,287 3,799 Miscellaneous
$9,995 $279,819 $269,824 Total revenues
Expenditures
$19,855 $10,004 $29,859 General government
4,351 186,863 191,214 Public Safety
1,833 20,289 22,122 Highways and streets
3,412 29,806 33,218 Culture and recreation
1,599 1,815 3,414 Capital Outlay
---Debt service: Principal
---Debt service: Interest
---Bond issuance costs
$31,050 $248,777 $279,827 Total expenditures
$41,045 $31,042 ($10,003) Deficiency of revenue under expenditures Other financing sources (uses)
($12,615) $51,763 $64,378 Transfers in
14,953 (51,262) (66,215) Transfers out
---Proceeds from issuance of long-term debt
---Payment to Escrow for Advance Refunding
---Capital Lease Proceeds
(68) -68 Sales of capital assets
2,270 501 (1,769) Total other financing sources (uses)
$43,315 $31,543 ($11,772) Net change in fund balance
-89,624 89,624 Fund balance, beginning
$43,315 $121,167 $77,852 Fund balance, ending
FY 2020 Budget vs. Amended vs. FY 2020/21
Emergency FY 2021 Budget to be adopted on June 16 th in lieu of biennial budget
Table below includes $40M of budget balancing measures for FY 2020/21 as detailed on slide 8
22 General Fund FY 2020 Adopted Budget & FY 2021 Emergency Budget Emergency Budget
2020-21
Amended Mid-Cycle
2019-20
Adopted Budget
2019-20
$278,400,277 $279,136,415 $280,999,020 Total Revenues
$278,400,277 $280,372,427 $282,235,032 Total Expenditures -($1,236,012) ($1,236,012) Revenue Over/(Under) Expenditures -($1,236,012) ($1,236,012) Net Change in Fund Balance
$56,000,000 $60,433,966 $60,433,966 Fund balance, Beginning $56,000,000 $59,197,954 $59,197,954 Fund balance, Ending $56,200,000 59,100,000 55,085,400 Measure Z – Transaction & Use Tax $54,252,010 59,139,201 57,528,914 Measure Z – Appropriations Measure Z: Three Year History
Measure Z is a one-cent transaction
and use tax approved by City voters
in November 2016
Expires in 2036; up for
reauthorization in 2035
Separate oversight/management by
Budget Engagement Commission
Ending FY 2019 fund balance:
$42.5M
Committed: $5.0M
Assigned: $17.3M
Unassigned: $20.2M
Projected COVID-19 revenue
impacts:
$9.1M for FY 2020 and $5.0M for FY
2021
Given scalability of Measure Z
program, discretionary capital
projects and programs will be
deferred
23 FY 2019 FY 2018 FY 2017 (Amounts Expressed in Thousands) Revenues
$62,283 $56,202 $12,605 Measure Z Tax Revenue
409 6 1 Rental and Investment Income
$62,692 $56,208 $12,606 Total Revenues
Expenditures
$1,957 $1,454 $27 General Government
14,968 18,404 449 Public Safety
890 115 -Highways and Streets
50 --Culture and Recreation
$17,865 $19,973 $476 Total Expenditures
$44,827 $36,235 $12,130 Revenues Over (Under) Expenditures Other Financing Sources:
$3,460 $10,935 -Transfers In
(10,790) (11,088) -Transfers Out
(13,239) (20,482) (9,489) Transfers Out to General Fund ($20,569) ($20,635) ($9,489) Total Other Financing Sources (Uses) $24,258 $15,600 $2,641 Net Change in Fund Balances
18,241 2,641 -Fund Balances - Beginning
$42,499 $18,241 $2,641 Fund Balances - Ending
Declining General Fund Debt Burden
City has maintained manageable
General Fund debt levels
11.2% of GF budget in FY 2019
General Fund receives significant
contributions from external
sources to help manage debt
service
General Fund allocable share of
debt about 55% currently,
dropping to ≈45% after FY 2023
Total net debt service scheduled to
step down after FY 2023 from
approximately $25M (8% of budget) to
$13M (4% of budget)
In conjunction with smoothing of
pension costs through 2020 POB
(see next section), overall annual
debt (bonds/UAL) payments are
projected to be lower and more
affordable/predictable
24 Approximate General
Fund Contribution
Outstanding
Par 1Original Par Series
100% $37,225,000 $89,540,000 2004 POB (CSCDA)
45% $2,795,000 $30,000,000 2005A POB
0% $5,000 $19,945,000 2006 COP
81% $94,200,000 $128,300,000 2008 COP
69% $28,300,000 $41,240,000 2012A Refunding LRB
100% $899,671 $4,000,000 2012 Lease (Ryan Bonaminio Park) 100% $33,782,177 $44,650,000 2012 Lease (Convention Center) 0% $29,775,000 $35,235,000 2013 COP
0% $26,100,000 $31,960,000 2017 Refunding POB
0% $15,375,000 $15,980,000 2019A Refunding LRB (Galleria) 0% $31,340,000 $33,505,000 2019B LRB (Main Library)
$299,796,848 $474,355,000 Total
1 As of May 1, 2020
* Projected based on FY 2020 GF budget; assumes 2% annual growth of GF budget 0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
$-
$5
$10
$15
$20
$25
$30
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
Millions
Riverside General Fund Allocable Net Debt Service
2004 POB
2005A POB
2008 COP
2012 Lease (Ryan Bonaminio Park)
2012 Lease (Convention Center)
2012A LRB
Debt Service as % of GF Budget*
19 20
21 22
23 24
11/9/2023
5 Per Pension Funding Policy, City Intends to Redeploy
Maturing Debt Payments Towards Section 115 Trust
25 $-
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
$40,000,000
Jun-20
Jun-22
Jun-24
Jun-26
Jun-28
Jun-30
Jun-32
Jun-34
Jun-36
General Fund Debt Service
As existing debt matures,
continue appropriation if
feasible, but redeploy to
Section 115 Trust
-
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
Jun-20
Jun-22
Jun-24
Jun-26
Jun-28
Jun-30
Jun-32
Jun-34
Jun-36
Jun-38
Jun-40
Jun-42
Jun-44
Jun-46
Section 115 Trust
CalPERS Pension and OPEB
$642.1 million projected UAL for 6/30/2020
$328.8 million Safety Plan (71.5% funded status)
$313.3 million Miscellaneous Plan (77.9% funded status) Modest $38.3 million OPEB liability
OPEB benefit is not vested nor contractually binding
City of Riverside – Unfunded Liability and Funded Ratios (6/30/2018) Valuation Date Funded Status
Unfunded
Accrued Liability
Market Value of
Assets Accrued Liability Pension Plans
6/30/2018 77.9% $310,286,130 $1,090,728,598 $1,401,014,728 Miscellaneous 6/30/2018 71.5% $316,942,437 $794,903,449 $1,111,845,886 Safety 6/30/2018 75.04% $627,228,567 $1,885,632,047 $2,512,860,614 T otal 26 Parada v. City of Riverside (“ Parada II ”)
Filed Sept. 12, 2018: Challenges the use of certain non-rate revenues to fund the General Fund Transfer
On April 17, 2020, tentative ruling finding that the use of that certain non-rate revenue violates Article XIII C of the CA Constitution; estimated at $19-25M annually (beginning January 1, 2019 until settlement)
Plaintiffs NOT seeking relief from the General Fund
Risk to General Fund is loss of future General Fund Transfer (GFT) revenues Loss of future GFT is $19-$25m if the City is unable to identify additional non-rate revenue If City loses litigation and a refund is required, the City expects refund to come from the Electric Fund
Available Electric Fund reserves are $336M
If tentative ruling becomes final, appeal would be allowed only after second phase of trial on remedies and damages
City has variety of revenue sources to address potential reduction in transfer, including going to voters to approve transfers (as was done for Water Fund transfers) and Measure Z revenues (general tax, use fully discretionary) 27 Track Record of Proactively Managing Pension Costs
2003-2005: City issued POBs to
extinguish UAL at that time and
reduce payments; Recent (January
2020) actuarial analysis
determined that City has saved
over $55M since time of issuance
after analyzing actual PERS returns,
assumption changes, etc.
2011-2012: All new employees
begin paying the employee portion
of PERS pension costs
2013: Established lower pension
benefits for new employees,
resulting in lower pension costs
(PEPRA)
2016: City bargaining units agree
to begin paying for their share of
pension costs (phased in fully by FY
2020/21)
2017: Refinanced $30 million BAN;
fixed-rate POB and accelerated 10-
year amortization
2017 – 2020: Finance Committee
and Budget Engagement
Committee presentations
2018 - 2020: CalPERS Challenge
project initiated with weekly team
meetings and transparent
education and communication to
stakeholders through website and
various presentations, workshops
and meetings
2018 – 2020 : Pre-pay UAL at
beginning of FY to save 3.5%
($1.2M to $1.5M annually)
Fall 2019 – Spring 2020:
Comprehensive POB due diligence
process (see next page)
28 2020 POBs – The Process
Stakeholder Education and Involvement
• Workshops and presentations since Fall of 2019
Thorough evaluation of 25+ structuring options to achieve City objectives, optimize results and manage risk
• Size: $100M to $642M analyzed
• Maturity: Same term vs. shorten/lengthen
• Shape: Proportional, level, wrap, etc.
• Base Selection: Optimal UAL amortization bases to pay off Risk Assessment and Stress Testing of Options
• What happens to POB savings under adverse CalPERS returns scenarios 29 2020 POB S – STRATEGY AND STRUCTURE
25 26
27 28
29 30
11/9/2023
6 2020 POBs – Security Features
(1) Increase funding ratios of City’s CalPERS Plans to 92% (2) Pay Costs of Issuance Purpose
(1) Issued under 2004 Indenture
(2) Absolute and unconditional obligation of the City
(3) Parity with $63.3M outstanding 2004 POB and 2017 POB (4) Secured by validated pledge of “all available funds” (5) Debt service pre-funded by August 1 of each year
Security
N/A Debt Service Reserve Fund
$432,330,000 Par Amount
6/1 and 12/1 principal and interest; 6/1 principal
First interest payment date 12/1/2020 Payment Dates
31 City has historically pre-paid its UAL, so prepayment feature on 2020 POBs does not add any additional cash flow pressure
2020 POBs - Financing Plan
32 Increase Funding Ratios for Both
Safety and Miscellaneous Plans
Target 92% for both plans
Pay $230.1M to reduce UAL Payments
for Safety Plan and $200.6M to reduce
UAL Payments Miscellaneous Plan
General Fund responsible for 100% of
Safety Plan but only 46% of
Miscellaneous Plan
Generate significant savings for the
City and its General Fund
Approximately $159.9M in total
projected savings and $120.5M in PV
savings
Approximately $120.1M in projected
savings for the General Fund and
$92.8M in PV savings
At least $7M in projected annual
savings for the first 12 fiscal years
Summary of Financing
70% % of Safety UAL Funded
64% % of Miscellaneous UAL Funded
$430.70 Total UAL Funded ($ millions)
92% Target Funding Ratio (Both Plans)
3.53% All-in Interest Rate with Costs
11.6 Average Life of Bonds (Years)
Projected Benefit Summary
$159.88 Projected Cumulative Benefit
($ millions)
$120.56 Projected Present Value Benefit
($ millions)
27.99% Projected Present Value Benefit
(% UAL Funded)
$7.0 - $10.9 Projected Annual General Fund
Savings (2021-2032, $ millions)
2020 POBs – Structuring Rationale and Objectives
33 Refunding of certain existing UAL amortization bases, to be selected strategically by a linear optimization model to meet the following objectives
Create a more affordable/sustainable repayment profile by smoothing payments over the next 15 to 20 years
No dissavings projected for any year & no maturity extension Final maturity and average life of POB do not exceed those of the UAL bases being prepaid
Achieve $7M - $11M of annual savings to General Fund thru FY 2032 Minimize both Maximum Annual Debt Service and Total Pension Related Liabilities
Levelling maximum annual total liabilities is consistent with recent funding risk management changes by CalPERS for amortization of future unfunded liabilities (shift from level % of payroll to level dollars) Estimated S&U, Debt Service & Unrefunded UAL
Sources & Uses
-
10.0 20.0
30.0 40.0
50.0 60.0
70.0 80.0
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
Debt Service Pro-Forma UAL Payments Current UAL Payments $160M of savings projected through FY 2035
Gradual ramp up in payments and then relatively level (POB + Unrefunded UAL) from FY 2024 to FY 2036
Total UAL Payments & Debt Service ($ millions
34 Sources:
432,330,000 Par Amount
432,330,000 Total Sources:
Uses:
230,148,564 Safety Plan UAL Payments
200,543,939 Misc. Plan UAL Payments
1,630,825 Costs of Issuance
6,672 Additional Proceeds
432,330,000 Total Uses:
3.527% All-in-TIC
11.6 years Average Life - Bonds
Estimated Savings: Citywide and Just General Fund
Total Cumulative
Savings of $160M
General Fund
cumulative
savings of $120M
Maximum Annual
Total Pension
Payment reduced
$18.7M from
$70.2M to
$51.5M
Maximum Annual
General Fund
Payment reduced
$10.9M from
$51.2 to $40.3M
35 Considered 3 downside risk scenarios to further str ess-test benefits from proposed financing
Present Value
Savings
(% Funded UAL)
Present Value
Savings
($ millions)
Scenarios
28.0% $121 Base Case
1.3% $6 Scenario 1: -20% return in the first year followed by 7% return thereafter
14.3% $62 Scenario 2: 6% annual investment return
5.1% $22 Scenario 3: 5% annual investment return
Stress Testing Results (Scenarios)
Under current financing assumptions, the transactio n generates healthy projected savings even under adverse investment performance conditions 36 31 32
33 34
35 36
11/9/2023
7 Stress Testing Results (Bartel)
Bartel Associates hired by the City to
provide analysis of the impact of the
proposed POB on future employer
contributions
POB Cost Reduction (success) or Increase
(failure) calculated as the present value of:
Employer CalPERS contributions without POB
for 30 years, minus
Employer CalPERS contributions with POB &
debt service for 30 years, plus
CalPERS assets with POB minus assets without
POB after 30 years
Discount rate for cash flow differences:
3.0%
Discount rate for asset difference at 30
years: 7.0%
Investment return assumptions include
lower (than expected) returns for next 9
years followed by higher (than expected)
returns
Median Simulated Return First 9 Years: 6.43%
Median Simulated Return First 20 Years: 6.93%
Average benefit of $83.8 million Expected
Benefit
5% probability losses greater than $117.8M5th Percentile Break-even (75% probability POBs will benefit the City) 25 th Percentile 50% probability benefit will be higher/lower than $78M Median 25% probability of benefit greater than $154.2M 75 th Percentile 5% probability of benefit greater than $297.9M 95 th Percentile 37 CONCLUSION
Conclusion
39 Have led to very strong and growing reserve levels; allowed City to not overcommit annual Measure Z revenue, which remains mostly available for current, internal liquidity needs
Institutionally
Embedded
Policies/Practices
City has tremendous financial flexibility to act deliberately and aggressively as required to right-size/tailor organization to fit required revenue limits
Numerous Tools in
Toolbox
Tool used thoughtfully to enhance internal liquidity and create ability to absorb potential additional PERS shocks (resiliency) in future
POB Structure
Carefully Crafted and
Stress-Tested
Well positioned with higher education, health care and
transportation assets to continue strong economic growth City is Hub of Inland
Empire
Proactive management, supportive City Council, and a stable, diversified economic base have placed the City in an extremely strong financial position.
We respectfully request consideration of an upgrade to our rating.
Received City Council Approval May 5
Rating Presentations May 14
Receive Ratings May 22
Pricing June 4
Closing & Wire Proceeds to CalPERS June 18
Financing Schedule
40 37 38
39 40
REQUEST FOR PROPOSAL FOR FINANCIAL ADVISORY SERVICES – NHA ADVISORS, LLC
APPENDIX D: CITY OF EL CENTRO 2023 LRBS CREDIT PRESENTATION 11/9/2023
1 1 6
Interested Parties
3 City of El Centro
Cedric Ceseña
Interim City Manager
Issuer
Karla Chaparro
Finance Director
Abraham Campos
Public Works Director
Adriana Nava
Community Services Director
Angel Hernandez
Community Development Director
Robert Sawyer
Police Chief
Elizabeth Martyn
City Attorney
NHA Advisors
Municipal Advisor
Roy Kim
Associate
Eric Scriven
Principal
Mike Meyer
Vice President
Matt DeFilippis
Senior Analyst
Norton Rose Fulbright
Bond & Disclosure Counsel
Russ Trice
Partner
Stepan Haytayan
Senior Counsel
Ramirez & Co.
Underwriter
Esthela Carreón
Vice President
Raul Amezcua
Senior Managing
Director
Michael Mejia
Managing Director
Shayan Golshan
Associate
Table of Contents
I. Executive Summary & Credit Highlights
II. Local Economy Strength and Development
III. Management, Budget and Operations
IV. El Centro Regional Medical Center
V. Measure P Sales Tax
VI. City Police Station Project
VII. 2023A Lease Revenue Bonds
VIII. Conclusion
Appendix A : City Overview & Demographic Information
Appendix B : Additional Detailed Information on Economic Development and Growth
4 EXECUTIVE SUMMARY & C REDIT HIGHLIGHTS
Executive Summary & Credit Highlights
2023A Lease Revenue Bond Transaction
City intends to fund a new $40M police station proj ect, the second strategic Measure P capital project after the Public Library project which opened succe ssfully in November 2022, on time and within budget 2047 final maturity same as that for the 2021A LRB (Public Library) and ties to Measure P (General Sales Tax) sunset $7.5M of 2022 Measure P receipts > $3.8M combined e st. debt service on 2021A + 2023A LRBs Economy
City is the regional center for government, healthc are, retail activity and jobs; continued and strong economic growth leading to increased employment and revenue growth Assessed value has grown an annual average 7.0% from $2.02B in 2015 to $3.15B in 2023 Annual border crossings up 43% since 2020 from 10.8M to 15.4M Liquidity, Budgetary Strengths & Debt
Tax revenues up 22% since FY 2020 ($34.0M → $41.6M), supported by Measure P sales tax growth Unassigned reserves have grown from 67% → 114% of annual expenditures ($22.6M → $38.8M) Annual Measure P sales tax receipts have increased 43% since 2020 ($5.2M → $7.5M) Extremely strong liquidity with 377 days cash on ha nd Management
Proactive management, conservative budgeting, prude nt capital planning and robust financial policies continue to improve on a strong & resilient financi al position City adopted and implemented a pension funding poli cy (2021); established Section 115 Trust ($4.0M) 6 1 2
3 4
5 6
11/9/2023
2 LOCAL ECONOMY STRENGTH AND DEVELOPMENT
Trade Area Population of 1.4 Million
8 Imperial
17,550
Yuma, AZ
203,247
Brawley
26,390
Calexico
40,351
Heber
4,275
Mexicali
1,101,000
El Centro
45,657
Total Trade Area Population
1,438,470
Monthly Border Crossings in 2022
9 Source: United States Bureau of Transportation Statistics
1.87M 1.79M
2.00M 1.91M 2.05M 1.93M 1.93M 1.88M 1.88M
2.07M 2.04M 2.11M
0.00 0.25
0.50 0.75
1.00 1.25
1.50 1.75
2.00 2.25
Jan 2022 Feb 2022 Mar 2022 Apr 2022 May 2022 Jun 2022 Jul 2022 Aug 2022 Sep 2022 Oct 2022 Nov 2022 Dec 2022 Millions
Monthly Border Crossings
Calexico & Calexico East
Bus Passengers Pedestrians Personal Vehicle Passengers Personal Vehicles Buses Trucks 3 Million
Pedestrians
7.6 Million
Vehicles
12.4 Million
Personal Vehicle
Passengers
453,776
Trucks
Annual Border Crossings 2020-2022
10 10,776,453
12,270,197
15,404,322
2020 2021 2022
(Sum of Pedestrians & Passengers)
Diversified Economic Base in Imperial County MSA
Imperial County MSA has a
diverse economic base and
provides many essential and
durable services
Top 5 Industries:
Local Government
Agriculture
Educational and Health
Services
Retail Trade
Leisure and Hospitality
11 Agriculture
17%
Mining, Logging
and Construction
3%
Manufacturing
3%
Wholesale
Trade
3%
Retail Trade
12%
Transportation,
Warehousing,
Utilities
4%
Information
0% Finance and
Insurance
2%
Professional and
Business Services
4%
Educational and
Health Services
15%
Leisure and
Hospitality
6%
Other
Services
2%
Federal
Government
4%
State
Government
4%
Local Government
21%
Imperial County MSA
Industry & Labor Force (2021)
Source: Labor Division of the California State Employment Development Department, March 2021 Benchmark. $-
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
2015 2016 2017 2018 2019 2020 2021 2022 2023
Billions
City of El Centro - Total Assessed Value
Growing Property Tax Base
12 FYE 2023 Total Assessed Value (“AV”): $3.15 billion Strong Historical AV growth : Average annual growth of 7.0% since 2015 Low AV Concentration : Top 10 property taxpayers account for under 10% of total AV Source: Imperial County Auditor/Controller’s Office through 2022. California Municipal Statistics, Inc. for 2023. 7 8
9 10
11 12
11/9/2023
3 Diversified Property Taxpayer Base
City of El Centro – Top Ten Property Taxpayers (as of June 30, 2022) Primary Business Use % of Total AV Assessed Value (“AV”) Taxpayer Retail 2.03% $56,506,642 IV Plaza LLC (RJFP LLC)
Retail/ Prof. Offices 1.82% $50,876,479 Imperial Valley Mall II, LP Retail 1.18% $32,962,760 Town Center Courtyard
Retail 0.83% $23,057,946 RJ Development Co. LLC
Retail/ Prof. Offices 0.77% $21,589,830 Wal-Mart Stores Inc.
Multi-Family Units 0.65% $18,144,145 PMB EL CENTRO LLC
Retail 0.55% $15,308,996 Target Corporation
Auto Dealership 0.45% $12,575,311 Lakeside Investment LLC Multi-Family Units 0.45% $12,500,000 El Centro Miraflores LP Prof. Offices 0.42% $11,800,000 EG P CH EL Centro LLC
9.15% $255,322,109 Top Ten Total
Diversified tax base: Top 10 taxpayers
represent less than 10% of FYE 2022 AV
13 Strong Brand-Name Presence: Key tenants
(e.g., Walmart, Target) provide a sturdy
baseline for sales tax revenues
Source: Imperial County Assessor's Office
Dynamic and Stable Local Employment Base
14 Many of the County’s top employers provide essential services (i.e., government agencies, educational institutions, and healthcare institutions) Industry Location Employer Name
Labor Organizations El Centro 8A Packing LLC
University-College Dept/Facility/Office Imperial Academic Services Government Offices-State Calipatria Calipatria State Prison Government Offices-State Imperial Centinela State Prison School Districts El Centro Central Union High School District Federal Government-National Security El Centro El Centro Naval Air Base Hospitals El Centro El Centro Regional Medical Ctr
Mental Health Services El Centro Imperial County Behavioral Government Offices-County El Centro Imperial County Coroner Educational Associations El Centro Imperial County Ofc-Edu Fndtn Government Offices-County El Centro Imperial County Sheriff Nurserymen Winterhaven Imperial Date Gardens
Distribution Services El Centro Imperial Irrigation District Labor Contractors Calexico Jjall LLC
Health Care Management Brawley Pioneers Memorial Healthcare Casinos Felicity Quechan Casino Resort
Sugar Refiners (mfrs)Brawley Spreckels Sugar Co Inc
Department Stores El Centro Target
Gypsum & Gypsum Products (mfrs)Imperial United States Gypsum Co Federal Government-Police El Centro US Border Patrol
Power Plants Calipatria Vulcan-Bn Geothermal Power
Department Stores Brawley Walmart Supercenter
Department Stores El Centro Walmart Supercenter
Department Stores Calexico Walmart Supercenter
Mines Brawley Western Mesquite Mines Inc
Source: Employment Development Department extracted from America’s Labor Market Information System (ALMIS) Employer Database, 2022 1st Edition.
Development Map
15 Adaptive Reuse of Vacant Commercial Buildings
16 Citywide, vacant large commercial
sites have been repurposed
Coyne PowerSports Center
6.4-acre vacant auto dealership
Flagship store for regional off-road
dealership
Site of new businesses:
National brands brought in on similar projects since 2016 After
Before
Continuing Demand for Hotel Rooms
17 Rooms Status Hotel
94 Built 2010 Fairfield Inn
88 Built 2010 TownPlace Suites
97 Built 2015 Hampton Inn
79 Under
Construction
Home 2 Suites
128 Building
Permit
Review
Residence Inn
99 Planning
Review
Surya Boutique
Hotel
Fairfield Inn & Suites TownPlace Suites
Hampton Inn
Residence Inn
Home 2 Suites
Surya Boutique Hotel
Continued New Development in the City
18 HOTELS
HOUSING
PUBLIC FACILITIES
HEALTHCARE/
EDUCATION
TOWN CENTER VILLAGE IV
WILLOWBEND SUBDIVISION
LOTUS RANCH SUBDIVISION TOWN CENTER II SUBDIVISION
STATE COURTHOUSE
CHP STATION
POLICE STATION
VALLEY CENTER POINT
VO MEDICAL CENTER CUHS STEM BUILDING
HOME-2-SUITES-IV MALL
RESIDENCE INN-IV MALL
RETAIL/
RESTAURANTS CHIPOTLE – N. IMPERIAL
SAM’S CLUB - S. IMPERIAL
INDUSTRIAL TOWN CENTER INDUSTRIAL
PARK-300 KSF HOMEGOODS – IV PLAZA
JERSEY MIKE’S
N. IMPERIAL
13 14
15 16
17 18
11/9/2023
4 Strategic Leveraging of Funds
19 LEVERAGING FUNDS TO SUPPORT GROWTH
REPRESENTATIVE MAJOR FY23 and FY24 CIP
City maintains diversified funding
sources for streets and facilities
CIP projects, including:
Measure P Sales Tax for facilities
Measure D Sales Tax for
transportation projects
Gas Tax (SB1) for transportation
projects
Federal and State Grants, including
STPL, HIP, ATP, STBG and CMAQ for
transportation projects
City maintains separate funding
sources for water and
wastewater CIP , including:
Water Enterprise Funds
Wastewater Enterprise Funds
Representative Projects:
Imperial Avenue Extension $5.9M
Dogwood/Wake Intersection $1.4M
2023 Street Maintenance $3.3M
Southern Pump Station $7.0M
McGee Park Improvements $900K
Buena Vista Park $1.3M
Gomez Park $5.7M
Infrastructure That Supports Economic Growth
20 SEWER INFRASTRUCTURE
SEWER PUMP STATION No.2
$3.6 million, completed 2018
SOUTHERN PUMP STATION
$7 million, completion 2024
WASTEWATER PLANT
ENERGY EFFICIENCY IMPROVEMENTS
$16 million, completed 2021
EXPANDED SERVICE TO
SOUTHERN CITY QUADRANTS
TRANSPORTATION
IMPERIAL AVENUE BRIDGE
$44 million, completed 2022
DOGWOOD AVENUE BRIDGE
$30 million, completed 2018
IMPERIAL AVENUE
EXTENSION
$16 million, completion 2023
Active Investment in Growth and Modernization
21 2020 - First Responders Park - $2M
2019 – Aquatic Center - $18M
2013 – Regional Bus Transfer Station - $5M
2015 – Skate Park - $3.2M 2014 – MLK Sports Pavilion - $ 6M 2022 – El Centro Library - $17M
Proven city project delivery experience
MANAGEMENT , B UDGET AND OPERATIONS
• 7 financial policies
ensure City’s finances are
managed prudently to
deliver quality services,
deliver balanced
budgeting and establish
sufficient reserve levels
Comprehensive
Financial Policies
• Workers Compensation
• Liability Insurance
• Estimated Retiree
Medical Payments
• Equipment Depreciation
• Major Maintenance
• 10% General Fund
reserve target
Financial Reserve
Policy
• Establishes procedures
for effective governance,
management and
administration of debt
and financing obligations
Debt Management
Policy
• Conservative investment
philosophy minimizes risk
and aims to maintain
safety and liquidity
• Detailed criteria and
established parameters
for investment
instruments
Investment Policy
• Provides guidelines for
budgeting, financial
reporting, logging,
inventory, transfer,
depreciation and disposal
of fixed assets
Fixed Assets
Capitalization and
Control Policy
• City maintains
cybersecurity insurance
through CIPIA
• City currently reviewing
establishment of
comprehensive policy
Cybersecurity
Policy
• Pension Reserve Fund
(PRF) established to be
funded after funding of 3
General Fund reserves
• 50-75% of surplus funds
above reserve minimums
to be transferred to PRF
• $4.0M Section 115 Trust
balance as of 2/28/23
Pension Funding
Policy
• City develops five-year
capital improvements
plan, updated at least bi-
annually
• Identifies projects,
funding source and effect
of the plan on key
financial variables
Capital
Improvement
Policy
Robust and Sound Financial Policies & Practices
23 Policies can be accessed here: https://nha.egnyte.com/fl/sDnfpC9ZC3 General Fund Revenues by Source
Combined sales tax revenues
represented 57% of General Fund
revenues in FY 2022
Bradley Burns % = 39% of revenues
Measure P % = 18% of revenues
Strong annual growth of 10-11%
since FY 2020 pandemic
FY 2022 General Fund revenues 19%
over pre-pandemic (2019) high of
$35.0M
Estimated $1.2M - $1.5M in
cannabis community benefit fees to
be collected annually
24 % of General Fund % of General Fund Actual Actual Actual Revenue Source Revenues (FY 2022) 1 Revenues (FY 2021)
1 FY 2022 FY 2021 FY 2020
39% 39% $16,342,832 $14,738,209 $12,842,770 Sales Tax - Bradley Burns 18% 16% 7,519,268 6,116,180 5,221,987 Sales Tax - Measure P 10% 11% 4,197,853 4,088,991 3,977,671 Property Tax
12% 13% 4,918,467 4,753,060 4,551,788 Motor Vehicle in Lieu 6% 6% 2,423,575 2,151,327 1,807,981 Transient Occupancy Taxes 2% 2% 1,000,693 933,924 714,401 Charges for Services
13% 14% 5,236,348 5,126,363 4,915,268 Other
$41,639,036 $37,908,054 $34,031,866 Totals
Source: City of El Centro
1 Rounded
$-
$5
$10
$15
$20
$25
$30
$35
$40
$45
FY 2020 FY 2021 FY 2022
Millions
Sales Tax - Bradley Burns Sales Tax - Measure P Property Tax Motor Vehicle in Lieu Transient Occupancy Taxes Charges for Services Other
19 20
21 22
23 24
11/9/2023
5 General Fund Operating Statement
General Fund has
achieved operating
surpluses for the past 5
fiscal years, including
during the COVID-19
pandemic (FY 2020)
Increase in tax revenue
attributable to collection
of Measure P sales tax
beginning in April 2017
Increased capital outlay
attributable in part to
Measure P projects
Transfers in and out in
FY 2022 largely
attributable to $2.5M
deposit into PARS Trust
Fund and 2021A LRB
debt service payments
25 2018 2019 2020 2021 2022
Revenues
Taxes $23,946,816 $25,284,478 $24,650,046 $27,950,120 $3 1,376,087 Licenses and permits 423,868 266,735 299,970 324,355 441, 200 Intergovernmental 5,679,992 6,234,930 6,738,296 6,866,07 9 7,480,152 Charges for services 848,953 727,046 714,401 933,924 1,000 ,693 Fines and forfeitures 76,671 66,376 47,633 37,300 34,508 Interest - 1,118,789 340,253 498,236 95,613
Other 1,108,095 1,271,997 1,241,267 1,298,040 1,210,783 Total revenues $32,084,395 $34,970,351 $34,031,866 $37, 908,054 $41,639,036 Expenditures
Current:
General government $4,007,539 $3,675,448 $3,428,969 $3,53 8,826 $3,929,636 Public safety 16,016,794 15,879,598 16,562,864 16,363,14 1 14,770,364 Public works 1,334,529 1,439,809 1,389,688 1,418,547 1,49 7,177 Parks and recreation 3,181,183 3,375,179 3,352,874 3,582, 223 7,707,453 Community development 1,809,277 1,786,103 1,975,223 2,259 ,860 1,981,524 Capital Outlay 2,155,606 8,192,328 6,897,395 2,641,078 4, 206,361 Total expenditures $28,504,928 $34,348,465 $33,607,013 $29,803,675 $34,092,515 Excess (Deficiency) of Revenues
over (under) Expenditures $3,579,467 $621,886 $424,853 $ 8,104,379 $7,546,521 Other Financing Sources (Uses)
Transfers in $2,421,273 $3,075,436 $2,584,212 $1,028,500 $3,630,142 Transfers out (1,714,368) (2,044,000) (1,500,000) - (3,08 7,750) Total Other Financing Sources (Uses) $706,905 $1,031,436 $ 1,084,212 $1,028,500 $542,392 Net Change in Fund Balances $4,286,372 $1,653,322 $1,509,0 65 $9,132,879 $8,088,913 Fund balances – Beginning of Fiscal Year $18,241,276 $22,5 27,648 $24,180,970 $25,690,035 $34,822,914 Fund Balances at End of Year $22,527,648 $24,180,970 $25, 690,035 $34,822,914 $42,911,827 Source: City of El Centro Audited Financial Statements
Budget to Actual
26 City generated
significantly higher
revenues than
budgeted in FY 2022
Increase in
intergovernmental
revenues tied to
receipt of COVID-19
relief funds
Balanced FY 2022
operations achieved
netting out increase
in intergovernmental
revenues
City projects to
achieve a balanced
budget in FY 2023
Fiscal Year 2022 Fiscal Year 2022 Final 2023
Final Budget Actual Budget
Revenues
Taxes $28,077,000 $31,376,087 $3,299,087 $30,790,760
Licenses and permits 346,600 441,200 94,600 346,300
Intergovernmental 1,280,000 7,480,152 6,200,152 6,398,000 Charges for services 918,200 1,000,693 82,493 934,540
Fines and forfeitures 68,000 34,508 (33,492) 35,300
Interest 145,000 95,613 (49,387) 155,300
Other 1,211,000 1,210,783 (217) 1,023,000
Total Revenues 32,045,800 41,639,036 9,593,236 39,683,200 Expenditures
Current:
General government 3,686,501 3,929,636 (243,135) 4,447,203 Public safety 17,740,793 14,770,364 2,970,429 20,920,141 Public works 1,950,204 1,497,177 453,027 2,484,620
Parks, recreation and culture 4,503,087 7,707,453 (3,204,366) 6,037,921 Community Development 2,028,088 1,981,524 46,564 2,140,413 Capital Outlay: 5,022,192 4,206,361 815,831 2,731,301
Total Expenditures 34,930,865 34,092,515 838,350 38,761,599 Excess (deficiency) of revenues over (under) expend itures (2,885,065) 7,546,521 10,431,586 921,601 Other Financing Sources (Uses) :
Transfers in 1,178,924 3,630,142 2,451,218 1,337,550
Transfers out - (3,087,750) (3,087,750) (901,469)
Total Other Financing Sources (Uses) 1,178,924 542,392 (636,532) 436,081 Net Change in Fund Balances (1,706,141) 8,088,913 9,795,054 1,357,682 Fund Balances at Beginning of Year 34,822,915 34,822,915 42,911,828 Fund Balances at End of Year $33,116,774 $42,911,828 $9,795,054 $44,269,510 Variance
Source: City of El Centro
General Fund Balance Sheet
27 Very strong liquidity with
$35.2M in unrestricted cash
and investments
General Fund assets 12x
greater than liabilities in FY
2022
City has significantly bolstered
reserve balances with
conservative application of
Measure P revenues
As of January 2023, Measure P
accounts comprise $18.1M of
General Fund unassigned fund
balances
Majority of restricted balances
attributable to pension Section
115 Trust ($4.0M balance as of
2/28/23); assigned balances
attributable to OPEB reserves
2018 2019 2020 2021 2022
Assets
Cash and investments 1 9,165,217 2 3,460,208 21,267,08 5 26,831,056 35,175,772
Receivables:
Accounts 2 58,883 1 60,890 1 3,317 11 5 - Taxes 2 ,636,927 2 ,884,244 2 ,442,013 4,321,737 3,8 69,982 Interes t 1 9,325 1 12,766 1 9,325 19,417 1 9,417 Grants - - - 6 8,902 113,500
Notes - - - 382,600 837,990
Leases - - - - 455,390
Other 4 77,956 6 33,431 6 99,487 1,310,776 749,626 Due from other funds 2 ,051,417 2 ,301,410 2,596,1 84 2,509,767 2,067,114 Restricted Assets:
Cash and investments 1 ,500,000 1 ,500,000 1,500,0 00 1,850,641 3,892,006 Cash and investments with Fiscal Agent - - - 141,225 141,223 Total Assets 2 6,109,725 3 1,052,949 2 8,537,411 37,436 ,236 47,322,020 Liabilities and Fund Balances
Accounts payable 1 ,745,387 5 ,152,639 1,155,616 1,376,106 2,006,030 Salaries/Benefits Payable 7 29,255 7 25,250 7 58,109 188,968 754,634
Unearned Revenue 1 89,436 8 7,158 13,205 - - Depos its 9 17,998 9 06,931 9 20,445 1,048,247 1,200,367 Total Liabilities 3,582,076 6,871,978 2,847,375 2,613,321 3,961,031 Deferred Inflows of Resources
Lease Revenue - - - - 449,161 Total Deferred Inflows of Resources
- - - - 449,161 Fund Balances
Restricted 1 ,500,000 1 ,500,000 1 ,500,000 1,850 ,641 4,033,229
Assigned 5 ,019,337 1 ,569,069 1 ,588,408 88,954 8 9,161 Unass igned 1 6,008,312 2 1,111,902 2 2,601,628 32,883,3 20 38,789,438 Total Fund Balances 2 2,527,649 2 4,180,971 25,690,036 34,822,915 42,911,828 Total Liabilities and Fund Balances 2 6,109,725 31,05 2,949 2 8,537,411 37,436,236 47,322,020 Source: City of El Centro Audited Financial Statements
General Fund Reserves – Fund Balance History
Combined unassigned balances have grown to $38.8M i n FY 2022 and comprise 90% of total General Fund balances. $4.0M in restricted balances designated for CalPERS Section 115 Trust. The Measure P fund balance has grown to approximate ly $18.1M as of January 2023 28 Note: The ACFR displays combined General Fund unassigned reserves, inclusive of Measure P amounts. $10.4M
(46%)
$11.7M
(49%)
$11.6M
(45%)
$18.6M
(53%)
$21.4M
(50%)
$5.6M
(25%)
$9.4M
(39%)
$11.0M
(43%)
$14.3M
(41%)
$17.4M
(41%)
$1.5M
(7%)
$1.5M
(6%)
$1.5M
(6%)
$1.9M
(5%)
$4.0M
(9%)
$5.0M
(22%)
$1.6M
(6%)
$1.6M
(6%)
$0.1M
(0%)
$0.1M
(0%)
$0.0 $5.0 $10.0 $15.0 $20.0 $25.0 $30.0 $35.0 $40.0 $45.0 2018
2019
2020
2021
2022
Millions
Unassigned (General Fund) Unassigned (Measure P) Restricted Assigned General Fund Debt Profile
Outstanding General Fund debt obligations:
2021A Lease Revenue Bonds (Library Project)
2021B Lease Revenue Refunding Bonds (Transportation Improvements) 29 $0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
$1.4
$1.6
$1.8
$2.0
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
Millions
Fiscal Year
City of El Centro - Outstanding General Fund Debt
2021B Lease Revenue Refunding Bonds
2021A Lease Revenue Bonds
Final Maturity (Fiscal Year) Outstanding Par Obligation 2048 $16,180,000 2021A Lease Revenue Bonds
2032 $6,585,000 2021B Lease Revenue Refunding Bonds
Funded Status of CalPERS Pension Plans
30 City has a $37.3M Unfunded Accrued Liability (“UAL”) as of 6/30/2021 based on the most recent CalPERS Valuation Reports
CalPERS reported investment returns of -7.5% for FY 2021-22, which is projected to increase the City’s UAL balance to approximately $61.6M. Increases in annual UAL payments will begin in FY 2024-25 Miscellaneous Plan: $10.2M UAL Safety Plans: $27.1M UAL Source: CalPERS Annual Valuation Reports (2017-2021).
$-
$20
$40
$60
$80
$100
$120
$140
2017 2018 2019 2020 2021
Millions
Accrued Liability vs. Market Value of Assets
Accrued Liability Market Value of Assets
80% 79% 78% 76%
89%
50%
55%
60%
65%
70%
75%
80%
85%
90%
2017 2018 2019 2020 2021
Funded Ratio
$-
$20
$40
$60
$80
$100
$120
$140
2017 2018 2019 2020 2021
Millions
Accrued Liability vs. Market Value of Assets
Accrued Liability Market Value of Assets
72% 71% 71% 70%
79%
50%
55%
60%
65%
70%
75%
80%
85%
90%
2017 2018 2019 2020 2021
Funded Ratio
25 26
27 28
29 30
11/9/2023
6 Fully Addressed OPEB Liability
Total OPEB Liability: $6.3 million
City has over-funded 188% of $6.3M OPEB liability with $11.6M balance in CalPERS trust
31 Total Membership of OPEB Plan
50 Inactive employees or beneficiaries currently receiving benefit payments -Inactive employees entitled to but not yet receiving benefit payments 232 Active employees
282 Total
Source: City of El Centro 2022 ACFR
EL CENTRO REGIONAL MEDICAL CENTER
Local Hospital Financial Difficulties
El Centro Regional Medical Center (“ECRMC”):
Provides medical services within the City as a municipal hospital, separate agency and enterprise operation of the City
ECRMC’s finances are currently reported within the Proprietary Funds of the City’s financial statements The Authority has $123.8 million of outstanding hospital limited obligation revenue bonds (no City pledge) issued for the benefit of ECRMC
Supported by installment purchase payments that constitute special limited obligations of the City, secured solely by all revenues, income, receipts and money received by the Medical Center Other than donor-restricted gifts, grants, bequests , donations contributions and tax revenues Neither the full faith and credit nor the taxing power of the City is pledged to the repayment of ECRMC’s bonds
The Medical Center Bonds do not constitute a debt of the City, the Authority (other than as provided in the financing documents for such bonds) or of the State of California ECRMC is currently experiencing significant operational and financial difficulties ECRMC’s auditor has opined that ECRMC does not have recurring income sufficient to meet its ongoing operating expenditures or debt service obligations that raise substantial doubt about its ability to continue as a going concern
33 Local Hospital Financial Difficulties (Continued)
In November 2022, members of the City Council re-assumed governance of ECRMC’s Board of Trustees to help stabilize the financial and operational situation and the Medical Center Potential City impacts:
The City would expect to incur site security and legal costs if conditions with ECRMC deteriorate ECRMC is one of the largest employers in the City and there could be indirect impacts to the City’s revenues
There may be unanticipated costs to the City’s General Fund, although the City does not expect any such costs to impair the City’s ability to make payments in connection with the 2023A Bonds or any other outstanding long-term obligation of the City
Given the ongoing challenges at ECRMC, the City, ECRMC and UC San Diego Health (“UCSD”) have entered into an agreement pursuant to which UCSD will assume actual management and day-to-day operations of ECRMC, subject to the ultimate oversight of ECRMC’s Board of Trustees
ECRMC, the City and UCSD entered into a Letter of Intent on February 27, 2023 for UCSD to provide interim management and operations of ECRMC while a formal Operations and Administrative Support Agreement is developed in the next several months
34 MEASURE P S ALES TAX
Measure P Sales Tax
30-year, ½ cent sales tax approved in Nov. 2016 to fund general City services, such as police, fire protection, senior programs, and street maintenance Collection began April 2017 and sunsets in 2047
Received $6.1M in FY 2021 and $7.5M in FY 2022; projected at $7.5M in FY 2023 Above HdL projections from FY 2021
36 $-
$2
$4
$6
$8
$10
$12
$14
$16
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
Millions
Measure P: Historical & Projected Sales Tax Receipts (FY) Received Sales Tax City Projection 3% Growth Projection Projected Measure P Sales Tax in 2021 31 32
33 34
35 36
11/9/2023
7 El Centro Public Library (2021A LRB)
In 2021, the El Centro Financing Authority issued $1 6.7 million of Lease Revenue Bonds, 2021 Series A to finance the ac quisition, construction and improvement of a new library facility
Payments of approx. $900k are supported by revenues of Measure P In November 2022, the City successfully opened the n ew El Centro Public Library on time and within budget
37 CITY POLICE STATION PROJECT
Existing Police Station
39 El Centro’s Police Department is housed in
an amalgamation of buildings that date
back to the end of WWII.
Original station designed for a
department of 26, currently it serves
staffing levels three times the amount.
Buildings predate California Essential
Services Buildings Seismic Safety Act.
2018 SPACE NEEDS ASSESSMENT STUDY FINDINGS
Police Department works in severely
overcrowded spaces.
Any expansion or renovations would
trigger complete reinforcement of all
major structural systems.
Not cost effective to reinforce a building
that does not serve the current or future
needs of El Centro
Project Status
City intends to finance a new, $40 million Police Station to replace the existing facility built in 1950 The Police Station Project consists of two buildings totaling 44,477 square feet The main building is 32,671 square feet and will in clude a public lobby, a community meeting/multipurp ose space, offices for administration, investigators an d records and patrol related functions including: l ockers, fitness, report writing areas, etc.
The second support building is 11,806 square feet t he ground floor and will house property and evidenc e, k-9, the fingerprint laboratory and various police suppo rt and storage functions. The upper floor may house an indoor police firearms range, depending on the over all cost of the project The development will also contain approximately 128 parking spaces on grade Estimated annual operational costs of $1,075,000 upon completion of the Police Station Feasibility Study Completed 2018 by
McClaren, Wilson & Lawrie, Inc.
Environmental Completed 2022
Design Completed January 2023 by
Statement of Probable Cost completed March
2022 by
City Police Station Project (2023A LRB)
40 2023A L EASE REVENUE BONDS
2023A Lease Revenue Bonds – Security Features
(1) Finance the acquisition, construction, and improvement of a new police station in the City
(2) Pay Costs of issuance
Purpose
Base rental payments from City’s General Fund Security
3-pronged test; may be satisfied with surety Debt Service Reserve Fund $40,220,000 Estimated Par Amount
4/1 and 10/1 principal and interest; 10/1 principal
First interest payment date 10/1/2023, First principal date 10/1/26 (occupancy expected 4/1/25)
Payment Dates
Level annual payments through 2047, beginning FY 2026 Principal Amortization Aquatic Center & real property of Police Station Project during construction; Police Station Facilities after occupancy Leased Properties 42 37 38
39 40
41 42
11/9/2023
8 Estimated Sources and Uses of Funds
LRB structured with fiscal year level debt service through FY 2048 Final maturity aligned with that of the 2021 Lease Revenue Bonds (Library Project) 10/1/2047 final maturity captures entirety of Measure P receipts Sources & Uses Fiscal Year Debt Service ($ in millions) 43 Sources:
$40,220,000 Principal Amount
3,670,000 Original Issue Premium
$43,890,000 T otal Sources:
Uses:
$40,000,000 Project Deposit
2,995,000 Capitalized Interest
445,000 Total Costs of Issuance
360,000 Bond Insurance Premium
90,000 Surety Reserve
$43,890,000 T otal Uses:
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
Millions
2023A Lease Revenue Bonds
2023A Lease Revenue Bonds Net Debt Service
Measure P Financing Capacity
$0.0
$2.0
$4.0
$6.0
$8.0
$10.0
$12.0
$14.0
$16.0
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
Millions
Projected Measure P Revenues vs. 2021A + 2023A LRB*
2021A Lease Revenue Bonds
2023A Lease Revenue Bonds
Total Debt Service Net of Capitalized Interest
Projected Measure P Sales Tax
44 *Assumes previous FY Measure P receipts support current FY debt service (i.e. FY 2023 receipts support FY 2024 debt service).
Annual Measure P receipts (>=$7.5M) projected to have significant capacity to support combined debt service on the 2021A + 2023A LRBs (~$3.8M) Credit Comparison
Days Cash
on Hand
Fund
Balance
(Ending) /
Exp (%)
General
Fund
Surplus
T otal
Direct
Debt
T otal
Rev
Estimated Full
Value per Capita
Median
Housing
Value
Unemployment
Rate Population S&P Credit Name
124 76.88 3,846 4,836 41,219 53,777 402,600 10.8 39,501 A+ Bell Gardens 136 96.10 3,756 28,561 39,408 54,509 238,500 13.5 41,941 AA-Coachella 377 125.87 7,544 28,856 58,169 63,174 221,500 10.2 44,158 A+ El Centro 187 48.91 2,428 2,590 19,261 46,597 427,300 9.1 25,138 A+ Maywood 91 23.90 -101,600 124,821 67,556 139,291 641,700 10.0 61,096 AA Monterey Park
149 83.85 4,324 10,697 100,664 86,258 428,800 10.2 56,173 AA-National City 242 77.61 5,805 190 43,777 86,101 388,300 11.1 53,733 AA-Paramount 32 39.61 5,057 11,835 55,158 88,644 304,600 10.2 70,117 A+ Yuba City Source: CreditScope. Data as of 4/11/2023.
Notes :
All numbers are based on fiscal year ending 6/30/2021 except El Centro, which is based on fiscal year ending 6/30/2022.
A+ rating for Bell Gardens and Yuba City reflects the city's Lease Appropriation rating; S&P Capital IQ does not show an ICR rating.
CONCLUSION
Conclusion
47 The City continues to showcase exceptional budgetary performance, with operating surpluses over 20% in 2021 & 2022. Unassigned General Fund reserves have grown to over 110% of FY 2022 expenditures and have created very strong budget flexibility and liquidity.
Pro-Active
Management,
Comprehensive Policies
& Prudent Practices
Robust policy framework and conservative budgeting support the City to manage service levels and ongoing obligations in a sustainable and fiscally prudent manner.
Pension Reserve Policy (2021) established Pension Reserve Fund ($4.0M Section 115 Trust) with defined funding mechanisms to proactively address pension liabilities. City strategically leverages multiple CIP funding sources including state & federal grants.
Fiscal Restraint,
Opportunistic
Investments and Patient
Execution
Level combined payments on 2021A & 2023A LRBs with same 2047 final maturity ensures project costs, including expected incremental operations/maintenance costs, will be well covered by earmarked Measure P revenues. Measure P revenues project to be >2.1x combined debt service over life of 2021A + 2023A LRB issuances, leaving significant funding for additional pay-go projects from this source of revenue.
Thoughtful Financing
Structure and Resiliency
City’s economy has grown to support a total trade area population (1.4 million) 30x its own. Annual border crossings (15.4 million) have grown 43% since 2020. Ideal way- station for efficient east-west and north-south logistics operations. Hub for governmental, retail, healthcare and agricultural activities creates strong buffer to volatility and prospects for sustained growth in the City and region.
Unique Crossroads
Location and Robust
Trade Area Economy
City’s proven economic resiliency, high-growth trade area demographics and history of exceptionally strong reserves & operational performance warrant consideration for an enhanced rating assessment.
Credit Presentation to S&P April 12
Receive Credit Rating Week of April 17 th
Bond Sale Week of May 1 st
Close & Fund Week of May 15 th
Financing Schedule
48 43 44
45 46
47 48
11/9/2023
9 APPENDIX A:
CITY OVERVIEW & D EMOGRAPHIC INFORMATION
City Overview
Population: 44,508
Area: 11 square miles
Incorporated in 1908
Charter city (Adopted 2009)
Council-Manager government
Full-service city
120 miles east of San Diego,
13 miles north of Mexicali,
Mexico and 60 miles from
Yuma, AZ
Economic link between
northern Mexico and the
western coast of the United
States
50 Taxable Transactions in the City
51 Total value of taxable
transactions increased
27.1% from 2015 to 2021
Since 2015, retail stores
have consistently
accounted for at least 82%
of the value of all taxable
transactions,
demonstrating a strong
and reliable retail presence
in the City
In 2021, retail stores
accounted for 85.7% of the
total taxable transaction
value
Source: California Department of Tax and Fee Administration – Taxable Sales – Large Cities. $0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
$1.4
2015 2016 2017 2018 2019 2020 2021
Billions
City of El Centro
Valuation of Taxable Transactions
Retail Stores All Other Outlets
APPENDIX B: ADDITIONAL DETAILED INFORMATION ON
ECONOMIC DEVELOPMENT AND GROWTH
Governmental and Employment Center
53 El Centro is the County Seat for Imperial County
Administration offices for Imperial County, US Social Security Admin, Imperial Irrigation District, El Centro SD, CA Dept. etc. Numerous additional facilities under construction, including 27,000 ft 2 highway patrol station and 46,000 ft 2 state courthouse Central Union High School
STEM Building
Superior Court of California
El Centro Courthouse
United States Courthouse
El Centro Courthouse
El Centro is a Retail Center
54 Imperial Valley Mall
Local mall attracts visitors
from surrounding cities as
well as those from other areas
such as, Yuma, Arizona and
Mexicali, Mexico
Sears closed but the mall
maintains several anchor
tenants that remained open
for business, including
Dillards, Macy’s and JC Penney
Continues to have a very
diverse retail footprint that
includes traditional retail,
food and entertainment
Big box retailers have become
a critical component of
growth
Walmart Supercenter opened
in 2005 with 235K sq. ft and
Costco opened in 1992 with
150K sq. ft including gas
Operations were critical for
the community and remained
opened during entire COVID
shutdown (essential business
designation)
Operations have expanded to
online fulfillment centers for
the entire region
49 50
51 52
53 54
11/9/2023
10 Diversified Retail Outlets
55 Growing the Economy
56 Planning for Development
57 El Centro 2040 General Plan Update
Opportunity Areas: The updated General Plan
identifies five areas targeted for new growth
and redevelopment. This will be achieved
though permitting mixed-use “by-right,”
expanding allowed uses in the Downtown
District, and matching growth areas with
investments in public infrastructure.
Reduced Environmental Review: Projects
consistent with the General Plan will benefit
from a Program Environmental Impact Report
for the project. This translates in reduced time
and costs for environmental compliance.
Implementation Plan: Policies and goals
included in the General Plan update will be put
into place though the Implementation Plan.
This plan will provide instructions on zoning
code changes, development policy reforms,
and the implementation of city programs to
pursue the goals of the General Plan.
55 56
57 REQUEST FOR PROPOSAL FOR FINANCIAL ADVISORY SERVICES – NHA ADVISORS, LLC
APPENDIX E: CITY OF LANCASTER 2019 REVENUE BONDS CREDIT PRESENTATION
REQUEST FOR PROPOSAL FOR FINANCIAL ADVISORY SERVICES – NHA ADVISORS, LLC
APPENDIX F: PROVPORT 2023 COPS CREDIT PRESENTATION
11/9/2023
1 Rating Presentation
Providence Redevelopment Agency
2023 Certificates of Participation (Port of Providence Lease) December 1, 2022
Presentation Team
2 City and PRA MA ‐ HilltopSecurities
Maureen Gurghigian, Managing Director
Sean Fisher, Vice President
Matthew Blais, Vice President
ProvPort MA ‐ NHA Advisors
Eric Scriven, Principal
Leslie Bloom, Vice President
ProvPort / Waterson Terminal Services
William Brody, General Counsel
Chris Waterson, General Manager
Ray Meador, Chief Financial Officer
Liz Messier, Controller
Don Hunt, Legal Advisor to the Port
City of Providence
Lawrence Mancini, Chief Financial Officer
Sara Silveira, Director of Finance
Jeff Dana, City Solicitor
Underwriter ‐ Raymond James
Alex Shih, Managing Director
Bob Coven, Managing Director
Bond Counsel ‐ Locke Lord LLP
Karen Grande, Partner
Susan Kiernan, Senior Counsel
Underwriter Counsel – Savage Law Partners
Ellen Corneau, Partner
Table of Contents
Executive Summary
Overview of ProvPort
ProvPort Financial Management
2023 Certificates of Participation
Conclusion and Timeline
3 EXECUTIVE SUMMARY
Executive Summary
5 ProvPort intends to issue approximately $12.1 million in Certificates of Participation (“COPs”) to fund new projects at the Port and surrounding area of the City
Installment Payments secured by and payable from Port Revenues consisting of Gross Revenues net of de minimus O&M Security includes Debt Service Reserve Fund and Supplemental Re serve Fund (available to pay operation and maintenance, and deb t service, if needed)
Security also includes the City’s Moral Obligation, subject to appropriation of funds by the City Council, to replenish DSRF for any shortfall Credit Strengths
Tenured and proactive management with conservative financial management practices Strong available cash and investments at FYE 2022 of $6.08 million (351 days of operating expenses) ProvPort projects continued accretion to reserves under conserva tive assumptions Very manageable debt profile
Very strong debt service coverage of 6.99x in FY 2021‐22 and 4.02x when including subordinate expenses (legally subordinate to debt service)
Projected debt service coverage after issuance of 2023 COPs est imated at over 5.5x and ~2.7x when including subordinate expenses Monthly transfer of lease payments to Lease (Debt Service) Paym ent Fund ProvPort has strong market position
Limited direct competition; Significant barriers to tenants (re)locating ProvPort facilities and cargos elsewhere Offshore wind provides significant revenue growth opportunity No exposure to Russia, China, Ukraine imports/exports ProvPort/Waterson Terminal Services and Tenants have completed significant Capital Improvements in recent years Manageable future CIP and identified funding sources (Series A COPs Debt Service, programmed from cash‐flow)
OVERVIEW OF PROVPORT
12 34
56 11/9/2023
2 ProvPort Overview
7 City of Providence developed the Port in the 1920s for maritime shipping ProvPort was created in 1994 as a non‐profit, public‐private partnership ProvPort purchased the Port from the City for $16.5 million; paid the City an additional $6 million in 2006 ProvPort pays the City an annual percentage of gross revenues and other fees ProvPort’s investments and management have stabilized and increased the Port’s status as an economic engine for the City producing union jobs and other ancillary taxes to the City and benefits to the local and regional economy Port facilities are strategically located in an intensive industrial‐commercial harbor complex located at the head of Narragansett Bay within the City
Facilities comprise a large deep‐water port in the Narragansett Bay Approximately 5,000 linear feet of docks comprising 6 berths with a depth of up to 38.5 feet 50,000 square feet of covered storage space
13 acres of docks and open storage
ProvPort Imports, Exports & Intermodal Opportunities
8 International, maritime commerce utilize the deep‐water federal channel Petroleum, asphalt, cement, LPG, aluminum oxide, off‐shore wind turbines, road salt, and project cargoes are the primary imports
Primary exports are scrap metals, automobile and project cargoes Adjacent access to Interstate 95 and 195 and railways On‐site rail is connected to all major railroads offering service to all US and Canadian destinations
Nearby Ports, Yet Little Direct Competition
9 ProvPort benefits from primarily
importing commodities, which is
unique compared to the surrounding
ports
Only Boston, New London and ProvPort
have berths and channels dredged to 40
feet
As a result, ProvPort does not face direct
competition from nearby ports
The surrounding ports are primarily
dedicated to the following
Port of Davisville/Quonset Point ‐A u t o
imports
New Bedford ‐ Offshore Wind; limited
capacity
New London – On‐shore staging for offshore
wind
Boston ‐ Cruises and containers
Fall River – Fishing
Brayton Point ‐ landing point for the
electricity generated by off‐shore wind
turbines
Portsmouth and New Haven – Out of market
area
Port of
Davisville
Brayton
Point
Terminal Management Agreement
10 Terminal Management Agreement between ProvPort and Waterson Terminal Services (“WTS”) effective May 2007
Expires at end of proposed financing
Agreement grants WTS license to manage all port operations and requires WTS to complete necessary capital improvements
General Duties
Manage all vessel activity
Provide security throughout the Port area
Provide business development services to assure continued growth of the Port Maintain all buildings and grounds
Negotiate leases subject to final approval by the ProvPort Board Manage all existing leases and tenant relationships
Provide long term planning to assure that ProvPort’s competitive advantage is secure Interact with Coast Guard, Corps of Engineers and other maritime agencies Terminal Management Agreement, Cont’d
11 Agreement states that all
Terminal Management Fees are
subordinate to Debt Service
Monthly Terminal Management
Services payments occur only after
the required monthly transfer to the
Lease (Debt Service) Payment Fund
ProvPort Operations and Maintenance
Lease Payments (Debt Service) for
2003, 2006 & 2023 Certificates
Subordinate Payments ‐
Terminal Management Services Fees
And
Payments to City for In Lieu taxes,
payments to Neighborhood
Improvement1, Sustainability Fund
and Community Benefit Fund
Priority of Cash Disbursements from
General Revenue Account
(Identified in Article IX of Agreement)
1 Beginning in FYE 2024, ProvPort no longer makes payment to Neigh borhood Improvement OffShore (OSW) Wind Power Generation
12 US OSW Development Pipeline – 35 gigawatts (GW)
Primary development areas < 200 NM from ProvPort
Network of ports required:
Manufacturing, construction, and operations
Multiple component packages
ProvPort OSW Hub Current Operations:
Foundation component fabrication (secondary steel)
Survey vessel terminal support
Long‐term cable storage & maintenance
Cable installation support & marshalling
Opportunities Actively under Development:
Scour protection stone staging/stevedoring
Wind turbine generator (WTG) component
marshalling/manufacturing
Foundation marshalling (primary steel)
Offshore supply/crew vessel support
Sea fastening/grillage fabrication and disposal
Grouting logistics and stevedoring
Marine coordination
78 91 0
11 12
11/9/2023
3 ProvPort Tenant: Ørsted’s OSW New Development
13 Energy company Ørsted and utility
Eversource recently constructed a
wind manufacturing facility at
ProvPort
The new facility is now operational
Facility used for fabrication and
assembly of foundation platforms for
Ørsted and Eversource’s joint‐venture
offshore wind projects serving Rhode
Island, Connecticut, and New York
With the new facility, Ørsted area
under lease increased from 7.3 to
19 acres
Facility will benefit the region by
offering union jobs, lowering
energy costs, and decreasing air
pollution
Recent Expansion and Improvements to Facilities
ProvPort/WTS Improvements
14 ProvPort and WTS have completed Capital Improvements in recent years, expanding and maintaining state‐of‐the‐art port facilities Cost of
ImprovementImprovementProvPort Area
$8,400,000Acquired approximately 8‐acre site adjacent to ProvPort along wi th existing warehouse structureAcquisition of Adjacent Property 2,500,000Capping of former municipal dump, installation of water collect ion system, complete community park areaBerth 6
1,500,000Repaving of interior streets within ProvPortStreets 1,200,000Ace Warehouse demolition and creation of additional storage areaBerth 1 775,000Consisted of removing existing paving and sub‐structures of repaving area for heavy loadsRebuild of Berth 1 Area
750,000Construct retaining wall in conjunction with Orsted's new building.
Created approximately 1.5 acres of new property for lease.Berth 6 Orsted 440,000Demolition of structureAce Warehouse
100,000General improvements at entry gate and surveillance camerasSecurity 50,000General upgrades to building and roofAdministration Building 400,000RepairsCrane
250,000RepairsBarge
$16,365,000Total
Recent Expansion and Improvements to Facilities
Recent Tenant Improvements
15 Over the last five years, Tenants have also made
significant investments in their ProvPort facilities
Tenant improvements total more than $86 million
Cost of
Improvement
(if available)ImprovementTenant
$25,000,000Complete Construction of New BuildingOrsted
12,300,000Upgrade of Terminal and Storage DomeSea 3
2,750,000Build New Wind TurbineGreen Energy
15,000,000Convert Marine Terminal Building to Cement Facility McInnis 18,000,000Build New Dome for Cement Storage;
1,500,000Dock Improvements
4,500,000Upgrade to Yard;
Snitzer
750,000Paving of Access Road from Yard to Dock
5,500,000General Yard and Distribution ImprovementsNew England Petroleum
800,000General Yard and Scale ImprovementsMorton
$86,100,000Total
PROVPORT FINANCIAL MANAGEMENT
Historical Cash Balances
17 As of June 30, 2022, the Port’s available cash and investments totaled approximately $6.08M (351 days cash on hand)
Cash balance decreased in FYE 2016, 2017 and 2018 due to accelerated paydown of a loan with BofA ($6 million loan for barge; 10‐year loan paid off in 3 years)
6‐year old barge sold for $5 million; proceeds received in 2022 ProvPort will continue to strengthen reserves
1 Operating expenses for days cash includes operating expenses and subordinate expenses comprised of base terminal management fees, payments in lieu to the City and neighborhood improvement fund. Excludes non‐cash items (depreciation), capital expenses and discretionary CIP/Terminal Mgt Incentive.
Historical Cash and Investments Balance
2021‐222020‐212019‐202018‐192017‐18FYE
$6,085,000$2,483,811$2,933,468$1,264,304$214,676Total Cash & Investments 6,315,7975,393,3415,955,2964,989,6634,879,532Total Operating Expenses1 351.7168.1179.892.516.1Days Cash on Hand
Historical and Projected Debt Service Coverage
Source: ProvPort, Inc. Audited Financial Statements for FYE 2017‐2022; ProvPort Revised Budget (December 2022) for FYE 2023 projects; Projected figures for FYE 2024‐2027 provided by ProvPort
Projected (in $) 14Revised
Budget (in $) 13Audited (in $)
2026‐272025‐262024‐252023‐242022‐232021‐222020‐212019‐202018‐192017‐18 Gross Revenues:1
5,821,132 5,651,584 5,486,975 5,327,160 5,172,000 4,912,328 4,258,112 3,717,715 3,533,646 3,919,791 Rental 6,942,138 6,739,940 6,543,631 6,353,040 6,168,000 5,995,511 4,246,438 4,458,358 4,117,956 3,685,249 Wharfage/Dockage 472,714 458,945 445,578 432,600 420,000 565,916 312,880 255,694 230,521 359,608 Storage 0 0 0 0 0 527,250 614,000 487,500 0 467,431 Charter 2
675,305 655,636 636,540 618,000 600,000 758,852 522,008 490,357 492,638 714,335 Security assessment 787,856 764,909 742,630 721,000 700,000 944,065 306,486 520,114 533,623 0 Cranes and barge ‐ related party 67,531 65,564 63,654 61,800 60,000 4,605 4,715 130,429 6,253 0 Other income, net 14,766,676 14,336,578 13,919,008 13,513,600 13,120,000 13,708,527 10,264,639 10,060,167 8,914,637 9,146,414 Total Gross Revenues Operating Expenses:3,4
1,118,387 1,065,131 1,014,410 966,105 920,100 847,165691,4631,313,686649,832 528,618 Personnel Costs, rent and general expenses 1,118,387 1,065,131 1,014,410 966,105 920,100 847,165 691,463 1,313,686 649,832 528,618 Total Operating Expenses 13,648,288 13,271,447 12,904,598 12,547,495 12,199,900 12,861,362 9,573,176 8,746,481 8,264,805 8,617,796 Net Operating Revenues Debt
444,438 443,813 442,838 443,283 0 0 0 0 0 0 2023 Bonds (Preliminary, Subject to Change)5 1,835,000 1,835,000 1,835,000 810,000 0 0 0 0 0 0 2006A COPs 0 0 0 1,025,000 1,838,625 1,838,750 1,834,625 1,836,500 1,834,625 1,839,250 2003A COPs 2,279,438 2,278,813 2,277,838 2,278,283 1,838,625 1,838,750 1,834,625 1,836,500 1,834,625 1,839,250 Total Debt Service
5.99 5.82 5.67 5.51 6.64 6.99 5.22 4.76 4.50 4.69 Debt Service Coverage 11,368,85110,992,63510,626,76010,269,21210,361,27511,022,6127,738,5516,909,9816,430,1806,778,546Net Income Before Subordinate Expenses Subordinate Expenses6
6,016,9875,730,4645,457,5855,197,7005,197,7004,717,2004,164,0004,164,0003,876,0003,876,000Terminal Management Fees (TMFs) ‐ Base Operating Mgmt Fees 7 1,033,6671,003,560974,331945,952652,720727,432515,878453,610439,831450,914Payments in lieu of taxes, City of Providence8 24,00024,00022,00024,00024,00024,000Neighborhood Improvement9 147,667143,366139,190135,136000000Community Benefit Fund10 147,667143,366139,190135,136000000Sustainability Fund10 7,345,9887,020,7566,710,2966,413,9245,874,4205,468,6324,701,8784,641,6104,339,8314,350,914Total Subordinate Expenses
2.76 2.74 2.72 2.69 3.44 4.02 2.66 2.24 2.14 2.32 Debt Service Coverage after Subordinate Expenses 11 800,000800,000800,000Deposit to Restricted Supplemental Reserve Fund 12 4,022,8633,171,8793,116,4653,055,2884,486,8555,553,9803,036,6732,268,3712,090,3492,427,632Ending Balance 13 14
15 16
17 18
11/9/2023
4 Historical and Projected Debt Service Coverage
Footnotes
19 1 Change in gross revenues from FYE 2018 to FYE 2019 due to the lease cancellation by TEPPCO for the propane terminal ($690,000), the decline of Storage as coal, stored on a short‐term basis was shipped out ($130,000) and crane rental charges decreased by $180,000 as volume declined.
2 Charter revenues no longer budgeted for or projected due to sale of barge in FYE 2022. 3 Excludes non‐cash items (such as depreciation) and capital expenses. 4 Change in “Personnel costs, rent and general expense” from FYE 2019 to FYE 2020 primarily due to a one‐time expense of $608,292i n FYE 2020.
5 2023 Current Interest COPs amortize beginning in FYE 2024. 2023 CABS begin amortize FYE 2038 though FYE 2053, after maturity of 2006 CABs in FYE 2037. 2023 CABs will carry reduced level of debt service as 2006 CABs. 6 Pursuant to the Proposed Amended and Restated Trust Agreement, these expenses are subordinate to debt service. 7 Terminal Management Fees (TMFs) are composed of all operating expenses to operate ProvPort by Waterson, including all salaries, maintenance of all docks, berths, buildings, general equipment, cranes and barges. 8 "Payments in lieu of taxes" are budgeted at 5% of total gross revenues and will increase to 7% of gross revenues in FYE 2024. 9 Beginning in FYE 2024, ProvPort no longer has Neighborhood Impro vement expense. 10 Beginning in FYE 2024, ProvPort contributes to the Community Ben efit Fund and the Sustainability Fund based on a formula of 1% of gross revenues each.
11 Debt service coverage after subordinate expenses are for inform ational purposes only. By legal definition, Terminal Management Fees, Payments to the City and Neighborhood Improvement expenses are subordina te to debt service. 12 Deposit to Restricted Supplemental Reserve Fund is required per the Trust Agreement and occurs over a 3‐year period. 13 FY 2022‐23 figures based on Revised Budget (December 2022). 14 For FYE 2024, 2025, 2026 and 2027 all Operating Revenues assume annual growth of 3% and Operating Expenses assume annual growt h of 5%.
Historical Statement of Financial Position
20222021202020192018ASSETS
Current Assets:
$6,085,493$2,483,811$2,933,468$1,264,304$214,676Cash and cash equivalents 5,491,4263,063,9303,414,4332,866,2763,499,120Restricted cash and cash equivalents 1,238,2961,020,307694,594665,249944,853Accounts receivable, net 6,9376,9376,9376,9376,937Prepaid expenses and other current assets $12,822,152$6,574,985$7,049,432$4,802,766$4,665,586Total current assets Non‐current Assets:
$25,365,888$31,343,449$32,307,839$32,737,213$33,396,084Property and equipment, net 5,210,2405,210,2405,210,2405,210,2405,210,240Other assets 1,846,3571,845,7021,845,5161,892,6001,858,521Restricted cash and cash equivalents $32,422,485$38,399,391$39,363,595$39,840,053$40,464,845Total non‐current assets $45,244,637$44,974,376$46,413,027$44,642,819$45,130,431TOTAL ASSETS LIABILITIES AND NET ASSETS
Current Liabilities:
$1,745,000$1,660,000$1,575,000$1,500,000$1,425,000Current portion of certificates payable 00000Current portion of note payable ‐ bank
154,949130,975481,014187,403203,324Accounts payable and accrued expenses 392,576430,285356,675258,554281,087Deferred revenue
722,512515,181455,408439,831450,914Due to City of Providence, payments in lieu of taxes $3,015,037$2,736,441$2,868,097$2,385,788$2,360,325Total current liabilities Non‐current Liabilities:
$4,662,312$2,053,633$2,907,967$0$1,843,347Accrued terminal management incentive fees 9,525,6128,664,8037,849,2117,076,4886,344,370Accrued interest 7,759,2409,414,90310,986,95812,475,24013,889,752Certificates payable, less current portion and debt issuance costs 00000Note payable ‐ bank, less current portion
$24,962,201$22,869,780$24,612,233$21,937,516$24,437,794Total liabilities Net Assets:
$20,282,436$22,104,596$21,800,794$22,705,303$20,692,637Without donor restrictions $45,244,637$44,974,376$46,413,027$44,642,819$45,130,431TOTAL LIABILITIES AND NET ASSETS Source: ProvPort, Inc. Audited Financial Statements
Projected Capital Improvement Plan
21 Near‐term CIP expenditures to be completed with bond proceeds and pay‐go
Pay‐go CIP is required to be paid out of Terminal Management Services fee and is very manageable
Series A COPs will fund the following projects totaling $4.75 million ProvPort is preparing a Master Plan that creates longer term capital improvement plan
The State of Rhode Island has approved $20 million to fund ProvPort expansion and improvements to the Port’s facilities
$12 million in funding still available
Project
$2,000,000Improvement of adjacent properties for port expansion 500,000 Master Plan preparation
600,000 Purchase of two streets vacated by City of Providence 750,000Workforce Training Facility
900,000Other
$4,750,000 Total
ProvPort Outstanding Obligations
2003A COPs & 2006A COPs
The 2003A COPs mature on 9/1/2023
The 2006A COPs mature on 9/1/2036
When the 2003A COPs mature, the $1.835 million
2003A DSRF will be transferred to the 2006A COPs
When 2006A COPS mature, the 2006A DSRF will be
transferred to the 2023B COPs
Assured Guaranty* insures both the 2003A COPs and
2006A COPs
$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
$1,600,000
$1,800,000
$2,000,000
2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 Fiscal Year
ProvPort Outstanding Debt Service
2003A COPs & 2006A COPs
2003A COPs 2006A COPs
2006A COPs2003A COPs
Aggregate P+IP+IP+IDate
$1,838,750$1,838,7506/30/2022
1,838,6251,838,6256/30/2023
1,835,000$810,0001,025,0006/30/2024
1,835,0001,835,0006/30/2025
1,835,0001,835,0006/30/2026
1,835,0001,835,0006/30/2027
1,835,0001,835,0006/30/2028
1,835,0001,835,0006/30/2029
1,835,0001,835,0006/30/2030
1,835,0001,835,0006/30/2031
1,835,0001,835,0006/30/2032
1,835,0001,835,0006/30/2033
1,835,0001,835,0006/30/2034
1,835,0001,835,0006/30/2035
1,835,0001,835,0006/30/2036
1,835,0001,835,0006/30/2037
$58,416,396$24,665,000$33,751,396Total
* Radian was the original insurer and was acquired by Assured Guaranty in April 2015 Financial Policies and Practices
23 Financial budget and reporting practices:
Budget adopted annually with reports to the ProvPort Board on a quarterly basis Monthly transfers to Lease (Debt Service) Payment Fund required Current Capital Improvement Plan established in 2019 and Master Plan will establish the new longer‐term CIP
Cybersecurity:
Recently ProvPort upgraded all its on‐premises servers under the direction of its IT provider, Braver Technologies, and is undergoing the transition to secure, cloud‐based platforms supported by risk‐based controls. Advanced security systems were recently installed on all computers and ProvPort/Waterson Terminal Services has implemented a robust IT Security policy which has been approved by the US Coast Guard.
2023 CERTIFICATES OF PARTICIPATION
19 20
21 22
23 24
11/9/2023
5 Financing Overview
25 Approximately $12.1 million of COPs issued in two series Series A: Approximately $5.375 million Taxable Current Interest COPs Series B: Approximately $6.734 million Tax‐Exempt Capital Appreciation COPs Series A will be issued as Current Interest COPs
Proceeds of the Certificates will be used for ProvPort capital projects and rights‐of‐way acquisition
Level debt service structure; Final maturity of September 1, 2052 The 2023A COPs will have a DSRF requirement of Maximum Annual Debt Service 10‐year par call on Current Interest COPs
Series B will be issued as Capital Appreciation COPs
Proceeds of the COPs will be used for payment to the City of Providence for capital projects CABs will mature September 1, 2037 through September 1, 2052 The 2023B COPs will have a DSRF requirement of Maximum Annual Debt Service Upon maturity of the 2006A COPs on September 1, 2036, the 2006A COP reserve balance will be transferred to the 2023B COPs reserve fund in an amount equal to Maximum Annual Debt Service on the Series B COPs
Legal Structure
26 DescriptionProvisions
Series A $5,375,000* Taxable Current Interest COPs and
Series B $6,734,432* Tax‐Exempt Capital Appreciation COPsEstimated Par Amount March 1 and September 1 (principal)Payment Dates
Capital improvement projectsPurpose
The COPs are secured with Port Revenues consisting of Gross Revenues less de minimus ProvPort Operations & Maintenance (as detailed below) of the Port with moral obligation backstop of City of Providence, subject to appropriation of the funds by City Council Security
Gross Revenues less de minimus ProvPort Operations & Maintenance (All other expenses are subordinate to debt service, including Terminal Management Services Operating Expenses, Payments to City for In Lieu Taxes, Neighborhood Improvement Fund and contributions to Sustainability Fund and Community Benefit Fund)
Revenue Pledge
2003 COPs and 2006 COPsParity Debt
Series A: Maximum Annual Debt Service
Series B: Maximum Annual Debt Service; Upon maturity of the 2006A COPs on September 1, 2036, the 2006A COP reserve balance will be transferred to the 2023B COPs reserve fund in an amount equal to Maximum Annual Debt Service on the Series B COPs.
Reserve Requirement
ProvPort to make monthly payments to a Supplemental Reserve Account through June 30, 2026 until Supplemental Reserve Account equals Maximum Annual Debt Service for all Parity Indebtedness
Supplemental Reserve
Net Revenues at least equal to 1.25x all parity debt; plus estimated 3‐year consecutive test following capital improvements/project of Net Revenues at least equal to 1.25x parity debtAdditional Parity Debt *Preliminary, subject to change
Estimated S&U and Debt Service*
*Preliminary, subject to change.
27 Total
2023ABSeries 2023B (CABs)Series 2023A (CIBs)
Debt ServiceDebt Service
Compounded
InterestPrincipalDebt ServiceInterestPrincipalPeriod Ending ‐‐‐‐‐‐6/30/2023
$448,108‐‐‐$448,108$428,108$20,0006/30/2024
442,488‐‐‐442,488387,48855,0006/30/2025
443,463‐‐‐443,463383,46360,0006/30/2026
444,088‐‐‐444,088379,08865,0006/30/2027
444,363‐‐‐444,363374,36370,0006/30/2028
444,288‐‐‐444,288369,28875,0006/30/2029
443,863‐‐‐443,863363,86380,0006/30/2030
443,088‐‐‐443,088358,08885,0006/30/2031
446,788‐‐‐446,788351,78895,0006/30/2032
444,963‐‐‐444,963344,963100,0006/30/2033
442,788‐‐‐442,788337,788105,0006/30/2034
444,944‐‐‐444,944329,944115,0006/30/2035
446,244‐‐‐446,244321,244125,0006/30/2036
446,819‐‐‐446,819311,819135,0006/30/2037
2,093,489$1,646,820$984,668$662,153446,669301,669145,0006/30/2038 2,093,5061,647,7121,025,289622,423445,794290,794155,0006/30/2039 2,090,2151,646,0221,061,856584,166444,194279,194165,0006/30/2040 2,092,8111,646,1241,097,273548,851446,688266,688180,0006/30/2041 2,092,0801,648,8051,132,326516,479443,275253,275190,0006/30/2042 2,088,9561,645,0001,160,893484,107443,956238,956205,0006/30/2043 2,090,8141,647,3741,211,485435,889443,440223,440220,0006/30/2044 2,093,3441,646,8091,238,302408,508446,535206,535240,0006/30/2045 2,091,7751,648,4311,265,086383,346443,344188,344255,0006/30/2046 2,090,1751,646,3081,287,384358,924443,866168,866275,0006/30/2047 2,090,3831,647,4641,310,741336,723442,919147,919295,0006/30/2048 2,094,4771,649,1591,333,158316,001445,318125,318320,0006/30/2049 2,093,7791,647,9001,351,880296,020445,879100,879345,0006/30/2050 2,092,5211,647,9191,370,400277,519444,60374,603370,0006/30/2051 2,091,6001,645,2951,385,537259,758446,30546,305400,0006/30/2052 2,090,8031,645,0001,401,524243,476445,80315,803430,0006/30/2053 $39,697,016$26,352,142$19,617,800$6,734,342$13,344,874$7,969,874$5,375,000Total Total
Series B
(CABs)
Series A
(CIBs)
Sources
$12,109,342$6,734,342$5,375,000Par Amount
$12,109,342$6,734,342$5,375,000Total Sources
Uses
$11,266,996$6,516,996$4,750,000Project Fund
448,1080448,108
Debt Service Reserve
Fund
394,238217,346176,892Issuance Costs*
$12,109,342$6,734,342$5,375,000Total Uses
*Includes fees and expenses related to underwriting, legal coun sel, municipal advisory, rating, trustee, printing, bond insurance, and additional miscellaneous fees Aggregate Debt Service After Bond Issuance*
28*Debt Service for the Series 2023A (CIBs) and Series 2023B (CABs) is preliminary and subject to change Total All
Series2006A COPs2003A COPs
Series 2023B
(CABs)
Series 2023A
(CIBs)
Debt ServiceDebt ServiceDebt ServiceDebt ServiceDebt ServicePeriod Ending $1,838,625‐$1,838,625‐‐6/30/2023
2,283,108$810,0001,025,000‐$448,1086/30/2024
2,277,4881,835,000‐‐442,4886/30/2025
2,278,4631,835,000‐‐443,4636/30/2026
2,279,0881,835,000‐‐444,0886/30/2027
2,279,3631,835,000‐‐444,3636/30/2028
2,279,2881,835,000‐‐444,2886/30/2029
2,278,8631,835,000‐‐443,8636/30/2030
2,278,0881,835,000‐‐443,0886/30/2031
2,281,7881,835,000‐‐446,7886/30/2032
2,279,9631,835,000‐‐444,9636/30/2033
2,277,7881,835,000‐‐442,7886/30/2034
2,279,9441,835,000‐‐444,9446/30/2035
2,281,2441,835,000‐‐446,2446/30/2036
2,281,8191,835,000‐‐446,8196/30/2037
2,093,489‐‐$1,646,820446,6696/30/2038
2,093,506‐‐1,647,712445,7946/30/2039
2,090,215‐‐1,646,022444,1946/30/2040
2,092,811‐‐1,646,124446,6886/30/2041
2,092,080‐‐1,648,805443,2756/30/2042
2,088,956‐‐1,645,000443,9566/30/2043
2,090,814‐‐1,647,374443,4406/30/2044
2,093,344‐‐1,646,809446,5356/30/2045
2,091,775‐‐1,648,431443,3446/30/2046
2,090,175‐‐1,646,308443,8666/30/2047
2,090,383‐‐1,647,464442,9196/30/2048
2,094,477‐‐1,649,159445,3186/30/2049
2,093,779‐‐1,647,900445,8796/30/2050
2,092,521‐‐1,647,919444,6036/30/2051
2,091,600‐‐1,645,295446,3056/30/2052
2,090,803‐‐1,645,000445,8036/30/2053
$69,064,391$24,665,000$4,702,375$26,352,142$13,344,874Total $0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
Fiscal Year Ending
Aggregate Debt Service
Series 2023A (CIBs) Series 2023B (CABs) 2003A COPs 2006A COPs City of Providence Moral Obligation
29 The 2023 COPs will be on parity with the 2003A COPs and 2006A COPs The City of Providence adds further security to the COPs by providing its moral obligation pledge on the Port’s outstanding COPs’ DSRF The City has agreed as a party to the trust agreement to pay, subject to appropriation, to the trustee, no later than the September 1 next following the receipt of such notice, the amount of any shortfall in the series 2003A, 2006A and 2023A & 2023B DSRF
CONCLUSION AND TIMELINE
25 26
27 28
29 30
11/9/2023
6 Conclusion
31 T enured and proactive management with conservative financial management practices Available cash and investments at FYE 2022 of $6.08 million (351 days of operating expenses)
Strong accretion to reserves under conservative projection assumptions Very manageable debt profile
Very strong debt service coverage of 6.99x in FY 2021‐22 and 4.02x when including subordinate expenses (legally subordinate to debt service)
Projected debt service coverage after issuance of 2023 COPs estimated at over 5.5x and ~2.7x when including subordinate expenses
Monthly transfer of Lease (debt service) payments to Debt Service Payment Fund ProvPort has strong market position
Competition: ProvPort has unique market position, limited competition; Difficult to replicate facilities in trade area Revenue Stability: Long‐term credit tenants with significant facility investments and no viable alternatives Revenue Growth: Offshore wind provides significant revenue growth opportunity Key Risks: Port has no exposure to Russia, China, Ukraine imports/exports Facilities / Capital: ProvPort/Waterson Terminal Services and Tenants have completed significant Capital Improvements in recent years to propel Port to sustained, growing revenues and reduced unforeseen capital needs and operational costs
Manageable near‐term CIP; CIP inclusive of Series 2023A COPs proceeds Timeline
32 Public Hearing held and the matters were voted out of Finance Committee with recommendation of passage by full City CouncilNovember 28 Rating PresentationDecember 1, 2022
ProvPort Board Meeting Approving Financing; City Council consideration of bond resolution and lease extension and first passage of the Tax Stabilization Agreement
December 1, 2022
Distribute Revised Legal Documents & POSDecember 7
City Council tentative second/final passage of the Tax
Stabilization AgreementDecember 8
Receive Rating AssessmentDecember 19
Decision on Whether to Publish RatingDecember 20
Receive Insurance BidsDecember 21
Post POSWeek of January 3, 2023
Price COPsWeek of January 16, 2023
Close Week of January 30, 2023
31 32
REQUEST FOR PROPOSAL FOR FINANCIAL ADVISORY SERVICES – NHA ADVISORS, LLC
APPENDIX G: TDVA 2020 STATELINE REVENUE BONDS INVESTOR PRESENTATION
REQUEST FOR PROPOSAL FOR FINANCIAL ADVISORY SERVICES – NHA ADVISORS, LLC
APPENDIX H: NHA HOLISTIC FUNDING PRESENTATION
HOLISTIC FUNDING PLAN APPROACH SAMPLE
2 Background / Objectives
District plans comprehensive CIP of its Wastewater Treatment Plant over the next 5 years
Expansion to take the WWTP from the current 7.5 MGD capacity to 12 MGD Advanced treatment for expanded recycled water operations Potential Renewable Power Generation for power cost hedging/savings, grid independence, resiliency Potential Biosolid conversion to fertilizer for regulatory hedging, potential added net revenue Core Objective - Develop Plan of Finance that achieves multiple goals Retain affordable rates for District’s customers…
Through a comprehensive funding plan using available subsidized funding sources, reserves and debt to secure the lowest cost of borrowing and favorable terms Maintain long-term fiscal sustainability and operational flexibility 3 Project Description
Expansion to take the Wastewater Treatment Plant
Increases current capacity of 7.5 MGD to 12 MGD
Advanced treatment for expanded recycled water operations Tertiary Treatment
4 Comprehensive Financing Approach
SRF & WIFIA Debt
Financing
State Resilience
Capacity Building
and Construction
Grants
Reserves and
Pay As You Go
Financing
IRA Tax Credits Carbon
Credits
Federal
Resilience
Grants
including
BRIC
Partnerships:
Public and
Private
5 “Capital Stack”
The capital stack refers to the
layers of capital that go into
funding a project
Capital stack can be comprised of
multiple funding components such
as cash, grants, subsidized funding
(SRF, WIFIA), debt financing, etc.,
that when added together equal the
total project cost
$0
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
$70,000,000
$80,000,000
$25 Million
Debt Financing -
Public or
Subsidized
(33.3%)
$25 Million
Cash Reserves -
(33.3%)
$25 Million
Grant Funding -
(33.3%)
Example Capital Stack for
Project Cost $75M
6 Holistic Funding for Resilience
Major Funding Categories
Federal grants (e. g. FEMA BRIC)
State grants (e. g. OPR capacity building)
Carbon credits (e. g. State of Michigan sale of
carbon credits)
Local utility rate increases (e. g. funding
groundwater recycling projects)
Inflation Reduction Act (IRA) Tax Credits
State Earmarks for LADWP and Valley Water
What is a resilient project?
Recycled water
Groundwater storage using alternative water
sources
Stormwater capture
Biosolids disposal
Renewable energy generation
1 2
3 4
5 6
7 Detailed Project Draw Schedule is Critical
Quarterly funding requirements
detailed by various uses and
specific components of the
Project
Assists in matching to specific
funding sources
Most grants and subsidized loan
programs (i.e. “Capacity-Building,”
Inflation Reduction Act grants,
USDA or SRF Loans) have narrow
terms for use and timelines for
funding
Uses of Funds
Quarter Ending
Date
Pre-
Construction
(Design,
Permitting) Construction Commissioning
Quarterly
Project
Cashflows
12/15/2022 500,000 500,000
3/15/2023 500,000 500,000
6/15/2023 500,000 500,000
9/15/2023 500,000 500,000
12/15/2023 1,000,000 1,000,000
3/15/2024 1,000,000 1,000,000
6/15/2024 1,000,000 1,000,000
9/15/2024 5,000,000 5,000,000
12/15/2024 5,000,000 5,000,000
3/15/2025 5,000,000 5,000,000
6/15/2025 5,000,000 5,000,000
9/15/2025 10,000,000 10,000,000
12/15/2025 10,000,000 10,000,000
3/15/2026 10,000,000 10,000,000
6/15/2026 10,000,000 10,000,000
9/15/2026 10,000,000 10,000,000
12/15/2026 10,000,000 10,000,000
3/15/2027 6,000,000 6,000,000
6/15/2027 5,000,000 2,000,000 7,000,000 9/15/2027 2,000,000 2,000,000
5,000,000 91,000,000 4,000,000 100,000,000 8 Baseline: Match Project Draw Requirements to Funding Sources Sewer Revenue
Bonds may be
considered as a
“plug figure” as
various other no-
or low-cost
funding sources
are identified and
pursued
“Worst Case”
option to be
improved upon
Uses of Funds
Quarter Ending
Date
Pre-
Construction
(Design,
Permitting) Construction Commissioning
Quarterly
Project
Cashflows Pay-Go Reserves
Sewer
Revenue Bonds
(the "Plug"
Figure)
12/15/2022 500,000 500,000 - 500,000 3/15/2023 500,000 500,000 - 500,000 6/15/2023 500,000 500,000 - 500,000 9/15/2023 500,000 500,000 - 500,000 12/15/2023 1,000,000 1,000,000 - 1,000,000 3/15/2024 1,000,000 1,000,000 - 1,000,000 6/15/2024 1,000,000 1,000,000 - 1,000,000 9/15/2024 5,000,000 5,000,000 - 5,000,000 12/15/2024 5,000,000 5,000,000 - 5,000,000 3/15/2025 5,000,000 5,000,000 - 5,000,000 6/15/2025 5,000,000 5,000,000 - 5,000,000 9/15/2025 10,000,000 10,000,000 10,000,000
12/15/2025 10,000,000 10,000,000 10,000,000
3/15/2026 10,000,000 10,000,000 10,000,000
6/15/2026 10,000,000 10,000,000 10,000,000
9/15/2026 10,000,000 10,000,000 10,000,000
12/15/2026 10,000,000 10,000,000 10,000,000
3/15/2027 6,000,000 6,000,000 6,000,000
6/15/2027 5,000,000 2,000,000 7,000,000 7,000,000 9/15/2027 2,000,000 2,000,000 2,000,000 5,000,000 91,000,000 4,000,000 100,000,000 - - 100,000,000 FUNDING SOURCES TOTAL: 100,000,000
Sources of Funds
9 Further Refining Timing of Uses to Sources
Use of Pay-go and
Reserves, while
there is a cost in
lost interest
earnings, may be
considered
appropriate for
reducing the bond
amount and
managing
customer rates
Uses of Funds
Quarter Ending
Date
Pre-
Construction
(Design,
Permitting) Construction Commissioning
Quarterly
Project
Cashflows Pay-Go Reserves
Sewer
Revenue Bonds
(the "Plug"
Figure)
12/15/2022 500,000 500,000 500,000 - 3/15/2023 500,000 500,000 500,000 - 6/15/2023 500,000 500,000 500,000 - 9/15/2023 500,000 500,000 500,000 - 12/15/2023 1,000,000 1,000,000 1,000,000 - 3/15/2024 1,000,000 1,000,000 1,000,000 - 6/15/2024 1,000,000 1,000,000 1,000,000 - 9/15/2024 5,000,000 5,000,000 5,000,000 - 12/15/2024 5,000,000 5,000,000 5,000,000 - 3/15/2025 5,000,000 5,000,000 5,000,000 - 6/15/2025 5,000,000 5,000,000 5,000,000 - 9/15/2025 10,000,000 10,000,000 10,000,000
12/15/2025 10,000,000 10,000,000 10,000,000
3/15/2026 10,000,000 10,000,000 10,000,000
6/15/2026 10,000,000 10,000,000 10,000,000
9/15/2026 10,000,000 10,000,000 10,000,000
12/15/2026 10,000,000 10,000,000 10,000,000
3/15/2027 6,000,000 6,000,000 6,000,000
6/15/2027 5,000,000 2,000,000 7,000,000 7,000,000 9/15/2027 2,000,000 2,000,000 2,000,000 5,000,000 91,000,000 4,000,000 100,000,000 5,000,000 20,000,000 75,000,000 FUNDING SOURCES TOTAL: 100,000,000
Sources of Funds
10 Additional Granularity Allows for Further Optimization of Funding Similarly, securing low- and no-cost funding sources will also reduce bonding and customer rate impacts Uses of Funds
Quarter Ending
Date
Pre-
Construction
(Design,
Permitting) Construction Commissioning
Quarterly
Project
Cashflows Pay-Go Reserves SRF Loan
"Capacity
Building" Grant
Inflation
Reduction Act
Grant
Sewer
Revenue Bonds
(the "Plug"
Figure)
12/15/2022 500,000 500,000 500,000 - 3/15/2023 500,000 500,000 500,000 - 6/15/2023 500,000 500,000 500,000 - 9/15/2023 500,000 500,000 500,000 - 12/15/2023 1,000,000 1,000,000 1,000,000 - 3/15/2024 1,000,000 1,000,000 1,000,000 - 6/15/2024 1,000,000 1,000,000 1,000,000 - 9/15/2024 5,000,000 5,000,000 5,000,000 - 12/15/2024 5,000,000 5,000,000 5,000,000 - 3/15/2025 5,000,000 5,000,000 5,000,000 - 6/15/2025 5,000,000 5,000,000 5,000,000 - 9/15/2025 10,000,000 10,000,000 10,000,000 - 12/15/2025 10,000,000 10,000,000 10,000,000 - 3/15/2026 10,000,000 10,000,000 10,000,000 - 6/15/2026 10,000,000 10,000,000 10,000,000
9/15/2026 10,000,000 10,000,000 10,000,000
12/15/2026 10,000,000 10,000,000 10,000,000
3/15/2027 6,000,000 6,000,000 6,000,000
6/15/2027 5,000,000 2,000,000 7,000,000 7,000,000 9/15/2027 2,000,000 2,000,000 2,000,000 5,000,000 91,000,000 4,000,000 100,000,000 5,000,000 20,000,000 20,000,000 - 10,000,000 45,000,000 FUNDING SOURCES TOTAL: 100,000,000
Sources of Funds
11 Optimizing the Capital “Stack” to Reduce the Annual Payment 7 8
9 10
11 REQUEST FOR PROPOSAL FOR FINANCIAL ADVISORY SERVICES – NHA ADVISORS, LLC
APPENDIX I: NHA RESUMES
Eric Scriven, Principal
Since 1990, Mr. Scriven has sought to earn the status of trusted advisor to his municipal and special district clientele. During his career, Mr. Scriven has developed a generalist background and common-sense approach to solving problems and “going the extra mile” to serve his clients. He provides second-to-none level of due diligence, always developing the widest array of strategic options, using his skills (and his fiduciary ethos towards his clients) to be their agent and energetic advocate during negotiations with other parties, and an efficient and effective project manager when called upon to act in a municipal advisory or investment banking (at prior firms) role.
During his career – roughly half as a banker and half as an advisor – Mr. Scriven has successfully managed and closed 300+ financings totaling over $5 billion. Importantly, as an advisor to his clients during his consulting and transaction-related assignments, Mr.
Scriven always “leans in” with his creativity, ideas, advice, templates, referrals – “whatever it takes”—to facilitate a complete understanding of their options. Mr. Scriven believes strongly that his job is to serve his clients by listening closely to what their goals, opportunities and challenges are, doing the due diligence, uncover and provide all alternatives and executing upon his clients’ directives. He provides, upon request, his thoughts and recommendations, yet always is mindful that his Duty of Loyalty (i.e. placing their interests before his own) is unequivocal.
Mr. Scriven’s objective is always to be part of his client’s “inside team.” He takes pride in deploying his experience to advise and assist his clients to optimally position their policies, practices and finances with an emphasis upon best-practices forecasting methods for capital planning, budgeting and investment. These efforts are always complemented by Mr. Scriven’s efforts to advise and assist in creating (or enhancing) an excellent suite of polices that “telegraph” to an audience a public agency’s efforts to optimize their financial accountability, planning, decision-making, transparency and disclosure by staff and the elected body.
Mr. Scriven’s career has been lengthy, varied and enjoyable. His assignments have ranged from large, AAA metropolitan city credits to non-rated, “story bond” financings in remote locations. As banker and advisor, he has successfully structured and closed, variable rate notes, interest rate swaps and caps, forward closing bonds, anticipation notes, transactions with extraordinary redemption flexibility, as well as many, many long-term fixed rate bonds. Mr . Scriven draws upon many years as an investment banker to advise his clients on how they best can match their goals and objectives with feasible solutions that will be accepted by underwriters and investors. Additionally, he uses this detailed experience to assist his clients during the bond sale process to secure optimal results.
He has a number of “1sts” or notable projects that he is proud of: 1st CFD escrow bond (Fontana, 1990); Detention Facility Construction Bond (Rhode Island, 1998), Water Bank Land Acquisition (Madera ID, 2005) 24 hour RDA Note Refinancing Sale/Closing (Gonzales, 2011), Numerous recent CalPERS Liability Restructuring Bonds, Solid waste Green Bond (Napa, 2016), and numerous recent consulting assignments that provided stakeholder education, advocacy or numerical analysis that facilitated better understanding and better financial results for his clients.
Between virtual client visits and office time, Eric actively seeks out outdoor adventures.
Kings Canyon, Colorado’s Crested Buttes, Half Dome, Glacier NP, the Mt. Shasta summit and the Grand Canyon—and always the Pacific Ocean—are recent and very memorable destinations!
Public Finance
Professional Since:
1990
Expertise
• Cities, Special Districts
• All security types – tax or
revenue backed
• All fund types – general,
utilities, RDA, special
• Land-secured, pension,
energy, utility, successor
agency projects
• Policy development,
fiscal sustainability,
forensic analysis,
negotiation support
• Translator, educator,
project manager, client
advocate, credit analysis,
communications
Education
• B.S. Urban Land
Economics and Finance
• MBA, Haas School of
Business
Licenses & Registrations
• Registered with the SEC
and MSRB
• Series 50 License
• Series 54 License
• FINRA Series 7 (Inactive)
• FINRA Series 52 (Inactive)
• Real Estate Broker by CA
Dept. of Real Estate
(Inactive)
Staff Resumes – NHA Advisors, LLC
Mark Northcross, Principal
During a California public finance career that spans back to 1981, Mr. Northcross has structured debt for nearly every kind of issuer and nearly every kind of revenue source legally available in the State.
A leader in climate change adaptation, Mr. Northcross works with Resilient by Design, the Bay Conservation and Development Commission, the Mayor of Sacramento, The Resources Legacy Fund, the North Richmond Living Levee Project and the Yuba Water Agency on climate change adaptation projects. Mr. Northcross serves as financial advisor to the Town of Paradise for their wildfire recovery program. He also prepared an article on financing recovery from wildfires at the invitation of the Federal Reserve Bank of San Francisco.
Mr. Northcross has structured about 90 sewer and water revenue bond issues for over 30 sewer districts, water districts and cities since 1983, including private placements with commercial banks. He has successfully delivered funding to California utilities facing the challenges of drought, earthquake, flooding, and Prop 218 litigation.
Mr. Northcross is a leader in California in negotiating both public-private partnerships for both land secured debt and redevelopment. He has negotiated public-private partnerships (P3) for the successful development of major mixed-use projects throughout the State.
He is also a leader in negotiating joint ventures between different public agencies – with notable success in putting together bond funded risk sharing programs for cities, counties, and school districts in California. In the mid 1980’s, Mr. Northcross structured four financings to fund nearly $100 million in reserves for new JPA’s formed to provided liability insurance for California cities, counties and school districts
When not working on solutions to tough problems for his clients, Mr. Northcross serves on a variety of non-profit corporation boards. He is also a proud recipient of the Norman Bright trophy in the annual Dipsea Race, the oldest cross country foot race in the nation. Mr. Northcross is also the Treasurer of the West Point Inn Association, a non-profit that runs a 118-year-old hike-in hotel in the parklands of Mt. Tamalpais.
Public Finance
Professional Since:
1981
Expertise
• Climate change
finance
• Utility Revenue
Bonds
• Development/Land-
Secured Financing
• P3
Education
• B.A. Social Sciences
Licenses & Registrations
• Registered with the
SEC and MSRB
• Series 50 License
Staff Resumes – NHA Advisors, LLC
Craig Hill, Managing Principal
Mr. Hill has been a public finance professional since 1989 and is a founding partner of NHA Advisors, LLC. His clients include California cities, special districts, counties, K-12 school districts and former redevelopment agencies throughout the State. In addition to providing traditional financial advisory expertise on public finance, Mr.
Hill’s expertise includes advising on public policies related to financial matters, appropriate reserve levels and capital finance requirements. His understanding of local government and the operational components (public safety, water, sewer, marinas, airports, golf courses and other enterprise funds) provides a professional basis to assist public agencies in developing sound financial planning practices.
Mr. Hill’s technical experience includes advising on the issuance of water and sewer revenue bonds, general obligation bonds, tax allocation bonds, certificates of participation, tax and revenue anticipation notes, land-secured improvement bonds, and bond anticipation notes. In addition to traditional projects, Mr. Hill is also active in energy efficiency and renewable energy project financing including power purchase agreements.
Mr. Hill regularly speaks on public finance, renewable and energy efficiency project finance and public policy matters to professional associations including the League of California Cities, the California Society of Municipal Finance Officers, California Debt and Investment Advisory Commission, Municipal Management Association of Northern California (MMANC), the Milken Institute and Carbon War Room.
Prior to founding NHA Advisors, Mr. Hill began his public finance career as a financial analyst for the Sacramento Municipal Utility District (SMUD) to evaluate the financial and economic feasibility of the Rancho Seco Nuclear Power Plant Plan.
In addition to working for the SMUD, Mr. Hill worked for the State of California (Office of Energy Assessments) to develop financing programs for statewide facility upgrades mandated by the governor. Since joining the private practice, he managed the financial services group of Jones Hall Hill & White, a premier bond counsel firm in San Francisco. Mr. Hill began his own municipal advisory practice with Mark Northcross in 1996 after working for Kelling, Northcross & Nobriga.
In addition to working as a municipal advisor, Mr. Hill serves as a board member for the HdL Companies and has served as a member of the Novato Park & Recreation Commission, Novato Investment Committee, and Novato Budget Committee. He has also served on the board of directors for the Novato Youth Soccer Association and as President of the Novato Lacrosse Club.
Public Finance
Professional Since:
1989
Expertise
• Utility – Water,
Wastewater, Refuse
• Renewable & Energy
Efficiency Financing
• Educational
Presentations, Public
Speaking
• Public Finance and
Policy Leadership
• Voter-Approved
Financing
Education
• B.S. Managerial
Economics
• B.S. Agricultural
Economics
Licenses & Registrations
• Registered with the
SEC and MSRB
• Series 50 License
Staff Resumes – NHA Advisors, LLC
Public Finance
Professional Since:
2007
Expertise
• Utility Financing
• Project Management
• Financial Modeling
• Credit Analysis and
Presentations
• General Fund
Financing
• Land-secured Debt
Education
• B.S. Accounting and
Finance
Licenses & Registrations
• Registered with the
SEC and MSRB
• Series 50 License
Leslie Bloom, Vice President
Since 2007, Ms. Bloom has provided municipal advisory and investment banking services for public agencies throughout California. Prior to joining NHA Advisors, Ms. Bloom worked in Public Finance Debt Investment Banking, most recently with Raymond James. In an investment banking role, Ms. Bloom completed over 250 senior managed and private placement financings totaling more than $3.5 billion par, working with a wide variety of public agencies throughout the State. Ms.
Bloom’s experience includes utility (water and wastewater), general fund lease, tax allocation, land secured, sales tax, general obligation, pension obligation, and short-term notes.
Ms. Bloom is active with Women in Public Finance and is currently a Board Member for the San Diego Chapter of Women in Public Finance. Ms . Bloom is also active with CSMFO, the National Federation of Municipal Analysts and California Society of Municipal Analysts.
Ms. Bloom received her BS in both Accounting and Finance from the University of Arizona.
Staff Resumes – NHA Advisors, LLC
Christian Sprunger, Asst. Vice President
Mr. Sprunger has covered a variety of public finance assignments for California special districts and cities throughout the State. He has assisted on over 100 financings for California agencies, representing over $2.2 billion in par.
In recent years, Mr. Sprunger has developed expertise in a variety of utility financings – from combination SRF/USDA fundings for Treatment facilities, to WIFIA Loans for groundwater recharge, to energy efficiency financings for plant improvements, to traditional water and sewer bonds.
Mr. Sprunger’s recent utility financings have included the Oxnard 2022 WIFIA Loan, Pittsburg 2022 Water Bonds, Central Basin MWD 2022 Bonds, North Marin WD 2022 Water Loan, Mendota 2021 Wastewater Bonds, West County WD 2021 Wastewater Bonds, and Suisun Solano Water Authority 2021 Water Bonds Outside of his utility expertise, Mr. Sprunger has experience with equipment leases, competitive general fund and general obligation bond financings, tax and revenue anticipation notes, and pension obligation bonds.
Prior to making a career switch into public finance in 2016, Mr. Sprunger was an R&D microbiologist at a veterinary pharmaceutical company and taught microbiology laboratory techniques as adjunct faculty at Biola University for several years.
Public Finance
Professional Since:
2016
Expertise
• Utility Financing
• Budgeting and
Cashflow Analysis
• Market Research and
Refinancing Analysis
• Demographic
Research and Credit
Presentations
Education
• M.S. Finance
• B.S. Biological
Sciences (Biola
University)
Licenses & Registrations
• Registered with the
SEC and MSRB
• Series 50 License
Staff Resumes – NHA Advisors, LLC
Roy Kim, Associate
Since joining the firm in 2018, Mr. Kim has committed to providing the highest level of support to California public agencies as a municipal advisor and consultant. He works closely with the firm’s Pension and Fiscal Sustainability Group and also has assisted on all major types of financings available to California municipalities, representing over $2 billion in par. Mr. Kim has worked with municipalities and special districts serving communities of all sizes across the state.
As part of NHA’s Pension and Fiscal Sustainability Group, Mr. Kim has worked on nearly all of the firm’s recent engagements to assist clients with CalPERS education, unfunded liability cost management strategies and UAL restructuring projects. As the nuances of managing CalPERS-related costs differ for each agency, Mr. Kim and the NHA team have prepared tailored educational materials for numerous councils, boards, commissions, staff and community stakeholders over the course of the past several years.
With the re-emergence of the pension obligation bond market in recent years, Mr.
Kim has provided support on over $1 billion of unfunded liability restructuring transactions for cities and special districts. This experience includes all types of UAL financing structures: both privately placed debt as well as publicly offered, validated and non-validated POBs, as well as alternative structures including lease revenue bonds, utility revenue bonds and pension tax override secured bonds.
Mr. Kim has also enjoyed working with clients on fiscal sustainability initiatives, including budgetary forecasting & cost management strategies, in addition to new project financings.
Public Finance
Professional Since:
2018
Expertise
• Pension Obligations
• Fiscal Sustainability
• General Fund
Financing
• Financial Modeling
• Credit Analysis and
Research
Education
• M.S. Finance
• B.A. Global Studies
(UC Santa Barbara)
Licenses & Registrations
• Registered with the
SEC and MSRB
• Series 50 License
Staff Resumes – NHA Advisors, LLC
Public Finance
Professional Since:
2021
Expertise
• Utility Financing
• Financial Modeling
• Credit Research and
Presentations
• Pension Obligations
Education
• B.A. Applied
Mathematics
Licenses & Registrations
• Registered with the
SEC and MSRB
• Series 50 License
Matt DeFilippis, Senior Analyst
Since joining NHA in 2021, Mr. DeFilippis has provided quantitative, research, and management support to his colleagues so that NHA can best serve California special districts and cities. His work has covered a variety of assignments, including coverage analysis for utility financings, refinancing discovery and analysis, CalPERS pension liability analysis and modeling, and more. Mr. DeFilippis has assisted on several financings for California agencies, totaling over $450 million in par.
Over the past year, Mr. DeFilippis has provided support for NHA’s Pension and Fiscal Sustainability Group. Most recently, he has worked on unfunded accrued liability (“UAL”) restructuring transactions for Hanford, Sonoma County Fire District, and San Miguel Consolidated Fire Protection District, totaling a combined $71.9 million in par.
While not assisting the Pension and Fiscal Sustainability Group, Mr. DeFilippis provides support for a variety of the firm’s other projects, such as recently managing a $32.9 million wastewater revenue refinancing for the City of Turlock, drafting credit presentations, and writing proposals.
Mr. DeFilippis received his B.A. in Applied Mathematics from the University of California, Berkeley.
In his spare time, Mr. DeFilippis enjoys exploring the outdoors, both on foot and on bike. Some of his favorite trips include backpacking Southern Oregon/Northern California, climbing Mount Shasta, and watching the sunrise from Half Dome.
Staff Resumes – NHA Advisors, LLC
Rob Schmidt, Vice President
Mr. Schmidt is a founding member of NHA Advisors, LLC. He has served as a municipal advisor and consultant to cities, special districts, school districts, and counties on hundreds of financial transactions and consulting assignments. His clients have come in all shapes and sizes, ranging from small rural farming communities to the largest cities and counties in the California.
Mr. Schmidt’s experience spans a variety of financing structures, including general fund lease obligations, utility revenue bonds (water, wastewater, etc.), general obligation bonds, short-term notes (TRANs, BANs, etc.), special tax and assessment bonds, tax allocation bonds, sales tax revenue bonds, and pension obligation bonds. His experience also includes state and federal loan and tax credit programs.
Mr. Schmidt has established himself as a subject matter expert in continuing disclosure compliance and leads NHA Advisors’ Continuing Disclosure Compliance Group, which provides SEC and CDIAC reporting and compliance services.
While Mr. Schmidt’s financial and analytical acumen serves as a key benefit to his clients, he believes the most important attribute of any advisor is integrity, which drives Mr. Schmidt to serve his clients to the utmost of his ability. His willingness to listen and learn allows him to gain a full understanding of a client’s objectives and needs, creating an opportunity to develop a wide spectrum of funding options and deliver a successful solution.
As a trusted confidant to each of his clients, Mr. Schmidt provides impartial, financially sound, and creative solutions to meet their long-term objectives and ensure integrity and accountability throughout the financial process.
Prior to beginning his career as a municipal advisor, Mr. Schmidt served as a Senior Associate and Northern California manager for a public finance consulting firm, for which he formed and administered dozens of public financing districts throughout California.
In his spare time, Mr. Schmidt enjoys spending time with his wife and three kids, expanding his knowledge on topics ranging from personal finance to global economics, coaching youth sports, and participating in a wide range of his own competitive and recreational sports.
Mr. Schmidt earned a B.A. in Economics and a Specialization in Computing from the University of California, Los Angeles.
Public Finance
Professional Since:
2004
Expertise
• Continuing
Disclosure
• General Fund
Financing
• Utility Financing
• Land-Secured Debt
• Financial Modeling
Education
• B.A. Economics
• Specialization in
Computing
Licenses & Registrations
• Registered with the
SEC and MSRB
• Series 50 License
Staff Resumes – NHA Advisors, LLC
Mike Meyer, Vice President
Since 2003, Mr. Meyer has been providing a high level of support to California municipalities as an advisor, consultant, and an investment banker. He manages NHA’s Pension and Fiscal Sustainability Group.
Mr. Meyer has executed all types of financings available to California municipalities, including pension obligation bonds, utility revenue (water/wastewater/storm drain), general fund backed leases, tax increment, general obligation, transportation, land secured, housing and sales tax transactions.
As the firm’s resident pension expert, Mr. Meyer also manages NHA’s Pension and Fiscal Sustainability Group, which has advised over 80 California local agencies on topics ranging from basic CalPERS education, to UAL cost management strategies (Section 115 Trusts, Additional Discretionary Payments, etc.), to UAL restructuring projects. In 2015, he led the firm’s efforts to pioneer some of the first UAL “smoothing” transactions, which were executed as privately placed lease revenue bonds given that POBs were not feasible at that time. During the re-emergence of the POB market, Mr. Meyer worked on over $2.0 billion of pension bond transactions for cities, utilities districts and fire districts. This experience includes all types of UAL financing structures: both privately placed debt as well as publicly offered, validated and non-validated POBs, as well as alternative structured like lease revenue bonds and utility revenue bonds.
Mr. Meyer has worked on several unique financing programs in his career including the 2004 Vehicle License Fee (VLF) pooled financing (>100 different city participants), 2009 Beverly Hills OPEB Buyout, 2016 Berkeley Parking Revenue Bonds for a new downtown garage, transportation revenue secured financings (gas tax and local sales tax return) for Oxnard and Lancaster, and lease bonds to fund CalPERS UAL in the cities of Torrance, Ukiah, West Covina, Lakeport and Arcata.
Prior to NHA Advisors, Mr. Meyer served as a Principal with Eric Scriven (NHA partner) at p2 Capital Advisors (2012 to 2014), providing independent consulting and advisory work to numerous California public agencies. Prior to that, he served as a Vice President at De La Rosa Investment Bankers.
From 2013 to 2017, Mr. Meyer also helped coach the Division I UC Davis Men’s Tennis team and obtain the program’s first national ranking and NCAA tournament berth. Mr. Meyer enjoys being active and in nature, spending his free time backpacking, hiking, surfing, playing sports and is a dedicated practitioner of yoga and meditation.
Public Finance
Professional Since:
2003
Expertise
• Fiscal Sustainability
• General Fund
Financing
• Pension Obligations
• Project Management
• Financial Modeling
• Credit Analysis and
Presentations
Education
• B.S. Management
Science
Licenses & Registrations
• Registered with the
SEC and MSRB
• Series 50 License
Staff Resumes – NHA Advisors, LLC
Public Finance
Professional Since:
2022
Expertise
• Financial Modeling
• Credit Research and
Presentations
• Utility Financing
• General Fund
Financing
Education
• B.B.A. Finance
Licenses & Registrations
• Registered with the
SEC and MSRB
• Series 50 License
Adrian Gonzalez, Analyst
Mr. Gonzalez provides research, modeling, and project management support to his colleagues so that NHA can best serve its clients. Since joining NHA in Spring 2022, Mr. Gonzalez has assisted on several bond financings for both utility and general fund credits, as well as a variety of consulting projects.
Recently, Mr. Gonzalez provided project support on the City of Martinez Financing Authority 2022 Lease Revenue Bonds, which closed in early November 2022. This financing allowed the City of Martinez to purchase a parcel of undeveloped land to retain its use as open space and parkland for the benefit of the community. The Lease Revenue Bonds were based on a parcel tax passed by the City in its June 2022 election.
While not assisting on bond financings, Mr. Gonzalez provides support to NHA through his research and development of financial models.
Mr. Gonzalez received his B.B.A. in Finance from the University of Texas, El Paso.
In his spare time, Mr. Gonzalez enjoys playing strategy-intensive tabletop games, writing poetry, playing and composing music, and playing recreational sports.
Staff Resumes – NHA Advisors, LLC
REQUEST FOR PROPOSAL FOR FINANCIAL ADVISORY SERVICES – NHA ADVISORS, LLC
APPENDIX J: NHA’S REQUIRED DISCLOSURES
REQUEST FOR PROPOSAL FOR FINANCIAL ADVISORY SERVICES – NHA ADVISORS, LLC
Fiduciary Duty
NHA Advisors, LLC (“ NHA”) is registered as a Municipal Advisor with the U. S. Securities and Exchange Commission (“SEC”) and Municipal Securities Rulemaking Board (“MSRB”). As such, NHA has a fiduciary duty to the City and must provide both a Duty of Care and a Duty of 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 City with informed advice; c) make a reasonable inquiry as to the facts that are relevant to the City’s determination as to whether to proceed with a course of action or that form the basis for any advice provided to the City; and
d) undertake a reasonable investigation to determine that NHA is not forming any recommendation on materially inaccurate or incomplete information; NHA must have a reasonable basis for:
i. any advice provided to or on behalf of the City;
ii. any representations made in a certificate that it signs that will be reasonably foreseeably relied upon by the City, any other party involved in the municipal securities transaction or municipal financial product, or investors in the City securities; and iii. any information provided to the City or other parties involved in the municipal securities transaction in connection with the preparation of an official statement.
Duty of Loyalty:
NHA must deal honestly and with the utmost good faith with the City and act in the City’s best interests without regard to the financial or other interests of NHA. NHA will eliminate or provide full and fair disclosure (included herein) to the City about each material conflict of interest (as applicable). NHA will not engage in municipal advisory activities with the City as a municipal entity, if it cannot manage or mitigate its conflicts in a manner that will permit it to act in the City’s best interest.
Conflicts of Interest and Other Matters Requiring Disclosures As of the commencement date of the Project, there are no actual or potential material conflicts of interest, other than those potential conflicts noted below, that NHA is aware of that might impair its ability to render unbiased and competent advice or to fulfill its fiduciary duty. If NHA becomes aware of any material potential conflict of interest that arises after this disclosure, NHA will disclose the detailed information in writing to the City in a timely manner.
Pursuant to MSRB Rule G -42, on Duties of Non -Solicitor Municipal Advisors, Municipal Advisors are required to make certain written disclosures to clients which include, amongst other things, Conflicts of Interest and any Legal or Disciplinary events of NHA and its associated persons.
REQUEST FOR PROPOSAL FOR FINANCIAL ADVISORY SERVICES – NHA ADVISORS, LLC
The following are potential conflicts of interest to be considered. • NHA represents that in connection with the issuance of municipal securities, NHA may receive compensation from the City for services rendered, which compensation is contingent upon the successful closing of a transaction and/or is based on the size of a transaction. Consistent with the requirements of MSRB Rule G-42, NHA hereby discloses that such contingent and/or transactional compensation may present a potential conflict of interest regarding NHA’ ability to provide unbiased advice to enter into such transaction. The contingent fee arrangement creates an incentive for NHA to recommend unnecessary financings or financings that are disadvantageous to the City, or to advise the City to increase the size of the issue. This potential conflict of interest will not impair NHA’ ability to render unbiased and competent advice or to fulfill its fiduciary duty to the City.
• NHA’ fees under this potential agreement may be based on hourly fees of NHA’ personnel, with the aggregate amount equaling the number of hours worked by such personnel times an agreed- upon hourly billing rate. This form of compensation presents a potential conflict of interest because it could create an incentive for NHA to recommend alternatives that would result in more hours worked. This conflict of interest will not impair NHA’ ability to render unbiased and competent advice or to fulfill its fiduciary duty to the City. • NHA’ fees under this potential agreement may be a fixed amount established at the outset of this potential agreement. The amount is usually based upon an analysis by the City and NHA of, among other things, the expected duration and complexity of the transaction and the scope of services to be performed by NHA. This form of compensation presents a potential conflict of interest because, if the transaction requires more work than originally contemplated, NHA may suffer a loss. Thus, NHA may recommend less time -consuming alternatives, or fail to do a thorough analysis of alternatives. This conflict of interest will not impair NHA’ ability to render unbiased and competent advice or to fulfill its fiduciary duty to the City. • The fee paid to NHA increases the cost of investment to the City. The increased cost occurs from compensating NHA for municipal advisory services provided. • NHA serves a wide variety of other clients that may, from time to time, have interests that could have a direct or indirect impact on the interests of another NHA client. For example, NHA serves as municipal advisor to other municipal advisory clients and, in such cases, owes a regulatory duty to such other clients just as it does to the City. These other clients may, from time to time and depending on the specific circumstances, have competing interests. In acting in the interests of its various clients, NHA could potentially face a conflict of interest arising from these competing client interests. NHA fulfills its regulatory duty and mitigates such conflicts through dealing honestly and with the utmost good faith with the City.
• Gerald Craig Hill, the Managing Principal of NHA Advisors is currently serving as an outside director for the HdL Companies based in Diamond Bar, CA. HdL Companies is a software and professional REQUEST FOR PROPOSAL FOR FINANCIAL ADVISORY SERVICES – NHA ADVISORS, LLC
services consulting company providing revenue data and collections information to local governments, potentially including NHA Advisors’ clients. HdL Companies have affiliates including, but not limited to, HdL Coren & Cone. From time to time, NHA Advisors utilizes the services of HdL Coren & Cone for its clients. NHA Advisors is mindful of this conflict of interest and fulfills its regulatory duty and mitigates such conflicts through dealing honestly and with the utmost good faith when this situation arises.
• NHA does not have any affiliate that provides any advice, service, or product to or on behalf of the City that is directly or indirectly related to the municipal advisory activities to be performed by NHA.
• NHA has not made any payments directly or indirectly to obtain or retain NHA’ municipal advisory business.
• NHA has not received any payments from third parties to enlist NHA’ recommendation to the City of its services, any municipal securities transaction, or any municipal finance product. • NHA has not engaged in any fee -splitting arrangements involving NHA and any provider of investments or services to the City.
• NHA does not have any legal or disciplinary event that is material to the City’s evaluation of the municipal advisory or the integrity of its management or advisory personnel. • NHA does not act as principal in any of the transaction(s) related to this potential agreement.
Legal Events and Disciplinary History
NHA does not have any legal events and disciplinary history on its Form MA and Form MA-I, which includes information about any criminal actions, regulatory actions, investigations, terminations, judgments, liens, civil judicial actions, customer complaints, a rbitrations and civil litigation. The City may electronically access NHA’ most recent Form MA and each most recent Form 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.
Recommendations
If NHA 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 the City and is within the scope of the engagement, NHA will determine, based on the information obtained through reasonable diligence of NHA whether a municipal securities transaction or municipal financial product is suitable for the City. In addition, NHA will inform the City of:
REQUEST FOR PROPOSAL FOR FINANCIAL ADVISORY SERVICES – NHA ADVISORS, LLC
• the evaluation of the material risks, potential benefits, structure, and other characteristics of the recommendation;
• the basis upon which NHA reasonably believes that the recommended municipal securities transaction or municipal financial product is, or is not, suitable for the City; and • whether NHA has investigated or considered other reasonably feasible alternatives to the recommendation that might also or alternatively serve the City objectives.
If the City elects a course of action that is independent of or contrary to the advice provided by NHA, NHA is not required on that basis to disengage from the City.
Municipal Securities Rulemaking Board Rule G-10 Disclosure Pursuant to MSRB 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:
• NHA is currently registered as a Municipal Advisor with the SEC and MSRB. • Within the MSRB website at www.msrb.org, the City 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.
Record Retention
Effective July 1, 2014, pursuant to the SEC record retention regulations, NHA is required to maintain, in writing, all communication and created documents between NHA and the City for five (5) years.
If there are any questions regarding the above, please do not hesitate to contact NHA.