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HomeMy WebLinkAboutSYCAMORE ADMVISORS SYCAMORE ADVISO RS L, December 1,2016 Mr. Len Ashack Utility Director Jeffersonville Wastewater Department River Ridge Commerce Center 423 Lewman Way Jeffersonville, IN 47130 RE: Engagement Letter for Municipal Advisory Services related to Phase III: Negotiations with US EPA on Possible Changes to Long Term Control Plan Dear Mr. Ashack: Sycamore Advisors, LLC ("Sycamore")has appreciated the opportunity to work with the City of Jeffersonville, IN Wastewater Department (the "Department") on Phase I of its work plan - the evaluation of existing debt capacity under the current rate structure to fund the Department's Long Term Control Plan ("LTCP") and other needed capital improvements; and Phase II of its work plan - an update to the Financial Capability Assessment for US EPA. Phases I and II are complete, with the FCA delivered to US EPA in September 2016. We now embark on the next phase, Phase III,which will involve working with the Department and its counsel on negotiations with US EPA and IDEM on possible changes to the LTCP. You have asked Sycamore to serve as Municipal Advisor to the Department for Phase III of the project. This Engagement Letter will describe the Phase III Scope of Work for which Sycamore will be responsible and memorialize the terms of the engagement and the proposed fees to complete Phase III. Sycamore has the depth and experience to engage in complex transactions and analyses for a range of municipal and nonprofit clients,having served in recent years as the financial advisor on over $5.2 billion in financing transactions covering the breadth of options in terms of maturity, structure, purpose and credit. Sycamore is a registered Municipal Advisor with the Securities and Exchange Commission and the Municipal Securities Rulemaking Board. Sycamore is an independent firm focused on adding value on behalf of the client; our senior professionals have all served as Issuers, providing us with a greater understanding of the unique perspective on risk from an Issuer's standpoint. Sycamore has direct Consent Decree/FCA experience in a number of communities, including the City of Indianapolis in 2005, 2010 and 2016. SYCAMORE ADVISORS LLC 612 EAST 13"STREET INDIANAPOLIS,INDIANA 46202 OFFICE:317-631-1900 FAx:317-631-1900 WEBSITE: www.sycamoreadvisors.com SYCAMORE ADVISORS Scope of Work Sycamore anticipates performing the following services, as well as additional services as requested by the Department, to negotiate with US EPA and the Indiana Department of Environmental Management ("IDEM") and make modifications to the City of Jeffersonville's LTCP, subject to the Not to Exceed provisions below: 1. Provide independent advice and serve solely the interests of the Department. 2. Prepare for and attend meetings with US EPA, IDEM, the working group and Board meetings as requested by the Department. 3. Based on the preliminary analysis of legal opportunities for modification based on MHI, RI and other reasons for potential modification identified in the FCA, model and develop scenarios for revised debt service and capacity based on suggested reductions in capital expenditures under the LTCP. 4. Develop an FCA aligned with a 10 year extension of the LTCP and a change in levels of control as modeled by engineering professionals. 5. Develop and test assumptions for the revised LTCP. 6. Respond to US EPA requests for information. 7. When requested,assist with communicating strategy to the Board and community. 8. If requested, participate in the completion of a rate analysis offering recommendations on staged rate increases, including recommendations on how best to allocate rates to different classes of ratepayers. 9. Project Debt Metrics and Financial Capacity. SYCAMORE ADVISORS LLC 612 EAST 13`"STREET INDIANAPOLIS,INDIANA 46202 OFFICE:317-631-1900 FAX:317-631-1900 WEB SITE:www.sycamoreadvisors.com SYCAMORE ADV1SORS 10. Provide modeling and feedback on the impacts of proposed modifications to the LTCP. 11. Review final documentation of any changes as requested by the Department. Disclosures The MSRB and the SEC require certain disclosures by a registered Municipal Advisor, including the following: 1. Registration. Sycamore is registered with the Securities and Exchange Commission (SEC) and the Municipal Securities Rulemaking Board (MSRB) as a municipal financial advisor and is subject to compliance requirements with those agencies. 2. Affiliates. Sycamore does not control, is not controlled by, and is not under common control with, another person(an"affiliate") that provides advice, services, or products to the City of Jeffersonville or the Jeffersonville Wastewater Department. 3. No Material Conflicts. Sycamore is not aware of any known material conflicts of interest with respect to this representation, based on the exercise of reasonable diligence by Sycamore. 4. Legal and Disciplinary History. Sycamore is required to file information with the SEC regarding the occurrence (or absence) of certain legal and disciplinary proceedings. Sycamore's Form MA and the form MA-Is filed for its individual advisors may be accessed electronically at www.sec.aov/edgar. 5. Insurance. Sycamore maintains professional liability insurance in the amount of$2 million. Compensation Sycamore will bill on an hourly basis for work completed, including minimal time for project management. Any modifications to the Scope will be discussed in advance with the Department and adjustments to fees, if appropriate, will be approved by Department personnel, subject to Board approval. Other professionals will provide a specific fee quote and scope of work for their respective parts of the project, and they will invoice the Department independently from Sycamore. SYCAMORE ADVISORS LLC 612 EAST 13"STREET INDIANAPOLIS,INDIANA 46202 OFFICE:317-631-1900 FA%:317-631-1900 WEBSITE: www.sycamoreadvisors.com SYCAMORE ADVISORS i L1. Sycamore charges an hourly fee for work performed under the Scope of Work according to the following hourly rates: Professional Rate per Hour President $275 Senior Vice President $215 Senior Financial Analyst $175 Financial Analyst $140 Administrative Support $ 80 If applicable, Sycamore will submit reasonable travel expenses to Jeffersonville for travel associated with any meetings and travel required to properly complete this Scope of Work. The primary contacts for the professionals serving Jeffersonville will be Diana Hamilton, President and Courtney Tobin, Sr. Vice President. Requested Not to Exceed Estimate The Department has requested that Sycamore provide a Not to Exceed amount for this Scope of Work. For this Not to Exceed amount, Sycamore has assumed two full day meetings with US EPA/IDEM, both in Indianapolis, as well as time to work with the Department's legal and engineering professionals to revise the model for debt service capacity based on an extension of the current LTCP and new controls. This estimate does not assume any work on rate modeling, and it does not contemplate updating for 2016 financial results or for any changes or updates in the underlying data such as number of customers, MHI, or other economic and demographic data that is integral to an FCA analysis. Sycamore anticipates that the following time by each professional will be required to complete the scope of work under these assumptions. Professional R t Hours T t l President $275 45 $ 12,375 Senior Vice President $215 25 $ 5,375 Senior Financial Analyst $175 15 $ 2,625 Financial Analyst $140 10 $ 1,400 Administrative Support $80 5 $ 400 TOTAL $ 22,175 If the Sewer Board or City Council would like to meet with Sycamore prior to the EPA meeting, the preparation and presentation for that meeting would be an additional $2,825, for a total Not to Exceed figure of$25,000. SYCAMORE ADVISORS LLC 612EAST13T"STREET INDIANAPOLIS,INDIANA 46202 OFFICE:317-631-1900 FAX:317-631-1900 WEB SITE: www.sycamoreadvisors.com SYCAMORE ADVISORS Sycamore and the Department have agreed that Sycamore will keep the Department informed on the status of fees and will let the Department know when it has reached 80% of this estimate. Additional tasks beyond those described above would require a revised scope of work. Confidential Information Sycamore recognizes that it will be given access to valuable proprietary Confidential Information of Jeffersonville arising in connection with the performance of advisory services under this Engagement Letter. Sycamore will not, whether during the term of this Engagement or thereafter, disclose any item of Confidential Information of Jeffersonville to any third party or use any such item for its own benefit or for the benefit of any third party without the prior express written consent of Jeffersonville, until such time as the Confidential Information shall have properly become known to the general public. "Confidential Information" includes, without limitation, (1) any information designated by Jeffersonville as confidential, secret or proprietary, or of a confidential nature that is not available to the public; and (2) nonpublic information or documentation concerning Jeffersonville's business, operations, finances,plans or procedures. Communication This will confirm that Jeffersonville has authorized and directed Sycamore to direct all communications through you, unless and until directed otherwise, except that the parties agree that Sycamore may contact and/or meet with other professionals engaged by Jeffersonville to aid in completing the Scope of Work. All parties agree to maintain open and frequent communication throughout the term of this Engagement Letter. Term of Enanement and Withdrawal The term of this engagement began on or about December 1, 2016 and is expected to conclude on or before December 1, 2017 unless extended by mutual agreement of the parties or at such earlier time as either party informs the other party that they wish to terminate the engagement. If Sycamore withdraws from the engagement, it must provide Jeffersonville with 15 business days' written notice, any work product due to Jeffersonville and a memorandum to Jeffersonville describing any work still outstanding and incomplete under the Scope of Work. Jeffersonville may terminate the services herein without cause, at any time, by notice in writing to Sycamore Advisors. Such termination shall be effective thirty (30) calendar days from the date the notice is received or the date stated in the notice, whichever is later. SYCAMORE ADVISORS LLC 612EAST13'"STREET INDIANAPOLIS,INDIANA 46202 OFFICE:317-631-1900 FAx:317-631-1900 WEBSITE: www.sycamoreadvisors.com SYCAMORE ADVISORS Thank you again for the opportunity to serve the Jeffersonville Wastewater Department and the City of Jeffersonville, W. Very Truly Yours, UAkA Signed: Diana H. Hamilton, President Sycamore Advisors,LLC Accepted: --- r120At Mr. Le Ashack Utility Director Jeffersonville Wastewater Department River Ridge Commerce Center 423 Lewman Way Jeffersonville, IN 47130 SYCAMORE ADVISORS LLC 612 EAST 13"STREET INDIANAPOLIS,INDIANA 46202 OFFICE:317-631-1900 FAX:317-631-1900 Wee SITE: www.sycamoreadvisors.com