one gateway plaza me,ropoli,, t,,,po,';o, autho,., 90012...

One Gateway Plaza ~ Los Angeles County ~ Me,ropoli,," T,,",po,"';o, Autho,., Los Angeles. CA 90012-2952

213.922 .2000 Tel metro.net

Metro

SEPTEMBER 21, 2011

TO: BOARD OF DIRECTORS

THROUGH: ARTHUR T. LEAHY

FROM: TERRY MATSUMOTO ~

CHIEF EXECUTIVE OFtERU

CHIEF FINANCIAL SER E FFICER AND TREASURER

SUBJECT: UNDERWRITER RECOMMENDATION

ISSUE

The attachments provide further detail supporting the staff recommendations for Item 23 on the September 22,2011 agenda.

DISCUSSION

The staff report recommends Stone and Youngberg as book running senior manager, De La Rosa & Co and Siebert Branford Shank & Co., LLC as co-senior managers and Backstrom McCarley Berry & Co, LLC, Greencoast Capital Partners, and Prager Sealy & Co., LLC as co-managers.

The fee proposal of the book runner sets the total underwriters fees for the entire team. The total fees proposed by the three firms considered for the book running position are:

Stone and Youngberg De La Rosa & Co. Siebert Branford Shank

$ 510,000 760,000 660,000

The attachments provide a narrative description of the scoring process and a spreadsheet showing the factor weighting, scores by factor and weighted total scores for each firm. For the co-manager category, price was not considered.

Attachments

Summary of Evaluation Process for Bond Underwriters Proposition A Refunding Series 2011-A Refunding

1. On August 8th PFM issued the RFP to 43 underwriting firms on our distribution list. The distribution was not limited to California Headquartered or Emerging firms.

2. On August 11 th, PFM received 13 proposals by email

a. Proposals from Citigroup and Goldman Sachs were deemed to not meet the minimum requirements as neither met either the California Headquartered criteria or the criteria for having less than $50 million of net capital.

3. Proposals were distributed to the evaluation panel along with a scoring sheet with columns corresponding to the evaluation criteria listed in the RFP. Evaluators were asked to review and rank the proposals in two award categories, bookrunner and co-managers. Bookrunner has an emphasis on pricing, compensation, structuring and net capital, while co-manager scores exclude price and emphasize marketing and sales and distribution channels that would enhance distribution of the bonds. See criteria weightings at top right of scoring sheet.

4. On August 16th, the four person evaluation panel convened a meeting, with

one external member attending by phone.

5. Each responsive proposal was discussed in alphabetical order. With each evaluator describing his/her perception of the strengths and weaknesses of the proposal, discussing any personal experience with the fi rms and assigned staff, and elaborating on the agreement or disagreement of comments made by other evaluators.

6. At the conclusion of the first round of discussion, the proposals had been discussed and classified as to whether a specific proposal warranted further consideration in the bookrunner category and whether it warranted further consideration in the co-manager category. All bookrunner candidates were also included in the co-manager category for further consideration. Three firms were included in the bookrunner category and eight firms were included in the co-manager category. Of those eight firms, three (Alamo Capital, Great Pacific and Kinsell Newcomb) were determined to have not demonstrated sufficient experience or unique distribution capabilities to warrant further consideration.

7. The subsequent round of discussion focused on determining the qualifications of firms assigned to the bookrunner category. Each of the three firms was

determined to be at least sufficiently well qualified to remain in the category. De La Rosa and Stone & Youngberg were considered the better qualified firms at marketing and distribution and about equally qualified, based on the proposals and experience of staff. Then price was reviewed for the three firms. Stone & Youngberg proposed a significantly lower underwriter discount that would reduce costs by $254,000, elevating S& Y to the number one position in the bookrunner category, followed by De La Rosa as the number two firm, and Siebert Branford Shank as number three.

8. Co-manager firms were then evaluated for their qualifications based on the evaluation criteria, but excluding price and compensation (which is determined based on the bookrunner's proposal), and emphasizing strong and unique sales, marketing and distribution capabilities that will add new distribution capabilities and new distribution channels to the team to provide access to new and different investors, to hopefully enhance demand for the bonds and achieve a lower true interest cost (TIC). Two of the firms still in consideration as co-manager (Blaylock Robert Vance and Grigsby & Associates) were determined not to offer unique or additional access to investors and were removed from further consideration.

LOS ANGELES COUNTY METROPOLITAN TRANSPORTATION AUTHORITY REFUNDING OF PROP A2001 BONDS UNDERWRITER SCORING SHEET

UW Proposal Evaluation for Refunding of Prop A 2001 Bonds RFP Dated August 8, 2011

Experience

'" C)

Firm 'c <: Experience of Assigned Professionals .. 'C "§l oS! CIl

CIl E == en E .= '" '" UIIl WIL

Nancy Mullally - Worked in municipal securities industry for 30 years Bill Mullally - 40 years of experience in securities

Alamo Capital Y Y industry

Don Backstrom - Has served as Senior Manager on over $8 billion - Recently served CA State Treasurer's Office, City of Inglewood, LA County, etc. Vincent McCarley - Experience includes ABAG Finance Authority, Alameda Co. Redevelopment Agency, CA Public Works Board, City of LA, City of Richmond, LADWP.

Backstrom McCarley y y Berry

Aquacena Lopez - 20 year background as FA - FA on 162 financings for CA

Blaylock Robert Van, municipalities

LLC Y Y

Citi N N

Prepared by PFM. Inc.

Marketing

Capabilities to Sell California Issuer Bonds, including to round out the selling team by

Experience and Capabilities of providing access to additional investors though e Firm In Similar Transactions e unique distribution channels, market sectors 0 0

0 0 served or geographic areas served. 1/1 1/1

- Has not served as book-running Limited distribution beyond bookrunner's capabilities; senior manager since January 1, very little detail or specifics on marketing plan 2008 - Served as co-manager 22 times since January 1, 2008

5 - Served as a syndicate member on 5 numerous primary market transactions - Secondary market trades of over $27MM of LACMTA bonds in past 5

Ivears - Focus on providing investment Partnership with Stern Brothers for retail distribution; banking services to CA issuers experience as co-manager on transportation issues - Served as co-manager on 4 bond financings with a total par of $917MM for the SF Bay Area Rapid Transit District, including BART's last issuance, $400MM Series 2007B GO bonds - Served as co-manager on BART's last two sales tax revenue bonds,

7 $65MM Series 2007B and $352MM Series 2005A

7

- Transportation ciients have included LACMTA, Riverside County Transportation Commission, SF Municipal Transportation Agency, SF Intemational Airport, etc. - In past 5 years, have only made general marketing calls to staff.

- Participated in 426 municipal Limited distribution beyond bookrunner's capabilities; underwritings totaling $226 bi llion very little detail or specifics on marketing plan - Sole or Senior Manager for 7 municipal debt issues with total

5 principal of over $430 million 7 - Met with Mike Smith and Lonnie Mitchell to present entry of BRV as municipal firm

-'" 0 6 0

CD u Experience of Professionals 10.0% 15.0%

Experience of Firm 15.0% 30.0% Marketing Capabilities 20.0% 50.0%

Price 55.0% 0.0% 100.0% 95.0%

Price/Cost

.. .. CIl CIl <: C) <: '" Price/Cost :::l <:

e e .. '" ..>0: CIl ::!: e 0 0 o .. 0 0 o 0 (, 8 III 0 1/1 1/1 1/1 U I/1

Estimated debt service: $899.148 (rank #8); Calculated debt service: $327,617,491 (rank #8); Combined rank #9 (tie)

5 5 5.0 4.8

Estimated debt service: $790,772 (rank #7); Calculated debt service: $327,142.426 (rank #7); Combined rank #6

7 7 7.0 6.7

Estimated debt service: $975,039 (rank #10); Calculated debt service: $326,781.422 (rank #6);

4 Combined rank #9 (tie) 5 5.1 4.9

0.0 0.0

9/21/2011

.. 01

Firm 'c c "''0 '§ .E .. .. E = en E .: .. .. UID Wu..

De La Rosa & Co. Y Y

Goldman Sachs N N

Great Pacific

Greencoast Capital y y Partners

Grigsby & Associates Y Y

Prepared by PFM, Inc.


Experience Marketing

Capabilities to Sell California Issuer Bonds, including to round out the seiling team by Experience and Capabilities of Experience of Assigned Professionals providing access to additional Investors though e Firm in Similar Transactions ..

(; unique distribution channels, market sectors 0 (J (J

IJ) IJ) served or geographic areas served. Raul Amezcua - Since 1/1/2008, underwritten 160 Significant proven experience selling comparable - 20 years of municipal finance CA revenue bond financings with bonds as a co-manager; target professional retail experience total par of $32.6 bil lion, serving as buyers; retail distribution agreements with Credit - Completed more than 100 senior senior manager in 36 of these Suisse. UnionBanc; large (16 person) California based managed debt financings with an engagements. sales desk aggregate par value of $22 billion -In 2010 DLR ranked #3 - Served as lead bank for sales tax underwriter of CA negotiated tax-issuers including SANDAG. RCTC. exempt revenue bond financings on LAMTA. SANBAG. OCTA. STA. a senior managed basis Califomia Transit Finance Corporation.

10 - Experience with CA issuers such 10 San Diego MTC, and Ports of Los as LA Wastewater, LADWP,

Angeles. Long Beach, and San D.iego LAWA. LAUSD. LACCD. MWD. Guillermo Garcia Port of LA, Port of LB. SANDAG, - Has served as co-lead banker for DLR's and RCTC engagements with LAMTA, RCTC, East - Provided 10 refunding and market Bay Municipal Utility District, and the City updates regarding the Series 2001-of Los Angeles A and 2001-B Bonds since Nov

2009

Christopher Vinck - Since 2008 Co-manager in 28 Specializes in California bonds; limited specifics on - Focused on developing trading issuances raising over $60 billion in marketing capabilities or plan platforms and serviCing the needs of capital for the State of Califomia institutional clients since 1993

5 5 David Swoish - Founded the firm 20 years ago - Recently engaged in $950 MM Presidio Parkwav P3 nroiect Mary Neale - Worked on P3 lease revenue in Will work with U.S. Bancorp as distribution agent -In public finance since 1987 Kentucky - Previously MD in Municipal Securities - Currently working on P3 for Divis!on at Citigroup Alabama Daniel Gangwish - No other revenue bond - 24 years of public finance experience 7 experience

5 - From 2001 to 2007 Ms. Garban worked at Goldman Sachs, where she oversaw execution of LACMTA's commercial paper

Calvin Grigsby - Completed 8 revenue bond Has co-manager experience on comparable bonds, - Experience with 2.060 muniCipal issues transactions as lead book-running but dated; primarily institutional coverage, which may with aggregate principal of $296.6 billion senior manager for total par of overlap with bookrunner; identifies Separate Managed - Senior book-running manager on 461 $242.260 million since 2008 Accounts (wealth managers) as part of investor base issues - Completed has completed $3.8 - $12.2 billion of transportation billion for the LAMT A experience. 5 - Has presented unsolicited 5 Hector ReyeS-Erazo proposals to the MT A - 18 years of municipal finance experience - Completed over $17 billion in municipal transactions

Price/Cost

.. ... .. .. c 01 c ..

Price/Cost 2 c .. e .. (; ..... ~ ..

0 o .. o 0 (J (J o 0 IJ) IJ) ID~ U (J

IJ)

Estimated debt service: $763,781 (rank #6); Calculated debt service: $323.712,496 (rank #2); Combined rank #4

8 8 8~5 ' 8.5

0.0 0.0 Estimated debt service: $1.250.888 (rank #12); Calculated debt service:

5 $330.837.596 (rank #12); Combined rank #12 5 5.0 4.8

Estimated debt service: $953.746 (rank #9); Calculated debt service: $328,103,301 (rank #10); Combined rank #11

5 6 5.8 5,1

Estimated debt service: $721,764 (rank #5); Calculated debt service: $323,399,237 (rank #1); Combined rank #1 (tie)

5 6 5.6 4.8

9/21/2011

co CI '2 I: Firm '-'C .~ .E Gl

Gl E = .. co co E.= UID Wu..

Kinsell Newcomb

Prager Y Y

Siebert Brandford Shank Y Y & Co., LLC

Stone & Youngberg Y Y

Prepared by PFM, Inc.

-- - - - - - - - --


Experience Marketing

Capabilities to Sell California Issuer Bonds, including to round out the selling team by Experience and Capabilities of Experience of Assigned Professionals provid ing access to additional investors though i!! Firm in Similar Transactions i!!

unique distribution channels, market sectors 0 0 u u en en served or geographic areas served. Daniel P. Massiello - Sole-managed several large Targets "second-tier," high net worth (they define as - 20 years of public finance experience transactions professional money managers), retail investors; - Advised or underwritten $5+ billion - $67.735 million Santa Paula Utility limited detail on specific investors public agency bond transaction Authority - Structured several revenue-backed - $83,77 million Victorville Joint utility financings 5 Powers Authority 5 Jeffrey Kinsell - Currently engaged as the Senior - In public finance in 1975 Book-Running manager on the - Advisor or Underwriter in issuance of > Water Replenishment District of $10 billion 'In securities Southern CA's $70MM COP

Saul Rosenbaum - Since 2008, served as senior Uses "MuniCenter" web-based wholesaling; - Joined firm in 1994 manager on 63 revenue bond distribution agreement with HSBC securities Steven Hass offerings, with combined par of ovel - Has 13 years of public finance $2,2 billion experience - In Oct 2009, co-managed - Has served the NY MTA, Triborough 7 LACMTA's $320,945,000 Prop A 6 Bridge and Tunnel Authority, and Puerto Series 2009-A bonds Rico Highways and Transportation - Has presented to LACMT A on Authority benefits of BABs

- Provides a market update to LACMT A on a weeki,; basis

Napoleon Brandford - Since 2008, served as senior Detailed, focused marketing plan based on maturity - 30 years of experience in public finance manager on 109 revenue bonds (short term funds, retail, trusts, intermediate funds); - As Chairman, has overseen over $233 totaling $17.9 billion in par significant institutional coverage based on prior billion in negotiated municipal bond - Since 2008, transportation experience, access to professional retail in California underwriting transactions revenue bond experience totals $7 and Muriel Siebert brokerage - $10.5 billion senior managed and billion in par oversight on transactions for LA World - Ranked 7th as senior manager of Airports , Dallas Area Rapid Transit, San 8 negotiated transportation financings

8 Diego International Airport, Metropolitan in 2010 Transit Authority of Harris County, etc. - Provides LACMTA with refunding Nicol Malas memos and market updates - Senior banker on a total of $10.1 billion of transportation-related financings

Steve Heaney - Since 2008, senior managed Significant proven experience selling comparable - Head of LA office; prior experience with more revenue bond financings in bonds as a co-manager; claims to have largest LACMTA the State than any other institutional trading force in California; has a Private Parker Colvin underwriting firm Client Group that markets to money managers, - Over past 5 years, led more senior- - Since 2008, served as book- investment advisors, trust accounts, and "managed managed CA muniCipal financings than running senior manager on 297 wrap accounts." any underwriter revenue bond financings for a total - Experience with large CA issuers, such par amount in excess of $7 billion as UC Regents, Met Water District of 8 - Since 2008, book runner on 238 9 Southern CA. Contra Costa Water CA revenue bond financings for District, and the CA Department of Water total par of $5.6 billion Resources - Frequently visits the LACMTA,

provides structuring suggestions and market updates

Price/Cost

'- Q; Gl I: CI I: co

Price/Cost 2 c: i!! i!! co

... Gl ::!i Gl 0 0 o '- o (; o 0 u u en en ID~ U~

Estimated debt service: $1 ,302,510 (rank #13); Calculated debt service: $500,000,000 (rank #13); Combined rank #13

5 5 5.0 4.8

Estimated debt service: $1,117,121 (rank #11); Calculated debt service: $324,928,771 (rank #4); Combined rank #7 (tie)

7 6 6.3 6A


8 8 8:0 7.6


9 10 9.5

1 8.4

9/21/2011

one gateway plaza me,ropoli,, t,,,po,';o, autho,., 90012...

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