20211108 City Council Agenda Packet (Special)
Agenda
City of Vernon
Special City Council Meeting
Monday, November 08, 2021, 03:00 PM
City Hall, Council Chamber
4305 Santa Fe Avenue
Vernon, California
Melissa Ybarra, Mayor
William Davis, Mayor Pro Tem
Leticia Lopez, Council Member
Crystal Larios, Council Member
Judith Merlo, Council Member
MEETING ATTENDANCE PROTOCOLS
Assembly Bill 361 (AB 361) authorizes public meetings to take place via teleconference because
State and Local officials are recommending measures to promote social distancing. Meetings are
conducted in a hybrid format that includes both in-person and Zoom participation.
The public is encouraged to view the meeting at https://www.cityofvernon.org/webinar-cc or by
calling (408) 638-0968, Meeting ID 842-9815-0716#. You may address the Council via Zoom or
submit comments to PublicComment@ci.vernon.ca.us with the meeting date and item number in
the subject line.
CALL TO ORDER
FLAG SALUTE
ROLL CALL
APPROVAL OF THE AGENDA
PUBLIC COMMENT
Members of the public interested in addressing the City Council during this Special Meeting may
address any item which has been described in the notice of this Special Meeting before or during
consideration of that item in accordance with Government Code Section 54954.3(a). For Closed
Session matters members of the public shall be provided an opportunity to address the City Council
before the Council recesses into Closed Session.
Special City Council Meeting Agenda
November 08, 2021
Page 2 of 3
NEW BUSINESS
1.Finance/Treasury
Appointment of Goldman Sachs & Co. for Investment Banking and Underwriting
Services
Recommendation:
Appoint Goldman Sachs & Co. (Goldman Sachs) as underwriters for Malburg
Generating Station (MGS) bond issuance in accordance with staff's recommendation.
1. Investment Banking and Underwriting Services RFP
2. Goldman Sachs Proposal for Investment Banking and Underwriting Services
ORAL REPORTS
City Administrator Reports on Activities and other Announcements.
City Council Reports on Activities (including AB 1234), Announcements, or Directives to Staff.
CLOSED SESSION
2.CONFERENCE WITH REAL PROPERTY NEGOTIATORS
Government Code Section 54956.8
Property: Malburg Generating Station, 2715 East 50th Street, Vernon, California
Agency negotiator: Carlos Fandino, City Administrator
Negotiating parties: Bicent (California) Malburg LLC
Under negotiation: Consideration of Price and Terms of Payment
CLOSED SESSION REPORT
ADJOURNMENT
I hereby certify under penalty of perjury under the laws of the State of California, that the foregoing
agenda was posted on the bulletin board at the main entrance of the City of Vernon City Hall,
located at 4305 Santa Fe Avenue, Vernon, California, and on the City’s website, not less than 24
hours prior to the meeting set forth on this agenda.
Dated this 4th day of November, 2021.
By: __________________________________
Sandra Dolson, Administrative Secretary
/s/
Special City Council Meeting Agenda
November 08, 2021
Page 3 of 3
Guide to City Council Proceedings Meetings of the City Council are held the first and third Tuesday of each month at 9:00 a.m. and
are conducted in accordance with Rosenberg's Rules of Order (Vernon Municipal Code Section
2.1-1).
Copies of all agenda items and back-up materials are available for review in the City Clerk
Department, Vernon City Hall, 4305 Santa Fe Avenue, Vernon, California, and are available for
public inspection during regular business hours, Monday through Thursday, 7:00 a.m. to 5:30 p.m.
Agenda reports may be reviewed on the City's website at www.cityofvernon.org or copies may be
purchased for $0.10 per page.
Disability-related services are available to enable persons with a disability to participate in this
meeting, consistent with the Americans with Disabilities Act (ADA). In compliance with ADA, if you
need special assistance, please contact the City Clerk department at CityClerk@ci.vernon.ca.us
or (323) 583-8811 at least 48 hours prior to the meeting to assure arrangements can be made.
The Public Comment portion of the agenda is for members of the public to present items, which
are not listed on the agenda but are within the subject matter jurisdiction of the City Council. The
City Council cannot take action on any item that is not on the agenda but matters raised under
Public Comment may be referred to staff or scheduled on a future agenda. Comments are limited
to three minutes per speaker unless a different time limit is announced. Speaker slips are available
at the entrance to the Council Chamber.
Public Hearings are legally noticed hearings. For hearings involving zoning matters, the applicant
and appellant will be given 15 minutes to present their position to the City Council. Time may be
set aside for rebuttal. All other testimony shall follow the rules as set for under Public Comment. If
you challenge any City action in court, you may be limited to raising only those issues you or
someone else raised during the public hearing, or in written correspondence delivered to the City
Clerk at or prior to the public hearing.
Consent Calendar items may be approved by a single motion. If a Council Member or the public
wishes to discuss an item, it may be removed from the calendar for individual consideration.
Council Members may indicate a negative or abstaining vote on any individual item by so declaring
prior to the vote on the motion to adopt the Consent Calendar. Items excluded from the Consent
Calendar will be taken up following action on the Consent Calendar. Public speakers shall follow
the guidelines as set forth under Public Comment. New Business items are matters appearing before the Council for the first time for formal action.
Those wishing to address the Council on New Business items shall follow the guidelines for Public
Comment. Closed Session allows the Council to discuss specific matters pursuant to the Brown Act,
Government Code Section 54956.9. Based on the advice of the City Attorney, discussion of these
matters in open session would prejudice the position of the City. Following Closed Session, the
City Attorney will provide an oral report on any reportable matters discussed and actions taken. At
the conclusion of Closed Session, the Council may continue any item listed on the Closed Session
agenda to the Open Session agenda for discussion or to take formal action as it deems
appropriate.
City Council Agenda Item Report
Agenda Item No. COV-848-2021
Submitted by: Angela Melgar
Submitting Department: Finance/Treasury
Meeting Date: November 8, 2021
SUBJECT
Appointment of Goldman Sachs & Co. for Investment Banking and Underwriting Services
Recommendation:
Appoint Goldman Sachs & Co. (Goldman Sachs) as underwriters for Malburg Generating Station (MGS)
bond issuance in accordance with staff's recommendation.
Background:
Staff seeks to finance the acquisition of MGS through issuance of revenue bonds. Interest rates continue
to hover near an all-time low, and the transaction is expected to close mid-December 2021. The
underwriter is one of the key participants in the issuance of bonds.
The primary function of the bond underwriter is to develop the financing plan, market, sell and underwrite
the bonds. Other duties include creating a rating strategy to optimize the City’s presentation to rating
agencies, and identifying ways to enhance the City’s capital markets strategy across projects and credits
to identify potential opportunities. The underwriter reviews the Official Statement for the bonds in
accordance with Federal Securities laws, as applied to the facts and circumstances of the transaction.
Finally, the underwriter will review all disclosure documents developed by the bond and disclosure
counsel.
On October 14, 2021, City staff issued a Request for Proposals (RFP) for Investment Banking and
Underwriting Services for three project categories: 1) Redevelopment Agency Financing, 2) Pension
Obligation Financing, and 3) Financing of Major Maintenance/Infrastructure Improvements and Asset
Acquisitions. The RFP was distributed to the following ten (10) firms that specialize in public bond
financing: Bank of America Merrill Lynch, Piper Sandler, Raymond James & Associates, Inc., Goldman
Sachs, Citigroup Global Markets Inc., Hilltop Securities Inc., J.P. Morgan, Morgan Stanley, Samuel A.
Ramirez & Co., Inc., RBC Capital Markets, and Stifel Public Finance. In an effort to maximize the
diversity of the firms notified, staff advertised the RFP on PlanetBids, via which nineteen (19) vendors
were notified, including the aforementioned. Timely proposals were received from the following seven
firms: Citigroup Global Markets, Raymond James & Associates, Inc., Drexel Hamilton, Goldman Sachs,
Hilltop Securities Inc., Stifel Public Finance, and Samuel A. Ramirez & Co., Inc. Only four of the seven
proposals responded to the MGS acquisition project specifically: Goldman Sachs, Samuel A. Ramirez &
Co., Inc., Raymond James & Associates, Inc., and Hilltop Securities Inc. Separate evaluations will be
conducted for each of the additional projects at a later date, and multiple underwriters may be selected.
A review panel evaluated the four acquisition project proposals received from qualified respondents. A
comprehensive and impartial evaluation of the proposals was conducted in accordance with the
specifications set forth within the RFP on the basis of four weighted criteria: Qualifications 40%, Costs
and Fees 30%, Responsiveness 10%, and References 20%. Goldman Sachs was determined to be the
best fit due to the firm's exceptional qualifications, competitive prices, and past experience. As a leading
firm in the industry, Goldman Sachs’ will facilitate a prudent process that is aligned with the MGS
project’s expedited timeline. Additionally, Goldman Sachs' extensive sales and distribution platform, and
integrated distribution team will help the City achieve attractive pricing. At this time, staff recommends
that the City Council appoint Goldman Sachs as underwriters for the MGS bond issuance in order to
allow the firm to commence their work on this transaction.
Next Step in Bond Process:
Upon finalizing the Series 2021 bond financial requirements and disclosure documents, City Council will
be briefed on the specifics of the bonding transaction before proceeding with a final sale. At that time,
staff will request that Council approve a resolution to move forward with the bond transaction, including
approval of the Bond Purchase and Sale Agreement with Goldman Sachs, and authorization for the
Director of Finance to accept or reject bids and set the interest rates on the bonds sold. A calculation will
be completed by the City’s Financial Advisor to determine the lowest cost investor bids to be accepted.
This information will be presented to City Council, and will be incorporated into the authorizing resolution.
Fiscal Impact:
The total estimated cost for investment banking and underwriting services is expected not-to-exceed
$669,000 based on a $200 million bond transaction ($3.342/$1,000 bond), and will be paid from bond
proceeds upon transaction completion. To the extent the transaction includes a forward settlement
component, the takedown would increase by $1.00/bond for the applicable bonds ($4.00/bond). In a
case where the transaction amount exceeds $200 million, fees on a dollar per bond basis would remain
the same, and the amount would scale with size.
Attachments:
1. Investment Banking and Underwriting Services RFP
2. Goldman Sachs Proposal for Investment Banking and Underwriting Services
City of Vernon
Request for Proposals (RFP)
Investment Banking and Underwriting
Services
City of Vernon
Finance Department
4305 Santa Fe Avenue, Vernon, CA 90058
Phone: (323) 583-8811
City of Vernon Investment Banking and Underwriting Services Request for Proposals
Page 2 of 11
1.INTRODUCTION AND PROJECT
The City of Vernon is requesting proposals for investment banking and underwriting
services for the execution of a restructuring/refinancing of outstanding redevelopment
agency debt, financing all or a portion of the City’s Unfunded Accrued Liability (UAL)
pension obligations, and financing for major acquisitions and/or maintenance and
revenue-financed infrastructure improvements.
Redevelopment Agency Financing: The City seeks to refinance its existing series
2005 Industrial Redevelopment Project Tax Allocation Bonds (of which $30,785,000 is
currently outstanding), and series 2011 Industrial Redevelopment Project Tax
Allocation Bonds (Federally Taxable) (of which $8,130,000 is currently outstanding), in
order to realize interest rate savings.
Pension Obligation Financing: The City is also interested in pursuing financing
opportunities to benefit the City and increase financing options/flexibility in the near and
long term and is exploring pension obligation bonds in order to stabilize UAL costs over
time.
Financing of Major Maintenance/Infrastructure Improvements and Asset
Acquisitions: The City may engage in or pursue major maintenance projects, revenue-
financed infrastructure improvements, and asset acquisitions in order to strengthen the
City’s infrastructure and long-term ability to provide necessary City services. The City is
interested in pursuing financing opportunities to fund such maintenance, improvements
and/or acquisitions.
Proposers may submit a proposal for one or multiple service categories. The City will
select one or more firms, based on demonstrated competence and qualifications to
perform investment banking and underwriting services. Proposers must demonstrate a
comprehensive understanding of municipal finance.
The City intends to use this solicitation to select the firm(s) that, at the City’s sole
discretion, is/are found to offer the most favorable recommendations and terms.
Depending on the structure and size of the chosen approach, the City may later, at the
City’s sole discretion, choose firms for co-manager roles. The City is not obligated to
proceed with any transaction or to select any underwriting firm pursuant to this RFP.
2.BACKGROUND
The City of Vernon was founded in 1905, is approximately 5.2 square miles in size and
is located approximately 5 miles southeast of downtown Los Angeles California. Over its
long history, Vernon has been developed as an industrial community. At the turn of the
20th century the lands that make up Vernon were comprised largely of farmlands. The
presence of three major rail lines in the area led influential business and property owners
to encourage the railroad companies to run spur lines onto the farmlands. These rail
extensions enabled the creation of an “exclusively industrial” city. By the 1920’s, Vernon
was attracting large stockyards and meatpacking facilities. In the 1930’s, Vernon
became the location of choice for many heavy industrial plants. As economic conditions
changed over the decades, these large-scale industrial operations have relocated out of
City of Vernon Investment Banking and Underwriting Services Request for Proposals
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Southern California and Vernon has attracted smaller, lighter industrial facilities. The
City’s business friendly environment, low cost utilities and key location for trucking and
rail transport continue to position Vernon as an ideal location for industrial uses.
City Government: The City Council consists of five members, elected at-large, who
serve five-year staggered terms. A Mayor and a Mayor Pro Tem are annually appointed
according to a rotation schedule based on year of election.
Labor Force: Vernon has approximately 225 employees, and its departments include a
Police Department, Finance Department, Public Works Department, Public Utilities
Department and Health and Environmental Control Department. Present bargaining
units include the Vernon Police Officers Benefit Association, Vernon Police Management
Association, International Brotherhood of Electrical Workers Local 47, and Teamsters
Local 911.
3.FINANCING CATEGORIES
A. FORMER REDEVELOPMENT AGENCY OUTSTANDING DEBT
The City is considering opportunities to refinance the existing Series 2005 and Series
2011 (Taxable) Tax Allocation Bonds in an optimal way to decrease debt service and
term. The former Redevelopment Agency currently has $38,915,000 (as of 9/1/2021) of
outstanding debt. The following table provides the maturity schedule of the two bonds.
B. PENSION OBLIGATIONS
The City is also considering financing opportunities to finance all or a portion of its
existing unfunded actuarial liability. As of the June 30, 2020 CalPERS valuations reports,
the City’s UAL is $146,631,689, as shown in the table below:
City of Vernon Investment Banking and Underwriting Services Request for Proposals
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C. FINANCING OF MAJOR MAINTENANCE/INFRASTRUCTURE
IMPROVEMENTS AND ASSET ACQUISITIONS
The City may engage in or pursue major maintenance projects, revenue-financed
infrastructure improvements, and asset acquisitions in order to strengthen the City’s
infrastructure and long-term ability to provide necessary City services. The City is
interested in pursuing financing opportunities to fund such maintenance, improvements
and/or acquisitions.
4. SCOPE OF SERVICES REQUIRED
With respect to each type of contemplated financings, the City of Vernon is seeking the
services of a highly qualified consulting firm to assist in the following:
A. Provide continued analyses to help determine an optimal approach for
financing/refinancing and other opportunities;
B. Attend and participate in meetings related to the financing(s);
C. Provide support services for completion of the financing(s), including
periodical preparation of schedules and distribution lists;
D. Provide ongoing information to the finance team regarding the activity and
status of the financing(s) and market conditions, including regular updates to
financing scales and numbers;
E. Assist in preparation of presentations to rating agencies and investors;
F. Structure, schedule, market, and purchase the bonds including underwriting
any balances of unsold bonds;
G. Present a timely, comprehensive summary of management performance; and
H. Obtain bids for credit enhancement and recommend efficient utilization of
available credit enhancement, including but not limited to bank facilities and
bond insurance, if necessary.
5. QUALIFICATIONS & CRITERIA
A. Qualifications: The City of Vernon may select one or more firms to provide
the outlined Scope of Service on the bases of qualifications, experience, and
cost. The following are the minimum qualifications to be used to evaluate
responses to this Request for Proposals:
Respondents must have a minimum of five (5) years of municipal finance
experience serving as an underwriter for acquisition, redevelopment and/or
pension obligation transactions, as required based on the scope of proposed
services. Experience in financing/refinancing similar sizes and types of bond
issuances in the State of California is desired.
B. Selection Criteria: The City will conduct a comprehensive, fair, and
impartial evaluation of proposals received in response to this RFP. All
proposals received will be reviewed and evaluated by a committee of
qualified personnel. The name, information, or experience of the individual
members will not be made available to any proposer. The Evaluation
Committee will first review and screen all proposals submitted, except for the
City of Vernon Investment Banking and Underwriting Services Request for Proposals
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cost proposals, according to the minimum qualifications set forth above. The
following criteria will be used in reviewing and comparing the proposals and
in determining the highest scoring bid:
1. 40% Qualifications, background and prior experience of the firm in the
Service Area(s) being proposed, experience of key staff assigned to
oversee services provided to Vernon, evaluation of size and scope of
similar work performed and success on that work.
2. 30% Cost and fees to the City for handling matters. Cost is not the
sole determining factor but will be taken into consideration. Proposer
must offer services at a rate comparable to the rate proposer offers to
other governmental entities for similar work. Offering a higher rate to
the City than the comparable rate is grounds for disqualification of the
Proposer. If rates differ for different types or levels of service, or for
different Service Areas, the Proposer should so state.
3. 10% Responsiveness to the RFP, and quality and responsiveness of
the proposal.
4. 20% References including past performance of proposer.
6. FORMAT AND DELIVERY OF RESPONSE
Respondents are asked to submit an electronic copy via email to Scott Williams, Director
of Finance/City Treasurer to swilliams@ci.vernon.ca.us of their proposals in sufficient
detail to allow for a thorough evaluation and comparative analysis. The proposal should
include, at a minimum, the following information in sectionalized format addressing all
phases of the work in the RFP.
A. Format: Limit your proposal to 15 typed 8.5” X 11” pages, or fewer. You may
attach a firm brochure if you wish, but it must be as a separate attachment
and independent from the required elements noted above.
1. Use a conventional typeface with a minimum font size of 12 points.
Use a 1” margin on all borders.
2. Organize your submittal in the order described above.
3. Prominently label the package: “Investment Banking and Underwriting
Services RFP” and include the name of the primary contact for the
respondent.
4. Responses are due on or before 5:00 p.m. on October 25, 2021.
Late response will not be accepted.
5. If you have any questions about this RFP, please contact Scott
Williams via email at swilliams@ci.vernon.ca.us. Please note that any
questions asked and any response provided by Vernon will be sent to
every person who will be submitting a proposal, to the extent the City
is aware of them.
City of Vernon Investment Banking and Underwriting Services Request for Proposals
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B. Cover Letter: All proposals shall include a cover letter which states that the
proposal shall remain valid for a period of not less than ninety (90) days from
the date of submittal. If the proposal contemplates the use of sub-
contractors, the sub-contractors shall be identified in the cover letter. If the
proposal is submitted by a business entity, the cover letter shall be executed
by an officer authorized to contractually bind the business entity. With
respect to the business entity, the cover letter shall also include: the
identification of the business entity, including the name, address and
telephone number of the business entity; and the name, title, address and
telephone number of a contact person during the proposal evaluation period.
C. Introduction: Present an introduction of the proposal and your
understanding of the assignment and significant steps, methods and
procedures to be employed by the proposer to ensure quality deliverables
that can be delivered within the required time frames and your identified
budget.
D. General Scope of Work: Briefly summarize the scope of work as the
proposer perceives or envisions it for each Service Area proposed.
E. Work Plan: Present concepts for conducting the work plan and
interrelationship of all projects. Define the scope of each task including the
depth and scope of analysis or research proposed.
Provide clear and concise responses to the following:
1. Other Financing Opportunities. Provide a summary of the firm’s
approach to other financing opportunities that could benefit the City.
Specifically, provide a detailed discussion regarding the firm’s
recommendation of fixed versus variable rate bonds and the
considerations surrounding same. Additionally, provide an opinion on an
appropriate amortization schedule. If applicable, discuss the subtopics
listed in the “Refinancing Approach” section below and how they affect
the firm’s other financing opportunities recommendation.
2. Financing/Refinancing Approach. Provide a summary of the firm’s
approach to debt financing/refinancing followed by a more detailed
discussion of the ideas and considerations surrounding the recommended
approach. If applicable, provide series-specific descriptions and results
followed by the aggregate anticipated outcome. As part of the discussion,
address the following as they relate to the recommended approach:
a. Structure. The proposal should include other alternatives
explored and why those options were not selected as the primary
recommendation.
b. Credit Ratings. Given the City’s ratings and any information that
can be ascertained from rating agency reports, disclosure
documents and financials, which ratings should the City plan to
City of Vernon Investment Banking and Underwriting Services Request for Proposals
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seek in association with the recommended transaction? Provide
information on how many ratings the firm would recommend
procuring and which rating agencies the firm recommends
approaching. Which ratings does the firm expect City to receive?
What are the primary areas of concern and how does the firm
recommend addressing them? What implications will the proposed
refinancing have on credit ratings and how should they be
addressed?
3. Approach to Sale. Detail the recommended approach to the potential
bond sale associated with the recommended refinancing approach.
Describe the firm’s marketing strategy, including: retail order period, net
roadshow, sealed bid, syndicate policies, etc. Explain how the firm
intends to sell the bonds at the best rates and include the firm’s proposal
for total compensation and liability.
F. Fees and costs: Although an important aspect of consideration, the financial
cost estimate will not be the sole justification for consideration. Negotiations
may or may not be conducted with the proposer; therefore, the proposal
submitted should contain the proposer’s most favorable terms and conditions,
since selection and award may be made without discussion with any firm. All
prices should reflect “not to exceed” amounts per item. Proposer must offer
services at a rate comparable to the rate proposer offers to other
governmental entities for similar work. Offering a higher rate to the City than
the comparable rate is grounds for disqualification of the Proposer.
Please provide a maturity-by-maturity takedown request for the potential
transaction assuming only one underwriter is selected. The City may
ultimately decide to appoint a co-manager or group of co-managers to work
with the lead manager which the City is intending to select. Also please detail
all expected expenses and management fee in a dollar-per-bond format.
Assume $50,000 for Underwriter’s Counsel. Proposer must offer services at a
rate comparable to the rate Proposer offers to other governmental entities for
similar work.
G. Ability of the Proposer to Perform: Provide a detailed description of the
proposer and his/her/its qualifications, including names, titles, detailed
professional resumes and past experience in similar work efforts/products of
key personnel who will be working on the assignment. Provide a list of
specific related work projects that have been completed by the proposer
which are directly related to the assignment described in this RFP. Note the
specific individuals who completed such project(s). Identify role and
responsibility of each member of the project team. Include the amount of
time key personnel will be involved in the respective portions of the
assignment. Provide the names, contact information and very brief resumes
for the core (no more than 3 individuals) banking team that would be
assigned to this contract. Provide the name, contact information and very
brief resume for the underwriter who would be assigned for the sale of any
bonds. Focus resumes on relevant experience and particularly highlight any
City of Vernon Investment Banking and Underwriting Services Request for Proposals
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direct experience with transactions for the City of Vernon. Include the amount
of time key personnel will be involved in the respective portions of the
assignment. The identification and utilization of specific key personnel
throughout the contract term are important factors in the City’s consideration
and selection of a firm. Any changes in identified key personnel after the
award of the agreement must be approved by the City in writing before the
change is made. The City reserves the right to cancel the agreement if it
objects to a change in identified key personnel after the award, and to award
the contract to the next highest proposer or conduct a new RFP.
Respondents are encouraged to supply relevant examples of their
professional product. Provide a list of references.
The selected firm shall not subcontract any work under the RFP nor assign
any work without the prior written consent of the City.
If selected to participate in the interview phase, proposers will be asked to
address whether there are any conflicts of interest that would limit the
proposer’s ability to provide the requested service.
H. Affidavit of Non-Collusion. Proposer must submit a completed and
executed, “Affidavit of Non-Collusion.” (Copy attached as Exhibit A).
7.ADDENDA, CHANGES, AND AMENDMENTS TO THIS SOLICITATION
At any time prior to the due date for responses, the City may make changes,
amendments, and addenda to this solicitation, including changing the date due to allow
respondents time to address such changes. Addenda, changes, and amendments, if
made, will be posted on the City’s website (www.cityofvernon.org/planetbids), which is
deemed adequate notice. A proposer may make a request to the City’s project
coordinator to be placed on a list of persons to receive notice of any such addenda,
changes, or amendments. The preferred manner of communications is via e-mail due to
its timeliness.
8.CONDITIONS FOR RESPONSES TO RFP
The following conditions apply to this RFP process:
A. Nothing contained in this RFP shall create any contractual relationship
between the respondent and the City.
B. This RFP does not obligate the City to establish a list of service providers
qualified as prime contractors, or award an agreement to any respondent.
The City reserves the right to amend or cancel this RFP without prior notice,
at any time, at its sole discretion.
C. The City shall not be liable for any expenses incurred by any individual or
organization in connection with this RFP.
D. No conversations or agreements with any officer, agent, or employee of the
City of Vernon Investment Banking and Underwriting Services Request for Proposals
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City shall affect or modify any terms of this RFP. Oral communications or any
written/e-mail materials provided by any person other than designated
contact staff of City shall not be considered binding.
E. The City reserves the right, in its sole discretion, to accept or reject any or all
Proposals without prior notice and to waive any minor irregularities or defects
in a Proposal. The City reserves the right to seek clarification on a Proposal
with any source.
F. The dates, times, and sequence of events related to this RFP shall ultimately
be determined by the City. The schedule shown above is subject to change,
at the sole discretion of the City, although the City will attempt to follow it and,
if it must be altered, will attempt to provide reasonable notice of the changes.
G. Respondents shall not issue any news release pertaining to this RFP, or the
City without prior written approval of the City.
H. All submitted proposals and information included therein or attached thereto
shall become public record upon delivery to the City.
9.RIGHT BY THE CITY TO WITHDRAW THIS REQUEST
The City may, at its sole discretion and for any reason whatsoever, withdraw this
solicitation at any time.
10.STANDARD TERMS AND CONDITIONS
Prior to the award of any work hereunder, City and proposer shall enter into the City’s
standard form services agreement attached hereto as Exhibit B. Proposers responding
to this RFP are strongly advised to review all the terms and conditions of the Agreement.
The term of the Agreement shall not exceed three (3) years pursuant to the Vernon
Municipal Code.
City of Vernon Investment Banking and Underwriting Services Request for Proposals
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EXHIBIT A
AFFIDAVIT OF NON-COLLUSION
March 2013
AFFIDAVIT OF NON-COLLUSION BY CONTRACTOR
STATE OF CALIFORNIA )
) ss
COUNTY OF LOS ANGELES )
_______________________________________________________________, being first duly sworn deposes
and says that he/she is ______________________________________________________________________
(Insert "Sole Owner", "Partner", "President, "Secretary", or other proper title)
of______________________________________________________________________________________
(Insert name of bidder)
who submits herewith to the City of Vernon a bid/proposal;
That all statements of fact in such bid/proposal are true;
That such bid/proposal was not made in the interest of or on behalf of any undisclosed person,
partnership, company, association, organization or corporation;
That such bid/proposal is genuine and not collusive or sham;
That said bidder has not, directly or indirectly by agreement, communication or conference with anyone
attempted to induce action prejudicial to the interest of the City of Vernon, or of any other bidder or
anyone else interested in the proposed contract; and further
That prior to the public opening and reading of bids/proposals, said bidder:
a. Did not directly or indirectly, induce or solicit anyone else to submit a false or sham
bid/proposal;
b.Did not directly or indirectly, collude, conspire, connive or agree with anyone else that said
bidder or anyone else would submit a false or sham bid/proposal, or that anyone should refrain
from bidding or withdraw his/her bid/proposal;
c. Did not, in any manner, directly or indirectly seek by agreement, communication or conference
with anyone to raise or fix the bid/proposal price of said bidder or of anyone else, or to raise or
fix any overhead, profit or cost element of his/her bid/proposal price, or of that of anyone else;
d.Did not, directly or indirectly, submit his/her bid/proposal price or any breakdown thereof, or
the contents thereof, or divulge information or data relative thereto, to any corporation,
partnership, company, association, organization, bid depository, or to any member or agent
thereof, or to any individual or group of individuals, except the City of Vernon, or to any person
or persons who have a partnership or other financial interest with said bidder in his/her business.
I certify under penalty of perjury that the above information is correct
By:______________________________________ Title:________________________________
Date:____________________________________
City of Vernon Investment Banking and Underwriting Services Request for Proposals
Page 11 of 11
EXHIBIT B
STANDARD FORM AGREEMENT
Page 1 of 17
SERVICES AGREEMENT BETWEEN THE CITY OF VERNON AND [CONTRACTOR’S
NAME] FOR INVESTMENT BANKING AND UNDERWRITING SERVICES
COVER PAGE
Contractor: [insert name of contractor]
Responsible Principal of Contractor: [insert name, title]
Notice Information - Contractor: [insert name of contractor]
[insert street address]
[insert city, state, zip code]
Attention: [insert name, title]
Phone: [insert phone number]
Notice Information - City: City of Vernon
4305 Santa Fe Avenue
Vernon, CA 90058
Attention: Scott Williams
Director of Finance/City Treasurer
Telephone: (323) 583-8811 ext. 849
Email: swilliams@ci.vernon.ca.us
Commencement Date: [insert commencement date]
Termination Date: [insert termination date]
Consideration: Total not to exceed $[insert amount]
(includes all applicable sales tax); and more
particularly described in Exhibit B
Records Retention Period Three (3) years, pursuant to Section 11.20
Page 2 of 17
SERVICES AGREEMENT BETWEEN THE CITY OF VERNON AND [CONTRACTOR’S NAME]
FOR INVESTMENT BANKING AND UNDERWRITING SERVICES
This Agreement is made between the City of Vernon ("City"), a California charter City
and California municipal corporation (“City”), and [Contractor’s Name], a [State incorporated in]
corporation (“Contractor”).
The City and Contractor agree as follows:
1.0 EMPLOYMENT OF CONTRACTOR. City agrees to engage Contractor to
perform the services as hereinafter set forth as authorized by the City Council on
____________, ____.
2.0 SCOPE OF SERVICES.
2.1 Contractor shall perform all work necessary to complete the services set
forth in the City’s Request for Proposals issued on or about , and titled
, and Contractor's proposal to the City ("Proposal") dated
, Exhibit “A”, a copy which is attached to and incorporated into this
Agreement by reference.
2.2 All services shall be performed to the satisfaction of City.
2.3 All services shall be performed in a competent, professional, and
satisfactory manner in accordance with the prevailing industry standards for such services.
3.0 PERSONNEL.
3.1 Contractor represents that it employs, or will employ, at its own expense,
all personnel required to perform the services under this Agreement.
3.2 Contractor shall not subcontract any services to be performed by it under
this Agreement without prior written approval of City.
3.3 All of the services required hereunder will be performed by Contractor or
by City approved subcontractors. Contractor, and all personnel engaged in the work, shall be
fully qualified and authorized or permitted under State and local law to perform such services
and shall be subject to approval by the City.
4.0 TERM. The term of this Agreement shall commence on [state date], and it shall
continue until [state date which may not be more than three years from the commencement
date], unless terminated at an earlier date pursuant to the provisions thereof.
5.0 COMPENSATION AND FEES.
5.1 Contractor has established rates for the City of Vernon which are
comparable to and do not exceed the best rates offered to other governmental entities in and
around Los Angeles County for the same services. For satisfactory and timely performance of
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the services, the City will pay Contractor in accordance with the payment schedule set forth in
Exhibit “B” attached hereto and incorporated herein by reference.
5.2 Contractor's grand total compensation for the entire term of this
Agreement, shall not exceed [state amount] without the prior authorization of the City, as
appropriate, and written amendment of this Agreement.
5.3 Contractor shall, at its sole cost and expense, furnish all necessary and
incidental labor, material, supplies, facilities, equipment, and transportation which may be
required for furnishing services pursuant to this Agreement. Materials shall be of the highest
quality. The above Agreement fee shall include all staff time and all clerical, administrative,
overhead, insurance, reproduction, telephone, air travel, auto rental, subsistence, and all related
costs and expenses.
5.4 City shall reimburse Contractor only for those costs or expenses
specifically approved in this Agreement, or specifically approved in writing in advance by City.
Unless otherwise approved, such costs shall be limited and include nothing more than the
following costs incurred by Contractor:
5.4.1 The actual costs of subcontractors for performance of any of the
services that Contractor agrees to render pursuant to this Agreement, which have been
approved in advance by City and awarded in accordance with this Agreement.
5.4.2 Approved reproduction charges.
5.4.3 Actual costs and/or other costs and/or payments specifically
authorized in advance in writing and incurred by Contractor in the performance of this
Agreement.
5.5 Contractor shall not receive any compensation for extra work performed
without the prior written authorization of City. As used herein, “extra work” means any work that
is determined by City to be necessary for the proper completion of the Project, but which is not
included within the Scope of Services and which the parties did not reasonably anticipate would
be necessary at the time of execution of this Agreement. Compensation for any authorized
extra work shall be paid in accordance with the payment schedule as set forth in Exhibit “B,” if
the extra work has been approved by the City.
5.6 Licenses, Permits, Fees, and Assessments. Contractor shall obtain, at
Contractor’s sole cost and expense, such licenses, permits, and approvals as may be required
by law for the performance of the services required by this Agreement. Contractor shall have the
sole obligation to pay for any fees, assessments, and taxes, plus applicable penalties and
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interest, which may be imposed by law and which arise from or are necessary for the
performance of the Services by this Agreement.
6.0 PAYMENT.
6.1 As scheduled services are completed, Contractor shall submit to the
City an invoice for the services completed, authorized expenses, and authorized extra work
actually performed or incurred according to said schedule.
6.2 Each such invoice shall state the basis for the amount invoiced, including
a detailed description of the services completed, the number of hours spent, reimbursable
expenses incurred and any extra work performed.
6.3 Contractor shall also submit a progress report with each invoice that
describes in reasonable detail the services and the extra work, if any, performed in the
immediately preceding calendar month.
6.4 Contractor understands and agrees that invoices which lack sufficient
detail to measure performance will be returned and not processed for payment.
6.5 City will pay Contractor the amount invoiced within thirty (30) days after
the City approves the invoice.
6.6 Payment of such invoices shall be payment in full for all services,
authorized costs, and authorized extra work covered by that invoice.
7.0 CITY'S RESPONSIBILITY. City shall cooperate with Contractor as may be
reasonably necessary for Contractor to perform its services; and will give any required decisions
as promptly as practicable so as to avoid unreasonable delay in the progress of Contractor's
services.
8.0 COORDINATION OF SERVICES. Contractor agrees to work closely with City
staff in the performance of Services and shall be available to City’s staff, consultants, and other
staff at all reasonable times.
9.0 INDEMNITY. Contractor agrees to indemnify City, its officers, elected officials,
employees and agents against, and will hold and save each of them harmless from, any and all
actions, suits, claims, damages to persons or property, losses, costs, penalties, obligations,
errors, omissions or liabilities (herein “claims or liabilities”), including but not limited to
professional negligence, that may be asserted or claimed by any person, firm or entity arising
out of or in connection with the work, operations or activities of Contractor, its agents,
employees, subcontractors, or invitees, provided for herein, or arising from the acts or
omissions of Contractor hereunder, or arising from Contractor’s performance of or failure to
perform any term, provision, covenant or condition of this Agreement, except to the extent such
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claims or liabilities arise from the gross negligence or willful misconduct of City, its officers,
elected officials, agents or employees.
10.0 INSURANCE. Contractor shall, at its own expense, procure and maintain
policies of insurance of the types and in the amounts set forth below, for the duration of the
Agreement, including any extensions thereto. The policies shall state that they afford primary
coverage.
i.Automobile Liability with minimum limits of at least $1,000,000 combined single
limit, including owned, hired, and non-owned liability coverage.
ii.Contractor agrees to subrogate automobile liability resulting from performance
under this Agreement by agreeing to defend, indemnify and hold harmless, the City, and its
respective employees, agents, and City Council from and against all claims, liabilities, suits,
losses, damages, injuries and expenses, including all costs and reasonable attorney’s fees
(“Claims”), which are attributable to any act or omission by the City under the performance of
the services.
iii.General Liability with minimum limits of at least $1,000,000 per occurrence and
$2,000,000 aggregate written on an Insurance Services Office (ISO) Comprehensive General
Liability "occurrence" form or its equivalent for coverage on an occurrence basis.
Premises/Operations and Personal Injury coverage is required. The City of Vernon, its
directors, commissioners, officers, employees, agents, and volunteers must be endorsed on the
policy as additional insureds as respects liability arising out of the Contractor's performance of
this Agreement.
(1) If Contractor employs other contractors as part of the services rendered,
Contractor's Protective Coverage is required. Contractor may include all
subcontractors as insureds under its own policy or shall furnish separate
insurance for each subcontractor, meeting the requirements set forth
herein.
(2) Contractor agrees to subrogate General Liability resulting from
performance under this Agreement by agreeing to defend, indemnify and
Page 6 of 17
hold harmless, the City, and its respective employees, agents, and City
Council from and against all claims, liabilities, suits, losses, damages,
injuries and expenses, including all costs and reasonable attorney’s fees
(“Claims”), which are attributable to any act or omission by the City under
the performance of the services.
iv.Professional Errors and Omissions coverage in a sum of at least $1,000,000,
where such risk is applicable. Applicable aggregates must be identified and claims history
provided to determine amounts remaining under the aggregate. Contractor shall maintain such
coverage for at least one (1) year after the termination of this Agreement.
v.Contractor shall comply with the applicable sections of the California Labor Code
concerning workers' compensation for injuries on the job. In addition, Contractor shall require
each subcontractor to similarly maintain workers’ compensation insurance in accordance with
the laws for California for all of the subcontractor’s employees. Compliance is accomplished in
one of the following manners:
(1) Provide copy of permissive self-insurance certificate approved by the
State of California; or
(2) Secure and maintain in force a policy of workers' compensation insurance
with statutory limits and Employer's Liability Insurance with a minimal limit
of $1,000,000 per accident. The policy shall be endorsed to waive all
rights of subrogation against City, its directors, commissioners, officers,
employees, and volunteers for losses arising from performance of this
Agreement; or
(3) Provide a "waiver" form certifying that no employees subject to the Labor
Code's Workers' Compensation provision will be used in performance of
this Agreement.
vi.Each insurance policy included in this clause shall be endorsed to state that
coverage shall not be cancelled except after thirty (30) days' prior written notice to City.
Page 7 of 17
vii.Insurance shall be placed with insurers with a Best's rating of no less than A-VIII.
viii.Prior to commencement of performance, Contractor shall furnish City with a
certificate of insurance for each policy. Each certificate is to be signed by a person authorized
by that insurer to bind coverage on its behalf. The certificate(s) must be in a form approved by
City. City may require complete, certified copies of any or all policies at any time.
ix.Failure to maintain required insurance at all times shall constitute a default and
material breach. In such event, Contractor shall immediately notify City and cease all
performance under this Agreement until further directed by the City. In the absence of
satisfactory insurance coverage, City may, at its option: (a) procure insurance with collection
rights for premiums, attorney's fees and costs against Contractor by way of set-off or
recoupment from sums due to Contractor, at City's option; (b) immediately terminate this
Agreement and seek damages from the Agreement resulting from said breach; or (c) self-insure
the risk, with all damages and costs incurred, by judgment, settlement or otherwise, including
attorney's fees and costs, being collectible from Contractor, by way of set-off or recoupment
from any sums due to Contractor.
11.0 GENERAL TERMS AND CONDITIONS.
11.1 INDEPENDENT CONTRACTOR.
11.1.1 It is understood that in the performance of the services herein
provided for, Contractor shall be, and is, an independent contractor, and is not an agent, officer
or employee of City and shall furnish such services in its own manner and method except as
required by this Agreement, or any applicable statute, rule, or regulation. Further, Contractor
has and shall retain the right to exercise full control over the employment, direction,
compensation and discharge of all persons employed by Contractor in the performance of the
services hereunder. City assumes no liability for Contractor’s actions and performance, nor
assumes responsibility for taxes, bonds, payments, or other commitments, implied or explicit, by
or for Contractor. Contractor shall be solely responsible for, and shall indemnify, defend and
save City harmless from all matters relating to the payment of its employees, subcontractors
and independent contractors, including compliance with social security, withholding and all other
wages, salaries, benefits, taxes, exactions, and regulations of any nature whatsoever.
11.1.2 Contractor acknowledges that Contractor and any subcontractors,
agents or employees employed by Contractor shall not, under any circumstances, be
considered employees of the City, and that they shall not be entitled to any of the benefits or
rights afforded employees of City, including, but not limited to, sick leave, vacation leave,
Page 8 of 17
holiday pay, Public Employees Retirement System benefits, or health, life, dental, long-term
disability or workers' compensation insurance benefits.
11.2 CONTRACTOR NOT AGENT. Except as the City may authorize
in writing, Contractor and its subcontractors shall have no authority, express or implied, to act
on behalf of or bind the City in any capacity whatsoever as agents or otherwise.
11.3 OWNERSHIP OF WORK. All documents and materials furnished by the
City to Contractor shall remain the property of the City and shall be returned to the City upon
termination of this Agreement. All reports, drawings, plans, specifications, computer tapes,
floppy disks and printouts, studies, memoranda, computation sheets, and other documents
prepared by Contractor in furtherance of the work shall be the sole property of City and shall be
delivered to City whenever requested at no additional cost to the City. Contractor shall keep
such documents and materials on file and available for audit by the City for at least three (3)
years after completion or earlier termination of this Agreement. Contractor may make duplicate
copies of such materials and documents for its own files or for such other purposes as may be
authorized in writing by the City.
11.4 CORRECTION OF WORK. Contractor shall promptly correct any
defective, inaccurate or incomplete tasks, deliverables, goods, services and other work, without
additional cost to the City. The performance or acceptance of services furnished by Contractor
shall not relieve the Contractor from the obligation to correct subsequently discovered defects,
inaccuracy, or incompleteness.
11.5 RESPONSIBILITY FOR ERRORS. Contractor shall be responsible for its
work and results under this Agreement. Contractor, when requested, shall furnish clarification
and/or explanation as may be required by the City, regarding any services rendered under this
Agreement at no additional cost to City. In the event that an error or omission attributable to
Contractor occurs, then Contractor shall, at no cost to City, provide all necessary design
drawings, estimates and other Contractor professional services necessary to rectify and correct
the matter to the sole satisfaction of City and to participate in any meeting required with regard
to the correction.
11.6 WAIVER. The City's waiver of any term, condition, breach, or default of
this Agreement shall not be considered to be a waiver of any other term, condition, default or
breach, nor of a subsequent breach of the one waived. The delay or failure of either party at any
time to require performance or compliance by the other of any of its obligations or agreements
shall in no way be deemed a waiver of those rights to require such performance or compliance.
No waiver of any provision of this Agreement shall be effective unless in writing and executed
Page 9 of 17
by a duly authorized representative of the party against whom enforcement of a waiver is
sought.
11.7 SUCCESSORS. This Agreement shall inure to the benefit of, and shall
be binding upon, the parties hereto and their respective heirs, successors, and/or assigns.
11.8 NO ASSIGNMENT. Contractor shall not assign or transfer this
Agreement or any rights hereunder without the prior written consent of the City and approval by
the City Attorney, which may be withheld in the City's sole discretion. Any unauthorized
assignment or transfer shall be null and void and shall constitute a material breach by the
Contractor of its obligations under this Agreement. No assignment shall release the original
parties from their obligations or otherwise constitute a novation.
11.9 COMPLIANCE WITH LAWS. Contractor shall comply with all Federal,
State, County and City laws, ordinances, rules and regulations, which are, as amended from
time to time, incorporated herein and applicable to the performance hereof. Violation of any law
material to performance of this Agreement shall entitle the City to terminate the Agreement and
otherwise pursue its remedies. Further, if the Contractor performs any work knowing it to be
contrary to such laws, rules, and regulations Contractor shall be solely responsible for all costs
arising therefrom.
11.10 ATTORNEY'S FEES. If any action at law or in equity is brought to
enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorney's fees, costs, and necessary disbursements in addition to any other relief to
which such party may be entitled.
11.11 INTERPRETATION.
11.11.1 Applicable Law. This Agreement shall be deemed an
agreement and shall be governed by and construed in accordance with the laws of the State of
California. Contractor agrees that the State and Federal courts which sit in the State of
California shall have exclusive jurisdiction over all controversies and disputes arising hereunder,
and submits to the jurisdiction thereof.
11.11.2 Entire Agreement. This Agreement, including any exhibits
attached hereto, constitutes the entire agreement and understanding between the parties
regarding its subject matter and supersedes all prior or contemporaneous negotiations,
representations, understandings, correspondence, documentation, and agreements (written or
oral).
11.11.3 Written Amendment. This Agreement may only be changed
by written amendment executed by Contractor and the City Administrator or other authorized
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representative of the City, subject to any requisite authorization by the City Council. Any oral
representations or modifications concerning this Agreement shall be of no force or effect.
11.11.4 Severability. If any provision in this Agreement is held by any
court of competent jurisdiction to be invalid, illegal, void, or unenforceable, such portion shall be
deemed severed from this Agreement, and the remaining provisions shall nevertheless continue
in full force and effect as fully as though such invalid, illegal, or unenforceable portion had never
been part of this Agreement.
11.11.5 Order of Precedence. In case of conflict between the terms of
this Agreement and the terms contained in any document attached as an Exhibit or otherwise
incorporated by reference, the terms of this Agreement shall strictly prevail. The terms of the
City’s Request for Proposals shall control over the Contractor’s Proposal.
11.11.6 Construction. In the event an ambiguity or question of intent
or interpretation arises with respect to this Agreement, this Agreement shall be construed as if
drafted jointly by the parties and in accordance with its fair meaning. There shall be no
presumption or burden of proof favoring or disfavoring any party by virtue of the authorship of
any of the provisions of this Agreement.
11.12 TIME OF ESSENCE. Time is strictly of the essence of this agreement
and each and every covenant, term, and provision hereof.
11.13 AUTHORITY OF CONTRACTOR. The Contractor hereby represents
and warrants to the City that the Contractor has the right, power, legal capacity, and authority to
enter into and perform its obligations under this Agreement, and its execution of this Agreement
has been duly authorized.
11.14 ARBITRATION OF DISPUTES. Any dispute for under $25,000
arising out of or relating to the negotiation, construction, performance, non-performance,
breach, or any other aspect of this Agreement, shall be settled by binding arbitration in
accordance with the Commercial Rules of the American Arbitration Association at Los Angeles,
California and judgment upon the award rendered by the Arbitrators may be entered in any
court having jurisdiction thereof. The City does not waive its right to object to the timeliness or
sufficiency of any claim filed or required to be filed against the City and reserves the right to
conduct full discovery.
11.15 NOTICES. Any notice or demand to be given by one party to the other
must be given in writing and by personal delivery or prepaid first-class, registered or certified
mail, addressed as follows. Notice simply to the City of Vernon or any other City department is
not adequate notice.
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If to the City:
City of Vernon
Attention: Scott Williams, Director of Finance/City Treasurer
4305 Santa Fe Avenue
Vernon, CA 90058
If to the Contractor:
Any such notice shall be deemed to have been given upon delivery, if personally
delivered, or, if mailed, upon receipt, or upon expiration of three (3) business days from the date
of posting, whichever is earlier. Either party may change the address at which it desires to
receive notice upon giving written notice of such request to the other party.
11.16 NO THIRD PARTY RIGHTS. This Agreement is entered into for the sole
benefit of City and Contractor and no other parties are intended to be direct or incidental
beneficiaries of this Agreement and no third party shall have any right or remedy in, under, or to
this Agreement.
11.17 TERMINATION FOR CONVENIENCE (Without Cause). City may
terminate this Agreement in whole or in part at any time, for any cause or without cause, upon
fifteen (15) calendar days' written notice to Contractor. If the Agreement is thus terminated by
City for reasons other than Contractor's failure to perform its obligations, City shall pay
Contractor a prorated amount based on the services satisfactorily completed and accepted prior
to the effective date of termination. Such payment shall be Contractor's exclusive remedy for
termination without cause.
11.18 DEFAULT. In the event either party materially defaults in its obligations
hereunder, the other party may declare a default and terminate this Agreement by written notice
to the defaulting party. The notice shall specify the basis for the default. The Agreement shall
terminate unless such default is cured before the effective date of termination stated in such
notice, which date shall be no sooner than ten (10) days after the date of the notice. In case of
default by Contractor, the City reserves the right to procure the goods or services from other
sources and to hold the Contractor responsible for any excess costs occasioned to the City
thereby. Contractor shall not be held accountable for additional costs incurred due to delay or
default as a result of Force Majeure. Contractor must notify the City immediately upon knowing
that non-performance or delay will apply to this Agreement as a result of Force Majeure. At that
time Contractor is to submit in writing a Recovery Plan for this Agreement. If the Recovery Plan
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is not acceptable to the City or not received within 10 days of the necessary notification of Force
Majeure default, then the City may cancel this order in its entirety at no cost to the City, owing
only for goods and services completed to that point.
11.19 TERMINATION FOR CAUSE. Termination for cause shall relieve the
terminating party of further liability or responsibility under this Agreement, including the payment
of money, except for payment for services satisfactorily and timely performed prior to the service
of the notice of termination, and except for reimbursement of (1) any payments made by the City
for service not subsequently performed in a timely and satisfactory manner, and (2) costs
incurred by the City in obtaining substitute performance. If this Agreement is terminated as
provided herein, City may require, at no additional cost to City, that Contractor provide all
finished or unfinished documents, data, and other information of any kind prepared by
Contractor in connection with the performance of Services under this Agreement. Contractor
shall be required to provide such document and other information within fifteen (15) days of the
request.
11.19.1 Additional Services. In the event this Agreement is terminated in
whole or in part as provided herein, City may procure, upon such terms and in such manner as
it may determine appropriate, services similar to those terminated.
11.20 MAINTENANCE AND INSPECTION OF RECORDS.
The City, or its authorized auditors or representatives, shall have access
to and the right to audit and reproduce any of the Contractor's records to the extent the City
deems necessary to insure it is receiving all money to which it is entitled under the Agreement
and/or is paying only the amounts to which Contractor is properly entitled under the Agreement
or for other purposes relating to the Agreement.
The Contractor shall maintain and preserve all such records for a period
of at least three (3) years after termination of the Agreement.
The Contractor shall maintain all such records in the City of Vernon. If
not, the Contractor shall, upon request, promptly deliver the records to the City of Vernon or
reimburse the City for all reasonable and extra costs incurred in conducting the audit at a
location other than the City of Vernon, including, but not limited to, such additional (out of the
City) expenses for personnel, salaries, private auditors, travel, lodging, meals, and overhead.
11.21 CONFLICT. Contractor hereby represents, warrants, and certifies that no
member, officer, or employee of the Contractor is a director, officer, or employee of the City of
Vernon, or a member of any of its boards, commissions, or committees, except to the extent
permitted by law.
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11.22 HEADINGS. Paragraphs and subparagraph headings contained in this
Agreement are included solely for convenience and are not intended to modify, explain or to be
a full or accurate description of the content thereof and shall not in any way affect the meaning
or interpretation of this Agreement.
11.23 ENFORCEMENT OF WAGE AND HOUR LAWS. Eight hours labor
constitutes a legal day's work. The Contractor, or subcontractor, if any, shall forfeit twenty-five
dollars ($25) for each worker employed in the execution of this Agreement by the respective
Contractor or subcontractor for each calendar day during which the worker is required or
permitted to work more than 8 hours in any one calendar day and 40 hours in any one calendar
week in violation of the provisions of Sections 1810 through 1815 of the California Labor Code
as a penalty paid to the City; provided, however, work performed by employees of contractors in
excess of 8 hours per day, and 40 hours during any one week, shall be permitted upon
compensation for all hours worked in excess of 8 hours per day at not less than 1½ times the
basic rate of pay.
11.24 EQUAL EMPLOYMENT OPPORTUNITY PRACTICES. Contractor
certifies and represents that, during the performance of this Agreement, it and any other parties
with whom it may subcontract shall adhere to equal employment opportunity practices to assure
that applicants, employees and recipients of service are treated equally and are not
discriminated against because of their race, religion, color, national origin, ancestry, disability,
sex, age, medical condition, sexual orientation or marital status. Contractor further certifies that
it will not maintain any segregated facilities. Contractor further agrees to comply with The Equal
Employment Opportunity Practices provisions as set forth in Exhibit “C”.
[Signatures Begin on Next Page].
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
Commencement Date stated on the cover page.
City of Vernon, a California charter City
and California municipal corporation
By: ____________________________
Carlos R. Fandino, Jr.
City Administrator
[CONTRACTOR’S NAME], a [State
incorporated in] corporation
By:
Name:
Title:
ATTEST:
_______________________________
Lisa Pope, City Clerk
By:
Name:
Title:
APPROVED AS TO FORM:
_______________________________
Zaynah N. Moussa,
Interim City Attorney
Page 15 of 17
EXHIBIT A
CONTRACTOR'S PROPOSAL
Page 16 of 17
EXHIBIT B
SCHEDULE
Page 17 of 17
EXHIBIT C
EQUAL EMPLOYMENT OPPORTUNITY
PRACTICES PROVISIONS
A. Contractor certifies and represents that, during the performance of this Agreement, the
contractor and each subcontractor shall adhere to equal opportunity employment practices
to assure that applicants and employees are treated equally and are not discriminated
against because of their race, religious creed, color, national origin, ancestry, handicap,
sex, or age. Contractor further certifies that it will not maintain any segregated facilities.
B. Contractor agrees that it shall, in all solicitations or advertisements for applicants for
employment placed by or on behalf of Contractor, state that it is an "Equal Opportunity
Employer" or that all qualified applicants will receive consideration for employment without
regard to their race, religious creed, color, national origin, ancestry, handicap, sex or age.
C. Contractor agrees that it shall, if requested to do so by the City, certify that it has not, in the
performance of this Agreement, discriminated against applicants or employees because of
their membership in a protected class.
D. Contractor agrees to provide the City with access to, and, if requested to do so by City,
through its awarding authority, provide copies of all of its records pertaining or relating to its
employment practices, except to the extent such records or portions of such records are
confidential or privileged under state or federal law.
E. Nothing contained in this Agreement shall be construed in any manner as to require or
permit any act which is prohibited by law.
Investment Banking and
Underwriting Services RFP
City of Vernon, California
October 25, 2021
Primary Contact: Joseph Natoli, Managing Director
October 25, 2021
Scott Williams, Director of Finance / City Treasurer
City of Vernon, 4305 Santa Fe Avenue, Vernon CA 90058
Scott,
On behalf of Goldman Sachs & Co. LLC (“Goldman Sachs”), we are pleased to submit our
response to the City of Vernon’s (the “City”) Request for Proposals for Investment Banking and
Underwriting Services. As we hope the City witnessed with our experience with the 2020 VPU
financing, we can offer significant value as senior manager on the proposed financing when it
comes to bond structuring, tax analysis, rating agency strategy, and the distribution of bonds. We
highlight some key themes of our proposal below:
Leading Underwriter of Taxable Municipal and Pension Obligation Bonds: Goldman Sachs
has a long history of leadership in the taxable municipal bond market. In 2019, we were the #1
negotiated underwriter of California taxable bonds. In 2020, we priced over $19bn of taxable
municipal bonds for ~30 issuers nationwide, and over $2.3bn for issuers in California. Since
January 2010, we have been involved as either lead or co-manager on nearly $8bn of POB
issues, and over the same time period we rank #3 in the POB underwriter league table.
Dedicated Team Ready to Focus on any future City Lease Revenue Bond (LRB) Offering:
We would be well equipped to assist the City in establishing a LRB Indenture and financing
program to fund its major maintenance / infrastructure improvements and asset acquisitions.
Goldman Sachs has extensive experience structuring and marketing LRBs in California, with
recent senior managed deals for the Cities of Los Angeles and Anaheim earlier this year.
Credit Expertise: In the current market, we believe the City’s financings can be executed
efficiently with a single rating from S&P. Given that the City has no existing General
Obligation rating, we want to work with the City in approaching S&P to produce the best
possible results, leveraging the City’s financial resilience and strong cash balance.
We are excited for the opportunity to work with the City again. We believe that our team, relevant
experience, and team-oriented cross sector coverage approach positions us well. If you have any
questions, please feel free to reach out to Joey at 415-393-7765. We look forward to discussing
our proposal with you further.
This proposal shall remain valid for a period of 90 days from the date of submittal. Although we
do not intend to use sub-contractors, and thus do not identify any in this proposal, we are prepared
to discuss other firms to the extent the City desires.
Sincerely,
Joseph Natoli, Managing Director Jessica Yueh, Vice President Chris Bergeron, Vice President
Business Entity Responding: Goldman Sachs & Co. LLC, Address: 200 West Street, New York, NY 10282;
Telephone: 212-902-1000; Primary Contact: Joseph Natoli, Managing Director, E-mail: joseph.natoli@gs.com
Address: 555 California St., Fl. 45, San Francisco, CA 94104; Telephone: 415-393-7765
Table of Contents
Response to Questions
C. Introduction 2
D. General Scope of Work 2
E. Work Plan 2
F. Fees and Costs 12
G. Ability of the Proposer to Perform 12
H. Affidavit of Non-Collusion 15
Appendix A. Conflicts of Interest
Appendix B. Scope of Services
Appendix C. Taxable Bond Experience
Appendix D. LRB Experience
Appendix E. Case Studies
Appendix F. Affidavit of Non-Collusion
Goldman Sachs & Co. LLC (“Goldman Sachs“) is providing the information contained in this document for discussion purposes
only in anticipation of serving as underwriter to the City of Vernon (the “City”). Goldman Sachs’ response to this RFP is being
provided pursuant to the exemption from the definition of municipal advisor (as defined in Section 15B of the Securities
Exchange Act of 1934 (the “Act”)) for responses to requests for proposals or qualifications for services in connection with a
municipal financial product or the issuance of municipal securities. The primary role of Goldman Sachs, as an underwriter, is to
purchase securities, for resale to investors, in an arm’s-length commercial transaction between the City and Goldman Sachs and
Goldman Sachs has financial and other interests that differ from those of the City. Goldman Sachs is not acting as a municipal
advisor, financial advisor or fiduciary to the City or any other person or entity. The information provided is not intended to be
and should not be construed as “advice” within the meaning of Section 15B of the Act. City should consult with its own financial
and/or municipal, legal, accounting, tax and other advisors, as applicable, to the extent it deems appropriate. If the City would
like a municipal advisor in this transaction that has legal fiduciary duties to the City, then the City is free to engage a municipal
advisor to serve in that capacity. See our disclosures on Conflicts of Interest in Appendix A for other activities that Goldman
Sachs may be engaged in during the course of this assignment.
Nothing in Goldman Sachs's response to this RFP is an expressed nor an implied commitment by Goldman Sachs to act in any
capacity contemplated by this RFP. Any such commitment to perform the services contemplated by this RFP shall only be set
forth in a separate agreement, subject to further approvals including conflicts clearance. With respect to any trade data provided
herein, this material has been prepared based upon information that Goldman Sachs believes to be reliable. However, Goldman
Sachs does not represent that this material is accurate, complete or up to date and accepts no liability if it is not. Goldman Sachs
is not obligated to update this material to correct any inaccuracies it may contain or to reflect any changes that may occur in the
future.
Notwithstanding anything to the contrary contained in the RFP, the City of Vernon (the “City”) acknowledges that nothing in
Goldman Sachs' response is an agreement to include all of the Standard Terms and Conditions (as drafted or otherwise) in a
purchase agreement nor an expressed nor an implied commitment by Goldman Sachs to act in any capacity contemplated by the
RFP. Any such commitment to perform the services contemplated by the RFP shall only be set forth in a separate agreement. If
selected by the City to perform the services contemplated by the RFP, Goldman Sachs reserves the right to negotiate the terms of
the purchase agreement or other appropriate form of agreement appropriate for the type of engagement and/or transaction
involved which would contain customary terms and conditions mutually agreed upon by Goldman Sachs and the City and would
be the exclusive agreement governing the applicable transaction and the rights and obligations of the parties thereto.
2
C. Introduction
For the past six years, Goldman Sachs has
worked diligently to assist the City, most
recently in 2020 with the issuance of its
Electric System Revenue Bonds. It is through
this commitment to the City, and our resulting
familiarity, that we have been able to carefully
tailor our proposal to the City’s financial
position. In response to the City’s RFP, we
are seeking to provide underwriting services
on its (B) Pension Obligation Financing and
(C) Financing of Major Maintenance /
Infrastructure Improvements and Asset
Acquisitions.
By hiring Goldman Sachs, the City would be
able to again leverage the full expertise of the
firm for either financing program. If hired, we
would expect to assist the City and its MA on:
(i) POB/LRB structuring considerations, (ii)
alternative structuring ideas, (iii) credit rating
strategy, (iv) investor marketing, (v) the bond
sale, and (vi) if appropriate, committing firm
balance sheet to support the offering.
In our response, we have endeavored to
provide the City with insights into specific
strategies for each financing program, as well
as a holistic framework to meet the City’s
objectives.
D. General Scope of Work
Goldman Sachs is a leading investment bank
with relevant experience managing complex
transactions for other California cities and
municipalities. We look forward to assisting
the City with its financings and are prepared
to support the City with all major financing
tasks related to its two finance plans,
including:
Financing Analysis: Throughout the
transaction, we will update the City on
different approaches, changes in market
conditions, and ideas around security
provisions to enable the City to make the most
informed decisions.
Rating Strategy: As described in our
response, we believe this will be a significant
component of the work plan, and we will be
deeply involved through the process. By
properly presenting the City to the rating
agencies, we believe we can position the City
in a way that assists with marketing the bonds
at tight credit spreads.
Marketing, Selling, and Underwriting
Bonds: As the senior manager, we would
expect to work with the City to create a
marketing program that would help the City
obtain the lowest all-in cost of financing. If
the market environment is not cooperative,
and it is appropriate to do so, Goldman Sachs
would be prepared to use its balance sheet to
underwrite unsold balances.
Commitment: Goldman Sachs is committed
to providing the City with the highest level of
service, including assuring that its team will
attend all financing meetings. The close
attention we have paid to the City over the
past six years will continue.
E. Work Plan
1. OTHER OPPORTUNITIES
As discussed above, we are committed to
providing a high level of investment banking
service to the City. This means taking a
holistic approach and finding ways to
optimize the City’s capital markets strategy
across projects and credits. We see several
potential opportunities, including:
3
Optimizing Capital Expenditures. Like all
municipalities, a portion of the City’s
operating budget is used to fund routine
maintenance capital projects, some of which
are eligible to be funded with tax-exempt bond
proceeds. The City can explore issuing
additional LRBs to fund these expenditures
and simultaneously dedicate a portion of its
annual operating budget to making Additional
Discretionary Payments (“ADPs”) to
CalPERS. From an economic standpoint, this
would enable the City to finance pension
liabilities on a tax-exempt basis.
Leveraged Refundings. Along the same
lines, the City can explore devoting cash flow
savings generated by refunding transactions to
making accelerated pension payments.
Structuring refunding savings upfront would
create the maximum impact and effectively
allow the City to finance pension liabilities
with lower cost tax-exempt bonds. Given that
most of the City’s refunding opportunities are
for VPU, some additional structuring would
be necessary to ensure that any ADPs to
CalPERS are credited to the liabilities
associated with VPU employees.
Refinancing Pension Obligations with
LRBs. The majority of pension financings in
California have been authorized by a
cumbersome judicial validation process. The
City can consider avoiding the validation
process by refinancing pension obligations
with LRBs. Recently, two large cities have
taken this approach (Torrance and West
Covina). If the City is already planning to
issue LRBs for other purposes, it may wish to
upsize the financing to refinance a portion of
its unfunded pension liabilities.
2. FINANCING APPROACH
B. PENSION OBLIGATIONS
We recognize the importance of the planned
pension financing and its long-term impact on
the City. Decisions made today will have
repercussions for decades to come. In this
context, we are committed to taking an
analytical and data-driven approach to
exploring the impact of different structuring
approaches. Our leadership and unique
insights into the taxable municipal market will
inform all aspects of the structuring process,
which we believe will ensure the best
execution for the City. We expect the process
to be iterative and view our role as providing
the tools and analytical insights to help the
City and BLX make strategic decisions that
are in the best interests of City stakeholders,
both in the short and long-term horizon.
Interest rates are (still) near all-time lows.
Despite some recent upward pressure on
yields, long-term interest rates remain very
low. Interest rates, along with benign credit
spreads, provide the City with an opportunity
to fund the UAL at an attractive cost on a
historical basis. With an estimated all-in cost
of 3.05%, the City could earn well below
CalPERS’ assumed investment return of 6.8%
and still be in a favorable position versus the
status quo. Treasury rates have only been
lower only around 10-30% of the time over
the last 15 years across the yield curve.
Investment earnings and timing. While the
savings levels associated with the financing
are meaningful, they are driven by future
investment performance. There are reasons to
be cautious given high asset values. As an
example, one measure of equity market
valuation is the Cyclically Adjusted Price to
Earnings Ratio (Shiller PE Ratio). As shown
below, the Shiller PE Ratio is higher than its
historic average, suggesting that stocks are
currently overvalued and returns over the next
several years may be compressed as the
market corrects itself.
Shiller PE Ratio for the S&P 500 Since 2000
26.73
43.77
13.32
38.74
0
10
20
30
40
50
2000 2005 2010 2015 2020
20 Year Average Shiller PE Ratio
4
However, it will be critical to hold a long-term
perspective on the market (given the
contemplated 20+ year term of the financing).
Goldman Sachs economists published an
article estimating that the S&P 500 will
deliver an average annualized return of 6%
during the next 10 years with returns of 2%-
11% within one standard deviation. The mean
estimate of 6% may be less than CalPERS
actuarial rate but it is in notable excess of the
approximate 3.05% borrowing cost that we
project for the City in the current market.
Furthermore, GS Research has looked at a set
of historical 10-year S&P 500 returns since
1880. While conventional knowledge might
indicate that there is greater downside risk of
forecasted returns, the more normal
distribution seems to indicate the relatively
equal probability of positive or negative
returns within one standard deviation of the
projected mean return of 6%.
STRUCTURE
Base case structure. Below, we provide a
base case financing scenario which assumes
100% funding of the City’s UAL and level
debt service through FY 2035. This structure
is consistent with the approach taken by many
of the City’s peers. The structure distributes
refinancing savings from FY2023 to FY2035
while not increasing UAL costs in any year
above what is currently anticipated.1
1 We have assumed taxable pension bonds with a 10 year par call, interest rates
as of October 20th, a closing date of May 1, 2022, cost of issuance of $300,000,
and underwriter’s discount as proposed in our response.
We note the City’s 6/30/2020 CalPERS
valuation reports do not take into account the
outsize FY21 investment return of 21.3% or
the resulting automatic reduction in the
discount rate to 6.8% under the Funding Risk
Mitigation Policy. While the City’s
consultants and CalPERS can assist in
determining the appropriate amount to finance
to pay off 100% of its UAL, for this purpose
we have estimated that amount at $115
million.
The results of this case are detailed below.
Financing Results (100% of UAL & Level Debt) ($mm)
Total Par Issued / Bond Proceeds $115.7
CalPERS Deposit $115.0
Issuance Costs $0.7
All-in TIC 3.05%
Average Life (Years) 10.7
Final Maturity FY2043
Gross Expected Savings ($) $39.1
PV Expected Savings ($) / (%)2 at 3.05% $31.0 / 26.7%
With an estimated all-in TIC of 3.05%, the
financing will generate substantial PV savings
under most investment return assumptions,
including a 6.8% discount rate. The following
chart compares debt service against UAL
amortization. Annual savings ranges from
$0.9mm to $4.0mm.
UAL Amortization vs. Debt Service ($mm)
Amount of UAL to Fund. In light of the size
of the City’s pension liabilities, the City
Council presentation, and the direction
provided by the RFP, we have assumed a
financing sized to retire the full amount of the
City’s UAL – estimated at $115 million, after
taking into account FY21 investment returns.
The majority of recent California POBs have
2 % reflects PV savings as a percentage of UAL refunded
0
5
10
15 Remaining UAL Principal
Interest Current UAL
5
funded 100% of UAL, however there are
many reasons the City might choose to fund a
lesser amount. For instance, by financing only
50% of UAL now the City mitigates the risk
of sharp negative CalPERS investment returns
soon after the financing. Of course, the City
could always choose to do another pension
financing at a later date.
To illustrate the impact of funding less than
100% of the UAL, we have included below an
additional scenario assuming the City funds
50% of its UAL – approximately $58mm. In
order to maximize savings, we have selected
the longest amortization bases.
Financing Results (50% of UAL & Level Debt) ($mm)
Total Par Issued / Bond Proceeds $58.0
CalPERS Deposit $57.5
Issuance Costs $0.5
All-in TIC 3.31%
Average Life (Years) 14.5
Final Maturity FY2043
Gross Expected Savings ($) $26.8
PV Expected Savings ($) / (%)3 at 3.05% $26.8 / 46.6%
While expected PV savings are clearly lower
($26.8mm vs $31.0mm) they are higher as a
percentage of UAL funded (46.6% vs 26.7%).
This is a function of selecting the longest
amortization bases (20+ years remaining),
since the City realizes the benefit of the 3.31%
cost of capital on the bonds compared to the
6.8% discount rate over a longer period.
UAL Amortization vs. Debt Service ($mm)
Amortization Profile. The bond amortization
structure is an important structuring decision
facing the City. While there is no “correct”
way to structure POBs, we generally
recommend a level debt service approach,
and believe it is a prudent strategy to create
3 % reflects PV savings as a percentage of UAL refunded
the budgetary capacity to handle unforeseen
challenges, such as the creation of new UAL.
Of the 30+ California pension deals since the
beginning of 2020, most have been structured
with level debt service. Only a few have
included modestly escalating debt service
(West Covina, El Monte, and Chula Vista).
Redemption Feature. In addition to enabling
issuers to refund POBs for savings and
reshape amortization in the future, a 10-year
par call allows issuers more flexibility to call
the bonds should there be an unforeseen event
(e.g. legislative, CalPERS policy or other).
We estimate the cost of a par call ranges based
on the maturity from 5-15bp (which is
included in our numbers). We estimate that
using only a make-whole call would increase
PV savings by approximately $1.0mm.
Bond Insurance. In light of the City’s
anticipated “A-” rating from S&P, bond
insurance is likely not a tool the City can use.
Our Team asked BAM about the possibility,
and was told the focus was limited to “AA”
rated POBs. In fact, BAM has only insured
two “AA-” rated POB transactions since their
recent involvement in the space. Furthermore,
it is our understanding that the other major
bond insurer, Assured Guaranty, will only
provide insurance in unique circumstance (e.g.
if a pension override tax is pledged or the
bonds are structured as Lease Revenue
Bonds).
POB CREDIT RATINGS
We recommend obtaining a single credit
rating from S&P for the proposed POB
transaction. Nearly all recent POBs issued by
cities and counties in California have had a
S&P rating. This is largely because S&P rates
POBs on parity with an issuer’s highest
unsecured credit rating. S&P views POBs as
an absolute and unconditional obligation of
the general fund that incorporates and takes
into account an issuer’s ability to raise
revenue. Given that S&P already rates the
0
5
10
15 Remaining UAL Principal
Interest Current UAL
6
City’s electric, water and sewer, and
redevelopment bonds, there may be value in
further developing its relationship with S&P.
In general, Moody’s takes a slightly negative
view of POBs, arguing that they increase an
issuer’s exposure to volatile pension fund
investments. With bond yields at very low
levels, their view is that pension fund
managers are being forced to increase their
exposure to risky assets to meet lofty return
targets. A recent Moody’s report for the sale
of POBs by the City of Tucson, AZ
underscores this view. Moody’s notes “While
the issuance is balance sheet neutral and will
provide some short-term expense stability, we
believe the transaction overall is modestly
credit negative given the city's increased
balance sheet exposure to market conditions.”
Secondly, Moody’s rates POBs lower than an
issuer’s general obligation credit rating. Some
of the larger California POB transactions have
included a second rating from Moody’s or
Fitch (which also rates POBs below an
issuer’s general obligation rating). For a
transaction of this size, we do not anticipate
any pricing penalty by pursuing a single rating
from S&P and believe that it is the right
approach for Vernon.
City Credit Analysis
Based on our assessment, we believe the City
should advocate for an A- rating from S&P.
The City’s proactive management team,
conservative budgeting practices and strong
liquidity has served the City well, especially
in light of COVID. First and foremost, the
City has embarked on several strategic
initiatives over the last few years that further
boosts the City’s financial position, including
the transition of fire services to the Los
Angeles County Fire Department and a new
sales tax measure (Measure V) which began
collections in October 2020, and general
expenditure cuts. The City is budgeting for an
$4.7 million increase in FY 2022 in
connection with Measure V as well as a $2.7
million increase in general sales and use taxes.
For FY 2020, the City’s general fund balance
was over $7 million above budget, largely
attributed to higher appropriations than actual
expenditures in capital outlay. The City has
consistently demonstrated fiscal discipline
compared to budget, and in turn has been able
to grow the City’s ending general fund
balances from a deficit of $2.7 million in FY
2018 to over $8.5 million in FY 2020.
The City maintains robust liquidity with over
$8 million in fund balance (15% of total
expenditures), of which nearly $4.5 million is
unassigned, which S&P will view as “very
strong.” Total governmental funds available
are also strong with over $9.5 million in cash
and cash equivalents, which after taking into
consideration the potential POB issuance, will
still be deemed “strong.”
Based on our review and the City’s strong
FY 2020 results coupled with the strong
management team, we believe the City should
advocate for an A-category credit rating from
S&P. Due to the City’s overwhelmingly
industrial and commercial tax base, there are
limited comparable credits, and a greater
range of rating outcomes. This underscores the
importance of crafting a robust and thoughtful
credit presentation, which is an area where the
Goldman Sachs banking team can bring
tremendous value.
Positioning POBs with S&P
We do not believe the issuance of POBs will
adversely impact the City’s credit story. S&P
has a neutral view of POBs and considers
them to be a refinancing of existing debt.
S&P’s view of the City’s debt and contingent
liability profile will likely be viewed as
“weak” after the proposed financing. S&P will
be focused on how the POBs are structured
and what policies the City has in place to
manage future UAL. It will be important to
emphasize that the City is issuing POBs to
lock in favorable market conditions and better
manage UAL and not simply to provide near
term budget relief. S&P is likely to drill down
into how the financing will affect current
7
contributions and what the overall debt
structure will mean for contributions over the
life of the bond amortization schedule (front
loading of savings, extending debt service
beyond the current amortization, etc.).
While S&P will presumably flag the pension
obligation as a credit weakness for the City,
the City’s funded ratio is in line with other
municipalities within California. S&P also
appreciates that a low interest rate
environment has prompted many California
municipalities to issue POBs to provide
“savings” versus their annual contributions.
The credit approach should be centered on the
fact that pursing a POB issuance is not driven
by an underlying financial stress at the City or
an inability to budget accordingly. It is instead
driven by a market opportunity to lock-in
historically low taxable rates and better
manage the funding of UAL. Second, as
discussed in our plan of finance, the City can
pursue a conservative level debt structure
profile to provide budgetary certainty and to
smooth volatile contributions without
extending its obligations longer than the
current amortization, a credit positive.
Conclusion
In the current market, we believe the City’s
financing can be executed efficiently with a
single rating from S&P. The City’s financial
performance and strong liquidity will be the
cornerstone of a credit strategy that focuses on
the City’s financial resilience and strong cash
balance to achieve an A- rating outcome.
C. FINANCING OF MAJOR
MAINTENANCE / INFRASTRUCTURE
IMPROVEMENTS AND ASSET
ACQUISITIONS
In order to efficiently finance any major
improvements or asset acquisitions, the City
can issue tax-exempt bonds secured by
revenues from leases on its public facilities
(Lease Revenue Bonds or LRBs).
LRB STRUCTURE
Establish a Master Lease. Establishing a
Master Lease and Indenture may not be a
quick exercise, but would provide flexibility
to the City as it looks ahead to major
maintenance / infrastructure improvements
and asset acquisition needs over the next
several years. A new Master Lease would
ideally include one or more essential facilities
with an estimated fair market value that will
exceed the par amount of any proposed LRB
issuance. The “pooling” of City assets creates
a stronger, more diversified lease credit.
Investors and rating agencies continue to have
a slight preference for Master Lease structures
that include essential City properties.
No DSRF. Rating agencies and investors have
widely accepted LRBs with no DSRF in
recent years. Based on our initial credit review
and the City’s robust liquidity position, we do
not believe the City needs to include a DSRF
with a future LRB issuance. We have
successfully priced CA LRBs without a
DSRF, including the City of Los Angeles’
most recent LRB refunding in February 2021.
However, the City can alternatively consider a
reduced (50% MADS) DSRF if it
meaningfully enhances the City’s credit
during the rating process. The City can retain
flexibility in its Master Lease to set up
reserves for future financings as needed.
Asset Substitution to Minimize Capitalized
Interest. Depending on the project needs, the
City may be able to use any excess fair market
lease value from existing assets to minimize
any need for capitalized interest. We have
executed these types of asset substitution,
lease consolidation and/or optimization
structures in other LRB transactions.
Amortization. Options with regards to the
amortization structure for lease revenue bonds
are relatively limited. Our base case structure
assumes a hypothetical $50 million
improvement or acquisition, the bonds are
issued under a new Master Lease with a 30-
year level debt service structure, the standard
10-year par call, no capitalized interest, and no
8
Debt Service Reserve Fund. Based on market
conditions as of October 21, 2021, the City
would achieve an all-in TIC of 3.16%.
New Money LRB Statistics ($mm)
Par Amount $ 40.2
Project Fund $ 50.0
All-in TIC 3.16%
Average Life 18.3
Max Ann. DS $ 2.7
Avg Ann. DS $ 2.7
Total DS $ 77.0
PV DS @ 2.75% $ 54.4
Rates as of October 21, 2021
LRB CREDIT RATINGS
Consistent with our POB recommendations
above, we believe that obtaining a single
rating from S&P is sufficient for a LRB
financing in today’s market. LRBs are
typically rated one notch lower than the G.O.
by the rating agencies (or 1-2 for Moody’s,
depending on asset essentiality). This would
suggest a BBB+ rated LRB credit based on
our City GO assessment above. However, the
final outcome will be heavily influenced by
the size of the City’s POB and LRB
financings, as well as the characteristics of the
pledged assets.
3. APPROACH TO SALE
B. TAXABLE POBs
The objective of our marketing and pricing
process is to achieve the lowest possible cost
while reducing market risk. Selling the value
and stability of our client’s credit is the
keystone of our marketing effort. As a leading
underwriter of municipal and corporate bonds,
Goldman Sachs maintains an extensive sales
and distribution platform through which we
cover all major investor types and classes
which we believe will help the City achieve
attractive pricing. Goldman Sachs’ integrated
distribution team — including credit and
capital markets experts, salespeople, and
underwriters — work together to create access
to key investor pools, including institutional
buyers, such as bond funds, insurance
companies and bank portfolios; high-net-
worth individuals; retail-focused institutions,
such as Separately Managed Accounts
(“SMAs”), trust departments and asset
managers; and trading-oriented entities, such
as hedge funds. The Firm has resources
dedicated to each of these key segments, and
is organized to quickly leverage opportunities
that present themselves across markets.
This approach is particularly useful for a POB
financing given the historical premium
investors have assessed. And while the current
market is generally strong for taxable
municipal credits (particularly in California,
where they remain state tax-exempt), there are
unique challenges in marketing a POB. Over
the last 5-10 years, there have been negative
headlines associated with POB financings. As
such, a credit story will need to be crafted in
order to overcome investor concerns. We
believe a formal investor presentation via an
internet roadshow will be key to telling this
story, even despite the recent momentum in
POB issuance.
DISTRIBUTION CAPABILITIES
Goldman Sachs covers more than 400
traditional municipal accounts, as well as
potential crossover buyers, such as corporate
and sovereign wealth funds. Our coverage of
institutional investors is characterized by a
number of advantages, including:
Tax-exempt and taxable sales teams that
are united under one physical and
reporting structure, enhancing our ability
to tap into nontraditional municipal
demand in a seamless manner
Multiple sales groups marketing tax-
exempt bonds, including: 10 sales
personnel dedicated solely for the
distribution of municipal securities and 23
sales personnel in the Multi-Asset
Platform Sales group, covering a range of
middle-market investors including
municipal buyers
9
Integrated sales coverage that can bring in
orders for taxable municipal issues and
crossover interest, including: 13 sales
personnel focused on Investment Grade
taxable investors and 16 sales personnel
covering High Yield buyers
The Firm maintains strong relationships with
key people throughout investor organizations
(portfolio managers, credit analysts and
sector-specific analysts) — so we don’t just
target the right organizations, but the right
people within them.
CIMD PLATFORM
Goldman Sachs Consumer Investment
Management Division (“CIMD”) is one of the
largest Municipal Bond platforms by Assets
Under Management. CIMD purchases
municipal bonds for clients through
discretionary investment advisory
accounts. Clients include high net worth
individuals, registered mutual funds and other
institutional accounts. As of June 1, 2021, the
CIMD platform includes 37 asset management
professionals, including 16 portfolio
managers, 8 research analysts and 3 new issue
traders. Additionally, the platform had $145.8
billion of total municipal assets and over
22,283 discretionary separate accounts for
high net worth individuals under management.
The previously mentioned accounts are
sourced through 14 Regional Offices with
approximately 600 individual Private Wealth
Advisors. As of June 22, 2021, $14.2bn of the
platform’s municipal assets were invested in
bonds issued out of California across over
5,674 accounts.
ONE DESK APPROACH
A key aspect of Goldman Sachs’s
underwriting success is our unique syndicate
desk structure. Unlike many of our
competitors, our municipal and corporate
investment grade underwriters sit side-by-side
and work together in a “one desk” approach.
The two sides of our desk are each familiar
with not only the tone of the taxable municipal
markets, but also the specific needs and
demands of municipal and taxable investors in
each respective market. Together, their
complementary areas of expertise allow them
to develop a marketing strategy that targets a
broader base of investors for this issue. Not
only does this better allow us to try and
provide the City with seamless execution, but
can allow for additional demand from
different pockets of capital, which in turn
can drive down the City’s borrowing cost.
We believe this integration distinguishes
Goldman Sachs from its competitors and
provides a broad range of distribution outlets
for taxable municipal issuance as described
previously.
INVESTOR TARGETING STRATEGY
Our Investor Marketing Group will take an
active role in developing an investor outreach
plan for the City’s transaction. IMG is led by
Petros Voulgaris, Vice President, who sits
with our traders and is in constant
communication with investors and provides
real-time feedback to develop investor targets,
throughout the marketing process and post-
financing. IMG is often the first to hear about
investors’ preferences, as well as market-
specific (e.g., fund flows) events. Per
conversations with IMG and our syndicate,
below we outline the main categories and sub-
categories of investors we would target:
Most Active California POB Buyers – The
first group we would target are active
buyers of recent California POB
transactions. This group will have an
existing understanding of POB offerings
and will have a basic comfort level with
California local government general fund
backed debt.
10
Active California POB Buyers
Nationwide Insurance Goldman Sachs AM
Delphi 40/86 Advisors
Robert W. Baird Prudential
Wellington Management Allstate
BlackRock PPM America
Hartford New York Life
2020’s Most Active Buyers of Taxable
Bonds, including with a 10 year Par Call –
As one of the largest underwriters of
taxable municipal bonds in California and
nationwide, we have unique insights into
the most active buyers of taxable bonds,
including those who purchase taxable
bonds with a 10 year par call. While the
structure is not as common in the taxable
space, there is a specific subset of buyers
who are active participants on transactions
with par call features, as evidenced by our
recent City of LA transaction.
Active Taxable Buyers
TC Asset Management Breckinridge
Vanguard Franklin
Eaton Vance Nuveen
BNY Mellon Wells Cap
AllianceBernstein MFS
Bel Aire Invesco
More broadly, we would seek to target
investors based on market conditions at the
time of the sale. For example, California bond
funds with inflows closer to the sale may have
appetite for the bonds (select targeted funds
highlighted in yellow above). Finally, we
believe there could be some demand from
retail buyers (including professional retail),
however, our expectation is that retail demand
will be modest.
California Bond Funds with Inflows –
Because the City’s taxable offering would
still be exempt from California taxes, we
would seek to target California specific
bond funds that will benefit from state tax
exemption. Funds with recent inflows are
the best targets as they are incentivized to
put capital to work.
International Investors - On recent taxable
financings, including for SFPUC, we have
seen some participation from international
taxable investors. In our experience,
international investors are more apt to
participate in municipal deals when they
are presented with (i) benchmark
maturities, (ii) benchmark size, (iii) make
whole call features, and (iv) “household”
issuers. This suggests that the City’s
transaction may not be a great fit for most
international buyers. However, we would
recommend including the appropriate
disclosure for international investors in
order to have the option to explore that
avenue as we have seen some recent
interest from Taiwanese investors, among
others.
Taxable / Crossover Buyers – Our
syndicate desks (municipal and corporate
investment grade) work seamlessly to find
incremental buyers. We would target
certain buyers who primarily buy corporate
taxable bonds and who may be seeking to
diversify their portfolios for a variety of
reasons.
Retail / SMAs – Professional retail money
managers / SMA investors continue to be a
huge portion of the municipal market.
Some of them have appetite for municipal
taxable bonds, specifically those who
manage assets for California based
accounts. That said, some professional
retail money managers and advisors will
not buy pension financings or appropriation
structures as a basic rule; thus we expect
retail demand to be modest. However,
given state tax exemption, we would
anticipate some demand in the front-end of
the curve.
PRICING STRATEGY
While the prior sections describe ways in
which the City can better position itself before
pricing, there are a number of ways that the
City can structure the pricing process to obtain
11
superior pricing. The following are tools that
can improve results:
Syndicate Policies / Order Priority
As discussed above, we believe bond funds
and other institutional accounts will be the
primary investors for POBs. However, we will
want to craft the syndicate policy to also
encourage SMA accounts to participate.
As such, we would suggest structuring the
syndicate policies to create retail order
priority. Due to the importance of SMA’s in
the retail market versus more traditional mom-
and-pop, we strongly encourage including
them in the definition of “retail” as it relates to
Vernon’s retail priority policies.
Retail Order Period (“ROP”)
In the face of recent market volatility and
uncertainty caused by the COVID-19
pandemic, the City should seek to minimize
the amount of time it is in the market. A one-
day pricing with retail priority rather than a
day long dedicated ROP reduces market risk
and allows the City to nimbly enter the market
if conditions warrant, while still ensuring that
SMA buyers have a chance to purchase bonds.
As such, we do not think a separate retail
order period is necessary, but we are happy to
revisit this closer to pricing.
Sealed Bid
A sealed bid for the first maturity, for which
syndicate members put in orders and the order
with the lowest cost is awarded the bonds, is
something we would be happy to consider.
That said, we have seen a number of issuers
move away from sealed bids so as to: (i)
maximize demand via order period, (ii) retain
the ability to tighten price, and (iii) due to
issue price certificate considerations. We are
open to running a sealed bid, though we do
not believe there is a need to have one.
UNDERWRITING UNSOLD BALANCES
Goldman Sachs stands behind its clients,
including underwriting unsold balances when
necessary. Our underwriters have full
discretion and authority to underwrite issues
as needed, which allows us to react nimbly.
Our syndicate desk has underwritten over
$380mm of unsold balances over the last year
in order to help clients achieve successful
pricings in the face of COVID-19.
LIABILITIES AND COMPENSATION
For this transaction, we suggest that the City
select one sole manager that is involved on a
daily basis in assisting the City’s team to craft
the financing plan. For this type of credit, the
focus should be on giving the City guidance
on how best to structure its financing. The
manager has significant responsibilities
including modeling, credit strategy,
marketing, and if necessary, underwriting
unsold balances. Therefore, considering the
proposed deal size and responsibilities, we
would suggest one sole manager with 100%
liabilities and a commensurate underwriter’s
discount allocation.
C. LEASE REVENUE BONDS
While much of our marketing strategy above
also applies to a LRB financing, LRBs also
require a carefully crafted and diligently
executed marketing strategy given the credit
nuances. Certain investors will not buy LRBs
given prior bankruptcies and credit events,
while other investors will only purchase
certain types of LRBs. As part of our targeted
marketing strategy, we will focus on the
City’s credit story, the state and psychology of
investor demand, the City’s lease structure and
asset quality, and on developing an optimized
financing structure. Our approach will help
maximize demand and create price
competition between different types of
investors, lowering yields for the City. We
believe what sets us apart from our
competitors is our experience and ability to
take the time to focus investors on the
strengths of the City’s LRB program. For a
future LRB transaction we would recommend
generally the same steps and syndicate
policies as described above but with the
following enhancements:
12
Emphasize Asset Essentially and Lack of
Construction Risk – If applicable, the lack of
construction completion risk, the asset
essentiality, the multiple assets, and asset
diversification would be key sale points to be
conveyed to investors.
Highlight Stronger Abatement Lease Structure
– Not all investors understand the nuances of
California abatement leases versus
appropriation leases/credits. A major part of
our success and leadership in this space is our
ability to highlight the relative strength of
California LRBs. As part of our marketing
strategy, we will focus investors on the same
positive features that are offered by the City’s
LRBs.
Maintain Right to Re-Let – While we have
sold LRBs for other issuers without the right
to re-let pledged property, we found that
certain investors have declined to participate,
including Vanguard and USAA. The City
should include this provision in its LRBs to
the extent possible.
Target Most Active California LRB Buyers –
In addition to a number of the investor
categories highlighted above, we would target
active buyers of recent California LRB
transactions. This group will have an existing
understanding of LRB credits and will likely
serve as anchor orders for any future City
LRB transactions.
Active California LRB Buyers
Vanguard Blackrock
AllianceBernstein JP Morgan AM
BNY Mellon Fidelity
MFS Oppenheimer
Capital Research Nuveen
MacKay Shields Deutsche
F. Fees and Costs
For the City’s contemplated transaction, we
propose a takedown of $3.00 per bond plus
reimbursement for actual expenses incurred.
We are not proposing a management fee;
however, a complex transaction may warrant a
discussion with the City whether a fee is
appropriate. Our proposal assumes a $116mm
transaction.
We believe our pricing proposal reflects our
eagerness to work with the City, the
complexity and scope of the work to be done,
the value we expect to contribute, as well as
current market conditions. Goldman Sachs
prides itself on pricing aggressively and
achieving competitive rates for clients. Our
proposal is detailed below. We would be
happy to discuss it further with the City.
Gross Spread Summary
$ / $1,000 Amount ($)
Takedown $3.000 $346,950
Expenses 0.618 71,473
Total $3.618 $418,423
Estimated Underwriter’s Expenses (NTE)
$ / $1,000 Amount ($)
Underwriter’s Counsel $0.432 $50,000
CUSIP Fee 0.008 902
CDIAC Fee 0.043 5,000
Ipreo Fees 0.102 11,771
DTC 0.007 800
Continuing Disclosure 0.009 1,000
GS Out-of-Pocket 0.017 2,000
Total $0.618 $71,473
G. Ability of the Proposer to Perform
Goldman Sachs & Co. LLC is one of the
largest, most diversified, and strongest
capitalized banking institutions in the world.
The Firm provides a full range of investment,
advisory, and financial services to a
diversified client base including governments,
corporations, financial institutions, and
individuals around the world. Headquartered
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in New York City, Goldman Sachs has 17
regional offices in the United States and
maintains additional offices in over 30
countries with over 34,000 employees
worldwide.
COMMITMENT TO SECTOR AND CALIFORNIA
Serving the public sector is a core business of
Goldman Sachs. The Firm initially entered the
public finance sector in 1954 and for over 65
years has been one of the leading industry
participants. Our focus and dedication to
municipal issuers remains strong as we
continually strive to develop innovative
financing ideas and deliver best execution for
our clients’ transactions. The PSI Banking
Group and Municipal Sales and Trading
Group include 132 dedicated municipal
professionals, including over 85 banking
personnel. Additionally, Goldman Sachs
maintains a leading bond sales organization,
including over 500 registered representatives.
Goldman Sachs maintains a strong
commitment to our clients in California. We
have had a presence in Los Angeles since
1961 and a presence in San Francisco since
1968. Goldman Sachs currently employs over
160 individuals in the Los Angeles office and
more than 370 in the San Francisco office.
Across both offices, Goldman Sachs employs
18 PSI bankers dedicated to municipal
financings, with the primary focus on
California. Additionally, the firm also has
offices in Menlo Park and Irvine covering
other industries.
RELEVANT POB EXPERIENCE
Goldman Sachs has extensive experience
leading POB financings. Our Firm has been
involved as either lead or co-manager on
nearly $8 billion of POB issues nationwide
since January 2010. Additionally, we rank
fifth in the POB underwriter league table
during the same time period. We have also
been engaged as the lead underwriter for a
large southern California city planning to
execute a POB financing in 2022.
We have also executed some of the earliest
California POB financings including for the
County of Los Angeles in the early 1990s and
restructured Orange County’s POB debt, both
underwriting new issues and tendering, for
over $830 million between 1996 and 2000.
Goldman Sachs also senior managed POB
financings for the County of San Bernardino
in 2004 and 2008. More recently, Goldman
Sachs was bookrunning senior manager on the
City of Philadelphia’s $300 million and $231
million POB financings (2012), the State of
Illinois’ $3.4 and $3.7 billion pension
financings (2010 and 2011), and a $396
million POB financing for the City and
County of Denver’s School District (2011). In
2016, Goldman Sachs was appointed to serve
as a joint bookrunner for the State of Alaska’s
multi-billion POB offering. During the
marketing process, the deal was pulled after
State legislature support dwindled. We also
worked with a large city in 2018 to explore a
multi-billion pension financing. Goldman
Sachs helped the city conduct confidential
rating agency evaluations of the financing
structure and its impact on the GO credit.
Through these transactions, we have gained
important insights into how the rating
agencies and investors view POBs and the
impact of the financing on credit.
OTHER RELEVANT EXPERIENCE
Goldman Sachs has a long history of
leadership in the taxable municipal bond
market, both in California and nationally. In
2019 we were the #1 negotiated underwriter
of California taxable bonds. During 2020,
Goldman Sachs priced municipal taxable
transactions for ~30 issuers nationwide,
representing over $19bn in par (excluding
corporate CUSIP not-for-profit issuers). In
2019, we sold one of the largest ever, at the
time, taxable transactions with a par call for
Foothill Eastern TCA in Orange County
($897mm), and recently led another large
refinancing for TCA as well as a taxable
financing for the City of Los Angeles. As
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demonstrated by the below assignments, our
taxable market leadership and frequent
investor engagement gives us the tools and
insights to deliver best execution and pricing
to the City. A list of recent taxable bond
experience is included in Appendix C.
RELEVANT LRB EXPERIENCE
Goldman Sachs has extensive experience
structuring and marketing lease revenue bonds
in the California and west region. In just the
past year alone, we have senior managed lease
revenue financings for the City of Los Angles
(MICLA) and the City of Anaheim, and
remain a top ranked underwriter of California
GF-backed lease revenue bonds. We believe
our market leadership uniquely positions us
to best help the City successfully structure,
market, and price any future LRB/ General
Fund financings. Please see Appendix D for
a list of our LRB experience. Case studies for
these transactions are included in Appendix E.
DIRECT CITY EXPERIENCE
On March 4, 2020, the City’s GS team
banking and underwriting leads (Joey, Jessica
and Sam) priced VPU’s $72mm of Electric
System Revenue Bonds, 2020 Series A. The
Bonds, issued to current refund $58mm of
outstanding 2009 Series A bonds and fund
$25mm of the City’s Capital Improvement
Plan, created over $1.6mm of PV savings.
During the process, Goldman Sachs led a
highly tailored rating agency approach,
resulting in an upgrade from Moody’s to Baa2
from Baa3 despite Vernon being party to
ongoing litigation related to its electric
system. Ultimately, the Bonds priced
successfully with an all-in TIC of 2.29% in the
wake of significant rate market volatility the
day after the Federal Reserve announced an
emergency 50bp cut in response to the
outbreak of COVID-19.
PROJECT TEAM
Goldman Sachs has assembled a project team
which will provide the City with a high level
of service and expertise for its financing. Our
team members have direct and relevant
experience leading taxable and LRB
financings for municipal issuers.
Joey Natoli, Co-Head of West Region Public
Sector & Infrastructure Group, Jessica
Yueh, Vice President, and Chris Bergeron,
Vice President, will serve as the core banking
team and day-to-day managers on the
transaction. Their brief resumes are included
below. Mark Somers, Vice President (Time:
10%), Vanessa Eckert, Vice President (Time:
10%), and Liza Koulikova, Analyst (Time:
40%) will provide additional banking support
for this transaction, and are committed to
delivering the highest level of service. The
lead underwriter for the City’s transaction will
be Sam Denton-Schneider, Vice President
(Time: 15%). Sam has tremendous experience
with California issuers and leads the majority
of our west coast financings.
Below, we describe three of the individuals
that will be involved day-to-day, as well as
our lead syndicate member, but the City will
have access to the entire Goldman Sachs team,
as well as other specialists on credit advisory,
tax and bond structuring, as needed.
CORE BANKING TEAM
Joseph Natoli
Role: Team Lead (Time: 75%)
(415) 393-7765 / Joseph.Natoli@gs.com
Joseph Natoli will lead our team, providing
day-to-day leadership, analytical and credit
insights as well as ensuring the City has
access to firm resources. Joseph, based in San
Francisco, co-heads our West Coast PSI
practice, and leads coverage of the City itself,
APU, SCPPA, and SMUD, among others. In
2020, Joey led the Goldman Sachs team to
successfully price the City’s Electric System
Revenue Bonds, initiating a robust investor
marketing effort during the onset of the
COVID-19 pandemic.
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15
Jessica Yueh
Role: Execution (Time: 70%)
(310) 410-5706 / Jessica.Yueh@gs.com
Jessica Yueh will lead execution and serve as
an additional day-to-day contact. A vice
president based in Los Angeles with over 12
years of experience, Jessica covers
infrastructure clients with a focus on Southern
California issuers such as the Cities of
Vernon, Los Angeles, and Anaheim. Jessica
has worked on a number of complicated LRB
financings, including a $811mm City of LA
LRB restructuring in 2016 and 2021 LRB
financings for the Cities of LA and Anaheim
earlier this year. Jessica has previously helped
support the City over the last few years in its
efforts to finance a potential purchase of the
Malburg Generating Station.
Chris Bergeron
Role: Analytics (Time: 65%)
(802) 825-1874 / Chris.Bergeron@gs.com
Chris Bergeron will provide analytical
support to the team. Chris focuses on western
region infrastructure clients, including cities
and counties, among other areas. Over his
career, Chris has structured over $17bn of
financings for a wide variety of borrowers.
His recent experience with California cities
includes executing transactions for the cities
of Sacramento, Orange, Santa Barbara,
Torrance, and Pittsburg, among others. Chris
is also leading the quantitative analysis for a
POB transaction in Southern California.
LEAD UNDERWRITER
Sam Denton-Schneider
Role: Underwriter (Time: 15%)
(212) 902-6591 / Sam.Denton-
Schneider@gs.com
Sam Denton-Schneider will serve as lead
underwriter for the proposed transaction. Sam
has over 11 years of experience in the
Municipal Finance business. He worked as an
investment banker in our San Francisco PSI
office for several years before transitioning to
an underwriting role. Sam leads nearly all of
our west coast issuance, including the City’s
$72mm 2020 Electric System financing. He
maintains strong relationships with both
national and CA-specific funds. Sam’s recent
taxable and LRB financing experience
includes offerings for the City of Los Angeles,
the City of Anaheim, the City of Sacramento,
the State of California, the California State
Public Works Board, and Riverside County
Transportation Commission, among others.
REFERENCES
References for the team are provided below:
References
City of Los Angeles
Ha To, Chief of Debt Management
(213) 473-7529 / ha.to@lacity.org
2021: $177mm lease revenue bonds
City of Chicago
Jack Brofman, Deputy Chief Financial Officer
(312) 744-5042 / jack.brofman@cityofchicago.org
2020: $1bn sales tax financing, $466mm GO financing,
$1.5bn tender offer
City of Sacramento
Brian Wong, Debt Manager
(916) 808-5811 / bwong@cityofsacramento.org
2020: $216mm water/wastewater revenue ref bonds
H. Affidavit of Non-Collusion
Please see Appendix F for a completed
“Affidavit of Non-Collision” form.
Appendix A. Conflicts
Goldman Sachs is a full service firm engaged in trading, underwriting, investment banking,
commercial banking, financial advisory, investment management, investment research, principal
investment, hedging, market making, brokerage and other financial and non-financial activities
and services for various persons and entities.
Goldman Sachs has in place policies and procedures designed to prevent the unauthorized
disclosure of confidential information from its investment banking division, including the Public
Sector and Infrastructure Banking group (“PSI”), to its sales and trading, investment research and
investment management divisions. In reliance on these policies and procedures, business units
outside of PSI may purchase, sell or hold a broad array of investments and actively trade securities,
derivatives, loans, commodities, currencies, credit default swaps and other financial instruments
(each, an “Instrument”) for our own account or for the accounts of our customers. Our sales and
trading, investment research and investment management divisions may also communicate
independent investment recommendations, market color or trading ideas and/or publish or express
independent research views in respect of such Instruments, and may at any time recommend or
otherwise communicate to clients that they should acquire long and/or short positions (including,
for example, by buying and/or selling credit protection against default by an issuer) in such
Instruments. The investment and trading activities and communications described in this
paragraph are conducted in business units outside of PSI and may relate to or involve the issuer or
Instruments of the issuer or persons or entities with relationships with the issuer, and may be, or
appear to be, inconsistent with the interests of the issuer. Goldman Sachs, including PSI, may also
provide investment banking, commercial banking, underwriting, financial advisory services and
other services to persons and entities with relationships with the issuer.
Goldman Sachs has considered this assignment through our centralized conflicts clearance
process it uses to evaluate potential new investment banking assignments. Based on our review,
we do not believe that there are any activities in which the firm is currently engaged that would
present an actual conflict that would prevent us from accepting a mandate from you or from
executing fully the roles and responsibilities that are the subject of this Request for
Proposal. Please be assured that, in the event we are selected to act as an underwriter in
connection with the offerings contemplated by this Request for Proposal, we will follow the
same robust conflict clearance process with respect to potential future investment banking
assignments and, if we believe that any such assignment would present an actual conflict that
would prevent us from executing fully the roles and responsibilities that are the subject of this
Request for Proposal, at such time that we are not otherwise able to resolve, we will, to the
extent we are permitted to do so, notify you of such conflict and endeavor to work with you to
resolve such conflict to our mutual satisfaction.
Appendix B. Scope of Services
Please note the exclusion for underwriters from the definition of municipal advisor (as defined in
Section 15B of the Securities Exchange Act of 1934 (the “SEC MA Rules”)) is limited to
activities that are within the scope of an underwriting of a particular issuance of municipal
securities. As such (absent another exemption or exclusion), if Goldman Sachs is engaged to be
an underwriter for the City of Vernon’s (the” City”) issuance of municipal securities
contemplated by the RFP (the “Offering”), any engagement would be limited to those services
related to the Offering and deemed to be within the scope of the underwriter exclusion of the
SEC MA Rules (see pgs. 165-166 of SEC Release No. 34-70462). In order to be able to provide
services outside the scope of the underwriting exclusion, Goldman Sachs must be able to rely on
the exemption to the MA Rules (the “IRMA exemption”) for entities that are represented by an
independent registered municipal advisor with respect to the same aspects upon which Goldman
Sachs provides any advice with respect to municipal financial products or the issuance of
municipal securities; provided, that, any such services performed in reliance on the IRMA
exemption would not alter the role of Goldman Sachs as an underwriter or the arm’s length
nature of the relationship between the City and Goldman Sachs. Further, the City, its counsel
and other advisors shall be responsible for the disclosure documents and other legal documents;
provided, that, as an underwriter, Goldman Sachs will review the disclosure documents in
accordance with, and as part of, its responsibilities to investors under the federal securities
laws. The primary role of Goldman Sachs, as an underwriter, would be to purchase securities,
for resale to investors, in an arm’s-length commercial transaction between the City and Goldman
Sachs and Goldman Sachs has financial and other interests that differ from those of the City.
Goldman Sachs would not be acting as a municipal advisor, financial advisor or fiduciary to the
City or any other person or entity in connection with the role and matters contemplated by the
RFP. As noted in our proposal, nothing in Goldman Sachs's response to this RFP is an expressed
nor an implied commitment by Goldman Sachs to purchase or place any securities, provide
credit or liquidity or to act in any capacity contemplated by this RFP. Any such commitment to
perform the services contemplated by this RFP shall only be set forth in a separate
agreement. For information regarding the role of an underwriter, please see our disclaimer on
the cover page.
Appendix C. Taxable Bond Experience
Recent GS California Taxable Bond Experience
Sale Date Issuer Par ($mm) GS Role Bankers/UW
06/10/21 Anaheim Public Financing Authority $139 Lead JY, CB, SDS
02/24/21 City of Los Angeles 177 Lead JY, SDS
01/27/21 Foothill/Eastern TCA 241 Lead SDS
11/19/20 Port of Oakland 344 Lead SDS
10/07/20 San Fran Pub Utilities Co 664 Lead SDS
09/15/20 Roseville Electric System 35 Sole JRN, VSE, SDS
09/10/20 So Cal Public Power Authority 70 Lead JRB, SDS
08/26/20 Trustees of the Cal State Univ 995 Lead MS, SDS
06/18/20 City of Sacramento 28 Sole CB, SDS
04/23/20 City of Sacramento 188 Lead CB, SDS
12/10/19 Foothill/Eastern TCA 897 Lead SDS
12/05/19 San Diego Co Reg Trans Co 443 Lead SDS
12/03/19 Orange Co Water District 59 Sole SDS
10/16/19 San Diego USD 27 Lead SDS
09/19/19 Bay Area Toll Authority 973 Lead JRN, SDS
04/17/19 Anaheim Pub Fin Authority 7 Sole JY, SDS
01/11/19 San Fran City & Co Airport Co 89 Lead SDS
Total $ 5,376
Appendix D. LRB Experience
LRB Experience Since 2017
Sale Date Issuer Par ($mm) GS Role Bankers/UW
6/10/21 Anaheim Public Fin Authority $139 Lead JY, CB, SDS
5/5/21 Ohio 228 Co MS, SDS
2/24/21 City of Los Angeles (MICLA) 238 Lead JY, SDS
6/03/20 Ventura Co Public Finance Authority 287 Co JY, SDS
4/17/20 California State Public Works Board 113 Co SDS
4/08/20 New York Transportation Development Corp 318 Lead SDS
2/12/20 Indiana University 108 Co SDS
10/29/19 California State Public Works Board 313 Co SDS
4/17/19 Anaheim Public Fin Authority 175 Sole JY, SDS
6/19/17 Los Angeles County Asset Leasing Corp 37 Sole JY, SDS
Total $ 1,956
Appendix E. Recent LRB Case Studies
MUNICIPAL IMPROVEMENT CORPORATION OF THE CITY OF LOS ANGELES
In February 2021, Goldman Sachs served as senior manager on the Municipal Improvement Corporation of Los
Angeles’ (“MICLA” of “City”) $177mm Lease Revenue Refunding Bonds, Series 2021-A (Federally Taxable) and
as Dealer Manager on an associated $60mm Exchange Offer. The City had planned to refund $225mm of its existing
Series 2014-A, 2014-A, 2019-A, and 2019-B Lease Revenue Bonds with taxable refunding bonds, and then elected
to also pursue an exchange of these bonds which, if successful, would allow it to refund the targeted bonds on a tax-
exempt basis and thus enhance debt service savings. In aggregate, the combined taxable refunding and tax-exempt
exchange transaction (which achieved ~55% participation on the targeted bonds) achieved $17.7mm of PV Savings
(7.9% of refunded par) and $22.0mm of near-term cashflow savings to be realized in the upcoming fiscal years for
critical budgetary relief.
The City priced $177mm of taxable bonds to advance refund all remaining bonds that were not exchanged. The
taxable transaction priced during volatile market conditions largely driven by the prospect of increased inflation,
which led the 10y UST to increase 10bps in the week leading to pricing. In addition, during the same week, a
market-wide correction in the municipal market saw outflows and under performance, with the 10y MMD
increasing by 27bps over that same week period, which contributed to a weaker market tone leading into pricing.
Despite these challenging market conditions, the City was able to hold initial spread levels, with over 20 investors
participating in the transaction.
ANAHEIM PUBLIC FINANCING AUTH.
LEASE REVENUE BONDS
In June 2021, Goldman Sachs served as senior manager on the City of Anaheim’s (the “City”) Lease Revenue
Bonds Series 2021A transaction. The Bonds were issued to cover FY 2021 to 2024 projected General Fund deficits
due to the impacts of the COVID-19 pandemic.
The pandemic’s closure of the City’s theme parks, the Anaheim Convention Center and sports and entertainment
venues had an outsized effect on the City’s General Fund, with the top two revenue sources, transient occupancy tax
(TOT) and sales taxes revenues, facing particularly large reductions. While the City implemented expense
reductions as a result of the economic impact, a working capital borrowing was necessary to continue to maintain
service levels for the community.
Due to State law constraints, the City was required to implement a long-term lease revenue financing to fund the
near-term projected General Fund deficits. The pledged property for the Bonds comprised of essential assets,
including City Hall and police stations.
Goldman Sachs worked with the City to optimize its plan of finance and generate budgetary relief while the City’s
revenues recover. Alongside the City’s financial advisor, Goldman Sachs crafted a credit presentation showing the
strength of the lease structure and that the City was well-positioned to return a position of economic stability and
growth. This resulted in Moody’s revising the City’s outlook from ‘negative’ to ‘stable’. The City disclosed its
intention to redeem the Bonds well in advance of their 2051 final maturity, and the Bonds were structured with a
10-year par call to allow for the planned early redemption.
A robust marketing effort consisting of an online investor roadshow and one-on-one investor calls resulted in a
diverse order book that was multiple times oversubscribed and an all-in TIC of 2.94%. We believe this transaction
highlights Goldman Sachs’ leadership in the General Fund lease revenue structure and our ability to successfully
execute such financings.
Appendix F. Affidavit of Non-Collision
March 2013
AFFIDAVIT OF NON-COLLUSION BY CONTRACTOR
STATE OF CALIFORNIA )
) ss
COUNTY OF LOS ANGELES )
_______________________________________________________________, being first duly sworn deposes
and says that he/she is ______________________________________________________________________
(Insert "Sole Owner", "Partner", "President, "Secretary", or other proper title)
of______________________________________________________________________________________
(Insert name of bidder)
who submits herewith to the City of Vernon a bid/proposal;
That all statements of fact in such bid/proposal are true;
That such bid/proposal was not made in the interest of or on behalf of any undisclosed person,
partnership, company, association, organization or corporation;
That such bid/proposal is genuine and not collusive or sham;
That said bidder has not, directly or indirectly by agreement, communication or conference with anyone
attempted to induce action prejudicial to the interest of the City of Vernon, or of any other bidder or
anyone else interested in the proposed contract; and further
That prior to the public opening and reading of bids/proposals, said bidder:
a.Did not directly or indirectly, induce or solicit anyone else to submit a false or sham
bid/proposal;
b.Did not directly or indirectly, collude, conspire, connive or agree with anyone else that said
bidder or anyone else would submit a false or sham bid/proposal, or that anyone should refrain
from bidding or withdraw his/her bid/proposal;
c.Did not, in any manner, directly or indirectly seek by agreement, communication or conference
with anyone to raise or fix the bid/proposal price of said bidder or of anyone else, or to raise or
fix any overhead, profit or cost element of his/her bid/proposal price, or of that of anyone else;
d.Did not, directly or indirectly, submit his/her bid/proposal price or any breakdown thereof, or
the contents thereof, or divulge information or data relative thereto, to any corporation,
partnership, company, association, organization, bid depository, or to any member or agent
thereof, or to any individual or group of individuals, except the City of Vernon, or to any person
or persons who have a partnership or other financial interest with said bidder in his/her business.
I certify under penalty of perjury that the above information is correct
By:______________________________________ Title:________________________________
Date:____________________________________
Goldman Sachs & Co. LLC
Managing Director
Joseph Natoli
10/25/2021
Joseph Natoli Managing Director
City Council Agenda Item Report
Agenda Item No. COV-854-2021
Submitted by: Eva Muro
Submitting Department: City Attorney
Meeting Date: November 8, 2021
SUBJECT
CONFERENCE WITH REAL PROPERTY NEGOTIATORS
Government Code Section 54956.8
Property: Malburg Generating Station, 2715 East 50th Street, Vernon, California
Agency negotiator: Carlos Fandino, City Administrator
Negotiating parties: Bicent (California) Malburg LLC
Under negotiation: Consideration of Price and Terms of Payment
Recommendation:
Background:
Fiscal Impact:
Attachments: