PORT OF SEATTLE
MEMORANDUM
COMMISSION AGENDA
Item No.
6b
Date of Meeting:
November 10, 2009
DATE: October 29, 2009
TO: Tay Yoshitani, Chief Executive Officer
FROM: Craig J. Kerr, Treasury Manager
Elizabeth Morrison, Sr. Manager, Corporate Finance
SUBJECT: New Solicitation for Financial Advisory Services
ACTION REQUESTED:
Authorize the Chief Executive Officer to enter into a solicitation process and execute a contract
for Financial Advisory (FA) Services for Five (5) years with the Right to Extend for Two (2)
Additional Years at an estimated cost of $3,000,000.00.
BACKGROUND
When issuing debt, governmental entities, including the Port of Seattle (Port), employ the
services of independent outside financial expertise. These firms advise on the overall debt and
financial management activity of the Port. Financial advisors are able to provide current
information on market trends, rates, debt structures and investor concerns. They provide
analytical support and insights into rating agencies, and other issuers.
The Port’s debt management needs include new issuance to fund capital improvements and
management of existing debt, currently $3.7 billion. For example, the Port’s financial advisor
advises on the Port’s overall debt structure and financial management, bringing the perspective
of investors and rating agencies; advises on opportunities to refund existing debt for savings;
participates in all aspects of bond issuance; advises on and participates in extensions and
replacements of letters of credit on variable rate debt; assists in the coordination of the finance
team and evaluates proposals and new financial products; and provides an independent
perspective at Commission briefings on financial matters. The Port’s Financial Advisor also
shares their knowledge of other local government issuers, of other airports and seaports
nationwide are encountering in their need for financing as well as analyzing the financial impact
of pending or new legislation. Finally, the financial advisor provides recommendations for
improving the long term financial position of the Port.
COMMISSION AGENDA
Tay Yoshitani, Chief Executive Officer
October 29, 2009
Page 2 of 2
The current financial advisory contract is a five-year contract that expires on April 1, 2010. Due
to the timing of letter of credit expirations, it is important to have the new financial advisory
contract signed and the advisor fully functioning prior to April, 2010. The proposed
procurement schedule allows the Port to have a new contract place by February, 2010, allowing
adequate time to address the expiring letters-of-credit.
Staff is requesting that this contract exceed the three year limit. Financial and debt management
are on-going functions that benefit from a consistent approach and a long-term view. Some Port
financing initiatives have been multiyear efforts, for example, the development of the Port’s
Intermediate Lien, which was tied to the lengthy negotiation of a new airline agreement, the
rental car facility financing, which took several years to complete due to challenging business
and bond market conditions, and the Terminal 18 Special Revenue bond transaction, which
involved complex tenant negotiations. A five year contract should also encourage wider
participation among potential respondents, since there is considerable effort required for the
successful firm to become familiar with the Port’s businesses, financial structure and
management and the Port’s debt – including familiarity with voluminous legal documents. A
longer-term contract will encourage firms to submit a response and make the investment of their
time.
FEES
The financial advisor would be compensated in two ways. For new bond issues, the FA would
receive a fee per bonds. In addition, the FA would be paid an annual fee for all work not related
to a new bond issue e.g. letters of credit, debt structure advise, rating agency updates, etc.
Because the timing and amount of debt depends on the capital needs of the operating divisions or
on the market driven refunding opportunities, the dollar amount is set a level that is estimated to
accommodate five to seven years of multiple transactions, taking into account the Port’s prior
experience.
REQUESTED ACTION
Authorize the Chief Executive Officer to enter into a solicitation process and execute a contract
for Financial Advisory Services for Five (5) years with the Right to Extend for Two (2)
additional years at an estimated cost of $3,000,000.00.
