REPORT TO THE CITY COUNCIL
DATE: February 18, 2021
FROM: MICHAEL LIMA, Finance Director/City Controller
Finance Department
BY: PHILLIP HARDCASTLE, Principal Accountant - Debt Administration
Finance Department
SUBJECT
Title
Approve a Five-year Agreement with KNN Public Finance for Financial Advisory Services for a total fee not to exceed $425,000
Body
RECOMMENDATION
Staff recommends approval of a five-year agreement with KNN Public Finance (KNN) for on-going financial advisory services to assist the City in evaluating and coordinating bond financing/refinancing strategies.
EXECUTIVE SUMMARY
Staff recommends that Council approve an agreement with KNN for a period of five years. The award of the Financial Advisory Services agreement to KNN promotes efficiency and expediency in the handling of City bond strategies and financial consulting. KNN is considered to be best suited to analyze financial alternatives available to the City, and to provide the City with the most optimal consulting recommendations.
Their staff will serve as an extension of City staff in structuring the most cost-effective bond transactions/refinancings by working with credit and insurance agencies, assessing market conditions, advertising bond sales, and evaluating bids from underwriters. In addition, KNN will continue to aid the City in working toward obtaining the most favorable rating and credit enhancements possible.
BACKGROUND
It is anticipated that the City will access the bond market over the next few years for financing upcoming projects and possibly refinancing existing City bonds. A financial advisor assists the City in structuring the most cost-effective bond transactions by working with credit and insurance agencies, assessing market conditions, advertising bond sales, and evaluating bids from underwriters to purchase City bonds. A financial advisor also continually assists the City in monitoring existing outstanding bonds and watches for refinancing opportunities so as to take advantage of prospective occasions to reduce debt service payments.
With the expiration of the previous financial services advisor contract, the City issued an RFP on October 23, 2020, through Planet Bids and the Business Journal to solicit proposals from firms interested in providing financial advisory services in connection with the issuance/refinancing of municipal bonds. There were 689 firms notified through the City's BidsOnline website with 16 prospective bidders downloading the specifications. The proposal period ended on December 1, 2020. KNN Public Finance was the only entity to submit a proposal under the RFP. Since there was only one proposer, a committee was not needed to evaluate the proposal. While they were the only respondent, KNN’s experience, knowledge, years in the market and in-depth familiarity with the City's bond portfolio make them an outstanding candidate for this contract.
KNN is one of the largest and most active financial advisors in California, with 15 financial advisors located in a single office. The professionals assigned to work with the City have well over 50 years of combined experience, and bring with them a large measure of institutional memory and consistency to the City's debt program. Mr. David Brodsly will continue to assume overall responsibility for the engagement with the City. He has been the KNNs Lead Financial Advisor on the City of Fresno’s debt for the past 20 years.
KNN’s services under the proposed agreement are multi-faceted. KNN staff will provide the City with recommendations related to debt issuance, and assist the City in maintaining or improving its credit ratings. Additionally, they will assist the City in its Enterprise Departments’ debt issuance needs and assist City staff with monitoring the debt portfolio for refinancing opportunities in order to reduce ongoing debt service.
Should the City proceed with a new bond transaction during the term of the contract (identified as a “project”), KNN would be paid $85,000 plus expenses when the City successfully closes a transaction. This cost becomes a part of the cost of the debt issuance and is funded out of bond proceeds. To the extent that the City may require additional services outside of the scope of a “project”, a separate compensation component would make KNN available to the City on an “as needed” advisory basis at an hourly rate of $275 an hour for an Assistant Vice President and up to $345 per hour for a Managing Director.
ENVIRONMENTAL FINDINGS
This item is not a project of the City of Fresno, and as such for purposes of this hearing, the California Environmental Quality Act requirements are not applicable.
LOCAL PREFERENCE
Local preference was not implemented because no local businesses submitted a proposal.
FISCAL IMPACT
KNN will be compensated according to the terms of the agreement as previously mentioned. While it is unknown how many bond transactions will be conducted and “as needed” advisory services will be needed during the life of this agreement, a total maximum compensation of $425,000 over the five year term of this contract has been agreed to by the parties. Sufficient funding for as-needed consulting services has been appropriated as part of the 2021 Budget in Citywide Contractual Obligations.
Attachment: Agreement