HomeMy WebLinkAbout09 - Award of PSA for Investment Advisor ServicesTO:
FROM:
CITY OF
NEWPORT BEACH
City Council Staff Report
December 13, 2022
Agenda Item No. 9
HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
Michael Gomez, Deputy Finance Director — 949-644-3124,
mgomez@newportbeachca.gov
PREPARED BY: Michael Gomez, Deputy Finance Director,
mgomez@newportbeachca.gov
PHONE: 949-644-3124
TITLE: Award of Professional Services Contract to Chandler Asset
Management for Investment Advisor Services
ABSTRACT:
The City of Newport Beach (City) issued a Request for Proposals (RFP) for investment
advisor services for the five-year period ending December 31, 2027. Based on the results
of the competitive selection process, it is recommended that the City enter into a
professional services agreement with Chandler Asset Management for investment
advisor services.
RECOMMENDATION:
a) Determine this action is exempt from the California Environmental Quality Act (CEQA)
pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines because
this action will not result in a physical change to the environment, directly or indirectly;
b) Approve a five-year Professional Services Agreement with Chandler Asset
Management for investment advisor services for the five-year period ending
December 31, 2027, and a total not to exceed amount of $750,000; and
c) Authorize the Mayor and City Clerk to execute the Agreement.
DISCUSSION:
The City has contracted with investment advisors to oversee its investment portfolio. The
portfolio is valued at approximately $290 million. Chandler Asset Management is the
current investment advisor. The consultant's current contract is at the end of its five-year
term. The City solicited and evaluated proposals to oversee the City's investment portfolio
for the next five-year period.
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Award of Professional Services Contract to Chandler Asset Management
for Investment Advisor Services
December 13, 2022
Page 2
On August 5, 2022, the City posted a Request for Proposals (RFP) for investment
advisory services. By the RFP due date, the City had four firms submit a proposal,
including Chandler Asset Management, Public Trust Advisors, LLC, PFM Asset
Management, LLC, and Government Portfolio Advisors. Under the coordination of the
finance director, proposals were reviewed and ranked by a three -person selection
committee comprised of the finance director, deputy finance director, and finance
manager. The written technical proposals were reviewed and ranked by the selection
committee before the sealed cost bids were opened and scored.
All firms met the minimum requirements for their proposals to be evaluated and staff
evaluated and ranked each proposal based on the following criteria:
• Organizational information and qualifications
• Experience and references
• Proposer's approach and methodology
• Answers to industry and experience related questions
• Proposed cost
The results of the selection committee's technical score and cost ratio analysis is
summarized in the table below:
Proposer
Chandler Asset Management
Proposal Score
87.55
Public Trust Advisors, LLC
85.83
PFM Asset Management, LLC
85.74
Government Portfolio Advisors
83.33
Based on the results of the competitive selection process, it is recommended that the City
enter into a professional services agreement with Chandler Asset Management for
investment advisor services for the five-year period ending December 31, 2027. Chandler
Asset Management has been in business since 1988 providing investment management
services primarily to public agencies. Chandler focuses on serving public agencies who
share similar objectives for safety, liquidity and yield.
FISCAL IMPACT:
Based on the fee schedule associated with a five-year contract, the total annual cost for
the services may range between $125,000 and $150,000 per year depending on the total
assets managed per year. There is sufficient funding for this contract. Since cash and
investments are pooled together for investment management purposes, the fees are
initially expensed to a non -departmental "Investment Advisor Services" account, which is
then netted against investment earnings before earnings are shared and allocated to each
fund based on its proportionate cash balance.
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Award of Professional Services Contract to Chandler Asset Management
for Investment Advisor Services
December 13, 2022
Page 3
ENVIRONMENTAL REVIEW:
Staff recommends the City Council find this action is not subject to the California
Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) (the activity will not
result in a direct or reasonably foreseeable indirect physical change in the environment)
and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA
Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no
potential for resulting in physical change to the environment, directly or indirectly.
NOTICING:
The agenda item has been noticed according to the Brown Act (72 hours in advance of
the meeting at which the City Council considers the item).
ATTACHMENT:
Attachment A — Professional Services Agreement
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Attachment A
Professional Services Agreement
PROFESSIONAL SERVICES AGREEMENT
WITH CHANDLER ASSET MANAGEMENT, INC. FOR
DISCRETIONARY INVESTMENT ADVISORY SERVICES
THIS PROFESSIONAL SERVICES AGREEMENT ("Agreement") is made and
entered into as of this 1st day of January, 2023 ("Effective Date"), by and between the
CITY OF NEWPORT BEACH, a California municipal corporation and charter city ("City"),
and CHANDLER ASSET MANAGEMENT, INC., a California corporation ("Consultant"),
whose address is 6225 Lusk Boulevard, San Diego, California 92121, and is made with
reference to the following:
RECITALS
A. City is a municipal corporation duly organized and validly existing under the laws
of the State of California with the power to carry on its business as it is now being
conducted under the statutes of the State of California and the Charter of City.
B. City is required to manage its operating portfolio of cash and marketable securities
in accordance with the City's current adopted investment policy ("Council Policy F-
1 "). Council Policy F-1 is attached to this Agreement as Exhibit A and incorporated
herein by reference.
C. City desires to engage Consultant to provide investment advisory services and
execute an investment strategy consistent with the City's investment policy
objectives and parameters. ("Project").
D. City has solicited and received a proposal from Consultant, has reviewed the
previous experience and evaluated the expertise of Consultant, and desires to
retain Consultant to render professional services under the terms and conditions
set forth in this Agreement.
E. Consultant represents it is a registered investment advisor under the Investment
Advisers Act of 1940 and possesses the skill, experience, ability, background,
certification and knowledge to provide the services described in this Agreement.
NOW, THEREFORE, it is mutually agreed by and between the undersigned parties
as follows:
1. TERM
The term of this Agreement shall commence on the Effective Date, and shall
terminate on December 31, 2027, unless terminated earlier as set forth herein.
2. SERVICES TO BE PERFORMED
Consultant shall diligently perform all the services described in the Scope of
Services attached hereto as Exhibit B and incorporated herein by reference ("Services"
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or "Work"). City may elect to delete certain Services within the Scope of Services at its
sole discretion.
3. TIME OF PERFORMANCE
3.1 Time is of the essence in the performance of Services under this Agreement
and Consultant shall perform the Services in accordance with the schedule included in
Exhibit B. In the absence of a specific schedule, the Services shall be performed to
completion in a diligent and timely manner. The failure by Consultant to strictly adhere to
the schedule set forth in Exhibit B, if any, or perform the Services in a diligent and timely
manner may result in termination of this Agreement by City.
3.2 Notwithstanding the foregoing, Consultant shall not be responsible for
delays due to causes beyond Consultant's reasonable control. However, in the case of
any such delay in the Services to be provided for the Project, each party hereby agrees
to provide notice within two (2) calendar days of the occurrence causing the delay to the
other party so that all delays can be addressed.
3.3 Consultant shall submit all requests for extensions of time for performance
in writing to the Project Administrator as defined herein not later than ten (10) calendar
days after the start of the condition that purportedly causes a delay. The Project
Administrator shall review all such requests and may grant reasonable time extensions
for unforeseeable delays that are beyond Consultant's control.
3.4 For all time periods not specifically set forth herein, Consultant shall
respond in the most expedient and appropriate manner under the circumstances, by
hand -delivery or mail.
4. COMPENSATION TO CONSULTANT
4.1 City shall pay Consultant for the Services on a time and expense not -to -
exceed basis in accordance with the provisions of this Section and the Schedule of Billing
Rates attached hereto as Exhibit C and incorporated herein by reference. Consultant's
compensation for all Work performed in accordance with this Agreement, including all
reimbursable items and subconsultant fees, shall not exceed Seven Hundred Fifty
Thousand Dollars and 00/100 ($750,000.00), without prior written authorization from
City. No billing rate changes shall be made during the term of this Agreement without the
prior written approval of City.
4.2 Consultant shall submit monthly invoices to City describing the Work
performed the preceding month. Consultant's bills shall include the name of the person
who performed the Work, a brief description of the Services performed and/or the specific
task in the Scope of Services to which it relates, the date the Services were performed,
the number of hours spent on all Work billed on an hourly basis, and a description of any
reimbursable expenditures. City shall pay Consultant no later than thirty (30) calendar
days after approval of the monthly invoice by City staff.
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4.3 City shall reimburse Consultant only for those costs or expenses specifically
identified in Exhibit C to this Agreement or specifically approved in writing in advance by
City.
4.4 Consultant shall not receive any compensation for Extra Work performed
without the prior written authorization of City. As used herein, "Extra Work" means any
Work that is determined by City to be necessary for the proper completion of the Project,
but which is not included within the Scope of Services and which the parties did not
reasonably anticipate would be necessary at the execution of this Agreement.
Compensation for any authorized Extra Work shall be paid in accordance with the
Schedule of Billing Rates as set forth in Exhibit C.
5. PROJECT MANAGER
5.1 Consultant shall designate a Project Manager, who shall coordinate all
phases of the Project. This Project Manager shall be available to City at all reasonable
times during the Agreement term. Consultant has designated Jayson Schmitt to be its
Project Manager. Consultant shall not remove or reassign the Project Manager or any
personnel listed in Exhibit B or assign any new or replacement personnel to the Project
without the prior written consent of City. City's approval shall not be unreasonably
withheld with respect to the removal or assignment of non -key personnel.
5.2 Consultant, at the sole discretion of City, shall remove from the Project any
of its personnel assigned to the performance of Services upon written request of City.
Consultant warrants that it will continuously furnish the necessary personnel to complete
the Project on a timely basis as contemplated by this Agreement.
5.3 If Consultant is performing inspection services for City, the Project Manager
and any other assigned staff shall be equipped with a cellular phone to communicate with
City staff. The Project Manager's cellular phone number shall be provided to City.
6. ADMINISTRATION
This Agreement will be administered by the Finance Department. City's Finance
Director or designee shall be the Project Administrator and shall have the authority to act
for City under this Agreement. The Project Administrator shall represent City in all matters
pertaining to the Services to be rendered pursuant to this Agreement.
7. CITY'S RESPONSIBILITIES
To assist Consultant in the execution of its responsibilities under this Agreement,
City agrees to provide access to and upon request of Consultant, one copy of all existing
relevant information on file at City. City will provide all such materials in a timely manner
so as not to cause delays in Consultant's Work schedule.
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8. STANDARD OF CARE
8.1 All of the Services shall be performed by Consultant or under Consultant's
supervision. Consultant represents that it possesses the professional and technical
personnel required to perform the Services required by this Agreement, and that it will
perform all Services in a manner commensurate with community professional standards
and with the ordinary degree of skill and care that would be used by other reasonably
competent practitioners of the same discipline under similar circumstances. All Services
shall be performed by qualified and experienced personnel who are not employed by City.
By delivery of completed Work, Consultant certifies that the Work conforms to the
requirements of this Agreement, all applicable federal, state and local laws, and legally
recognized professional standards.
8.2 Consultant represents and warrants to City that it has, shall obtain, and shall
keep in full force and effect during the term hereof, at its sole cost and expense, all
licenses, permits, qualifications, insurance and approvals of whatsoever nature that is
legally required of Consultant to practice its profession. Consultant shall maintain a City
of Newport Beach business license during the term of this Agreement.
8.3 Consultant shall not be responsible for delay, nor shall Consultant be
responsible for damages or be in default or deemed to be in default by reason of strikes,
lockouts, accidents, acts of God, or the failure of City to furnish timely information or to
approve or disapprove Consultant's Work promptly, or delay or faulty performance by
City, contractors, or governmental agencies.
9. HOLD HARMLESS
9.1 To the fullest extent permitted by law, Consultant shall indemnify, defend
and hold harmless City, its City Council, boards and commissions, officers, agents,
volunteers and employees (collectively, the "Indemnified Parties") from and against any
and all claims (including, without limitation, claims for bodily injury, death or damage to
property), demands, obligations, damages, actions, causes of action, suits, losses,
judgments, fines, penalties, liabilities, costs and expenses (including, without limitation,
attorneys' fees, disbursements and court costs) of every kind and nature whatsoever
(individually, a Claim; collectively, "Claims"), which may arise from or in any manner relate
(directly or indirectly) to any breach of the terms and conditions of this Agreement, any
Work performed or Services provided under this Agreement including, without limitation,
defects in workmanship or materials or Consultant's presence or activities conducted on
the Project (including the negligent, reckless, and/or willful acts, errors and/or omissions
of Consultant, its principals, officers, agents, employees, vendors, suppliers, consultants,
subcontractors, anyone employed directly or indirectly by any of them or for whose acts
they may be liable, or any or all of them).
9.2 Notwithstanding the foregoing, nothing herein shall be construed to require
Consultant to indemnify the Indemnified Parties from any Claim arising from the sole
negligence or willful misconduct of the Indemnified Parties. Nothing in this indemnity shall
be construed as authorizing any award of attorneys' fees in any action on or to enforce
Chandler Asset Management, Inc. Page 4
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the terms of this Agreement. This indemnity shall apply to all claims and liability
regardless of whether any insurance policies are applicable. The policy limits do not act
as a limitation upon the amount of indemnification to be provided by Consultant.
10. INDEPENDENT CONTRACTOR
It is understood that City retains Consultant on an independent contractor basis
and Consultant is not an agent or employee of City. The manner and means of
conducting the Work are under the control of Consultant, except to the extent they are
limited by statute, rule or regulation and the expressed terms of this Agreement. No civil
service status or other right of employment shall accrue to Consultant or its employees.
Nothing in this Agreement shall be deemed to constitute approval for Consultant or any
of Consultant's employees or agents, to be the agents or employees of City. Consultant
shall have the responsibility for and control over the means of performing the Work,
provided that Consultant is in compliance with the terms of this Agreement. Anything in
this Agreement that may appear to give City the right to direct Consultant as to the details
of the performance of the Work or to exercise a measure of control over Consultant shall
mean only that Consultant shall follow the desires of City with respect to the results of the
Services.
11. COOPERATION
Consultant agrees to work closely and cooperate fully with City's designated
Project Administrator and any other agencies that may have jurisdiction or interest in the
Work to be performed. City agrees to cooperate with the Consultant on the Project.
12. CITY POLICY
Consultant shall discuss and review all matters relating to policy and Project
direction with City's Project Administrator in advance of all critical decision points in order
to ensure the Project proceeds in a manner consistent with City goals and policies.
13. PROGRESS
Consultant is responsible for keeping the Project Administrator informed on a
regular basis regarding the status and progress of the Project, activities performed and
planned, and any meetings that have been scheduled or are desired.
14. INSURANCE
Without limiting Consultant's indemnification of City, and prior to commencement
of Work, Consultant shall obtain, provide and maintain at its own expense during the term
of this Agreement or for other periods as specified in this Agreement, policies of insurance
of the type, amounts, terms and conditions described in the Insurance Requirements
attached hereto as Exhibit D, and incorporated herein by reference.
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15. PROHIBITION AGAINST ASSIGNMENTS AND TRANSFERS
Except as specifically authorized under this Agreement, the Services to be
provided under this Agreement shall not be assigned, transferred contracted or
subcontracted out without the prior written approval of City. Any of the following shall be
construed as an assignment: The sale, assignment, transfer or other disposition of any
of the issued and outstanding capital stock of Consultant, or of the interest of any general
partner or joint venturer or syndicate member or cotenant if Consultant is a partnership or
joint -venture or syndicate or co -tenancy, which shall result in changing the control of
Consultant. Control means fifty percent (50%) or more of the voting power or twenty-five
percent (25%) or more of the assets of the corporation, partnership or joint -venture.
16. SUBCONTRACTING
The subcontractors authorized by City, if any, to perform Work on this Project are
identified in Exhibit B. Consultant shall be fully responsible to City for all acts and
omissions of any subcontractor. Nothing in this Agreement shall create any contractual
relationship between City and any subcontractor nor shall it create any obligation on the
part of City to pay or to see to the payment of any monies due to any such subcontractor
other than as otherwise required by law. City is an intended beneficiary of any Work
performed by the subcontractor for purposes of establishing a duty of care between the
subcontractor and City. Except as specifically authorized herein, the Services to be
provided under this Agreement shall not be otherwise assigned, transferred, contracted
or subcontracted out without the prior written approval of City.
17. OWNERSHIP OF DOCUMENTS
17.1 Each and every report, draft, map, record, plan, document and other writing
produced, including but not limited to, websites, blogs, social media accounts and
applications (hereinafter "Documents"), prepared or caused to be prepared by Consultant,
its officers, employees, agents and subcontractors, in the course of implementing this
Agreement, shall become the exclusive property of City, and City shall have the sole right
to use such materials in its discretion without further compensation to Consultant or any
other party. Additionally, all material posted in cyberspace by Consultant, its officers,
employees, agents and subcontractors, in the course of implementing this Agreement,
shall become the exclusive property of City, and City shall have the sole right to use such
materials in its discretion without further compensation to Consultant or any other party.
Consultant shall, at Consultant's expense, provide such Documents, including all logins
and password information to City upon prior written request.
17.2 Documents, including drawings and specifications, prepared by Consultant
pursuant to this Agreement are not intended or represented to be suitable for reuse by
City or others on any other project. Any use of completed Documents for other projects
and any use of incomplete Documents without specific written authorization from
Consultant will be at City's sole risk and without liability to Consultant. Further, any and
all liability arising out of changes made to Consultant's deliverables under this Agreement
by City or persons other than Consultant is waived against Consultant, and City assumes
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full responsibility for such changes unless City has given Consultant prior notice and has
received from Consultant written consent for such changes.
17.3 All written documents shall be transmitted to City in formats compatible with
Microsoft Office and/or viewable with Adobe Acrobat.
18. CONFIDENTIALITY
All Documents, including drafts, preliminary drawings or plans, notes and
communications that result from the Services in this Agreement, shall be kept confidential
unless City expressly authorizes in writing the release of information.
19. INTELLECTUAL PROPERTY INDEMNITY
Consultant shall defend and indemnify City, its agents, officers, representatives
and employees against any and all liability, including costs, for infringement or alleged
infringement of any United States' letters patent, trademark, or copyright, including costs,
contained in Consultant's Documents provided under this Agreement.
20. RECORDS
Consultant shall keep records and invoices in connection with the Services to be
performed under this Agreement. Consultant shall maintain complete and accurate
records with respect to the costs incurred under this Agreement and any Services,
expenditures and disbursements charged to City, for a minimum period of three (3) years,
or for any longer period required by law, from the date of final payment to Consultant
under this Agreement. All such records and invoices shall be clearly identifiable.
Consultant shall allow a representative of City to examine, audit and make transcripts or
copies of such records and invoices during regular business hours. Consultant shall allow
inspection of all Work, data, Documents, proceedings and activities related to the
Agreement for a period of three (3) years from the date of final payment to Consultant
under this Agreement.
21. WITHHOLDINGS
City may withhold payment to Consultant of any disputed sums until satisfaction of
the dispute with respect to such payment. Such withholding shall not be deemed to
constitute a failure to pay according to the terms of this Agreement. Consultant shall not
discontinue Work as a result of such withholding. Consultant shall have an immediate
right to appeal to the City Manager or designee with respect to such disputed sums.
Consultant shall be entitled to receive interest on any withheld sums at the rate of return
that City earned on its investments during the time period, from the date of withholding of
any amounts found to have been improperly withheld.
22. ERRORS AND OMISSIONS
In the event of errors or omissions that are due to the negligence or professional
inexperience of Consultant which result in expense to City greater than what would have
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resulted if there were not errors or omissions in the Work accomplished by Consultant,
the additional design, construction and/or restoration expense shall be borne by
Consultant. Nothing in this Section is intended to limit City's rights under the law or any
other sections of this Agreement.
23. CITY'S RIGHT TO EMPLOY OTHER CONSULTANTS
City reserves the right to employ other Consultants in connection with the Project.
24. CONFLICTS OF INTEREST
24.1 Consultant or its employees may be subject to the provisions of the
California Political Reform Act of 1974 (the "Act") and/or Government Code §§ 1090 et
seq., which (1) require such persons to disclose any financial interest that may
foreseeably be materially affected by the Work performed under this Agreement, and (2)
prohibit such persons from making, or participating in making, decisions that will
foreseeably financially affect such interest.
24.2 If subject to the Act and/or Government Code §§ 1090 et seg., Consultant
shall conform to all requirements therein. Failure to do so constitutes a material breach
and is grounds for immediate termination of this Agreement by City. Consultant shall
indemnify and hold harmless City for any and all claims for damages resulting from
Consultant's violation of this Section.
25. NOTICES
25.1 All notices, demands, requests or approvals, including any change in
mailing address, to be given under the terms of this Agreement shall be given in writing,
and conclusively shall be deemed served when delivered personally, or on the third
business day after the deposit thereof in the United States mail, postage prepaid, first-
class mail, addressed as hereinafter provided.
25.2 All notices, demands, requests or approvals from Consultant to City shall
be addressed to City at:
Attn: Finance Director
Finance Department
City of Newport Beach
100 Civic Center Drive
PO Box 1768
Newport Beach, CA 92658
25.3 All notices, demands, requests or approvals from City to Consultant shall
be addressed to Consultant at:
Attn: Jayson Schmitt
Chandler Asset Management, Inc.
6225 Lusk Boulevard
Chandler Asset Management, Inc. Page 8 9-12
San Diego, CA 92121
26. CLAIMS
Unless a shorter time is specified elsewhere in this Agreement, before making its
final request for payment under this Agreement, Consultant shall submit to City, in writing,
all claims for compensation under or arising out of this Agreement. Consultant's
acceptance of the final payment shall constitute a waiver of all claims for compensation
under or arising out of this Agreement except those previously made in writing and
identified by Consultant in writing as unsettled at the time of its final request for payment.
Consultant and City expressly agree that in addition to any claims filing requirements set
forth in the Agreement, Consultant shall be required to file any claim Consultant may have
against City in strict conformance with the Government Claims Act (Government Code
sections 900 et seq.).
27. TERMINATION
27.1 In the event that either party fails or refuses to perform any of the provisions
of this Agreement at the time and in the manner required, that party shall be deemed in
default in the performance of this Agreement. If such default is not cured within a period
of two (2) calendar days, or if more than two (2) calendar days are reasonably required
to cure the default and the defaulting party fails to give adequate assurance of due
performance within two (2) calendar days after receipt of written notice of default,
specifying the nature of such default and the steps necessary to cure such default, and
thereafter diligently take steps to cure the default, the non -defaulting party may terminate
the Agreement forthwith by giving to the defaulting party written notice thereof.
27.2 Notwithstanding the above provisions, City shall have the right, at its sole
and absolute discretion and without cause, of terminating this Agreement at any time by
giving no less than seven (7) calendar days' prior written notice to Consultant. In the
event of termination under this Section, City shall pay Consultant for Services
satisfactorily performed and costs incurred up to the effective date of termination for which
Consultant has not been previously paid. On the effective date of termination, Consultant
shall deliver to City all reports, Documents and other information developed or
accumulated in the performance of this Agreement, whether in draft or final form.
28. STANDARD PROVISIONS
28.1 Recitals. City and Consultant acknowledge that the above Recitals are true
and correct and are hereby incorporated by reference into this Agreement.
28.2 Compliance with all Laws. Consultant shall, at its own cost and expense,
comply with all statutes, ordinances, regulations and requirements of all governmental
entities, including federal, state, county or municipal, whether now in force or hereinafter
enacted. In addition, all Work prepared by Consultant shall conform to applicable City,
county, state and federal laws, rules, regulations and permit requirements and be subject
to approval of the Project Administrator and City.
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28.3 Waiver. A waiver by either party of any breach, of any term, covenant or
condition contained herein shall not be deemed to be a waiver of any subsequent breach
of the same or any other term, covenant or condition contained herein, whether of the
same or a different character.
28.4 Integrated Contract. This Agreement represents the full and complete
understanding of every kind or nature whatsoever between the parties hereto, and all
preliminary negotiations and agreements of whatsoever kind or nature are merged herein.
No verbal agreement or implied covenant shall be held to vary the provisions herein.
28.5 Conflicts or Inconsistencies. In the event there are any conflicts or
inconsistencies between this Agreement and the Scope of Services or any other
attachments attached hereto, the terms of this Agreement shall govern.
28.6 Interpretation. The terms of this Agreement shall be construed in
accordance with the meaning of the language used and shall not be construed for or
against either party by reason of the authorship of the Agreement or any other rule of
construction which might otherwise apply.
28.7 Amendments. This Agreement may be modified or amended only by a
written document executed by both Consultant and City and approved as to form by the
City Attorney.
28.8 Severability. If any term or portion of this Agreement is held to be invalid,
illegal, or otherwise unenforceable by a court of competent jurisdiction, the remaining
provisions of this Agreement shall continue in full force and effect.
28.9 Controlling Law and Venue. The laws of the State of California shall govern
this Agreement and all matters relating to it and any action brought relating to this
Agreement shall be adjudicated in a court of competent jurisdiction in the County of
Orange, State of California.
28.10 Equal Opportunity Employment. Consultant represents that it is an equal
opportunity employer and it shall not discriminate against any subcontractor, employee
or applicant for employment because race, religious creed, color, national origin,
ancestry, physical handicap, medical condition, marital status, sex, sexual orientation,
age or any other impermissible basis under law.
28.11 No Attorneys' Fees. In the event of any dispute or legal action arising under
this Agreement, the prevailing party shall not be entitled to attorneys' fees.
28.12 Counterparts. This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original and all of which together shall
constitute one (1) and the same instrument.
[SIGNATURES ON NEXT PAGE]
Chandler Asset Management, Inc. Page 10 9_14
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
on the dates written below.
APPROVED AS TO FORM:
CITY ATTORNEY'S OFFICE
Date: '�k
By: (�d
Harp kwK,
City Attorney
ATTEST:
Date:
:
Leilani I. Brown
City Clerk
Attachments: Exhibit A
Exhibit B
Exhibit C
Exhibit D
CITY OF NEWPORT BEACH,
a California municipal corporation
Date:
By:
Kevin Muldoon
Mayor
CONSULTANT: Chandler Asset
Management, Inc., a California
corporation
Date: 1 / %D %/ ZOZZ-
By: // / Gtcm� / "s�
Gartin(D. Cassell
Chief Executive Officer
Date:��—
By: ��'v /
Nicole Dragoo
Secretary
[END OF SIGNATURES]
Council Policy F-1
Scope of Services
Schedule of Billing Rates
Insurance Requirements
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EXHIBIT A
COUNCIL POLICY F-1
Chandler Asset Management, Inc. Page A-1 9-16
F-1
STATEMENT OF INVESTMENT POLICY PURPOSE:
The City Council has adopted this Investment Policy (the Policy) in order to
establish the scope of the investment policy, investment objectives, standards of
care, authorized investments, investment parameters, reporting, investment
policy compliance and adoption, and the safekeeping and custody of assets.
This Policy is organized in the following sections:
A. Scope of Investment Policy
1. Pooling of Funds
2. Funds Included in the Policy
3. Funds Excluded from the Policy
4. Investment Objectives
5. Safety
6. Liquidity
7. Yield
B. Standards of Care
1. Prudence
2. Ethics and Conflicts of Interest
3. Delegation of Authority
4. Internal Controls
C. Banking Services
D. Broker/ Dealers
E. Safekeeping and Custody of Assets
F. Authorized Investments
1. Investments Specifically Permitted
2. Investments Specifically Not Permitted
3. Exceptions to Prohibited and Restricted Investments
G. Investment Parameters
1. Diversification
2. Maximum Maturities
3. Credit Quality
4. Competitive Transactions
H. Portfolio Performance
I. Reporting
J. Investment Policy Compliance and Adoption
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1. Compliance
2. Adoption
A. SCOPE OF INVESTMENT POLICY
1. Pooling of Funds
All cash shall be pooled for investment purposes. The investment
income derived from the pooled investment shall be allocated to the
contributing funds, net of all banking and investing expenses, based
upon the proportion of the respective average balances relative to the
total pooled balance. Investment income shall be distributed to the
individual funds not less than annually.
2. Funds Included in the Policy
The provisions of this Policy shall apply to all financial assets of the
City as accounted for in the City's Comprehensive Annual Financial
Report, including;
a) General Fund
b) Special Revenue Funds
c) Capital Project Funds
d) Enterprise Funds
e) Internal Service Funds
f) Trust and Agency Funds
g) Permanent Endowment Funds
h) Any new fund created unless specifically exempted
If the City invests funds on behalf of another agency and, if that
agency does not have its own investment policy, this Policy shall
govern the agency's investments.
3. Funds Excluded from this Policy
Bond Proceeds - Investment of bond proceeds will be made in
accordance with applicable bond indentures.
B. INVESTMENT OBJECTIVES
The City's funds shall be invested in accordance with all applicable City
policies and codes, State statutes, and Federal regulations, and in a
manner designed to accomplish the following objectives, which are listed in
priority order:
1. Safety
Preservation of principal is the foremost objective of the investment
program. Investments of the City shall be undertaken in a manner
that seeks to ensure the preservation of capital in the overall
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portfolio. The objective shall be to mitigate credit risk and interest rate
risk. To attain this objective, the City shall diversify its investments by
investing funds among several financial institutions and a variety of
securities offering independent returns.
a) Credit Risk
The City shall minimize credit risk, the risk of loss due to
the failure of the security issuer or backer, by:
• Limiting investments in securities that have higher
credit risks, pre -qualifying the financial institutions,
broker/ dealers, intermediaries, and advisors with
which the City will do business
• Diversifying the investment portfolio so as to minimize
the impact any one industry/ investment class can have on the
portfolio
b) Interest Rate Risk
To minimize the negative impact of material changes in the
market value of securities in the portfolio, the City shall:
• Structure the investment portfolio so that
securities mature concurrent with cash needs to
meet anticipated demands, thereby avoiding the
need to sell securities on the open market prior to
maturity
• Invest in securities of varying maturities
2. Liquidity
The City's investment portfolio shall remain sufficiently liquid to enable
the City to meet all operating requirements which might be
reasonably anticipated without requiring a sale of securities. Since all
possible cash demands cannot be anticipated, the portfolio should
consist largely of securities with active secondary or resale markets. A
portion of the portfolio also may be placed in money market mutual
funds or LAW which offer same -day liquidity for short-term funds.
3. Yield
The City's investment portfolio shall be designed with the objective of
attaining a benchmark rate of return throughout budgetary and
economic cycles, commensurate with the City's investment risk
constraints and the liquidity characteristics of the portfolio. Return on
investment is of secondary importance compared to the safety and
liquidity objectives described above. The, core of investments is
limited to relatively low risk securities in anticipation of earning a fair
return relative to the risk being assumed.
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C. STANDARDS OF CARE
1. Prudence
The standard of prudence to be used for managing the City's
investment program is California Government Code Section 53600.3,
the prudent investor standard, which states that "when investing,
reinvesting, purchasing, acquiring, exchanging, selling, or managing
public funds, a trustee shall act with care, skill, prudence, and
diligence under the circumstances then prevailing, including, but not
limited to, the general economic conditions and the anticipated needs
of the agency, that a prudent person acting in a like capacity and
familiarity with those matters would use in the conduct of funds of a
like character and with like aims, to safeguard the principal and
maintain the liquidity needs of the agency."
The City's overall investment program shall be designed and
managed with a degree of professionalism that is worthy of the
public trust. The City recognizes that no investment is totally without
risk and that the investment activities of the City are a matter of public
record. Accordingly, the City recognizes that occasional measured
losses may occur in a diversified portfolio and shall be considered
within the context of the overall portfolio's return, provided that
adequate diversification has been implemented and that the sale of a
security is in the best long-term interest of the City.
The Finance Director and authorized investment personnel acting in
accordance with established procedures and exercising due diligence
shall be relieved of personal responsibility for an individual security's
credit risk or market price changes, provided that deviations from
expectations are reported in a timely fashion to the City Council and
appropriate action is taken to control adverse developments.
2. Ethics and Conflicts of Interest
Elected officials and employees involved in the investment process
shall refrain from personal business activity that could conflict with
proper execution of the City's investment program or could impair or
create the appearance of an impairment of their ability to make
impartial investment decisions. Employees and investment officials
shall subordinate their personal investment transactions to those of
the City. In addition, City Council members, the City Manager, and
the Finance Director shall file a Statement of Economic Interests
each year as required by California Government Code Section 87203
and regulations of the Fair Political Practices Commission.
3. Delegation of Authority
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Authority to manage the City's investment program is derived from the
Charter of the City of Newport Beach section 605 G). The Finance
Director shall assume the title of and act as City Treasurer and with the
approval of the City Manager appoint deputies annually as necessary
to act under the provisions of any law requiring or permitting action by
the City Treasurer. The Finance Director may then delegate the
authority to conduct investment transactions and to manage the
operation of the investment portfolio to other specifically authorized
staff members. No person may engage in an investment transaction
except as expressly provided under the terms of this Policy.
The City may engage the support services of outside investment
advisors with respect to its investment program, so long as it can be
demonstrated that these services produce a net financial advantage or
necessary financial protection of the City's financial resources. Such
companies must be registered under the Investment Advisors Act of
1940, be well -established and exceptionally reputable. Members of the
staff of such companies who will have primary responsibility for
managing the City's investments must have a working familiarity with
the special requirements and constraints of investing municipal funds
in general and this City's funds in particular. These firms must insure
that the portion of the portfolio under their management complies with
various concentration and other constraints specified herein, and
contractually agree to conform to all provisions of governing law and
the collateralization and other requirements of this Policy. Selection
and retention of broker/ dealers by investment advisors shall be at
their sole discretion and dependent upon selection and retention
criteria as stated in the Uniform Application for Investment Advisor
Registration and related Amendments (SEC Form ADV 2A).
4. Internal Controls
The Finance Director is responsible for establishing and maintaining
a system of internal controls. The internal controls shall be designed
to prevent losses of public funds arising from fraud, employee error,
and misrepresentation by third parties, unanticipated changes in
financial markets, or imprudent action by City employees and officers.
The internal structure shall be designed to provide reasonable
assurance that these objectives are met. The concept of reasonable
assurance recognizes that (1) the cost of a control should not exceed
the benefits likely to be derived, and (2) the valuation of costs and
benefits requires estimates and judgments by management.
D. BANKING SERVICES
Banking services for the City shall be provided by FDIC insured banks
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approved to provide depository and other banking services. To be eligible,
a bank shall qualify as a depository of public funds in the State of California
as defined in California Government Code Section 53630.5 and shall secure
deposits in excess of FDIC insurance coverage in accordance with California
Government Code Section 53652.
E. BROKER/DEALERS
In the event that an investment advisor is not used to purchase securities,
the City will select broker/ dealers on the basis of their expertise in public
cash management and their ability to provide service to the City's account.
Each approved broker/ dealer must possess an authorizing certificate from
the California Commissioner of Corporations as required by Section 25210
of the California Corporations Code.
To be eligible, a firm must meet at least one of the following criteria:
1. Be recognized as Primary Dealers by the Federal Reserve Bank of New
York or have a primary dealer within their holding company structure,
or
2. Report voluntarily to the Federal Reserve Bank of New York, or
3. Qualify under Securities and Exchange Commission (SEC) Rule
15c3-1 (Uniform Net Capital Rule).
F. SAFEKEEPING AND CUSTODY OF ASSETS
The Finance Director shall select one or more banks to provide
safekeeping and custodial services for the City. A Safekeeping Agreement
approved by the City shall be executed with each custodian bank prior to
utilizing that bank's safekeeping services.
Custodian banks will be selected on the basis of their ability to provide
services for the City's account and the competitive pricing of their
safekeeping related services.
The purchase and sale of securities and repurchase agreement
transactions shall be settled on a delivery versus payment basis. All
securities shall be perfected in the name of the City. Sufficient evidence to
title shall be consistent with modern investment, banking and commercial
practices.
All investment securities, except non-negotiable Certificates of Deposit,
Money Market Funds and local government investment pools, purchased
by the City will be delivered by book entry and will be held in third -party
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safekeeping by a City approved custodian bank, its correspondent bank or
its Depository Trust Company (DTC) participant account.
All Fed wireable book entry securities owned by the City shall be held in
the Federal Reserve system in a customer account for the custodian bank
which will name the City as" customer."
All DTC eligible securities shall be held in the custodian bank's DTC
participant account and the custodian bank shall provide evidence that the
securities are held for the City as" customer."
G. AUTHORIZED INVESTMENTS
All investments and deposits of the City shall be made in accordance with
California Government Code Sections 16429.1, 53600-53609 and 53630-
53686. Any revisions or extensions of the a code sections will be assumed
to be part of this Policy immediately upon being enacted. The City has
further restricted the eligible types of securities and transactions. The
foregoing list of authorized securities and transactions shall be strictly
interpreted. Any deviation from this list must be pre- approved by resolution
of the City Council. In the event an apparent discrepancy is found between
this Policy and the Government Code, the more restrictive parameter(s) will
take precedence.
Where this section specifies a percentage limitation or minimum credit
rating for a particular security type, that percentage or credit rating
minimum is applicable only at the date of purchase.
1. Investments Specifically Permitted
a) United States Treasury bills, notes, or bonds with a final maturity
not exceeding five years from the date of trade settlement.
There is no limitation as to the percentage of the City's portfolio
that may be invested in this category.
b) Federal Instrumentality (government -sponsored enterprise)
debentures, discount notes, callable and step-up securities,
with a final maturity not exceeding five years from the date of
trade settlement. There is no limitation as to the percentage of
the portfolio that can be invested in this category. No more
than thirty percent (30%) of the portfolio may be invested in
any single Federal Instrumentality/GSE issuer. The maximum
percentage of callable Federal Instrumentality/GSE securities
in the portfolio will be twenty percent (20%.)
c) Federal Agency Obligations for which the full faith and credit of
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the United States are pledged for the payment of principal and
interest and which have a final maturity not exceeding five
years from the date of trade settlement. There is no limitation as
to the percentage of the portfolio that can be invested in this
category.
d) Mortgage -backed Securities, Collateralized Mortaaae
Obligation Cl MO) and Asset -backed Securities from issuers
not defined sections a, band c of the Investments Specifically
Permitted section of this investment policy are limited to bonds
with a final maturity not exceeding five years from the date of
trade settlement. The security itself shall be rated at least
"AAA" or the equivalent by an NRSRO. No more than five
percent (5%) of the City's total portfolio shall be invested in any
one issuer of mortgage -backed and asset- backed securities
listed above, and the aggregate investment in mortgage -
backed and asset -backed securities shall not exceed twenty
percent (20%) of the City's total portfolio.
e) Medium -Term Notes issued by corporations organized and
operating within the United States or by depository institutions
licensed by the United States or any state and operating within
the United States, with a final maturity not exceeding five years
from the date of trade settlement, and rated in at least the "A"
category or the equivalent by an NRSRO. No more than five
percent (5%) of the City's total portfolio shall be invested in any
one issuer of medium- term notes, and the aggregate
investment in medium -term notes shall not exceed thirty
percent (30%) of the City's total portfolio.
f) Municipal Bonds including bonds issued by the City of Newport
Beach, including bonds payable solely out of the revenues
from a revenue -producing property owned, controlled, or
operated by the City or by a department, board, agency, or
authority of the City.
State of California registered warrants or treasury notes or
bonds, including bonds payable solely out of the revenues
from a revenue- producing property owned, controlled, or
operated by the state or by a department, board, agency, or
authority of the state.
Registered treasury notes or bonds of any of the other 49 states
in addition to California, including bonds payable solely out of the
revenues from a revenue producing property owned, controlled,
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or operated by a state or by a department, board, agency, or
authority of any of the other 49 states, in addition to California.
Bonds, notes, warrants, or other evidences of indebtedness of a
local agency within California, including bonds payable solely
out of the revenues from a revenue -producing property owned,
controlled, or operated by the local agency, or by a
department, board, agency, or authority of the local agency.
In addition, these securities must be rated in at least the "A"
category or the equivalent by a NRSRO with maturities not
exceeding five years from the date of trade settlement. No
more than five percent (5%) of the City's total portfolio shall be
invested in any one municipal issuer. In addition, the aggregate
investment in municipal bonds may not exceed thirty percent
(30%) of the portfolio.
g) Non-negotiable Certificates of Deposit and savings deposits with
a maturity not exceeding two years from the date of trade
settlement, in FDIC insured state or nationally chartered banks or
savings banks that qualify as a depository of public funds in the
State of California as defined in California Government Code
Section 53630.5. Deposits exceeding the FDIC insured amount
shall be secured pursuant to California Government Code Section
53652. No one issuer shall exceed more than five percent (5%) of
the portfolio, and investment in negotiable and nonnegotiable
certificates of deposit shall be limited to thirty percent (30%) of
the portfolio combined.
h) Negotiable Certificates of Deposit only with a nationally or
state- chartered bank, a savings association or a federal
association (as defined by Section 5102 of the Financial Code), a
state or federal credit union, or by a federally licensed or state -
licensed branch of a foreign bank whose senior long-term debt
is rated in at least the "A" category, or the equivalent, or short-
term debt is rated at least "A-1" or the equivalent by an NRSRO
and having assets in excess of $10 billion, so as to ensure
security and a large, well- established secondary market. Ease of
subsequent marketability should be further ascertained prior to
initial investment by examining currently quoted bids by primary
dealers and the acceptability of the issuer by these dealers. No
one issuer shall exceed more than five percent (5%) of the
portfolio, and maturity shall not exceed two years. Investment in
negotiable and non- negotiable certificates of deposit shall be
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limited to thirty percent (30%) of the portfolio combined.
i) Prime Commercial Paper with a maturity not exceeding 270
days from the date of trade settlement that is rated "A-1", or
the equivalent, by an NRSRO. The entity that issues the
commercial paper shall meet all of the following conditions in
either sub- paragraph i. or sub -paragraph ii. below:
The entity shall (1) be organized and operating in the
United States as a general corporation, (2) have total
assets in excess of $500,000,000 and (3) have debt
other than commercial paper, if any, that is rated in at
least the "A" category or the equivalent by an NRSRO.
ii. The entity shall (1) be organized within the United States
as a special purpose corporation, trust, or limited liability
company, (2) have program wide credit enhancements,
including, but not limited to, over collateral ization, letters
of credit or surety bond and (3) have commercial paper
that is rated at least "A-1" or the equivalent, by an
NRSRO.
iii. No more than five percent (5%) of the City's total
portfolio shall be invested in the commercial paper of any
one issuer, and the aggregate investment in commercial
paper shall not exceed twenty-five percent (25%) of the
City's total portfolio. Under a provision sunsetting on
January 1, 2026, no more than forty percent (40%) of the
portfolio may be invested in commercial paper if the
City's assets under management are greater than
$100,000,000.
j) Eligible Banker's Acceptances with a maturity not exceeding
180 days from the date of trade settlement, drawn on and
accepted by a commercial bank whose senior long-term debt is
rated in at least the "A" category or the equivalent by an
NRSRO at the time of purchase. Banker's Acceptances shall be
rated at least "A-1", or the equivalent at the time of purchase by
an NRSRO. If the bank has senior debt outstanding, it must be
rated in at least the "A" category or the equivalent by an
NRSRO. The aggregate investment in banker's acceptances
shall not exceed forty percent (40%) of the City's total portfolio,
and no more than five percent (5%) of the City's total portfolio
shall be invested in banker's acceptances of any one bank.
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k) Repurchase Agreements and Reverse Repurchase
Agreements with a final termination date not exceeding 30 days
collateralized by U.S. Treasury obligations or Federal
Instrumentality securities listed in items 1 and 2 above with the
maturity of the collateral not exceeding ten years. For the
purpose of this section, the term collateral shall mean
purchased securities under the terms of the City's approved
Master Repurchase Agreement. The purchased securities shall
have a minimum market value including accrued interest of one
hundred and two percent (102%) of the dollar value of the
funds borrowed. Collateral shall be held in the City's custodian
bank, as safekeeping agent, and the market value of the
collateral securities shall be marked -to -the -market daily.
Repurchase Agreements and Reverse Repurchase
Agreements shall be entered into only with broker/ dealers and
who are recognized as Primary Dealers with the Federal
Reserve Bank of New York, or with firms that have a Primary
Dealer within their holding company structure. Primary Dealers
approved as Repurchase Agreement counterparties shall have
a short-term credit rating of at least "A-1" or the equivalent and
a long-term credit rating of at least "A" or the equivalent.
Repurchase agreement counterparties shall execute a City
approved Master Repurchase Agreement with the City. The
Finance Director shall maintain a copy of the City's approved
Master Repurchase Agreement and a list of the broker/ dealers
who have executed same.
In addition, the City must own assets for more than 30 days
before they can be used as collateral for a reverse repurchase
agreement. No more than ten percent (10%) of the portfolio
can be involved in reverse repurchase agreements.
State of California's Local Agency Investment Fund (LAIF),
pursuant to California Government Code Section 16429.1.
m) County Investment Funds: Los Angeles County provides a
service similar to LAIF for municipal and other government
entities outside of Los Angeles County, including the City.
Investment in this pool is intended to be used as a temporary
repository for short-term funds used for liquidity purposes. The
Finance Director shall maintain on file appropriate information
concerning the county pool's current investment policies,
practices, and performance, as well as its requirements for
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participation, including, but not limited to, limitations on
deposits or withdrawals and the composition of the portfolio. At
no time shall more than five percent (5%) of the City's total
investment portfolio be placed in this pool.
n) Mutual Funds and Money Market Mutual Funds registered
under the Investment Company Act of 1940, provided that:
MUTUAL FUNDS that invest in the securities and obligations
as authorized under California Government Code, Section
53601 (a) to (k) and (m) to (q) inclusive and that meet either of
the following criteria:
a. Attained the highest ranking or the highest letter
and numerical rating provided by not less than two
(2) NRSROs; or
b. Have retained an investment adviser registered or
exempt from registration with the Securities and
Exchange Commission with not less than five
years' experience investing in the securities and
obligations authorized by California Government
Code, Section 53601 and with assets under
management in excess of $500 million.
c. No more than 10% of the total portfolio may be
invested in shares of any one mutual fund.
ii. MONEY MARKET MUTUAL FUNDS registered with the
Securities and Exchange Commission under the
Investment Company Act of 1940 and issued by
diversified management companies and meet either of
the following criteria:
a. Have attained the highest ranking or the highest letter
and numerical rating provided by not less than two (2)
NRSROs; or
b. Have retained an investment adviser registered or
exempt from registration with the Securities and
Exchange Commission with not less than five years'
experience managing money market mutual funds with
assets under management in excess of $500 million.
c. No more than 20% of the total portfolio may be invested
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in Money Market Mutual Funds.
iii No more than 20% of the total portfolio may be invested in
these securities.
o) Suoranationals which are United States dollar denominated
senior unsecured unsubordinated obligations issued or
unconditionally guaranteed by the International Bank for
Reconstruction and Development (IBRD), International
Finance Corporation (IFC), or Inter -American Development
Bank (IADB), with a maximum remaining maturity of five years
or less, and eligible for purchase and sale within the United
States. Investments under this paragraph shall be rated in the
11 AA1 1 category, its equivalent, or better by at least
oneNRSRO.
No more than ten percent (10%) of the City's total portfolio shall
be invested in any one issuer of supranational obligations.
Purchases of supranational obligations shall not exceed twenty
percent (20%) of the investment portfolio of the City.
2. Investments Specifically Not Permitted
Any security type or structure not specifically approved by this policy
is hereby prohibited. Security types, which are thereby prohibited
include, but are not limited to: ;,exotic" derivative structures such as
range notes, dual index notes, inverse floating rate notes, leveraged
or de -leveraged floating rate notes, interest only strips that are
derived from a pool of mortgages and any security that could result in
zero interest accrual if held to maturity, or any other complex variable
or structured note with an unusually high degree of volatility risk.
Under a provision sunsetting on January 1, 2026, securities backed
by the
U.S. Government that c.ould result in a zero or negative interest
accrual if
held to maturity are permitted.
The City shall not invest funds with the Orange County Pool.
3. Exceptions to Prohibited and Restricted Investments
The City shall not be required to sell securities prohibited or restricted
in this policy, or any future policies, or prohibited or restricted by new
State regulations, if purchased prior to their prohibition and/ or
restriction. Insofar as these securities provided no notable credit risk
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to the City, holding of these securities until maturity is approved. At
maturity or liquidation, such monies shall be reinvested as provided
by this policy.
H. INVESTMENT PARAMETERS
1. Diversification
The City shall diversify its investments to avoid incurring
unreasonable risks inherent in over -investing in specific instruments,
individual financial institutions or maturities. As such, no more than
five percent (5%) of the City's portfolio may be invested in the
instruments of any one issuer, except governmental issuers,
supranationals, investment pools, mutual funds and money market
funds, or unless otherwise specified in this investment policy. This
restriction does not apply to any type of Federal Instrumentality or
Federal Agency Security listed in Sections G1 b and G1 c above.
Nevertheless, the asset allocation in the investment portfolio should
be flexible depending upon the outlook for the economy, the
securities markets and the City's anticipated cash flow needs.
2. Maximum Maturities
To the extent possible, investments shall be matched with anticipated
cash flow requirements and known future liabilities. The City will not
invest in securities maturing more than five years from the date of
trade settlement, unless the City Council has by resolution granted
authority to make such an investment at least three months prior to
the date of investment.
3. Credit Quality
Each investment manager will monitor the credit quality of the
securities in their respective portfolio. In the event a security held by
the City is downgraded to a level below the requirements of this
policy, making the security ineligible for additional purchases, the
following steps will be taken:
Any actions taken related to the downgrade by the
investment manager will be communicated to the Finance
Director in a timely manner.
If a decision is made to retain the security, the credit quality
will be monitored and reported to the City Council.
4. Competitive Transactions
Investment advisors shall make best effort to price investment
transactions on a competitive basis with broker/ dealers selected
consistent with their practices disclosed in form ADV 2A filed with the
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SEC. Where possible, at least three broker/ dealers shall be
contacted for each transaction and their bid or offering prices shall be
recorded. If there is no other readily available competitive offering, the
investment advisor shall make their best efforts to document
quotations for comparable or alternative securities. If qualitative
characteristics of a transaction, including, but not limited to,
complexity of the transaction, or sector expertise of the broker,
prevent a competitive selection process, investment advisors shall
use brokerage selection practices as described above.
PORTFOLIO PERFORMANCE
The investment portfolio shall be designed to attain a market rate of return
throughout budgetary and economic cycles, taking into account prevailing
market conditions, risk constraints for eligible securities, and cash flow
requirements. The performance of the City's investments shall be
compared to the total return of a benchmark that most closely corresponds
to the portfolio's duration, universe of allowable securities, risk profile, and
other relevant characteristics. When comparing the performance of the
City's portfolio, its rate of return will be computed consistent with Global
Investment Performance Standards (GIPS).
J. REPORTING
Monthly, the Finance Director: shall produce a treasury report of the
investment portfolio balances, transactions, risk characteristics, earnings,
and performance results of the City's investment portfolio available to City
Council and the public on the City's Website. The report shall include the
following information:
1. Investment type, issuer, date of maturity, par value and dollar amount
invested in all securities, and investments and monies held by the City;
2. A description of the funds, investments and programs;
3. A market value as of the date of the report (or the most recent valuation
as to assets not valued monthly) and the source of the valuation;
4. A statement of compliance with this Policy or an explanation for non-
compliance
K. INVESTMENT POLICY COMPLIANCE AND ADOPTION
1. Compliance
Any deviation from the policy shall be reported to Finance Committee
as soon as practical, but no later than the next scheduled Finance
Committee meeting. Upon recommendation of the Finance
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Committee, the Finance Director shall review deviations from policy
with the City Council.
2. Adoption
The Finance Director shall review the Investment Policy with the
Finance Committee at least annually to ensure its consistency with
the overall objectives of preservation of principal, liquidity and return,
and its relevance to current law and financial and economic trends.
The Finance Director shall review the Investment Policy with City
Council at a public meeting if there are changes recommended to
the Investment Policy.
This Policy was endorsed and adopted by the City Council of the
City of Newport Beach on September 28, 2021. It replaces any
previous investment policy or investment procedures of the City.
Adopted - April 6, 1959
Amended- November 9, 1970
Amended - February 11, 1974
Amended - February 9, 1981
Amended - October 27, 1986
Rewritten- October 22, 1990
Amended- January 28, 1991
Amended- January 24, 1994
Amended- January 9, 1995
Amended - April 22, 1996
Corrected- January 27, 1997
Amended - February 24, 1997
Amended - May 26, 1998
Reaffirmed - March 22, 1999
Reaffirmed - March 14, 2000
Amended & Reaffirmed - May 8,
2001
Amended & Reaffirmed - April 23, 2002
Amended & Reaffirmed - April 8, 2003
Amended & Reaffirmed - April 13, 2004
Amended & Reaffirmed - September 13,
2005 Amended - August 11, 2009
Amended & Reaffirmed - August 10, 2010
Amended & Reaffirmed - September 28,
2010 Reaffirmed - June 28, 2011
Amended & Reaffirmed- October 9, 2012
Amended - August 13, 2013
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Amended - September 8, 2015
Amended- March 28, 2017
Amended - January 28, 2020
Amended - September 28, 2021
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EXHIBIT B
SCOPE OF SERVICES
Consultant shall perform the following services:
Provide full-time, discretionary investment research and advisory services of the City's
assets under management and conduct a continuous program of monitoring,
investment, evaluation and, when appropriate, sale and reinvestment of the City's
Managed Funds assets.
2. Provide discretionary investment advisory services which conform with state law,
federal law, as well as ordinances, resolutions and the City's investment policy and the
Prudent Expert Standard of care.
3. Be available in a timely manner, in person, by telephone, fax or e-mail, for consultation
or advice. Meet with and provide information to City finance staff, and if requested, to
other interested parties such as the Finance Committee, City Council and senior
management. Meet periodically with City staff, including on -site meetings not less than
twice annually, to review and refine portfolio strategy and performance. All documents
are to be in PDF and provided in advance of in -person meetings.
4. Provide detailed reports in PDF at least monthly of investment portfolio activity,
performance, holdings by type, maturity, broker, duration, and benchmark
comparables. Such statements shall be furnished to the City within five (5) calendar
days after the close of each month. Include earnings and accounting methodology.
Reports shall follow Generally Accepted Accounting Principles (GAAP) and
Governmental Accounting Standards Board (GASB) True -Value reporting and Deposit
& Investment Risk Disclosure, and any other reports that may now or later be required.
Provide separate quarterly and annual portfolio performance reports based on the
City's fiscal year. Quarterly reports are to include summaries of that period's economic
environment.
5. Provide assistance in developing and implementing investment strategies that will
maintain or enhance portfolio quality and performance within the parameters of the
City's investment policies and cash flow needs, taking into consideration the primary
objective, the preservation of principal.
6. Work with City staff to assure coordination of investment trades, delivery of the
securities and availability of funds. Assist with trade settlements. Provide technical and
fundamental market research including yield curve analysis and swap analysis. Obtain
and document competitive prices for securities transactions, and with hard copy and
electronic (in PDF) monthly reports, provide documentation to confirm competitive
pricing, with the City's preference for at least three (3) quotes per trade. (If less than
three, provide rationale.)
7. The successful Proposer will make recommendations to the City as to changes,
including the acquisition and sale of securities held in the account as the successful
Proposer from time to time deems appropriate and permissible under the laws
governing the City and as specified in the Investment Policies.
Chandler Asset Management, Inc. Page B-1 9-34
8. Annually assist in reviewing and recommending any appropriate amendments to City's
investment policy and compare to applicable laws. Recommend appropriate
amendments annually to comply with applicable laws or minimize risk with respect to
stated investment objectives.
9. Assist in reviewing investment internal controls.
10. Assist in reviewing investment procedures and portfolio documentation with a goal of
process improvement. Develop and execute an investment strategy consistent with
the City's stated investment policy objectives and parameters, applicable laws and an
understanding of the City's cash flow needs.
11. Establish an appropriate performance benchmark and compare historical results to
benchmark.
12. Regularly ensure portfolio structure matches the City's stated investment objectives.
13. Provide monthly reporting of each portfolio under management showing deposits,
withdrawals, purchases and sales (or maturities) of investments, earnings received,
and the value of assets held on the last business day of the month. The statement
shall be in the format and manner that is mutually agreed upon in writing by the
Consultant and the City.
14. Provide assurance of portfolio compliance with applicable policies and laws.
15. Immediately apprise Project Administrator of all instances of non-compliance with
applicable policies and laws.
16. Discuss cash flow needs and market strategy with Project Administrator quarterly.
17. Assist the City with cash flow/maturity analysis as needed.
18. Annually monitor (and provide supporting documentation to the City) the
creditworthiness of the financial institutions with which the City does business, except
for those with balances at or below the Federal Deposit Insurance Corporation's limits.
Assist in keeping the authorized financial institutions list updated. Monitor the
creditworthiness of the City's depository and custodian bank and investments in the
portfolio. Provide annual bank ratings report (more frequently if City's depository banks
have ratings changes), except for those banks with balance at or below the Federal
Deposit Insurance Corporation's limits.
19. Observe the instructions of the City with respect to broker/dealers who are approved
to execute transactions involving the City's Managed Funds and in the absence of
such instructions will engage broker/dealers who are reputable, qualified and
financially sound. In connection with the selection of such brokers and dealers and the
placing of such orders, the Consultant is directed to seek for the City the most
favorable execution and price.
20. Regularly evaluate market risk and develop strategies that minimize the impact on the
portfolio.
Chandler Asset Management, Inc. Page B-2 9-35
21. Immediately apprise City staff of significant market events impacting portfolio security
or performance.
22. Assist in the selection and review of third -party safekeeping/custodial services.
Interact and communicate effectively with the City's Custodian bank. All securities shall
be perfected in the name of the City. Sufficient evidence to title shall be consistent with
modern investment, banking and commercial practices.
23. Provide for online access to and electronic delivery of monthly statements.
24. Vote proxies on behalf of City unless otherwise instructed.
25. Value securities held in portfolios managed by Consultant no less than monthly.
26. Monitor repurchase agreement documentation to maintain the necessary paperwork.
27. Allow City to query data and generate internal reports and to be exportable to Excel.
28. Participate in City's evaluation, selection and review of any investment software the
City uses or considers using.
29. Provide City finance and treasury staff investment training and technical advice as
needed.
30. Provide periodic status reports on the services provided by the firm.
31. Provide itemized invoices of charges either monthly or quarterly, as agreed upon in
the contract.
Additional Terms:
1. Proxy Voting. Consultant has adopted and implemented written policies and
procedures and will provide City with a copy of the proxy voting procedures upon
request. Consultant will provide information regarding how City's proxies were voted
upon request.
2. Valuation. Securities or investments in the portfolio will be valued in a manner
determined in good faith by Consultant to reflect fair market value.
3. Custody of Securities and Funds. Consultant shall not have custody or possession of
the funds or securities that City has placed under its management. City shall appoint
a custodian to take and have possession of its assets. City shall compare statements
received from the appointed custodian to statements received from Consultant.
4. Investment Advice. City recognizes that the opinions, recommendations and actions
of Consultant will be based on information deemed by it to be reliable, but not
guaranteed to or by it. Provided that Consultant acts in good faith, City agrees that
Consultant will not in any way be liable for any error in judgment or for any act or
omission, except as may otherwise be provided for under the Federal Securities laws,
state law or other applicable laws.
Chandler Asset Management, Inc. Page B-3 9-36
5. Other Clients. It is further understood that Consultant may be acting in a similar
capacity for other institutional and individual clients, and that investments and
reinvestments for City's portfolio may differ from those made or recommended with
respect to other accounts and clients even though the investment objectives may be
the same or similar. Accordingly, it is agreed that Consultant will have no obligation to
purchase or sell for City's account any securities, which it may purchase or sell for
other clients.
6. Receipt of Brochure and Privacy Policy. City hereby acknowledges receipt of the
disclosure statement or "brochure" and "brochure supplement" also known as Part 2A
and Part 2B of Form ADV, required to be delivered pursuant to Rule 204- 3 of the
Investment Advisers Act of 1940 (Brochure). City further acknowledges receipt of
Consultant's Privacy Policy, as required by Regulation S-P.
7. Additional Services. If and to the extent that the City requests the Consultant to render
services other than those to be rendered by the Consultant according to this
Agreement, such additional services shall be compensated separately on terms to be
agreed upon between the City and the Consultant.
Chandler Asset Management, Inc. Page B-4 9-37
EXHIBIT C
SCHEDULE OF BILLING RATES
First $200 million
Assets over $200 million
0.06 of 1% (6 basis points)
0.03 of 1% (3 basis points)
The fee schedule is all-inclusive for the services that Consultant provides, including
technological resources, onboarding and implementation, online access to the
Consultant's Chandler Client Portal, comprehensive reporting, meetings, and
educational offerings for staff, as well as the investment management and treasury
management support services as needed according to the Scope of Services.
Pooled investment vehicles are excluded from fee calculations.
Since the Consultant calculates fees based on the average balance of assets under its
direct management (market value including accrued interest), fees will fluctuate based on
portfolio value.
Chandler Asset Management, Inc. Page C-1 9_38
L�1�42W- KAX
INSURANCE REQUIREMENTS — PROFESSIONAL SERVICES
1. Provision of Insurance. Without limiting Consultant's indemnification of City, and
prior to commencement of Work, Consultant shall obtain, provide and maintain at
its own expense during the term of this Agreement, policies of insurance of the
type and amounts described below and in a form satisfactory to City. Consultant
agrees to provide insurance in accordance with requirements set forth here. If
Consultant uses existing coverage to comply and that coverage does not meet
these requirements, Consultant agrees to amend, supplement or endorse the
existing coverage.
2. Acceptable Insurers. All insurance policies shall be issued by an insurance
company currently authorized by the Insurance Commissioner to transact
business of insurance in the State of California, with an assigned policyholders'
Rating of A- (or higher) and Financial Size Category Class VII (or larger) in
accordance with the latest edition of Best's Key Rating Guide, unless otherwise
approved by the City's Risk Manager.
3. Coverage Requirements.
A. Workers' Compensation Insurance. Consultant shall maintain Workers'
Compensation Insurance, statutory limits, and Employer's Liability
Insurance with limits of at least one million dollars ($1,000,000) each
accident for bodily injury by accident and each employee for bodily injury by
disease in accordance with the laws of the State of California, Section 3700
of the Labor Code.
Consultant shall submit to City, along with the certificate of insurance, a
Waiver of Subrogation endorsement in favor of City, its City Council, boards
and commissions, officers, agents, volunteers and employees.
B. General Liability Insurance. Consultant shall maintain commercial general
liability insurance, and if necessary umbrella liability insurance, with
coverage at least as broad as provided by Insurance Services Office form
CG 00 01, in an amount not less than one million dollars ($1,000,000) per
occurrence, two million dollars ($2,000,000) general aggregate. The policy
shall cover liability arising from premises, operations, personal and
advertising injury, and liability assumed under an insured contract (including
the tort liability of another assumed in a business contract).
C. Automobile Liability Insurance. Consultant shall maintain automobile
insurance at least as broad as Insurance Services Office form CA 00 01
covering bodily injury and property damage for all activities of Consultant
arising out of or in connection with Work to be performed under this
Agreement, including coverage for any owned, hired, non -owned or rented
vehicles, in an amount not less than one million dollars ($1,000,000)
combined single limit each accident.
Chandler Asset Management, Inc. Page D-1 9-39
D. Professional Liability (Errors & Omissions) Insurance. Consultant shall
maintain professional liability insurance that covers the Services to be
performed in connection with this Agreement, in the minimum amount of
one million dollars ($1,000,000) per claim and two million dollars
($2,000,000) in the aggregate. Any policy inception date, continuity date,
or retroactive date must be before the Effective Date of this Agreement and
Consultant agrees to maintain continuous coverage through a period no
less than three years after completion of the Services required by this
Agreement.
E. Fidelity Insurance. Consultant shall maintain fidelity insurance that covers
the Services to be performed in connection with this Agreement, in the
minimum amount of five million dollars ($5,000,000) limit per claim.
4. Other Insurance Requirements. The policies are to contain, or be endorsed to
contain, the following provisions:
A. Waiver of Subrogation. All insurance coverage maintained or procured
pursuant to this Agreement shall be endorsed to waive subrogation against
City, its City Council, boards and commissions, officers, agents, volunteers
and employees or shall specifically allow Consultant or others providing
insurance evidence in compliance with these requirements to waive their
right of recovery prior to a loss. Consultant hereby waives its own right of
recovery against City, and shall require similar written express waivers from
each of its subconsultants.
B. Additional Insured Status. All liability policies including general liability,
excess liability, pollution liability, and automobile liability, if required, but not
including professional liability, shall provide or be endorsed to provide that
City, its City Council, boards and commissions, officers, agents, volunteers
and employees shall be included as insureds under such policies.
C. Primary and Non Contributory. All liability coverage shall apply on a primary
basis and shall not require contribution from any insurance or self-insurance
maintained by City.
D. Notice of Cancellation. All policies shall provide City with thirty (30)
calendar days' notice of cancellation (except for nonpayment for which ten
(10) calendar days' notice is required) or nonrenewal of coverage for each
required coverage.
5. Additional Agreements Between the Parties. The parties hereby agree to the
following:
A. Evidence of Insurance. Consultant shall provide certificates of insurance to
City as evidence of the insurance coverage required herein, along with a
waiver of subrogation endorsement for workers' compensation and other
endorsements as specified herein for each coverage. Insurance certificates
and endorsement must be approved by City's Risk Manager prior to
Chandler Asset Management, Inc. Page D-2 9-40
commencement of performance. Current certification of insurance shall be
kept on file with City at all times during the term of this Agreement. The
certificates and endorsements for each insurance policy shall be signed by
a person authorized by that insurer to bind coverage on its behalf. At least
fifteen (15) days prior to the expiration of any such policy, evidence of
insurance showing that such insurance coverage has been renewed or
extended shall be filed with the City. If such coverage is cancelled or
reduced, Consultant shall, within ten (10) days after receipt of written notice
of such cancellation or reduction of coverage, file with the City evidence of
insurance showing that the required insurance has been reinstated or has
been provided through another insurance company or companies. City
reserves the right to require complete, certified copies of all required
insurance policies, at any time.
B. City's Right to Revise Requirements. City reserves the right at any time
during the term of the Agreement to change the amounts and types of
insurance required by giving Consultant sixty (60) calendar days' advance
written notice of such change. If such change results in substantial
additional cost to Consultant, City and Consultant may renegotiate
Consultant's compensation.
C. Right to Review Subcontracts. Consultant agrees that upon request, all
agreements with subcontractors or others with whom Consultant enters into
contracts with on behalf of City will be submitted to City for review. Failure
of City to request copies of such agreements will not impose any liability on
City, or its employees. Consultant shall require and verify that all
subcontractors maintain insurance meeting all the requirements stated
herein, and Consultant shall ensure that City is an additional insured on
insurance required from subcontractors. For CGL coverage,
subcontractors shall provide coverage with a format at least as broad as CG
20380413.
D. Enforcement of Agreement Provisions. Consultant acknowledges and
agrees that any actual or alleged failure on the part of City to inform
Consultant of non-compliance with any requirement imposes no additional
obligations on City nor does it waive any rights hereunder.
E. Requirements not Limiting. Requirements of specific coverage features or
limits contained in this Section are not intended as a limitation on coverage,
limits or other requirements, or a waiver of any coverage normally provided
by any insurance. Specific reference to a given coverage feature is for
purposes of clarification only as it pertains to a given issue and is not
intended by any party or insured to be all inclusive, or to the exclusion of
other coverage, or a waiver of any type. If the Consultant maintains higher
limits than the minimums shown above, the City requires and shall be
entitled to coverage for higher limits maintained by the Consultant. Any
available insurance proceeds in excess of the specified minimum limits of
insurance and coverage shall be available to the City.
Chandler Asset Management, Inc. Page D-3 9-41
F. Self -insured Retentions. Any self -insured retentions must be declared to
and approved by City. City reserves the right to require that self -insured
retentions be eliminated, lowered, or replaced by a deductible. Self-
insurance will not be considered to comply with these requirements unless
approved by City.
G. City Remedies for Non -Compliance. If Consultant or any subconsultant fails
to provide and maintain insurance as required herein, then City shall have
the right but not the obligation, to purchase such insurance, to terminate this
Agreement, or to suspend Consultant's right to proceed until proper
evidence of insurance is provided. Any amounts paid by City shall, at City's
sole option, be deducted from amounts payable to Consultant or reimbursed
by Consultant upon demand.
H. Timely Notice of Claims. Consultant shall give City prompt and timely notice
of claims made or suits instituted that arise out of or result from Consultant's
performance under this Agreement, and that involve or may involve
coverage under any of the required liability policies. City assumes no
obligation or liability by such notice, but has the right (but not the duty) to
monitor the handling of any such claim or claims if they are likely to involve
City.
Consultant's Insurance. Consultant shall also procure and maintain, at its
own cost and expense, any additional kinds of insurance, which in its own
judgment may be necessary for its proper protection and prosecution of the
Work.
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