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HomeMy WebLinkAbout26 - Professional Services Agreements - Baker Tilly Municipal Advisors - Housing and Economic Development Project Financial 1 June 2, 2026 Ms. Jesse DiTommaso City of Bozeman, Montana Delivered electronically RE: Economic Development Services Dear Ms. DiTommaso: This Scope Appendix is attached by reference to the Professional Services Agreement dated April 8th, 2025 (“Agreement”) between the City of Bozeman, Montana ("City," or the “Client”) and Baker Tilly Advisory Group, LP (BTAG) and relates to services to be provided by both BTAG and Baker Tilly Municipal Advisors, LLC (BTMA), collectively (Baker Tilly). Scope of Work BTMA will work collaboratively to evaluate the applicant’s Project proposal, accomplish the Client’s goals, minimize costs, and manage risk. The approach is designed to give the Client confidence that they are making an informed decision when considering public-private partnerships. BTMA’s time-proven approach is summarized below. Housing and Economic Development Project Financial Analysis and Related Services: BTMA TIME-PROVEN APPROACH Activity* Baker Tilly Added Value 1. Receive application and negotiate funding agreement Application design, standard funding agreement and non-disclosure language, policy and procedure refinement. 2. Determine due diligence to be performed, request information and prepare analysis Sophisticated processes to request, receive and organize project information in a way that protects confidentiality. Recognition that analysis results are important; but asking ourselves “What could go wrong?” while preparing the analysis leads to valuable insights. Concise — but thorough — reports referencing authoritative third-party sources. 3. Negotiate term sheet using due diligence results Experience negotiating hundreds of transactions totaling billions of dollars, always with a focus on finding mutually agreeable solutions. 4. Prepare and consider incentive documents Unique ability to communicate — both written and verbally — complex financial information in a way that is easy to understand. Years of practice supporting attorneys in the preparation of agreements and incentive documents. 5. Administer incentives A full range of incentive administration and cost certification services. Baker Tilly Municipal Advisors, LLC 7285 W 132nd St, Suite 220 Overland Park, KS 66213 +1 (816) 333 7200 and Anaconda, MT 59711 bakertilly.com Docusign Envelope ID: 4BD63581-AAE2-8744-8169-5C5A50824F95 2 SCOPE APPENDIX TO PROFESSIONAL SERVICES AGREEMENT DATED APRIL 8, 2025, BETWEEN THE CITY OF BOZEMAN, MONTANA AND BTMA * While we’ve listed these activities sequentially, experience has shown that some projects require revisiting activities due to project, market or other environmental changes. At initiation of a project, BTMA will guide the Client through the following process to identify the needed due diligence, recognizing the Project’s unique characteristics and risks. BTMA will perform the services selected by the Client when requested, which may include one or more of the following. Developer Review BTMA will analyze whether the applicant possesses the financial and managerial capacity to deliver the Project as proposed to include a review of the applicant’s financials, references and responses to disclosure questions. If there are gaps in information provided by the applicant, BTMA will identify those gaps and explain why and if they preclude a complete understanding of the applicant’s capacity. Analysis results will be presented to the Client in a letter report. Public Cash Flow Analysis and Project Viability BTMA will prepare an analysis of the applicant’s public revenue projections. • Evaluation of the applicant’s base assumptions • Substitution of alternative assumptions, if warranted • Calculation of projected revenues using applicant’s and recommended alternative assumptions • If applicable, estimation of the net bond proceeds which can be supported in the current marketplace by the combined Project revenue streams • Analyze the development experience and financial capacities to deliver the proposed project Internal Rate of Return (But-For) Analysis BTMA will provide an internal rate of return analysis based upon the applicant’s Project proforma. Docusign Envelope ID: 4BD63581-AAE2-8744-8169-5C5A50824F95 3 SCOPE APPENDIX TO PROFESSIONAL SERVICES AGREEMENT DATED APRIL 8, 2025, BETWEEN THE CITY OF BOZEMAN, MONTANA AND BTMA • Review the applicant’s proforma and related information to confirm accuracy of the calculations and reasonableness of assumptions • Identify alternative assumptions, if warranted • Calculate the unleveraged internal rate of return using the applicant’s assumptions and BTMA’s suggested alternative assumptions • To the extent the requested incentive is exceeding targeted ranges, negotiate reasonable rates of return for private and public participants Market Feasibility - Financial Typically performed in conjunction with public cash flow and internal rate of return analysis, BTMA will consider the reasonableness of all assumptions in the applicant’s Project proforma and confirm mathematical accuracy. An assessment of market absorption can be obtained through subconsultants. Market Verification & Economic Reasonableness To frame project impacts within the appropriate economic context, BTAG develops a market perspective that assesses conditions within the project’s micro-market, surrounding submarkets, and metro environment. Our team will verify and provide additional context into neighborhood, citywide, and regional factors that will influence and/or enhance the development scenarios, including macro-level trends in community growth factors related to residential markets, commercial business activity, and industry clusters. Depending on project needs and considerations, our core analysis components can include: • Analyze residential, visitor, and worker socio-economic profiles to map migration trends, daily commute patterns, and spending potential. • Identify and map core real estate types in the delivery pipeline of the relevant surrounding micro- and submarkets to understand potential new unit volumes, quality, pricing, and absorption of product that may enter the market during the project’s delivery schedule. • Conduct a retail gap analysis and Experian Mosaic customer segmentation to assess potential tenanting strategies for mixed-use development scenarios. The economic potential and alternatives analysis of the project’s development scenarios will be further supported with Baker Tilly’s extensive access to public and proprietary datasets. Our integrated data ecosystem allows our team to access key details about industry cluster performance, real estate markets, and commercial business activity across communities to understand local economic drivers and the potential for future investment. Our data sources help build a comprehensive perspective about market dynamics related to trends in labor, land, and capital in a given market, with sources including: ESRI Business Analyst, PolicyMap, Placer.ai, CoStar, GreenStreet, IBISWorld, Lightcast, and IMPLAN. Fiscal Impact Analysis BTMA will forecast the net fiscal impact to the Client and, if desired, other affected taxing entities based upon the requested level of incentive. • Working with the Client and applicant, identify baseline assumptions for the analysis. • Estimate anticipated primary and - if desired - secondary benefits and costs for each taxing entity during the incentive period. Calculate the net benefit/loss for each taxing entity. Economic Impact Analysis of Development Scenarios BTAG’s economic impact analysis balances qualitative and quantitative considerations to model project impacts to relevant municipal jurisdictions and assess the alignment of community priorities with the Docusign Envelope ID: 4BD63581-AAE2-8744-8169-5C5A50824F95 4 SCOPE APPENDIX TO PROFESSIONAL SERVICES AGREEMENT DATED APRIL 8, 2025, BETWEEN THE CITY OF BOZEMAN, MONTANA AND BTMA modeling results. Our methods will forecast the various tax revenues that will be generated, localized spending, and potential jobs that will be created, utilizing data-driven best practices and impact modeling in IMPLAN and Lightcast. Our core analysis components include: • Conduct cost segmentation of the project’s pro forma to appropriately allocate the project’s capital expenditures into IMPLAN’s cost specifications based on the project’s delivery schedule. • Build time series analysis of the project’s delivery schedule to quantify impacts in inflation-adjusted dollars to appropriately account for changes in the time value of construction costs versus operational impacts. • Build geography exclusion into the economic event modeling to appropriately account for inter-regional business activity and leakages through multi-regional input-output (MRIO) analysis. • Analyze the impacts of ongoing business operations after project delivery with Lightcast modeling to assess gross revenue spending and job creation of tenants. • Quantify the indirect and induced benefits of supply chain and community spending on local industries to assess the project’s economic output. General Economic Development Consulting BTMA will provide general economic development consulting and municipal advisory services related to redevelopment projects, public-private partnerships, housing initiatives, infrastructure improvements, and other economic development activities undertaken by the Client. Services may include review and evaluation of applicant proposals, financial structures, incentive requests, redevelopment strategies, and related implementation considerations. BTMA may assist the Client in negotiations with applicants and project stakeholders, preparation and review of development agreements and related entitlement documents, and documentation of negotiated business terms through term sheets and supporting materials. As requested, BTMA may participate in meetings with the Client’s staff, governing body members, project teams, and other stakeholders regarding project status, financing considerations, negotiations, and implementation strategies. Services may further include: • Assistance with development agreement negotiations and implementation of redevelopment plans; • Evaluation and negotiation support related to financial, security, timing, reimbursement, and default provisions; • Integration of development agreements and financing structures into broader redevelopment plans and project documents; • Evaluation of alternative funding sources, including grants, tax credits, and other public or private financing tools; and • Limited project management and implementation support for selected redevelopment activities, as requested by the Client. Docusign Envelope ID: 4BD63581-AAE2-8744-8169-5C5A50824F95 5 SCOPE APPENDIX TO PROFESSIONAL SERVICES AGREEMENT DATED APRIL 8, 2025, BETWEEN THE CITY OF BOZEMAN, MONTANA AND BTMA Related Administrative and Reporting Services BTMA will provide administrative, analytical, reporting, and compliance-related services associated with the City’s tax increment financing (“TIF”) districts, redevelopment programs, and related economic development activities. Services may include, but are not limited to, the following: • Review of City documentation for each district, including original and amended TIF plans, annual financial reports, financial statements, redevelopment agreements, governing documents, and other related records and supporting documentation; • Analysis of historical financial activity within each district, including verification and review of reported revenues, expenditures, transfers, obligations, and fund balances; • Performance of various compliance-related procedures and testing associated with applicable laws, regulations, policies, redevelopment plans, and governing documents related to district expenditures and activities; • Preparation of written summaries and analytical memoranda for individual districts, including findings, observations, and recommendations, as appropriate; • Preparation of memoranda and supporting documentation regarding overall TIF operations for permanent administrative and file record purposes; • Evaluation and recommendation of options regarding the use of future or available fund balances, including consideration of City policies, outstanding obligations, projected revenue availability, district closeout timing, eligible expenditures, and strategies intended to maximize redevelopment and economic development opportunities within the City’s TIF districts; • Preparation of overview financial reports, implementation summaries, and action plans for individual TIF districts; • Preparation and maintenance of summary reference materials and working documents intended to provide efficient day-to-day access to district information, operational considerations, compliance items, financial data, and implementation status. Docusign Envelope ID: 4BD63581-AAE2-8744-8169-5C5A50824F95 6 SCOPE APPENDIX TO PROFESSIONAL SERVICES AGREEMENT DATED APRIL 8, 2025, BETWEEN THE CITY OF BOZEMAN, MONTANA AND BTMA Housing and Economic Development Financial Planning and Capital Budgeting BTMA will assist and advise the City on economic development financing, capital planning, incentive evaluation, and municipal advisory matters related to redevelopment, housing, infrastructure, and economic development initiatives. Services may include, but are not limited to, the following: Financing Analysis and Planning • Identify, evaluate, and advise on both private and public financing options for proposed projects and economic development initiatives; • Prepare financing plans and implementation strategies for public-private partnerships and redevelopment projects; • Assist in identifying, evaluating, and developing alternative financial resources, including grants, tax credits, public incentives, debt financing structures, and other local, state, federal, or private funding mechanisms. Strategic Financial Planning BTMA will assist and advise the City with the development and implementation of long-range economic development strategic financial plans. Services may include: • Identification and evaluation of strategic objectives and performance against established objectives; • Review and analysis of cost-effective financing approaches, funding tools, and implementation alternatives; • Estimation of revenue generation, financing requirements, and long-term funding capacities; • Evaluation of fiscal sustainability and financial implementation strategies associated with economic development initiatives. Capital Budgeting and Financial Capacity Analysis BTMA will assist the City regarding the implementation and management of multi-year economic development capital budgets and financing programs. Services may include: • Review and analysis of current and projected revenue sources and determination of available funding capacities; • Assistance in scheduling and coordinating funding sources with project uses to optimize the City’s overall financial position and available resources; • Examination and analysis of fiscal impacts, debt capacity, and potential credit rating considerations associated with proposed projects or financing plans. Economic Development Incentive and Market Comparisons BTMA will assist the City regarding independent and community comparisons of economic development incentives, financing structures, and redevelopment outcomes. Services may include: • Research and benchmarking of local, state, and federal incentive programs and their applications within Montana and comparable jurisdictions; • Comparative analysis of economic development policies, incentive practices, fee structures, administrative approaches, and market conditions; • Collection and presentation of sample policies, applications, and related economic development materials for City consideration. Docusign Envelope ID: 4BD63581-AAE2-8744-8169-5C5A50824F95 7 SCOPE APPENDIX TO PROFESSIONAL SERVICES AGREEMENT DATED APRIL 8, 2025, BETWEEN THE CITY OF BOZEMAN, MONTANA AND BTMA Debt Programs and Municipal Advisory Services BTMA will assist the City regarding the application, management, and administration of short- and long-term debt programs and related municipal advisory matters. Upon the determination that an obligation of the City will be issued, BTMA shall provide a separate scope appendix providing greater detail as it relates to the bond issuance process. Services may include: • Assistance and advisory services related to debt obligations, including compliance considerations, financial capacity evaluations, refunding opportunities, and related administrative matters; • Evaluation of public and private market conditions relating to the marketability and structuring of bonds and other financing instruments; • Analysis regarding credit quality, debt structuring alternatives, and the marketability of potential debt issuances; • Assistance with capital finance planning, debt issuance support, and related financing implementation activities. Upon the determination that an obligation of the City will be issued, BTMA shall provide a separate scope appendix providing greater detail as it relates to the bond issuance services provided. Deliverables Deliverables will be mutually determined by the Client and BTMA. For each service selected by the Client, BTMA will deliver a written report to the Client where appropriate. Draft reports will be provided and revised as directed by the Client. Final reports will be presented at meetings as directed by the Client. Delivery dates will be mutually determined by the Client and BTMA. BTMA’s ability to complete the work will be highly impacted by responsiveness to requests for information. Docusign Envelope ID: 4BD63581-AAE2-8744-8169-5C5A50824F95 8 SCOPE APPENDIX TO PROFESSIONAL SERVICES AGREEMENT DATED APRIL 8, 2025, BETWEEN THE CITY OF BOZEMAN, MONTANA AND BTMA Engagement Team Meet the leading municipal advisory team we’ve assembled to achieve everything you envision. Selected intentionally for your goals and backed by our specialized resources, these individuals are collaborative and multidisciplinary. Their passion for the public sector industry will make them an unstoppable force on your behalf. You’ll find their bios as follows – including your long-standing lead advisor, Steve Scharff. THE TEAM TO ACHIEVE THE CLIENT’S GOALS Steve Scharff – Director +1 (406) 692 7966 | steve.scharff@bakertilly.com Residing in Anaconda, Steve is firmly committed to the State of Montana and its government clients. He has proudly served communities in this state for nine years. His experience primarily includes serving government entities by providing nuanced capital finance solutions through comprehensive debt and capital structuring, ongoing debt management, performing security pricing analysis, proforma cash flow forecasting, writing recommendations and structuring effective underwriting/lending requests for proposals; reviewing legal documents; providing tax impact and incremental revenue analysis, and performing various other ad-hoc reporting and analysis, most especially around legislative impact. He holds a Bachelor of Science in finance from Quincy University and a Master of Business Administration from the University of Minnesota-Carlson School of Management. Steve is MSRB Municipal Advisor Series 50 Qualified, Municipal Advisor Principal Series 54 Qualified, has a Series 65 Uniform Investment Advisor certification and was recently recognized as a Bond Buyer Rising Star - 2023 recipient. Kolbe Krzyzanowski — Senior Manager +1 (916) 333 6899 | kolbe@krzyzanowski@bakertilly.com Kolbe joined the firm in 2021, bringing experience in local government and economic development. Prior to joining Baker Tilly Municipal Advisors, LLC, he worked as an independent research consultant and economist for a large city in Missouri. In that role, Kolbe played a key part in developing a $1.7 billion annual budget, provided analytical support for strategic initiatives, built complex financial models, and conducted policy, program, fiscal, and economic analyses. His work included preparing cost-benefit and feasibility studies for economic development projects. Since joining Baker Tilly, Kolbe has delivered economic development advisory services on a wide range of projects across multiple states, supporting total investments exceeding $2 billion. Kolbe earned both a Master of Arts in Economics and a Bachelor of Arts in Economics from the University of Missouri–Kansas City. He is a registered Municipal Advisor with the Securities and Exchange Commission. Docusign Envelope ID: 4BD63581-AAE2-8744-8169-5C5A50824F95 9 SCOPE APPENDIX TO PROFESSIONAL SERVICES AGREEMENT DATED APRIL 8, 2025, BETWEEN THE CITY OF BOZEMAN, MONTANA AND BTMA Steve and Kolbe will be supported by our talented team of analysts and, depending on the requirements of the project, will draw on our specialists in areas such as real estate, construction audit and cost certification, affordable housing, site selection, and forensic audit. Kolbe and Steve are the tip of the spear, and you can stand confident in knowing that a broad range of professionals are supporting your efforts and engaged as needed, ensuring timeliness in response and delivery. Some of these supporting team members are: Tony Ollman, Principal Abigail Garrard, Consultant Jolena Presti, Managing Director Braden Ruge, Senior Consultant Kristian Vaughn, Senior Manager Joshua Davis, Senior Consultant Lucas Peterson, Senior Consultant Others Compensation and Invoicing Economic development is a “hurry up and wait” business. Deals typically come together in starts and stops. And when the foot comes off the brake, it usually goes down hard on the gas. Along the journey, the details of the transaction often change, requiring reconsideration of what has been previously determined. Unanticipated meetings are often called, sometimes with little notice. The unpredictable nature of the work makes fee prediction fraught with risk for both the Client and BTMA. For that reason, BTMA typically performs economic development work on a time and materials basis. Most of BTMA’s clients negotiate funding agreements with applicants, passing on 100% of BTMA’s fees. This arrangement both protects the Client’s finances and incentivizes the applicant to make efficient use of everyone’s time. Fees for services set forth in this Scope Appendix will be billed based on work performed at a blended hourly rate of $370 per hour. Bond Issuance Exception: This scope shall be complimentary to, but not contain services directly related to debt issuance. Given the general variance that debt obligations can take, upon the determination that the City shall issue an obligation established through this Scope Appendix, a separate scope appendix shall be provided, outlining the work and deliverables to be provided by BTMA, which fee shall be agreed upon as part of the scope appendix for such services. The purpose of this Scope Appendix shall be to serve the City up to the point of determination that an issuance is suitable, where applicable. Billing rates are subject to change periodically due to changing requirements and economic conditions. Baker Tilly will notify the Client thirty (30) days in advance of any change to fees. If the Client does not dispute such change in fees within that thirty (30) day period, the Client will be deemed to have accepted such change. The fees billed will be the fees in place at the time services are provided. Actual fees will be based upon experience of the staff assigned and the complexity of the engagement. BTMA will invoice the Client for out-of-pocket expenses such as travel, copies, faxes, conference calls, credit reports, the cost of research information or other expenses necessary to complete this Scope of Services. Additional work requested and authorized by the Client outside this scope of services will be invoiced at the standard hourly rates. For general matters related to the work herein, the Client will not be billed for mileage or meals directly related to travel by Steve Scharff. Docusign Envelope ID: 4BD63581-AAE2-8744-8169-5C5A50824F95 10 SCOPE APPENDIX TO PROFESSIONAL SERVICES AGREEMENT DATED APRIL 8, 2025, BETWEEN THE CITY OF BOZEMAN, MONTANA AND BTMA Billing Procedures Normally, the Client will receive a monthly statement showing fees and costs incurred in the prior month. Occasionally, BTMA may bill on a less frequent basis if the time involved in the prior month was minimal or if arrangements are made for the payment of fees. The account balance is due and payable on receipt of the statement. Nonattest Services As part of this engagement, BTMA will perform certain nonattest services. For purposes of the Engagement Letter and this Scope Appendix, nonattest services include services that the Government Auditing Standards refer to as nonaudit services. BTMA will not perform any management functions or make management decisions on behalf of the Client with respect to any nonattest services provided. In connection with BTMA’s performance of any nonattest services, Client agrees that they will: • Continue to make all management decisions and perform all management functions, including approving all journal entries and general ledger classifications when submitted • Designate an employee with suitable skill, knowledge and/or experience, preferably within senior management, to oversee the services performed • Evaluate the adequacy and results of the nonattest services performed • Accept responsibility for the results of nonattest services • Establish and maintain internal controls, including monitoring ongoing activities related to the nonattest function Conflicts of Interest BTMA is unaware of any additional conflicts of interest related to this Scope Appendix that exist at this time outside of what has been stated in the Agreement. Termination This Scope Appendix will terminate according to the terms of the Agreement. If this Scope Appendix is acceptable, please sign below and return one copy to us for our files. We look forward to working with you. Sincerely, Steve Scharff, Director +1 (406) 692 7966 | Steve.Scharff@bakertilly.com Docusign Envelope ID: 4BD63581-AAE2-8744-8169-5C5A50824F95 11 SCOPE APPENDIX TO PROFESSIONAL SERVICES AGREEMENT DATED APRIL 8, 2025, BETWEEN THE CITY OF BOZEMAN, MONTANA AND BTMA Signature Section: The services and terms as set forth in this Scope Appendix are agreed to on behalf of the Client by: Name: ______________________________ Title: ______________________________ Date: ______________________________ The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Baker Tilly US, LLP and Baker Tilly Advisory Group, LP and its subsidiary entities provide professional services through an alternative practice structure in accordance with the AICPA Code of Professional Conduct and applicable laws, regulations and professional standards. Baker Tilly US, LLP is a licensed independent CPA firm that provides attest services to clients. Baker Tilly Advisory Group, LP and its subsidiary entities provide tax and business advisory services to their clients. Baker Tilly Advisory Group, LP and its subsidiary entities are not licensed CPA firms. Baker Tilly Advisory Group, LP and Baker Tilly US, LLP, trading as Baker Tilly, are independent members of Baker Tilly International. Baker Tilly International Limited is an English company. Baker Tilly International provides no professional services to clients. Each member firm is a separate and independent legal entity, and each describes itself as such. Baker Tilly Advisory Group, LP and Baker Tilly US, LLP are not Baker Tilly International’s agent and do not have the authority to bind Baker Tilly International or act on Baker Tilly International’s behalf. None of Baker Tilly International, Baker Tilly Advisory Group, LP, Baker Tilly US, LLP nor any of the other member firms of Baker Tilly International has any liability for each other’s acts or omissions. The name Baker Tilly and its associated logo is used under license from Baker Tilly International Limited. Baker Tilly Municipal Advisors, LLC is a registered municipal advisor and controlled subsidiary of Baker Tilly Advisory Group, LP, a tax and advisory firm. Baker Tilly Advisory Group, LP, trading as Baker Tilly, is a member of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. Docusign Envelope ID: 4BD63581-AAE2-8744-8169-5C5A50824F95 City Manager 8/1/2026