DATE:
October 6, 2026
TO:
Mayor and Council Members
City Council, Serving as Successor Agency to the Hesperia Community Redevelopment Agency
Chair and Commissioners, Hesperia Housing Authority
Chair and Commissioners, Community Development Commission Chair and Board Members, Hesperia Fire Protection District Chair and Board Members, Hesperia Water District
FROM:
Rachel Molina, City Manager
BY:
Casey Brooksher, Assistant City Manager
Keith Cheong, Deputy Finance Director
SUBJECT:
Contract with Shuster Advisory Group for Investment Advisory Services for the City’s Operating Cash Reserve Portfolio
RECOMMENDED ACTION
It is recommended that the City Council authorize the City Manager to execute a one-year, sole-source professional services agreement with Shuster Advisory Group for Investment Advisory Services for the City’s Operating Cash Reserve Portfolio.
BACKGROUND
The City Treasurer is authorized to invest public funds in accordance with California Government Code (CGC) Sections 53600 et seq. and 5922(d). The FY 2026-27 Statement of Investment Policy (Policy) that guides the investment activity of the City, Successor Agency to the Hesperia Redevelopment Agency, Hesperia Housing Authority, Community Development Commission, Fire District, and Water District was adopted by the City Council at the September 1, 2026 meeting.
The Policy outlines maximizing the effectiveness and efficiency of Hesperia’s cash management system to attempt to obtain the highest yield available, while allowing the investments to meet the criteria established for safety, liquidity, and yield, in that order of priority.
City funds under the control of the City Treasurer that were not required for immediate cash flow needs are placed with the State Local Agency Investment Fund (LAIF) as the primary investment as it meets the City’s performance standards for safety and liquidity. The City currently retains the maximum amount of funds allowable with LAIF, with excess reserve cash held in the City’s bank account. Aside from LAIF, the Policy allows the City to utilize other authorized investments.
ISSUES/ANALYSIS
Shuster Advisory Group (Shuster), who manages the City and Water District’s Pension and Other Post-Employment Benefits (OPEB) Trusts, have worked with City staff and held regular meetings to review and evaluate the City's Section 115 trust investment portfolio. Shuster Advisory Group, LLC (“Shuster”) is an independent SEC-Registered Investment Advisor with over $11 billion in assets under management that specializes in serving the unique investment needs of governmental agencies. Shuster provides fiduciary investment management services, including investment selection, monitoring, and oversight as well as helping optimize liquidity, preserve capital, and enhance yields across reserve and long-term funds.
Based on a historical performance trend of Shuster’s investment management, the City and Water District’s Pension and Other Post-Employment Benefits (OPEB) Trusts, the City and Water District have a 13% and 11% return on investments respectively, which outperformed investment earnings from LAIF during that same time period.
Due to Shuster’s previous investment performance with the City and Water District’s Pension and OPEB Trust accounts and their historical knowledge, experience, and assistance with the City’s FY 2026-27 Investment Policy, a sole-source professional services agreement with Shuster for the City’s Operating Cash Reserve Investment Advisory Services is recommended.
The Shuster Investment Advisory Service fees include an annual fiduciary fee (professional service fee) of $20,000 plus a 0.07% asset management fee per year. For perspective, an annual investment of $1.0 million would result in $700 in asset management fees per year. The asset management fee varies based upon the amount of the investment and the investment earnings.
The City would continue to maintain satisfactory cash liquidity and quick access to funds through both LAIF and the Operating Cash Reserve Portfolio investments to enable the City to meet all anticipated and operating cash flow requirements. Also, City staff would continue to meet regularly with Shuster staff to review all investments to ensure they meet the City’s performance standards for safety, liquidity, market yields, diversification, and maturity, per the Investment Policy.
Consistent with the City’s standard practice, and per California Government Code Section 53646, regular monthly reporting of all City investments will continue to be presented to the City Council for review and approval through the Treasurer’s Report.
CITY GOAL SUPPORTED BY THIS ITEM
Financial Health - Maintain a balanced budget and adequate reserves
FISCAL IMPACT
Based upon previous investment performance, the City could expect to receive additional investment earnings. Although investments inherently carry various levels of risk depending on the type of investments and market conditions, adherence to the City’s Investment Policy, along with regular monitoring, prudence, and diversification, avoids incurring unreasonable and avoidable investment risks.
ALTERNATIVE(S)
Provide alternate direction to staff.
ATTACHMENT(S)
None
City of Hesperia STAFF REPORT City of Hesperia STAFF REPORT City of Hesperia
STAFF REPORT
City of Hesperia
STAFF REPORT
Staff Report to the Mayor and City Council/Board Members Contract with Shuster Advisory Group for Investment Advisory Services for the City’s Operating Cash Reserve Portfolio October 6, 2026