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18-0701_CHANDLER ASSET MANAGEMENT, INC._Professional Services Agreement CITY OF SAN JUAN CAPISTRANO PROFESSIONAL SERVICES AGREEMENT This Agreement is made and entered into as of July 1, 2018 by and between the City of San Juan Capistrano, a municipal corporation organized and operating under the laws of the State of California with its principal place of business at 32400 Paseo Adelanto, San Juan Capistrano, CA 92675 ("City"), and Chandler Asset Management, Inc., a Corporation with its principal place of business at 6225 Lusk Boulevard, San Diego, CA 92121 (hereinafter referred to as "Consultant"). City and Consultant are sometimes individually referred to as "Party" and collectively as "Parties" in this Agreement. "Party" and collectively as "Parties" in this Agreement. RECITALS A. City is a public agency of the State of California and is in need of professional services for the following project: Investment Management Services, (hereinafter referred to as "the Project"). B. Consultant is duly licensed and has the necessary qualifications to provide such services. C. The Parties desire by this Agreement to establish the terms for City to retain Consultant toprovide the services described herein. AGREEMENT NOW,THEREFORE, IT IS AGREED AS FOLLOWS: 1. Services Consultant shall provide the City with the services described in the Scope of Services attached hereto as Exhibit"A." 2. Compensation a. Subject to paragraph 2(b) below, the City shall pay for such services in accordance with the Schedule of Charges set forth in Exhibit "B." b. In no event shall the total amount paid for services rendered by Consultant under this Agreement exceed the sum of$210,000. This amount is to cover all printing and related costs, and the City will not pay any additional fees for printing expenses. Periodic payments shall be made within 30 days of receipt of an invoice which includes a detailed description of the work performed. Payments to Consultant for work performed will be made on a monthly billing basis. 1 3. Additional Work If changes in the work seem merited by Consultant or the City, and informal consultations with the other party indicate that a change is warranted, it shall be processed in the following manner: a letter outlining the changes shall be forwarded to the City by Consultant with a statement of estimated changes in fee or time schedule. An amendment to this Agreement shall be prepared by the City and executed by both Parties before performance of such services, or the City will not be required to pay for the changes in the scope of work. Such amendment shall not render ineffective or invalidate unaffected portions of this Agreement. 4. Maintenance of Records Books, documents, papers, accounting records, and other evidence pertaining to costs incurred shall be maintained by Consultant and made available at all • reasonable times during the contract period and for four (4) years from the date of final payment under the contract for inspection by City. 5. Time of Performance Consultant shall perform its services in a prompt and timely manner and shall commence performance upon receipt of written notice from the City to proceed ("Notice to Proceed"). Consultant shall complete the services required hereunder by June 30, 2023. The Notice to Proceed shall set forth the date of commencement of work. 6. Delays in Performance a. Neither City nor Consultant shall be considered in default of this Agreement for delays in performance caused by circumstances beyond• the reasonable control of the non-performing party. For purposes of this Agreement, such circumstances include but are not limited to, abnormal weather conditions; floods; earthquakes; fire; epidemics; war; riots and other civil disturbances; strikes, lockouts, work slowdowns, and other labor disturbances; sabotage or judicial restraint. b. Should such circumstances occur, the non-performing party shall, within a reasonable time of being prevented from performing, give written notice to the other party describing the circumstances preventing continued performance and the efforts being made to resume performance of this Agreement. 7. Compliance with Law a. Consultant shall comply with all applicable laws, ordinances, codes and regulations of the federal, state and local government, including Cal/OSHA requirements. 2 b. If required, Consultant shall assist the City, as requested, in obtaining and maintaining all permits required of Consultant by federal, state and local regulatory agencies. c. If applicable, Consultant is responsible for all costs of clean up and/ or removal of hazardous and toxic substances spilled as a result of his or her services or operations performed under this Agreement. 8. Standard of Care Consultant's services will be performed in accordance with generally accepted professional practices and principles and in a manner consistent with the level of care and skill ordinarily exercised by members of the profession currently practicing under similar conditions. 9. Assignment and Subconsultant Consultant shall not assign, sublet, or transfer this Agreement or any rights under or interest in this Agreement without the written consent of the City, which may be withheld for any reason. Any attempt to so assign or so transfer without such consent shall be void and without legal effect and shall constitute grounds for termination. Subcontracts, if any, shall contain a provision making them subject to all provisions stipulated in this Agreement. Nothing contained herein shall prevent Consultant from employing independent associates, and subconsultants as Consultant may deem appropriate to assist in the performance of services hereunder. 10. Independent Consultant Consultant is retained as an independent contractor and is not an employee of City. No employee or agent of Consultant shall become an employee of City. The work to be performed shall be in accordance with the work described in this Agreement, subject to such directions and amendments from City as herein provided. 11. Insurance Consultant shall not commence work for the City until it has provided evidence satisfactory to the Cityit has secured all insurance required under this section. In addition, Consultant shall not allow any subcontractor to commence work on any subcontract until it has secured all insurance required under this section. a. Commercial General Liability (i) The Consultant shall take out and maintain, during the performance of all work under this Agreement, in amounts not less than specified herein, Commercial General Liability Insurance, in a form and with insurance companies acceptable to the City. 3 (ii) Coverage for Commercial General Liability insurance shall be at least as broad as the following: (1) Insurance Services Office Commercial General Liability coverage (Occurrence Form CG 00 01) or exact equivalent. (iii) Commercial General Liability Insurance must include coverage for the following: (1) Bodily Injury and Property Damage (2) Personal Injury/Advertising Injury (3) Premises/Operations Liability (4) Products/Completed Operations Liability , (5) Aggregate Limits that Apply per Project (6) Explosion, Collapse and Underground (UCX) exclusion deleted (7) Contractual Liability with respect to this Contract (8) Broad Form Property Damage (9) Independent Consultants Coverage (iv) The policy shall contain no endorsements or provisions limiting coverage for (1) contractual liability; (2) cross liability exclusion for claims or suits by one insured against another; (3) products/completed operations liability; or (4) contain any other exclusion contrary to the Agreement. (v) The policy shall give City, its officials, officers, employees, agents and City designated volunteers additional insured status using ISO endorsement forms CG 20 10 10 01 and 20 37 10 01, or endorsements providing the exact same coverage. (vi) The general liability program may utilize either deductibles or provide coverage excess of a self-insured retention, subject to written approval by the City, and provided that such deductibles shall not apply to the City as an additional insured. b. Automobile Liability (i) At all times during the performance of the work under this Agreement, the Consultant shall maintain Automobile Liability Insurance for bodily injury and property damage including coverage for owned, non-owned and hired vehicles, in a form and with insurance companies acceptable to the City. (ii) Coverage for automobile liability insurance shall be at least as broad as Insurance Services Office Form Number CA 00 01 covering automobile liability (Coverage Symbol 1, any auto). (iii) The policy shall give City, its officials, officers, employees, agents and City designated volunteers additional insured status. 4 (iv) Subject to written approval by the City, the automobile liability program may utilize deductibles, provided that such deductibles shall not apply to the City as an additional insured, but not a self-insured retention. c. Workers'Compensation/Employer's Liability (i) Consultant certifies that he/she is aware of the provisions of Section 3700 of the California Labor Code which requires every employer to be insured against liability for workers' compensation or to undertake self-insurance in accordance with the provisions of that code, and he/she will comply with such provisions before commencing work under this Agreement. (ii) To the extent Consultant has employees at any time during the term of this Agreement, at all times during the performance of the work under this Agreement, the Consultant shall maintain full compensation insurance for all persons employed directly by him/her to carry out the work contemplated under this Agreement, all in accordance with the "Workers' Compensation and Insurance Act," Division IV of the Labor Code of the State of California and any acts amendatory thereof, and Employer's Liability Coverage in amounts indicated herein. Consultant shall require all subconsultants to obtain and maintain, for the period required by this Agreement, workers' compensation coverage of the same type and limits as specified in this section. d. Professional Liability (Errors and Omissions) At all times during the performance of the work under this Agreement the Consultant shall maintain professional liability or Errors and Omissions insurance appropriate to its profession, in a form and with insurance companies acceptable to the City and in an amount indicated herein. This insurance shall be endorsed to include contractual liability applicable to this Agreement and shall be written on a policy form coverage specifically designed to protect against acts, errors or omissions of the Consultant. "Covered Professional Services" as designated in the policy must specifically include work performed under this Agreement. The policy must "pay on behalf of the insured and must include a provision establishing the insurer's duty to defend. e. Minimum Policy Limits Required (i) The following insurance limits are required for the Agreement: Combined Single Limit Commercial General Liability $1,000,000 per occurrence/ $2,000,000 aggregate for bodily injury, personal injury, and property damage 5 Automobile Liability $1,000,000 per occurrence for bodily injury and property damage Employer's Liability $1,000,000 per occurrence Professional Liability $1,000,000 per claim and aggregate (errors and omissions) (ii) Defense costs shall be payable in addition to the limits. (iii) Requirements of specific coverage or limits contained in this section are not intended as a limitation on coverage, limits, or other requirement, or a waiver of any coverage normally provided by any insurance. Any available coverage shall be provided to the parties required to be named as Additional Insured pursuant to this Agreement. f. Evidence Required. Prior to execution of the Agreement, the Consultant shall file with the City evidence of insurance from an insurer or insurers certifying to the coverage of all insurance required herein. Such evidence shall include original copies of the ISO CG 00 01 (or insurer's equivalent) signed by the insurer's representative and Certificate of Insurance (Acord Form 25- S or equivalent), together with required endorsements. All evidence of insurance shall be signed by a properly authorized officer, agent, or qualified representative of the insurer and shall certify the names of the insured, any additional insureds, where appropriate, the type and amount of the insurance, the location and operations to which the insurance applies, and the expiration date of such insurance. g. Policy Provisions Required (i) Consultant shall provide the City. at least thirty (30) days prior written notice of cancellation of any policy required by this Agreement, except that the Consultant shall provide at least ten (10) days prior written notice of cancellation of any such policy due to non-payment of premium. If any of the required coverage is cancelled or expires during the term of this Agreement, the Consultant shall deliver renewal certificate(s) including the. General Liability Additional Insured Endorsement to the City at least ten (10) days prior to the effective date of cancellation or expiration. (ii) The Commercial General Liability Policy and Automobile Policy shall each contain a provision stating that Consultant's policy is primary insurance and that any insurance, self-insurance or other coverage maintained by the City or any named insureds shall not be called upon to contribute to any loss. (iii) The retroactive date (if any) of each policy is to be no later than the effective date of this Agreement. Consultant shall maintain such 6 coverage continuously for a period of at least three years after the completion of .the work under this Agreement. Consultant shall purchase a one (1) year extended reporting period A) if the retroactive date is advanced past the effective date of this Agreement; B) if the policy is cancelled or not renewed; or C) if the policy is replaced by another claims-made policy with a retroactive date subsequent to the effective date of this Agreement. (iv) All required insurance coverages, except for the professional liability coverage, shall contain or be endorsed to waiver of subrogation in favor of the City, its officials, officers, employees, agents, and volunteers or shall specifically allow Consultant or others providing insurance evidence in compliance with these specifications to waive their right of recovery prior to a loss. Consultant hereby waives its own right of recovery against City, and shall require similar written express waivers and insurance clauses from each of its subconsultants. (v) The limits set forth herein shall apply separately to each insured against whom claims are made or suits are brought, except with respect to the limits of liability. Further the limits set forth herein shall not be construed to relieve the Consultant from liability in excess of such coverage, nor shall it limit the Consultant's indemnification obligations to the City and shall not preclude the City from taking such other actions available to the City under other provisions of the Agreement or law. h. Qualifying Insurers (i) All policies required shall be issued by acceptable insurance companies, as determined by the City, which satisfy the following minimum requirements: (1) Each such policy shall be from a company or companies with a current A.M. Best's rating of no less than A:VII and admitted to transact in the business of insurance in the State of California, or otherwise allowed to place insurance through surplus line brokers under applicable provisions of the California Insurance Code or any federal law. is Additional Insurance Provisions (i) The foregoing requirementsas to the types and limits of. insurance coverage to be maintained by Consultant, and any approval of said insurance by the City, is not intended to and shall not in any manner limit or qualify the liabilities and obligations otherwise assumed by the Consultant pursuant to this Agreement, including but not limited to, the provisions concerning indemnification. (ii) If at any time during the life of the Agreement, any policy of insurance required under this Agreement does not comply with these specifications or is canceled and not replaced, City has the right but not the duty to 7 obtain the insurance it deems necessary and any premium paid by City will be promptly reimbursed by Consultant or City will withhold amounts sufficient to pay premium from Consultant payments. In the alternative, City may cancel this Agreement. (iii) The City may require the Consultant to provide complete copies of all insurance policies in effect for the duration of the Project. (iv) Neither the City nor any of its officials, officers, employees, agents or volunteers shall be personally responsible for any liability arising under or by virtue of this Agreement. j. Subconsultant Insurance Requirements Consultant shall not allow any subcontractors or subconsultants to commence work on any subcontract until they have provided evidence satisfactory to the City that they have secured all insurance required under this section. Policies of commercial general liability insurance provided by such subcontractors or subconsultants shall be endorsed to name the City as an additional insured using ISO form CG 20 38 04 13 or an endorsement providing the exact same coverage. If requested by Consultant, City may approve different scopes or minimum limits of insurance for particular subcontractors or subconsultants. 12. Indemnification a. To the fullest extent permitted by law, Consultant shall defend (with counsel reasonably approved by the City), indemnify and hold the City, its officials, officers, employees, agents and volunteers free and harmless from any and all claims, demands, causes of action, suits, actions, proceedings, costs, expenses, liability, judgments, awards, decrees, settlements, loss, damage or injury of any kind, in law or equity, to property or persons, including wrongful death, (collectively, "Claims') in any manner arising out of, pertaining to, or incident to any alleged acts, errors or omissions, or willful misconduct of Consultant, its officials, • officers, employees, subcontractors, consultants or agents in connection with the performance of the Consultant's services, the Project or this Agreement, including without limitation the payment of all consequential damages, expert witness fees and attorneys' fees and other related costs and expenses. Notwithstanding the foregoing, to the extent Consultant's services are subject to Civil Code Section 2782.8, the above indemnity shall be limited, to the extent required by Civil Code Section 2782.8, to Claims that arise out of, pertain to, or relate to the negligence, recklessness, or willful misconduct of the Consultant. Consultant's obligation to indemnify shall not be restricted to insurance proceeds, if any, received by the City, its officials, officers, employees, agents or volunteers . 8 b. Additional Indemnity Obligations. Consultant shall defend, with counsel of City's choosing and at Consultant's own cost, expense and risk, any and all Claims covered by this section that may be brought or instituted against the City, its officials, officers, employees, agents or volunteers. Consultant shall pay and satisfy any judgment, award or decree that may be rendered against the City, its officials, officers, employees, agents or volunteers as part of any such claim, suit, action or other proceeding. Consultant shall also reimburse City for the cost of any settlement paid by the City, its officials, officers, employees, agents or volunteers as part of any such claim, suit, action or other proceeding. Such reimbursement shall include payment for the City's attorney's fees and costs, including expert witness fees. Consultant shall reimburse the City, its officials, officers, employees, agents and volunteers, for any and all legal expenses and costs incurred by each of them in connection therewith or in enforcing the indemnity herein provided. Consultant's obligation to indemnify shall not be restricted to insurance proceeds, if any, received by the City, its officials, officers, employees, agents and volunteers. 13. California Labor Code Requirements a. Consultant is aware of the requirements of California Labor Code Sections 1720 et seq. and 1770 et seq., which require the payment of prevailing wage rates and the performance of other requirements on certain "public works" and "maintenance" projects. If the services are being performed as part of an applicable "public works" or "maintenance" project, as defined by the Prevailing Wage Laws, and if the total compensation is $1,000 or more, Consultant agrees to fully comply with such Prevailing Wage Laws, if applicable. Consultant shall defend, indemnify and hold the City, its elected officials, officers, employees and agents free and harmless from any claims, liabilities, costs, penalties or interest arising out of any failure or alleged failure to comply with the Prevailing Wage Laws. It shall be mandatory upon the. Consultant and all subconsultants to comply with all California Labor Code provisions, which include but are not limited to prevailing wages, employment of apprentices, hours of labor and debarment of contractors and subcontractors. b. If the Services are being performed as part of an applicable "public works" or"maintenance" project, then pursuant to Labor Code Sections 1725.5 and 1771.1, the Consultant and all subconsultants performing such Services must be registered with the Department of Industrial Relations. Consultant shall maintain registration for the duration of the Project and require the same of any subconsultants, as applicable. This Project may also be subject to compliance monitoring and enforcement by the Department of Industrial Relations. It shall be Consultant's sole responsibility to comply with all applicable registration and labor compliance requirements. 14. Verification of Employment Eligibility By executing this Agreement, Consultant verifies that it fully complies with all requirements and restrictions of state and federal law respecting the • 9 employment of undocumented aliens, including, but not limited to, the Immigration Reform and Control Act of 1986, as may be amended from time to time, and shall require all subconsultants and sub- subconsultants to comply with the same. 15. Laws and Venue This Agreement shall be interpreted in accordance with the laws of the State of California. If any action is brought to interpret or enforce any term of this Agreement, the action shall be brought in a state or federal court situated in the County of Orange, State of California. 16. Termination or Abandonment a. City has the right to terminate or abandon any portion or all of the work under this Agreement by giving ten (10) calendar days written notice to Consultant. In such event, City shall be immediately given title and possession to all original field notes, drawings and specifications, written reports and other documents produced or developed for that portion of the work completed and/or being abandoned. City shall pay Consultant the reasonable value of services rendered for any portion of the work completed prior to termination. If said termination occurs prior to completion of any task for the Project for which a payment request has not been received, the charge for services performed during such task shall be the reasonable value of such services, based on an amount mutually agreed to by City and Consultant of the portion of such task completed but not paid prior to said termination. City shall not, be liable for any costs other than the charges or portions thereof which are specified herein. Consultant shall not be entitled to payment for unperformed services, and shall not be entitled to damages or compensation for termination of work. b. Consultant may terminate its obligation to provide further services under this Agreement upon thirty (30) calendar days' written notice to City only in the event of substantial failure by City to perform in accordance with the terms of this Agreement through no fault of Consultant., c. Documents. Except as otherwise provided in "Termination or Abandonment," above, all original field notes, written reports, Drawings and Specifications and other documents, produced or developed for the Project shall, upon payment in full for the services described in this Agreement, be furnished to and become the property of the City. 19. Organization Consultant shall assign as Project Manager, Nicole Dragoo. The Project Manager shall not be removed from the Project or reassigned without the prior written • consent of the City. 10 20. Limitation of Agreement This Agreement is limited to and includes only the work included in the Project described above. 21. Notice Any notice or instrument required to be given or delivered by this Agreement may be given or delivered by depositing the same in any United States Post Office, certified mail, return receipt requested, postage prepaid, addressed to: CITY: CONSULTANT: City of San Juan Capistrano Chandler Asset Management, Inc. 32400 Paseo Adelanto 6225 Lusk Boulevard San Juan Capistrano, CA 92675 San Diego, CA 92121 Attn: Ken Al-Imam Attn: Nicole Dragoo and shall be effective upon receipt thereof. 22. Third Party Rights Nothing in this Agreement shall be construed to give any rights or benefits to anyone other than the City and the Consultant. 23. Equal Opportunity Employment • Consultant represents that it is an equal opportunity employer and that it shall not discriminate against any employee or applicant for employment because of race, religion, color, national origin, ancestry, sex, age or other interests protected by the State or Federal Constitutions. Such non-discrimination shall include, but not be limited to, all activities related to initial employment, upgrading, demotion, transfer, recruitment or recruitment advertising, layoff or termination. 24. Entire Agreement This Agreement, with its exhibits, represents the entire understanding of City and Consultant as to those matters contained herein, and supersedes and cancels any prior or contemporaneous oral or written understanding, promises or representations with respect to those matters covered hereunder. Each party acknowledges that no representations, inducements, promises or agreements have been made by any person which are not incorporated herein, and that any other agreements shall be void. This Agreement may not be modified or altered except in writing signed by both Parties hereto. This is an integrated Agreement. 11 25. Severability The unenforceability, invalidity or illegality of any provision(s) of this Agreement shall not render the provisions unenforceable, invalid or illegal. 26. Successors and Assigns This Agreement shall be binding upon and shall inure to the benefit of the successors in interest, executors, administrators and assigns of each party to this Agreement. However, Consultant shall not assign or transfer by operation of law or otherwise any or all of its rights, burdens, duties or obligations without the prior written consent of City. Any attempted assignment without such consent shall be invalid and void. 27. Non-Waiver None of the provisions of this Agreement shall be considered waived by either party, unless such waiver is specifically specified in writing. 28. Time of Essence Time is of the essence for each and every provision of this Agreement. 29. City's Right to Employ Other Consultants City reserves its right to employ other consultants, including engineers, in connection with this Project or other projects. 30. Prohibited Interests Consultant maintains and warrants that it has not employed nor retained any company or person, other than a bona fide employee working solely for Consultant, to solicit or secure this Agreement. Further, Consultant warrants that it has not paid nor has it agreed to pay any company or person, other than a bona fide employee working solely for Consultant, any fee, commission, percentage, brokerage fee, gift or other consideration contingent upon or resulting from the award or making of this Agreement. For breach or violation of this warranty, City shall have the right to rescind this Agreement without liability. For the term of this Agreement, no director, official, officer or employee of City, during the term of his or her service with City, shall have any direct interest in this Agreement, or obtain any present or anticipated material benefit arising therefrom. [SIGNATURES ON FOLLOWING PAGE] 12 SIGNATURE PAGE FOR PROFESSIONAL SERVICES AGREEMENT BETWEEN THE CITY OF SAN JUAN CAPISTRANO AND CHANDLER ASSET MANAGEMENT, INC. IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first written above. CITY OF SAN JUAN CAPISTRANO CHANDLER ASSET MANAGEMENT,INC. By: By: At--- c enja Sieg City Manager Its: Printed Name: ATTEST: By: for Mari M rri ity Clerk APPROVED AS TO FORM: By .:/1 ' 72) ffrallin r, Cittorney 13 SIGNATURE PAGE FOR PROFESSIONAL SERVICES AGREEMENT BETWEEN THE CITY OF SAN JUAN CAPISTRANO AND CHANDLER ASSET MANAGEMENT,INC. IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first written above. CITY OF SAN JUAN CAPISTRANO CHANDLER ASSET MANAGEMENT,INC. By: By: Benjamin Siegel, City Manager Its: COO/(960 Printed Name: 110_)91-e---bte/2300 ATTEST: By: Maria Morris, City Clerk APPROVED AS TO FORM: By: Jeffrey Ballinger, City Attorney 13 • EXHIBIT A Scope of Services Specific responsibilities of the investment manager will include, but not be limited to the following: A. Manage on a daily basis the City's separate investment portfolios pursuant to the specific, stated investment objectives. Place all orders for the purchase and sale of securities, communicate settlement information to City's staff and coordinate security settlement. Currently, pre-trade approval by authorized City personnel is required before executing any trades. For each trade, justification must be provided as to the reason for the trade. When proposed sales of securities will create an estimated realized loss in excess of$10,000, such amounts shall be so communicated at the time that the proposed sale is communicated. B. Serve as a general resource to City's staff for information, advice and training regarding fixed-income investments. C. Work with City staff to understand cash flow projections to ensure that 'the investment strategy is consistent with the City's liquidity requirements. D. Provide monthly statements with all the information indicated for investment reporting by the California Government Code and GASB pronouncements. A separate monthly financial report must be provided for the City portfolio and the Housing Authority portfolio. Each such monthly report must include both the securities management by the firm, as well as those managed directly by City staff. These reports must include the following: 1. Summary of Portfolio Holdings. A summary and a detailed listing of all securities held at the end of the month categorized by type of security, maturity and institution, including those investments managed directly by the City. 2. Investment Performance Report. For the portion of the portfolio managed by the investment manager, provide the following monthly and fiscal year- to-date data: yield (amount and rate), amount of realized gains/losses, amount of unrealized gains/losses, and total return (amount and rate). The report must also provide accrued interest as of month end. 3. Maturity/Duration Indicators. The monthly report should include portfolio duration and average maturity statistics to help monitor interest-rate risk. 4. Transaction Summary. A summary of completed transactions for the month. 5. Mark-to-Market Report. The monthly report should show the cost and market value for each security in the portfolio. 14 E. The selected investment manager must maintain accurate records on behalf of the City that allow the investment manager to monitor an appropriate diversification of investments and compliance with applicable investment policies of the City of San Juan Capistrano and State of California statutes. The monthly reports are required to be completed no later than the 15th of the following month in order to meet the timeline needed for presentation to the City Council at their next available meeting. F. Upon request (but not more than once a year), provide a portfolio status report to the City Council including a description of market conditions, investment strategies employed, portfolio performance, and suggested changes to investment strategy. The performance numbers shall be presented as required by the CFA Institute's GIPS. Typically such reported has not been required on a regular annual basis, but may be requested from time to time, as needed. G. The investment advisors WILL NOT provide custodial services or security safekeeping. H. Include in the monthly reports of investments a reconciliation of the investment report ending cost balance to the independent custodian statement ending cost balance and provide an explanation of any differences. This should be explicitly addressed in the proposal. Annually review and provide recommendations regarding the City's investment policy. J. Additional terms specific to investment management relationship (non- discretionary): 1. Client Representative. In its capacity as investment manager, Chandler shall receive all instructions, directions and other communications on Client's behalf respecting Client's account from Ken Al-Imam (Representative). Chandler is hereby authorized to rely and act upon all such instructions, directions and communications from such Representative or any agent of such Representative. 2. Investment Policy. In investing and reinvesting Client's assets, Chandler shall comply with Client's Investment Policy, which is attached hereto as Attachment 1. 3. Authority of Chandler. Chandler is hereby granted authority to invest and reinvest all assets under its management in securities permitted by the Investment Policy, subject to the prior approval of Representative. Such approval may be granted orally, by facsimile, or by email. 4. Notices. All reports and other communications required hereunder to be in writing shall bedelivered in person, or sent by first-class mail postage prepaid, by overnight courier, by confirmed facsimile with original to follow or by confirmed electronic mail with proof of receipt to the addresses set 15 forth below. Either party to this Agreement may, by written notice given at any time, designate a different address for the receipt of reports and other communications due hereunder. Chandler Asset Management Client Representative Attn: Nicole Dragoo City of San Juan Capistrano 6225 Lusk Boulevard Attn: Ken Al-Imam San Diego, CA 92121 32400 Paseo Adelanto San Juan Capistrano, CA 92675 5. Electronic Delivery. From time to time, Chandler may be required to deliver certain documents to Client such as account information, notices and required disclosures. Client hereby consents to Chandler's use of electronic means, such as email, to make such delivery. This delivery may include notification of the availability of such document(s) on a website, and Client agrees that such notification will constitute "delivery". Client further agrees to provide Chandler with Client's email address(s) and to keep this information current at all times by promptly notifying Chandler of any change in email address(s). Client email addresses: kalimamna,sanivancapistrano.org; mbannigan(a sanivancapistrano.org; mdaggettshort(a.sanivancapistrano.orq 6. Proxy Voting. Chandler will vote proxies on behalf of Client unless otherwise 'instructed. Chandler has adopted and implemented written policies and procedures and will provide Client with a description of the proxy voting procedures upon request. Chandler will provide information regarding how Clients' proxies were voted upon request. To request proxy policies or other information, please contact us by mail at the address provided, by calling 800-317-4747 or by emailing your request to infoachandlerasset.com. 7. Custody of Securities and Funds. Chandler shall not have custody or possession of the funds or securities that Client has placed under its management. Client shall appoint a custodian to take and have possession of its assets. Client recognizes the importance of comparing statements received from the appointed custodian to statements received from Chandler. Client recognizes that the fees expressed above do not include fees Client will incur for custodial services. 8. Valuation. Chandler will value securities held in portfolios managed by Chandler no less than monthly. Securities or investments in the portfolio will be valued in a manner determined in good faith by Chandler to reflect fair market value. 9. Investment Advice. Client recognizes that the opinions, recommendations and actions of Chandler will be based on information deemed by it to be reliable, but not guaranteed to or by it. Provided that Chandler acts in 16 good faith, Client agrees that Chandler will not in any way be liable for any error in judgment or for any act or omission, except as may otherwise be provided for under the Federal Securities laws or other applicable laws. 10. Payment of Commissions. Chandler may place buy and sell orders with or through such brokers or dealers as it may select. It is the policy and practice of Chandler to strive for the best price and execution and for commission and discounts which are competitive in relation to the value of the transaction and which comply with Section 28(e) of the Securities and Exchange Act. Nevertheless, it is understood that Chandler may pay a commission on transactions in excess of the amount another broker or dealer may charge, and that Chandler makes no warranty or representation regarding commissions paid on transactions hereunder. 11. Other Clients. It is further understood that Chandler may be acting in a similar capacity for other institutional and individual clients, and that investments and reinvestments for Client's portfolio may differ from those made or recommended with respect to other accounts andclients even though the investment objectives may be the same or similar. Accordingly, it is agreed that Chandler will have no obligation to purchase or sell for Client's account any securities which it may purchase or sell for other clients. 12. Confidential Relationship. The terms and conditions of this Agreement, and all information and advice furnished by either party to the other shall be treated as confidential and shall not be disclosed to third parties except (i) as required by law, rule, or regulation, (ii) as requested by a regulatory authority, (iii) for disclosures by either party of information that has become public by means other than wrongful conduct by such party or its officers, employees, or other personnel, (iv) for disclosures by either party to its legal counsel, accountants, or other professional advisers, (v) as necessary for Chandler to carry out its responsibilities hereunder, or (vi) as otherwise expressly agreed by the parties. 13. Receipt of Brochure and Privacy Policy. Client hereby acknowledges receipt of the disclosure statement or "brochure" and "brochure supplement" also known as Part 2A and Part 2B of Form ADV, required to be delivered pursuant to Rule 204 3 of the Investment Advisers Act of 1940 (Brochure). Client further acknowledges receipt of Chandler's Privacy Policy, as required by Regulation S-P. • 17 Attachment 1 CITY OF SAN JUAN CAPISTRANO INVESTMENT POLICY FIRST ADOPTED: APRIL 4, 1995 LAST REVIEW AND AMENDMENT: JUNE 21, 2016 CURRENT REVIEW AND AMENDMENT: JUNE 20, 2017 I. POLICY STATEMENT It is the policy of the City of San Juan Capistrano (City) to invest public funds in a manner which will provide security of principal invested, meet the daily cash flow needs of the City, seek to achieve a market rate of return throughout budgetary and economic cycles, and conform to the California Government Code sections governing the investment of public funds. II. SCOPE This Investment Policy applies to all financial assets and funds held by the City of San Juan Capistrano with the exception of deferred compensation assets (pension and other post-employment benefits) held in a trust and funds held by bond trustee that are controlled by the legal requirements of a debt indenture. For purposes of this policy, the "City of San Juan Capistrano" includes all funds of the City, the funds of the Successor Agency to the Community Redevelopment Agency of the City of San Juan Capistrano, the funds of the San Juan Capistrano Housing Authority, and the funds of any component unit that may be established by the City. III. OBJECTIVES The primary objectives, in priority order, of the City of San Juan Capistrano's investment activities shall be: A. SAFETY OF PRINCIPAL - Safety of principal is the foremost objective of the City. Investments of the City shall be undertaken in a manner that seeks to insure the preservation of capital in the portfolio. One of the methods to obtain this goal is diversification which is required in the portfolio's composition. B. LIQUIDITY - The City's investment portfolio will remain sufficiently liquid to enable it to meet all operating requirements which might be reasonably anticipated. "Liquidity" refers to the ability to sell at any given moment with a minimal chance of losing some portion of principal or interest. C. RETURN - The City's investment portfolio shall be designed with the objective of attaining a market average rate of return throughout budgetary and economic cycles, taking into account the City's risk constraints and cash flow needs. The City shall not engage in any activity that is designed to raise funds specifically for the purpose of investing (i.e., borrowing funds to invest, or leveraging). The City is not 18 restricted from investing proceeds from a bonafide debt issuance in accordance with this investment policy until such time as funds are needed for the purpose intended. IV. DELEGATION OF AUTHORITY A. The authority of the City Council to invest or reinvest funds of the City is delegated to the Chief Financial Officer (hereafter referred to as "City Treasurer"), who shall thereafter assume full responsibility for those transactions until the delegation of authority is revoked or expires. Subject to review, the City Council may renew the delegation of authority each year. B. The City may delegate investment authority to an investment advisor. The advisor will follow the Investment Policy and such other written instructions as are provided. C. The City Treasurer shall designate a staff person as a liaison/deputy in the event circumstances require timely action and the City Treasurer is not present. D. No officer or designee may engage in an investment transaction except as provided under terms of this Investment Policy and the procedures established by the City Treasurer and approved by the City Manager. E. The City Treasurer shall be responsible for all transactions undertaken and shall establish a•system of controls to regulate the activities of subordinate officials. F. The City Treasurer and other personnel involved in the investment process shall refrain from personal business activities that could conflict with proper execution of the investment program, or which could impair their ability to make impartial investment decisions. V. PRUDENCE A. The standard of prudence to be used in the investment function shall be the "prudent investor" standard and shall be applied in the context of managing.the overall portfolio. This standard states, "When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a trustee shall act with care, skill, prudence, and diligence under the circumstances then prevailing, including, but not limited to, the general economic conditions and the anticipated needs of the agency, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the agency." B. The City Treasurer, acting in accordance with written procedures and this Investment Policy, shall not be held personally accountable for a specific security's credit risk or market price change, provided that any unexpected deviations are reported in a timely manner and that appropriate action is taken to control adverse development. 19 C. The City may invest debt issuance proceeds to match or meet the anticipated timing of the expenditures. The City may not incur debt with the specific and sole purpose of arbitrage investment. VI. INTERNAL CONTROLS/INVESTMENT PROCEDURES A. The City Treasurer shall establish a system of written internal controls which will be reviewed annually with the independent auditor. The controls shall be designed to prevent loss of public funds due to fraud, employee error, misrepresentation by third parties, unanticipated market changes or imprudent actions by employees of the City of San Juan Capistrano. B. The City Treasurer shall develop and maintain investment procedures for the operation of the investment program which are consistent with this Investment Policy. Procedures will include reference to safekeeping/custody, wire transfer agreements, collateral and deposit agreements, and other investment related activities. VII. AUTHORIZED INVESTMENTS Where this Policy specifies a percentage limitation for a particular security. type or issuer, that percentage is applicable at the time the security is purchased. Diversification criteria listed in Section VIII and credit criteria listed in this section refers to the credit rating at the time the security is purchased. If an investment's credit rating falls below the minimum rating required at the time of purchase, the City's investment advisor (if any) and Treasurer will review the rating agency action may at his or her option sell the affected investment, but is not required to do so. The Treasurer has the same option with respect to the Diversification criteria listed in Section VIII. Investments that complied with Investment type and per issuer limitations at the time of purchase do not become noncompliant if at a later date the percentage of the portfolio applicable to that investment changes as a result of a change in the size of the portfolio. A. Obligations of the United States Government, its agencies and instrumentalities and government sponsored enterprises. B. Non-negotiable deposits in a state or national bank, savings association or federal association, federal or state credit union in the State of California. In accordance with California Government Code Section 53635.2, to be eligible to receive City deposits, a financial institution shall have received an overall rating of not less than "satisfactory" in its most recent evaluation by the appropriate federal financial supervisory agency of its record of meeting the credit needs of California's communities. Certificates of deposit are required to be collateralized as 'specified under Government Code Section 53630 et seq. The City, at its discretion, may waive the collateralization requirements for any portion that is covered by Federal Deposit Insurance Corporation (FDIC) insurance. The City shall have a signed agreement with any depository accepting City funds per Government Code Section 53649. No deposits shall be made at any time in certificates of deposit issued by a state or federal credit union if a member of the City Council or the Chief Financial Officer serves on the board of directors or any 20 committee appointed by the board of directors of the credit union. In accordance with Government Code Section 53638, any deposit shall not exceed that total shareholder's equity of any depository bank, nor shall the deposit exceed the total net worth of any institution. C. Negotiable certificates of deposit issued by 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- or state- licensed branch of a foreign bank. Negotiable certificates of deposit with maturities in excess of one year must be rated in a rating category of "A" or its equivalent or better by at least two (NRSROs). Negotiable certificates of deposit with maturities under one year must be rated in a rating category of "A-1" its equivalent or better by at least two nationally recognized statistical-rating organizations (NRSRO). No more than 30% of the City's investment portfolio may be invested in negotiable certificates of deposit. D. Shares of beneficial interest issued by diversified management companies that are money market funds registered with the Securities and Exchange Commission under the Investment Company Act of 1940 (15 U.S.C. Sec. 80a-1, et seq.). To be eligible for investment pursuant to this subdivision these companies shall either: have an investment advisor registered or exempt from registration with the Securities and Exchange Commission with not less than 5 years experience managing money market mutual funds and with assets under management in excess of $500,000,000, or attain the highest ranking letter or numerical rating provided by not less than two of the three largest. NRSROs. E. The State of California Local Agency Investment Fund (LAIF), as authorized by the Government Code Section 16429.1. E. Orange County Investment Pool, as authorized by the Government Code Section 53684. F. Local government investment pools (LGIPs), as authorized by the Government Code Section 53601(p). G. Passbook Savings Account Demand Deposits in California financial institutions. H. Taxable or tax-exempt warrants, notes, bonds or similar evidences of indebtedness issued by the State of California, a department, board, agency, or authority of the State, or any local agency within the State of California having received a rating in a rating category of"A" its equivalent or better by at least two NRSROs. Obligations eligible for investment under this subdivision with maturities under one year must be rated in a rating category of "A-1" its equivalent or better by two NRSROs. 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. Obligations eligible for investment under this subdivision must be rated in a rating 21 category of "A" or its equivalent or better by at least two NRSROs. Obligations eligible for investment under this subdivision with maturities under one year must be rated in a rating category of"A-1" or its equivalent or better by two NRSROs. J. Bankers' acceptances that are drawn on and accepted by a commercial bank. Eligible bankers' acceptances shall have the highest ranking or the highest letter and number rating in the rating category as provided for by at least two NRSROs and a maximum maturity of 180 days. K. Commercial paper of"prime" quality of the highest ranking or of the highest letter and number rating as provided for by at least two NRSROs. The entity that issues the commercial paper shall meet all of the following conditions in either paragraph (1) or paragraph (2): 1) The entity meets the following criteria: a. Is organized and operating in the United States as a general corporation. b. Has total assets in excess of five hundred million dollars ($500,000,000). c. 'Has debt other than commercial paper, if any, that is rated in a rating category of"A" or higher or its equivalent by at least two NRSROs. 2) The entity meets the following criteria: a. Is organized within the United States as a special purpose corporation, trust, or limited liability company. b. Has program wide credit enhancements including, but not limited to, over collateralization, letters of credit, or surety bond. c. Has commercial paper that is rated in a rating category of "A-1" or higher or its equivalent by at least two NRSROs.' Eligible commercial paper shall have a maximum maturity of 270 days. Investments may not represent more than 10% of the outstanding commercial paper of any single corporate issue. L. Medium-term corporate notes, defined as all corporate and depository institution debt securities with a maximum remaining maturity of 5 years or less, 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. Medium-term corporate notes shall be rated in a rating category "A" or its equivalent or better by at least two NRSROs. M. Supranationals, defined as United States dollar denominated senior unsecured unsubordinated obligations issued or unconditionally guaranteed by the International Bank for Reconstruction and Development (IBRD), International 22 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 in a rating category of"AAA" or its equivalent or better by at least two NRSROs. N. Asset-Backed Securities (ABS). Any mortgage pass-through security, collateralized mortgage obligation, mortgage-backed or other pay-through bond, equipment lease-back certificate, consumer receivable pass-through certificate, or consumer receivable-backed bond of a maximum of five years maturity. Securities eligible for investment under this subdivision shall be issued by an issuer that has a rating in a rating category of "A" or its equivalent or better for the issuer's debt by at least two by NRSROs and rated in a rating category of "AA" or its equivalent or better by at least two NRSROs. If additional types of securities are approved for investment of public funds by the California Government Code, they will not be eligible for investment by the City of San Juan Capistrano until this Investment Policy is amended and the amendment is passed by the City Council. VIII. DIVERSIFICATION AND MATURITY A. It is the policy of the City to diversify its investment portfolio. Invested funds shall be diversified to minimize the risk of loss resulting from over concentration of assets in a specific maturity, specific issuer, or specific class of securities. Diversification strategies shall be established and periodically reviewed by the City Treasurer and City Manager. The minimum diversification standards by security type and issuer shall be: U.S. Treasuries and securities having principal and interest guaranteed by the U.S. Government 100% U.S. Government agencies, instrumentalities and government Sponsored enterprises no more than 100% Non-negotiable CDs no more than 25% Negotiable CDs no more than 30% Money market funds no more than 20% Local Agency Investment Funds (LAIF) no more than 100% Orange County Investment Pool no more than 40% Local government investment pools (LGIPs) no more than 40% Passbook Savings Account Demand Deposit no more than 5% Municipal obligations no more than 25% Bankers' acceptances no more than 30% Commercial paper no more than 25% Medium-term corporate notes no more than 30% International Bank for Reconstruction and Development (IBRD), International Finance Corporation (IFC), and Inter-American Development Bank (IADB) (Supranationals) no more than 15% Asset-Backed Securities no more than 20% 23 No more than 3% of the City's investment portfolio may be invested in the securities of any one issuer regardless of security type excluding U.S. Treasuries, U.S. Government agencies, Supranationals, and pooled investments such as LAIF, LGIPs, and money market funds. B. The City shall not invest in a security whose maturity exceeds five years from the date of purchase unless City Council has provided approval for a specific purpose at least 90 days before the investment is made. C. The City Treasurer shall select investment maturities such, that they provide necessary liquidity, manage interest rate risk, and optimize earnings. Because of inherent difficulties in accurately forecasting cash flow requirements, the weighted average maturity of the investment portfolio shall not exceed 3.0 years. For those investment types for which this Policy does not specify a maturity limit, no individual investment shall exceed a maturity of five years from the date of purchase unless the City Council has granted express authority to purchase that investment either specifically or as a part of an investment program approved by the City Council no less than three months prior to purchase of the investment. IX. AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS The City Treasurer will maintain a list of financial dealers and institutions qualified and authorized to transact business with the City. The purchase by the City of any investment other than those purchased directly from the issuer, will be purchased either from an institution licensed by the State as a broker-dealer, as defined in Section 25004 of the Corporations Code, which is a member of the Financial Industry Regulatory Authority (FINRA), or a member of a federally regulated securities exchange, a national or state chartered bank, a federal or state association (as defined by Section 5102 of the Financial Code), or a brokerage firm designated as a Primary Government Dealer by the Federal Reserve Bank. The City Treasurer will investigate all institutions that wish to do business with the City to determine if they are adequately capitalized, make markets in securities appropriate for the City's needs, and agree to abide by the conditions set forth in this City's Investment Policy and any other guidelines that may be provided. This will be done annually by having the financial institutions: 1. Provide written notification that they have read, and will abide by, the City's Investment Policy. 2. Submit their most recent audited Financial Statement within 120 days of the institution's fiscal year end. If the City has an investment advisor, the investment advisor may use its own list of authorized broker/dealers to conduct transactions on behalf of the City. Purchase and sale of securities will be made on the basis of competitive bids and offers 24 with a minimum of three quotes being obtained. X. INVESTMENT POOLS The City Treasurer will perform an annual review of the investment policy and portfolio of any investment pools in which the City invests, including LAIF, the Orange County Investment Pool, and LGIPs. XI. SAFEKEEPING/CUSTODY AND COLLATERALIZATION A. All security transactions entered into by the City shall be conducted on a delivery versus payment (DVP) basis. B. Where applicable, all securities shall be held by a third-party bank custodian designated by the City Treasurer. The third-party custodian shall be required to issue a safekeeping receipt to the City listing the specific instrument, rate, maturity and other pertinent information. The only exception to the foregoing shall be depository accounts and securities purchases made with: (i) LAIF and local government investment pools; (ii) placement certificates of deposit, and, (iii) money market mutual funds, since the purchased securities are not deliverable. Evidence of each these investments will be held by the City Treasurer. C. Collateralization on bank deposits (including Certificates of Deposit and Passbook Savings Account Demand Deposit) shall be required in accordance with state law. XII. REPORTING A. The City Treasurer shall make a monthly report of investment transactions and holdings to the City Council. Such reporting shall exclude investments held by fiscal agent on behalf of holders of bonds or other instruments of debt that have been advance refunded pending redemption. B. If the City has an investment advisor, the investment advisor shall periodically report on the activity and results of the funds being managed by the investment advisor. C. The City Treasurer shall include a report on investment holdings in the City's Comprehensive Annual Financial Report as required by generally accepted accounting principles (GAAP) and the Governmental Accounting Standards Board (GASB). XIII. PERFORMANCE EVALUATION The City shall establish an appropriate performance benchmark and compare the total return of its investment portfolio to the total return of the benchmark. 25 XV. INVESTMENT POLICY ADOPTION The City's Investment Policy shall be reviewed annually. Any recommended modifications shall be reviewed and approved by the City Council. 26 • Exhibit B Schedule of Charges Fee Schedule C%'CHANDLER MANAGEMENT City of San Juan Capistrano FEES 1. Please indude a copy of your firm's fee schedule. State your fee in basis points for assets under management.It is understood that this fee will covert the cost of all services provided to the City by the proposing firm. Chandler Asset Management is pleased to provide comprehensive investment advisory services to the City of San Juan Capistrano and the Otis Housing Authority for the entire term of the engagement in accordance with the following fee schedule: Proposed Fee Schedule Tiered fee schedule In basis points Assets Under Management Annual Asset Management Fee First$25 million 0.10 of 146(10 basis pointsi Next$25 million 0.08 of 1%(8 basis points) Assets over$50 million 0.07 of 1%(7 basis points) Our proposed fee schedule is all-inclusive for the services that Chandler provides,lnduding full time non- discretionary investment advisory services, technological resources, onboarding and implementation, online access to the Chandler Client Portal, comprehensive reporting, meetings, personal visits, and educational offerings for your staff, as well as the additional services described herein in Chandler's proposal and 1n the Qty's Scope of Services. Chandler does not charge fees on funds held In liquid vehicles not directly under our management such as LAIF. a. Please indicate whether they Indude custodial fees. Our fee schedule does not include charges that the City would incur for third party custodial services. b. Is there a minimum ennui fee? No. c. Are fees charged when there is no activity In the account? Yes.Fees are based on the amount of assets under management and are not based on transaction volume.Management fees will accrue as long as there are assets In the portfolio,even If there is no activity during the period. Since the firm calculates fees based on the average balance of assets under our direct management(market value including accrued Interest),fees will fluctuate based on portfolio value. Fees are charged monthly In arrears, and can be debited directly from your third party custody account. Wage Exhibit B Fee Schedule Schedule of Charges C11kCHANDLER ASSET MANAGEMENT City ofSoe,uen Capistrano d. To illustrate your fee schedule,what would the annual fee be far$45 million($40 million for the City and$5 million for the Housing Authority) under management based on your proposed fee schedule?We understand the actual fee will vary based on assets under management. Based on a$45 million account(aggregated assets of the City and Housing Authority),the annual fee would be 9.11 basis points(0.091 of 1%),for en effective dollar fee of$41,000 per annum. For example: Market Value of Assets Under Management $45,000,000.00 as of{end of month date}: Market Value of Assets Under Management $45,000,000.00 as of(beginning of month date}: Average Portfolio Market Value for.Month: $45,000,000.00 Fee calculation: $25,000,000 x 0.10%= $25,000.00 $20,000,000 x 0.08%= $16,000.00 Total: $41,500.00 $41,000/$45,000,000=0.091%annually $41,000/12=$3A16.67 monthly Wage