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HomeMy WebLinkAboutOctober 7, 2002 Work SessionCITY OF COLUMBIA HEIGHTS 590 40th Avenue N.E., Columbia Heights, MN 55421-3878 (763) 706-3600 TDD (763) 706-3692 Visit Om' Website at: www. ci. coh.nbia-heights, mn. us ADMINISTRATION NOTICE OF CITY COUNCIL MEETING to be held in the CITY OF COLUMBIA HEIGHTS as follows: Mayor Gary L. Peterson Councilmembers Marlaine Szurek Julienne Wy&off Bruce Nawrocki Robert A. Williams City Manaoer Walt Fehst Meeting of: Date of Meeting: Time of Meeting: Location of Meeting: COLUMBIA HEIGHTS CITY COUNCIL OCTOBER 7, 2002 7:00 P.M. CONFERENCE ROOM 1 6:15 p.m. Council interviews of two Park and Recreation Commission Candidates ,4 GENDA Discussion Items 1. Budget Review - Police Department 2. Budget Review - Fire Department 3. Budget Review - Community Development Department 4. Bonding for Public Improvements Thc City of Columbia Heights does not discriminate on the basis of disability in the admission or access to, or treatment or employment in, its services, programs, or activities. Upon request, accommodation will be provided to allow individuals with disabilities to participate in all City of Columbia Heights' services, programs, and activities. Auxiliary aids for handicapped persons are available upon request when the request is made at least 96 hours in advance. Please call the City Council Secretary at 706-3611, to make arrangements. (TDD/706-3692 for deaf or hearing impaired only) THE CITY OF' COLUMBIA HEIGHTS DOES NOT DISCRIMINATE ON THE BASIS OF DISABILITY IN EMPLOYMENT OR THE PROVISION OF SERVICES EQUAL OPPORTUNITY EMPLOYER CITY COUNCIL LETTER Council Meeting of: October 14, 2002 AGENDA SECTION: ORIGINATING DEPT: CITY MANAGER NO: FINANCE ITEM: BONDING FOR PUBLIC BY: WILLIAM ELRITE BY: IMPROVEMENTS AND AUTHORIZATION TO DATE: 10/03/02//,/ DATE: SEEK PROPOSALS FOR UTILITY RATE~// STUDY This council letter is a follow-up to previous discussions with the City Council regarding public improvements in Zone 5, Zone 6A, Zone 6B, Zone 7 and Central Avenue. At the time these projects were approved, there were limited discussions in relationship to bonding for the projects for the street portion, the water main portion and the storm sewer portion as there are not adequate City reserves to cover these construction items. The only fund that has adequate reserves to cover the construction where bonding is not necessary is the Sanitary Sewer fund. The following chart shows the breakdown of bonding needed. As a follow-up to the work session of September 16th, staff sent out informal requests for financial advisor proposals. Attached is a memo from the City Finance Director summarizing these proposals. Name Amount Street Construction $1,370,442 Water Construction 1,240,693 Storm Sewer Construction 450,316 Streetscape 250,190 TOTAL $ 3,311,641 Also in relationship to this bonding, it will be necessary to increase storm sewer and water utility rates. To facilitate this and to examine the long-range picture in our utility funds and rate structure, staff is recommending utilizing a consultant to review and make recommendations in relationship to utility rates. The reason for this is to have an outside individual perform a more in-depth evaluation of our long-term needs and establish a long-term rate schedule. To accomplish both of these objectives, staff is requesting approval to seek proposals for a utility rate study and seeking authorization from the council to have Ehlers & Associates Inc. prepare documents for a bond sale. RECOMMENDED MOTION: Move to authorize the Mayor and City Manager to enter into an agreement vei[h Ehlers & Associates Inc. to prepare bond documents at a cost of $15,750 based on their informal proposal of September 30, 2002 for financial advisory service. RECOMMENDED MOTION: Move to authorize staffto seek proposals for the utility rate study. WE:sms 021003aCOUNCIL Attachment COUNCIL ACTION: CITY OF COL UMBL4 HEIGHTS DATE: OCTOBER 3, 2002 TO: FROM: WALT FEHST CITY MANAGER WILLIAM ELRITE t,'/~5'- FINANCE DIRECTOR INFORMAL REQUEST FOR FINANCIAL ADVISOR PROPOSALS (Page 1 of 2) Attached is the letter I sent out requesting proposals for financial advisory services. Also attached are excerpts from the various proposals showing the services provided and the fees charged. Some of the proposals included additional information on other services provided by their company such as clients served and bonding theories. The entire proposals are available for anyone who wants them. The chart below shows the total cost of the three proposals. From this chart, you can see that Springsted, Inc. is high and Evensen Dodge is low with Ehlers & Associates coming in at a cost slightly higher than Evensen Dodge. The costs in these proposals were not surprising as Evensen Dodge has a reputation of consistently being the low-cost bidder. As is noted in the Springsted proposal, "Some of our competitors leave more of the detail work to others." This statement could tie into several of the statements in the proposal from Evensen Dodge where they indicate that they assist the city in various aspects of the bond issuance process. At the same time both the Ehlers and Springsted proposals quite clearly list the work that they will perform. In the past the City has utilized services from both Springsted and Ehlers and found both firms to provide fully satisfactory service. Springsted Ehlers Evensen Dodge Financial Advisor Service 16,500.00 15,750.00 14,600.00 Print/Publication Cost (Est) 1,500.00 Included Included Miscellaneous Cost (Est) 470.00 Included Included Total Proposal 18,470.00 15,750.00 14,600.00 Cost Difference from: Springsted 2,720.00 3,870.00 Ehlers 1,150.00 In seeking a financial advisor, I think it is very important that the City look at establishing a long-term relationship. As this is a consulting, advisory service, it is very important to consider the long-term ramifications and not just the immediate cost savings of the current proposal. By having a long-term relationship with a financial advisor finn, staff can call on them during the Page Two year for information and advice on various issues. If the City is bouncing around on every bond issue looking for low bid only, we cannot develop a long-term relationship and we have no one to turn to during the year for information and other related financial advisor services. In the past Springsted has served as the City's financial advisor for bond issues. Ehlers has served as financial advisor to the EDA and has done the City's grant applications and financial reporting for the tax increment financing (TIF). This TIF financial advisor relationship with Ehlers has been very successful in recent years as they did apply for and qualify us for a $300,000 state TIF grant. They also saved us several thousand dollars in the more recent controversy with the state auditor's office over TIF funds received in the Sullivan Lake TIF district. In addition to this, Ehlers staff has met with us on several occasions to provide financial advisor information regarding TIF and other items as a free service. Based on past experience and the proposals received, I would recommend accepting the proposal from Ehlers & Associates. The reason for this is that Ehlers has demonstrated a consistently high level of service to the City and their proposal is $2,720 less than the Springsted proposal. The City could save an additional $1,150 by going with Evensen Dodge. However, their service is an unknown and it would be interrupting a successful, long-term relationship that we have had with Ehlers & Associates. This, in a long run, could prove to be less cost-effective, particularly if Ehlers began to charge for the ongoing advice they provide us during the year in relationship to TIF and other items. If you would like any additional information regarding this, please let me know. WE:sms 0210031CM Attachments 85 SEVENTH PLACE EAST, SUITE 100 SAINT PAUL, MN 55101-7887 651.223. 3000 FAX: 651. 223. 3002 E-MAIL: advisors ~ springsted.com SPRINGSTED Adx'isors to the P~d~lic Sector September 30, 2002 Mr. William Elrite, Finance Director City of Columbia Heights 590 - 40th Avenue NE Columbia Heights, MN 55421 Dear Mr. Elrite: Springsted is responding to your request for a formal proposal regarding our cost for the City of Columbia Heights' upcoming Capital Improvement Bond for approximately $3,400,000. We are pleased to have served as the City's Financial Advisor for twelve years and truly desire to continue that relationship. We recognize that cost is important in undertaking any public project and that good public policy dictates that a review of cost be a part of the process. We take pride in the fact that our standard fees for undertaking municipal bond issues have not significantly changed since 1987. We have maintained the highest quality of service available in the municipal industry and have met all the increased state and federal regulations while keeping our fees constant. Of course, our cost of business has gone up just as the City's, but we have been able to maintain our rate structure by the application of technology and paying very close attention to our cost. We try to make our cost to the client as transparent as possible. Direct cost is identified, as well as indirect cost. State and federal law mandate the bond issue process. All of the steps and details have to be undertaken. It's just a matter of who gets paid to do it. We assume the responsibility for managing the entire project, including coordinating with the City, bond council, underwriters, credit and reinsuring agencies. Some of our competitors leave more of the detail work to others. They hold their cost down but others have to charqe more. This is a fact known in the industry. We have included a detailed outline of the services we render in a bond transaction. With regard to other, less experience proposals, the old saying still holds, "If it seems too good to be true, it probably is". Springsted serves close to 400 public localities in Minnesota, more than all our competitors combined. We do not work for the private sector, so our focus is clear and we know which side of the table we always represent. This is not true of the competition. The reason these public entities choose Springsted year after year is our high quality service, delivered with absolute integrity, at a fair market price. We hope Columbia Heights will see our proposal in the same light as other public entities in the State. A partial list of representative Springsted clients is enclosed for the Council's review. CORPORATE OFFICE: SAINT PAUL, MN · Visit our website at www. springsted.com IOWA · KANSAS · MINNESOTA , VIRGINIA · WASHINGTON, DC ~ WISCONSIN City of Columbia Heights, September 30, 2002 Page 2 ©ur fee, based upon our standard fee schedule that has been in place and known to our competitors, is as follows for a $3,400,000 Capital Improvement Special Assessment Bond: Springsted Fee $16,500 Electronic Posting/Printing Cost Estimates $ 1,500 Misc. Cost Estimates $ 470 Bond Council Cost $ To be determined by City, may vary depending on financial advisor. Rating Agency Based upon Moody's fee schedule. Will be the same regardless of who is financial advisor. One of Springsted's defining qualities is long term relationships with our clients. Some of our clients go back to the original day Ossie Springsted opened the doors more than 50 years ago. We continue to provide independent financial advisory services to the public sector. Because of our belief in the importance of long term financial relationships and the value it brings to both Springsted and Columbia Heights, we will also propose the following contract terms: o Springsted will provide a 5% discount on our fee on all projects undertaken during the next three years, based upon the standard schedule included in this proposal, assuming a three-year contract with the City. This will include bond issues and any special studies and tax increment work. Springsted will provide a 10% discount based upon a five-year contract for the same services. After five-years, Springsted believes both parties should reevaluate the contractual relationship currently being undertaken. Finally, we consider Columbia Heights an important client with whom we have enjoyed a professional and respectful relationship. Our proposal represents our commitment to this relationship and we look forward to discussing it with you to our mutual benefit. Respectfully, Paul T. Steinman, Vice President Client Representative dv City of Columbia Heights, Minnesota Description of Services and Project Approach General Financial Advisory Services Financial planning for public jurisdictions is a coordinated, continuous process, subiect to review and modification as client obiectives, demographics, financial results and economic conditions change. Although it often occurs in phases, the public financial planning process is an integrated and ongoing financial management tool using numerous independent decisions relating to a jurisdiction's financial concerns. Springsted identifies five phases in this strategic planning process: 2. 3. 4. 5. Review data and establish financial goals and objectives. Process and analyze information. Recommend a comprehensive financial plan and debt policy. Implement the plan. Periodically monitor the plan. Phase 1 Review Data and Establish Financial Goals and Objectives During the initial client meeting, the team clarifies and establishes what the client may expect from planning sessions and what the team requires to complete all phases. The scope is finalized and the compensation structure is outlined, in addition to all gathering necessary details regarding the services to be rendered. Springsted will gather and review quantitative and qualitative data. The client will assist in providing the following documents (when available): · Mission Statement · Comprehensive Annual Financial Report (last three years) · Most Recent Preliminary Official Statement (general obligation) · Most Recent Preliminary Official Statement (revenue) · Capital Improvements Plan · Debt Management Policies · Current Fiscal Year's Budget · Five-Year Financial Forecasts · Current Year's Unaudited Financial Reports · Most Recent Credit Reports from Credit Rating Agencies · Other Available Information (Client-Specific) (e.g., joint powers agreement, developer agreements, tax increment financing plans, enterprise cash flows, feasibility studies, previous utility or enterprise rate studies, engineering feasibility's studies, etc.) The initial meeting is followed by more extensive fact-finding sessions as necessary. Our computer system facilitates the processing, storing and retrieving of client data. [] SPRINGSTED Page 1 Cit~ of Columbia Heights, Minnesota In conjunction with developing a quantitative economic and financial profile, we ascertain qualitative information about each client, as well. These topics include: · Defined goals and objectives · Risk profile · Anticipated legislative changes · Current and future political climate · Other planning assumptions After thorough review of the client data, we assist the jurisdiction in establishing realistic goals (or modifying existing ones) and quantifying them as measurable objectives. As the central focus of the strategic planning process, financial goals are quantified in dollar amounts and time frames, to the extent possible. Objectives are prioritized and ranked in order of importance. The nature of the objective may require evaluation of certain limiting constraints or parameters, such as a declining tax base, volatile political climate, etc. The team identifies and evaluates all factors limiting the range of alternatives appropriate to meeting client public policy needs and achieving strategic objectives. Phase 2 Process and Analyze Information IIn Phase 2, we review relevant policy, planning, financial and legal documents, such as statements of financial position, current cash flow statements and, where appropriate, projections of enterprise cash flows, developer agreements and analyses of the make-up of revenues and expenditures. Once all relevant information has been reviewed, the team analyzes it to identify strengths and weaknesses in the jurisdiction's total financial situation, prioritizing areas needing immediate attention. Springsted identifies existing potential problems that may negatively affect a client's ability to achieve objectives. This is an important part of strategic financial planning. Springsted reviews preliminary financial planning information with client staff and, if necessary, suggests ways to modify the priority of objectives, the objectives themselves, or the client's understanding of current or future program needs and available resources. Economic conditions, both current and forecasted, are evaluated in this phase. [] SPRINGSTED Page 2 City of Columbia Heights, Minnesota Phase 3 Recommend a Comprehensive Financial Plan and Debt Policy Next, Springsted identifies appropriate techniques for achieving client objectives in light of the political, legal and economic environment. Usually, several scenarios emerge (using conservative, moderate and aggressive assumptions) to establish a range of possible alternatives for detailed evaluation. Alternative scenarios are further evaluated and integrated into a comprehensive financial plan with recommendations to meet each client's requirements. The draft comprehensive plan is then presented to key client staff and elected officials. After appropriate modification, the final comprehensive financial plan is presented to the jurisdiction for approval and adoption. Concurrent with the development of the comprehensive financial plan, we will work with the client to assist in the development of financial and debt management policies. Often this work is done in conjunction with other professionals, such as the auditor and risk manager, who provide financial advice to the client. Phase 4 Implement the Plan In this phase, the client, with Springsted's assistance, implements the plan using other professionals as needed. A more detailed description of the six specific steps we take when implementing a financing plan is provided in the following section entitled "Services Related to Debt Issuance." Phase 5 Periodically Monitor the Plan lAs the plan is implemented, Springsted establishes with the client a system for pedodic review and revision. Springsted monitors annual financial results, changes in tax laws and general economic conditions. In addition, we evaluate new financial products for possible inclusion in the client's plan. In regularly scheduled reviews, we evaluate the comprehensive financial plan for changes in the client's situation. Objectives, revenue sources, expenses, legal and/or political circumstances may have changed. In these situations, clients may need to return to Phase 1 of the process to gather and review additional data to develop and meet new requirements. Springsted provides its clients with a variety of ongoing services. We publish a newsletter that addresses trends in the market, including interest rates, financial instruments, financial disclosure and federal tax laws. Our Client Representatives are able to report to clients the results of a sale for any bond issue that is offered publicly. Our Resource Center tracks state law changes that have a financial component affecting particular clients. [] SPRINGSTED Page 3 City of Columbia Heights, Minnesota We maintain all past bond sales in a computer database, thus facilitating periodic review of outstanding debt for refunding opportunities. Our orientation is toward long-term client relationships. Springsted contracts with its clients for certain ongoing Additional Optional services that must be provided on an annual basis, Services including arbitrage rebate and Securities and Exchange Commission (SEC) annual financial disclosure. Under SEC disclosure regulations, effective July 3, 1995, underwriters may not purchase or sell bonds in new offerings of over $1 million, unless the issuer or obligor will sign a written agreement to provide information and notice of material events to certain repositories. In addition, brokers or dealers must have procedures in place to review information before recommending sales of securities. Notice of material events includes such things as delinquencies, defaults, unscheduled draws on debt service, credit enhancement draws, adverse tax opinions, bond calls and rating changes. Annual financial information includes audited financial statements, if available, and/or annual financial information, such as budgets. Services Related to Debt Issuance Springsted's debt issuance services permit clients to select the service approach best meeting their needs and resources. The selection ranges from a full-service approach, whereby we perform all appropriate steps in the process, to a "menu-like" service approach. Our objective is to complement the client's resources to yield and optimal financing program. Regardless of which service approach the client selects, we endorse, and can provide, a comprehensive process to ensure that an individual financing meets both the client's immediate and long-term objectives. A hallmark of our unique approach to client service is the initial planning phase that precedes every Step 1 financing. We have discussed in some detail our Planning Phase approach to financial planning. We believe very strongly in this approach, for it provides the foundation for all bond financings. We provide a written recommendation for each financing that describes in detail the relevant points of the transaction. This document, including the sale recommendations, facilitates an understanding of the financing by client staff and elected officials. Normally, we follow up this written presentation with an oral presentation by the Client Representative to the appropriate client constituents. [] SPRINGSTED Page 4 City of Columbia Heights, Minnesota In conjunction with designated client staff, our analysts will prepare the Official Statement that is Step 2 Prepare and Distribute used in marketing the obligations. Our extensive the Official Statement Resoume Center, the client's staff and other soumes provide information for the development of a financial, economic and demographic profile of the issuer. The draft Official Statement is reviewed by the client, bond counsel and Springsted before being distributed. Our internal procedures ensure that full disclosure requirements are met. Springsted converts the Official Statement document into a PDF format and posts it on our website. We then notify potential bond purchasers across the nation, through the use of electronic mail, that the Official Statement has been posted and is ready for their use. This process guarantees that each bond offering receives the widest exposure possible to receive the maximum number of bids. A limited number of Official Statements are printed in hardcopy version and sent to our clients. In addition (after the completion of the sale), all final Official Statement are printed in hard copy and delivered to the purchaser of the bonds. Printing of the hardcopy Official Statement is most frequently performed on our in-house docuTech brand equipment, but due to workload and special needs, it may be outsourced. When appropriate, the team conducts informational meetings with the investment community, including investment bankers (dealers and dealer banks, institutional investor's banks, bank holding companies and insurance companies) in New York and elsewhere, to establish bidding interest for each offering. We also advertise the sale in appropriate national financial publications above and beyond any state publication requirements. Our staff collects and submits necessary documentation to the credit rating agency Step 3 Obtain a or agencies. Before this is done, our staff reviews Credit Rating the Official Statement, the client's financial statements and budget, and independently arrives at a credit assessment. This helps us identify strengths and weaknesses so they may be addressed in a proactive rather than reactive manner. This process has been crucial to our clients' overall success in protecting weakened credits and upgrading strong credits. [] SPRINGSTED Page 5 City of Columbia Heights, Minnesota A member of the project team will help develop the presentation and accompany your representatives on a rating presentation meeting. As the bond sale approaches, we will do a full rating analysis and a cost/benefit analysis to determine whether the cost of pursuing an upgrade would be offset by interest cost savings or other benefits of an upgrade. Depending on the size of the project or projects to be financed, as well as possible changes that may have occurred, we may, as a result of our in-house evaluation, recommend that a client select appropriate representatives to visit New York for a personal presentation to the rating agencies. A Springsted representative will coordinate the development of the presentation and accompany the client's representatives to guide them through the actual rating presentation. We can work with rating agencies to help you manage the impact of debt on your credit rating. Springsted uses the Bloomberg terminal for up-to-the-minute reseamh on market trends, Step 4 Monitor interest rate levels, comparable sales, market supply the Market and demand factors, economic trends and political events affecting the markets. Monitoring these situations before the sale can aid in optimal timing of the sale. We use such research on an ongoing basis after the sale as a basis for comparison with other issuers in the market. Our master mailing list for competitive sales includes national, regional and state dealers, as well as institutional investors. By contacting the trading desks of previous syndicate managers and selling group buyers, in addition to others who have indicated an interest, we can increase the number of potential bidders and increase their awareness of the offering. In competitive sales, our preference is to conduct the bid-taking process from our fully staffed and Step 5 Conduct fully equipped offices, rather than at the site of the Sale the issuer. This reduces the risk of having to reject bids because they could not be processed prior to the bidding deadline. It also speeds verification and reporting. Tabulated bids are then promptly presented to the client, along with our recommendation for acceptance or rejection. Because electronic technology is having a great impact on the way municipal securities will be presented to the investment market, we believe special attention should be given to our experience in this area. Springsted has had experience using all three electronic bidding platforms that are currently available for this purpose: MuniAuction, Parity and Bloomberg. There are differences among them. For example, MuniAuction permits separate bids for each maturity; the others do not. Another difference we have observed is that Parity is linked to the Bond Buyer's BidComp program, [] SPRINGSTED Page 6 City of Columbia Heights, Minnesota which is used by nearly all major underwriters to prepare their bids. It requires only a touch of a button for the underwriters to submit the bid electronically. As a result, the underwriters are happy to pay for the Parity bidding service. Our legal liaison group coordinates the compilation of transcript material with the client's bond attorney, oversees all bond printing or book entry set-up and registration procedures, and ensures that proceeds are wired to the proper client account on the day of settlement. This unique client service reduces the time and concern expended by the client and other parties to the financing. Step 6 Ass/st with Legal Transcript and Settlement [] SPRINGSTED Page 7 EHLERS & ASSOCIATES INC C) To: From: Subject: Date: Dear Mr. Elrite: William Elrite, Finance Director City of Columbia Heights Mark Ruff, Financial Advisor Shelly Eldridge, Financial Advisor Financial Services, September 19, 2002 Request September 30, 2002 The fee for a $3,400,000 bond sale by Ehlers and Associates, Inc. would be $15,750. This fee would include one bond issue that would include three different purposes, street, water system and storm sewer improvements and does not include any underwriter's fee (discount). The fee includes all services necessary in the issuing of the obligation, including, but not limited to: ® Working with city staff and engineers in preparation and planning of the issue and its structure, · Providing debt service schedules, · Forecasting alternative scenarios for special assessment revenues and pre-paid specials, and altering the debt service schedules to avoid unexpected arbitrage or (in today's investment rates) negative arbitrage, · Work with bond attomeys to assemble appropriate documentation necessary to issue the bond, · Research, author, produce and distribute a thorough, accurate and attractive official statement for the sale of the bonds, · Advertise the sale as required in financial publications to best assure competitive bidding, · Facilitate bond rating conference with Moody's Investors Service, · Attend all requested City Council meetings, · Receive bids, compute results and advise as to the acceptability in light of the bond market conditions, · Supervise the delivery of the obligations, closing the financial transaction and delivery of the proceeds, · and provide a record book to the city, of all necessary documents and necessary data through the maturity of the issue. Recently a number of our client communities have received bond rating upgrades. We begin the process by working with city staff to assemble and prepare presentation material and have had strategy sessions prior to the bond rating interview. We would suggest and facilitate Moody's Investors Service visiting the City of Columbia Heights as an enhancement to the usual rating conference call. Ehlers and Associates, Inc. will work to make the issue as flexible as possible for the City without LEADERS IN PUBLIC FINANCE 3060 Centre Pointe Drive Roseville, MN 55113-1105 651.697.8504 fax 651.697.8555 shelly@ehlers-inc.com Page 2 September 30, 2002 compromising interest rates. We have been able to achieve this by structuring 15 year improvement issues, which traditionally have had call dates at ten years, with call dates as short as five to eight years while receiving competitive interest rates. We believe that we provide the highest level of quality and innovative service to our clients. We are an independent financial advising firm, meaning we have no financial interest in the issue, beyond the stated up-front fee. We have a wide range of expertise in staff and personnel available to assist the City of Columbia Heights in this and furore projects and will make any of these personnel available to the City upon request. We look forward to serving as part of the City of Columbia Heights team. EVENSEN DODGE FINANCIAL AND INVESTMENT ADVISORS September 30, 2002 Mr. William Elrite Finance Director City of Columbia Heights 590 - 40th Avenue NE Columbia Heights, MN 55421-3835 Re: Proposal for Financial Advisory Services Dear Mr. Elrite: Evensen Dodge is pleased to present our proposal to provide financial advisory services to the City of Columbia Heights regarding the proposed issuance of approximately $3,400,000 in Street, Water System, and Storm Sewer Improvement Bonds. This proposal includes an overview of our firm's qualifications, a summary of our services in connection with the City's proposed financing, a debt service summary and a refunding feasibility analysis in response to the historic low interest rates in today's market. Thank you for your consideration of our firm. Since I am on vacation this week, please contact Wayne Burggraaff with any questions concerning our proposal. Yours truly, EVENSEN DODGE, INC. Christy Lynne Myers Senior Vice President 02p075 Fee Proposal Our financial ad~4sory service fee including related expenses with the exception of those contained in your September 19, 2002 letter for the sale of $3,400,000 in general obligation bonds for the purposes listed would be $14,600. If you were to decide to issue refunding bonds to refund your G.O. Capital Appreciation Bonds of 1990 at the same time, the overall fee for the $3,400,000 of new money bonds and the refunding bonds would be $22,500 exclusive of independent verification service for the refunding escrow. 02p075 Firm Overview Hisfo of the Firm. Founded in 1922, Evensen Dodge is the nation's first independent financial ads4soD- firm to serve municipal clients. The firm's primerT business is prosfding high quality, sound advice to state and local government clients on matters related to their capital financing needs. Assuring the highest standards of independence and objecti~4ty, the firm is internally owned, and has no ownership relationships with commercial banks, underwriters, or securities dealers. We do not underwrite bonds or any other debt obligations. The firm represents only our client's position in a financial transaction. We have a multidisciplinary staff of 31. The majority of our professionals have advanced degrees or professional certifications with backgrounds including government admimstration, investment banking, accounting, economics, law, engineering, and financial management. The firm's professionals ate organized into specialty groups that have developed expertise in various disciplines including tax increment, economic development, education, student loan, housing, general infrastructure, pooled loan programs, water and sewer, public power, transportation, and solid waste. Over the years, our clients' financing needs have become increasingly complex. To meet these needs, we have aggressively expanded our clients' financing alternatives with nexv revenue sources, enabling legislation, new financing instruments, credit enhancements, and innovative structuring and marketing concepts. Though the dynamics of our work have become more complex, our hallmark commitment to integrity, professionalism, and the highest level of client service remains unchanged. Our reputation in this regard is unparalleled. Headquartered in Nfinneapolis, Minnesota, Evensen Dodge has offices natiomvide in order to better serve our clients. Ran ki ngs. Based upon calendar year 2001 statistics produced by Thomson Financial Securities Data, Evensen Dodge ranked fourth by number of issues and fifth by volume among the nation's top financial advisors. In addition, for the first half of 2002, Evensen Dodge was ranked first in Minnesota, sixth nationally in refundings and seventh nationally by volume. Please see the attached 2002 rankings section for more detail. Top Te~ N~ti°~ia'l-~inancial Ad~iSOr~ - Long. Term Issues - 2001 it of Amount Rank Firm Issues (S000's) 0 Public Financial Management Inc. 507 $ 21,121,300 ~ First Southwest Co. 464 10,544,900 ~ Ehlers & Associates 329 1,365,500 O EVENSEN DODGE INC 296 5,443,300 ~ Springsted Inc. 278 2,284,700 ~ RBC Dain Rauscher 167 4,861,500 ~ Stauder Batch & Associates 136 2,049,700 ~ CSG Advisors Inc. ! 28 2,389,600 ~l) SWS Securities Inc. 126 987,100 ~ Public Resources Advisory Group 122 19,674,700 U.S. Banc0rp Piper Jeffrey Inc. 122 1,771,000 S~ntrce: Thomson Financial Securities Data Top Ten National Financial Advisors Long-Term Issues - 2001 Amount it of Rank Firm ($O00's) Issues 0 Public Financial Management Inc. $25,121300 507 ~ Public Resources Advisory Group 19,674,700 122 ~ First Southwest Co. 10,544,900 464 ~} Lamont Financial Services Corp. 5,542,200 43 ~ EVENSEN DODGE INC 5,443,300 296 ~ RBC Dain Rauscher 4,861,500 167 ~ P.G Corbin & Co., Inc. 4,565,700 48 ~ SeaRle-Northwest Securities Corp. 3,225,700 38 {~} Estrada Hinojosa & Co. 2,729,400 51 ~l) Government Finance Associates, Inc. 2,689,900 23 Source: Thomson Financial Securities Data 02p075 Page I Project Team. We believe that the role of the financial advisor should be to serve as an extension and enhancement of the City's staff, providing flexible resources for assignment to priority tasks on an as-required basis. The members of this team have the skills, experience, and proven ability to work as part of an interdisciplinary team, all of which are necessal3, to effectively assist the CiD- in achieving its goals. Resumes of these individuals are presented as follows: Wayne S. Burggraaff Senior [lice President and Ptindpal Minneapolis Office Wayne S. Burggraaff will sen, e as Engagement Principal. He will be responsible for the overall performance of the team. He will allocate staff for the project, assure the timeliness and qualit3, of work products, attend meetings and make presentations as necessary. Mr. Burggraaff has been a Senior Vice President and Principal of Evensen Dodge since 1981. He has served as Engagement Principal or Project Manager for over 700 issues, with an aggregate value in excess of $8 billion during his tenure with the fn-m. Mr. Burggraaff holds an M.G.A. degree in governmental management from the Wharton School at the University of Pennsylvania and a B.A. degree from Lafayette College. Christy L. Myers Senior [/ice President Minneapolis Office Ms. Myers has been prm4ding financial consulting sen, ices since joining Evensen Dodge in 1974. Specializing in developing financings to meet the infrastructure and sen4ce needs of local and regional governments, Ms. Myers has been associated with over $7 billion of tax-exempt debt and served as project manager on over 400 financings. Ms. Myers' experience is broad based, covering the financial planning and debt issuance needs facing governments today including capital infrastructure, economic development, municipal utilities, public facilities, health care, transportation, educational facilities, and recreation. Ms. Myers also assists clients with strategy planning to maintain and improve their credit position, including the development of debt management policies and guidelines. Her work has been instrumental in improving communications between appointed and elected officials, improving ratings, and lowering financing costs. 02p075 Page 2 In ~finnesota, Ms. Myers has provided financial advisoD- sen4ces on the following client engagements: Metropolitan Council (~Lmneapolis/St. Paul); Suburban Hennepin Regional Park District; Cities of White Bear Lake and New Hope; and the school districts of Faribault, Hopkins, Owatonna, Richfield and Shakopee. Ms. Myers has also served as Project Manager for the following selected clients: City of Overland Park, Kansas; Oklahoma City Water Utilities Trust, Oklahoma; Cit'), of/~filwaukee, City of Wausau, and/~filwaukee Count3,, Wisconsin; City of Davenport, Iowa; and City of Burlington, Vermont. Robert M. Winthrop [Gce President Minneapolis Robert M. Winthrop, Vice President, relocated from New York City to join Evensen Dodge in its Minneapolis Headquarters in August 2001. He serves as the firm's client ~manager to the City of St. Paul HRA and the Washington Count3, HRA, I~hnnesota. During his four years at the Nexv York City Mayor's Office of Management and Budget (OMB), he most recently xvas the Unit Head for Pension Analysis. In this position, he led a unit in developing cost analyses for the $100 billion New York City Pension Systems. Prior to his pension work, Mr. Winthrop projected revenue for over $400 million in parking violations and helped prepare the City's capital budget for transportation. In addition to his work at the Mayor's office, for three years Mr. Winthrop was an Adjunct Lecturer of Public Finance at New York Universit3"s Robert F. Wagner Graduate School of Public Service. Prior to OMB, Mr. Winthrop ,,vas a Microsoft Certified Trainer and worked at various not-for-profit organizations. Mr. Winthrop holds a Master of Public Admimstrafion in Finance from N~'/U and a Bachelor of Science in Mathematics and Political Science from the University of Wisconsin - Madison. Centrolizod Re$ourco$. Evensen Dodge has considerable resources available to support the Project Team providing the primal, services to the City. In our Minneapolis headquarters there are three service groups to assist project managers in meeting our clients' needs: an analytical group, a quantitative group, and an administrative group. These service groups are comprised of full-time professionals who are dedicated to their respective specialty. These centralized resources of Evensen Dodge ensure that thorough and accurate sen-ices are provided to clients in all areas of the count~'. The Analytical Group manages the competitive sale process through careful document preparation and the coordination of the specific details for each sale. This group of professionals prepares official statements for primary market offerings, secondary market disclosure documentation, pre- sale and post-sale market analyses, credit rating agency materials and other specialized reports. The individuals within the group are assigned to specific clients to work on the preparation of disclosure documentation and the smooth implementation of the sale process. The Quantitative Analysis Group is the foundation of our technical expertise. This group of specialists produces all of the major analytical work requiting computer modeling and complicated financial analysis for the firm's clients. The professionals in this group are highly skilled in such areas as escrow structuring, arbitrage rebate, housing loan cash flows, and structured finance, thus 02p075 Page 3 allowing Evensen Dodge to prepare all financial analyses in-house. As a result of our quantitative capabilities, Evensen Dodge has become one of the leading financial adx4sors in the nation. The Administrative Services Group facilitates the production of official statements, bid documents, and all other reports and analyses for presentation to the public. Utilizing advanced xvord processing, color graphics, and printing software, they are capable of producing both small and large documents within fight deadlines for clients across the country. Ability to Serve the City. Evensen Dodge has the experience necessary to meet the financing requirements of jurisdictions of varying size and complexity. Our clients consistently enter the market with every size and type of financing in the industaT. We have advised clients on x4rtually ever5, financing structure and purpose for which states and local governments issue bonds and conduct financings including: general obligation; revenue; COP/lease financings; limited and special assessment security structures; senior, subordinate, callable and non-callable bonds; fixed, variable, floating and inverse floating interest rate provisions; interest rate swaps, caps, floors and related innovative financial structures; and insured, enhanced, rated and unrated bond issues. The adjacent table details the diversity of our 2001 experience and rankings in various Securities Data categories. We work with our clients on a day-to-day basis, coordinate their individual financings with their long- term debt goals, prepare financing alternatives, develop rating plans, and represent clients in negotiations with underwriters and other sen, ice providers. 2001 Rankings ~y Securities Data Categories Issue Type # Issues I Rank Long-Term 296 5 Short-Term 122 6 Tax-Exempt 279 5 Taxable 17 9 Negotiated 95 7 Competitive 201 4 Revenue 102 5 General Obligation 194 4 New Financing 192 4 Refunding 104 9 Variable Rate 24 5 Use of Proceeds Airport 5 22 Combined Utilities I 12 Economic Development 6 5 Education 70 6 General Purpose 122 9 Healthcare I 9 Housing I 13 2 Industrial Development I 24 Public Power 3 27 Solid Waste 2 21 Student Loan I I 1 Transportation 14 I l Water, Sewer and Gas 22 31 Principal Amount (Mils) $5,443.3 1,087.8 5,210.5 232.8 3.525.1 1,918.1 3,082.7 2,360.6 3,993.0 1,450.3 831.1 93.0 6.6 120.9 801.8 1.421.7 152.2 1.450.9 2.2 34.8 0.6 33.3 558.9 223.9 Source: Thomson Financial Securities Data Financial Advisory Services. In providing financial adx4sory sen4ces, our intent is to provide the most professional and comprehensive sen-ice to the CitT to assist in the sale of its street, water system and storm sewer improvement bonds. Evensen Dodge can provide a full range of financial advisors, sen4ces designed to meet the City's needs. We offer sen4ces in debt issuance, financial modeling, economic development analysis and implementation, rating agency assistance, refunding sen4ces, analysis of financing and investment proposals, and staff development. A summary of our sen4ces regarding the City's proposed debt issuance is as follows: Tasks Common To All Financings. The Project Team will perform certain tasks which are common to any financing the Cit3' undertakes. The Project Team will be responsible to the City for planning, structuring and completing its financings in a timely manner and under the most favorable interest rate and financing terms. Responsibilities that the Project Team will expect to provide to the City for each of its financings include: 02p075 Page 4 Coordinate Project Team members throughout the entire financing process, pursuant to a financing timetable developed by the Team and approved by the CID'. Reviexv the City's debt management plan and policies. Plan and execute each issue in a manner consistent with the City's debt management plan and policies. Complete an analysis of financing alternatives in order to recommend the amount, the optimal financing method and schedule of financing. The analysis will address general marketability questions and will include preliminary debt schedules and repayment plans. Make recommendations with respect to security prox4sions, maturity schedules, amortization schedules, redemption provisions and credit enhancement features if deemed necessary or cost effective. Assist the City in the selection of ancilla~? sen-ice providers, such as bond registrar and paying agent. Review the appropriate sale method, including the advantages and disadvantages of a competitive sale versus a negotiated sale given market conditions, timing concerns, size of the issue, facilities or equipment to be financed, and general security and redemption provisions. Implement a comprehensive credit rating strategy appropriate to the financing. Develop rating agency presentations and participation in those meetings, if requested. Participate in the preparation of the Official Statement, as well as other financing documents. As part of this responsibilit3;, participate in all document drafting meetings. Apprise CiD- about market conditions on a regular basis in preparation for selecting the most favorable time to enter the market. Pre-sale activities including such tasks as conducting information meetings for interested underwriters, institutional investors and other members of the investment community, if appropriate. Assist the CiD, and other members of the financing team in the bond closing process, including attending the closing, if appropriate, and reviewing appropriate legal documents for conformit3- to the terms of the sale. Assist the City in developing a strategy for the investment of bond proceeds. Prepare and deliver a Postsale Analysis to the City which will document the results of the sale. This analysis will be prepared by the Project Team and reviewed in detail with interested City staff, as requested. Pro~4de ongoing advice throughout the life of the bond issue to discuss general matters related to the financing and answer any questions. This sen4ce is provided as part of our initial fee and no supplemental billings occur for this sen-ice. 02p075 Page 5 Competitive Sale Method. through competitive sale: The following additional tasks are performed for bonds sold Provide analysis and recommendations xx4th respect to bidding rules appropriate to the size and complexit3, of the issue within market preferences and constraints. Rules may include the flexibility for the bidders to use serial, term, capital appreciation bonds or derivative products, such as floater-inverse floater securities. Use of good faith checks or suret3? bonds; auction or "all or nothing" bidding restxictions will be reviewed and recommendations made. The bidding rules will be developed to encourage the largest number of bidders and to prox4de incentives for efficient bids to be structured so that the resulting debt sen-ice to be paid by the City xvill be the lowest possible. Assist in the preparation of a Notice of Sale and Bid Form to be used by the City in advertising the sale and describing the terms thereof and the form and rules by which bids will be taken and evaluated. The Notice of Sale and Bid Form will be distributed along with the PreliminaD- Official Statement to prospective bidders. The Evensen Dodge website will be used to post the Preliminary Official Statement. Assist in setting up electronic bidding procedures. During the txvo weeks preceding the sale, place telephone calls to the syndicate managers on previous competitive sales to market the issue and coordinate the creation of bidding syndicates. On the day of sale, receive and evaluate bids to determine the most favorable bid and recommend appropriate action for the Cit?. A fee proposal for our sen-ices follows in the next section. 02p075 Page 6