AGENDA INFORMATION SHEET
DEPARTMENT: Materials Management
ACM: Bryan Langley
AGENDA DATE: December 6, 2016
SUBJECT
Title
Consider adoption of an ordinance authorizing the City Manager to execute a professional services agreement for Bond Counsel Services for the City of Denton; providing for the expenditure of funds therefor; and providing an effective date (File 6254-awarded to McCall, Parkhurst and Horton, LLP (“MPH”). The Audit/Finance Committee recommends approval (3-0).
Body
FILE INFORMATION
On February 21, 2012, the City Council adopted Ordinance No. 2012-028 awarding a five-year contract to McCall, Parkhurst and Horton, LLP (“MPH”) for bond counsel services. This contract became effective March 27, 2012 and is due to expire on March 26, 2017. In an effort to reduce costs at that time, staff requested that MPH review its fee schedule for the City which resulted in a slight reduction in fees. At that time, staff estimated that the reduced fee schedule represented a savings of $2,500 on a $50 million bond sale. The current fee schedule is a graduated fee schedule with declining rates as the amount of bonds increases. Additionally, MPH agreed to include a provision that if an issue exceeded $100 million they would extend a negotiated discount for that issue. For the upcoming Utility System Revenue Bonds, Series 2016, the firm agreed to a discount of approximately $38,000 to coincide with their proposed fees for a potential new contract. This discount is not contingent upon approval of a contract.
In anticipation of this approaching expiration date, staff requested a proposed fee schedule from MPH for this service assuming a five (5) year continuous term contract. While the term of the contact is proposed for five (5) years, the City has the right to terminate the contact with thirty (30) day notice. Below are the current and proposed fees:
|
|
Current Fee |
Proposed Fee |
|
Bond Counsel Services: |
|
|
|
Base Fee for first $1 million of Bonds |
$5,000 |
$5,000 |
|
Plus 1,000 of Bonds for next $9 million of Bonds |
$1.00 |
$1.00 |
|
Plus 1,000 of Bonds for next $30 million of Bonds |
$0.95 |
$0.95 |
|
Plus 1,000 of Bonds thereafter1 |
$0.90 |
N/A |
|
Plus 1,000 of Bonds for next $60 million of Bonds |
N/A |
$0.90 |
|
Plus 1,000 of Bonds thereafter |
N/A |
$0.50 |
|
|
|
|
|
Optional Legal Disclosure Services2: |
|
|
|
Partner |
$250 per hour |
$375 per hour |
|
Associate |
$150 per hour |
$275 per hour |
1If an issue exceeds $100 million, the firm and City will negotiate a discount on fees.
2To date, optional legal services have not been necessary.
The proposed fees above now fully memorializes the “negotiated discount” included in the current fee schedule. As such, staff anticipates that ongoing savings will occur if the City’s capital improvement programs continue to expand for the foreseeable future.
As a due diligence check on fees, staff conducted an informal inquiry into pricing for bond counsel services among various cities. While not all cities are experiencing the same growth as the City of Denton nor are they, in most cases, full service cities, staff did find that most fees are comparable to those charged by MPH. However, staff would note that most other cities pay an additional markup (up to 1.5 times) on fees for refunding issues, variable rate issues and issues related to federal or state agencies. MPH does not differentiate between types of issues. In addition, hourly fees or additional fixed charges are also charged for services not directly related to an upcoming issuance or bond election. MPH does not charge separate fees for such services.
City staff is very pleased with the services provided by MPH and the lead attorney, Mr. Greg Schaecher, who is assigned to represent the City. Mr. Schaecher is always available to City staff and assists with development legal issues as requested and at no additional costs. The City’s Legal Department is also pleased with the services provided by MPH and also recommends a renewed contract for bond counsel services. MPH ranks number 1 (10 of last 11 years) in Texas by number of issues and amount issued. In 2015, MPH ranked number 3 nationally by number of issues and amount issued. Staff has attached (Exhibit 2) MPH’s statement of qualifications that provides additional information regarding the firm’s experience, staff and services.
PRIOR ACTION/REVIEW (COUNCIL, BOARDS, COMMISSIONS)
On September 27, 2016, the Audit/Finance Committee recommended approval to forward this item to the City Council for consideration.
RECOMMENDATION
Staff recommends award of a new five (5) year continuous term contract with McCall, Parkhurst and Horton, LLP for bond counsel services.
PRINCIPAL PLACE OF BUSINESS
McCall, Parkhurst and Horton, LLP
Dallas, TX
ESTIMATED SCHEDULE OF PROJECT
This is a five (5) year contract that expires on March 25, 2022.
FISCAL INFORMATION
These services will be funded from the account number associated with the sale of a particular type of bond which may include General Obligation Bonds, Certificate of Obligation and/or Revenue Bonds, as appropriate.
STRATEGIC PLAN RELATIONSHIP
The City of Denton’s Strategic Plan is an action-oriented road map that will help the City achieve its vision. The foundation for the plan is the five long-term Key Focus Areas (KFA): Organizational Excellence; Public Infrastructure; Economic Development; Safe, Livable, and Family-Friendly Community; and Sustainability and Environmental Stewardship. While individual items may support multiple KFAs, this specific City Council agenda item contributes most directly to the following KFA and goal:
Related Key Focus Area: Organizational Excellence
Related Goal: 1.1 Manage financial resources in a responsible manner
EXHIBITS
Exhibit 1: Current MPH Contract
Exhibit 2: Statement of Qualifications
Exhibit 3: Ordinance
Exhibit 4: Contract
Respectfully submitted:
Chuck Springer, 349-8260
Director of Finance
For information concerning this acquisition, contact: Tony Puente at 349-7283.