HomeMy WebLinkAboutFinance Committee Agenda - August 13, 20151
This Finance Committee is subject to the Ralph M. Brown Act. Among other things, the Brown Act requires that the Finance Committee’s agenda be posted at least seventy-two (72) hours in advance of each regular meeting and that the public be allowed to comment on agenda items before the Finance Committee and items not on the agenda but are within the subject matter jurisdiction of the Finance Committee. The Finance Committee may limit public comments to a reasonable amount of time, generally three (3) minutes per person.
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CITY OF NEWPORT BEACH
FINANCE COMMITTEE AGENDA
NEWPORT COAST CONFERENCE ROOM, BAY 2E 100 CIVIC CENTER DRIVE, NEWPORT BEACH
AUGUST 13, 2015, 4:00 P.M.
FINANCE COMMITTEE MEMBERS: STAFF MEMBERS:
Keith Curry, Chair / Council Member
Diane Dixon, Mayor Pro Tem Tony Petros, Council Member
Bill McCullough, Committee Member William C. O’Neill, Committee Member
Larry Tucker, Committee Member John Warner, Committee Member
Dave Kiff, City Manager
Dan Matusiewicz, Finance Director / Treasurer Steve Montano, Deputy Director, Finance
Marlene Burns, Administrative Specialist to the Finance Director
____________________________________________________ I. CALL MEETING TO ORDER II. ROLL CALL III. PUBLIC COMMENTS
Public comments are invited on agenda and non-agenda items generally considered to be within the
subject matter jurisdiction of the Finance Committee. Speakers must limit comments to three (3) minutes. Before speaking, we invite, but do not require, you to state your name for the record. The
Finance Committee has the discretion to extend or shorten the speakers’ time limit on agenda or non-agenda items, provided the time limit adjustment is applied equally to all speakers. As a
courtesy, please turn cell phones off or set them in the silent mode. IV. APPROVAL OF MINUTES A. Summary:
Approval of the July 21, 2015, Finance Committee Minutes.
Recommended Action: Approve and file.
V. CURRENT BUSINESS
A. ANNUAL INVESTMENT PORTFOLIO PERFORMANCE REVIEW
Summary: A Staff and a City investment advisor will provide of brief fixed income market review of the past
year and comment on the performance of the City's investment portfolio.
Finance Committee Meeting Agenda
August 13, 2015 Page 2
Recommended Action: Receive and file.
B. ANNUAL INVESTMENT POLICY REVIEW AND UPDATE
Summary: In furtherance of Section K-2 of Council Policy F-1, Statement of Investment Policy (the Policy),
the Finance Department has completed an annual review of the Policy 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. Staff is proposing two modifications to the Investment Policy as recommended by the City’s investment advisors, Public Financial
Management (PFM) and Chandler Asset Management (Chandler), and supported by the City’s Finance Director/Treasurer.
Recommended Action:
Review, discuss, and approve or revise staff recommendations for Council approval.
C. RECOMMENDATIONS FOR THE ANNUAL FINANCE COMMITTEE BUDGET REVIEW PROCESS
Summary: During the July 21, 2015, Finance Committee meeting, members discussed the need for greater
transparency and accountability during the annual budget development process. This report provides recommendations and associated action items to improve budget transparency and to
increase the Finance Committee’s involvement during the annual review of the City’s budget.
Recommended Action: Review, discuss, and approve or revise staff recommendations and action items for Council
approval.
D. WASTEWATER SERVICE IN NEWPORT BEACH Summary:
The City Council has requested a review of the City’s Wastewater Operation as part of the City’s on-going effort to review operations for effectiveness, efficiency and cost. This report provides
the roles and responsibilities of the Division.
Recommended Action: Provide recommendation to the City Council considering the following options:
1. Keep the Wastewater Division as an in-house municipal function.
2. Engage a consultant to review the efficiency and effectiveness of the Division. 3. Consider outsourcing the maintenance function to a third party through a Request for
Proposal Process (RFP). 4. Consider annexation of the system to another governmental entity such as a special district.
E. CITY COUNCIL POLICY F-9 CITY VEHICLE/EQUIPMENT GUIDELINES
Summary: City Council Policy F-9 establishes the service life of vehicles and equipment and helps
determine funding requirements for their replacement. At the request of City Council and due to a number of changes in operations, staff requests the Finance Committee to review and
comment on the proposed changes.
Recommended Action:
Provide direction to staff on the proposed changes. F. ERP UPDATE Summary:
ERP (Enterprise Resource Planning) software is a business management software system that integrates all of the City’s core functional requirements for financials, human capital
Finance Committee Meeting Agenda
August 13, 2015 Page 3
management, citizen services, and revenues. The ERP implementation is scheduled to take
between 25 and 30 months and will consist of five major phases. The City has completed Phase 1 (Financials) and is currently implementing Phase 2 (HR/Payroll) and Phase 3 (Utility
Billing/Revenue), each scheduled to be operational in January 2016 and May 2016, respectively. The software provider of the City’s ERP is Tyler Technologies Inc. and this project is titled
“eSAIL,” short for ERP System Administration and Implementation Lineup.
Recommended Action: Receive and file.
G. FINANCE COMMITTEE SCHEDULE UPDATE
Summary: The Finance Committee work plan represents the planned topics of discussion; however, is
subject to change based on the availability of Committee members, information and the need to schedule other topics as they arise. This item allows Committee consideration of an update to
the work plan schedule.
Recommended Action: Discuss and confirm upcoming meeting dates.
VI. ADJOURNMENT
Finance Committee Meeting Minutes
July 21, 2015
Page 1 of 5
CITY OF NEWPORT BEACH
FINANCE COMMITTEE
JULY 21, 2015 MEETING MINUTES
I. CALL MEETING TO ORDER
The meeting was called to order at 4:00 p.m. in the Newport Coast Conference Room, Bay 2E,
100 Civic Center Drive, Newport Beach, California 92660.
II. ROLL CALL
PRESENT: Council Member Keith Curry (Chair); Mayor Pro Tem Diane Dixon;
Council Member Tony Petros; Committee Member Bill McCullough; and
Committee Member Larry Tucker
ABSENT: Committee Member John Warner (Excused)
STAFF PRESENT: City Manager, Dave Kiff; Finance Director, Dan Matusiewicz; Deputy
Finance Director, Steve Montano; Administrative Specialist to the
Finance Director, Marlene Burns; Deputy City Manager/HR Director,
Terri Cassidy; Accounting Manager, Rukshana Virany; Budget Manager,
Susan Giangrande; and Interim Assistant City Manager, Carol Jacobson
MEMBERS OF THE
PUBLIC: Jim Mosher and William O'Neill
III. PUBLIC COMMENTS - None
IV. APPROVAL OF MINUTES
A. Summary:
Approval of the June 11, 2015, Finance Committee Minutes.
Recommended Action:
Approve and file.
Committee Member Tucker noted written corrections to the minutes, submitted by Mr. Jim
Mosher.
Chair Curry opened public comments.
With no public comments, Chair Curry closed public comments.
Committee Member Tucker moved, and Committee Member McCullough seconded, to approve
the June 11, 2015, Finance Committee Minutes, as corrected. The motion carried with 4 ayes
and 1 abstention (Council Member Petros) and 1 absent (Committee Member Warner).
V. CURRENT BUSINESS
A. 2014-15 AUDIT PLANNING AND COMMUNICATION
Summary:
Receive and file a letter from the City’s Independent Auditor communicating the scope and
responsibilities associated with the Fiscal Year 2014-2015 Financial Statement audit. The
letter also provides the auditor’s contact information and invites those charged with
governance to contact the auditor should matters come to the Finance Committee’s attention
that would have material bearing on the financial statements taken as a whole including
Finance Committee Meeting Minutes
July 21, 2015
Page 2 of 5
errors, fraudulent financial reporting, misappropriation of assets, or violations of laws by
management or employees acting on behalf of the City.
Recommended Action:
Receive and file report and letter.
Finance Director Dan Matusiewicz provided details of the staff report addressing the initial
planning meeting, audit adjustments, and a summary of the audit.
Finance Director Matusiewicz discussed a higher than normal chance this year for experiencing
financial reporting errors as the result of implementing the new integrated finance system (ERP).
In response to Chair Curry's inquiry regarding the tenure of the City’s current auditing firm,
Finance Director Matusiewicz reported that staff is in conformance with current Council policy to
retain an auditing firm for up to 5 years. He commented that it is not advantageous to either staff
or the auditors to switch auditing firms at less than every 5 years.
Council Member Petros commented and Finance Director agreed on the benefits of having an
auditor for at least four years that is familiar with the City's systems and internal controls,
especially now that the city has a new finance system.
Chair Curry opened public comments.
Jim Mosher referenced comments he submitted, in writing and addressed conflicts and
inconsistencies in the City Charter. He opined that the decision regarding an auditor, should
have been presented to City Council for public discussion. He suggested that the Finance
Committee may want to review the entire financial section of the City Charter.
Chair Curry closed public comments.
Council Member Petros moved, and Mayor Pro Tem Dixon seconded, to receive and file a letter
from the City’s Independent Auditor communicating the scope and responsibilities associated with
the Fiscal Year 2014-2015 Financial Statement audit. The motion carried with 5 ayes and 1
absent (Committee Member Warner).
B. COUNCIL RESERVE POLICY F-2 REVIEW
Summary:
Council Reserve Policy F-2 provides guidance to City Staff regarding target reserve levels
that are an integral part of prudent financial planning.
Recommended Action:
The Committee may review and comment on the current policy. Any changes to the policy
recommended by the Finance Committee would be forwarded to the City Council for review
and consideration.
Chair Curry addressed restricted and unrestricted funds noting they are subject to various Council
policies, and deferred to staff for a report.
Finance Director Matusiewicz provided a staff report addressing differences between fund
balance and net assets, the importance of the City's contingency reserves and the City's policy of
allocating twenty-five percent (25%) of expenditures to reserves.
Discussion followed regarding drawing on reserves.
Finance Committee Meeting Minutes
July 21, 2015
Page 3 of 5
Finance Director Matusiewicz reported on the Facilities Replacement Plan, the importance of the
Master Plan in determining the annual rate the City needs to save, in order to replace facilities.
He added that the Reserve Policy has a minimum floor recommended as the maximum annual
debt service on current debt.
Discussion followed regarding setting funds aside, in the budget process to fulfill capital plans;
addressing the process, as a whole; allocating funds without impacting other programs; and
developing an approach to mitigate foreseeable risks.
Mayor Pro Tem Dixon asked why seawalls were not included as a line item in the Facilities
Financing Plan.
Finance Director Matusiewicz reported that Council could choose to do so but that it is a different
type of asset with a different maintenance cycle than others in the Plan.
City Manager Dave Kiff added that the City is on the precipice of adopting a Tidelands Capital
Plan and that it will be brought forward, for consideration, in the near future.
Chair Curry opened public comments.
Jim Mosher commented on the Capital Improvement Fund and the creation of a Special Capital
Improvement Fund created for a specific purpose and where the money needed to be used for
that announced purpose. He opined that the current budget is not consistent with the Charter
section that refers to the requirement for establishing Capital Improvement Fund.
Council Member Petros noted that Council may create an ordinance to fund specific special
capital improvement projects, at any time.
Jim Mosher noted that Council has used that provision, at least once before, related to an off-
street parking reserve fund. He added that the City Charter created the general Capital
Improvement Fund.
Chair Curry closed public comments.
Discussion followed regarding the Charter review process and update.
In response to William O'Neill's questions, Finance Director Matusiewicz reported that Tidelands
Funds have special restrictions and that he would not recommend adding General Funds to a
special revenue fund. He addressed Harbor Funds, how funds are collected and how loans are
repaid. He commented on the importance of having Master Plans and discussed potential areas
of exposure.
Mayor Pro Tem Dixon commented on sequestration from surplus funds and on projects needing
increased priority.
Finance Director Matusiewicz noted that was primarily done with the Facilities plans.
Council Member Petros noted that this discussion is supposed to be global rather than focusing in
on a project.
Council Member Petros suggested holding a joint study session with Council regarding funding
seawalls on a go-forward basis.
In reply to Committee Member Tucker's question regarding where the $15 million Tidelands
Receivables is shown, Finance Director Matusiewicz reported that the receivable is recorded in
the general fund offset by reserves for long-term liabilities.
Finance Committee Meeting Minutes
July 21, 2015
Page 4 of 5
C. QUESTION/ANSWERS PERTAINING TO FY 2015-16 ADOPTED BUDGET
Summary:
As a follow up to the previous Finance Committee meetings, the Committee is welcome to
continue its questions and comments about the Fiscal Year 2015-2016 Adopted Budget. All
questions and comments are still relevant even following Council adoption of the Fiscal Year
2015-2016 Budget as the input will help frame both budget adjustments and planning for the
Fiscal Year 2016-2017 Budget, which begins relatively soon.
Recommended Action:
The Committee may ask questions specific to the Adopted Fiscal Year 2015-2016 Budget or
any topics pertaining to City finance practices, policies, and procedures.
Chair Curry explained the purpose of the item and directed the Committee to continue its
questions and comments on the Fiscal Year 2015-2016 Budget.
Committee Member Tucker asked regarding staff suggestions for the most-likely places where
the City could save on employee salaries.
City Manager Kiff listed these as Fleet Maintenance (Municipal Operations Department), Fire
Prevention/Inspection and Wastewater. He added that staff would like to bring the topics back to
the Finance Committee for consideration, on a regular basis, in the next few months.
Council Member Petros stated that the budget development process is very opaque and that in
the next cycle, he would like staff to come up with a way to talk about global policy issues and for
Committee and Council colleagues to talk about the process and render decisions. He suggested
starting the process much earlier or changing the dynamic for Council involvement.
Mayor Pro Tem Dixon agreed with Council Member Petros's comments and added that the
process could start with the Finance Committee establishing broad principles and direction as to
how staff should move forward.
Chair Curry stated that the Finance Committee will have the opportunity to make
recommendations that will impact the budget and have practical implications.
Discussion followed regarding establishing parameters, increased visibility in the budget process,
soliciting input from the Finance Committee as early as possible in the process, the need for clear
direction, organizational changes, potential timeline for developing the budget and providing
information regarding trends (i.e., revenues) to facilitate discussions on broad policies.
Council Member Petros commented on re-budgeted items and stated he would like, in the next
budget, a full commitment to achieve what is planned in a budget year. He added that it will help
to constrain the budget, going forward.
Chair Curry opened public comments.
Jim Mosher reported that the proposed budget needs to be uploaded onto the City's website.
Chair Curry closed public comments.
VI. ADJOURNMENT
The Finance Committee adjourned at 5:09 p.m. to the next regular meeting of the Finance
Committee on August 13, 2015, at 4:00 p.m.
Filed with these minutes are copies of all materials distributed at the meeting.
Finance Committee Meeting Minutes
July 21, 2015
Page 5 of 5
The agenda for the Regular Meeting was posted on July 17, 2015, at 9:55 a.m., in the binder and
on the City Hall Electronic Board located in the entrance of the Council Chambers at 100 Civic
Center Drive.
Attest:
___________________________________ _____________________
Keith Curry, Chair Date
Finance Committee Chair
Finance Committee Meeting Minutes July 21, 2015
Page 2 of 5
errors, fraudulent financial reporting, misappropriation of assets, or violations of laws by management or employees acting on behalf of the City. Recommended Action: Receive and file report and letter.
Finance Director Dan Matusiewicz provided details of the staff report addressing the initial planning meeting, audit adjustments, and a summary of the audit. Finance Director Matusiewicz discussed a higher than normal chance this year for experiencing financial reporting errors as the result of implementing the new integrated finance system (ERP).
In response to Chair Curry's inquiry regarding the tenure of the City’s current auditing firm, Finance Director Matusiewicz reported that staff is in conformance with current Council policy to retain an auditing firm for up to 5 years. He commented that it is not advantageous to either staff or the auditors to switch auditing firms at less than every 5 years. Council Member Petros commented and Finance Director agreed on the benefits of having an auditor for at least four years that is familiar with the City's systems and internal controls, especially now that the city has a new finance system. Chair Curry opened public comments.
Jim Mosher referenced comments he submitted, in writing and addressed conflicts and inconsistencies in the City Charter. He opined that the decision regarding an auditor, should have been presented to City Council for public discussion. He suggested that the Finance Committee may want to review the entire financial section of the City Charter. Chair Curry closed public comments.
Committee Member Tucker suggested that the Auditor pay particular attention to a review of internal controls because of the change over to the ERP system. He also suggested that Chair Curry have a conversation with the Auditor to reinforce the Finance Committee’s wishes that internal controls of the new system be a focus of the Auditor’s work, which Chair Curry concurred with doing. Council Member Petros moved, and Mayor Pro Tem Dixon seconded, to receive and file a letter from the City’s Independent Auditor communicating the scope and responsibilities associated with the Fiscal Year 2014-2015 Financial Statement audit. The motion carried with 5 ayes and 1 absent (Committee Member Warner).
B. COUNCIL RESERVE POLICY F-2 REVIEW Summary: Council Reserve Policy F-2 provides guidance to City Staff regarding target reserve levels that are an integral part of prudent financial planning. Recommended Action: The Committee may review and comment on the current policy. Any changes to the policy recommended by the Finance Committee would be forwarded to the City Council for review and consideration. Chair Curry addressed restricted and unrestricted funds noting they are subject to various Council
policies, and deferred to staff for a report.
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Finance Committee Meeting Minutes July 21, 2015
Page 3 of 5
Finance Director Matusiewicz provided a staff report addressing differences between fund balance and net assets, the importance of the City's contingency reserves and the City's policy of allocating twenty-five percent (25%) of expenditures to reserves.
Discussion followed regarding drawing on reserves. Finance Director Matusiewicz reported on the Facilities Replacement Plan, the importance of the Master Plan in determining the annual rate the City needs to save, in order to replace facilities. He added that the Reserve Policy has a minimum floor recommended as the maximum annual debt service on current debt.
Discussion followed regarding setting funds aside, in the budget process to fulfill capital plans; addressing the process, as a whole; allocating funds without impacting other programs; and developing an approach to mitigate foreseeable risks. Mayor Pro Tem Dixon asked why seawalls were not included as a line item in the Facilities Financing Plan. Finance Director Matusiewicz reported that Council could choose to do so but that it is a different type of asset with a different maintenance cycle than others in the Plan. City Manager Dave Kiff added that the City is on the precipice of adopting a Tidelands Capital
Plan and that it will be brought forward, for consideration, in the near future. Chair Curry opened public comments. Jim Mosher commented on the Capital Improvement Fund and the creation of a Special Capital Improvement Fund created for a specific purpose and where the money needed to be used for
that announced purpose. He opined that the current budget is not consistent with the Charter section that refers to the requirement for establishing Capital Improvement Fund. Council Member Petros noted that Council may create an ordinance to fund specific special capital improvement projects, at any time. Jim Mosher noted that Council has used that provision, at least once before, related to an off-street parking reserve fund. He added that the City Charter created the general Capital Improvement Fund. Will O’Neill asked whether there were any other reserves with a negative balance other than the
Harbor Capital fund. Will O’Neill also asked how a negative reserve balance would affect funding
for projects like the seawalls.
Chair Curry closed public comments.
Discussion followed regarding the Charter review process and update. In response to William O'Neill's questions, Finance Director Matusiewicz reported that Tidelands Funds have special restrictions and that he would not recommend adding General Funds to a special revenue fund. He addressed Harbor Funds, how funds are collected and how loans are
repaid. He commented on the importance of having Master Plans and discussed potential areas of exposure. Mayor Pro Tem Dixon commented on sequestration from surplus funds and on projects needing increased priority.
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CITY OF NEWPORT BEACH
FINANCE COMMITTEE STAFF REPORT
Agenda Item No. 5A
August 13, 2015
TO: HONORABLE CHAIR AND MEMBERS OF THE COMMITTEE
FROM: Finance Department
Dan Matusiewicz, Finance Director (949) 644-3123 or danm@newportbeachca.gov
SUBJECT: ANNUAL INVESTMENT PORTFOLIO PERFORMANCE REVIEW
EXECUTIVE SUMMARY
The purpose of this memorandum is to report on the performance of the City’s
investment portfolio relative to the City’s investment objectives. The report includes all invested City funds with the exception of bond proceeds. All investments are in
compliance with California Government Code and the City’s adopted Statement of
Investment Policy.
DISCUSSION
Guided by Council Policy F-1 and constrained by California Government Code, the
City’s core investment objectives are to provide safety of the invested principal by
maintaining a well-diversified, high quality portfolio of liquid assets while earning a
market rate of return commensurate with the City’s conservative risk profile. California State Code Section 53600.5 mandates that the City Treasurer shall follow three
objectives when investing, reinvesting, purchasing, acquiring, exchanging, selling, or
managing public funds. The primary objective of the City Treasurer shall be to
safeguard the principal of the funds under its control. The secondary objective shall be
to meet the liquidity needs of the City. The third objective shall be to achieve a return on the funds under his or her control.
CURRENT MARKET CONDITIONS
Treasury yields fluctuated throughout the year, moving higher on strong economic news
in the U.S., and lower when the Federal Open Market Committee (FOMC) indicated that they are not yet ready to raise rates. Yields also fluctuated when investors sought the
safety of high quality government bonds as uncertain financial conditions in Greece
continued to worsen. Overall, the trend was toward higher rates for yields on most
Annual Investment Portfolio Performance Review August 13, 2015
Page 2 maturities shorter than five years, with yields for maturities longer than five years falling. Rates continue to remain low by historical standards, though many investors expect yields to rise moderately in late 2015 or early 2016.
Annual Investment Portfolio Performance Review August 13, 2015
Page 3
U.S. GDP grew at an estimated 2.3 percent in the second quarter of Calendar Year 2015. This second quarter upturn was boosted by higher consumer spending and a strengthened housing market. Calendar Year 2015 first quarter GDP was revised
upwards to 0.6 percent from -0.2 percent. Original measurements for the first quarter
indicated that gross domestic product (GDP) had declined by 0.2 percent, but increases
in consumer spending and inventories contributed to the upward revision.
Annual Investment Portfolio Performance Review August 13, 2015
Page 4 The U.S. labor market continued to improve, as the unemployment rate fell from 5.5 percent in March to 5.3 percent in June. While robust headline job creation continued, some of the underlying metrics related to employment—particularly wage growth—were
weak.
Greek-related tensions grew as the troubled nation missed a payment of €1.6 billion to
the International Monetary Fund (IMF), and Greek voters overwhelmingly rejected
austerity measures demanded by creditors as a condition for further financial assistance. These actions leave open the possibility that Greece would abandon the
euro and even leave the Eurozone.
INVESTMENT STRATEGY
There is growing investor expectation that U.S. economic conditions will continue to grow. Rising consumer confidence, growth in personal spending and a stronger housing
sector should contribute to improved economic conditions. Improving employment
statistics in the U.S. suggest that an increase in the benchmark Federal Funds rate may
be appropriate soon. However, stubbornly low inflation remains a concern for the
Federal Reserve policy makers. Market participants still expect the FOMC to initiate at least one rate hike in 2015, but there is growing consensus that the pace of subsequent
increases is likely to be gradual.
The City’s strategy will continue to focus on working with its investment advisors to identify value from among the full range of investment options, while ensuring the
portfolio continues to be well diversified.
Annual Investment Portfolio Performance Review August 13, 2015
Page 5 PORTFOLIO OVERVIEW
The City’s cash, excluding bond proceeds, is pooled for investment purposes. As of June 30, 2015, invested funds totaled over $234 million. These investments are assets
of the City Newport Beach, which includes the General Fund, special revenue funds,
internal service funds, the enterprise funds (i.e., Water and Wastewater) as well as
various non-major funds. Short-Term Portfolio
The City uses a combination of demand deposit accounts (DDA) and the Local Agency
Investment Fund (LAIF) in its short-term portfolio to provide sufficient liquidity to meet its
operating requirements. Municipal deposits in DDA accouns are 110 percent collateralized by bank assets and the City currently receives a compensating balance credit against bank fees at a rate of .55 percent. The average investment life of the
LAIF fund was 239 days on June 30, 2015. The average effective yield was 0.30
percent.
Medium-Term Portfolio
Funds that are unlikely to be spent in the near future are kept in a medium-term portfolio
consisting of over $169 million that is actively managed by two individual investment
advisors in accordance with all applicable City policies and codes, State statutes, and
Federal regulations. The City’s entire investment portfolio of over $234 million as of June 30, 2015, is
summarized as follows:
Annual Investment Portfolio Performance Review August 13, 2015
Page 6
The City’s investment portfolio is structured to have risk and return characteristics similar to that of the City’s benchmark, the Merrill Lynch 1-3YR Treasury Index. The
City’s medium-term portfolio average annual total return was 0.930 percent, as
compared to the City’s performance-measuring benchmark return of 0.88 percent
during the fiscal year. This is largely attributable to increased yields in the maturity ranges in which the City invests, as well as the benefits of having diversified investments.
Although all investments contain an element of risk, the City’s Investment Policy is
designed to limit exposure to risk. Each of the professional investment advisors has
unique strategies to minimize risk and take positions on key variables within the constraints of the City’s Investment Policy. The total return performance of each advisor is shown on a monthly and annual basis in the table that follows.
Annual Investment Portfolio Performance Review August 13, 2015
Page 7
Prepared by: Submitted by:
/s/Jeremiah Lim
/s/Dan Matusiewicz
Jeremiah Lim Dan Matusiewicz
Accountant Finance Director
1
CITY OF NEWPORT BEACH
FINANCE COMMITTEE
STAFF REPORT
Agenda Item No. 5B
August 13, 2015
TO: HONORABLE CHAIRMAN AND MEMBERS OF THE COMMITTEE
FROM: Finance Department
Dan Matusiewicz, Finance Director
(949) 644-3123 or danm@newportbeachca.gov
SUBJECT: Annual Investment Policy Review and Update
ABSTRACT:
In furtherance of Section K-2 of Council Policy F-1, Statement of Investment Policy (the
Policy), the Finance Department has completed an annual review of the Policy 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. Staff is
proposing two modifications to the Investment Policy as recommended by the City’s
investment advisors, Public Financial Management (PFM) and Chandler Asset Management (Chandler), and supported by the City’s Finance Director/Treasurer.
RECOMMENDATION:
With Finance Committee concurrence, Finance staff will bring the suggested revisions to Council for formal approval. These changes are in furtherance of the City’s
investment objectives of safety, liquidity and return.
DISCUSSION: The investment of City funds is governed by California Code (Sections 53600-53610)
that prescribe the investment vehicles in which local agencies are permitted to invest
available funds. Staff, working with the City’s investment advisors, Chandler and PFM,
has completed a comprehensive review of the City’s Investment Policy including
compliance with relevant sections of the Government Code, as well as, incorporating best investment practices.
The most significant change to the Investment Policy is the inclusion of supranationals
to the list of authorized investments. Supranationals are international development
institutions that provide financing and financial services to member countries to promote
Annual Investment Policy Review and Update August 13, 2015
Page 2 sustainable local economic growth. In January 2015, California Assembly Bill1933
added subsection (q) to Government Code Section 53601. This subsection allows local
agencies to invest in the senior debt obligations of three supranational issuers,
specifically the International Bank for Reconstruction and Development, International
Finance Corporation, and Inter-American Development Bank. In the current market, supranationals offer a comparable yield to traditional U.S Agencies. Large supranational
debt is rated AAA by most Nationally Recognized Statistical Rating Organizations
(NRSROs), and is highly liquid. Also, supranational debt is issued and available in a
wide range of maturities. The inclusion of the supranational issues opens up a new
asset class for the City’s portfolio. Having broader investment opportunities is important as the mandated winding down of the Federal Home Loan Mortgage Corporation
(FHLMC) and the Federal National Mortgage Association (FNMA) will result in reduced
investment options in the future.
Finance staff recommends an amendment to the Policy, mirroring the Government Code, to add three supranationals as an authorized investment. All three organizations
are AAA rated with conservative risk management policies. The Federal Reserve
considers debt issued by these organizations as a high quality liquid asset. The United
States is a shareholder in all three organizations. Additionally, Finance staff
recommends that no more than 10 percent of the City’s total portfolio shall be invested in any one issuer of supranational obligations and purchases of supranational
obligations shall not exceed 30 percent of the investment portfolio of the City.
Staff also recommends including a statement that percentage limitations are applicable
only on the date of purchase as explained in Code Section 53601. This may become applicable if a sector allocation is near its percentage limit and the overall size of the
portfolio decreases. The City should not be required to bring the sector back under the
limitation under any specific timeline, but may not purchase any additional investments
in the sector until it falls back under the limit. See the redline Statement of Investment
Policy for recommended changes, included as Attachment A.
POLICY LANGUAGE
Staff recommends that the City incorporate the following language into its Policy and establish the following restrictions:
G.) Where this section specifies a percentage limitation for a particular security type
that percentage is applicable only at the date of purchase.
G.1.o) Supranationals 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
Annual Investment Policy Review and Update August 13, 2015
Page 3 sale within the United States. Investments under this subdivision shall be rated
"AA", its equivalent, or better by at least one NRSRO.
No more than 10 percent of the City’s total portfolio shall be invested in any one
issuer of supranational obligations. Purchases of supranational obligations shall not exceed 30 percent of the investment portfolio of the City.
Prepared by: Submitted by:
/s/Steve Montano
/s/Dan Matusiewicz
Steve Montano Dan Matusiewicz Deputy Finance Director Finance Director
Attachment:
A. Council Policy F-1, Statement of Investment Policy
ATTACHMENT A
Council Policy F-1 Statement of Investment Policy
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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
B. Investment Objectives
1. Safety
2. Liquidity
3. Yield
C. Standards of Care
1. Prudence
2. Ethics and Conflicts of Interest
3. Delegation of Authority
4. Internal Controls
D. Banking Services
E. Broker/Dealers
F. Safekeeping and Custody of Assets
G. Authorized Investments
1. Investments Specifically Permitted
2. Investments Specifically Not Permitted
3. Exceptions to Prohibited and Restricted Investments
H. Investment Parameters
1. Diversification
2. Maximum Maturities
3. Credit Quality
4. Competitive Transactions
I. Portfolio Performance
J. Reporting
K. Investment Policy Compliance and Adoption
1. Compliance
2. Adoption
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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 the 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 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
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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 LAIF
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.
C. STANDARDS OF CARE
1. Prudence
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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 “wWhen 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
Authority to manage the City’s investment program is derived from the
Charter of the City of Newport Beach section 605 (j). The Finance Director
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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 iensure 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 approved
to provide depository and other banking services. To be eligible, a bank shall
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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 safekeeping by a
City approved custodian bank, its correspondent bank or its Depository Trust
Company (DTC) participant account.
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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 these 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 for a particular security type,
that percentage 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.
c) Federal Agency Obligations for which the full faith and credit of
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 Mortgage Obligation
(CMO) and Asset-backed Securities limited to mortgage-backed
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pass-through securities issued by a US government agency, or
consumer receivable pass-through certificates or bonds with a final
maturity not exceeding five years from the date of trade
settlement. Securities eligible for investment under this
subdivision shall be issued by an issuer whose debt is rated at least
“A” or the equivalent by a Nationally Recognized Statistical Rating
Organization (NRSRO). 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 at least “A” 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, 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,
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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 at least “A” 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 at least
“A”, 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 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
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paper shall meet all of the following conditions in either sub-
paragraph i. or sub-paragraph ii. below:
i. 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 at least “A” 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 collateralization, 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.
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 at least “A”
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 at least “A” 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.
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 G1 a and 2G1 b 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
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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.
l) 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 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) Money Market Funds registered under the Investment Company
Act of 1940 that (1) are “no-load” (meaning no commission or fee
shall be charged on purchases or sales of shares); (2) have a
constant net asset value per share of $1.00; (3) invest only in the
securities and obligations authorized in the applicable California
statutes and (4) have a rating of at least AAA or the equivalent by
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at least two NRSROs. The aggregate investment in money market
funds shall not exceed twenty percent (20%) of the City’s total
portfolio and no more than ten percent (10%) of the City’s total
portfolio shall be invested in any one fund.
o) Supranationals 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
subdivision shall be rated "AA", its equivalent, or better by at least
one NRSRO.
No more than fiveten percent (10%) of the City’s total portfolio
shall be invested in any one issuer of supranational obligations.
Purchases of ssupranational obligationss shall not exceed thirty
percent (30%) percent of the investment portfolio of the
CityDistrict.
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.
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 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
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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, supranational issuers, investment
pools and mMoney mMarket fFunds. 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
The City shall not purchase any security rated “A1” and / or “A+” or
below if that security has been placed on “credit watch” for a possible
downgrade by an NRSRO.
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 the
subject of a rating downgrade which brings it below accepted minimums
specified herein, or the security is placed on negative credit watch, where
downgrade could result in a rate drop below acceptable levels, the
investment advisor who purchased the security will immediately notify
the Finance Director. The City shall not be required to immediately sell
such securities. The course of action to be followed will then be decided
on a case by case basis, considering such factors as the reason for the rate
drop, prognosis for recovery or further drop, and market price of the
security. The City Council will be advised of the situation and intended
course of action.
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
SEC. Where possible, at least three broker/dealers shall be contacted for
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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.
I. 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 is practical, but no later than the next scheduled Finance
Committee meeting. Upon recommendation of the Finance Committee,
the Finance Director shall review deviations from policy with the City
Council.
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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 October 9, 2012__________________. 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
CHANDLER ASSET MANAGEMENT
6225 Lusk Blvd | San Diego, CA 92121 | Phone 800.317.4747 | Fax 858.546.3741 | www.chandlerasset.com
Period Ending
July 31, 2015
City of Newport Beach
Investment Report
Table of Contents
Economic Update
Account Profile
Portfolio Holdings
Investable Universe
SECTION 1
SECTION 2
SECTION 3
SECTION 4
1
1
SECTION 1
Economic Update
2
2
Economic Update
Momentum is building toward a potential fed funds rate hike at the September 16-17 Federal Open Market
Committee (FOMC)meeting.Inflation is still running below target,but labor market conditions are likely at or
near a level consistent with monetary policy normalization.Over the past three months,payrolls have
increased by an average of 235,000 per month,compared to the trailing six-month average of 213,000.In
July,the unemployment rate was 5.3%.The Personal Consumption Expenditures (PCE)price index was up
just 0.3%on a year-over-year basis in June,while the Core PCE price index was up just 1.3%.Though
inflation remains below the Fed’s 2.0%target,multiple Fed Presidents have recently made public comments
indicating they are moving closer toward the lift-off date for monetary policy normalization.We believe the
first fed funds rate hike will occur before the end of this year.There are three remaining FOMC meetings
scheduled this year (September 16-17, October 27-28, and December 15-16).
The financial markets continue to experience volatility,fueled largely by the uncertain outlook for Fed
monetary policy and mixed economic data.While employment trends have generally been favorable,
consumer spending trends have been lackluster and manufacturing data remains soft.Housing data has
been somewhat volatile,but the outlook remains constructive.Overall,we believe the economy continues to
grow at a slow pace.According to the advance estimate,real annualized GDP growth was 2.3%in the
second quarter of 2015,following growth of 0.6%in the first quarter.We are expecting GDP growth of about
2.5%-3.0% in the second half of 2015.
Interest rate volatility remains elevated as global sovereign debt markets continue to be influenced by
divergent central bank policies.The Treasury yield curve flattened modestly in July,with short-term rates up
slightly and longer-term rates down about 20 basis points.We believe this flattening trend reflects market
participants’ expectations for a fed funds rate hike before the end of the year.
3
Employment
Source: U.S. Department of Labor
0
50
100
150
200
250
300
350
400
450
(0
0
0
'
s
)
Nonfarm Payroll (000's)
5.0%
5.5%
6.0%
6.5%
7.0%
7.5%
8.0%
Unemployment Rate
Nonfarm payrolls rose by 215,000 in July,slightly below the consensus forecast of 225,000.However,May and
June payrolls were revised upward by a total of 14,000.The unemployment rate was unchanged at 5.3%,and
the participation rate held steady at a low level of 62.6%.A broader measure of unemployment called the U-6,
which includes those whom are marginally attached to the labor force and employed part time for economic
reasons,declined to 10.4%from 10.5%.Wages rose 0.2%on a month-over-month basis in July,and rose to
2.1%from 2.0%in June on a year-over-year basis.Over the past three months,payrolls have increased by an
average of 235,000 per month, compared to the trailing six-month average of 213,000.
4
Consumer
Source: U.S. Department of Commerce Source: Federal Reserve
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
Retail Sales Y-O-Y % Change
Retail sales were weaker than expected in June,down 0.3%on a month-over-month basis.On a year-over-
year basis,retail sales rose just 1.4%in the month.Ongoing improvement in the labor market should have a
positive influence on consumer spending,but thus far consumer spending trends have been lackluster.
Consumer credit rose by $20.7 billion in June versus a gain of $16.5 billion in May.Revolving credit (credit
cards) rose by $5.5 billion in June while nonrevolving credit (student and auto loans) increased by $15.2 billion.
0
5
10
15
20
25
30
Do
l
l
a
r
(
$
)
B
i
l
l
i
o
n
s
Consumer Credit
5
Broad Measures
Source: US Department of Commerce Source: The Conference Board
0
100
200
300
400
500
600
700
800
(0
0
0
'
s
)
Single-Family Housing Starts
Housing starts rose 9.8%in June following a 10.2%decline in May.The strength in June was driven by a
29.4%increase in multi-family starts.Single-family housing starts fell 0.9%in June.Permits were much
stronger than expected in June,up 7.4%,following a 9.6%increase in May.Overall,activity in the housing
sector has recently picked up.The index of Leading Economic Indicators (LEI)rose 0.6%in June,exceeding
the consensus forecast,following an increase of 0.8%in May.Strength was driven by interest rate spread and
building permits. Overall, the LEI points to modest economic expansion.
-0.4%
-0.2%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
Leading Economic Indicators
6
Manufacturing
Source: Institute for Supply Management Source: Federal Reserve
76.0%
76.5%
77.0%
77.5%
78.0%
78.5%
79.0%
79.5%
Capacity Utilization
45.0
47.5
50.0
52.5
55.0
57.5
60.0
Institute of Supply Management
Purchasing Manager Index
Expanding
Contracting
During July,the ISM manufacturing index declined to 52.7 from 53.5 in June.Overall,manufacturing
trends remain soft,however,a reading above 50.0 is viewed as expansionary in the manufacturing
sector,while a reading below 50.0 suggests contraction.Capacity utilization,which is production
divided by capacity,increased to 77.8%in June from 77.7%in May.The capacity utilization rate is
lower than the long-run average of 80.1%(1972-2014).Notably,manufacturing capacity utilization
actually declined in June to 77.2% from 77.3% in May.
7
Inflation
Source: US Department of Labor
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
CPI Y-O-Y % Change
0.5%
1.0%
1.5%
2.0%
2.5%
Core CPI Y-O-Y % Change
In June,overall Consumer Price Index (CPI)inflation was up 0.1%on a year-over-year basis after being flat in
May.Headline inflation remains low,following a precipitous decline in energy prices at the end of last year.The
year-over-year Core CPI (CPI less food and energy)rose slightly to 1.8%in June from 1.7%in May.Pricing
pressures (excluding food and energy)at the consumer and producer levels have firmed slightly,but inflation
remains below the Fed's target.
8
Gross Domestic Product
Source: U.S. Department of Commerce
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
GDP Quarterly % Change
According to the advance estimate,real annualized GDP growth was 2.3%in the second quarter of 2015,
slightly weaker than the 2.5%consensus estimate.However,first quarter GDP was revised up to 0.6%from
negative 0.2%.Growth in the second quarter was boosted by strength in residential investment and personal
consumption expenditures.Net exports also added slightly to second quarter GDP growth after dragging down
the first quarter.
9
The yield on the two-year Treasury note rose slightly in July as the yield curve flattened.Market participants are
anticipating a potential fed funds rate hike before the end of this year.Divergent global central bank monetary
policies,both conventional and unconventional,have been a source of market volatility as the Federal Reserve
remains the only major central bank contemplating a tightening of monetary policy over an intermediate time
horizon.
Interest Rates
Source: Bloomberg
0.00%
0.10%
0.20%
0.30%
0.40%
0.50%
0.60%
0.70%
Yield on the Two-Year Note
July 2013 through July 2015
10
During the past three months,the Treasury yield curve shifted upward.Mixed U.S.economic data,divergent
central bank monetary policies, and concerns about the ability and desire of Greece to remain in the Euro have
fueled interest rate volatility in recent months.
Yield Curves
Source: Bloomberg
April 30, 2015 and July 31, 2015
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4/30/15 7/31/15
11
SECTION 2
Account Profile
12
12
Objectives
Investment Objectives
The investment objectives of the City of Newport Beach are first, to provide safety of principal to ensure the
preservation of capital in the overall portfolio; second, to provide adequate liquidity to meet all requirements
that may be reasonably anticipated; and third, to earn a commensurate rate of return.
Chandler Asset Management Performance Objectives
The performance objective of Newport Beach is to earn a return that equals or exceeds the return of the
Bank of America Merrill Lynch 1-3 Year US Treasury Index.
Strategy
In order to achieve these objectives, we invest in high quality fixed income securities consistent with the
investment policy and California Government Code.
13
13
Compliance
Category Standard Comment
Treasury Issues No Limit Complies
Agency Issues No Limit Complies
Municipal Issues "A" rated; 30% maximum Complies
Banker’s Acceptances A-1/P-1; 40% max; 180 days max maturity Complies
Commercial Paper A-1 or equiv.; 25% max; 270 days max
maturity
Complies
Repurchase Agreements "A" rated issuer; 30 days max maturity Complies
Rev. Repo Agreements 10% max; 30 days max maturity Complies
Negotiable CDs "A" rated issuer; 30% max; 1 year max
maturity
Complies
Non-Negotiable CDs Collateralized or FDIC Insured Complies
Medium Term Notes A-rated; 30% maximum Complies
Mortgage-Backed Securities;
Pass-Throughs; CMOs
"AAA" rated; 20% max combined with
Asset-Backed Securities
Complies
Asset-Backed Securities "AAA" rated; 20% max combined with
Mortgage-Backed Securities; MPTs; CMOs
Complies
Money Market Mutual Funds "AAA" rated; 20% maximum Complies
LAIF Not used by outside adviser Complies
LA County Pool Not used by outside adviser Complies
Inverse floaters, range notes Prohibited Complies
Interest only strips Prohibited Complies
Zero interest accruals Prohibited Complies
Maximum maturity 5 years Complies
COMPLIANCE WITH INVESTMENT POLICY
Assets managed by Chandler Asset Management are in full compliance with State law and the City's
investment policy.
City of Newport Beach
July 31, 2015
14
14
Account Profile
Total Market Value 84,656,194 84,564,369
Modified Duration 1.78 1.73 1.76
Average Quality**AAA AA/Aa1 AA+/Aa1
Average Market Yield 0.63 %0.83 %0.70 %
Average Purchase Yield n/a 0.95 %0.93 %
Benchmark*Portfolio Portfolio
Average Maturity (yrs)1.82 1.92 1.92
* BAML 1-3 Yr US Treasury Index
** Benchmark is a blended rating of S&P, Moody's, and Fitch. Portfolio is S&P and Moody's respectively.
City of Newport Beach, California
07/31/2015 04/30/2015
Portfolio Characteristics
During the reporting period, we maintained the portfolio characteristics close to the strategy benchmark by evaluating opportunities
for the reinvestment of recent maturities. New purchases included a diversified mix of Treasury, Agency, Asset Backed, Corporate
and Commercial Paper securities. The portfolio increased its exposure to several high quality corporate issuers, such as Oracle and
Occidental Petroleum. Securities were purchased with maturities ranging from October 2015 to August 2019.
15
15
Sector Distribution
City of Newport Beach, California
July 31, 2015 April 30, 2015
The sector allocation changed slightly over the period. The portfolio’s exposure increased to the Corporate and Asset Backed
Securities (ABS) sectors while the Commercial Paper and Treasury sectors declined from recent maturities. We expect the
allocation to Corporate securities to remain roughly constant while we look to increase our exposure to Asset Backed Securities as
we see attractive valuation characteristics relative to government securities.
16
16
Issuers
17
17
Quality Distribution
City of Newport Beach, California
4/30/15 6.0 %80.1 %11.5 %0.0 %2.5 %
7/31/15 6.9 %76.0 %14.7 %0.0 %2.4 %
Source: S&P Ratings
AAA AA A <A NR
July 31, 2015 vs. April 30, 2015
4/30/157/31/15
18
18
Duration Distribution
City of Newport Beach, California
Portfolio Compared to the Benchmark as of July 31, 2015
Benchmark*0.1 % 0.0 % 7.5 % 56.5 % 35.9 % 0.0 % 0.0 % 0.0 %
Portfolio 4.2 % 1.2 % 21.8 % 34.0 % 30.5 % 8.2 % 0.0 % 0.0 %
0 - 0.25 0.25 - 0.50 0.50 - 1 1 - 2 2 - 3 3 - 4 4 - 5 5+
* BAML 1-3 Yr US Treasury Index
The duration of the portfolio decreased slightly during the reporting period, currently 1.73 versus 1.76 at the end of April 2015.
Interest rate volatility is likely to remain elevated as the Federal Reserve considers raising the fed funds rate towards the end of
2015. We anticipate keeping the duration close to the benchmark in the coming quarter using the proceeds from maturities and
sales to extend the duration of the portfolio.
19
19
Investment Performance
BAML 1-3 Yr US Treasury Index 0.15 % 1.01 % 0.77 % 0.59 % 0.78 % 2.55 %4.29 %
City of Newport Beach, California 0.11 % 1.21 % 0.98 % 0.74 % 1.05 % 2.92 %4.56 %
Annualized
3 months 12 months 2 years 3 years 5 years 10 years Since Inception
Total rate of return: A measure of a portfolio's performance over time. It is the internal rate of return, which equates the beginning value of the portfolio with the ending value; it
includes interest earnings, realized and unrealized gains and losses in the portfolio.
City of Newport Beach, California
Period Ending
July 31, 2015
Total Rate of Return
Annualized Since Inception
March 31, 1991
20
20
SECTION 3
Portfolio Holdings
21
21
Chandler Asset Management - CONFIDENTIAL Execution Time: 8/6/2015 12:31:23 PM
3133XXP43 FHLB Note
3.125% Due 3/11/2016
500,000.00 08/10/2011
1.11 %
544,792.50
505,966.98
101.74
0.28 %
508,688.50
6,076.39
0.61 %
2,721.52
Aaa / AA+
AAA
0.61
0.60
3133EDEC2 FFCB
0.55% Due 4/28/2016
2,000,000.00 02/06/2014
0.44 %
2,004,920.00
2,001,644.04
100.10
0.41 %
2,002,064.00
2,841.67
2.37 %
419.96
Aaa / AA+
AAA
0.75
0.74
3133ECFV1 FFCB Note
0.43% Due 1/29/2016
800,000.00 03/26/2013
0.45 %
799,608.00
799,931.65
100.12
0.18 %
800,972.80
19.11
0.95 %
1,041.15
Aaa / AA+
AAA
0.50
0.49
313382B77 FHLB Note
0.42% Due 2/12/2016
1,000,000.00 02/22/2013
0.46 %
998,800.00
999,783.73
100.09
0.25 %
1,000,918.00
1,971.67
1.18 %
1,134.27
Aaa / AA+
AAA
0.54
0.53
3133ED6D9 FFCB Note
0.5% Due 5/4/2016
500,000.00 02/28/2014
0.41 %
500,975.00
500,340.57
100.05
0.43 %
500,255.00
604.17
0.59 %
(85.57)
Aaa / AA+
AAA
0.76
0.76
3137EADQ9 FHLMC Note
0.5% Due 5/13/2016
850,000.00 02/24/2014
0.44 %
851,116.90
850,396.32
100.10
0.37 %
850,869.55
920.83
1.01 %
473.23
Aaa / AA+
AAA
0.79
0.78
AGENCY
477877AD6 John Deere Owner Trust 2014-B A3
1.07% Due 11/15/2018
935,000.00 Various
1.09 %
934,749.69
934,810.97
100.05
1.03 %
935,484.33
444.64
1.11 %
673.36
Aaa / NR
AAA
3.30
1.39
89236WAC2 Toyota Auto Receivables Owner 2015-A
1.12% Due 2/15/2019
760,000.00 02/24/2015
1.13 %
759,885.09
759,901.06
99.92
1.17 %
759,423.92
378.31
0.90 %
(477.14)
Aaa / AAA
NR
3.55
1.72
43813NAC0 Honda Auto Receivables 2015-2 A3
1.04% Due 2/21/2019
960,000.00 05/13/2015
1.05 %
959,852.64
959,860.47
99.78
1.16 %
957,930.24
277.33
1.13 %
(1,930.23)
NR / AAA
AAA
3.56
1.81
161571FL3 Chase CHAIT Pool #2012-A5
0.59% Due 8/15/2017
560,000.00 03/19/2013
0.59 %
560,000.00
560,000.00
100.00
0.64 %
559,993.84
146.84
0.66 %
(6.16)
NR / AAA
AAA
2.04
0.02
43813JAC9 Honda Auto Receivables 2014-1 A3
0.67% Due 11/21/2017
525,000.00 01/22/2015
0.90 %
523,400.39
523,829.10
99.81
0.90 %
523,985.70
97.71
0.62 %
156.60
Aaa / NR
AAA
2.31
0.86
43813CAC4 Honda Auto Receivables 2012-4 A3
0.52% Due 8/18/2016
71,590.17 10/11/2012
0.52 %
71,583.24
71,589.66
100.00
0.54 %
71,588.45
13.44
0.08 %
(1.21)
Aaa / AAA
NR
1.05
0.13
89231NAC7 Toyota Auto Receivable 2012-B A3
0.46% Due 7/15/2016
46,234.88 09/18/2012
0.46 %
46,230.48
46,234.70
100.00
0.45 %
46,235.43
9.45
0.05 %
0.73
Aaa / AAA
NR
0.96
0.08
47787RAC4 John Deere Owner Trust 2012-B A3
0.53% Due 7/15/2016
23,361.44 11/18/2013
0.50 %
23,371.48
23,365.06
100.00
0.60 %
23,360.34
5.50
0.03 %
(4.72)
Aaa / NR
AAA
0.96
0.07
89231MAC9 Toyota Auto Receivables Owner 2014-A
0.67% Due 12/15/2017
810,000.00 Various
0.79 %
809,096.11
809,347.20
99.89
0.82 %
809,109.81
241.20
0.96 %
(237.39)
Aaa / AAA
NR
2.38
0.75
43814GAC4 Honda Auto Receivables 2014-2 A3
0.77% Due 3/19/2018
395,000.00 05/13/2014
0.78 %
394,952.52
394,971.50
99.83
0.95 %
394,323.37
109.83
0.47 %
(648.13)
Aaa / AAA
NR
2.64
0.99
43814HAC2 Honda Auto Receivables 2014-3 A3
0.88% Due 6/15/2018
390,000.00 08/12/2014
0.89 %
389,924.77
389,949.33
100.05
0.85 %
390,180.18
152.53
0.46 %
230.85
NR / AAA
AAA
2.88
1.24
47787VAC5 John Deere Owner Trust 2014-A A3
0.92% Due 4/16/2018
565,000.00 04/02/2014
0.93 %
564,909.49
564,948.83
100.05
0.87 %
565,290.41
231.02
0.67 %
341.58
Aaa / NR
AAA
2.71
0.95
Total ABS 6,041,186.49 0.92 %
6,037,955.90
6,038,807.88 0.95 %
6,036,906.02
2,107.80
7.13 %
(1,901.86)
Aaa / AAA
Aaa
2.87
1.13
ABS
Holdings Report
As of 7/31/15
City of Newport Beach, California
Account #10
CUSIP Security Description Par Value/Units
Purchase Date
Book Yield
Cost Value
Book Value
Mkt Price
Mkt YTM
Market Value
Accrued Int.
% of Port.
Gain/Loss
Moody/S&P
Fitch
Maturity
Duration
22
22
22
Chandler Asset Management - CONFIDENTIAL Execution Time: 8/6/2015 12:31:23 PM
3135G0PP2 FNMA Callable Note 1X 9/20/2013
1% Due 9/20/2017
1,250,000.00 Various
0.94 %
1,253,387.50
1,251,480.63
100.41
0.80 %
1,255,153.75
4,548.61
1.49 %
3,673.12
Aaa / AA+
AAA
2.14
2.10
3133EAY28 FFCB Note
0.83% Due 9/21/2017
1,690,000.00 Various
0.84 %
1,689,087.20
1,689,600.03
100.89
0.41 %
1,704,983.54
5,065.30
2.02 %
15,383.51
Aaa / AA+
AAA
2.15
2.11
3135G0ZL0 FNMA Note
1% Due 9/27/2017
730,000.00 Various
1.08 %
728,182.90
728,725.70
100.50
0.76 %
733,667.52
2,514.44
0.87 %
4,941.82
Aaa / AA+
AAA
2.16
2.12
313370SZ2 FHLB Note
2.25% Due 9/8/2017
520,000.00 01/04/2013
0.89 %
552,271.20
534,572.26
102.85
0.88 %
534,837.68
4,647.50
0.64 %
265.42
Aaa / AA+
AAA
2.11
2.04
313379FW4 FHLB Note
1% Due 6/9/2017
550,000.00 09/14/2012
0.82 %
554,652.18
551,827.45
100.51
0.72 %
552,795.10
794.44
0.65 %
967.65
Aaa / AA+
AAA
1.86
1.83
3137EADJ5 FHLMC Note
1% Due 7/28/2017
1,000,000.00 09/23/2013
1.19 %
992,760.00
996,248.41
100.52
0.74 %
1,005,223.00
83.33
1.19 %
8,974.59
Aaa / AA+
AAA
1.99
1.97
3133EDDV1 FFCB Note
1.16% Due 10/23/2017
600,000.00 01/29/2015
0.87 %
604,680.00
603,820.98
100.42
0.97 %
602,525.40
1,894.67
0.71 %
(1,295.58)
Aaa / AA+
AAA
2.23
2.19
3134G5N76 FHLMC Callable Note Qtrly 11/13/2015
1.05% Due 11/13/2017
2,000,000.00 11/13/2014
1.11 %
1,996,500.00
1,997,331.05
100.21
0.96 %
2,004,160.00
4,550.00
2.37 %
6,828.95
Aaa / AA+
AAA
2.29
0.97
3133EDDP4 FFCB Note
0.52% Due 6/17/2016
2,000,000.00 03/13/2014
0.48 %
2,001,600.00
2,000,621.79
100.14
0.36 %
2,002,862.00
1,271.11
2.37 %
2,240.21
Aaa / AA+
AAA
0.88
0.87
3137EACW7 FHLMC Note
2% Due 8/25/2016
800,000.00 11/08/2011
1.19 %
829,992.00
806,680.11
101.61
0.49 %
812,874.40
6,933.33
0.97 %
6,194.29
Aaa / AA+
AAA
1.07
1.05
3137EADS5 FHLMC Note
0.875% Due 10/14/2016
1,000,000.00 10/29/2013
0.65 %
1,006,530.00
1,002,660.37
100.46
0.49 %
1,004,630.00
2,600.69
1.19 %
1,969.63
Aaa / AA+
AAA
1.21
1.19
3135G0JA2 FNMA Note
1.125% Due 4/27/2017
625,000.00 Various
1.05 %
626,565.75
625,840.36
100.78
0.67 %
629,899.38
1,835.94
0.75 %
4,059.02
Aaa / AA+
AAA
1.74
1.72
3137EACT4 FHLMC Note
2.5% Due 5/27/2016
500,000.00 03/23/2012
1.06 %
529,310.00
505,773.47
101.74
0.37 %
508,724.50
2,222.22
0.60 %
2,951.03
Aaa / AA+
AAA
0.82
0.81
313373SZ6 FHLB Note
2.125% Due 6/10/2016
660,000.00 12/24/2012
0.55 %
695,593.80
668,856.14
101.51
0.36 %
669,973.26
1,986.88
0.79 %
1,117.12
Aaa / AA+
AAA
0.86
0.85
3133786Q9 FHLB Note
1% Due 2/13/2017
1,000,000.00 10/17/2012
0.75 %
1,010,600.00
1,003,772.77
100.54
0.65 %
1,005,373.00
4,666.67
1.19 %
1,600.23
Aaa / AA+
AAA
1.54
1.51
3137EADT3 FHLMC Note
0.875% Due 2/22/2017
825,000.00 02/24/2014
0.77 %
827,495.63
826,306.15
100.34
0.66 %
827,772.83
3,188.28
0.98 %
1,466.68
Aaa / AA+
AAA
1.57
1.54
3135G0VM2 FNMA Callable Note 1X 3/14/14
0.75% Due 3/14/2017
3,500,000.00 04/11/2013
0.75 %
3,507,350.00
3,500,000.00
100.18
0.64 %
3,506,426.00
9,989.58
4.15 %
6,426.00
Aaa / AA+
AAA
1.62
1.60
3135G0ES8 FNMA Note
1.375% Due 11/15/2016
625,000.00 09/14/2012
0.67 %
642,968.12
630,579.57
101.12
0.50 %
632,020.00
1,814.24
0.75 %
1,440.43
Aaa / AA+
AAA
1.30
1.28
3130A0C65 FHLB Note
0.625% Due 12/28/2016
1,000,000.00 12/23/2013
0.79 %
995,250.00
997,770.05
100.09
0.56 %
1,000,922.00
572.92
1.18 %
3,151.95
Aaa / AA+
AAA
1.41
1.40
3133EEHY9 FFCB Note
0.7% Due 1/13/2017
1,225,000.00 02/20/2015
0.71 %
1,224,840.75
1,224,877.45
100.13
0.61 %
1,226,641.50
428.75
1.45 %
1,764.05
Aaa / AA+
AAA
1.46
1.44
AGENCY
Holdings Report
As of 7/31/15
City of Newport Beach, California
Account #10
CUSIP Security Description Par Value/Units
Purchase Date
Book Yield
Cost Value
Book Value
Mkt Price
Mkt YTM
Market Value
Accrued Int.
% of Port.
Gain/Loss
Moody/S&P
Fitch
Maturity
Duration
23
23
23
Chandler Asset Management - CONFIDENTIAL Execution Time: 8/6/2015 12:31:23 PM
594918AK0 Microsoft Note
2.5% Due 2/8/2016
775,000.00 05/10/2013
0.54 %
816,175.75
782,872.44
101.12
0.34 %
783,680.78
9,310.76
0.94 %
808.34
Aaa / AAA
AA+
0.53
0.51
931142CX9 Wal-Mart Stores Note
1.5% Due 10/25/2015
775,000.00 05/10/2013
0.43 %
795,064.75
776,909.86
100.25
0.41 %
776,960.75
3,100.00
0.92 %
50.89
Aa2 / AA
AA
0.24
0.23
084664BN0 Berkshire Hathaway Note
2.45% Due 12/15/2015
250,000.00 01/23/2012
1.08 %
263,027.50
251,248.58
100.68
0.62 %
251,698.25
782.64
0.30 %
449.67
Aa2 / AA
A+
0.38
0.37
US CORPORATE
60934N104 Federated GOVT OBLIG MMF 68,286.37 Various
0.01 %
68,286.37
68,286.37
1.00
0.01 %
68,286.37
0.00
0.08 %
0.00
Aaa / AAA
AAA
0.00
0.00
Total Money Market Fund FI 68,286.37 0.01 %
68,286.37
68,286.37 0.01 %
68,286.37
0.00
0.08 %
0.00
Aaa / AAA
Aaa
0.00
0.00
MONEY MARKET FUND FI
89233HX25 Toyota Motor Credit Discount CP
0.31% Due 10/2/2015
1,000,000.00 01/15/2015
0.31 %
997,761.11
997,761.11
99.78
0.31 %
997,761.11
1,705.00
1.18 %
0.00
P-1 / A-1+
F-1
0.17
0.17
06538CXT3 Bank of Tokyo Mitsubishi NY Discount
CP
0.3% Due 10/27/2015
1,000,000.00 06/26/2015
0.30 %
999,000.00
999,000.00
99.90
0.30 %
999,000.00
275.00
1.18 %
0.00
P-1 / A-1
F-1
0.24
0.24
Total Commercial Paper 2,000,000.00 0.31 %
1,996,761.11
1,996,761.11 0.31 %
1,996,761.11
1,980.00
2.36 %
0.00
P-1 / A-1
F-1
0.21
0.21
COMMERCIAL PAPER
3130A4GJ5 FHLB Note
1.125% Due 4/25/2018
1,600,000.00 03/30/2015
1.00 %
1,605,910.40
1,605,261.89
100.36
0.99 %
1,605,772.80
4,800.00
1.90 %
510.91
Aaa / AA+
AAA
2.74
2.68
3135G0WJ8 FNMA Note
0.875% Due 5/21/2018
1,500,000.00 Various
1.18 %
1,484,200.00
1,487,329.52
99.56
1.04 %
1,493,370.00
2,552.08
1.77 %
6,040.48
Aaa / AA+
AAA
2.81
2.76
3133EEFE5 FFCB Note
1.125% Due 12/18/2017
1,600,000.00 01/30/2015
0.85 %
1,612,496.00
1,610,324.33
100.71
0.82 %
1,611,368.00
2,150.00
1.91 %
1,043.67
Aaa / AA+
AAA
2.39
2.34
3135G0TG8 FNMA Note
0.875% Due 2/8/2018
1,225,000.00 01/15/2015
0.91 %
1,223,738.25
1,223,960.38
99.34
1.14 %
1,216,885.60
5,150.95
1.44 %
(7,074.78)
Aaa / AA+
AAA
2.53
2.47
3135G0E33 FNMA Note
1.125% Due 7/20/2018
1,700,000.00 Various
1.18 %
1,697,059.95
1,697,187.38
99.99
1.13 %
1,699,746.70
584.38
2.01 %
2,559.32
Aaa / AA+
AAA
2.97
2.91
3137EADK2 FHLMC Note
1.25% Due 8/1/2019
1,700,000.00 Various
1.36 %
1,692,427.40
1,692,845.26
99.12
1.48 %
1,685,108.00
10,625.00
2.00 %
(7,737.26)
Aaa / AA+
AAA
4.01
3.86
3135G0YT4 FNMA Note
1.625% Due 11/27/2018
940,000.00 Various
1.56 %
942,208.85
941,809.54
101.43
1.18 %
953,472.08
2,715.55
1.13 %
11,662.54
Aaa / AA+
AAA
3.33
3.22
Total Agency 38,015,000.00 0.87 %
38,227,870.28
38,064,126.33 0.71 %
38,150,955.89
102,620.70
45.19 %
86,829.56
Aaa / AA+
Aaa
1.86
1.75
AGENCY
Holdings Report
As of 7/31/15
City of Newport Beach, California
Account #10
CUSIP Security Description Par Value/Units
Purchase Date
Book Yield
Cost Value
Book Value
Mkt Price
Mkt YTM
Market Value
Accrued Int.
% of Port.
Gain/Loss
Moody/S&P
Fitch
Maturity
Duration
24
24
24
Chandler Asset Management - CONFIDENTIAL Execution Time: 8/6/2015 12:31:23 PM
68389XAN5 Oracle Corp Note
1.2% Due 10/15/2017
1,100,000.00 Various
1.32 %
1,095,291.00
1,097,061.14
99.89
1.25 %
1,098,786.70
3,886.67
1.30 %
1,725.56
A1 / AA-
A+
2.21
2.16
69371RM37 Paccar Financial Corp Note
1.4% Due 11/17/2017
500,000.00 11/12/2014
1.42 %
499,780.00
499,831.59
100.21
1.31 %
501,065.50
1,438.89
0.59 %
1,233.91
A1 / A+
NR
2.30
2.25
02665WAQ4 American Honda Finance Note
1.55% Due 12/11/2017
650,000.00 12/08/2014
1.58 %
649,395.50
649,524.01
100.30
1.42 %
651,950.65
1,399.31
0.77 %
2,426.64
A1 / A+
NR
2.37
2.31
084664BS9 Berkshire Hathaway Note
1.6% Due 5/15/2017
325,000.00 11/26/2013
1.18 %
329,657.25
327,404.10
101.05
1.01 %
328,408.28
1,097.78
0.39 %
1,004.18
Aa2 / AA
A+
1.79
1.76
009158AS5 Air Products & Chemicals Note
1.2% Due 10/15/2017
700,000.00 03/03/2015
1.28 %
698,551.00
698,775.79
99.72
1.33 %
698,039.30
2,473.33
0.83 %
(736.49)
A2 / A
NR
2.21
2.16
69371RM45 Paccar Financial Corp Note
1.45% Due 3/9/2018
824,000.00 Various
1.47 %
823,560.84
823,581.05
100.04
1.44 %
824,300.76
4,712.82
0.98 %
719.71
A1 / A+
NR
2.61
2.53
94974BFG0 Wells Fargo Corp Note
1.5% Due 1/16/2018
600,000.00 09/09/2014
1.64 %
597,192.00
597,937.59
100.06
1.48 %
600,346.20
375.00
0.71 %
2,408.61
A2 / A+
AA-
2.47
2.40
459200HZ7 IBM Corp Note
1.125% Due 2/6/2018
1,035,000.00 02/03/2015
1.23 %
1,031,843.25
1,032,350.17
99.53
1.31 %
1,030,169.66
5,660.16
1.22 %
(2,180.51)
Aa3 / AA-
A+
2.52
2.46
166764AV2 Chevron Corp. Note
1.365% Due 3/2/2018
860,000.00 02/24/2015
1.37 %
860,000.00
860,000.00
99.88
1.41 %
858,931.88
4,826.03
1.02 %
(1,068.12)
Aa1 / AA
NR
2.59
2.52
17275RAT9 Cisco Systems Note
1.1% Due 3/3/2017
500,000.00 09/10/2014
1.07 %
500,330.00
500,211.73
100.35
0.88 %
501,762.00
2,261.11
0.60 %
1,550.27
A1 / AA-
NR
1.59
1.57
037833AH3 Apple Inc Note
0.45% Due 5/3/2016
650,000.00 Various
0.54 %
648,369.50
649,571.21
100.02
0.43 %
650,105.95
715.00
0.77 %
534.74
Aa1 / AA+
NR
0.76
0.75
38259PAC6 Google Inc Note
2.125% Due 5/19/2016
435,000.00 11/15/2012
0.75 %
455,571.30
439,707.54
101.33
0.46 %
440,779.41
1,848.75
0.52 %
1,071.87
Aa2 / AA
NR
0.80
0.79
46625HHX1 JP Morgan Chase Note
3.45% Due 3/1/2016
2,000,000.00 10/19/2012
1.31 %
2,140,000.00
2,024,362.75
101.49
0.88 %
2,029,798.00
28,750.00
2.43 %
5,435.25
A3 / A
A+
0.59
0.57
717081DJ9 Pfizer Inc. Note
1.1% Due 5/15/2017
195,000.00 05/12/2014
1.13 %
194,828.40
194,897.76
100.09
1.05 %
195,171.60
452.83
0.23 %
273.84
A1 / AA
A+
1.79
1.76
166764AC4 Chevron Corp. Note
0.889% Due 6/24/2016
675,000.00 08/15/2013
0.87 %
675,317.25
675,100.15
100.25
0.61 %
676,676.03
616.74
0.80 %
1,575.88
Aa1 / AA
NR
0.90
0.89
36962GY40 General Electric Capital Corp Note
5.375% Due 10/20/2016
1,000,000.00 01/15/2013
1.31 %
1,148,590.00
1,048,337.81
105.21
1.06 %
1,052,113.00
15,079.86
1.26 %
3,775.19
A1 / AA+
NR
1.22
1.18
674599CB9 Occidental Petroleum Note
1.75% Due 2/15/2017
1,060,000.00 Various
1.12 %
1,077,702.80
1,070,163.75
100.82
1.21 %
1,068,687.76
8,553.61
1.27 %
(1,475.99)
A2 / A
A
1.55
1.50
458140AH3 Intel Corp Note
1.95% Due 10/1/2016
625,000.00 03/22/2013
0.91 %
647,500.00
632,482.48
101.41
0.73 %
633,806.88
4,062.50
0.75 %
1,324.40
A1 / A+
A+
1.17
1.15
06406HBX6 Bank of New York Note
2.3% Due 7/28/2016
485,000.00 11/19/2012
0.89 %
509,618.80
491,635.89
101.20
1.08 %
490,825.34
92.96
0.58 %
(810.55)
A1 / A+
AA-
0.99
0.98
949746JE2 Wells Fargo Company Note
5.125% Due 9/15/2016
978,000.00 04/29/2013
1.24 %
1,103,032.45
1,019,745.19
104.17
1.36 %
1,018,825.63
18,935.17
1.23 %
(919.56)
A3 / A
A+
1.13
1.08
US CORPORATE
Holdings Report
As of 7/31/15
City of Newport Beach, California
Account #10
CUSIP Security Description Par Value/Units
Purchase Date
Book Yield
Cost Value
Book Value
Mkt Price
Mkt YTM
Market Value
Accrued Int.
% of Port.
Gain/Loss
Moody/S&P
Fitch
Maturity
Duration
25
25
25
Chandler Asset Management - CONFIDENTIAL Execution Time: 8/6/2015 12:31:23 PM
912828SY7 US Treasury Note
0.625% Due 5/31/2017
975,000.00 03/24/2014
1.04 %
962,282.56
967,684.46
99.96
0.65 %
974,618.78
1,032.27
1.15 %
6,934.32
Aaa / AA+
AAA
1.84
1.82
912828TG5 US Treasury Note
0.5% Due 7/31/2017
1,400,000.00 Various
0.62 %
1,394,067.19
1,396,665.74
99.64
0.68 %
1,394,968.40
19.03
1.65 %
(1,697.34)
Aaa / AA+
AAA
2.00
1.99
912828TW0 US Treasury Note
0.75% Due 10/31/2017
750,000.00 09/09/2014
1.16 %
740,598.22
743,232.69
99.98
0.76 %
749,824.50
1,421.54
0.89 %
6,591.81
Aaa / AA+
AAA
2.25
2.22
912828A91 US Treasury Note
0.75% Due 1/15/2017
1,300,000.00 07/07/2014
0.78 %
1,298,882.81
1,299,354.16
100.34
0.52 %
1,304,366.70
450.41
1.54 %
5,012.54
Aaa / AA+
AAA
1.46
1.45
912828SM3 US Treasury Note
1% Due 3/31/2017
1,000,000.00 06/05/2014
0.75 %
1,006,875.00
1,004,062.20
100.71
0.57 %
1,007,109.00
3,360.66
1.19 %
3,046.80
Aaa / AA+
AAA
1.67
1.65
912828SS0 US Treasury Note
0.875% Due 4/30/2017
1,400,000.00 Various
0.83 %
1,401,673.22
1,401,078.50
100.45
0.61 %
1,406,343.40
3,095.79
1.66 %
5,264.90
Aaa / AA+
AAA
1.75
1.73
912828UA6 US Treasury Note
0.625% Due 11/30/2017
1,410,000.00 Various
1.00 %
1,393,418.40
1,397,898.65
99.63
0.79 %
1,404,712.50
1,492.83
1.66 %
6,813.85
Aaa / AA+
AAA
2.34
2.31
912828UE8 US Treasury Note
0.75% Due 12/31/2017
735,000.00 Various
1.21 %
723,550.90
727,036.74
99.85
0.81 %
733,909.26
479.35
0.87 %
6,872.52
Aaa / AA+
AAA
2.42
2.39
912828UJ7 US Treasury Note
0.875% Due 1/31/2018
775,000.00 08/21/2014
1.20 %
766,677.40
768,938.76
100.08
0.84 %
775,605.28
18.43
0.92 %
6,666.52
Aaa / AA+
AAA
2.51
2.47
912828RX0 US Treasury Note
0.875% Due 12/31/2016
1,000,000.00 05/12/2014
0.70 %
1,004,531.25
1,002,442.44
100.55
0.49 %
1,005,469.00
760.87
1.19 %
3,026.56
Aaa / AA+
AAA
1.42
1.41
912828WX4 US Treasury Note
0.5% Due 7/31/2016
1,000,000.00 09/11/2014
0.51 %
999,882.81
999,937.56
100.16
0.34 %
1,001,562.00
13.59
1.18 %
1,624.44
Aaa / AA+
AAA
1.00
1.00
912828B74 US Treasury Note
0.625% Due 2/15/2017
675,000.00 02/28/2014
0.68 %
673,947.57
674,450.40
100.13
0.54 %
675,843.75
1,946.22
0.80 %
1,393.35
Aaa / AA+
AAA
1.55
1.53
912828RJ1 US Treasury Note
1% Due 9/30/2016
850,000.00 01/07/2013
0.55 %
864,080.97
854,407.42
100.67
0.42 %
855,711.15
2,856.56
1.01 %
1,303.73
Aaa / AA+
AAA
1.17
1.16
US TREASURY
02665WAC5 American Honda Finance Note
2.125% Due 10/10/2018
425,000.00 09/09/2014
1.93 %
428,149.25
427,466.10
101.35
1.69 %
430,757.05
2,784.64
0.51 %
3,290.95
A1 / A+
NR
3.20
3.06
808513AK1 Charles Schwab Corp Callable Note Cont
2/10/2018
1.5% Due 3/10/2018
1,130,000.00 Various
1.49 %
1,130,242.70
1,130,269.74
100.18
1.42 %
1,132,067.90
6,638.76
1.35 %
1,798.16
A2 / A
A
2.61
2.45
24422ESB6 John Deere Capital Corp Note
1.3% Due 3/12/2018
1,015,000.00 Various
1.39 %
1,012,047.05
1,012,630.32
99.58
1.46 %
1,010,720.76
5,094.74
1.20 %
(1,909.56)
A2 / A
NR
2.62
2.55
747525AG8 Qualcom Inc Note
1.4% Due 5/18/2018
1,255,000.00 Various
1.45 %
1,253,021.30
1,253,150.94
98.84
1.83 %
1,240,420.67
3,465.20
1.47 %
(12,730.27)
A1 / A+
NR
2.80
2.72
Total US Corporate 20,822,000.00 1.21 %
21,383,859.64
20,967,229.68 1.13 %
20,976,856.69
138,415.26
24.94 %
9,627.01
A1 / AA-
A+
1.71
1.66
US CORPORATE
Holdings Report
As of 7/31/15
City of Newport Beach, California
Account #10
CUSIP Security Description Par Value/Units
Purchase Date
Book Yield
Cost Value
Book Value
Mkt Price
Mkt YTM
Market Value
Accrued Int.
% of Port.
Gain/Loss
Moody/S&P
Fitch
Maturity
Duration
26
26
26
Chandler Asset Management - CONFIDENTIAL Execution Time: 8/6/2015 12:31:23 PM
912828RH5 US Treasury Note
1.375% Due 9/30/2018
1,250,000.00 Various
1.29 %
1,253,092.08
1,253,173.86
100.93
1.08 %
1,261,621.25
5,776.13
1.50 %
8,447.39
Aaa / AA+
AAA
3.17
3.08
912828ST8 US Treasury Note
1.25% Due 4/30/2019
1,100,000.00 07/31/2015
1.24 %
1,100,519.31
1,100,518.93
100.03
1.24 %
1,100,343.20
3,474.86
1.30 %
(175.73)
Aaa / AA+
AAA
3.75
3.64
912828SD3 US Treasury Note
1.25% Due 1/31/2019
1,500,000.00 04/29/2015
1.18 %
1,504,106.59
1,503,828.23
100.20
1.19 %
1,503,046.50
50.95
1.78 %
(781.73)
Aaa / AA+
AAA
3.51
3.42
Total US Treasury 17,120,000.00 0.92 %
17,088,186.28
17,094,710.74 0.74 %
17,155,054.67
26,249.49
20.30 %
60,343.93
Aaa / AA+
Aaa
2.17
2.13
US TREASURY
TOTAL PORTFOLIO 84,066,472.86 0.95 %
84,802,919.58
84,229,922.11 0.83 %
84,384,820.75
271,373.25
100.00 %
154,898.64
Aa1 / AA
Aaa
1.92
1.73
TOTAL MARKET VALUE PLUS ACCRUED 84,656,194.00
Holdings Report
As of 7/31/15
City of Newport Beach, California
Account #10
CUSIP Security Description Par Value/Units
Purchase Date
Book Yield
Cost Value
Book Value
Mkt Price
Mkt YTM
Market Value
Accrued Int.
% of Port.
Gain/Loss
Moody/S&P
Fitch
Maturity
Duration
27
27
27
SECTION 4
Investable Universe
28
28
City’s Investable Universe
Security Type Max % Exposure Max Maturity Minimum Rating
United States Treasury N/A 5 Years N/A
Federal Instrumentality N/A 5 Years N/A
Agency Obligations N/A 5 Years N/A
Supranationals 30%5 Years "AA"
MBS, CMO, & ABS 20%5 Years "AAA"
Medium Term Notes 30%5 Years "A"
Municipal Bonds 30%5 Years "A"
Non negotiable CDs
30% combined with
NCDs 2 Years
Negotiable CDs
30% combined with
NNCDs 2 Years LT "A", ST "A-1"
Commercial Paper 25%270 days "A-1"
Banker's Acceptance 40%180 days "A-1"
LAIF
Money Market Funds 20%"AAA"
29
CITY OF NEWPORT BEACH
FINANCE COMMITTEE STAFF REPORT
Agenda Item No. 5C August 13, 2015
TO: HONORABLE CHAIRMAN AND MEMBERS OF THE COMMITTEE
FROM: Finance Department Dan Matusiewicz, Finance Director
(949) 644-3123, danm@newportbeachca.gov
SUBJECT: Recommendations for the Annual Finance Committee Budget Review Process
SUMMARY:
During the July 21, 2015, Finance Committee meeting, members discussed the need for
greater transparency and accountability during the annual budget development process.
This report provides recommendations and associated action items to increase the Finance Committee’s involvement during the annual review of the City’s budget.
RECOMMENDED ACTION:
See the recommended actions in the discussion section of this report.
DISCUSSION:
The Finance Committee has expressed an interest in having greater involvement in the
review of the proposed budget prior to its adoption by the City Council. During the July 21, 2015, Finance Committee meeting, members discussed the need for greater
transparency and accountability during the annual budget development process. Many
of the comments shared with staff can be generalized along these four major themes:
1. The need to better define and communicate our budgeting priorities or principles to ensure that budget dollars further these goals.
2. The need to discuss budget assumptions and strategies prior to the development
of the budget.
3. The need to better demonstrate accountability for the resources consumed and
to demonstrate the value of programs and services.
Recommendations for the Annual Finance Committee Budget Review Process August 13, 2015
Page 2 4. The need to better communicate the value of keeping certain job functions in-house or propose potential areas for outsourcing, where it makes sense.
To address these themes and to facilitate greater Finance Committee involvement in
the review of the annual budget, we have the following recommendations for the
Committee’s consideration: Recommendation 1: Seek City Council’s explicit statements of budgeting
principles to guide the development of the annual budget. Seek Finance
Committee guidance on budget assumptions and strategies prior to the
development of the Fiscal Year 2016-2017 budget. Budget principles or priorities capture the fundamental purposes for which the City
serves its citizens and are broad enough to have staying power from year to year.
Unlike the priorities set by the City Council in January during the annual “Goal Setting”
session which typically refer to desired projects or areas that require special attention, budget priorities refer to statements upon which the entire budget can be based. What follows is a list of staff derived budget principles that were used in the development of
the Fiscal Year 2015-2016 budget. We welcome the Committee’s input and Council’s
approval of budget principles for Fiscal Year 2016-2017 that either builds upon or
provides alternatives to the concepts expressed below. a. Maintain a Customer Focused/Quality of Life Enhancing Government – This
budget principle is an ongoing, organization-wide effort to maintain the City
as a highly performing municipal corporation that anticipates and responds
to customer needs by delivering public services better, faster, less expensively, and when customers need them.
b. Safety and Security of Neighborhoods – Our goal is to provide a safe and
healthy environment for all community members and visitors.
c. Maintain a High Quality Physical Environment – Another key goal is to
maintain a high-quality natural and physical environment by creating
aesthetically pleasing places in which to live, work, recreate, and visit.
d. Maintain a Prosperous, Fiscally Sustainable, and Economically Viable City Another aspect of our balanced approach to management maintains the City’s financial health by managing resources as efficiently as possible,
responsibly managing debt, and working collaboratively with employees to
recalibrate the compensation structure and share in the costs of pension
obligations. Recommended Action:
City Council can consider and approve a recommended list of budget principles and
priorities in September or October 2015, prior to the development of the annual budget.
Recommendations for the Annual Finance Committee Budget Review Process August 13, 2015
Page 3 In October or November 2015, the Committee can also work on developing budget recommendations or guidance on items such as pension funding, Other Post- Employment Benefits (OPEB), Facilities Financial Planning (FFP), Seawall
replacement(s), programs, services, and other budget items prior to the development of
the FY 2016-17 budget.
Recommendation 2: Prior to Budget Development, provide Finance Committee and other stakeholders the ability to assess services, programs, and resource
utilization. If needed, involve the participation of department directors and their
key staff to describe program purposes, beneficiaries, and needs served.
Certain members of the Finance Committee expressed a desire to be more involved in the early stages of the budget process, as was the case with the Fiscal Year 2015-2016
budget prior to its adoption by the City Council in May of 2015. As Attachment A, Draft
Fiscal Year 2016-2017 Budget Calendar indicates, budget development is typically well
underway by February, the month that the Committee convened its first meeting in 2015. Soliciting Committee input earlier will provide the Finance Committee with a better opportunity to be involved and better understand the proposed budget.
Finance Committee members identified the need for clarity in the following areas:
1. The broad and varied components of compensation across bargaining units; 2. The reasons for large year-over-year budget changes; and 3. Various funding allocations for departments and an understanding of program
specific line items.
Recommended Actions: 1. Between July and December of 2015, the Finance Committee should continue its review of the Fiscal Year 2015-2016 budget to assess current services,
programs, and resource utilization. This will provide members with the context
and understanding of the City’s programs in advance of the Fiscal Year 2016-
2017 budget process and reinforce an environment of continual process improvement. 2. Upon Committee request, department directors and their key staff could be made
available at Committee meetings so that questions about program operations can
be adequately addressed.
3. The Finance Committee can develop a formal list of items for the City Council and City Manager to consider in November, prior to the development of the Fiscal Year 2016-2017 budget.
4. In February, staff will then present major strategies, assumptions and tactics to
coalesce Council adopted principles, Finance Committee recommendations and
ideas that may surface during the Council goal setting session(s). Finance Committee and City Council review of entire budget would then commence in April/May.
Recommendations for the Annual Finance Committee Budget Review Process August 13, 2015
Page 4 Recommendation 3: City Manager’s Office can facilitate a Finance Committee review of selected City programs or functions that have the potential to operate more efficiently or at lower cost if outsourced in whole or in part. The
City fosters an environment of continuous process improvement which continues
throughout the year. Evaluation of program and services should not be limited to
the budget cycle. In fact, generally, it is preferable that this analysis start well before the budget cycle.
Details about this recommendation and associated action items are the subject of
“Wastewater Service in Newport Beach,” Agenda Item No. 5D, of this August 13, 2015,
agenda packet. Staff will similarly present other operational areas for consideration in the two subsequent Finance Committee meetings.
We look forward to working collaboratively with both the Finance Committee and the
City Council in preparation of the Fiscal Year 2016-2017 budget.
Prepared and Submitted by:
/s/ Dan Matusiewicz
_____________________________
Dan Matusiewicz Finance Director
Attachment:
A. Draft Budget Calendar Fiscal Year 2016-2017
ATTACHMENT A
Draft Budget Calendar Fiscal Year 2016-2017
DRAFT Budget Calendar FY 2016-17
Last Updated 8-6-15
DATE OWNER TASK
Sep. 2015 Finance Committee Recommend budget principles/priorities for Council consideration. Begin review of the current FY 15-16
budget to assess current services, programs, and
resource utilization in preparation for the new budget cycle.
City Council Study Session to consider FY 16-17 budget
principles/priorities.
Oct. 2015 City Council City Council adopts FY 16-17 budget
principles/priorities.
Finance Committee Draft FY 16-17 budget recommendations/guidance
Nov. 2015 Finance
Committee
Finalize FY 16-17 budget recommendations/
guidance
Finance Dept. Revenue budget training for departments.
Departments FY 2015-16 Year-end Estimates and FY 2016-17 Preliminary Revenue Estimates are due.
Dec. 2015 Finance Dept. Payroll budget training conducted by Tyler Munis staff.
Departments Expenditure Budget workshop-½ day session.
Budget processors can work on their department’s budget with OMB staff available to provide
assistance or answer questions.
Jan. 2016 Departments Expenditure budgets and Performance Plan pages (excluding Service Indicators) must be completed;
budget module will be closed.
City Council Annual Council Goal Setting Session
Feb. 2016 Finance
Committee
Review strategies, assumptions and tactics
Departments Service Indicators for the Performance Plan due.
Finance Dept. Meet with City Manager to discuss departmental
budgets.
Mar. 2016 Finance Public Works Prepare and print Proposed Budget documents.
Apr. 2016 City Manager Submit Proposed Budget to City Council and
Finance Committee.
May 2016
Finance
Committee
Review of Proposed Budget.
City Council First budget review with staff at the Study Session. Set date for public hearing on budget.
Jun. 2016 City Council Public Hearing and Adoption of FY 2015-16 Budget and GANN Limit.
Jul. 2016 Beginning of FY 2016-17.
Aug. 2016 Finance Dept. Target posting of final budget documents online.
CITY OF NEWPORT BEACH
FINANCE COMMITTEE
STAFF REPORT
Agenda Item No. 5D
August 13, 2015
TO: HONORABLE CHAIRMAN AND MEMBERS OF THE COMMITTEE
FROM: Municipal Operations Department and City Manager’s Office
George Murdoch, Municipal Operations Director (949) 644-3011,
gmurdoch@newportbeachca.gov
Carol Jacobs, Interim Assistant City Manager (949) 644-3313,
cjacobs@newportbeachca.gov
SUBJECT: Wastewater Service in Newport Beach
SUMMARY:
The City Council has requested a review of the City’s Wastewater Operation as part of
the City’s on-going effort to review operations for effectiveness, efficiency and cost.
This report provides the roles and responsibilities of the Division.
RECOMMENDED ACTION:
Provide recommendation to the City Council considering the following options:
1. Keep the Wastewater Division as an in-house municipal function.
2. Engage a consultant to review the efficiency and effectiveness of the Division.
3. Consider outsourcing the maintenance function to a third party through a
Request for Proposal Process (RFP).
4. Consider annexation of the system to another governmental entity such as a
special district.
BACKGROUND:
The Wastewater Division of the Municipal Services Department is responsible for four
core functions:
1. Pump Stations – Operate, maintain and repair the sewer pump station system.
2. Maintenance – Minimize sewer spills by performing routine maintenance and
cleaning.
Wastewater Service in Newport Beach
August 13, 2015
Page 2
3. Construction Operations – Replace sewer mains, laterals and manholes as
needed.
4. Emergency Response – Respond to unplanned sewer system issues that occur
anytime that could result as a hazard to public health.
These operations must be in compliance with Federal and State regulations in order to
protect the public health and the water quality in Newport Beach’s bays and ocean. The
California Regional Water Quality Control Board is the primary regulatory agency that
enforces the Waste Discharge Requirements that include a Sewer System Management
Plan, which City Council adopted in 2014. The Division has been successful in meeting
all regulatory standards.
Prior to determining the best method to deliver this service, the Division developed a
detailed report that identifies all of the specific operations of the Division. This report is
included as Attachment A.
Many of the functions of the Wastewater Division have been contracted out to private
firms over the years, these functions include: closed circuit television inspections, root
foaming, sewer roach control, man hole lining, and pipe relining at a cost of $1,668,800.
In addition, there are number of on-call services that are shared with several
departments totaling over $1,000,000.
The Wastewater Division is in one of the City’s two Enterprise Funds. These funds are
established with separate accounting and financial reporting systems as a fee is
charged for the service rendered. Revenues anticipated to be collected during Fiscal
Year 2015-2016 are $3,054,551. The Division has a total of 12 employees and a
budget of $3,388,614. This Fiscal Year 2015-2016 expenditure budget includes
$500,000 for Capital Improvement Projects (CIP) that is currently not meeting the needs
to replace the aging infrastructure. The City’s rate structure has not kept pace with the
rising costs and needed infrastructure improvements. The last rate increase was in
2006.
DISCUSSION:
Outsourcing is not new to the City. There have been a number of services outsourced
to the private sector over the years while other services have been studied and
determined that the service is best provided by City staff. The driving force behind
many of these decisions has been the rising retirement costs of City employees and
providing a similar level of service to the community.
The following issues should be considered when determining whether or not to
outsource a service:
Is it something the private sector does well?
What is the state of our own service? Can we avoid layoffs?
Wastewater Service in Newport Beach
August 13, 2015
Page 3
Are there enough quality vendors from which to select?
Is a quality contract available and does the City have the skills to manage it?
Are there enough long-term cost savings to warrant the change?
Can the liability of the function be shifted to a contractor?
There are a number of pros and cons that should be considered prior to making a
decision to contract a service or keep the service in-house.
Pros Cons
No long-term retirement costs Loss of control of rate structure
Cost Low price may mean low quality
More efficient with less staff and
equipment
Need to provide contract oversight
Cost containment through contract
negotiations
Response times may be extended
due to location of vendor
Shift liability to vendor Ratepayer ultimately responsible
Lower equipment costs for
maintenance of the system
Loss of overhead costs to General
Fund
Establish penalties and fines for
non-performance
Less control over quality of
customer service
In addition, it is recommended that the City invest over $29 million dollars in
infrastructure improvements over the next 30 years. The existing rate structure does
not accommodate this funding and a vendor, another governmental agency or the City
will need to determine if this investment will be made in the wastewater system.
Should the Finance Committee and the City Council choose to explore annexation of
the system to another governmental agency, the Local Agency Formation Commission
would be required to approve the annexation of the City’s system into either the Costa
Mesa Sanitary District or the Irvine Ranch Water District, which are the only two viable
agencies that are geographically close enough to consider. Additionally, should this
option be evaluated further, a decision regarding infrastructure ownership would need to
be addressed.
Prepared and Submitted by:
/s/Carol Jacobs___________
Carol Jacobs
Interim Assistant City Manager
Wastewater Service in Newport Beach
August 13, 2015
Page 4
Attachment:
A. Wastewater Services in Newport Beach
ATTACHMENT A
Wastewater Services in Newport Beach
Wastewater Services
in Newport Beach
August 3, 2015
Municipal Operations Department
Executive Summary ........................................................................................................................ 1
Wastewater Division Overview ...................................................................................................... 3
Regulations ..................................................................................................................................... 4
Pump Station Operation .................................................................................................................. 5
Maintenance .................................................................................................................................... 8
Construction Operation ................................................................................................................. 10
Emergency Reponses .................................................................................................................... 11
Potential Fines Associated with Spills .......................................................................................... 11
Personnel ....................................................................................................................................... 12
Performance Measures .................................................................................................................. 13
Customer Service .......................................................................................................................... 15
Budget ........................................................................................................................................... 17
Overview of Current Wastewater Division Contracts .................................................................. 19
City versus Contracting Costs ....................................................................................................... 20
Wastewater Rate Study and Rate Comparison to Other Cities ..................................................... 22
Capital Improvement Program ...................................................................................................... 23
Summary ....................................................................................................................................... 24
Municipal Operations Department
Executive Summary
The City of Newport Beach is known for its beautiful beaches and bays. The close proximity of
residences, businesses and sewer lines to these waterways presents a significant hazard should
untreated wastewater resulting from a sanitary sewer overflow reach these areas. This could
potentially result in the City receiving a considerably large fine from the State Water Board.
Moreover, the closure of these water ways would have a tremendous impact on the local
community and economy in Newport Beach due to the large tourist population.
Wastewater Division Overview
The Wastewater Division of the Municipal Operations Department provides sewer services to
approximately 64,465 residents in Newport Beach. The City’s wastewater service area lies
within the Orange County Sanitation District (OCSD). OCSD is responsible for treating the
City’s wastewater. The City owns and operates 21 pump stations in various areas which lift the
wastewater from the lower areas of Newport Beach and several island communities for
transportation to OCSD’s treatment plant. The total length of the wastewater collection system in
Newport Beach is 285.7 miles.
The Wastewater Division is tasked with performing preventative maintenance on the City’s
pump stations, sewer mains, and laterals. The division also repairs and replaces damaged sewer
mains and laterals in order to prevent a sewer system overflow. The maintenance and repair of
the sewer laterals is unique to the City of Newport Beach as most other wastewater agencies and
jurisdictions do not maintain wastewater laterals. The lateral is the connection between the
property and the City’s sewer main. In addition, personnel respond to emergency incidents that
involve power outages, sewer backups and sewer spills both during normal business hours, after
hours, and weekends.
Regulations
Almost every aspect of the wastewater system is regulated by federal, state or local regulations.
These regulations have been put in place in order to protect the environment and public health. A
violation of these regulations, or a significant sewer system overflow that impacts the beaches or
bays of Newport Beach can result in a substantial fine to the City. It is imperative that the City’s
maintains its wastewater collection system so that there are no sewer system overflows that reach
the public water ways.
Customer Service
Division staff provides customer service to the residents, businesses, and visitors of Newport
Beach. The average emergency response time of staff during normal business hours is 15 to 20
minutes. Staff is also on-call after-hours and weekends. Per department policy, all on-call
personnel must have the ability to respond to city limits within 30 minutes. This provides a rapid
response to any sewer overflow situation occurring so that the impact can be minimized. On-call
personnel are assigned a City owned vehicle to take home to respond directly to the incident
Municipal Operations Department
Page 2
from their residence. The Municipal Operations Department frequently receives feedback from
customers thanking them for their quick and efficient work.
Budget
The Wastewater Division’s budget is designated as an enterprise fund. An enterprise fund has
separate accounting and financial reporting mechanisms for municipal services, such as
wastewater. Operating costs, capital expenditures, long term maintenance, and repair expenses
for wastewater services are recovered through charges to the residents and businesses in Newport
Beach. In order to appropriately fund the Wastewater Enterprise Fund, revenues should slightly
exceed expenses in order to set aside funding for the replacement of the sewer system as it ages.
For Fiscal Year 2015/2016, City Council adopted a budget of $3,388,614 for expenses related to
wastewater. This includes expenditures for personnel, equipment, internal service fees, contracts,
and an administrative transfer to the general fund to partially fund the City Manager, City
Attorney, and other staff who provide support to the Wastewater Division. City Council adopted
a revenue budget of $3,054,441 for the Wastewater Division. This results in a shortfall of
$334,063 between expenses and revenue which will be covered this fiscal year by the wastewater
reserve fund. The reserve fund, as set by City Council Policy, is to have a fund balance of at
least half of the expenses for the current fiscal year. More detail on the budget can be found on
page 17.
Capital Improvement Program
Any major construction that is necessary for improving or replacing the City’s aging wastewater
infrastructure is typically contracted through Public Works. These projects are subject to
prevailing wage and must go through the City’s formal bid process. Beginning in 2011, the
Wastewater Enterprise Fund has contributed $500,000 a year for major capital improvement
projects. According to the City’s Finance Department, this amount has been increased every year
by three percent so that the current contribution for Fiscal Year 2015/2016 is estimated to be
$562,754 in the adopted budget for Wastewater services.
Wastewater Rate Study
The City retained the services of HF&H Consulting to conduct a wastewater and recycled rate
study. The proposed recycled rates were presented to City Council and approved in 2014 which
resulted in the reduction of overall charges. In June of 2015, staff presented the wastewater rates
to City Council at a study session. The study concluded that the current revenues are not enough
to cover the adopted operating and capital expenditures. One of the primary causes is that the
rates have not increased since 2006.
The capital expenditures are identified in the Wastewater Master Plan which outlines
infrastructure that is in need of repair or replacement. The Master Plan recommends an estimated
$1,000,000 a year to be spent on capital improvements. This would increase to $1,300,000 by
Fiscal Year 2019/2020 to cover increased costs of construction. The rate study incorporates an
increase in revenue to meet the Master Plan recommendations.
Municipal Operations Department
Page 3
Although revenues are insufficient to cover expenditures and capital improvement costs, the
Wastewater Reserve account is fully funded. The study shows that reserves will be depleted by
2017 without an increase in rates. At the City Council study session in June several options were
discussed including the use of General Funds to cover wastewater operations, reducing the
capital replacement program, and outsourcing services in lieu of raising rates. This report
addresses the outsourcing option. An overview of the wastewater rate study can be found on
page 22.
Comparison Costs for Contracting Services versus City Paid Personnel
The City utilizes contractors to perform some wastewater services and the Municipal Operations
Department continually looks at cost efficiency by comparing the cost of City staff to outsourced
vendors. It is difficult to locate pump station operation or emergency response vendors; however
the cost for maintenance and cleaning operations as well as construction operations can be
compared. The maintenance and cleaning operations that are conducted by City personnel cost
approximately $584,379 per year. Recent proposals from outside vendors performing the same
maintenance and cleaning operations would range from approximately $819,000 to $1,120,392
per year. The estimates provided by the vendors do not include what it would cost for them to
respond after hours to emergencies related to sewer system issues. More details for this
comparison are available on page 21.
The repair of sewer laterals, sewer mains, spot repairs to the sewer system, and the installation of
sewer cleanouts are typically conducted by City staff. In order to examine the cost of potentially
contracting out the Construction Operations Division, three actual incidents that occurred in
Newport Beach were proposed to the emergency, on-call repair vendors with whom the City
already has established contracts. In all three instances, City personnel were able to perform the
repairs and/or installations at a lower cost than the vendors. The cost savings to the City ranged
from $10,422.85 to $19,070.85 or an average of $3,474.28 to $6,356.67 per project. The details
for these projects can be viewed on page 22.
Wastewater Division Overview
The Wastewater Division is responsible for the collection of residential and commercial
wastewater. Wastewater is water containing wastes from residential, commercial, and industrial
processes. Wastewater requires treatment to remove pollutants prior to discharge.
A wastewater collection system is a network of pipes, manholes, cleanouts, traps, siphons, lift
stations and other required structures to collect all the wastewater from an area and transport it to
a treatment plant or disposal system. The existing wastewater collection system in the City of
Newport Beach consists of 198 miles of mainline gravity pipes, 4.7 miles of force mains with
4,922 manholes and cleanouts as well as 25,525 sewer laterals with an approximate length of 83
miles in the public right-of-way. The City of Newport Beach owns and maintains the laterals
within the public right-of-way, whereas most other cities and sanitary districts they do not own
the laterals. Assuming an average lateral length of 25 feet within the public right-of-way, the
Municipal Operations Department
Page 4
total length of sewers owned by the City is 285.7 miles. All wastewater is transported via this
system to the Orange County Sanitation District for treatment and disposal.
The Municipal Operations Wastewater Division serves four core functions for the City of
Newport Beach which are:
Pump Stations - Operate, maintain and repair the sewer pump station system
Maintenance - Minimize sewer spills by performing routine maintenance and
cleaning
Construction Operations - Replace sewer mains, laterals and manholes as needed
Emergency Responses – Responses to unplanned sewer system issues that occur
regardless of time of day that could result in a hazard to public health.
Additionally, the Municipal Operations Department has several defined department goals. Of
these goals, two of them are relevant to the Wastewater Division. These goals are:
Operate, maintain and repair the City’s sewer collection system to convey wastewater
to the Orange County Sanitation District for treatment. Make every effort to minimize
spills and continue to comply with all regulations
Quickly respond to all emergencies that arise at any time, during working hours or at
nights, on weekends and holidays.
In order to meet the established goals and core functions, the Wastewater Division is divided into
three sub-sections: Pump Station Operation, Cleaning Operation and Construction Operation.
These three sub-sections provide services related to pump station repair and maintenance; sewer
main, lateral and manhole cleaning; sewer blockage and odor; and sewer main and lateral breaks
and repairs.
Regulations
Wastewater management encompasses a broad range of efforts that promote effective and
responsible water use, treatment and disposal. Through effective management of wastewater, the
nation's watersheds, local watersheds, and the beaches of Newport Beach can be maintained in a
way as to protect the watersheds and the environment from the hazards of improper wastewater
disposal.
Federal
The Clean Water Act (33 U.S.C §1251 et seq. (1972)), adopted by Congress and signed into law
by the President of the United States, establishes the basic structure for regulating discharges of
pollutants into the waters of the United States and regulating quality standards for surface waters.
Initially, Congress enacted the Federal Water Pollution Control Act in 1948; however, the Act
was significantly reorganized and expanded in 1972. The "Clean Water Act" became the Act's
common name with amendments in 1972. Under the Clean Water Act, the Environmental
Protection Agency (EPA) has implemented pollution control programs such as setting industry
standards for wastewater control. They also set water quality standards for all contaminants in
surface waters.
Municipal Operations Department
Page 5
State
The California Environmental Protection Agency further regulates the discharge of wastewater.
While some wastewater discharge may be exempt under federal law, California law may still
apply as some stricter regulations have been adopted by the state.
To provide a consistent, statewide regulatory approach to address Sanitary Sewer Overflows
(SSOs), the State Water Resources Control Board (State Water Board) adopted Statewide
General Waste Discharge Requirements (WDRs) for Sanitary Sewer Systems, Water Quality
Order No. 2006-0003 (Sanitary Sewer Systems WDR) on May 2, 2006. The Sanitary Sewer
Systems WDR requires public agencies that own or operate sanitary sewer systems to develop
and implement sewer system management plans (SSMP) and report all SSOs to the State Water
Board’s online SSO database.
Local
The City of Newport Beach further regulates wastewater through Title 14 of the Municipal Code
which regulates sewer construction. All sewer construction must be in accordance with City
standards (Section 14.24). The inspection requirements by City staff are provided in Chapter
14.04.120.
Additionally, Newport Beach complies with the State Water Board Order Number 2006-0003
which requires the City to have a Sewer System Management Plan (SSMP). The SSMP
describes the activities that the Wastewater Division undertakes in order to effectively manage
the City’s wastewater collection system. Some of the required elements that are present in the
City’s SSMP include:
Collection system management goals
Overflow emergency response plan
Fats, oils and grease (FOG) control program
Measures and activities to maintain the wastewater collection system
Pump Station Operation
In general, wastewater moves through a system by gravity. From the homes/businesses,
wastewater flows to an underground tank called a “wet well”. Pumps then lift the wastewater to a
higher elevation where gravity can continue the conveyance to another pump station or treatment
plant. It is essential that these stations remain operational 24 hours a day. Failure of a station can
result in neighborhood sewer backing up into homes/businesses or spills that can reach the bay
and ocean. The City of Newport Beach has 21 Wastewater Pump Stations. They are:
19th Street Pump Station
Balboa/19th Street
Newport Beach, CA
62nd Street Pump Station
515 ½ Clubhouse
Newport Beach, CA
Back Bay Pump Station
2149 Vista Entrada
Newport Beach, CA
Municipal Operations Department
Page 6
Bren Tract Pump Station
1799 Port Sheffield
Corona Del Mar, CA
Buck Gully Pump Station
Glen/Ocean Blvd
Corona Del Mar, CA
Cameo Shores Pump Station
115 Milford Drive
Corona Del Mar, CA
Carnation Pump Station
2323 ½ Bayside Drive
Corona Del Mar, CA
China Cove Pump Station
3733 ½ Ocean Blvd.
Corona Del Mar, CA
Collins Island Pump Station
½ Collins Island
Balboa Island, CA
Diamond Street Pump Station
106 ½ Diamond Street
Balboa Island, CA
Ford Road Pump Station
2779 ½ Ford Road
Corona Del Mar, CA
Harbor Island Pump Station
36 ½ Harbor Island Drive
Newport Beach, CA
Harbor Ridge Pump Station
25 ½ Vienna
Corona Del Mar, CA
Lido Island Pump Station
102 Piazza Genoa
Newport Beach, CA
Linda Isle Pump Station
½ Linda Isle
Newport Beach, CA
Main Beach Pump Station
3299 ½ Breakers Drive
Corona Del Mar, CA
Mariners Pump Station
950 ½ Mariners Drive
Newport Beach, CA
Newport Pier
9 Newport Pier
Newport Beach, CA
Polaris Pump Station
1019 Polaris Drive
Newport Beach, CA
Section 5 Pump Station
1086 S. Bayfront
Balboa Island, CA
Shellmaker Island
600 Shellmaker Road
Newport Beach, CA
A map of the Sewer Pump Stations located in the City of Newport Beach can be found on the
next page.
Page 7
Municipal Operations Department
Map 1: Sewer Pump Station in the City of Newport Beach
Municipal Operations Department
Page 8
All 21 pump stations in Newport Beach receive routine maintenance on a weekly, monthly,
quarterly, biannual, annual, and biennial basis. Some of the maintenance items include:
Checking the wet well washers, bypass pumps, generators and portable compressor
Cleaning wet wells, sump pumps and discharge manholes
Backflush forced mains
Testing sump pump, dry pit flood alarm and control panel indicator lights
Grease motor, pumps and power frames as required
Inspecting pipes leading to and from the pump station for leaks and/or damage.
Maintenance
As part of the City’s Sewer System Management Plan, the wastewater collection lines must be
regularly cleaned and repaired to ensure reliable operation and to prevent sewer system
overflows. Cleaning and inspecting sewer lines are essential to maintaining a properly
functioning sanitary sewer system. Most sewer lines are inspected using either closed-circuit
television (CCTV) or visual inspection.
CCTV and Visual Inspections
CCTV inspections are the most frequently utilized and most effective method to inspect the
internal condition of a sewer. The City of Newport Beach does
employ CCTV to inspect the City’s wastewater collection
system in order to identify any potential issue prior to an actual
incident occurring. Preventative maintenance and/or repairs can
be made when a problem is recognized during a CCTV
inspection. The Municipal Operations Department contracts
with Houston and Harris to perform all of the CCTV
inspections in Newport Beach. The City does have a CCTV
vehicle that can be used by City personnel for troubleshooting
issues when the City’s contractor is unavailable.
Visual inspections are vital in fully understanding the condition of a sewer system. Visual
inspections of manholes and pipelines are comprised of surface and internal inspections. During
inspections, City personnel pay specific attention to sunken areas in the groundcover above a
sewer line and areas with ponding water as this indicates there may be issues with the sewer
collection system.
City Maintenance and Cleaning
To maintain its proper function, a sewer system needs to have a preventative maintenance
cleaning schedule. There are several traditional cleaning techniques used to clear blockages and
to act as preventative maintenance tools. The two tools primarily utilized by the Wastewater
Division are sewer cleaning vehicles known as Vactors and chemical root foaming.
Figure 1: CCTV Inspection of
Sewer Line
Municipal Operations Department
Page 9
Effective sewer cleaning vehicles help protect the environment by
cleaning and maintaining sewer systems. It is the Division’s
standard practice to not only jet rod the pipe but to root cut the pipe
to remove any tree roots during routine maintenance. It is an extra
step not typically taken by vendors or other jurisdictions; however, it
ensures a good functioning pipe. The jet rodding, root cutting, and
cleaning of both sewer mains and laterals are currently performed by
City staff in the Wastewater Division.
Vactor vehicles are utilized to vacuum up the waste from a sewer
system overflow so that the spill is contained and there is little to no
effect on the environment. These vehicles are used on a daily basis
to maintain and clean the wastewater collection system; reduce
localized flooding due to clogged storm drains; and respond to main
line and resident emergency incidents on short notice. The City of
Newport Beach owns two Vactor vehicles and one jet rodding
vehicle.
Contract Maintenance
Maintenance of sewer lines also includes the mitigation of root intrusion through root foaming.
Root foaming is a preventive maintenance technique where Environmental Protection Agency
(EPA) registered products are applied into the sewer line in order to kill any roots that have
infiltrated through the pipes, without harming the vegetation above. An on-call contractor
provides this service to the City.
Other programs for the maintenance of the wastewater collection system include sewer roach
control and manhole lining. Sewer roach control is currently handled by an outside contractor
with a two year on-call agreement. Sewer manhole lining is the process of rehabilitating existing
sewer manholes by relining all interior concrete surfaces with a suitable polyurethane lining.
This is done annually on an as-needed basis, using a contractor under the direction of the
Wastewater Division.
Fats, Oils, and Grease Program
The City of Newport Beach has a proactive, cooperative relationship
with local restaurants to keep fats, oils, and grease out of the sewer
system and prevent spills. It has been demonstrated that fats, oils, and
grease clog sewer lines which can cause sewage backups and
overflows. This will cause property damage, environmental problems,
and other health hazards.
Fats, oils and grease (FOG) primarily infiltrate the sewer system from
commercial food preparation establishments that do not have adequate grease control measures
in place such as grease interceptors. As FOG infiltrates the pumping system, it will stick to the
Figure 2: 32 Foot Root Removed from
Sewer Lateral
Figure 3: Vactor Being Used to
Clean Sewer System
Figure 4: Grease Buildup inside
a Sewer Pipe
Municipal Operations Department
Page 10
inside of sewer pipes both on the consumer’s property and on the City’s property. Over time,
FOG will build up and block the entire pipe causing sewage backups and overflow.
Each year, the Municipal Operations
Department, in accordance with state law,
ensures that businesses are appropriately
preventing FOG from entering the sewer
system. The Department contracts with
Environmental Compliance Inspection
Services (ECIS) to execute the City’s FOG
program. ECIS inspects all restaurants that
may create FOG on an annual basis to ensure
that any FOG created is removed by an
authorized waste hauler, employees are trained how to appropriately dispose of FOG, and
kitchen equipment is properly maintained. This inspection and one follow up inspection are at
no cost to the business owner with the primary benefit of the City being a free flowing sewer
system with little to no back up due to clogged wastewater lines.
Construction Operation
The Construction Operation subsection of the Wastewater Division repairs sewer mains,
manholes, and laterals. Additionally, they are responsible for installing sewer cleanouts, and
replacing sewer laterals.
The Municipal Operations Department has
instituted a sewer lateral line replacement
technique known as pipe bursting that has
made Construction Operations more
efficient and cost effective. Pipe bursting is
a trenchless method of replacing buried
pipelines (such as water and sewer lines)
without the need for a traditional construction trench. This results in no damage to the existing
street, gutter, curb, or sidewalk that the pipeline may be under. With this technique, a project
that used to take several days can be accomplished in half of the time and at a significant cost
savings to the City.
Title 14 of the City’s Municipal Code regulates all sewer
construction and any sewer construction must be in accordance with
City standards. The inspection requirements by City staff are
provided in Chapter 14.04.120.
The City has its Standard Plans and Specifications for the
Construction of Sanitary Sewers, which assures the sewer lines and
connections are properly designed and constructed. The City’s
Figure 5: How a Grease Interceptor Works
Figure 7: Pipe Bursting
Figure 6: Diagram of Pipe Bursting
Municipal Operations Department
Page 11
Specifications by reference incorporate the Standard Plans and Specifications for Public Works
Construction (the "Green Book"), which helps ensure proper design and construction of sewer
facilities.
Emergency Reponses
The Wastewater Division has a well-established history of responding quickly to issues with the
City’s sewer system. Due to the rapid response of on-call after-hours personnel, large sewer
spills that could have very significant impacts to the health and safety of residents, businesses,
and visitors to Newport Beach have been mitigated. A few examples of staff responses to
include:
November 1, 2014: on-call after-hours personnel responded to water flowing out of an
AT&T conduit and junction box under the Arches Bridge. Further investigation revealed
a sinkhole next to the sidewalk on the southwest side of the bridge which
contained wastewater. It was determined that the wastewater was coming
from an Orange County Sanitary District (OCSD) force main. Additional
City personnel were requested to respond
due to the size of spill and the potential
environmental impact. Two City Vactor
trucks were staffed to control the overflow
until OCSD staff and their contractors could
arrive. Although there was a closure of the
canal waterway in the area, the Wastewater
crew’s quick response and diagnosis averted
a potentially larger spill into the harbor.
August 2012: A dredging firm working in Newport Bay accidentally pulled up a section
of the Balboa Island sewer force main. Irvine Ranch Water District (IRWD), Costa Mesa
Sanitation District (CMSD), and Orange County Sanitation District (OCSD) assisted in
the City’s response to maintain sewer service. The repairs were made to the line in a
cooperative effort between the City and the dredging firm. Divers spent several days
replacing the section of underwater sewer main that was damaged. The Wastewater
Division supplied the necessary parts to get the line back in service as soon as possible.
October 11, 2011: A Southern California Edison (SCE) power outage affected six of the
City’s sewer lift stations. Two of the lift stations regained power immediately while the
remaining four lifts stations required Vactor crews to respond until portable generators
could be installed. The timely response by Wastewater personnel averted any overflows
from entering the bay and ocean.
Potential Fines Associated with Spills
The Santa Ana Regional Water Quality Control Board (Regional Board) under the State Water
Resources Control Board has jurisdiction regarding any Sanitary Sewer Overflows that reach
Figure 8: Newport Beach Personnel on
Scene Treating Spill
Figure 9: Sewer
Overflow from
Sinkhole
Municipal Operations Department
Page 12
public waters. Due to the close proximity to the bay and ocean it is highly likely that any spill in
Newport Beach of significant size will reach the bay and ocean by means of the storm drain
system or directly if a spill occurs in the Island areas. The typical fines associated with spills are
calculated at $10 per gallon. The Regional Board does have the option to adjust fines given
certain conditions. An example of a recent spill resulting in the discharge to public waters is
presented below.
In July 2015, the Costa Mesa Sanitary District (CMSD) responded to fines assessed by
the Regional Board for two sewer spills that occurred in their service area and discharged
wastewater into the Upper Newport Bay. The proposed fines are estimated to be
$503,000. The City of Newport Beach did respond to the spill and contained it but
thousands of gallons had already been discharged into the bay. CMSD, like many
agencies, rely on the mutual aid of surrounding agencies to assist in responding. CMSD
has since added more staff and equipment to respond quicker.
Personnel
The Wastewater Division currently has twelve full-time equivalent (FTE) allocated positions for
Fiscal Year 2015-2016 that are funded by Wastewater Enterprise Fund as shown in Table 1. The
Municipal Operations Director and four administrative staff support this division but are not
funded by the Wastewater Fund. In addition, the fund pays an approximate annual cost of
$360,000 to the General Fund for administrative assistance from other departments. Breakdowns
of those costs are identified in the budget on Page 18.
Position Assigned To Number of
employees
Utilities Manager Overall Wastewater Division Operations .5
Utilities Supervisor Pump Station, Maintenance, Construction, and Managing Contracts 1
Utilities Crew Chief
1 FTE assigned 100% to cleaning; 1 FTE assigned 80% to pump
station repair and maintenance with 20% assigned to cleaning and/or
construction as needed; 1 FTE assigned 80% to repairs and
construction of sewer lines with 20% assigned to cleaning
3
Utilities Specialist
Senior
1 FTE assigned 100% to cleaning; 1 FTE assigned 80% to repairs and
construction of sewer lines with 20% assigned to cleaning 2
Utilities Specialist
1 FTE assigned 80% of the time to reviewing CCTV video with the
other 20% assigned to the Vactor, construction, or repairs; 3
remaining FTEs assigned 80% to construction for repairs and/or
construction of sewer lines with the remaining 20% assigned to
cleaning operations
4
M&O Specialist One FTE assigned to SCADA and half a FTE assigned to generator
maintenance 1.5
TOTAL: 12
Table 1: Personnel Assigned to Wastewater Division
The number of personnel funded by the Wastewater Enterprise Fund has decreased by 20 percent
over the last four fiscal years. In Fiscal Year 2011/2012 fifteen City staff members were
Municipal Operations Department
Page 13
assigned to the Wastewater Fund. Due to the economic recession, three positions were defunded
resulting in a total of twelve FTE positions assigned to the Wastewater Services Division as of
Fiscal Year 2015/2016.
Disaster Service Worker
All City employees are designated by both State and City law as Disaster Service
Workers. When the City declares a state of emergency, all City employees serve as disaster
service workers and are expected to immediately report to work once they ensure that their home
and family are safe. All Municipal Operations Department (MOD) Staff, especially field
personnel, are vital to a successful response to a natural or manmade disaster. Personnel
assigned to MOD are expected to respond to floods, high tides, tsunamis, and other disasters as
MOD staff are experienced in handling these situations. Staff are trained to work within the
Incident Command System so that personnel can effectively prioritize disaster related
emergencies and operate within the established chain of command.
Performance Measures
The Wastewater Division operates and maintains the City’s sanitary sewer system in accordance
with federal, state, and local regulations to protect public health to ensure efficient, economical,
and environmentally sound collection and transportation of the City’s wastewater to the Orange
County Sanitation District.
Wastewater performance measures are critical in ensuring that the Wastewater Division is
delivering high quality service for maintaining, cleaning, and repairing the City’s sewer pump
stations and wastewater collection lines. The current Performance Measurements for the
Wastewater Division are listed in the table below.
FY 12/13
Actual
FY 13/14
Actual
FY 14/15
Estimated
FY 15/16
Projected
Pipe Cleaned (miles) 250 234 240 240
Pipe Video Inspected (miles) 23 37 40 40
Wastewater Repairs 50 53 50 50
Wastewater Services Requested 300 435 400 400
Table 2: Performance Measures
In addition to these Performance Measures, the Wastewater Division tracks the number of after -
hour emergency calls they respond to, how much time is spent on emergency calls, and the
nature of the emergency call out. The Wastewater Division has seen an increase in calls for
service afterhours. In Fiscal Year 2013/2014, on-call personnel responded to 63 incidents after
normal business hours. Normal business hours are considered to be 7:00 a.m. to 4:30 p.m.
Monday thru Thursday and 7:00 a.m. to 3:30 p.m. on Friday. In Fiscal Year 2014/2015 the
Municipal Operations Department
Page 14
Wastewater Division on-call personnel responded to 71 after-hour emergency calls, an increase
of 11 percent over the previous fiscal year. When comparing FY 14/15 to FY 11/12, there is a
34 percent increase in after-hour emergency calls. The four year average for these incidents is
64 per year.
Figure 10: After Hours Calls For Service
Overall, staff has averaged 311 hours each year for the last four fiscal years for after-hour
emergency responses for wastewater incidents. A chart depicting the number of hours spent
handling each of these situations is depicted in Figure 11.
Figure 11: Total Hours Spent Responding to Emergency Calls after Hours per Fiscal Year
0
10
20
30
40
50
60
70
80
FY 11/12 FY 12/13 FY 13/14 FY 14/15
55
70 63 71
After Hours Emergency Calls
0
50
100
150
200
250
300
350
400
FY 11/12 FY 12/13 FY 13/14 FY 14/15
276.31
334.16
276.16
358.03
Number of After Duty Hours Per
Fiscal Year Spent on Emergency Calls
Municipal Operations Department
Page 15
Finally, the types of emergency responses that the Wastewater Division responds to 24 hours a
day, 7 days a week, 365 days a year consist of:
CCTV - Lateral Sewer main repair
Generator By-pass Sewer manhole back up
Odor Complaint Sewer manhole repair
Roach Complaints Sewer overflow - cleanout
Sewer - Other Sewer overflow - manhole
Sewer cleanout back up Sewer pipe blockage
Sewer inspections Sewer Pump Station
Sewer lateral repair Wastewater lift station alarm
The statistics for each call type for Fiscal Years 2011/2012 through Fiscal Year 2014/2015 are
shown in Table 3.
Calls for Services by Call Type and Fiscal Year
Call Type FY 11/12 FY 12/13 FY 13/14 FY 14/15
CCTV – Lateral 1 3 - -
Generator By-pass 5 9 5 8
Odor Complaint 2 2 1 4
Roach Complaints - - - -
Sewer - Other 3 8 4 6
Sewer cleanout back up 7 12 22 21
Sewer inspections - 1 - 1
Sewer lateral repair - - - 1
Sewer main repair - - 1 -
Sewer manhole back up 2 - 1 3
Sewer manhole repair - - 3 1
Sewer overflow - cleanout 9 8 4 3
Sewer overflow - manhole 2 1 1 2
Sewer pipe blockage 1 4 4 2
Sewer Pump Station 23 20 13 17
Wastewater lift station alarm - 2 4 2
Totals 55 70 63 71
Table 3: Numbers of Calls for Service by Call Type
Customer Service
The Wastewater Division provides sewer services to approximately 64,465 customers. Staff
responds to calls from residents who have sewer back-ups into their homes, sewer overflows into
Municipal Operations Department
Page 16
the environment, power outages that can cause a sewer pump station to go out of service, and
many other types of calls related to the sewer system as shown in Table 3 above.
When an emergency event occurs during normal business hours, staff are redirected from their
current assignment of cleaning and maintaining sewer lines to respond to incident. Staff
response time on average is within 15-20 minutes. Depending on the situation, they can prevent
a sewer system overflow from reaching the storm drain and entering the ocean and bay.
When an emergency event occurs after normal business hours the wastewater division has staff
on-call and available to respond within 30 minutes to the event. To meet the department policy
directed 30 minute response time, personnel are assigned a City owned vehicle to go straight to
the scene. As noted in the Performance Measurement section, off duty personnel responded to 71
incidents last fiscal year and averaged 5.04 hours of off duty time mitigating emergency events.
The Wastewater Division frequently receives letters, emails, and phone calls from the customers
thanking them for their quick and efficient work in addressing any wastewater issue they might
be experiencing. A few recent examples of the positive feedback the Wastewater division
receives from the public are shown below.
Letter of Commendation 1
Municipal Operations Department
Page 17
Transcription of Phone Message
Letter of Commendation 2
Budget
The Wastewater Division operates from an enterprise fund. An enterprise fund establishes a
separate accounting and financial reporting mechanism from the General Fund for municipal
utility services. Wastewater revenues are collected from the rate payers and used for specifically
for wastewater operations and capital improvements.
Table 4 illustrates the revenue that is received for the services rendered by the Wastewater
Division while Table 5 shows a summary of expenditures. Included in Table 5 is a transfer of
$357,657 to the City’s general fund for administrative assistance from other departments such as
Public Works, Finance, and City Manager’s office. Fiscal Years 2011/2012 through Fiscal Year
2015/2016 have been included in these tables for reference. Please note Fiscal Year 2012/2013
was the first year that some services previously rendered by City employees were contracted out.
Municipal Operations Department
Page 18
Revenue for Wastewater
Wastewater Enterprise
Fund
FY 2011/2012
Adopted
FY 2012/2013
Actual
FY 2013/2014
Actual
FY 2014/2015
Projected
FY 2015/2016
Proposed
Charges for Services $3,171,844 $3,416,719 $3,425,551 $3,023,000 $3,037,000
Interest Income $0 $5,688 $17,559 $14,497 $13,354
Other Revenue $3,000 $6,221 $13,176 $4,947 $4,197
Revenue Total $3,174,844 $3,428,628 $3,456,286 $3,042,444 $3,054,551
Table 4: Budget for Wastewater Enterprise Fund Revenue
Expenditures for Wastewater
Wastewater Enterprise
Fund
FY 2011/2012
Adopted
FY 2012/2013
Adopted
FY 2013/2014
Adopted
FY 2014/2015
Amended
FY 2015/16
Proposed
Salaries and Benefits $1,573,152 $1,566,059 $1,479,875 $1,616,872 $1,532,098
Maintenance and Operations $802,899 $744,251 $684,855 $800,704 $1,146,380
Administrative Transfer to
General Fund $223,084 $223,084 $223,084 $369,424 $357,657
Automotive ISF $321,424 $366,424 $372,940 $372,940 $183,331
Other IS $93,703 $102,805 $52,157 $52,157 $136,148
Capital Outlay $36,000 $60,894 $33,000 $33,000 $33,000
Expenditure Total $3,050,262 $3,063,517 $2,845,911 $3,245,097 $3,388,614
Table 5: Budget for Wastewater Fund Expenses
These two tables demonstrate that expenses are exceeding revenue as of Fiscal Year 2014/2015.
For Fiscal Year 2014/2015, there will be a deficit of $334,063 between the revenue collected for
wastewater services and the expenditures for maintaining, repairing, and improving the
wastewater infrastructure.
As wastewater rates have not increased since 2006, the Municipal Operations Department
retained the consulting services of HF&H Consultants, LLC (“HF&H”) to prepare a wastewater
and recycled water rate study. This study was presented to City Council on June 9, 2015.
Per City Council Policy, the Wastewater Enterprise Fund needs to maintain a reserve balance of
50 percent of the annual expenditure budget. The Fiscal Year 2014/2015 estimated ending
reserves are approximately $1,865,103. While this is currently above the minimum reserve
balance, in order to continue to fund operating and capital improvement costs, reserve funds will
need to be used to balance the expenditure budget should no rate increase occur. This trend will
deplete reserves by 2017 as shown in Figure 12.
Municipal Operations Department
Page 19
Figure 12 : Reserve Balances from Wastewater Rate Study
Under the proposed rate structure by the consultant, a single family home with a 3/4” meter size
and 15 HCF usage would see their monthly rate increase from $8.52 a month to $12.28 a month.
This rate increase is necessary in order to properly maintain the City’s wastewater infrastructure
and to cover annual expenditures for maintaining, cleaning and repairing the City’s pump
stations, sewer mains and laterals. A further discussion on the wastewater rate study can be
found on page 22.
Overview of Current Wastewater Division Contracts
The Wastewater Division utilizes several contractors for implementing programs, managing
services, and maintaining certain aspects of the Cleaning Operations associated with the
wastewater collection system. The contracts that are specific to wastewater are listed in Table 6.
Contract
Number Description Contractor Expires Amount
C-5734
Grease control inspections
services, and Best Management
Practices program (Fat, Oil, and
Grease Program)
Environmental Compliance
Inspection Services (ECIS) 1/31/2019 NTE $318,800
C-4298 Sewer roach control services Golden Bell Products, Inc. 7/30/2015 NTE $25,000
C-5548 CCTV Services Houston & Harris 7/30/2023 NTE $750,000
C-5587 Pacific Sewer Maintenance Sewer Root Control Services 06/30/2015* NTE $150,000
C-6150 Pipe relining service Sancon Engineering 5/26/2018 NTE $200,000
C-5094 Sewer Manhole Lining Service Zebron Corporation Inc. 7/31/2017 NTE $225,000
Total $1,668,800
Table 6: Contracts within the Wastewater Division
*Request for Proposal Complete, New Contract Awaiting Signatures
Municipal Operations Department
Page 20
Additionally, the Wastewater Division participates in several citywide contracts. These include:
Contract
Number
Description Contractor Expires Amount
C6147
On-Call Underground
Utility Repair and
Installation Services
Doty Bros Equipment Co. 4/30/2018 NTE $300,000
C-6418
On-Call Underground
Utility Repair and
Installation Services
GCI Construction Inc. 4/30/2018 NTE $300,000
C-6149
On-Call Underground
Utility Repair and
Installation Services
T.E. Roberts, Inc. 4/30/2018 NTE $300,000
C-6185
City-wide generator
preventative maintenance
and as-needed repairs
Global Power 6/30/2020 NTE $210,686
Total $1,110,686
Table 7: Citywide Contracts that Wastewater Participates in
City versus Contracting Costs
In government contracting, prevailing wage is defined as the hourly wage, usual benefits and
overtime that are paid to the majority of workers, laborers, and mechanics within a particular
area. Prevailing wages are established by regulatory agencies for each trade and occupation
employed in the performance of public work, as well as by State Departments of Labor or their
equivalents. In California, the Director of the Department of Industrial Relations (DIR)
determines the general prevailing rate of per diem wages for the locality in which the work is to
be performed for each craft, classification, or type of workman or mechanic needed to execute
the contract. Section 1770 of the California State Labor Code provides the legal basis by which
prevailing wage is paid for contract work performed for government agencies.
With the passage of Senate Bill 7 - Public Works: Prevailing Wage, all charter cities as of
January 1, 2015 are required to pay prevailing wage per Labor Code Section 1782. Charter cities
must pay prevailing wage on any construction contract that exceeds $25,000 and for maintenance
contracts that exceed $15,000 in order to remain eligible for state funding and any other type of
state financial support for projects including loans and loan guarantees.
Cleaning Operations
The Utilities Manager that oversees the Wastewater Division solicited information from three
companies as to what their costs would be to perform root cutting, rodding, and Vactor services
to maintain the wastewater collection system for the City of Newport Beach. The costs obtained
from these companies was strictly for performing services related to rodding, vacuuming, and
root cutting for the system and were not related to repairs. This cost does not include any
Municipal Operations Department
Page 21
requirements for after hour responses related to sewer system overflows or any other wastewater
related emergency. The prevailing wage costs for the three companies are:
Downstream, $342 per hour
National Plant Services, $300 per hour
Propipe, $250 per hour
In order to determine the annual cost for contracting, the Wastewater Division examined the total
normal work day hours for its employees and found that 3,120 hours a year were dedicated by
crew personnel to rodding, root cutting, and use of the Vactor to maintain the City’s Wastewater
System. This figure for the number of hours combined with the quotes obtained from three
companies is shown in Table 8. A five percent administrative fee for processing invoices,
contract evaluation, and follow up on correcting any issues that may arise with the contractor
was added to the cost estimate for outsourcing Cleaning Operations. This five percent
administrative fee was not included for the City costs listed below as the costs for program
oversight, internal service fees, etc. are already included in the hourly rate.
Contractor
Hourly
Rate
Hours Per
Year
Annual
Cost
Administrative
Fee Total Annual Cost
City Cost $187.30 3,120 $584,379 N/A $584,379
Propipe $250 3,120 $780,000 $39,000 $819,000
National Plan Services $300 3,120 $936,000 $46,800 $982,800
Downstream $342 3,120 $1,067,040 $53,352 $1,120,392
Table 8: Comparison Cost for Wastewater Maintenance & Cleaning Operations
Construction Operations
The City’s Construction Operations Division routinely replaces sewer laterals throughout
Newport Beach. In order to obtain a cost estimate for a contractor to perform the routine
replacement of sewer laterals the Wastewater Division reached out to Doty Bros. Equipment
Company, GCI Construction Inc., and T.E. Roberts Incorporated. Each company was presented
with three scenarios for the replacement of sewer laterals. These projects were actual routine
assignments performed by City Staff in the last several months. Of the three companies
contacted, only GCI Construction Inc. and T.E. Roberts Incorporated responded to the request.
Table 9 reflects the City’s actual costs for these projects as well as the quotes from the two
responsive vendors.
Municipal Operations Department
Page 22
Project
GCI
Estimate
T.E.
Roberts
Estimate City Cost
Santella Terrace - Sewer Clean Out $6,000.00 $4,876.00 $975.06
Surfview Lane - Install City Clean Out and Run a New Lateral $15,000.00 $12,585.00 $6,917.55
Via Lido Soud - Install City Clean Out and Connect to City Main $10,200.00 $5,091.00 $4,236.54
Total Cost for Repairs $31,200.00 $22,552.00 $12,129.15
City Costs $12,129.15 $12,129.15 N/A
Cost Savings to City for City Staff to Perform Services $19,070.85 $10,422.85 N/A
Table 9: Summary of Project Costs
In all three instances listed in Table 9, City personnel were able to perform the repairs and/or
installations at a significantly lower cost than the vendors. The total cost savings to the City
ranged from $10,422.85 to $19,070.85 or an average of $3,474.28 to $6,356.67 per project. Each
project listed took approximately one day to complete.
Last fiscal year, the Construction Operations staff completed 60 projects. Utilizing the average
cost per project, and applying it to 60 projects, the anticipated costs for the City as well as the
contractors to perform the projects are listed in Table 10.
Company
Average Cost
Per Project
Estimated Cost
For a Year
GCI $10,400 $624,000
T.E. Roberts $7,517 $451,020
City Costs $4,043 $242,580
Table 10: Estimated Annual Construction Costs to City for Sewer Line Repairs
Wastewater Rate Study and Rate Comparison to Other Cities
The City’s current sewer customers pay the sum of the following: a fixed monthly sewer use
charge that is based on the size of the connection and a commodity charge based on metered
water use during the monthly period. The wastewater rate should generate sufficient revenue to
fund the City’s wastewater collection system expenses, local capital improvements funded from
cash, and to maintain the Wastewater Reserve Fund at 50% of the adopted fiscal year
expenditure budget per City policy. Table 11 lists the costs of other jurisdictions and/or districts
that provide wastewater services in Orange County who utilize a fixed monthly use charge
coupled with a flow-based commodity charge in order to conduct a fair comparison of costs for
wastewater charges. As a side note, larger agencies tend to have lower rates than smaller
agencies as they are able to take advantage of economies of scale so they are better able to
distribute fixed costs over a larger customer base. Figure 13 shows that the City’s current and
proposed sewer rates are in line with our neighbors.
Municipal Operations Department
Page 23
City Population Monthly Rate As of
Newport Beach - Current 86,874 $8.52 7/1/2011
Newport Beach - Proposed 86,874 $12.28 7/1/2015
Buena Park 82,344 $17.03 Note*
Fullerton 140,131 $6.53 Note*
Seal Beach 24,591 $15.71 7/1/2014
Garden Grove Sanitary District 170,883 $12.61 Until 7/1/2016; capped at $12.61
Costa Mesa Sanitary District 116,700 $7.25 7/1/2014
La Habra 61,717 $7.96 7/1/2013
Huntington Beach 195,999 $10.90 10/20/2010
Irvine Ranch Water District 370,000 $9.02 7/1/2015
Table 11: Sewer Rate Comparison
*Most current rate increase based on rates available on website
One of the considerations for the study was to fund the replacement of the wastewater collection
system in a manner as to prevent a major failure of the system. Over the next 30 years, it is
recommended that the City invest just over $29 million dollars in improving the wastewater
collection system capacity, the condition of the system, and pump station improvements. In
order to fund these projects utilizing cash from rate revenue, the City would need to increase its
traditional formula for cost allocation to capital projects to approximately $1.3 million annually
by Fiscal Year 2019-2020.
Figure 13: Cost Comparison to Other Agencies
Capital Improvement Program
The primary goal of the Capital Improvement Program (CIP) is to provide the City of Newport
Beach with a long-range planning tool for implementing sewer infrastructure improvements in an
Municipal Operations Department
Page 24
orderly manner. Projects within the CIP are prioritized primarily with the health and safety
considerations for the community in mind as well as the protection of the environment by
minimizing sewer system overflows. The City’s Sewer Master Plan that was published in 2010
recommended projects based on the results of a hydraulic analysis and established priorities.
These priorities should be updated annually as CCTV inspections
of the wastewater system are completed. These inspections may
identify severe and/or major defects in the system that may be
addressed in the immediate future which will require the CIP to be
updated.
The Sewer Master Plan mentions the City should be spending
approximately $1 million dollars a year to maintain and replace
items associated with the wastewater certain; currently, a bare
minimum of $500,000 is being spent on these items. Without a
wastewater rate increase, the amount spent per year on CIP
projects will continue at the $500,000 level and may need to
decrease in order for the wastewater fund to remain solvent.
Summary
Due to its close proximity to the bays and ocean, the City of Newport Beach is challenged to
maintain its wastewater collection system in pristine condition in order to prevent sewer system
overflows from reaching these public waterways and contaminating them. Should an incident
occur, personnel from the City must be able to rapidly respond to the emergency, contain the
overflow, and correct the issue before the environment and the community become impacted.
The Municipal Operations Department Wastewater Division performs preventative maintenance
on the City’s pump stations, sewer mains, and laterals. They also replace sewer mains, laterals,
and manhole covers as needed to ensure the City’s wastewater collection system remains in good
condition. The City of Newport Beach is one of a few jurisdictions in California that owns the
sewer laterals. Most sanitary sewer districts and cities will not maintain or replace damaged
sewer laterals as they are owned by the property owner. This level of maintenance ensures that
there is a routine level of preventative maintenance conducted on the sewer laterals so the
occurrence of sewer system issues is minimal.
Additionally, the Wastewater Division responds to emergency incidents that involve power
outages, sewer backups, sewer spills, and numerous other incidents during both normal business
hours and after normal business hours. In Fiscal Year 2014/2015, City staff responded to 71
emergency incidents after hours. Due to the quick actions of City staff, there were no significant
impacts to the environment.
Overall, the current FY 2015/2016 budget for the Wastewater Enterprise Fund is $3,388,614 for
expenditures and $3,054,441 for revenue. This leaves a deficit of $334,063 between revenue that
is expected to be collected and the anticipated costs to maintain and operate the City’s sewer
system. The difference between revenue and expenditures will be covered by the wastewater
Figure 14: Sewer Master Plan
Municipal Operations Department
Page 25
reserve fund; however, without a rate increase in the near future the reserve fund will become
depleted by 2017.
In order to efficiently and effectively provide for the maintenance and repairs to the City’s
existing sewer collection system and pump stations, the Municipal Operations Department uses a
combination of City paid staff and private companies. A review of potential vendors that could
perform services currently accomplished with personnel paid for by the City’s Wastewater Fund
was conducted in July 2015. The survey resulted in the following findings:
1) Without going through a formal request for proposal, no vendor was located to perform
the routine maintenance and repairs associated with pump station maintenance
2) The City will minimally save $234,621 a year by continuing to provide cleaning and
maintenance operations services for the wastewater collection system with City personnel
who are funded by the Wastewater Enterprise Fund (see page 21).
3) The City will minimally save $3,474 per project completed by the Construction
Operations section of the Wastewater Division (see page 22).
Wastewater Services in
Newport Beach
Finance Committee Meeting
August 13, 2015
Goals and Objectives
•Collect and convey wastewater from residents and businesses to the Orange County Sanitation District for treatment
•Repair, maintain, and replace infrastructure
–198 miles of sewer mains
–83 miles of sewer laterals
–25,525 connections
–21 pump stations
•Respond quickly to prevent property damage, spills, ocean/bay contamination and public health issues.
Service Overview
•Four Core Functions
1.Pump Station operations, maintenance and repair
2.Maintenance and cleaning of pipelines
3.Construction operation of mains, laterals and
manholes
4.Emergency response to stoppages, overflows,
power failures and disasters
Staffing
•12 FTE (Full Time Equivalent)
–20% decline in personnel since FY 11/12
–Serve as disaster service workers
•Department Support Staff
–Director and four administrative staff
•Other Department Support Staff
–$360,000 transfer to General Fund - City Manager’s
Office, City Attorney’s Office, Public Works, and
Finance.
Wastewater Budget
Wastewater
Enterprise Fund
FY 11/12
Adopted
FY 12/13
Actual
FY 13/14
Actual
FY 14/15
Projected
FY 15/16
Proposed
Revenue $3,174,844 $3,428,628 $3,456,286 $3,042,444 $3,054,551
Expenditure $3,050,262 $3,063,517 $2,845,911 $3,245,097 $3,388,614
Difference $124,582 $365,111 $610,375 ($202,653) ($334,063)
•Reserve balance is currently $1,865,103
•Rates
–Wastewater Rate Study completed in 2014
–Finance Committee reviewed November, 2014
–City Council study session June, 2015
Current Contracts
•Video inspection of sewer mains and laterals
•Sewer manhole lining
•Sewer pipe relining
•Sewer root control
•Sewer roach control
•FOG program compliance
•Main line repair
•Capital Improvement Projects (CIP)
Prevailing Wage
•As of January 1st, all jurisdictions must pay
prevailing for construction and maintenance
contracts
•Increases the cost to contract services with
private companies
Outsource Opportunities
•Pump station operations/maintenance
•Emergency response
•Sewer main cleaning*
•Lateral repair/replacement*
* Staff requested proposals from Southern California firms that provide these
services. A full RFP process may generate lower proposals.
Proposals - Cleaning Operations
Contractor
Hourly
Rate
Hours Per
Year
Annual
Cost
Admin
Fee
Total Annual
Cost
City of Newport Beach $187.30 3,120 $584,379 N/A $584,379
Propipe $250 3,120 $780,000 $39,000 $819,000
National Plant
Services $300 3,120 $936,000 $46,800 $982,800
Downstream $342 3,120 $1,067,040 $53,352 $1,120,392
Proposals - Lateral Replacement
Company Average Cost
Per Project
Projects
Per Year
Estimated
Cost Per Year
City of Newport Beach $4,043 60 $242,580
T.E. Roberts $7,517 60 $451,020
GCI $10,400 60 $624,000
Outsourcing Options
•Annexation of entire system to another agency
–Sell infrastructure
•Outsource all services to another agency
–Keep infrastructure.
•Outsource additional services to contractors
–Outsource Opportunities
Outsourcing Pros/Cons
Pros
–No Long Term Retirement Costs
–Possibly Less Expensive
–More Efficient – Less Staff/Equipment
–Cost Containment through Contract Negotiations
–Shift Liability to Vendor
–Lower Equipment Costs for Maintenance of System
–Establish Penalties and Fines for Non-Performance
Cons
–Loss of Control of Rate Structure
–Low Price May Mean Low Quality
–Need to Provide Contract Oversight
–Response Times May be Extended Due to Location of Vendor
–Ratepayer Ultimately Responsible
–Loss of Overhead Costs to General
Fund
–Less Control Over Quality of
Service
Possible Recommendations to City
Council
•Keep Division as an in-house function
•Engage Consultant to review Division
•Release an RFP for maintenance functions
•Consider Annexation of entire system
Questions?
CITY OF NEWPORT BEACH
FINANCE COMMITTEE STAFF REPORT
Agenda Item No. 5E August 13, 2015
TO: HONORABLE CHAIRMAN AND MEMBERS OF THE COMMITTEE
FROM: City Manager’s Office & Municipal Operations Department
Carol Jacobs, Interim Assistant City Manager
(949) 644-3313, cjacobs@newportbeachca.gov
Mike Pisani, Municipal Operations Director (949) 644-3059,
mpisani@newportbeachca.gov
SUBJECT: City Council Policy F-9 City Vehicle/Equipment Guidelines
SUMMARY:
City Council Policy F-9 establishes the service life of vehicles and equipment and helps determine funding requirements for their replacement. At the request of City Council and due to a number of
changes in operations, staff requests the Finance Committee to review and comment on the proposed changes.
RECOMMENDED ACTION:
Provide direction to staff on the proposed changes.
DISCUSSION:
Council Policy F-9 City Vehicle/Equipment Replacement Guidelines was established on December 14,
1992. Since that time the policy has been updated three times (1994, 1995 and 2001). The purpose of the policy is twofold: 1) to establish a funding mechanism for the replacement of vehicles and equipment
through the Internal Service Fund and 2) to estimate the useful life of each type of vehicle/equipment taking into consideration safety, cost of maintenance and uniformity among all City departments.
The City has an Equipment Maintenance Internal Service Fund which is utilized to collect “rents” from the
departments in order to pay for annual maintenance as well as equipment replacement of City vehicles and large pieces of equipment. Each year the Municipal Operations Department and Finance
Department work with each department to determine their operational needs. Vehicles and equipment that have reached their useful life based on age of the vehicle, maintenance costs, mileage and fuel
efficiency are scheduled for replacement through the Equipment Maintenance Fund.
The Equipment Maintenance Fund supports 7.5 full-time employees who are responsible for maintaining approximately 340 vehicles and other pieces of equipment managed by the Municipal Operations
Department. The Police Department has a staff of two and a budget of $1,970,313 funded through the
City Council Policy F-9 Vehicle/Equipment Guidelines August 13, 2015
Page 2 General Fund. The proposed policy changes would affect the useful life of police vehicles and equipment as well as all other City vehicles/equipment. There are two components to the fund: 1) the Equipment
Maintenance Premium and 2) the Equipment Replacement Premium. Council Policy F-9 relates to the Equipment Replacement Premium and would not affect the Maintenance Premium.
In Fiscal Year 2015-16, the charges for replacement (considered revenue to the Internal Equipment
Fund) are budgeted at $3,921,991. There are 49 vehicles/pieces of equipment scheduled to be replaced during the year at an estimated cost of $3,488,982. This includes 31 Public Safety vehicles/boats and 18
vehicles from all other departments. Should the Finance Committee and City Council approve the proposed changes, it is estimated that the annual contribution to the replacement fund will decrease by
$1,039,172 as the City will be capturing the replacement cost of the vehicles over an extended life of the vehicles/equipment. At the end of Fiscal Year 2014-15, the reserve in the Equipment Replacement Fund
is estimated to be approximately $7.5 million. Attachment A is the current adopted policy and Attachment B is the proposed policy. The major changes to the policy include:
• Extending the life/mileage of police motorcycles, sedans and wagons, SUV’s, pickup trucks, vans,
heavy trucks, welders, saws, pumps, radios and beacons, and fire engines.
• Added a category for police detective/plain vehicles
• Added ATV’s and SUV’s to the equipment list
• Added personal watercraft to the equipment list
• Eliminated small emergency boats from the proposed policy
• Added Reserve categories for Fire Engines, Fire Trucks and Ambulances
• Eliminated refuse trucks, paint stripers and refuse transfer trailers, as the City no longer operates these programs in-house.
In addition, staff added clarifying language to the policy with regard to frontline and reserve equipment in
the Fire Department. After a fire engine or truck reaches its useful life, the unit is placed in a reserve status for 5-15 years depending on the type of vehicle. This allows the Fire Department to have
additional equipment on hand in case of a major emergency or a vehicle should one be out of service. Each piece of equipment will be evaluated annually to determine the appropriateness of replacing the
vehicle/equipment.
Due to the diligence of the Fleet Maintenance staff many of the vehicles and equipment exceed the useful life and mileage guidelines; however they are mechanically functional with low maintenance costs. The
staff will continue to monitor the vehicles and equipment based on the policy and prudent care of the equipment.
Attachments:
A. Existing City Vehicle/Equipment Replacement Guidelines B. Proposed City Vehicle/Equipment Replacement Guidelines
Prepared and Submitted by:
_/s/Carol Jacobs_______________
Carol Jacobs
Interim Assistant City Manager
ATTACHMENT A
Existing City Vehicle Equipment Replacement Guidelines
F-9
CITY VEHICLE/EQUIPMENT REPLACEMENT GUIDELINES
PURPOSE
To establish the policy to insure that the full service life of each City vehicle or item of
equipment is achieved and that uniform guidelines be implemented among all
departments.
POLICY
It shall be the policy of the City that the replacement of all motor vehicles shall be
normally based on the following schedule:
Police Patrol/Traffic Vehicles
Police Motorcycles
Beach Vehicles
Sedans and Station Wagons
Pickup Trucks (1/4 to 3/4 Ton)
Vans, excluding Paramedic Vans
Paramedic Vans
Heavy Trucks (1 Ton and larger)
Refuse Trucks
Paint Stripers
Beach Cleaners
Street Sweepers
Small Boats
Small Emergency Boats
Large Emergency Boats
Heavy Equipment
Trailers
Refuse Transfer Trailers
Vactors/Sewer Rodders
Welders, Saws, Pumps
Transfer Equip (Radios/Beacons)
Fire Engines
Fire Trucks
75,000 miles or 4 years
60,000 miles or 5 years
4 Years
80,000 miles or 8 years
85,000 miles or 9 years
80,000 miles or 8 years
80,000 miles or 6 years
100,000 miles or 9 years
100,000 miles or 8 years
9 years
8 years
7 years
10 years
12 years
25 years
10 years or 5,000 hours
12 years
6 years
10 years
10 years
8 years
10 years
15 years
F-9
After these milestones are reached, the General Services Department shall inspect the
equipment annually to determine the appropriateness of replacing the vehicles. Factors
to consider include, but are not limited to, maintenance and upkeep costs, fuel
efficiency, etc.
Adopted - December 14, 1992
Amended - January 24,1994
Amended - March 27,1995
Amended - May 8, 2001
Formerly F-26
2
ATTACHMENT B
Attachment B - Proposed City Vehicle Equipment Replacement Guidelines
F-9
CITY VEHICLE/EQUIPMENT REPLACEMENT GUIDELINES
PURPOSE
To establish a policy to ensure that the full service life of each City vehicle or item of equipment is
utilized to its fullest potential, provide for a funding timeline and implement uniform guidelines be
among all departments.
POLICY
It shall be the policy of the City that the funding and replacement of all motor vehicles shall be normally
based on the expected service life of the vehicle described on the following schedule:
Vehicle/Equipment Current Revised
Police Patrol/Traffic Vehicles 75,000 miles or 4 years Current
Police Motorcycles 60,000 miles or 5 years 75,000 miles or 5 years
Police Detective/Plain Vehicles N/A 80,000 miles or 8 years
Beach Vehicles/ATV’s 4 years 4 years
Sedans/Station Wagons/SUV’s 80,000 miles or 8 years 120,000 miles or 12 years
Pickup Trucks (1/4 to 3/4 Ton) 85,000 miles or 9 years 100,000 miles or 10 years
Vans 80,000 miles or 8 years 100,000 miles or 10 years
Ambulances (commercial chassis) 80,000 miles or 6 years 100,000 miles or 8 years
Ambulances – Reserve N/A 4 years
Heavy Trucks (1 Ton and larger) 100,000 miles or 9 years 120,000 miles or 10 years
Refuse Trucks 100,000 miles or 8 years N/A
Paint Stripers 9 years N/A
Beach Cleaners 8 years 8 years
Street Sweepers 7 years 10 years
Small Boats/Personal Watercraft 10 years 10 years
Small Emergency Boats 12 years N/A
Large Emergency Boats 25 years 25 years
Heavy Equipment 10 years or 5,000 hours 10 years or 5,000 hours
Trailers 12 years 10 years
Refuse Transfer Trailers 6 years N/A
Vactors/Sewer Rodders 10 years 10 years
Welders, Saws, Pumps 10 years 13 years
Transfer Equip (Radios/Beacons) 8 years 10 years
Fire Engines – Frontline 10 years 13 years
Fire Trucks – Frontline 15 years 15 years
Fire Engine – Reserve N/A 5-7 years
Fire Truck - Reserve N/A 10-15 years
Fire engines, trucks and ambulances are placed within stations as frontline vehicles when they are
purchased. They will remain in a frontline status until the expected useful life is over. At that time the
engines and trucks will be placed in reserve status for an additional period of time as described above.
The Municipal Operations Department shall inspect the equipment annually to determine the
appropriateness of replacing each piece of equipment in conjunction with the assigned Department. All
non-emergency vehicles shall be replaced based on, but not limited to, the following factors: expected
service life, lifecycle maintenance costs, fuel efficiency, purchase price (cost), environmental rating, etc.
The City will actively seek opportunities to use cleaner burning fuels and higher efficiency vehicles when
possible.
Should the expected life of the equipment be less than expected, the Municipal Operations Department
in conjunction with the Finance Department and the assigned Department will make a recommendation
to the City Manager or his designee on the disposition and replacement of the equipment.
Adopted - December 14, 1992
Amended - January 24, 1994
Amended - March 27, 1995
Amended - May 8, 2001
Formerly F-26