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HomeMy WebLinkAboutRES2023-065 PFM Financial Advisors Contract CITY OF SEWARD,ALASKA Sponsored by: Regis RESOLUTION 2023-065 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SEWARD, ALASKA, AUTHORIZING THE CITY MANAGER TO ENTER A FINANCIAL ADVISORY AGREEMENT WITH PFM FINANCIAL ADVISORS LLC,AND APPROPRIATING FUNDS WHEREAS, the City of Seward previously maintained a contract with Don Grimes through Mitch Associates for Financial Advisor Services; and WHEREAS, Don Grimes is no longer available to provide these valuable services to the community; and WHEREAS,the City of Seward has a number of projects underway, including the design of a new Public Works Facility, which will require the city to obtain bonding in the near future; and WHEREAS, services in the Financial Advisor Services agreement include, but are not limited to: Debt Transactions, Market Updates and Management, Financial Planning, Policy Development, and Bond Council Interactions. NOW,THEREFORE,BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SEWARD,ALASKA that: Section 1. The City Manager is authorized to enter a Financial Advisory Agreement with PFM. Section 2. Funding in the amount of $30,000 is appropriated from the General Fund Reserves account number 01000-0000-3400 to the City Manager contracted services account number 01000-1120-7009. Section 3. This resolution shall take effect upon adoption. PASSED AND APPROVED by the City Council of the City of Seward,Alaska this 22°d day of May, 2023. THE CITY OF SEWARD, ALASKA grCOPcf\IT-CL.v Sue McClure,Mayor CITY OF SEWARD,ALASKA RESOLUTION 2023-065 I AYES: Osenga, DeMoss, Calhoon, Wells, Finch, Barnwell, McClure NOES: None ABSENT: None ABSTAIN: None ATTEST: �/ Kris Peck Deputy City Clerk (City Seal) s.•'�`l OF SEtY°�., a • SEAL ' s il ..,.. City Council Agenda Statement Meeting Date: May 22, 2023 To: City Council From: Norm Regis, Acting City Manager Subject: Resolution 2023-065: Authorizing the City Manager to Enter a Financial Advisory Agreement with PFM Financial Advisors LLC, And Appropriating Funds Background and justification: The City of Seward previously utilized Don Grimes for Financial Advisory Services, dating back to the 1980s. Don worked for Wells Fargo Brokerage Services LLC and Blitch Associates, Inc over the course of that 40+ year relationship with the City of Seward. Don unfortunately passed away in 2022 and the City has a need for a new Financial Advisor. Financial Advisory Services include, but are not limited to; Debt Transactions, Market Updates and Management, Financial Planning, Policy Development, and Bond Council Interactions. With a number of projects underway and projected in the near future, it is important that the City of Seward obtain a new provider of these financial services. Compensation for these services will be provided at the following rates: Bond Proceeds Issuance Fee per $1,000 For financings up to $20 million $1.50 per$1,000, with a $25,000 minimum For financings between $20 million and $75 million $30,000 plus$0.75 per$1,000 over$20 million For financings over$75 million $75,000 plus$0.25 per$1,000 over$75 million Compensation for Other Services For non-transactional services. PFM will charge hourly rates as follows: Experience Level Hourly Rate Managing Dire ctor+Director $350 Senior Managing Consultant $300 Senior Analyst $250 Analyst $225 Associate (Administrative Support) $190 Comprehensive and Strategic Plan Consistency Information This legislation is consistent with (citation listed): Comprehensive Plan: All aspects of the Comprehensive Plan are affected Strategic Plan: Other: Certification of Funds Total amount of funds listed in this legislation: $ 30,000 This legislation (✓): Creates revenue in the amount of: $ x Creates expenditure in amount of: $ 30,000 Creates a savings in the amount of: $ Has no fiscal impact Funds are (✓): Budgeted Line item(s): x Not budgeted 01000-1120-7009 Not applicable Fund Balance Information Affected Fund (✓): x General SMIC Electric Wastewater Boat Harbor Parking F1 Water F1 Healthcare Motor Pool Other Note:amounts are unaudited Fund Balance/Net position — unrestricted/unassigned $ 6,697,919 Available Unrestricted Cash Balance: $ 9,436,721 Finance Director Signature: =� Attorney Review RYes Attorney Signature: Not applicable Comments: Administration Recommendation x Approve Res. Other: PFM FINANCIAL ADVISORS LLC AGREEMENT FOR FINANCIAL ADVISORY SERVICES This agreement ("Agreement"), made and entered into this 1st day of May, 2023, by and between the City of Seward, Alaska (the "City") and PFM Financial Advisors LLC (hereinafter called"PFM"), sets forth the terms and conditions under which PFM shall provide services. WHEREAS, the City desires to obtain the services of a financial advisor to develop and assist in implementing the City's strategies to meet its current and long-term operations, financial obligations, capital financing needs and render assistance in respect to debt transactions; and WHEREAS, PFM is capable of providing the necessary financial advisory services. NOW, THEREFORE, in consideration of the above-mentioned premises and intending to be legally bound hereby, the City and PFM agree as follows: I. SCOPE OF SERVICES PFM shall provide, upon request of the City, services related to financial planning, budget and strategic advice and planning, policy development and services related to debt issuance, as applicable and set forth in Exhibit A to this Agreement. the City acknowledges and agrees that most tasks requested by the City will not require all services provided for in Exhibit A and as such the specific scope of services for such task shall be limited to just those services required to complete the task. Any material changes in or additions to the scope of services described in Exhibit A shall be promptly reflected in a written supplement or amendment to this Agreement. Services provided by PFM which are not specifically referenced in the scope of services set forth in Exhibit A of this Agreement shall be completed as agreed in writing in advance between the City and PFM. Upon the request of the City, an affiliate of PFM or a third party referred or otherwise introduced by PFM may agree to additional services to be provided by such affiliate or third party, by a separate writing, including separate scope and compensation, between the City and such affiliate or third party. IL WORK SCHEDULE The services of PFM are to commence as soon as practicable after the execution of this Agreement and a request by the City for such service. III. REGISTERED MUNICIPAL ADVISOR; REQUIRED DISCLOSURES 1. PFM is a registered municipal advisor with the Securities and Exchange Commission (the "SEC") and the Municipal Securities Rulemaking Board (the "MSRB"), pursuant to the Securities Exchange Act of 1934 Rule 15Bal-2. If the City has designated PFM as its independent registered municipal advisor ("IRMA") for purposes of SEC Rule 15Bal- 1(d)(3)(vi) (the"IRMA exemption"),then services provided pursuant to such designation shall be the services described in Exhibit A hereto, subject to any agreed upon limitations. Verification of independence (as is required under the IRMA exemption) shall be the responsibility of such third Rev.11.12.2021 - I - 135 party seeking to rely on such IRMA exemption. PFM shall have the right to review and approve in advance any representation of PFM's role as IRMA to the City. 2. MSRB Rules require that municipal advisors make written disclosures to their clients of all material conflicts of interest, certain legal or disciplinary events and certain regulatory requirements. Such disclosures are provided in PFM's Disclosure Statement delivered to the City prior to or together with this Agreement. IV. FINANCIAL ADVISORY COMPENSATION For the services provided under this Agreement, PFM's professional fees shall be paid as provided in Exhibit B to this Agreement and the City shall pay expenses and fees for other services not set forth in Exhibit A as provided below. All fees shall be due to PFM within thirty (30) days of the date of invoice. 1. Reimbursable Expenses In addition to fees for services, PFM will be reimbursed for necessary, reasonable, and documented out-of-pocket expenses incurred, including travel, meals, lodging, telephone, mail, and other ordinary cost and any actual extraordinary cost for graphics, printing, data processing and computer time which are incurred by PFM. Upon request of the City, documentation of such expenses will be provided. 2. Other Services Any services which are not included in the scope of services set forth in Exhibit A of this Agreement will be subject to separate, mutually acceptable fee structures. V. TERMS AND TERMINATION This Agreement shall be effective from the date first set forth above until December 31, 2025 (the"Initial Term")and shall automatically renew for additional 3 year periods (each a "Renewal Term" and together with the Initial Term, the "Term"), unless terminated in writing by either party upon thirty (30) days written notice to the other party. Upon any such termination, PFM will be paid for all services performed and costs and expenses incurred up to the termination date. VI. ASSIGNMENT PFM shall not assign or transfer any interest in this Agreement or subcontract any of the work performed under the Agreement without the prior written consent of the City; provided that PFM retains the right to enter into a sale, merger, acquisition, internal reorganization, or similar transaction involving PFM's business without any such consent. Rev.11.12.2021 - 2 - 136 VIL INFORMATION TO BE FURNISHED TO PFM All information, data, reports, and records in the possession of the City or any third parry necessary for carrying out any services to be performed under this Agreement("Data") shall be furnished to PFM. PFM may rely on the Data in connection with its provision of the services under this Agreement and the provider thereof shall remain solely responsible for the adequacy, accuracy and completeness of such Data. VIIL NOTICES All notices and other communication required under this Agreement shall be in writing and shall be sent by certified mail, return receipt requested, or by nationally recognized courier, with written verification of receipt. Notices shall be sent to the parties at the following addresses, or to such other address as a parry may furnish to the other party: CITY OF SEWARD, ALASKA 410 Adams Street City Hall Building Seward,AK 99664 Attention: Sully Jusino,Deputy Finance Director PFM FINANCIAL ADVISORS LLC 107 Spring Street Seattle,WA 98104 Attention: Thomas Toepfer,Managing Director with copy via email at toe12fert&12fm.com and copy via email to Fred Eoff, Director, at eofM12fm.com IX. TITLE TRANSFER All materials, except functioning or dynamic financial models,prepared by PFM pursuant exclusively to this Agreement shall be the property of the City. Subject to the exception described above, upon termination of this Agreement, at the City's reasonable request no later than three (3) years after the termination of this Agreement PFM shall deliver to the City copies of any deliverables pertaining to this Agreement. X. PFM'S REPRESENTATIVES The services set forth in this Agreement shall be provided by PFM's project manager, Fred Eoff, Director, Matt Schoenfeld, Senior Managing Consultant, and other PFM employees as may be necessary. The City has the right to request, for any reason, that PFM replace any member of the advisory team. Should the City make such a request, PFM shall promptly suggest a substitute for approval by the City. XI. INSURANCE PFM shall maintain insurance coverage with policy limits not less than as stated in Exhibit C. Rev.11.12.2021 - 3 - 137 XII. LIMITATION OF LIABILITY Except to the extent caused by its willful misconduct, bad faith, gross negligence or reckless disregard of its obligations or duties, PFM shall have no liability to any parry under this Agreement. XIIL INDEPENDENT CONTRACTOR; NO THIRD-PARTY BENEFICIARY PFM, its employees, officers and representatives at all times shall be independent contractors and shall not be deemed to be employees, agents, partners, servants and/or joint venturers of the City by virtue of this Agreement or any actions or services rendered under this Agreement. Nothing in this Agreement is intended or shall be construed to give any person, other than the parties hereto,their successors and permitted assigns, any legal or equitable rights,remedy or claim under or in respect of this Agreement or any provisions contained herein. In no event will PFM be liable for any act or omission of any third party or for any circumstances beyond PFM's reasonable control including, but not limited to, fire, flood, or other natural disaster, war, riot, strike, act of terrorism, act of civil or military authority, software and/or equipment failure, computer virus, or failure or interruption of electrical,telecommunications or other utility services. XIV. APPLICABLE LAW This Agreement shall be construed, enforced, and administered according to the laws of the State of Alaska. PFM and the City agree that, should a disagreement arise as to the terms or enforcement of any provision of this Agreement, each parry will in good faith attempt to resolve said disagreement prior to pursuing other action. XV. ENTIRE AGREEMENT; SEVERABILITY This Agreement represents the entire agreement between the City and PFM and may not be amended or modified except in writing signed by both parties. For the sake of clarity, any separate agreement between the City and an affiliate of PFM or any third parry referred or introduced by PFM shall not in any way be deemed an amendment or modification of this Agreement. The invalidity in whole or in part of any provision of this Agreement shall not void or affect the validity of any other provision. XVL EXECUTION; COUNTERPARTS Each party to this Agreement represents and warrants that the person or persons signing this Agreement on behalf of such party is authorized and empowered to sign and deliver this Agreement for such party. This Agreement may be signed in any number of counterparts, each of which shall be an original and all of which when taken together shall constitute one and the same document. Rev.11.12.2021 - 4 - 138 IN WITNESS WHEREOF, the City and PFM have executed this Agreement as of the day and year herein above written. CITY OF SEWARD, ALASKA By: Name: Title: Date: PFM FINANCIAL ADVISORS LLC By: Name: Thomas Toepfer Title: Managing Director Date: Rev.11.12.2021 - S - 139 EXHIBIT A SCOPE OF SERVICES 1. Services related to debt transactions subject to transaction fees as set forth in Exhibit B, Section 1. Upon the request of the City or as required to complete the financing transaction: • Develop, or review, a financing plan in concert with the City's staff which would include recommendations as to the timing and number of series of bonds to be issued. • Advise as to the various financing alternatives available to the City. • Develop alternatives related to a debt transaction including evaluation of revenues available, maturity schedule and cash flow requirements. • Identify key bond covenant features and advise as to the financial consequences of provisions to be included in documents regarding security, creation of reserve funds, flow of funds, redemption provisions, additional parity debt tests, etc. • Assist the City by recommending a method of sale, either as a negotiated sale, direct (bank or other financial institution)placement, competitive sale, or through the Alaska Municipal Bond Bank Authority ("AMBBA"). • For a competitive sale or direct placement, make recommendation as to the best bid. • For a negotiated sale, assist in the solicitation, review and evaluation of any investment banking proposals, and provide advice and information to the City needed to make a selection of a specific firm(s). • If appropriate, develop credit rating presentation(s) and coordinate the review with the City and credit rating agency. • Assist the City in the procurement of other services relating to debt issuance such as official statement printing, verification agent,paying agent, registrar, etc. • Coordinate with the City's staff and other advisors as respects the furnishing of data for offering documents, it being understood that PFM is not responsible for the inclusion or omission of any material in offering documents. • Review Preliminary Official Statements and final Official Statements prepared on behalf of the City for use in marketing any bonds and meeting regulatory requirements. • As applicable, advise the City on the condition of the bond market at the time of sale, including volume, timing considerations, competing offerings, and general economic considerations. • Assist and advise the City in negotiations with investment banking groups regarding fees,pricing of the bonds and final terms of any security offering and make recommendations regarding a proposed offering to obtain the most favorable financial terms based on existing market conditions. • For any competitive sale of bonds or notes, assist in the preparation of the official notice of sale, recommend sale parameters, take steps necessary to ensure broad market exposure of the issue, through the use of newswire services and official statement distribution, and perform additional steps necessary and customary for competitive bond sales. • Arrange for the closing of the transaction including final delivery of the bonds. Rev.11.12.2021 - 6 - 140 2. General, ongoing services relative to periodic market updates, financial planning, credit ratings, and policy development, subject to fees forth in Exhibit B, Section 2. Upon request of the City: • Provide general advice, input, and planning as may be requested from time to time by the City. • Evaluate the City's capital financing plans and needs, and the City's financial resources, relative to any proposed financing. • Provide analysis of financing options,identify risks,and advise on the feasibility of financing plans. • Periodically review outstanding obligations of the City for potential debt consolidation or refinancing opportunities that may benefit the City. • Advise the City of changes in state or federal law that may be relevant to the City's future financing plans. • If requested, serve as the City's H?MA in connection with the "Municipal Advisor Rule," and review proposals/analysis provided by underwriters, banks, and other third parties. • Attend meetings with the City's staff, consultants, and other professionals upon request. Rev.11.12.2021 - 7 - 141 EXHIBIT B COMPENSATION FOR SERVICES 1. Transaction Fees The compensation schedule for competitive and negotiated sales of long-term financings according to the scope of work in Exhibit A, Section 1, will be billed at closing as follows: Bond Size Issuance Fee per $1,000 For financings up to $20 million $1.50 per$1,000,with a$25,000 minimum For financings between $20 million and $75 million $30,000 plus$0.75 per$1,000 over$20 million For financings over$75 million $75,000 plus$0.25 per$1,000 over$75 million For advisory services provided in connection with a state or federal loan, PFM will charge hourly rates based on the table above. As an example, if Seward is issuing debt through the Alaska Municipal Bond Bank Authority (AMBBA), PFM will not charge the City for work performed on behalf of AMBBA regarding their normal issuance process and will negotiate compensation with Seward for work performed on their behalf. Financings sold directly to a commercial bank(direct placements)may be subject to a reduced fee upon mutual agreement between the City and PFM, depending on the level of time and effort involved. 2. Hourly Project Fees For non-transaction services provided according to the scope of work in Exhibit A, Section 2,PFM will charge hourly fees as follows: Experience Level Hourly Rate Managing Director/Director $350 Senior Managing Consultant $300 Senior Analyst $260 Analyst $215 Associate $195 In the event the City requests PFM perform a significant special project beyond the scope of work contained in Exhibit A, Section 2,fees will be negotiated in advance of the project generally based upon the aforementioned hourly rates for the indicated levels of experience or their equivalents will apply. No such fee will be charged to the City without first entering into a written addendum or memorandum documenting the requested services and expected fee. Additionally, in the event a financing is started,but cancelled at the City's request, accrued time will be billed at hourly rates as described above. For each contract year following the initial contract year (each, individually, a "Subsequent Contract Year"), hourly fee rates shall be calculated by comparing the"All Items Consumer Price Index for All Urban Consumers (CPI-U) for the U.S. District Average" (the "Index") for the end of month immediately preceding the start of the Subsequent Contract Year and the Index on the date one year prior to that end of month. The greater of zero percent and the percentage change in the Index shall be applied to the hourly fee rate schedule above and shall be the hourly fee rates for the applicable Subsequent Contract Year. For example, and for avoidance of doubt, for a Subsequent Contract Year commencing January 1,2024,the Index in effect on December 31,2023 will be compared to the Index in effect on December 31,2022. The percentage change in the Index will then be applied to increase the hourly rates by a similar percentage. Rev.11.12.2021 - g - 142 EXHIBIT C INSURANCE PFM Financial Advisors LLC ("PFM") has a complete insurance program, including property, casualty, general liability, automobile liability and workers compensation. PFM maintains professional liability and fidelity bond coverages which total $5 million and $5 million single loss/$10 million aggregate, respectively. PFM also carries a$5 million cyber liability policy. Our Professional Liability policy is a "claims made" policy and our General Liability policy claims would be made by occurrence. Deductibles/SIR: Automobile$100 comprehensive& $1,000 collision Cyber Liability $100,000 General Liability $0 Professional Liability(E&O) $200,000 Financial Institution Bond $50,000 Insurance Company&AM Best Rating Professional Liability (E&O).............Lloyds of London; (A; Stable) ............................................................AXIS Surplus Insurance Company; (A; Stable) Financial Institution Bond..................Berkley Regional Insurance Company; (A+; Stable) Cyber Liability ...................................Greenwich Insurance Company (A+; Stable) General Liability ................................Valley Forge Insurance Company; (A Stable) Automobile Liability..........................Continental Insurance Company; (A Stable) Excess/Umbrella Liability.................Continental Insurance Company; (A Stable) Workers Compensation. .....................Continental Insurance Company; (A Stable) & Employers Liability Rev.11.12.2021 - 9 - 143 DISCLOSURE OF CONFLICTS OF INTEREST AND OTHER IMPORTANT MUNICIPAL ADVISORY INFORMATION PFM Financial Advisors LLC L Introduction PFM Financial Advisors LLC and PFM Swap Advisors LLC(hereinafter,referred to as"We,"..Us,"or"Our")are registered municipal advisors with the Securities and Exchange Commission(the"SEC")and the Municipal Securities Rulemaking Board (the"MSRB"),pursuant to the Securities Exchange Act of 1934 Rule 1513al-2.In accordance with MSRB rules,this disclosure statement is provided by Us to each client prior to the execution of its advisory agreement with written disclosures of all material conflicts of interests and legal or disciplinary events that are required to be disclosed with respect to providing financial advisory services pursuant to MSRB Rule G-42(b)and(c)(ii). We employ a number of resources to identify and subsequently manage actual or potential conflicts of interest in addition to disclosing actual and potential conflicts of interest provided herein. How We Identify and Manage Conflicts of Interest Code of Ethics.The Code requires that all employees conduct all aspects of Our business with the highest standards of integrity, honesty and fair dealing. All employees are required to avoid even the appearance of misconduct or impropriety and avoid actual or apparent conflicts of interest between personal and professional relationships that would or could interfere with an employee's independent exercise of judgment in performing the obligations and responsibilities owed to a municipal advisor and Our clients. Policies and Procedures.We have adopted policies and procedures that include specific rules and standards for conduct.Some of these policies and procedures provide guidance and reporting requirements about matters that allows Us to monitor behavior that might give rise to a conflict of interest.These include policies concerning the making of gifts and charitable contributions, entertaining clients, and engaging in outside activities,all of which may involve relationships with clients and others that are important to Our analysis of potential conflicts of interest. Supervisory Structure.We have both a compliance and supervisory structure in place that enables Us to identify and monitor employees' activities, both on a transaction and Firm-wide basis, to ensure compliance with appropriate standards. Prior to undertaking any engagement with a new client or an additional engagement with an existing client, appropriate municipal advisory personnel will review the possible intersection of the client's interests, the proposed engagement, Our engagement personnel, experience and existing obligations to other clients and related parties. This review,together with employing the resources described above,allows Us to evaluate any situations that may be an actual or potential conflict of interest. Disclosures. We will disclose to clients those situations that We believe would create a material conflict of interest, such as: 1)any advice,service or product that any affiliate may provide to a client that is directly related to the municipal advisory work We perform for such client; 2)any payment made to obtain or retain a municipal advisory engagement with a client; 3) any fee-splitting arrangement with any provider of an investment or services to a client;4)any conflict that may arise from the type of compensation arrangement We may have with a client;and 5)any other actual or potential situation that We are or become aware of that might constitute a material conflict of interest that could reasonably expect to impair Our ability to provide advice to or on behalf of clients consistent with regulatory requirements. If We identify such situations or circumstances, We will prepare meaningful disclosure that will describe the implications of the situation and how We intend to manage the situation. We will also disclose any legal or disciplinary events that are material to a client's evaluation or the integrity of Our management or advisory personnel. We will provide this disclosure(or a means to access this information)in writing prior to starting Our proposed engagement,and will provide such additional information or clarification as the client may request.We will also advise Our clients in writing of any subsequent material conflict of interest that may arise, as well as the related implications,Our plan to manage that situation,and any additional information such client may require. II. General Conflict of Interest Disclosures Disclosure of Conflicts Concerning the Firm's Affiliates Our affiliates offer a wide variety of financial services, and Our clients may be interested in pursuing services separately provided by an affiliate. The affiliate's business with the client could create an incentive for Us to recommend a course of action designed to increase the level of the client's business activities with the affiliate or to recommend against a course of Revised 12/1/2022 Page 1 144 action that would reduce the client's business activities with the affiliate. In either instance, We may be perceived as recommending services for a client that are not in the best interests of Our clients,but rather are in Our interests or the interests of Our affiliates. Accordingly,We mitigate any perceived conflict of interest that may arise in this situation by disclosing it to the client, and by requiring that there be a review of the municipal securities transaction or municipal financial product to ensure that it is suitable for the client in light of various factors,after reasonable inquiry,including the client's needs,objectives and financial circumstances. Further,We receive no compensation from Our affiliates with respect to a client introduction or referral. If a client chooses to work with an affiliate,We require that the client consult and enter into a separate agreement for services,so that the client can make an independent,informed,evaluation of the services offered. Disclosure of Conflicts Related to the Firm's Compensation From time to time,We may be compensated by a municipal advisory fee that is or will be set forth in an agreement with the client to be,or that has been,negotiated and entered into in connection with a municipal advisory service. Payment of such fee may be contingent on the closing of the transaction and the amount of the fee may be based,in whole or in part,on a percentage of the principal or par amount of municipal securities or municipal financial product. While this form of compensation is customary in the municipal securities market,it may be deemed to present a conflict of interest since We may appear to have an incentive to recommend to the client a transaction that is larger in size than is necessary. Further, We may also receive compensation in the form of a fixed fee arrangement. While this form of compensation is customary, it may also present a potential conflict of interest,if the transaction requires more work than contemplated and We are perceived as recommending a less time consuming alternative contrary to the client's best interest so as not to sustain a loss.Finally,We may contract with clients on an hourly fee bases. If We do not agree on a maximum amount of hours at the outset of the engagement, this arrangement may pose a conflict of interest as We would not have a financial incentive to recommend an alternative that would result in fewer hours. We manage and mitigate all of these types of conflicts by disclosing the fee structure to the client,and by requiring that there be a review of the municipal securities transaction or municipal financial product to ensure that it is suitable for the client in light of various factors,after reasonable inquiry,including the client's needs,objectives and financial circumstances. Disclosure of Conflicts Related to the Firm's Compensation Structure for Our Registered Advisors. Pursuant to various employee compensation structures, from time to time We offer certain of Our registered municipal advisors ("Registered Advisors") financial benefits based on his or her business plan, client base, performance, and/or transactions closed. This provides an incentive for such Registered Advisors to seek to retain additional clients and/or transactions or services from clients. While this form of compensation may be customary in some segments of the municipal advisory market,provision of such financial benefits may be deemed to present a conflict of interest. We manage and mitigate these types of conflicts by Registered Advisor's adherence to Our Code of Ethics and Policies and Procedures,and by requiring that there be a review of the municipal securities transaction or municipal financial product to ensure that it is suitable for the client in light of various factors,after reasonable inquiry,including the client's needs,objectives and financial circumstances. Disclosure Concerning Provision of Services to State and Local Government,and Non Profit Clients We regularly provide financial advisory services to state and local governments,their agencies,and instrumentalities,and non- profit clients. While Our clients have expressed that this experience in providing services to a wide variety of clients generally provides great benefit for all of Our clients,there may be or may have been clients with interests that are different from(and adverse to)other clients. If for some reason any client sees Our engagement with any other particular client as a conflict,We will mitigate this conflict by engaging in a broad range of conduct,if and as applicable. Such conduct may include one or any combination of the following: 1) disclosing the conflict to the client; 2) requiring that there be a review of the municipal securities transaction or municipal financial product to ensure that it is suitable for the client in light of various factors,including the client's needs, objectives and financial circumstances; 3) implementing procedures that establishes an "Informational Bubble"that creates physical,technological and procedural barriers and/or separations to ensure that non-public information is isolated to particular area such that certain governmental transaction team members and supporting functions operate separately during the course of work performed;and 4)in the rare event that a conflict cannot be resolved,We will withdraw from the engagement. Disclosure Related to Legal and Disciplinary Events As registered municipal advisors with the Securities and Exchange Commission (the "SEC") and the Municipal Securities Rulemaking Board(the"MSRB"),pursuant to the Securities Exchange Act of 1934 Rule 1513al-2, Our legal,disciplinary and judicial events are required to be disclosed on Our forms MA and MA-I filed with the SEC,in`Item 9 Disclosure Information' of form MA,`Item 6 Disclosure Information'of form MA-I,and if applicable,the corresponding disclosure reporting page(s) ("DRP"). To review the foregoing disclosure items and material change(s)or amendment(s),if any,clients may electronically Revised 12/1/2022 Page 2 145 access PFM Financial Advisors LLC filed forms MA and MA-I on the SEC's Electronic Data Gathering, Analysis, and Retrieval system,listed by date of filing starting with the most recently filed,at: PFM Financial Advisors LLC— http://www.sec.gov/cgi-bin/browse-edgar?company=PFM+Financial&owner=exclude&action=getcompany III. Specific Conflicts of Interest Disclosures—City Seward,Alaska To Our knowledge,following reasonable inquiry,We make the additional disclosure(s)of actual or potential conflicts of interest cited below in connection with the municipal advisory services currently being contemplated for client. Disclosure Pertaining to the Alaska Municipal Bond Bank Authority From time to time, We serve as financial advisor to the Alaska Municipal Bond Bank Authority on certain engagements. Although We do not anticipate that this will create a conflict of interest,nor do We believe this will impair our ability to provide services to the City of Seward("the City"),this situation may be perceived as a potential conflict of interest. Therefore,we will mitigate this conflict by 1)disclosing the situation to the City;2)requiring that there be a review of the municipal securities transaction to ensure that it is suitable for the City in light of various factors,including the City's needs,objectives and financial circumstances; and 3) maintaining the confidentiality of any non-public information obtained during the course of work performed on behalf of the City. IV. Municipal Advisory Complaint and Client Education Disclosure The MSRB protects state and local governments and other municipal entities and the public interest by promoting fair and efficient municipal securities markets.To that end,MSRB rules are designed to govern the professional conduct of brokers,dealers,municipal securities dealers and municipal advisors. Accordingly,if you as municipal advisory customer have a complaint about any of these financial professionals, please contact the MSRB's website at www.msrb.org, and consult the MSRB's Municipal Advisory Client brochure. The MSRB's Municipal Advisory Client brochure describes the protections available to municipal advisory clients under MSRB rules,and describes the process for filing a complaint with the appropriate regulatory authority. PFM's Financial Advisory services are provided by PFM Financial Advisors LLC. PFM's Swap Advisory services are provided by PFM Swap Advisors LLC. Both entities are registered municipal advisors with the MSRB and SEC under the Dodd Frank Act of 2010. Revised 12/1/2022 Page 3 146