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HomeMy WebLinkAboutNHA Advisors, LLC 2020-07-02; Amendment 1 2023-08-15 COU 2021-088-A 1 CITY OF UKIAH AMENDMENT NO. I TO PROFESSIONAL SERVICES AGREEMENT This Amendment No. 1, entered on August 15, 2023 revises the Agreement for Professional services dated July 2, 2020 between the City of Ukiah and NHA Advisors, LLC, a limited liability company, for professional consulting services relating to registered municipal financial advisor for continuing disclosure, debt issuance, and general financial consultancy services. This Amendment No. 1 adds modifies both the scope of services as well as the billing fees as per Exhibits A and B attached. Except as expressly amended by this Amendment, all other terms remain unchanged and in full force and effect. IN WITNESS WHEREOF, THE PARTIES HAVE EXECUTED THIS AMENDMENT ON THE EFFECTIVE DATE: NHA ADVISORS, LLC ,,?BY: DATE: 8/15/2023 PRINT NAME: Eric Scriven CITY OF UKIAH BY: _ DATE: Aug 17, 2023 SAGE SANGIACOMO, CITY MANAGER ATTEST � BY: Kr wi (Aug ,?' 2V 1144PDT' DATE: Aug 17, 2023 KRISTINE LAWLER, CITY CLERK AMENDMENT TO PROFESSIONAL CONSULTING SERVICES AGREEMENT(EFFECTIVE AUGUST 1,2023) COU NO. 2021-088 EXHIBIT A SCOPE OF SERVICES The scope of work will generally include, but will not be limited to, the following services: TASK 1:GENERAL FINANCIAL CONSULTING SERVICES ♦ General Financial Assistance • Work with City staff to review and provide advice on operational budgets • Develop financial models for funding capital needs • Assist in appropriate disclosure for annual financial reporting • Assist in appropriate continuing disclosure for outstanding obligations requiring annual filing • Review and respond to general questions related to public finance • Assist staff with reports or information items related to financing strategies or opportunities • Respond to general inquiries from staff ♦ Development Finance • Review proposed development plans for public infrastructure requirement or other possible financeable components • Develop initial funding model and tax impact of potential bond financing • Work with City staff and property owner to understand financial impact of project scoping on future property tax collections • Develop non-capital (services)funding vehicle if requested by the City • Work with City staff, consultants and property owner to develop funding agreement ♦ Utility Financing • Review the City's existing bond obligations • Develop financial model addressing coverage requirements and future parity capacity • Calculate feasibility of refinancing any outstanding obligations • Develop financing options ♦ General Fund Financing • Review the City's existing general fund obligations • Calculate feasibility of refinancing any outstanding obligations • Develop financing options • Budget and cash flow review and analysis ♦ Presentation to City Council,Staff or Other Stakeholders(as requested) • Develop presentation materials or memos detailing financing information • Present information in any format as determined by City staff TASK 2:SHORT-TERM CASH FLOW FINANCING NHA Advisors will work with the City and other parties to develop funding strategies and options for financing short-term cash flow deficits for its General Fund as well as other general advice as needed by the City staff related to this Task. NHA Advisors will serve as the municipal advisor of record for the City. The scope of work will generally include, but may not be limited to,the following services: ♦ Project Management • Manage financing process, including assembly of the financing team and assignment of tasks for all parties involved in the financing. • Provide information and advice on the timing of the financing process and develop timeline (schedule) of tasks. • Upon request, work with City staff to solicit and select a registered broker-dealer(underwriter or placement agent),bond/disclosure counsel,trustee,or other consultants that are required as part of financing process. Provide recommendation(s) and negotiate preferred terms and fees for said consultant(s). ♦ Quantitative Analysis and Financial Structuring • Work with City staff to prepare historical, estimated/actual, and projected cash flows for the General Fund, as necessary. • Work with City staff to determine alternate sources of liquidity, as necessary. • Evaluate and advise the City on the financing structure and method of sale,including the financing terms, call provisions,and covenants. • Analyze credit enhancement options (bond insurance and reserve surety bond policies). • Meetings or conference calls with credit enhancement or insurance companies to discuss the transaction, as necessary. ♦ Project Implementation • Coordinate the efforts of bond counsel, disclosure counsel, and/or any other legal counsel to prepare the financing documents for approval by the City Council. • Review and provide comments to financing documents to ensure consistency with the financing plan. • Upon request, make presentations or attend meetings with the City Council or stakeholders to answer questions about the financing and process. • Work with selected financing partner or funding source to determine optimal bond structure, including serial/term bonds, premium/discount bonds, and redemption provisions. • If a public offering method of sale is utilized: o Coordinate preparation of a comprehensive credit presentation to the rating services and bond insurance companies, if applicable. o Work with disclosure counsel to prepare, review, provide comments, and print the preliminary and final official statements. o If completed as a negotiated sale, monitor the underwriter's sales effort and assist the City with the negotiation of underwriting spreads and interest rates for the proposed financing. o If completed as a negotiated sale, monitor the underwriter's sales effort and assist the City with pricing negotiations. o If completed as a competitive sale, engage a nationally recognized firm to widely distribute the offering documents to potential investors and establish a bidding platform. o Assist with the solicitation of an investment advisor to coordinate investment of bond proceeds and/or accounts,as necessary. • If a private placement method of sale is utilized: o Assist with the preparation of a credit package for potential investors. o If a placement agent has been engaged, oversee placement agent's solicitation process, assist with the selection of the financing provider, and assist with the negotiation of terms, as necessary. o If no placement agent has been engaged for a privately placed loan (non-municipal security), upon request, NHA Advisors will solicit bids from potential investors and assist with the selection of the financing provider and negotiation of terms. o Manage bond or loan pricing and final financing structure (debt service and bond terms). • Work with bond counsel to finalize documents for execution by the City. • Prepare or coordinate preparation of a closing memorandum outlining a detailed flow of funds at the time of closing. TASK 3:BOND, LOAN OR OTHER DEBT FINANCING The scope of work will generally include, but may not be limited to, the following services: ♦ Project Management • Manage financing process, including assembly of the financing team and assignment of tasks for all parties involved in the financing. • Provide information and advice on the timing of the financing process and develop timeline (schedule) of tasks. • Upon request, work with City staff to solicit and select a registered broker-dealer(underwriter or placement agent),bond/disclosure counsel,trustee,or other consultants that are required as part of financing process. Provide recommendations) and negotiate preferred terms and fees for said consultant(s). ♦ Quantitative Analysis and Financial Structuring • Evaluate and advise the City on the financing structure and method of sale,including the financing terms, call provisions,and covenants. • Analyze credit enhancement options (bond insurance and reserve surety bond policies). • Meetings or conference calls with credit enhancement or insurance companies to discuss the transaction, as necessary. ♦ Project Implementation • Coordinate the efforts of bond counsel, disclosure counsel, and/or any other legal counsel to prepare the financing documents for approval by the City Council. • Review and provide comments to financing documents to ensure consistency with the financing plan. • Upon request, make presentations or attend meetings with the City Council or stakeholders to answer questions about the financing and process. • Work with selected financing partner or funding source to determine optimal bond structure, including serial/term bonds, premium/discount bonds, and redemption provisions. • If a public offering method of sale is utilized: o Coordinate preparation of a comprehensive credit presentation to the rating services and bond insurance companies, if applicable. o Work with disclosure counsel to prepare, review, provide comments, and print the preliminary and final official statements. o If completed as a negotiated sale, monitor the underwriter's sales effort and assist the City with the negotiation of underwriting spreads and interest rates for the proposed financing. o If completed as a negotiated sale, monitor the underwriter's sales effort and assist the City with pricing negotiations. o If completed as a competitive sale, engage a nationally recognized firm to widely distribute the offering documents to potential investors and establish a bidding platform. o Assist with the solicitation of an investment advisor to coordinate investment of bond proceeds and/or accounts,as necessary. • If a private placement method of sale is utilized: o Assist with the preparation of a credit package for potential investors. o If a placement agent has been engaged, oversee placement agent's solicitation process, assist with the selection of the financing provider, and assist with the negotiation of terms, as necessary. o If no placement agent has been engaged for a privately placed loan (non-municipal security), upon request, NHA Advisors will solicit bids from potential investors and assist with the selection of the financing provider and negotiation of terms. o Manage bond or loan pricing and final financing structure (debt service and bond terms). • Work with bond counsel to finalize documents for execution by the City. • Prepare or coordinate preparation of a closing memorandum outlining a detailed flow of funds at the time of closing. TASK4:CONTINUING DISCLOSURE AND CDIAC REPORTING COMPLIANCE SERVICES The City and its related entities (the "City") are required to file periodic disclosure reporting with the Municipal Securities Rulemaking Board ("MSRB"), California Debt and Investment Advisory Commission ("CDIAC"), and in some cases, with the underwriter, bond insurer, trustee, or other parties for the City's debt obligations. The City desires to appoint NHA Advisors, LLC ("NHA Advisors")to assist with the compliance of these obligations. A. MSRB Continuing Disclosure Compliance (Rule 15c2-12): The City has publicly offered bond transactions requiring annual continuing disclosure reports ("Annual Reports") to be filed on the Electronic Municipal Market Access ("EMMA") system. Each obligation has distinct disclosure requirements. The primary reporting requirements generally include the filing of: • Audited financial statements • Other financial information and operating data • Other material information • Notices of Significant Events NHA Advisors will provide the following services: • Prepare Annual Reports • Supervise and direct the City on issues related to its disclosure obligations • Notify the City of pending due dates • Assist in the tracking of rating changes and other Significant Events • Prepare Significant Events notices, as necessary • Post Annual Reports, notices, and other required documentation to EMMA • File a report with the City certifying that each Annual Report has been provided pursuant to this Continuing Disclosure Certificate • Review continuing disclosure requirements in preliminary official statements and draft bond documents • Provide ongoing support to City staff as questions arise regarding its continuing disclosure obligations NHA Advisors will make its best efforts to monitor rating changes for both the issuer and bond insurer, if applicable, for each outstanding obligation as well as the other Significant Events listed below. To best meet this objective, open lines of communication between the City and NHA Advisors are vital. The City must notify NHA Advisors immediately upon the occurrence of a Significant Event. Significant Events generally include: 1) Principal and interest payment delinquencies 2) Non-payment related defaults 3) Unscheduled draws on debt service reserves reflecting financial difficulties 4) Unscheduled draws on credit enhancements reflecting financial difficulties 5) Substitution of credit or liquidity providers, or their failure to perform 6) Adverse tax opinions or events affecting the tax-exempt status of the security 7) Modifications to rights of security holders 8) Bond calls and tender offers 9) Defeasances 10) Release, substitution, or sale of property securing repayment of the securities 11) Rating changes 12) Bankruptcy, insolvency, receivership or similar event of the obligated person 13) Consummation of a merger, consolidation, or acquisition 14) Appointment of a successor or additional trustee or the change of name of a trustee 15) Incurrence of a financial obligation affecting security holders 16) Default, event of acceleration,termination event, modification of terms, or similar event B. CDIAC Annual Debt Transparency Reporting(SB 1029): Effective January 1, 2017, state and local issuers are required to submit an annual debt transparency report for any issue of debt for which they have submitted a Report of Final Sale to CDIAC during the reporting period. The annual debt transparency report is due to CDIAC no later than January 315t of each year (beginning January 31, 2018)for any debt outstanding at any point during the prior fiscal year. NHA Advisors will work with the City to complete and file these reports with CDIAC prior to January 315Y each year. C. CDIAC Yearly Fiscal Status Reporting("YFSR"): (i) Marks-Roos Any joint powers authority ("Authority") selling bonds on or after January 1, 1996 that uses the proceeds to acquire one or more local obligations is required to report annually on the fiscal status of the Authority bonds and the local obligations acquired. Reports must be submitted to CDIAC no later than October 30th each year. (ii) Mello-Roos Issuers of community facilities district ("CFD") bonds after January 1, 1993 are required to report annually on certain information about the bonds. All issuers, regardless of when bonds are sold, are required to report any draw on reserve or default that occurs throughout the calendar year. Reports must be submitted to CDIAC no later than October 30th each year. NHA Advisors will work with the City to ensure that all reports are completed and filed with CDIAC prior to October 30th each year. D. Private Placement Debt and Other Loan Reporting: If the City issues or has issued privately placed debt or other loans that require reporting to the purchaser or other parties, NHA Advisors will assist the City with the disclosure obligations as outlined in the governing document(continuing disclosure agreement, indenture, term sheet, lease agreement, etc.). Future Obligations If the City issues privately placed debt or other loans that require reporting to the purchaser or other parties, NHA Advisors will assist the City with the disclosure obligations as outlined in the governing document (continuing disclosure agreement, indenture, term sheet, etc.). EXHIBIT B COMPENSATION SCHEDULE TASK 1: GENERAL FINANCIAL CONSULTING SERVICES For work described in the Scope of Services as Task 1, NHA Staff Hourly Allocation Rate Advisors will be compensated based upon the hourly rate principal $350 schedule provided in the table to the right. NHA Advisors will invoice the City on a monthly basis for time and Director/Senior Vice President $325 approved expenses incurred during the course of the Vice President $300 project. The not-to-exceed budget for Task 1 will be Assist. Vice President/Sr.Associate $275 $25,000. Associate $250 Senior Analyst $225 Analyst $200 Administrative $100 TASKS 2&3:SHORT-TERM CASH FLOW FINANCING AND BOND, LOAN OR OTHER DEBT FINANCING For work described in the Scope of Services as Task 2 and Task 3, compensation will be contingent on completion of the financing and is expected to be paid from proceeds of the transaction at the time of closing. The fee for these services is based on a number of factors, including the method of sale,financing structure,complexity,series of bonds, funding source, and the time expected to be required to manage the financing process. Base Municipal Advisory Services The transaction is expected to utilize one of the following methods of sale: (1) private placement with a private party or bank(requiring no public offering disclosure document), (2) negotiated public offering with a pre-selected underwriter, or(3) competitive public offering engaging an underwriter through a competitive sale. Based on the method of sale, NHA Advisors will receive a fee for services as follows. Short-Term Cash Bond, Loan or Other 1ELmethod . Debt Financing Fee Private Placement $20,000-$25,000 $42,500-$55,000 Public Offering—Negotiated Sale $22,500-$27,500 $47,500-$72,500 Public Offering—Competitive Sale $25,000-$30,000 $52,500-$77,500 Additional Services Credit Rating Process(as Needed)—For services related to a credit rating process, NHA Advisors will receive a fee for services as follows. Short-Term Cash Flow Financing $5,000 Bond, Loan or Other Debt Financing $10,000 In-Person Meetings(Upon Request)— NHA Advisors will be reimbursed $1,500 for each in-person meeting. NHA Advisors will participate on conference calls and virtual meetings at no additional cost to the City. Request for Proposals (Upon Request) — If the City has not engaged consultants to provide certain services required as part of financing process, at the City's direction, NHA Advisors will undertake the solicitation of one or more of these parties for the fees outlined in the following rate table. ProposalRequest for Broker-Dealer(Underwriter/Placement Agent) $5,000 Bond/Disclosure Counsel $2,500 Special Tax Consultant $2,000 Fiscal Consultant $1,500 Trustee $1,000 Bank/Investor Bid Process (Upon Request) — NHA Advisors will solicit bids for a privately placed loan (non- municipal security) where a placement agent has not been engaged, NHA Advisors will receive an additional fee of$5,000. Expenses (Out-of-Pocket) All expenses will be billed directly at cost to the City. Expenses will be limited to those necessary for completion of the project. TASK 4: CONTINUING DISCLOSURE AND CDIAC REPORTING COMPLIANCE SERVICES For the services outlined in Task 4, NHA Advisors will be compensated as follows. A. MSRB Continuing Disclosure Compliance (Rule 15c2-12): For services described in Subtask A of the Scope of Services, NHA Advisors shall be paid a fixed annual fee payable upon successful submission of the Annual Reports.The following table provides a snapshot of the initial fees associated with the City's current obligations: ReportingExisting Annual MSRB Continuing Disclosure 2022 Electric Revenue Bonds Electric Enterprise $2,750 2016 Water Revenue Refunding Bonds Water Enterprise $2,750 2022 Lease Revenue Bonds General Fund $2,250 2020A Lease Revenue Bonds General Fund $1,250(3) 2020B Lease Revenue Bonds General Fund $2501.1 Total Annual Fee 1) Excludes the cost of data from third-party sources,if required. Data costs will be passed on to the City with no additional markup. 2) In the event that the City's audited financial statements are not available prior to the reporting due date and NHA Advisors is required to file both unaudited and audited reports,NHA Advisors has the option to assess a$500 refiling fee for each obligation that requires a second filing. 3) Reflects discount for multiple series of bonds with similar reporting requirements. As additional debt is issued, new continuing disclosure obligations will be billed at the flat fees shown below, on a case-by-case basis, based on the amount of work required for each obligation: Future Annual Fee MSRB Continuing Disclosure Reporting General Obligation Bonds $1,000-$2,250 Certificates of Participation/Lease $1,250-$2,500 Utility Revenue Bonds(Water, Sewer, Electric, etc.) $1,500-$3,250 Land Secured Bonds $1,500-$3,500 Tax Allocation Bonds $1,500-$3,750 Other $1,000-$3,750 B. CDIAC Annual Debt Transparency Reporting(SB 1029): For services described in Subtask B of the Scope of Services, NHA Advisors shall be paid a fixed annual fee of$500 per report (unless otherwise stated below), payable upon successful submission of the reports. At present, the City has the following obligations outstanding that require CDIAC Annual Debt Transparency Reporting. CDIAC Annual - . 2022 Electric Revenue Bonds (Authority) Electric Enterprise $275 2022 Electric Revenue Bonds (Obligor) Electric Enterprise $375 2020 Wastewater Revenue Refunding Bonds Wastewater Enterprise $500 2022 Lease Revenue Bonds(Authority) General Fund $275 2022 Lease Revenue Bonds(Obligor) General Fund $375 2020A Lease Revenue Bonds(Authority) General Fund $275 2020A Lease Revenue Bonds(Obligor) General Fund $375 2020B Lease Revenue Bonds (Authority) General Fund $275 2020B Lease Revenue Bonds (Obligor) General Fund $375 2017 IBank Loan General Fund $500 2019A Tax Allocation Refunding Bonds Successor Agency $500 2019B Taxable Tax Allocation Refunding Bonds Successor Agency $500 Total .00 C. CDIAC Yearly Fiscal Status Reporting: (i) Marks-Roos For services described in Subtask C(i) of the Scope of Services, NHA Advisors shall be paid a fixed annual fee of$400 per report (unless otherwise stated below), payable upon successful submission of the reports. At present, the City has the following obligations outstanding that require Marks-Roos CDIAC Yearly Fiscal Status Reporting. ReportingMarks-Roos CDIAC Paid By Annual Fee Yearly Fiscal Status 2022 Electric Revenue Bonds (Authority) Electric Enterprise $275 2022 Electric Revenue Bonds (Obligor) Electric Enterprise $375 2022 Lease Revenue Bonds(Authority) General Fund $275 2022 Lease Revenue Bonds(Obligor) General Fund $375 2020A Lease Revenue Bonds(Authority) General Fund $275 2020A Lease Revenue Bonds(Obligor) General Fund $275 2020B Lease Revenue Bonds (Authority) General Fund $275 2020B Lease Revenue Bonds (Obligor) General Fund $275 Total Annual Fee $2,400 (ii) Mello-Roos For services described in Subtask C(ii) of the Scope of Services, NHA Advisors shall be paid a fixed annual fee of$750 per report, payable upon successful submission of the reports.At present,the City has no obligations outstanding that require Mello-Roos CDIAC Yearly Fiscal Status Reporting. Mello-Roos ReportingYearly Fiscal Status None N/A $0 D. Private Placement Debt and Other Loan Reporting: For services described in Subtask D of the Scope of Services, NHA Advisors shall be paid a fixed annual fee payable upon successful submission of the report. The following table provides a snapshot of the initial fee associated with the City's current obligations: OtherPrivate Placement Debt and 2020 Wastewater Revenue Refunding Bonds Wastewater Enterprise $2,250 2019A Tax Allocation Refunding Bonds Successor Agency $2,500 2019B Taxable Tax Allocation Refunding Bonds Successor Agency $500(3) Total Annual Fee 1) Excludes the cost of data from third-party sources.Data costs will be passed on to the City with no additional markup. 2) In the event that the purchasing bank requests additional information beyond what is outlined in the scope of work, this fee will increase commensurate with the additional work required to provide such information. 3) Reflects discount for multiple series of bonds with similar reporting requirements. Future Obligations In the event that the City issues additional privately placed debt or other loans that require periodic reporting, the annual fee will be commensurate with the amount of work required and the Future MSRB Continuing Disclosure Reporting fee schedule provided in Subtask A (Future MSRB Continuing Disclosure Reporting). TASK4-GRAND TOTAL ANNUAL FEE-The initial combined annual fee for the services outlined in Task 4 will be $21,500*. Subtask A: MSRB Continuing Disclosure Compliance $9,250 Subtask B: CDIAC Annual Debt Transparency Reporting $4,600 Subtask C(i): Marks-Roos CDIAC Yearly Fiscal Status Reporting $2,400 Subtask C(ii): Mello-Roos CDIAC Yearly Fiscal Status Reporting $0 Subtask D: Private Placement Debt and Other Loan Reporting $5,250 Grand Total Annual Fee F 00 *As prior obligations mature or new debt is issued, the Scope of Services and annual budget for services will change in accordance with the fees outlined above. Out-of-Pocket Expenses-Annual expense reimbursements are capped at$1,000 without prior approval from the City and will be limited to third-party contractor work and data purchases required to secure specific information required to complete the respective reports. Data costs will be passed on to the City with no additional markup. EXHIBIT C MUNICIPAL ADVISOR DISCLOSURES Fiduciary Duty NHA Advisors, LLC ("NHA Advisors") is registered as a Municipal Advisor with the U. S. Securities and Exchange Commission ("SEC") and Municipal Securities Rulemaking Board ("MSRB"). As such, NHA Advisors has a fiduciary duty to the City and must provide both a Duty of Care and a Duty of Loyalty that entail the following. Duty of Care: a) exercise due care in performing its municipal advisory activities; b) possess the degree of knowledge and expertise needed to provide the City with informed advice; c) make a reasonable inquiry as to the facts that are relevant to the City's determination as to whether to proceed with a course of action or that form the basis for any advice provided to the City; and d) undertake a reasonable investigation to determine that NHAAdvisors is not forming any recommendation on materially inaccurate or incomplete information; NHA Advisors must have a reasonable basis for: i. any advice provided to or on behalf of the City; ii. any representations made in a certificate that it signs that will be reasonably foreseeably relied upon by the City, any other party involved in the municipal securities transaction or municipal financial product, or investors in the City securities; and iii. any information provided to the City or other parties involved in the municipal securities transaction in connection with the preparation of an official statement. Duty of Loyalty: NHA Advisors must deal honestly and with the utmost good faith with the City and act in the City's best interests without regard to the financial or other interests of NHA Advisors. NHA Advisors will eliminate or provide full and fair disclosure (included herein) to the City about each material conflict of interest (as applicable). NHA Advisors will not engage in municipal advisory activities with the City as a municipal entity, if it cannot manage or mitigate its conflicts in a manner that will permit it to act in the City's best interest. Conflicts of Interest and Other Matters Requiring Disclosures As of the commencement date of the Project, there are no actual or potential material conflicts of interest, other than those potential conflicts noted below, that NHA Advisors is aware of that might impair its ability to render unbiased and competent advice or to fulfill its fiduciary duty. If NHA Advisors becomes aware of any material potential conflict of interest that arises after this disclosure, NHA Advisors will disclose the detailed information in writing to the City in a timely manner. Pursuant to MSRB Rule G-42, on Duties of Non-Solicitor Municipal Advisors, Municipal Advisors are required to make certain written disclosures to clients which include,amongst other things,Conflicts of Interest and any Legal or Disciplinary events of NHA Advisors and its associated persons. The following are potential conflicts of interest to be considered. • NHA Advisors represents that in connection with the issuance of municipal securities, NHA Advisors may receive compensation from the City for services rendered, which compensation is contingent upon the successful closing of a transaction and/or is based on the size of a transaction. Consistent with the requirements of MSRB Rule G-42, NHA Advisors hereby discloses that such contingent and/or transactional compensation may present a potential conflict of interest regarding NHA Advisors'ability to provide unbiased advice to enter into such transaction. The contingent fee arrangement creates an incentive for NHA Advisors to recommend unnecessary financings or financings that are disadvantageous to the City, or to advise the City to increase the size of the issue.This potential conflict of interest will not impair NHA Advisors' ability to render unbiased and competent advice or to fulfill its fiduciary duty to the City. • NHA Advisors' fees under this potential agreement may be based on hourly fees of NHA Advisors' 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 because it could create an incentive for NHA Advisors to recommend alternatives that would result in more hours worked.This conflict of interest will not impair NHA Advisors' ability to render unbiased and competent advice or to fulfill its fiduciary duty to the City. • NHA Advisors' fees under this potential agreement may be a fixed amount established at the outset of this potential agreement.The amount is usually based upon an analysis by the City and NHA Advisors of, among other things,the expected duration and complexity of the transaction and the scope of services to be performed by NHA Advisors. This form of compensation presents a potential conflict of interest because, if the transaction requires more work than originally contemplated, NHA Advisors may suffer a loss. Thus, NHA Advisors may recommend less time-consuming alternatives, or fail to do a thorough analysis of alternatives. This conflict of interest will not impair NHA Advisors' ability to render unbiased and competent advice or to fulfill its fiduciary duty to the City. • The fee paid to NHA Advisors increases the cost of investment to the City.The increased cost occurs from compensating NHA Advisors for municipal advisory services provided. • NHA Advisors 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 another NHA Advisors client. For example, NHA Advisors 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 the City.These other clients may, from time to time and depending on the specific circumstances, have competing interests. In acting in the interests of its various clients, NHA Advisors could potentially face a conflict of interest arising from these competing client interests. NHA Advisors fulfills its regulatory duty and mitigates such conflicts through dealing honestly and with the utmost good faith with the City. • Gerald Craig Hill, the Managing Principal of NHA Advisors is currently serving as an outside director for the HdL Companies based in Diamond Bar, CA. HdL Companies is a software and professional services consulting company providing revenue data and collections information to local governments, potentially including NHA Advisors' clients. HdL Companies have affiliates including, but not limited to, HdL Coren & Cone. From time to time, NHA Advisors utilizes the services of HdL Coren & Cone for its clients. NHA Advisors is mindful of this conflict of interest and fulfills its regulatory duty and mitigates such conflicts through dealing honestly and with the utmost good faith when this situation arises. • NHA Advisors does not have any affiliate that provides any advice, service, or product to or on behalf of the City that is directly or indirectly related to the municipal advisory activities to be performed by NHA Advisors. • NHA Advisors has not made any payments directly or indirectly to obtain or retain NHA Advisors'municipal advisory business. • NHA Advisors has not received any payments from third parties to enlist NHA Advisors' recommendation to the City of its services, any municipal securities transaction, or any municipal finance product. • NHA Advisors has not engaged in any fee-splitting arrangements involving NHA Advisors and any provider of investments or services to the City. • NHA Advisors does not have any legal or disciplinary event that is material to the City's evaluation of the municipal advisory or the integrity of its management or advisory personnel. • NHA Advisors does not act as principal in any of the transaction(s) related to this potential agreement. Legal Events and Disciplinary History NHA Advisors does not have any legal events and disciplinary history on its Form MA and Form MA-I, which includes information about any criminal actions,regulatory actions, investigations,terminations,judgments,liens, civil judicial actions, customer complaints, arbitrations and civil litigation. The City may electronically access NHA Advisors' most recent Form MA and each most recent Form MA-1 filed with the Commission at the following website: www.sec.gov/edgar/searchedgar/companysearch.html There have been no material changes to a legal or disciplinary event disclosure on any Form MA or Form MA-1 filed with the SEC. Recommendations If NHA Advisors makes a recommendation of a municipal securities transaction or municipal financial product or if the review of a recommendation of another party is requested in writing by the City and is within the scope of the engagement, NHA Advisors will determine, based on the information obtained through reasonable diligence of NHA Advisors whether a municipal securities transaction or municipal financial product is suitable for the City. In addition, NHA Advisors will inform the City of: • the evaluation of the material risks, potential benefits, structure, and other characteristics of the recommendation; • the basis upon which NHA Advisors reasonably believes that the recommended municipal securities transaction or municipal financial product is, or is not, suitable for the City; and • whether NHA Advisors has investigated or considered other reasonably feasible alternatives to the recommendation that might also or alternatively serve the City objectives. If the City elects a course of action that is independent of or contrary to the advice provided by NHA Advisors, NHA Advisors is not required on that basis to disengage from the City. Municipal Securities Rulemaking Board Rule G-10 Disclosure Pursuant to MSRB Rule G-10, on Investor and Municipal Advisory Client Education and Protection, Municipal Advisors are required to provide certain written information to their municipal entity and obligated person clients which include the following: • NHA Advisors is currently registered as a Municipal Advisor with the SEC and MSRB. • Within the MSRB website at www.msrb.org, the City may obtain the Municipal Advisory client brochure that is posted on the MSRB website.The brochure describes the protections that may be provided by the MSRB Rules along with how to file a complaint with financial regulatory authorities. Record Retention Effective July 1, 2014, pursuant to the SEC record retention regulations, NHA Advisors is required to maintain, in writing, all communication and created documents between NHA Advisors and the City for five (5)years. If there are any questions regarding the above, please do not hesitate to contact NHA Advisors.