City and County of San Francisco Office of the Controller REQUEST FOR INFORMATION (RFI) Soft Story Retrofit Financing Program RFI#CON2014-07 CONTACT: Vishal Trivedi, Vishal.Trivedi@sfgov.org, (415) 554-4862 The Office of the Public Finance, by way of this Request for Information (the RFI ), is requesting responses from qualified firms and parties to inform an industry review regarding administrative services and financing for a City and County of San Francisco (the City ) Soft Story Special Tax Financing Program (the Financing Program ). As described further in this RFI, the Financing Program is designed to allow property owners to undertake seismic building retrofits and finance the cost of such improvements over a period up to the useful life of the financed projects through the levy of special taxes on their property tax bills. The Financing Program would facilitate the project funding for each project through the sale of special tax bonds or other borrowings secured by a special tax levy secured by the participating landowners property. This Financing Program would assist property owners with seismic retrofits in two circumstances: 1. Mandatory retrofits pursuant to San Francisco Building Code Chapter 34B, the mandatory seismic retrofit ordinance (No. 66-13) that was passed by the San Francisco Board of Supervisors and signed into law by Mayor Ed Lee on April 18, 2013. The mandatory seismic retrofit ordinance amended the San Francisco Building Code to establish a mandatory seismic retrofit requirement for wood-frame buildings of three or more stories, or two stories over a basement or underfloor area that has any portion extending above grade, and containing five or more dwelling units, where the permit to construct was applied for prior to January 1, 1978 and the building has not been seismically strengthened. 2. Voluntary soft story retrofits of buildings being upgraded to meet the requirements of San Francisco Building Code Administrative Bulletin AB-094, which would bring their buildings into conformance with ordinance No. 54-10. This RFI is to be used solely for the purpose of an industry review by the City as it evaluates financing options, and the City assumes no responsibility for any other use of this document. It is not a requirement to participate in this industry review process in order to be considered for any subsequent competitive solicitation arising out of this process. The City will independently review and evaluate any information submitted as part of this process. Participation in this industry review is strictly voluntary and the City will not reimburse participants for any costs in connection therewith. The submission of responses to this RFI does not guarantee the respondent of any future business with the City. Schedule* RFI Issued: Questions Due: Answers Posted: Deadline for RFI Responses: *Dates are subject to change 04/01/2014 04/08/2014 (5:00 PM) 04/15/2014 (5:00 PM) 04/22/2014 (5:00 PM) Questions and Communications To ensure fair and equal access to information about this RFI, all questions, requests for clarification, and requests for additional information must be submitted to the Office of Public Finance, Vishal Trivedi, at Vishal.Trivedi@sfgov.org. Controller s Office City Hall, Room 316 1 Dr. Carlton B. Goodlett Place San Francisco, CA 94102 415.554.7500 1 Page
I. Background According to seismologists, there is a high likelihood that the Bay Area will experience a magnitude 6.7 or larger earthquake within the next 30 years. Many buildings in San Francisco pre-date the development of the modern earthquake design requirements included in current building codes. In order to prepare for such an event, and to decrease the extent and severity of damage caused by an earthquake, thereby reducing injuries, fatalities, adverse economic impacts and the loss of key cultural and other community resources, the City in 2011 developed a 30 year Earthquake Safety Implementation Program (ESIP) which was based on the Community Action Plan for Seismic Safety (CAPSS) that outlined key actions aimed at reducing the risks and damage posed by earthquakes. According to the CAPSS plan, approximately 2,800-2,900 of the City s approximately 4,300 wood-frame residential structures with five or more residential units on two or more stories likely have a soft story condition, and of these, anywhere from 43-85 percent may be rendered unsafe for occupancy after a strong earthquake. Of these, one quarter would be expected to collapse completely, affecting nearly 58,000 residents and 2,000 businesses. Timely retrofit could reduce these collapses to less than one percent of the most at-risk buildings, at an estimated cost of between $60,000 and $130,000 per building. The CAPSS plan includes many elements designed to address earthquake safety needs and increase the City s resilience in the face of a seismic event. Among the strategies identified in the CAPSS plan is the implementation of mandatory building upgrades for certain types of residential buildings. These buildings were identified as having a high degree of vulnerability to collapse or severe damage in the event of seismic activity. The Financing Program is a key element of the mandatory building upgrade strategy to address these vulnerabilities and mitigate seismic risks. On April 18, 2013, Mayor Ed Lee signed the Mandatory Soft Story Retrofit Ordinance that had been approved by the San Francisco Board of Supervisors. The mandatory ordinance became operative as of June 17, 2013. In 2010, the City launched a voluntary program for all wood frame soft story buildings and this program still applies to all wood frame buildings that are not covered by the mandatory program. Notices were issued to all applicable properties on September 15, 2013, advising property owners of the retrofit requirement and required screening process. All subject properties are required to submit an engineer- or architect-completed screening form to determine whether their building is within the scope of the program and requires retrofit. These forms are required to be submitted to the San Francisco Department of Building Inspection by September 15, 2014. Depending upon the building s compliance tier, this work is required to be completed within 4-7 years from the operative date of the ordinance. Role of the Controller s Office The City's 1996 Charter designates the Controller as the chief accounting officer and auditor for the City. The Controller is appointed by the Mayor and confirmed by the Board of Supervisors to serve a ten year term of office. The Controller is responsible for all financial management 2 Page
systems, procedures, internal control processes and reports that disclose the fiscal condition of the City to managers, policy makers and citizens. The Controller is also the auditor for the City performing financial and performance audits of departments, agencies, concessions and contracts. The Office of Public Finance is a division within the Controller s Office. The Office of Public Finance is responsible for issuing and managing the City s general fund debt obligations. Its mission is to provide and manage low-cost debt financing of large-scale, long-term capital projects and improvements. For more information regarding Office of Public Finance, visit: http://www.sfcontroller.org/index.aspx?page=288 The Office of Public Finance and the Earthquake Safety Implementation Program (ESIP) will continue to collaborate with our partners to create and facilitate a program to help property owners perform seismic retrofits to make their properties safer. The Office of Public Finance will work with ESIP to review RFI responses and determine next steps. II. Financing Program Description Certain barriers still remain for owners seeking to bring their buildings into compliance with these safety standards, both on a mandatory basis and a voluntary basis. One of these is the sizeable up-front design and construction costs for these retrofits. The City is therefore seeking information from qualified parties about ways in which they could help the City offer accessible financial options and lower barriers for participation in these seismic improvements, so that more homeowners can implement seismic retrofit improvements in a financially responsible manner. As of the date of publication of this RFI the City has received over 96 applications seeking an aggregate of over $6.6 million dollars for the first round of funding. Additional pools of funding are planned for various points throughout the life of this program based on the demand and success of this first round. The City has identified two key program tasks for which it is now seeking outside expertise: finance and administration. With respect to finance, the City is looking for information from entities that are capable of providing funding to allow for approval and disbursement of funds to qualified participants on an as-needed basis. The funding would be repaid through a special tax collected from participating properties over a specified period (not exceeding the useful life of the financed improvements). As security for any financing, the City would agree to initiate judicial foreclosure of delinquent installments. The City has determined that any funding product must offer a fixed interest rate and repayment schedule that does not change after the time a participant approves the financing and agrees to pay the special tax. The City anticipates that the financing could be structured in a number of ways other than the issuance of bonds. For example, the City successfully used a drawdown bond structure under a credit agreement in connection with a financing program for seismic improvements for unreinforced masonry buildings. 3 Page
The Financing Program might also involve additional security mechanisms. One straightforward approach would be for the City to fund a reserve account to cover delinquent payments. This would provide lenders with some measure of confidence in repayment, without immediately relying on the costly and time-consuming foreclosure process. In the current budgetary climate, however, any such use of City General Fund monies will be constrained. Therefore, the City recommends that proposers take account of the City s administration of property tax allocations generally before proposing specific characteristics of such a reserve (see City s Method of Property Tax Allocation below). The City is open to other innovative approaches, and provides these examples for informational purposes only. With respect to administration, the City is looking for information from entities that can perform the administrative tasks required for this innovative program in a cost-effective and efficient manner. These tasks are further described below and include property owner and contractor outreach, the processing of applications, verification of conditions to disbursement, and any other activities required under the respondent s proposed project approach. The City s objective for this RFI is to review information from firms and parties that would be able to meet the City s financing and administrative needs. Respondents are welcome to provide submittals in response to either or both tasks. The City encourages respondents to partner with other firms or parties if necessary to cover all of the elements of this RFI. City s Method of Property Tax Allocation One potential approach to striking an efficient balance between the lender s desire for security against delinquencies and the City s desire to limit cash outlays on a reserve account would be to structure the reserve account to reflect the City s success in collecting property taxes generally and the related administration of the City s Teeter Plan tax allocation program. Under its legal status as both a city and county, the City performs the same tax collection functions as other counties around the state. In recent times the City has joined most county tax collection agencies in implementing an alternative method of tax allocations. Under this socalled Teeter Plan, the City allocates to the City s taxing agencies 100% of the secured property taxes billed, even if 100% of those funds have not been collected. In return, as the delinquent property taxes and associated penalties and interest are collected, the City s General Fund retains such amounts. Under the more traditional aspects of the Teeter Plan, the City has funded payment of accrued and current delinquencies through authorized internal borrowing. In summary, under this approach, a payee of the Teeter Plan is in essence looking to the City s credit to make payment of the tax receivable. The City may consider incorporating the Financing Program into the Teeter Plan if it would improve repayment terms financing parties submit in response to this RFI. However, the City reserves the right to determine and revise its tax allocation program at any time and is not formally committing to incorporating this Financing Program into the Teeter Plan. The City maintains a Tax Loss Reserve for all tax allocations under the Teeter Plan. This reserve has been funded at $16.22 million as of June 30, 2009, $17.51 million as of June 30, 2010, $17.30 million as of June 30, 2011, $17.98 million as of June 30, 2012, and $18.34 million as of June 30, 2013. The table below shows the City s overall tax levy and collection performance over the past several years: 4 Page
CITY AND COUNTY OF SAN FRANCISCO Assessed Valuation of Taxable Property Fiscal Years 2008-09 through 2013-14 ($000s) Fiscal Year Net Assessed Valuation (NAV) 1 % Change from Prior Year Total Tax Rate per $100 2 Total Tax Levy 3 Total Tax Collected 3 % Collected June 30 2009-10 150,233,436 6.3% 1.159 1,808,505 1,764,100 97.54% 2010-11 157,865,981 5.1% 1.164 1,888,048 1,849,460 97.96% 2011-12 158,649,888 0.5% 1.172 1,918,680 1,883,666 98.18% 2012-13 165,043,120 4.0% 1.169 1,997,645 1,970,662 98.65% 2013-14 172,489,208 4.5% 1.188 2,049,172 n/a n/a 1 2 3 Based on Certificate of Assessed Valuation dated as of August 15, 2013. Net Assessed Valuation (NAV) is Total Assessed Value for Secured and Unsecured Rolls, less Non-reimbursable Exemptions and Homeowner Exemptions. Annual tax rate for unsecured property is the same rate as the previous year's secured tax rate. The Total Tax Levy and Total Tax Collected through FY 2012-13 is based on year-end current year secured and unsecured levies as adjusted through roll corrections, excluding supplemental assessments, as reported on Treaserer/Tax Collector Report 100 and reported to the State of California (available on the website of the California State Controller's Office). Total Tax Levy for FY 2013-14 is based on NAV times the 1.1880% tax rate. Note: This table has been modified from the corresponding table in previous bond disclosures to make levy and collection figures consistent with statistical reports provided to the State of California. Source: Office of the Controller, City and County of San Francisco. II. Purpose of the RFI The purpose of this RFI is to solicit information from market participants about the range of services offered by financial services firms for administering and financing a City-sponsored Soft Story Retrofit program. The City may solicit proposals to provide these services at a later date, at which point a Contractor may be selected to administer the Program. III. EVALUATING RESPONSES The City is utilizing this process for informational purposes only. No vendor will be selected to provide the services indicated in this RFI. The City may invite selected vendors to make oral presentations and demonstrate their experience and capabilities for the purpose of allowing the City to review and better understand the range and quality of available services. All such invitations will be issued in writing on or before April 28, 2014. Firms that are selected to make presentations will receive a list of questions to address at least two weeks prior to the presentation. This RFI is to be used solely for the purpose of this industry review and the City assumes no responsibility for any other use of this document. It is not a requirement to participate in this industry review process in order to be considered for any subsequent competitive solicitation 5 Page
arising out of this process. The City will independently review and evaluate any information submitted as part of this process. Participation in this industry review is strictly voluntary and the City will not reimburse participants for any costs in connection therewith. The submission of responses to this RFI does not guarantee the respondent of any future business with the City. IV. PREPARING A RESPONSE Respondents must submit the requested information in the format specified in Section V below. Responses shall not exceed ten (10) pages. The page maximum does not include brochures, literature and demonstrations. These additional items are welcome but should not be submitted in lieu of responding to the individual questions below. Please provide information on the numbered items below. Respondents are expected to answer all items. 1. Provide company name, address, contact name, title, phone number, and email address. 2. Provide a letter of introduction with a brief description of your description of your business including company history, size, organizational structure/chart, skill sets, vision and mission. This description should include an identification of any joint ventures proposed to be used by the respondent and their expertise. 3. Indicate the type of services the firm would propose includes, among other services, financing, administration, participant/contractor, marketing/outreach, and/or some combination of any of the same. 4. Provide firm s joint venture s and/or any sub-consultant s principal place of business and location of lead office for this engagement. 5. Include your firm s most recent annual report. 6. Describe your firm s local resources in the City and County of San Francisco that would be available to provide service to program participants. 7. Provide a brief description of the firm s customer service capabilities, including telephone and internet access to loan services. 8. Describe your firm s competitive advantages in participating in the City s Loan Program. 9. Funding Structures: Recommend strategies to creatively structure funding the Loan Program to broaden the appeal among potential investors; reduce risk to the City, program participants, and/or investors; and/or minimize financing costs to program participants as well as providing working capital to contractor. Alternative strategies may include potential partnerships with existing low-interest, long-term financing options. Devise a plan(s) to assess and implement the strategy or strategies. 6 Page
10. Indicate whether your firm would intend to structure as a loan or a purchase of bonds or both. With respect to your proposed structure(s), please address the following: interest rate setting; limitations on future loans/bond purchases/timing; prepayment options; initial commitment and issuance fees; and other fees and expenses. 11. [Optional] Submit at least two (2) references, preferably from local municipalities where your firm has administered tax-secured property improvement financing or similar structure you have proposed within the last five (5) years. Please include: Name Contact information (name, address, phone, email) Dates of engagement Project name Total loan amounts and number of loans serviced Type of improvements financed (e.g. energy efficiency upgrades, seismic retrofits, capital improvements, etc ) Interest rates and program fees V. RESPONSE SUBMISSION REQUIREMENTS All questions, requests for clarification, and requests for additional information regarding this RFI must be submitted to Vishal Trivedi at Vishal.Trivedi@sfgov.org. All such questions and requests must be submitted by e-mail. Responses to such questions and requests shall be at the City s sole discretion and nothing in this RFI shall create an obligation by the City to provide any response to the submitting party. Responses may, at the City s sole discretion, be posted as addenda to this RFI on the City s website. Responses must be received by 5:00 pm PT on the Response Due Date. Responses, including any attachments, should be submitted by email to Vishal.Trivedi@sfgov.org. VI. TERMS AND CONDITIONS OF THIS RFI Responses to this RFI become the exclusive property of the City and subject to the California Public Records Act and the City's Sunshine Ordinance. Please be aware that any information submitted, even personal identifying information may be disclosed to the public. The Respondent shall be solely and fully responsible for all costs associated with the development, preparation, transmittal, and submission of any material in response to this RFI. The City may, in its sole discretion, ask selected Respondents to present their material in person to City s representatives at the City s offices, and the costs of such presentations shall be solely the responsibility of the Respondent. The City assumes no contractual or other obligations as a result of the issuance of this RFI, the preparation or submission of materials by a Respondent, the evaluation of materials, the Respondent s conducting of presentations, or the selection of any Respondent for further negotiations. There may be no claims whatsoever for reimbursement from the City for such costs. 7 Page
VII. SUBMITTING A RESPONSE TO THE RFI The submittal of a response to this RFI does not guarantee use of the information provided. This is not a Request for Proposals (RFP). The City, at its sole discretion, will determine if a RFP or other competitive solicitation may be issued at a later date. Any RFP issued by the City may differ significantly in content from the applications and services described in this RFI. This RFI is to be used solely for the purpose of this industry review and the City assumes no responsibility for any other use of this document. It is not a requirement to participate in this industry review process in order to be considered by any competitive solicitation arising out of this process. Participation in this industry review is strictly voluntary and the City will not reimburse participants for any costs in connection therewith. Submission of the RFI does not guarantee any future business with the City. The issuance of this RFI does not constitute agreement by the City that any contract will actually be entered into by the City. The City expressly reserves the rights to: 1. Waive or correct any defect or informality in any proposal, response or response procedure; 2. Reject any or all responses and re-issue a new RFI, RFQ or RFP; 3. Prior to submission deadline for responses, modify all or any portion of the schedule for receiving responses; 4. Procure any materials, equipment, products or services specified in this RFI by any other means; or 5. Determine that no project will be pursued. 8 Page