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Home My WebLink About#05 - Financial Planning AgreementSTAFF REPORT DATE: August 4, 2020 CONSENT AGENDA ITEM: Financial Planning Agreement SUBMITTED BY: Kristina Handt, City Administrator BACKGROUND: In 2016 the City engaged Northland Securities Inc to develop a utility pro forma. The pro forma was last updated in 2018. In order to update the council on budget impacts in the utility (water, sewer, and stormwater) accounts, staff reached out to Northland to update the pro forma. ISSUE BEFORE COUNCIL: Should Council approve the Financial Planning Agreement with Northland Securities Inc? PROPOSAL: A copy of the agreement is included in your packet. It would allow for the update of the city’s utility pro forma in a format that staff could update in the future. This plan does not look at the city’s rate structure but similar to previous update will recommend rate changes as necessary. A lot has happened since the last update including the city’s 3M settlement, grant from the state 3M fund, new sewer projects in the CIP and additional projects (OV4) in the stormwater fund. With all of these changes the previous pro forma can no longer be relied upon to estimate future revenues and expenses. FISCAL IMPACT: $3,672 from the water fund, $3,672 from the sewer fund and $1,836 from the stormwater fund. OPTIONS: 1) Approve the Financial Planning Agreement with Northland Securities Inc 2) Amend and then approve the Financial Planning Agreement with Northland Securities Inc 3) Do not approve the Financial Planning Agreement with Northland Securities Inc RECOMMENDATION: If removed from the consent agenda: “Motion to approve the Financial Planning Agreement with Northland Securities Inc.” ATTACHMENTS: • Financial Planning Agreement Service Agreement – Financial Planning Services Page 1 FINANCIAL PLANNING AGREEMENT BY AND BETWEEN THE CITY OF LAKE ELMO, MINNESOTA AND NORTHLAND SECURITIES, INC. FINANCIAL PLANNING SERVICES This Agreement made and entered into by and between the City of Lake Elmo, Minnesota (hereinafter "City") and Northland Securities, Inc., of Minneapolis, Minnesota (hereinafter "NSI"). WITNESSETH WHEREAS,theCitydesirestousetheservicesofNSIforfinancialplanningservicesforanupdate to the Utility Rate Study of the Water Fund, Sanitary Sewer Fund, and the Stormwater Fund(the “Utility Funds” or the “Utility Systems”) for the City for ongoing financial management of the Utility Funds (hereinafter “Project”). WHEREAS, the Project is intended solely for financial planning purposes and NSI is not providingadviceonthetiming,terms,structureorsimilarmattersrelatedtoaspecificbondissue. WHEREAS, NSI desires to furnish services to the City as hereinafter described. NOW, THEREFORE, it is agreed by and between the parties as follows: SCOPE OF SERVICES TO BE PROVIDED BY NSI The scope of services to be performed by NSI is based on the following factors: 1.The City desires to maintain its current rate structure for charging services for the Utility Systems. 2.The model developed by NSI shall be in a manner that will allow for changes and updates to the model to test different assumptions and scenarios. NSI will undertake the following tasks: 1.Schedule and lead a kick-off meeting with the project management team (the “PMT”), which will include the City staff to be involved with the Project. 2.Gather information from the City on revenue, expenses, data, present and future system utilization, past and projected debt service cost, capital improvement costs, and other data needed to review and develop rates and charges for the Utility Systems. NSI shall provide the City with a detailed list of the items requested by Service Agreement – Financial Planning Services Page 2 NSI, including reports, capital improvement plans, development assumptions, among other information. 3.Develop and/or update the model that produces the information needed to perform the evaluation that is subject to the scope of services to be provided. The model shall be designed by NSI so that it can be updated to evaluate different assumptions and scenarios requested by the PMT. a.Complete analysis of existing rate structure for the Utility Systems. NSI shall prepare pro forma for the Utility Funds. The pro forma shall include modeling of future projected income and expense and assets and liabilities. 4.Complete data input and assumption development within the model. a.Develop a recommendation for the appropriate level of reserves amounts, including the basis for the recommendation. The recommendation shall include a recommendation for net position and cash position of the Utility Funds. 5.Test assumptions and finalize model. a.Complete analysis of proposed rates for the Utility Systems. Modeling of potential proposed rates shall be reflected in the pro forma and projected income and expense and assets and liabilities for the Utility Systems. b.Analysis of rate structure shall include the following: i.Review and comment on equity of current rate structure. ii.Evaluation of current funding approach for funding infrastructure maintenance and improvements for the Utility Systems. iii.Funding (or basis for shortfall in funding) depreciation. iv.Options to evaluate and determines rates needed to fund reserves. 6.Meeting with PMT to review assumptions for the Project. 7.Prepare a written report and presentation to summarize the findings and recommendations within the written report. 8.Meet with the PMT to review the draft report and presentation. 9.Finalize draft report and presentation and submit to the PMT for inclusion in meeting packet for Finance Committee of the City. 10.Attend Finance Committee of the City to present report 11.Update the report and presentation as needed based on feedback and direction from the Finance Committee of the City and submit to the PMT for inclusion in City Council meeting packet. 12.Attend City Council meeting to present report. Service Agreement – Financial Planning Services Page 3 COMPENSATION For the services specified, NSI will be paid a not to exceed amount of $9,180. For purposes of the City’s accounting this compensation is estimated to break-down as follows by the Utility Funds: Water Fund portion in the amount of $3,672. Sanitary Sewer Fund portion in the amount of $3,672. Stormwater Fund portion in the amount of $1,836. The amounts are based on the estimated number of hours required to complete these tasks at an hourly billing rate of $180 per hour plus reimbursable expenses for travel, printing and mailing. NSI will bill on a monthly basis for actual services performed and actual reimbursable expenses. The City may at is discretion authorize NSI to undertake additional relatedfinancing planning tasks beyond the Tasks listed above, including subsequent updates to the model, among other related tasks to this Agreement. Additional services authorized at the discretion of the City will be billed monthly. ASSIGNED NORTHLAND EMPLOYEE The NSI employee responsible for providing services pursuant to this agreement and for the services performed is Tammy Omdal, Managing Director. SUCCESSORS OR ASSIGNS The terms and provisions of this Agreement are binding upon and inure to the benefit of the City and NSI and their successors or assigns. DISCLAIMER In performing service under this agreement, NSI is relying on the accuracy of information provided by the City and the services provided by NSI are based on current State Law. The parties agree that the Minnesota property tax system and other laws may change and may affect the accuracy and validity of services provided by NSI. NSI will perform its work using the best available information. TERM OF THIS AGREEMENT This Agreement may be terminated by thirty (30) days written notice by either the City or NSI. In the event of early termination by the City, NSI shall provide the City with an itemized hourly statement of services already provided. All billable hours by NSI shall be billed at the stated hourly rates should early termination occur. Service Agreement – Financial Planning Services Page 4 Dated this __ day of ____________, 2020. Northland Securities, Inc. By: ______________________________ Tammy Omdal Managing Director City of Lake Elmo, MN By: ______________________________ Name _____________________ Title _____________________