18-0619_CHANDLER ASSET MANAGEMENT, INC._E8_Agenda ReportTO :
FROM :
SUBMITTED BY :
PREPARED BY:
DATE :
SUBJECT:
City of San Juan Capistrano
Agenda Report
Honorable Mayor and Members of the City Council
~njamin Siegel, City Manager
Ken Al-lmam, Chief Financial Officer pt/
Michelle Short, Senior Accountant ~
June 19, 2018
6/19/2018
E8
Professional Services Agreement for Investment Management
Services (Chandler Asset Management, Inc.)
RECOMMENDATION :
Approve and authorize the City Manager to execute a Professional Services Agreement
with Chandler Asset Management, Inc. for investment management services, in an
amount not-to-exceed $210,000 over the five-year term.
EXECUTIVE SUMMARY:
Professional investment management of public funds is a best practice that provides
substantial benefits to the City. These benefits include day-to-day monitoring of
investment yields available in the market; re-balancing of the portfolio's duration
(average maturity) to take advantage of interest rate trends; credit monitoring and
analysis; investment selection; and competitive shopping of investments to obtain the
best rates.
Since 2013, the City's current investment manager has provided investment
management services to the City under an agreement that terminates on June 30,
2018. In accordance with the City's purchasing policy, staff issued a request for
proposal (RFP) in January 2018, for investment management services beginning on
July 1, 2018 for a five-year term.
Three proposals were received from responsive bidders. Staff evaluated the three
proposals based on the criteria set forth in the RFP. Based on staff's evaluation,
reference checking, and the proposer's unqualified acceptance of the City's standard
contract language, staff is recommending Chandler Asset Management, Inc. (Chandler)
to provide investment management services to the City for the five-year period that
City Council Agenda Report
June 19, 2018
Page 2 of 4
begins on July 1, 2018. These investment management services will be applied to the
investments of all legal entities associated with the City.
DISCUSSION/ANALYSIS :
Staff initiated a process of competitive procurement by issuing an RFP for investment
management services in January 2018. The RFP was sent to fourteen firms and posted
on the City's website. The minimum qualifications for investment advisors to be
considered for investment management services were:
• Currently manage at least $10 billion of domestic fixed income assets for
public entities. Assets for which periodic (daily, monthly or quarterly) advice
is provided should be excluded from the calculation of funds under
management.
• Manage a minimum of 20 portfolios comprising California local agency
assets.
• Assign a portfolio manager and a relationship manager who each have a
minimum of ten years of experience providing investment advice to California
public entities.
• Be familiar with all applicable California statutes with regard to qualified
investments for public entities.
• Be registered with the Securities and Exchange Commission under the
Investment Advisor's Act of 1940.
• Be financially solvent and appropriately capitalized to be able to provide
service for the duration of the contract.
• Have Errors and Omissions insurance coverage of at least $10 million.
• Have fidelity bond coverage of at least $10 million .
• Adhere to the Code of Professional and Ethical Standards as described by
the Chartered Financial Analyst Institute (CFA Institute).
Three proposals were received from responsive bidders. The proposals were evaluated
based on:
• Relevant experience managing public agency funds .
• The experience, resources and qualifications of the investment advisor and
individuals assigned to this account.
• Proposed fees and compensation .
• Investment philosophy, strategy and demonstrated investment performance .
City Council Agenda Report
June 19, 2018
Page 3 of 4
• Ability to provide necessary portfolio accounting services according to the
CFA Institute's Global Investment Performance Standards (GIPS). . . .
• Understanding of the scope of services required by the City and ability to
provide these services.
• Acceptance of the language in the City's standard agreement.
All three proposals were competitively priced. One proposal was slightly lower in price;
however, the investment management philosophy and strategy in the proposal did not
conform to the composition of investments held in the City's portfolio. The two remaining
proposals were further evaluated by staff. Both proposals were strong and similarly
priced. However, one firm took exception to the protective language set forth in the
City's standard form of contract and was eliminated from consideration. Chandler did
not require deviations from the City's required contract language and was selected for
recommendation by staff.
Chandler Asset Management is an SEC-registered investment adviser with a targeted
focus on the management of fixed-income portfolios for the public sector. The firm was
founded by investment officers of large California public agencies based on the same
principles of investment management that guide those entities today. Since 1988,
Chandler has assisted public agencies like the City in fulfilling their fiduciary duty to their
constituents by providing high quality fixed income portfolios in a prudent investment
framework. Chandler uses investment strategies that conform to all applicable federal
laws and California Government Codes regarding qualified investments for public
entities.
FISCAL IMPACT:
The cost of investment management services is approximately $3,500 per month.
These services are expected to generate approximately $55,000 a month in interest
earnings, an earnings rate of approximately 1.8% in an investment portfolio with a
weighted average maturity of approximately 2 years.
The entire cost of services to be provided by the recommended investment firm are fully
accounted for in the 2018-19 and 2019-20 Adopted Budgets as an offset to budgeted
investment revenue, in accordance with industry practice. Over five years, the maximum
amount provided in the contract is $210,000.
ENVIRONMENTAL IMPACT:
Not applicable.
PRIOR CITY COUNCIL REVIEW:
On June 4, 2013, the City Council approved a three year agreement with PFM Asset
Management LLC for investment management services.
City Council Agenda Report
June 19, 2018
Page 4 of 4
On June 21, 2016, the City Council approved a two year extension for the agreement
with PFM Asset Manage~ent LLC.
COMMISSION/COMMITTEE/BOARD REVIEW AND RECOMMENDATIONS :
Not applicable.
NOTIFICATION :
Nicole Dragoo, Chandler Asset Management, Inc .
Sarah Meacham, PFM Asset Management LLC
Paul Jarvis, Time Value Investments
ATTACHMENT :
ATTACHMENT 1 -Professional Services Agreement for Investment Management
Services (Chandler Asset Management, Inc.)
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 to provide 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. Compensat ion
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.
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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 Gal/OSHA
requirements .
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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 City it 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.
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(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/Compl~ted 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 Symbol1, any auto).
(iii) The policy shall give City, its officials, officers, employees,
agents and City designated volunteers additional insured status.
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(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
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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. Ev iden ce Requi red .
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. Po l icy Provi si o ns Requi red
(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 (1 0) 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 (1 0) 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
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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.
i. Additional Insurance Provisions
(i) The foregoing requirements as 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
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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 m1n1mum 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.
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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. Verifica t io n of Empl oyment El ig ibi lity
By executing this Agreement , Consultant verifies that it fully complies with
all requirements and restrictions of state and federal law respecting the
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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 ~he 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 (1 0) 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.
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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:
City of San Juan Capistrano
32400 Paseo Adelanto
San Juan Capistrano, CA 92675
Attn: Ken Al-lmam
and shall be effective upon receipt thereof.
22. Third Party Rights
CONSULTANT:
Chandler Asset Management, Inc.
6225 Lusk Boulevard
San Diego, CA 92121
Attn: Nicole Dragoo
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.
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25. Severability
The unenforceability, invalidity or illegality of any provision(s) of this Agreement
shall not render the provisions unenforceable, invalid or illegal.
26. Suc cesso rs and As s igns
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 Emp loy Other Consultants
City reserves its right to employ other consultants, including engineers, 1n
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
ATTACHMENT 1 -Page 12 of 28
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
By:
Benjamin Siegel, City Manager
ATTEST:
By:
Maria Morris, City Clerk
APPROVED AS TO FORM:
By :
Jeffrey Ballinger, City Attorney
13
CHANDLER ASSET
MANAGEMENT, INC.
By:
Its:
Printed Name : ----------------
ATTACHMENT 1-Page 13 of 28
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.
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ATTACHMENT 1 -Page 14 of 28
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 expranation of any differences. This should be explicitly
addressed in the proposal.
I. 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-lmam
(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 P<?licy, 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 be delivered 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
ATTACHMENT 1 -Page 15 of 28
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
Attn: Nicole Dragoo
6225 Lusk Boulevard
San Diego, CA 92121
Client Representative
City of San Juan Capistrano
Attn: Ken Al-lmam
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: kalimam@sanjuancapistrano.org;
mbann igan@sanjuancapistrano. org;
mdaggettshort@sanjuancapistrano.org
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
info@chandlerasset.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
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ATTACHMENT 1 -Page 16 of 28
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 and clients 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 -Page 17 of 28
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.
Ill. 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
ATTACHMENT 1 -Page 18 of 28
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.
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ATTACHMENT 1 -Page 19 of 28
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
ATTACHMENT 1 -Page 20 of 28
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.
I. 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
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ATTACHMENT 1 -Page 21 of 28
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
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ATTACHMENT 1 -Page 22 of 28
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 1 00%
Non-negotiable COs ............................................................... no more than 25%
Negotiable COs ...................................................................... no more than 30%
Money market funds ............................................................... no more than 20%
Local Agency Investment Funds (LAIF) .................................. no more than 1 00%
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%
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ATTACHMENT 1 -Page 23 of 28
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
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ATTACHMENT 1 -Page 24 of 28
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.
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ATTACHMENT 1 -Page 25 of 28
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.
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ATTACHMENT 1 -Page 26 of 28
CHANDLER
ASSET MANAGEMENT
FEES
Exhibit 8
Schedule of Charges Fee Schedule
City of San Juan Capistrano
1. PlUM Include a COPV of your firm's fee schedule. State your fM In basis paints for assets under
manapment. tt Is undentoocl that this faa will cover the c:ost of all services provided to the aty bv tha
prapaslns firm.
Otandler Asset Management Is pleased to provide comprehensive Investment advisory services to the
Qty of San Juan capistrano and the City's Housing Authority for the entire term ~ the engagement fn
accordance wtth the followln1 fee schedule:
Proposed Fee Schedule
11en!d fee schedule In basis paints
Assets Under Management Annual Asset Management Fee
First $25 million
Next $25 million
Asset5 over $50 million
0.10 of 1" (10 basis polntsl
0.08 of 1" (8 basis points)
0.01 of 1" (7 basil points)
Our proposed fee schedule is all-inclusive for 1he services that Chandler provides, lndudlng full time non-
dfscretfonary Investment advisory services. technological resources, onboardlng and Implementation,
online access to the Chandler Oient Portal, comprehensive rep~ meetlnss, personal visits, and
educational afferfr.gs for your st..aff, as well as the additional services descrfbed herein ln Chandler's
proposal and In tha City's SaJpe o/Servit:ft.
Chandler does not dtarae fees on funds held In liquid whldes not directly under our manqement such
as lAIF.
L Pl...alndlalte whlth•r th-r Include cuatocn.l fees.
Our fee schedule does not Include charges that tha City would Incur for third party custodial services.
b. 11 there • mlnlmwn .nnulll fw?
No.
c. Are fees chaiPCI when there Is no actfvlty In the account?
Yes. Fees are based on the amount of assets under manapment and are not based on transaction
volume. Manqement fees will accrue as lona as there are assets In the portfolio, even If there Is no
activity durlna the period. Since the firm cala&latas fees based en the averap balance of assets
under our direct manqement (market valua lncludlftiiCCI'ued Interest), fees w111 fluctuate based on
portfolio wlua.
Fees are charpd monthly In arrears, and can be debited directly from your third party custody
account. ATTACHMENT 1 -Page 27 of 28
11P ag e
CHANDLER
ASSET MANAGEMENT
Exhibit B
Schedule of Charges
fee Schedule
City of San Juan Cilplstl'llno
d. To Illustrate your fea schedule, what would the annual ftJe be far $45 million ($40 million for the
aty and $5 million for the Houslna: .Authorttyl under manaaentent based on your proposed fee
schedule? We understand tha ac:tual faa will vary basad on asseb under man.,nent.
Based on a $45 million account (~d assets of the City and Housing Authority), the annual fee
would be 9.11 basis points (O.Q91 of 1"). for an effective dollilr fee of $4~000 per annum.
For example:
Market Value of Assets Under Management
as of {end of month date}:
Market Value of .Assets Under Management
as of {besrnnlnR of month date}:
Ave fi1118 Portfolio Market Value for Month:
Fee calculation:
$25,000,000 X 0.10% =
$20,000,000 X 0.08" =
Total:
$45,000,000.00
$45,000,000.00
$45,000,000.00
$25,000.00
$16,000.00
$41.000/$45,000,000 = 0.091" annually
$41,000/12 = $3,416.67 monthly
ATTACHMENT 1 -Page 28 of 28
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