Conflicts of Interest and Other Matters Requiring Disclosures.

Pursuant to Municipal Securities Rulemaking Board (“MSRB”) Rule G-42, on Duties of Non-Solicitor Municipal Advisors, Municipal Advisors are required to make certain written disclosures to clients which include, amongst other things, Conflicts of Interest and any Legal or Disciplinary events of Urban Futures, including Isom Advisors, a Division of Urban Futures, Inc. and its associated persons.

The following are potential conflicts of interest to be considered.

  • Urban Futures represents that in connection with the issuance of municipal securities, Urban Futures may receive compensation from an Issuer or Obligated Person for services rendered, which compensation is contingent upon the successful closing of a transaction and/or is based on the size of a transaction. Consistent with the requirements of MSRB Rule G-42, Urban Futures hereby discloses, that such contingent and/or transactional compensation may present a potential conflict of interest regarding Urban Futures ability to provide unbiased advice to enter into such transaction. The contingent fee arrangement creates an incentive for Isom Advisors to recommend unnecessary financings or financings that are disadvantageous to the client, or to advise the client to increase the size of the issue. This potential conflict of interest will not impair Urban Futures’ ability to render unbiased and competent advice or to fulfill its fiduciary duty to the client.
  • Urban Futures’ fees under a potential agreement with an Issuer may be based on hourly fees of Urban Futures’ personnel, with the aggregate amount equaling the number of hours worked by such personnel times an agreed-upon hourly billing rate.  This form of compensation presents a potential conflict of interest because it could create an incentive for Urban Futures to recommend alternatives that would result in more hours worked.  This conflict of interest will not impair Urban Futures’ ability to render unbiased and competent advice or to fulfill its fiduciary duty to its clients.
  • Urban Futures’ fees under a potential agreement, may be a fixed amount established at the outset of the agreement. The amount is usually based upon an analysis by the client and Isom Advisors of, among other things, the expected duration and complexity of the transaction and the Scope of Services to be performed by Urban Futures. This form of compensation presents a potential conflict of interest because, if the transaction requires more work than originally contemplated, Urban Futures may suffer a loss. Thus, Urban Futures may recommend less time-consuming alternatives, or fail to do a thorough analysis of alternatives. This conflict of interest will not impair Urban Futures’ ability to render unbiased and competent advice or to fulfill its fiduciary duty to the client.
  • The fee paid to Urban Futures increases the cost of investment to client.  The increased cost occurs from compensating Urban Futures for municipal advisory services provided.
  • Urban Futures serves a wide variety of other clients that may from time to time have interests that could have a direct or indirect impact on the interests of another Urban Futures client. For example, Urban Futures serves as municipal advisor to other municipal advisory clients and, in such cases, owes a regulatory duty to such other clients. These other clients may, from time to time and depending on the specific circumstances, have competing interests. In acting in the interests of its various clients, Urban Futures could potentially face a conflict of interest arising from these competing client interests. Urban Futures fulfills its regulatory duty and mitigates such conflicts through dealing honestly and with the utmost good faith with its clients.
  • Urban Futures does not have any affiliate that provides any advice, service, or product to or on behalf of the client that is directly or indirectly related to the municipal advisory activities to be performed by Urban Futures;
  • Urban Futures has not made any payments directly or indirectly to obtain or retain its clients’ municipal advisory business;
  • Urban Futures has not received any payments from third parties to enlist Urban Futures’ recommendation to its clients of its services, any municipal securities transaction or any municipal finance product;
  • Urban Futures has not engaged in any fee-splitting arrangements involving Urban Futures and any provider of investments or services to its clients;
  • Urban Futures does not have any legal or disciplinary event that is material to its clients evaluation of the municipal advisory or the integrity of its management or advisory personnel.
  • Urban Futures does not act as principal in any of the transaction(s) related to a potential agreement. Certain employees of Urban Futures, Inc. hold ownership interests in and serve as directors of California Municipal Statistics, Inc., a company that provides information services for municipal bond offerings and ongoing disclosures. These roles may result in financial or other benefits to those employees or the company. Urban Futures, Inc. maintains policies and procedures to manage any potential conflicts of interest and to ensure that our advice to clients remains objective, impartial, and in the best interests of our clients, consistent with our fiduciary duty.

Organizational Structure, Non-Municipal Advisory Services, and Potential Conflicts of Interest

Firm Structure

Urban Futures, Inc. (“Urban Futures” or “UFI”) is the parent entity of several affiliated divisions and operating brands, including Isom Advisors, District Advocates Group (DAG), and K12 Partners (collectively, the “Firm”). Certain services provided by the Firm constitute municipal advisory services, defined by Section 15B(e)(4)(A)[1] of the SEC Exchange Act, while other services are non-municipal advisory services and are not subject to MSRB and SEC Rules and Regulations, including the fiduciary standards.

Non-Municipal Advisory Services

From time to time, the Firm and its affiliated divisions may provide non-municipal advisory services that are separate from, and not part of, any municipal advisory engagement. These services may include, but are not limited to, the following:

  • Placement of loans and leases
  • Disclosure services provided without materiality analysis
  • Program management
  • Construction consulting and administration
  • Facilities master planning and needs assessments
  • Arbitrage rebate services
  • Software solutions
  • Bond ballot and election support services
  • Economic Development
  • Strategic Advisory Services (policy, program, and projects)
  • Fiscal Impact Analysis
  • Special District Formation Services
  • P3 Consulting
  • Other administrative or consulting services
  • Bond ballot and election support services may include campaign strategy support, voter communications, campaign budgeting, mailers, flyers, hand-outs, “get-out-the-vote” activities, and permitted campaign-related donations.

Division-Specific Non-Municipal Advisory Services

  • District Advocates Group (DAG), a division of Urban Futures, Inc., provides program management, facility consulting, construction administration, and related services, including software-enabled solutions. These services are non-municipal advisory services, as they are not related to the issuance of municipal securities or related municipal financial products.
  • K12 Partners, a division of Urban Futures, Inc., provides facilities master planning, needs assessments, and related services, including software-enabled solutions. These services are non-municipal advisory services, as they are not related to the issuance of municipal securities or related municipal financial products.

Strategic Partnerships, Ownership Interests, and Revenue Sharing

  1. Athenate, Inc.

The Firm, through its K12 Partners division, has entered into a strategic partnership with Athenate, Inc.[2] to provide facilities master planning, needs assessments, software solutions, and other related services. In connection with this partnership, the parties agree to split net revenue from master planning and/or services and/or software contracts originated by the Firm.  Certain employees of Urban Futures also hold ownership interests in Athenate, Inc. These services are non-municipal advisory services, as they are not related to the issuance of municipal securities or related municipal financial products.

  1. California Municipal Statistics, Inc.

Certain employees of Urban Futures hold ownership interests in, and serve as directors of, California Municipal Statistics, Inc.[3], an administrative company that collects publicly available data and prepares tables and reports, which can be used in official statements, disclosures documents, annual financial reports, rating agency presentations, and for other purposes. These services are non-municipal advisory services, as they are not related to the issuance of municipal securities or related municipal financial products.

Conflict Management and Fiduciary Duty

All of these non-municipal advisory services noted above may be provided to clients who also receive municipal advisory services from UFI and Isom Advisors, but such services are provided under separate agreements and outside the scope of municipal advisory services governed by MSRB Rule G-42.

Municipal Advisory Clients are under no obligation to retain DAG, K12 Partners, Athenate, Inc., California Municipal Statistics, Inc., or any affiliate for non-municipal advisory services and are encouraged to independently evaluate alternative service providers.

All of these roles noted above may result in financial or other benefits to Urban Futures, its affiliates, and/or certain employees of the Firm who also hold ownership in either Athenate, Inc. or California Municipal Statistics, Inc.

All of these relationships may present actual or potential conflicts of interest, including incentives to introduce or recommend certain services, vendors, software platforms, or delivery models.  Each Issuer will be made aware of these relationships, to determine if they want to continue with or engage UFI or Isom Advisors as its Municipal Advisor.

UFI and Isom Advisors maintain policies and procedures reasonably designed to identify, manage, mitigate, and disclose actual and potential conflicts of interest. These policies are intended to ensure that any municipal advisory services are provided objectively, impartially, and in the best interests of the client, consistent with the Firm’s fiduciary duty under SEC and MSRSB Rules, including MSRB Rule G-42, Duties of Non-Solicitor Municipal Advisors.

The existence of non-municipal advisory services, ownership interests, revenue-sharing arrangements, or affiliated business relationships will not impair Urban Futures’ or Isom Advisors’ ability to provide unbiased and competent municipal advisory advice.

Ongoing Disclosure

If Urban Futures becomes aware of any additional actual or potential conflicts of interest after delivery of this disclosure, the Firm will promptly disclose such information in writing to the affected Issuer or Obligated Person, in accordance with MSRB Rule G-42.

Legal Events and Disciplinary History

Urban Futures does not have any legal events and disciplinary history on its Form MA and Form MA-I, which includes information about any criminal actions, regulatory actions, investigations, terminations, judgments, liens, civil judicial actions, customer complaints, arbitrations and civil litigation. Any person may electronically access Urban Futures the most recent Form MA and each most recent Form MA-I filed with the Commission at the following website: www.sec.gov/edgar/searchedgar/companysearch.html.

There have been no material changes to a legal or disciplinary event disclosure on any Form MA or Form MA-I filed with the SEC.

[1] defines the term “municipal advisor” to mean a person that provides a) advice to or on behalf of a municipal entity or obligated person with respect to municipal financial products or the issuance of municipal securities, including advice with respect to the structure; timing; terms; and other similar matters concerning such financial products or issues; or (b) undertakes the solicitation of a municipal entity or obligated person.

[2] Certain employees of Athenate, Inc. (unrelated to UFI) are also involved with Modus Design Studio, Inc. (formerly Stacked, Inc.), an architecture firm, who may perform services on UFI’s transactions.  There is no direct relationship between UFI and Modus Design Studio, Inc.

[3] California Municipal Statistics, Inc. acquired the assets of Urbics, LLC, a company that provides similar data, analytics, and administrative services. Such services may be offered or marketed under the California Municipal Statistics name, the Urbics name, or both.