ADMINISTRATIVE REPORT

Date: July 19, 1999
Author/Local: P.Bruin
RTS No. 0890 CC File No. 113

Council: July 27, 1999

TO:	Vancouver City Council
FROM:	General Manager of Corporate Services, in consultation with the Director of Legal Services
SUBJECT:	Change in Transfer Agent for Debenture Bylaw Nos. 6586 and 7262

RECOMMENDATION

A. THAT Council approve the appointment of Montreal Trust Company of Canada ("Montreal Trust") as the transfer agent, interest disbursing agent and registrar (collectively the "Transfer Agent") for the debentures (the "Debentures") issued pursuant to Debenture Bylaws No. 6586 and 7262 (the "Debenture Bylaws") at a total cost of $28,000 for 1999 to 2004. Source of Funding is available from the Treasury Division's annual operating budget.

B. THAT Council authorize the Director of Finance and Director of Legal Services to negotiate and execute a transfer agency agreement (the "Transfer Agency Agreement") with Montreal Trust on the terms generally outlined in this report, which shall include the granting of an indemnity by the City of Vancouver in favor of Montreal Trust for any liabilities which Montreal Trust may suffer or incur arising from Montreal Trust acting as Transfer Agent, in accordance with the Transfer Agency Agreement.

C. THAT if Council approves Recommendations A and B that the Director of Legal Services be requested to bring forward the appropriate amending Debenture Bylaws to implement these recommendations.

GENERAL MANAGER COMMENTS

The General Manager of Corporate Services RECOMMENDS approval of A, B, and C.

POLICY

Under Section 248A of the Vancouver Charter, Council may engage a person or persons to conduct all business connected with the issue and servicing of Debentures.

PURPOSE

The purpose of this report is to obtain the approval of Council and corresponding authority to appoint Montreal Trust as the Transfer Agent for the City of Vancouver with respect to the servicing of the Debentures issued under Debenture By-law Numbers 6586 and 7262 and to amend the Debenture Bylaws accordingly.

DISCUSSION

Since the original issuance of the Debentures, the City has administered and serviced the following Debenture issues internally by Treasury Services Division in the Finance Department, including paying out interest on a semi-annual basis to the Debenture Holders, keeping a record of the Debenture Holders, registering any transfers of the Debentures, printing of the T-5 forms per Revenue Canada statutory requirements and all ancillary functions related thereto.

The Debentures authorized and issued pursuant to By-law 6586, with a $40,000,000 aggregate principal amount and with interest at 10 1/8% semi annually, were issued June 14, 1990 and mature December 14, 1999.

The Debentures authorized and issued pursuant to By-law 7262, with a $65,000,000 principal amount and 4.25% - 6.875% serial interest, were issued February 16, 1994 and mature February 16, 1995 to 2004 inclusive.

The data management related to these debenture issues is housed within an information system, called the Bond Management System (BMS) which is written in dbase, a database program that is no longer used by the City. For this reason, Information Technology has a limited knowledge pool to draw from in the support and upgrade of this system and has indicated that extensive testing will have to be completed on the BMS to determine if the system is Year 2000 compliant.

A business case analysis was conducted to determine whether the BMS should be tested and upgraded or whether the administration should be out sourced to an external fiscal agent.

The resulting findings indicated that outsourcing the administration to a fiscal agent is the lowest cost alternative over the remaining life span of the debenture issues (1999-2004) with a cost of $28,000. Other alternatives included $61,100 for Information Technology's costs to upgrade and support the BMS system plus Treasury administration costs; or buying a treasury system at a purchase price upwards of $80,000.

Montreal Trust as a condition of agreeing to act as the Transfer Agent requires that they be indemnified and held harmless from all liabilities, costs, expenses, claims, actions or damages arising out of or connected with any acts performed or omitted to be performed in accordance with their acting as Transfer Agent under the proposed Transfer Agency Agreement, except where Montreal Trust willfully defaulted or acted in bad faith in the performance of their duties.

This indemnity is in accordance with standard business practices of companies, similar to Montreal Trust, that agree to act in the capacity of a Transfer Agent, and is not unreasonable in the circumstances.

Based upon the cost analysis, it is recommended that Council amend the Debenture Bylaws as proposed and authorize the Director of Finance and Director of Legal Services to negotiate and execute an agreement with Montreal Trust to appoint Montreal Trust as the Transfer Agent and to perform the duties previously performed by Treasury staff.

The Agreement will be effective August 1, 1999, or as soon thereafter as the parties agree on the terms of Montreal Trust's appointment, and shall continue in effect for the respective Debentures until the maturity date of each of the respective Debentures. Amending by-laws will be required to authorize this change in Transfer Agent from the original Debenture By-laws and will be brought forward for Council's consideration if Council approves Recommendations A and B of this report.

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(c) 1998 City of Vancouver