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A. RESOLUTION NO. 2015-195 OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA APPROVING AN AGREEMENT TO PROVIDE INVESTMENT BANKING AND BOND UNDERWRITING SERVICES FOR THE BAYFRONT PROJECT BETWEEN THE CITY AND J.P. MORGAN SECURITIES, LLC AND AUTHORIZING THE CITY MANAGER TO EXERCISE FIVE ONE-YEAR OPTIONS TO EXTEND THE AGREEMENT
B. RESOLUTION NO. 2015-196 OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA WAIVING THE COMPETITIVE FORMAL BID REQUIREMENT, APPROVING AN AGREEMENT TO PROVIDE ECONOMIC ADVISORY SERVICES FOR THE BAYFRONT PROJECT BETWEEN THE CITY AND ECONOMIC & PLANNING SYSTEMS, INC., AND AUTHORIZING THE CITY MANAGER TO EXERCISE TWO ONE-YEAR OPTIONS TO EXTEND THE AGREEMENT
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RECOMMENDED ACTION
Recommended Action
Council adopt the resolutions.
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SUMMARY
The City of Chula Vista and the San Diego Unified Port District are participating in a joint planning effort to develop the Chula Vista Bayfront. In support of this process, contracting with J.P. Morgan Securities for investment banking and bond underwriting services and Economic & Planning Systems (EPS) for economic advisory services is recommended.
ENVIRONMENTAL REVIEW
The Development Services Director has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that the activity was covered in previously adopted Environmental Impact Report UPD#83356-EIR-65B/SCH#2005081077. The Development Services Director has also reviewed the proposed activity for additional compliance with CEQA and has determined that there is no possibility that the activity may have a significant effect on the environment; therefore, pursuant to Section 15061(b)(3) of the State CEQA Guidelines the activity is not subject to CEQA. Thus, no environmental review is required.
BOARD/COMMISSION RECOMMENDATION
Not applicable
DISCUSSION
In 2002, the City of Chula Vista and the Unified Port District of San Diego (the “Port”) began a collaborative planning process to create a master plan for the approximately 535-acre Chula Vista Bayfront area. The Chula Vista Bayfront Master Plan (CVBMP) was designed to transform Chula Vista’s underutilized industrial Bayfront landscape into a thriving residential and world-class waterfront resort destination. The CVBMP will create thousands of new jobs, create new public parks, protect natural coastal resources, provide conference and visitor-serving amenities and build an important asset for the San Diego region, the South Bay, Chula Vista residents and coastal visitors. The CVBMP represents the last significant waterfront development opportunity in Southern California.
The master plan will be implemented jointly by the City of Chula Vista and the Port in four major phases over a 24-year period. Phase one of implementation includes the development of a resort conference center, the creation of public parks and open space, the restoration of habitat areas, and the construction of a new fire station and mixed-use residential development.
Investment Banking & Bond Underwriting Services
Over the next several years, the City anticipates the CVBMP’s new development projects will require financing of major infrastructure projects. The City and Port expect a need to finance between $75 million and $100 million in infrastructure costs before the convention center and hotel can open for business. Additional funds may be required to finance a portion of the convention center and an associated public parking structure.
To this end, the City issued a Request for Proposals (RFP) in February of 2015 seeking proposals from firms qualified to serve as senior managing and/or co-managing underwriter for a variety of potential financings that include Certificates of Participation (COPs) and Community Facilities Districts (CFDs) and other financing mechanisms relating to the development of the Chula Vista Bayfront. The RFP was posted electronically on PlanetBids.com, a web-based vendor and bid management system that is widely used by other local agencies. In addition, the RFP was advertised in The Bond Buyer, a publication focusing on the municipal bond market.
Five proposals were received, and four firms were interviewed by a Selection Committee. The Selection Committee’s evaluation was based on the following technical criteria:
• Experience and ability of firm;
• Experience and ability of project team;
• Directly relatable experience in public/private partnerships and leasehold financing;
• Understanding of the City’s financing needs for the CVBMP project; and
• Fee proposal
Proposals were received from J.P. Morgan; Morgan Stanley; Stifel, Nicolaus & Company; Estrada Hinojosa; and Rockfleet. Based upon scores assigned for the above referenced criteria, the Selection Committee recommends awarding the contract to J.P. Morgan.
A bond underwriter is a securities dealer who helps government entities bring bond issues to market. The key role it plays is to assist the City in structuring the financing, securing ratings if appropriate, and premarketing and underwriting bonds. As an underwriter, J.P. Morgan will buy the bonds from the City and then resell them to investors.
J.P. Morgan is the top underwriter of municipal bonds in the U.S., as well as the top underwriter in the state of California (based on par value of financings since 2010). They have a strong presence in the San Diego Area, underwriting over $5 billion in the region since 2010. They also bring extensive experience structuring complicated project finance, private activity, and public/private partnership transactions for issuers throughout the country.
Economic Advisory Services
The Port and the City are currently developing a plan of finance to fund the public improvements required for the first phase of the CVBMP. In developing the plan of finance and the strategies necessary to implement it, it is critical that the City secure independent economic advice.
Economic & Planning Systems (EPS) has provided economic analysis and advisory services for the Bayfront project since 2005. In addition, EPS brings experience in large-scale redevelopment and reuse, public/private development, and waterfront development that will be valuable to the City’s efforts to develop the Bayfront.
Chula Vista Municipal Code Section 2.56.070(B)(3) & (4) authorizes the City Council to waive the formal competitive bid process. A waiver is requested for this agreement because EPS’s prior experience and unique performance capabilities analyzing the CVBMP gives them an in-depth understanding of the project’s economic drivers. This experience will be critical to the City’s ability to continue forward expeditiously in finalizing the plan of finance for the first phase of the CVBMP. As such, the City’s interests would be materially better served by waiving the competitive bid process and awarding the contract to EPS.
DECISION-MAKER CONFLICT
Staff has reviewed the property holdings of the City Council and has found that Mayor Casillas Salas has real property holdings within 500 feet of the boundaries of the property which is the subject of this action. Consequently, pursuant to California Code of Regulations Title 2, sections 18700 and 18705.2(a)(11), this item presents a disqualifying real property-related financial conflict of interest under the Political Reform Act (Cal. Gov't Code § 87100, et seq.) for the above-identified member.
Staff is not independently aware, and has not been informed by any City Council member, of any other fact that may constitute a basis for a decision maker conflict of interest in this matter.
LINK TO STRATEGIC GOALS
The City’s Strategic Plan has five major goals: Operational Excellence, Economic Vitality, Healthy Community, Strong and Secure Neighborhoods and a Connected Community. Approval of an agreement with J.P. Morgan for investment banking and bond underwriting services and an agreement with Economic & Planning Systems (EPS) for economic analysis services for the Bayfront project both support the Economic Vitality goal by securing services critical to the success of the Bayfront Project, which will in turn create local and regional jobs and provide amenities to visitors and residents.
CURRENT YEAR FISCAL IMPACT
Investment Banking & Bond Underwriting Services
Approval of a resolution approving an agreement with J.P. Morgan Securities to provide investment banking & bond underwriting services has no fiscal impact in the current year. All fees to be paid to J.P. Morgan are contingent upon issuing bonds, or entering into other financing agreements. All fees to be incurred will be paid solely from the proceeds of each particular transaction and therefore become part of the cost of issuance.
Economic Advisory Services
Approval of the resolution approving an agreement with Economic & Planning Systems to provide Economic Advisory Services will result in the expenditure of a not-to-exceed amount of $25,000, on an annual basis. Funds are available in the FY 2015-16 budget for this purpose and no additional appropriation is required.
ONGOING FISCAL IMPACT
Investment Banking & Bond Underwriting Services
There is no ongoing fiscal impact to the General Fund as a result of this action. All fees to be paid to J.P. Morgan are contingent upon issuing bonds, or entering into other financing agreements. All fees to be incurred will be paid solely from the proceeds of each particular transaction and therefore become part of the cost of issuance.
Economic Advisory Services
The initial term of the agreement with Economic & Planning Systems to provide Economic Advisory Services is one year, with two one-year options to extend. Should the City exercise these options, they will result in the expenditure of an additional not-to-exceed amount of $25,000 annually. Future funding will be requested via the regular budget process.
ATTACHMENTS
1. Investment Banking & Bond Underwriting Services Agreement
2. Economic Analysis Services Agreement
Staff Contact: Tiffany Allen, Finance Department