CITY COUNCIL STAFF REPORT
Meeting: May 21, 2024
Subject
Approve a Third Amendment with Chandler Asset Management to continue investment advisory services for a total not-to-exceed amount of $600,000 and extending the contract date to December 31, 2028 Recommended Action
Authorize the City Manager to execute the Third Amendment with Chandler Asset Management, reinstating the Professional Services Agreement to continue investment advisory services for a new not-to-exceed contract amount of $600,000 and extending the contract date to December 31, 2028 Description
Professional investment management of public funds is a best practice that provides substantial benefits to the City of Cupertino. 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.
In December 2018, after a competitive RFP process, the City awarded a contract under the City Manager’s award authority for investment advisory services to Chandler Asset Management (Chandler). Chandler was selected based on the following significant factors:
Provided the most similar clients as references (California public agencies with full investment discretion) Provided the best documentation of understanding the City of Cupertino, including recommending approval of the draft investment policy and suggesting improvements for future consideration Outstanding references, including testimonials of being service oriented, providing assistance beyond contracted services, validated performance beyond the benchmark while maintaining a lower risk than the benchmark Superior reporting and integration software that will save on the City of Cupertino’s staff time for accounting for investments Chandler provides monthly reporting, holds quarterly meetings to discuss quarterly results with the Audit Committee, and is available to present to City Council and Audit Committee as needed. Also, Chandler assists staff with the annual update of the Investment Policy, which ultimately will be submitted for City Council approval.
Chandler Asset Management’s original contract and two subsequent amendments were awarded and executed by the City Manager, with an expiration date of December 31, 2023. The City Attorney’s Office provided guidance for the execution of a third contract amendment regarding, the City Manager’s signing authority limit. The proposed third contract amendment is being presented to City Council for approval and to reinstate the terms of the agreement. Reinstatement is required when a contract exceeds its term . The delay in extending the contract was due to staff from Administrative Services and the City Attorney’s Office researching why the original contract was not brought to City Council for authorization. Further delays occurred during the finalization of the third amendment with Chandler.
Sustainability Impact
No sustainability impact.
Fiscal Impact
With an approximate $150 million portfolio subject to fees, the cost of investment management services is approximately $9,167 per month. However, it's important to note that the fees are counterbalanced by the investment income generated by Chandler. With an approximate average fee of 0.73% (7.3 basis points), the fees incurred for advisory services are outweighed by the returns delivered by Chandler's strategic investment decisions. Furthermore, while the City incurs a monthly expenditure (offset by investment earnings) for Chandler’s services, the overall fiscal impact remains favorable to the City.
California Environmental Quality Act
Not applicable.
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Prepared by: Jonathan Orozco, Finance Manager
Reviewed by: Kristina Alfaro, Director of Administrative Services Approved for Submission by: Pamela Wu, City Manager
Attachments:
A – Draft Third Amendment
B – Original Agreement
C – First Amendment with Chandler
D – Second Amendment with Chandler