12-21-2010 - Award of Bid for Bond CounselCity of West Covina
Memorandum
To: Andrew G. Pasmant, Executive Director
and the Community Development Commission
From: Thomas Bachman, Director
Finance Department
SUBJECT: AWARD OF BID FOR BOND COUNSEL
RECOMMENDATION:
AGENDA
Item No.: 6
Date: December 21. 2010
It is recommended that the Community Development Commission award the Bond Counsel Bid
for issuance of bonds to -finance the tax increment deferral owing to Los Angeles County to
Fulbright & Jaworski.
BACKGROUND:
In 1990, the CDC established the Eastland Amendment #1 Project Area (BBK landfill area).
When the project area was established, the CDC entered into an agreement with the County of
Los Angeles, in which the county was to receive 58% of tax increment from the area. As part of
that agreement, the County agreed to defer 50% of their amount and allow the CDC to instead
receive it over the first 20 years of the project's life. This deferral would constitute a loan from
the County to the CDC. The deferral period ended June 30, 2010 and the loan amount is now
payable from future tax increment generated in that project area. The amount deferred over the
last twenty years is approximately $10.1 million. Staff has identified a couple of issues related to
the calculation of the amount deferred and is working with the County to resolve these issues.
Once the CDC and County agree on the final amount due, the CDC will issue bonds to repay this
amount to the County, in an effort to extend the repayment period, lower the interest rate, and
provide for a more positive cash flow for the CDC. The CDC Staff has also requested that the
County identify capital expenditures on which to spend the bond proceeds, thereby allowing the
bonds to be issued on a tax-exempt basis. Otherwise, these bonds will need to be issued on a
taxable basis, which would result in higher borrowing costs. Depending on the determination of
whether this bond is taxable or not, and what the final deferral amount is, the total bond issue
will be between $10 million and $13.5 million. It is the CDC's intent to issue the bond in .the
first half of 2011.
In 2007, the City Council/Community Development Commission (CDC) of the City of West
Covina pre -approved a list of legal firms to serve the City/CDC as Bond Counsel and Disclosure
Counsel. Staff recently solicited proposals from the firms on that list to serve as Bond Counsel
on the bond issue described above. As an essential member of the City of West Covina/CDC's
bond financing team, the Bond/Disclosure Counsel will provides all legal and tax analysis for the
bond issue, reviews the various bond documents, and provides necessary legal documents and
opinions required to complete the transaction.
DISCUSSION:
Request for proposals inviting bids were prepared and sent out to the firms on October 21, 2010.
Bidding closed at 5 p.m. on November 15, 2010. Bid packages were received from five of the
six firms, summarized as follows:
Firm
Bond
Counsel
Disclosure
Counsel
Cost assuming a
$12 million Issue
Fulbright & Jaworski
$
36,000
$
20,000
$56,000 plus expenses
Richards Watson Gershon
$
44,500
$
35,000
$79,500 plus expenses
Squire Sanders
$
60,000
$
25,000
$85,000 plus expenses
Burke Williams & Sorrensen
$
65,000
$
35,000
$100,000 plus expenses
Jones Hall
na
na
Non -timely submission of bid
Rutan & Tucker
na
na
No response to RFP
Fulbright & Jaworski was the lowest cost submittal. The CDC has used the firm of Fulbright &
Jaworski as bond counsel on past issues and has more recently used them on tax analysis and
document review of various City and CDC outstanding bond issues. They also recently provided
services to the City and CDC on replacing the letters of credit on two outstanding bond issues.
Staff has been very pleased with the quality, responsiveness and professionalism of the services
provided by Fulbright & Jaworski. It is recommended that they provide bond counsel services
on this bond issue.
FISCAL IMPACT:
These and other costs of issuance will be part of the financing and paid off over the life of the
bonds. Staff expects that the debt service will be paid from cash flow savings from the merged
project area debt service fund.
Prepared by: Dennis Swink
City Controller
R e v i —eWN Ec Ky: Thomas an
Finance Director