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HomeMy WebLinkAboutUMBAUGH FINANCE UMBAUGH H.J.Umbaugh&Associates Certified Public Accountants,LLP 8365 Keystone Crossing Suite 300 Indianapolis,IN 46240-2687 Phone:317-465-1500 Fax:317-465-1550 June 5,2017 www.umbaugh.com Heather Metcalf,Controller City of Jeffersonville 500 Quartermaster Court, Suite 300 Jeffersonville, Indiana 47130 Re: Jeffersonville City(Indiana) -Proposed Municipal Advisory and Accounting Services Comprehensive Financial Plan Dear Ms.Metcalf: Thank you for requesting that H.J. Umbaugh & Associates, Certified Public Accountants, LLP (the "Firm") provide to the City of Jeffersonville, Indiana(the "Client") those services more fully set forth in Exhibit A hereto(the"Services"). Fees and Costs Fees charged for work performed are generally based on hourly rates, as set forth in Exhibit B, for the time expended, a fixed amount or other arrangement as mutually agreed upon as more appropriate for a particular matter. Hourly rates for work performed by our professionals vary by individual and reflect the complexity of the engagement. Disclosure of Conflicts of Interest with Various Forms of Compensation The Municipal Securities Rulemaking Board (MSRB) requires us, as your municipal advisor, to provide written disclosure to you about the actual or potential conflicts of interest presented by various forms of compensation. Exhibit C sets forth the potential conflicts of interest associated with various forms of compensation. By signing this letter of engagement, the signee acknowledges that he/she has received Exhibit C and that he/she has been given the opportunity to raise questions and discuss the matters contained within the exhibit with the municipal advisor. Billing Procedures Normally, you will receive a monthly statement showing fees and costs incurred in the prior month. Occasionally, we may bill on a less frequent basis if the time involved in the prior month was minimal or if arrangements are made for the payment of fees from bond proceeds. The account balance is due and. payable on receipt of the statement. Once our representation has been concluded or terminated, a final billing will be sent to you. If requested to provide an estimate of our fees for a given matter, we will endeavor in good faith to provide our best estimate, but unless there is a mutual agreement to a fixed fee, the actual fees incurred on any project may be less than or exceed the estimate. Any questions or errors in any fee statement should be brought to our attention in writing within sixty (60)days of the billing date. Termination Both the Client and the Firm have the right to terminate the engagement at any time after reasonable advance written notice. On termination, all fees and charges incurred prior to termination shall be paid promptly. Unless otherwise agreed to by the Client and the Firm, the scope of services provided in Exhibit A will terminate 60 days after completion of the services in each Article. Heather Metcalf,Controller City of Jeffersonville Re: Jeffersonville City(Indiana)-Proposed Municipal Advisory and Accounting Services Comprehensive Financial Plan June 5,2017 Page 2 Accountants' Opinion In performing our engagement, we will be relying on the accuracy and reliability of information provided by Client personnel. The services provided may include financial advisory services, consulting services, and accounting report services such as compilation, preparation, and agreed upon procedures reports. Please see Exhibit A and Exhibit D. We will not audit, review, or examine the information. Please also note that our engagement cannot be relied on to disclose errors, fraud, or other illegal acts that may exist. However, we will inform you of any material errors and any evidence or information that comes to our attention during the performance of our procedures that fraud may have occurred. In addition, we will report to you any evidence or information that comes to our attention during the performance of our procedures regarding illegal acts that may have occurred, unless they are clearly inconsequential. We have no responsibility to identify and communicate significant deficiencies or material weaknesses in your internal control as part of this engagement. The procedures we perform in our engagement will be heavily influenced by the representations that we receive from Client personnel. Accordingly, false representations could cause material errors to go undetected. The Client, therefore, agrees to indemnify and hold us harmless for any liability and all reasonable costs (including legal fees)that we may incur in connection with claims based upon our failure to detect material errors resulting from false representations made to us by any Client personnel and our failure to provide an acceptable level of service due to those false representations. The responsibility for auditing the records of the Client rests with the Indiana State Board of Accounts and the work performed by the Firm shall not include an audit or review of the records or the expression of an opinion on financial data. Client Responsibilities It is understood that the Firm will serve in an advisory capacity with the Client. The Client is responsible for management decisions and functions, and for designating an individual with suitable skill, knowledge or experience to oversee the services we provide. The Client is responsible for evaluating adequacy and results of the services performed and accepting responsibility for such services. The Client is responsible for establishing and maintaining internal controls, including monitoring ongoing activities. Additional Services Exhibit A sets forth the scope of the Services to be provided by the Firm. From time to time, additional services may be requested by the Client beyond the scope of Exhibit A. The Firm may provide these additional services and be paid at the Firm's customary fees and costs for such services. In the alternative, the Firm and the Client may complete a revised and supplemented Exhibit A to set forth the additional services (including revised fees and costs, as needed) to be provided. In either event,the terms and conditions of this letter shall remain in effect. E-Verify Program The Firm participates in the E-Verify program. For the purpose of this paragraph, the E-Verify program means the electronic verification of the work authorization program of the Illegal Immigration Reform and Immigration Responsibility Act of 1996 (P.L. 104-208), Division C, Title IV, s.401(a), as amended, operated by the United States Department of Homeland Security or a successor work authorization program designated by the United States Department of Homeland Security or other federal agency authorized to verify the work authorization status of newly hired employees under the Immigration Reform and Control Act of 1986 (P.L. 99-603). The Firm does not employ any "unauthorized aliens" as that term is defined in 8 U.S.C. 1324a(h)(3). Heather Metcalf, Controller City of Jeffersonville Re: Jeffersonville City(Indiana)-Proposed Municipal Advisory and Accounting Services Comprehensive Financial Plan June 5,2017 Page 3 Investments The Firm certifies that pursuant to Indiana Code 5-22-16.5 et seq. the Firm is not now engaged in investment activities in Iran. The Firm understands that providing a false certification could result in the fines, penalties, and civil action listed in I.C. 5-22-16.5-14. Municipal Advisor Registration The Firm is a Municipal Advisor registered with the Securities and Exchange Commission and the Municipal Securities Rulemaking Board. As such, the Firm is providing certain specific municipal advisory services to the Client. The Firm is neither a placement agent to the Client nor a broker/dealer. The offer and sale of any Bonds shall be made by the Client,in the sole discretion of the Client, and under its control and supervision.The Client agrees that the Firm does not undertake to sell or attempt to sell the Bonds, and will take no part in the sale thereof. Other Financial Industry Activities and Affiliations Umbaugh Cash Advisory Services, LLC ("UCAS") is a wholly-owned subsidiary of the Firm. UCAS is registered as an investment adviser with the Securities and Exchange Commission under the federal Investment Advisers Act. UCAS provides non-discretionary investment advice with the purpose of helping clients create and maintain a disciplined approach to investing their funds prudently and effectively. UCAS may provide advisory services to the clients of the Firm. UCAS has no other activities or arrangements that are material to its advisory business or its clients with a related person who is a broker-dealer, an investment company, other investment adviser or financial planner, bank,law firm or other financial entity. If the foregoing accurately represents the basis upon which we may provide Services to the Client, we ask that you execute this letter, in the space provided below setting forth your agreement. Execution of this letter can be performed in counterparts each of which will be deemed an original and all of which together will constitute the same document. If you have any questions, please let us know. We appreciate this opportunity to be of service to you and the City of Jeffersonville, Indiana. Very truly yours, H.J. Umbaugh &Associates Certified Public Accountants,LLP By: P alko E I Sa one, Partner The undersigned hereby acknowledges and agrees to the forego' g e er of enga ment. City of Jeffers n '11 ,Indiana Date: "A By: EXHIBIT A Services Provided Scope of Services The Firm agrees to furnish and perform the following services with respect to the preparation of a five- year Capital Plan. Article I. Five-Year Capital Plan(Consulting Services) A. Estimate the trend of the Client's assessed value and corporate project tax rate over the course of the Capital Projects planning period. B. Confer, as needed, with Client officials, department heads, employees, consulting engineers, and other individuals to determine the capital improvement needs of the Client in the project planning period and the estimated costs of those projects. C. With the assistance of the Client, determine on a preliminary basis,the availability of any funds currently on hand and analyze the corresponding reserve requirements and net funds available for the Capital Projects. Make recommendations regarding the use of funds on hand. D. Analyze the outstanding debt of the Client and identify potential opportunities for debt refinancing or restructuring. E. Investigate and determine alternative methods of financing the proposed Capital Projects Plan, including the use of bond financing, pay-as-you-go, funds on hand, grant funds,etc. F. Prepare a preliminary draft report summarizing our findings, discussing the potential impact on taxpayers and ratepayers,and meeting with Client officials. G. Prepare a formal presentation for considerations by the Client and attend meetings with Client officials to communicate results,as needed. H. Finalize the report on financing the Capital Projects and project funding alternatives. Article II. Comprehensive Financial Plan (Consulting and Preparation Services) Assist the Client in the development of a five year financial model as follows: A. Analyze historical revenues to determine trends and develop estimates of future revenues. Revenue streams include but may not be limited to: a. Property taxes, including impact of major appeals, possible delay or non- collection of Property Taxes, potential changes in Net Assessed Valuation, trending, and the Circuit Breaker Tax Credit. b. Excise Taxes c. Local Option Income Taxes d. Local Road and Street Distributions EXHIBIT A Services Provided(cont'd) e. Motor Vehicle Highway Fund distributions and taxes f. Other State distributions g. Receipts generated from fines and fees h. Other miscellaneous revenues B. Analyze historical disbursements to determine trends and develop estimates of future budget capacity. C. Prepare a cash flow model as detailed in B and C below for major funds to include: 1. General (#101) 2. Street Dept.MVH(#201) 3. Local Roads and Streets(#202) 4. Parks and Recreation (#204) 5. Parks Activity(#209) 6. Share of Gaming Revenues(#226) 7. Sanitation(#244) 8. TIF 63 Vogt Valve (#281) 9. TIF 64 Galvstar(#283) 10. TIF 66 Keystone(#287) 11. TIF 67 Bethnova(#289) 12. TIF 57,61-ICR(#291) 13. TIF 62-Harb Falls (#295) 14. Cum. Capital Improvement(#301) 15. Redevelopment Operating(#380) 16. Rainy Day(#390) 17. Cum. Capital Development(#403) 18. Public Safety LOIT(#430) 19. Econ Development Income Tax (#444) D. Prepare schedules of cash receipts,cash disbursements and fund balances of all major operating funds of the Client for the years ended December 31, 2015 and December 31, 2016 based upon reports and records of the Client, in order to identify trends in revenues,expenditures and fund balances. E. Prepare a projection of cash receipts, cash disbursements and fund balances of all major operating funds of the Client for the calendar years 2017 through and including 2021. Projections will include estimates of property tax collections, circuit breaker tax credits, income tax collections and planned expenditures for Client operations, maintenance,capital expenditures and debt service requirements. F. Recommend a level of minimum fund balances to be maintained. G. Identify fund balances within non-major funds that may be available to fund General Fund or other operating expenditures and provide a description of the authorized uses of fund balances. EXHIBIT A Services Provided (cont'd) H. Identify potential shortfalls in revenues. I. Provide a preliminary report of our findings and recommendations to the Client and present a summary of the report to the Council. Article VI. Other Accounting and Support Services (Consulting and Preparation Services) A. Attend other meetings not covered under the Articles above. B. Other agreed upon accounting support services. Exhibit B Fees The Firm's fees for services set forth in Exhibit A will be billed at the Firm's standard billing rates based upon the actual time and expenses incurred and will not exceed Forty Thousand Dollars ($40,000) without further authorization from the Client. Standard Hourly Rates by Job Classification 1/1/2017 Senior Partners $375.00 to $550.00 Partners/Principals $275.00 to $475.00 Managers $190.00 to $325.00 Consultants $130.00 to $250.00 Municipal Bond Disclosure Specialists $120.00 to $195.00 Support Personnel $105.00 to $150.00 • Billing rates are subject to change periodically due to changing requirements and economic conditions. Actual fees will be based upon experience of the staff assigned and the complexity of the engagement. The above fees shall include all expenses incurred by the Firm with the exception of expenses incurred for mileage which will be billed on a separate line item. No such expenses will be incurred without the prior authorization of the Client. The fees do not include the charges of other entities such as rating agencies, bond and official statement printers, couriers, newspapers, bond insurance companies, bond counsel and local counsel, and electronic bidding services, including Paritym. Coordination of the printing and distribution of Official Statements or any other Offering Document are to be reimbursed by the Client based upon the time and expense for such services. Exhibit C Disclosure Statement of Municipal Advisor PART A—Disclosures of Conflicts of Interest MSRB Rule G-42 requires that municipal advisors provide to their clients disclosures relating to any actual or potential material conflicts of interest, including certain categories of potential conflicts of interest identified in Rule G-42, if applicable. If no such material conflicts of interest are known to exist based on the exercise of reasonable diligence by the municipal advisor, municipal advisors are required to provide a written statement to that effect. Material Conflicts of Interest—The Firm makes the disclosures set forth below with respect to material conflicts of interest in connection with the Scope of Services under this Agreement, together with explanations of how the Firm addresses or intends to manage or mitigate each conflict. General Mitigations —As general mitigations of the Firm's conflicts, with respect to all of the conflicts disclosed below, the Firm mitigates such conflicts through its adherence to its fiduciary duty to Client, which includes a duty of loyalty to Client in performing all municipal advisory activities for Client. This duty of loyalty obligates the Firm to deal honestly and with the utmost good faith with Client and to act in Client's best interests without regard to the Firm's financial or other interests. The disclosures below describe, as applicable, any additional mitigations that may be relevant with respect to any specific conflict disclosed below. I. Affiliate Conflict. UCAS, an affiliate of the Firm (the "Affiliate"), has or is expected to provide certain advice to or on behalf of Client that is directly related to the Firm's activities within the Scope of Services under this Agreement. In particular, providing advice to Client regarding.investment of bond proceeds. The Affiliate's business with Client could create an incentive for the Firm to recommend to Client a course of action designed to increase the level of Client's business activities with the Affiliate or to recommend against a course of action that would reduce or eliminate Client's business activities with the Affiliate. In addition to the general mitigations described above, this conflict of interest is mitigated in part by the fact that Client had already engaged the Affiliate prior to engaging the Firm as a municipal advisor, and therefore the Firm as a municipal advisor did not influence this decision. Furthermore, this potential conflict is mitigated by the fact that the Affiliate is subject to its own comprehensive regulatory regime as a registered investment adviser with the Securities and Exchange Commission under the federal Investment Advisers Act. II. Compensation-Based Conflicts. The fees due under this Agreement are in a fixed amount established at the outset of the Agreement. The amount is usually based upon an analysis by Client and the Firm of, among other things, the expected duration and complexity of the transaction and the Scope of Services to be performed by the Firm. This form of compensation presents a potential conflict of interest because, if the transaction requires more work than originally contemplated, the Firm may suffer a loss.Thus,the Firm may recommend less time-consuming alternatives,or fail to do a thorough analysis of alternatives. This conflict of interest is mitigated by the general mitigations described above. The fees due under this Agreement are based on hourly fees of the Firm's personnel, with the aggregate amount equaling the number of hours worked by such personnel times an agreed-upon hourly billing rate.This form of compensation presents a potential conflict of interest if Client and the Firm do not agree on a reasonable maximum amount at the outset of the engagement, because the Firm does not have a financial incentive to recommend alternatives that would result in fewer hours worked. This conflict of interest is mitigated by the general mitigations described above. Exhibit C Disclosure Statement of Municipal Advisor(cont'd) III. Other Municipal Advisor Relationships. The Firm serves a wide variety of other clients that may from time to time have interests that could have a direct or indirect impact on the interests of Client. For example, the Firm serves as municipal advisor to other municipal advisory clients and, in such cases, owes a regulatory duty to such other clients just as it does to Client under this Agreement. These other clients may, from time to time and depending on the specific circumstances, have competing interests, such as accessing the new issue market with the most advantageous timing and with limited competition at the time of the offering. In acting in the interests of its various clients, the Firm could potentially face a conflict of interest arising from these competing client interests. This conflict of interest is mitigated by the general mitigations described above. PART B—Disclosures of Information Regarding Legal Events and Disciplinary History MSRB Rule G-42 requires that municipal advisors provide to their clients certain disclosures of legal or disciplinary events material to its client's evaluation of the municipal advisor or the integrity of the municipal advisor's management or advisory personnel. Accordingly, the Firm sets out below required disclosures and related information in connection with such disclosures. 1. Material Legal or Disciplinary Event. There are no legal or disciplinary events that are material to Client's evaluation of the Firm or the integrity of the Firm's management or advisory personnel disclosed, or that should be disclosed,on any Form MA or Form MA-I filed with the SEC. U. How to Access Form MA and Form MA-I Filings. The Firm's most recent Form MA and each most recent Form MA-I filed with the SEC are available on the SEC's EDGAR system at httQ//www.sec.,gov/c gi-bin/browse-edgar?action=getcompany&CIK=0001610268. III. Most Recent Change in Leaal or Disciplinary Event Disclosure. The Firm has not made any material legal or disciplinary event disclosures on Form MA or any Form MA-I filed with the SEC. PART C—Future Supplemental Disclosures As required by MSRB Rule G-42,this Disclosure Statement may be supplemented or amended,from time to time as needed, to reflect changed circumstances resulting in new conflicts of interest or changes in the conflicts of interest described above, or to provide updated information with regard to any legal or disciplinary events of the Firm. The Firm will provide Client with any such supplement or amendment as it becomes available throughout the term of the Agreement. Exhibit D Preparation Accounting Services Our Responsibilities: The objective of our engagement is to prepare financial statements in accordance with accounting principles generally accepted in the United States of America or the cash basis of accounting based on information provided by you. We will conduct our preparation engagement in accordance with the Statements on Standards for Accounting and Review Services (SSARS)promulgated b y the Accounting and Review Services Committee of the AICPA and comply with the AICPA's Code of Professional Conduct, including the ethical principles of integrity, objectivity, professional competence, and due care when performing the bookkeeping services or preparing financial statements. We are not required to, and will not, verify the accuracy or completeness of the information you will provide to us for the engagement or otherwise gather evidence for the purpose of expressing an opinion or a conclusion. Accordingly., we will not express an opinion or a conclusion nor provide any assurance on the financial statements. Our engagement cannot be relied upon to identify or disclose any financial statement misstatements, including those caused by fraud or error,or to identify or disclose any wrongdoing within the entity or noncompliance with laws and regulations. We in our sole professional judgement, reserve the right to refuse any procedure or take any action that could be construed as assuming management responsibilities. Your Responsibilities: The engagement to be performed is conducted on the basis that management acknowledges and understands that our role is the preparation of financial statements in accordance with accounting principles generally accepted in the United States of America or in accordance with the cash basis of accounting. Management has the following overall responsibilities that are fundamental to our undertaking the engagement to prepare your financial statements in accordance with SSARS: 1. The selection of the cash basis of accounting or accounting principles generally accepted in the United States of America as the financial reporting framework to be applied in the preparation of the financial statements. 2. The election to omit substantially all disclosures normally included in the financial statements in accordance with the cash basis of accounting or accounting principles generally accepted in the United States of America. 3. The design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the financial statements. 4. The prevention and detection of fraud. 5. To ensure that the Client complies with the laws and regulations applicable to its activities. 3 • f Exhibit D Preparation Accounting Services(cont'd) 6. The accuracy and completeness of the records, documents, explanations, and other information, including significant judgments, you provide to us for the engagement. 7. To provide us with— • access to all information of which you are aware is relevant to the preparation and fair presentation of the financial statements, such as records, documentation, and other matters. • additional information that we may request from you for the purpose of the preparation engagement. • unrestricted access to persons within the Client of whom we determine it necessary to make inquiries. You are also responsible for all management decisions and responsibilities and for designating an individual with suitable skills, knowledge, and experience to oversee our bookkeeping services and the preparation of your financial statements. You are also responsible for evaluating the adequacy and results of the services performed and accepting responsibility for such services. The financial statements may not be accompanied by a report. However, you agree that the financial statements will clearly indicate that no assurance is provided on them. Our Report: As part of our engagement, we may issue a report that will state that we did not audit, review or compile the financial statements and that, accordingly, we do not express an opinion, a conclusion, nor provide any assurance on them. If, for any reason, we are unable to complete the preparation of your financial statements,we will not issue a report on such statements as a result of this engagement.