April 18, 2023
LAKE FOREST CITY COUNCIL AGENDA Page 1
**REVISED** AGENDA
LAKE FOREST CITY COUNCIL
Regular Meeting of the City Council
Tuesday, April 18, 2023
Closed Session 5:30 p.m.
Public Session 6:30 p.m.
City Council Chambers, 100 Civic Center Drive, Lake Forest, California
NOTICE: Pursuant to Lake Forest Municipal Code Section 2.04.010, Regular Meetings of the City Council are held the First and Third Tuesday of each month at the hour of 5:30 p.m. for Closed Session matters, if required.
The Public Session of the meeting shall commence at 6:30 p.m. or as soon thereafter as possible. Special Meeting times may be held at a different time and date as listed on the Agenda.
AGENDA DOCUMENT REVIEW: The Agenda and staff reports are available on the Internet at
https://www.lakeforestca.gov/en/government/meeting-agendas-and-minutes/meeting-agendas and at the City Clerk’s Office, 100 Civic Center Drive, Lake Forest, California, on the Friday before the meeting on Tuesday.
AGENDA DESCRIPTION: The Agenda descriptions are intended to give notice to members of the public of a general summary of items of business to be transacted or discussed. The listed Recommended Action represents staff’s recommendation. The City Council may take any action which it deems to be appropriate on the agenda item and is not limited in any way by the recommended action.
AGENDA ON SOCIAL MEDIA: This meeting will be streamed through Facebook Live. Comments will not be taken via Facebook Live. The City provides the Facebook Live stream as an additional service to the public.
However, the City cannot guarantee that its network and/or the site will be uninterrupted. The City is not responsible for any interrupted service.
SPECIAL NOTICE REGARDING PUBLIC ACCESS TO THE MEETING AND PUBLIC COMMENT:
PUBLIC PARTICIPATION: In addition to attending in person, members of the public may access the meeting live on our website at https://www.lakeforestca.gov/en/government/meeting-agendas- and-minutes/meeting-
agendas.
PUBLIC COMMENT PRIOR TO THE MEETING: Members of the public may submit email comments to [email protected]. Email comments will be uploaded to the agenda packet and made part of the official public record of the meeting and will not be read at the meeting. To ensure staff reviews all comments prior to the City Council meeting, please submit email comments no later than 5:00 p.m. the day of the meeting.
PUBLIC COMMENT: Members of the public may provide comments in-person at the meeting. Public comments will no longer be accepted remotely. Those wishing to provide comments in-person at the meeting will be asked to submit a request to speak to the City Clerk.
April 18, 2023
LAKE FOREST CITY COUNCIL AGENDA Page 2
CALL TO ORDER: 5:30 p.m.
Council Members: Robert Pequeño
Scott Voigts
Benjamin Yu
Mayor Pro Tem: Mark Tettemer
Mayor: Doug Cirbo
City Manager: Debra Rose
City Attorney: Matthew E. Richardson
City Clerk: Lisa Berglund
CLOSED SESSION PUBLIC COMMENT:
CLOSED SESSION: At this time, the City Council may recess to Closed Session for conference with Legal Counsel to discuss the items listed below pursuant to Government Code requirements. Any items not concluded by 6:30 p.m. may be continued to the end of the Public Session. At this time, members of the public may address the City Council regarding any items listed on the Closed Session agenda. No action may be taken on items not listed on the agenda unless authorized by law. Comments shall be limited to three minutes per item. Any person wishing to address the City Council on a Closed Session matter is requested to complete a "Request to Speak" form available at agenda public review table near the entrance. The completed form is to be submitted to the City Clerk prior to an individual being heard by the City Council. Whenever possible, lengthy testimony should be presented to the City Council in writing (8 copies) and only pertinent points presented orally.
CLOSED SESSION (Item Nos. 1 – 2)
CLOSED SESSION: At this time, the City Council may recess to Closed Session for conference with Legal Counsel to discuss the items listed below pursuant to Government Code requirements. Any items not concluded by 6:30 p.m. may be continued to the end of the Public Session.
1. CONFERENCE WITH LEGAL COUNSEL- ANTICIPATED LITIGATION
SIGNIFICANT EXPOSURE TO LITIGATION PURSUANT TO GOVERNMENT CODE SECTION 54956.9(D)(2)
NUMBER OF POTENTIAL CASES: 1
RECOMMENDED ACTION: Conduct Closed Session.
2. CONFERENCE WITH LEGAL COUNSEL- ANTICIPATED LITIGATION
INITIATION OF LITIGATION PURSUANT TO GOVERNMENT CODE SECTION 54956.9(D)(4)
NUMBER OF POTENTIAL CASES: 2
RECOMMENDED ACTION: Conduct Closed Session.
RECESS: City Council will recess to Closed Session for the purpose of conducting regular City business.
RECONVENE: City Council will reconvene to continue regular City business.
April 18, 2023
LAKE FOREST CITY COUNCIL AGENDA Page 3
PUBLIC SESSION: 6:30 p.m.
PUBLIC SESSION: At this time, the City Council will convene to consider public matters. Those wishing to address the City Council must submit a completed “Request to Speak” form to the City Clerk prior to City Council action.
INVOCATION: The Invocation will be provided by Member of The Church of Jesus Christ of Latter-day Saints.
PLEDGE OF ALLEGIANCE: The Pledge of Allegiance to the Flag of our Country to be led by Mayor Cirbo.
CLOSED SESSION REPORT: City Attorney will report on Closed Session.
PRESENTATIONS (Item Nos. 3 – 4)
3. PROCLAMATION DECLARING APRIL 22, 2023, AS EARTH DAY IN THE CITY OF
LAKE FOREST
RECOMMENDED ACTION: Approve the Proclamation designating April 22, 2023, as Earth Day in the City of Lake Forest.
4. PROCLAMATION DECLARING APRIL 28, 2023, AS ARBOR DAY IN THE CITY OF
LAKE FOREST
RECOMMENDED ACTION: Approve the Proclamation designating April 28, 2023, as Arbor Day in the City of Lake Forest.
PUBLIC COMMENTS
Members of the public can submit an e-comment to [email protected]. E-comments will not be read at the meeting. Members of the public may also provide comments in -person at the meeting or remotely. Those wishing to provide comments in- person at the meeting will be asked to submit a request to speak to the City Clerk.
CONSENT CALENDAR (Item Nos. 5 – 11)
All matters listed under the Consent Calendar are considered routine and will be enacted by one vote. There will be no separate discussion of these items unless Members of the City Council, the public, or staff request specific items be removed from the Consent Calendar for separate action.
5. MOTION TO WAIVE READING OF RESOLUTIONS AND ORDINANCES
RECOMMENDED ACTION: Said Ordinances and Resolutions which appear on the public agenda shall be determined to have been read by title and further reading waived.
6. MONTHLY TREASURER'S REPORT - MARCH 2023
RECOMMENDED ACTION: Receive and file.
April 18, 2023
LAKE FOREST CITY COUNCIL AGENDA Page 4
7. MINUTES OF THE REGULAR MEETING OF THE CITY COUNCIL AND SPECIAL MEETING OF THE LAKE FOREST HOUSING AUTHORITY HELD ON APRIL 4, 2023.
RECOMMENDED ACTION: Approve as submitted.
8. RESOLUTION SUPPORTING THE MAKE-A-WISH FOUNDATION BY DECLARING APRIL 29, 2023, WORLD WISH DAY
RECOMMENDED ACTION: Adopt a Resolution entitled: A RESOLUTION OF THE
CITY COUNCIL OF THE CITY OF LAKE FOREST, CALIFORNIA, SUPPORTING THE MAKE-A-WISH FOUNDATION BY DECLARING APRIL 29, 2023, WORLD WISH DAY.
9. NATIONAL PUBLIC SAFETY TELECOMMUNICATORS WEEK
RECOMMENDED ACTION: Adopt a Resolution entitled: A RESOLUTION OF THE
CITY COUNCIL OF THE CITY OF LAKE FOREST, CALIFORNIA, RECOGNIZING
NATIONAL PUBLIC SAFETY TELECOMMUNICATORS WEEK
10. SECOND AMENDMENT TO THE AGREEMENT WITH JAMEY CLARK, INC. FOR
ON-CALL FACILITY AND PARK MAINTENANCE SERVICES
RECOMMENDED ACTION: 1. Approve the Second Amendment to the Agreement for On-Call Facility and Park Maintenance Services with Jamey Clark, Inc.
2. Authorize the Mayor to sign, and the City Clerk to attest, the Second Amendment substantially in the form attached.
11. REJECT ALL BIDS AND AUTHORIZE RE-BIDDING FOR STRUCTURAL STEEL PATIO COVER AT LAKE FOREST CIVIC CENTER SENIOR CENTER (PW 2022-13)
RECOMMENDED ACTION: 1. Reject all bids for the Structural Steel Patio Cover Senior Center Project (PW 2022-13).
2. Authorize staff to solicit new bids for this project.
DISCUSSION/ACTION ITEMS (Item Nos. 12 – 14)
The following matters are for City Council consideration/discussion/action. Members of the public may have the opportunity to address these items if they wish to do so. Please complete the Request to Speak form and give to the City Clerk.
April 18, 2023
LAKE FOREST CITY COUNCIL AGENDA Page 5
12. FISCAL YEAR 2022-23 MID-YEAR BUDGET REVIEW
RECOMMENDED ACTION: Adopt a Resolution entitled: A RESOLUTION OF THE
CITY COUNCIL OF THE CITY OF LAKE FOREST, CALIFORNIA, AMENDING THE 2021-2023 OPERATING BUDGET; AMENDING APPROPRIATIONS FOR FISCAL YEAR 2022-23
13. ANNUAL REVIEW OF THE STATEMENT OF INVESTMENT POLICY
RECOMMENDED ACTION: Approve the Attached Statement of Investment Policy
14. FIRST AMENDMENT TO THE MEMORANDUM OF UNDERSTANDING REGARDING
SOLID WASTE PROCUREMENT SERVICES BY AND BETWEEN THE CITY OF
LAGUNA HILLS AND THE CITY OF LAKE FOREST
RECOMMENDED ACTION: 1. Approve the First Amendment to the Memorandum of Understanding Regarding Solid Waste Procurement Services by and between the City of Laguna Hills and the City of Lake Forest.
2. Authorize the City Manager to execute, and the City Clerk to attest, the proposed First Amendment.
CITY MANAGER'S REPORT
At this time, the City Manager may comment on agenda and non-agenda items; and report on items of interest to the City Council and community.
CITY COUNCIL COMMENTS
At this time, City Council Members may comment on agenda or non-agenda matters. No discussion may take place on any item not appearing on the posted agenda. Council Members may ask a question for clarification, respond to statements made or questions posed by the public, make a brief announcement, or make a brief report on his or her own activities. In addition, the City Council may refer to staff or other resources for factual information, request staff to report back at a subsequent meeting or direct staff to place a matter of business on a future agenda. No action may be taken on non-agenda matters unless authorized by law (Government Code Section 54954.2).
Council Member Pequeño:
Council Member Voigts:
Council Member Yu:
Mayor Pro Tem Tettemer:
Mayor Cirbo:
April 18, 2023
LAKE FOREST CITY COUNCIL AGENDA Page 6
ADJOURNMENT
In compliance with the Americans With Disabilities Act, if you need special assistance to participate in this Meeting, including auxiliary aids or services, you should contact the Office of the City Clerk at (949) 461-3400. Notification 48 hours prior to the Meeting will enable the City to make reasonable arrangements to assure accessibility to this meeting. The City Council agenda and agenda back-up materials can be obtained from the Office of the City Clerk on the Friday prior to the City Council meeting. Copies of all Agendas, Staff Reports and Supporting Materials can also be found on the City’s website – https://www.lakeforestca.gov/129/Agendas. Agenda and agenda packets, if requested, will be made available in an appropriate alternative format to persons with a disability as required by the Americans With Disabilities Act. Copies of the agenda are provided at no cost and agenda back-up materials are available at the per page copy cost.
The City of Lake Forest mailing address is City Council Chambers, 100 Civic Center Drive, Lake Forest, California.
Phone: (949) 461-3400. FAX (949) 461-3511
CERTIFICATION: I, Lisa Berglund, City Clerk of the City of Lake Forest, California, hereby certify that the foregoing agenda was posted for public review at City Hall on April 13, 2023.
Lisa Berglund
City Clerk
CITY COUNCIL AGENDA REPORT
MEETING DATE: 4/18/2023
DEPARTMENT: Public Works
SUBJECT:
PROCLAMATION DECLARING APRIL 22, 2023, AS EARTH DAY IN THE CITY
OF LAKE FOREST
RECOMMENDED ACTION(S):
Approve the Proclamation designating April 22, 2023, as Earth Day in the City of Lake Forest.
EXECUTIVE SUMMARY:
Founded by Senator Gaylord Nelson, the first Earth Day event was held April 22, 1970 and has grown to be an annual global event. Earth Day raises awareness of environmental challenges and encourages people to take action to protect the community‘s natural resources.
The City of Lake Forest celebrates Earth Day year-round by:
•Participating in a local homeowners' association’s Earth Day event and providing information to residents on the importance of protecting the environment
•Encouraging residents and businesses to recycle food waste, which reduces methane emissions from landfills
•Hosting biannual household hazardous waste collection events to support proper disposal of hazardous materials
•Planting additional trees through the Expand the Forest Program to grow the City’s urban forest
•Sharing recycling information through the City’s website and social media Staff recommends the City Council approve a proclamation designating April 22, 2023 as Earth Day in the City of Lake Forest.
FISCAL IMPACT:
There is minimal fiscal impact with this recommended action.
Item: 3
7 ATTACHMENTS:
Proclamation Declaring April 22, 2023, as Earth Day in the City of Lake Forest Initiated By: Carole Langford, Administrative Specialist Submitted By: Thomas E. Wheeler, P.E., Director of Public Works/City Engineer Approved By: Debra Rose, City Manager
Item: 3
8 Attachment
Item: 3
9 PROCLAMATION
THE LAKE FOREST CITY COUNCIL
HEREBY PROCLAIMS
April 22, 2023
AS
“EARTH DAY”
_________________________________
DOUG CIRBO
MAYOR
MARK TETTEMER
MAYOR PRO TEM
__________________________
BENJAMIN YU
COUNCIL MEMBER
_______________________
ROBERT PEQUEÑO
COUNCIL MEMBER
__________________________
SCOTT VOIGTS
COUNCIL MEMBER
Item: 3
10 CITY COUNCIL AGENDA REPORT
MEETING DATE: 4/18/2023
DEPARTMENT: Public Works
SUBJECT:
PROCLAMATION DECLARING APRIL 28, 2023, AS ARBOR DAY IN THE CITY
OF LAKE FOREST
RECOMMENDED ACTION(S):
Approve the Proclamation designating April 28, 2023, as Arbor Day in the City of Lake Forest
EXECUTIVE SUMMARY:
As the secretary of the Nebraska territory, Julius Sterling Morton hosted the first Arbor Day on April 10, 1872. On that day, an estimated one million trees were planted in Nebraska. By the 1920s, the observance of Arbor Day became a national event celebrated by all fifty states. Arbor Day celebrates the planting, upkeep, and preservation of trees. Trees provide clean air and water, cooling shade, habitat for wildlife, and natural beauty in our community.
Staff recommends the City Council approve a proclamation designating April 28, 2023 as Arbor Day in the City of Lake Forest.
FISCAL IMPACT:
There is no fiscal impact with the recommended action.
ATTACHMENTS:
Proclamation Declaring April 28, 2023, as Arbor Day in the City of Lake Forest Initiated By: Carole Langford, Administrative Specialist Submitted By: Thomas E. Wheeler, P.E., Director of Public Works/City Engineer Approved By: Debra Rose, City Manager
Item: 4
11 Attachment
Item: 4
12 PROCLAMATION
THE LAKE FOREST
CITY COUNCIL
HEREBY PROCLAIMS
APRIL 28, 2023
AS
“ARBOR DAY”
DOUG CIRBO
MAYOR
MARK TETTEMER SCOTT VOIGTS
MAYOR PRO TEM COUNCIL MEMBER
BENJAMIN YU ROBERT PEQUEÑO
COUNCIL MEMBER COUNCIL MEMBER
Item: 4
13 CITY COUNCIL AGENDA REPORT
MEETING DATE: 4/18/2023
DEPARTMENT: City Clerk
SUBJECT:
MOTION TO WAIVE READING OF RESOLUTIONS AND ORDINANCES
RECOMMENDED ACTION(S):
Said Ordinances and Resolutions which appear on the public agenda shall be determined to have been read by title and further reading waived.
EXECUTIVE SUMMARY:
California Government Code 36934 allows titles of ordinances and resolutions to be waived.
FISCAL IMPACT:
There is minimal fiscal impact associated with the recommended action.
ATTACHMENTS:
None.
Submitted By: Lisa Berglund, MPA, City Clerk
Approved By: Debra Rose, City Manager
Item: 5
14 CITY COUNCIL AGENDA REPORT
MEETING DATE: 4/18/2023
DEPARTMENT: Finance
SUBJECT:
MONTHLY TREASURER'S REPORT - MARCH 2023
RECOMMENDED ACTION(S):
Receive and file.
EXECUTIVE SUMMARY:
The Treasurer's Report for the month ended March 31, 2023 is attached. There are no exceptions to the Investment Policy. Total cash and investments equal $183.3 million for the period.
DISCUSSION:
The Treasurer’s Report for the month ended March 31, 2023, is attached. There are no exceptions to the Investment Policy.
Investment Portfolio
The City’s balances consist of the following:
Type Millions
Local Agency Investment Fund (LAIF) 74.6
California Asset Management Program (CAMP) 44.2
Orange County Investment Pool (OCIP) 41.7
Federated Government Obligations Fund 0.0
Operating Bank Balance – US Bank 22.8
Total Cash and Investments 183.3
The investment portfolio balance (excluding the operating bank balance) was unchanged during the last month. The balance in the investment portfolio was consistent with staff’s expectations based on the operating and capital improvement activities during the month.
Item: 6
15 There were no investment purchases and no maturities during the month. The types of investments currently included in the portfolio are described below with any new information since the last report.
The Local Agency Investment Fund (“LAIF”), Orange County Investment Pool (“OCIP”), and California Asset Management Program (“CAMP”) are the City’s liquidity pools. Liquidity pools are the source of funding for weekly ongoing operating costs. Many cities use only LAIF, while Lake Forest has been more conservative in this respect. The US Bank balance reflected on the previous page is mostly transitory, as a function of holding deposits until the funds are invested and subsequently disbursed from LAIF/OCIP/CAMP for operations.
State law requires that these bank balances be collateralized at 110%. The Federated Government Obligations Fund Service Share Money Market Fund is also mostly transitory, as a function of holding matured investments and earnings until the City purchases new investments. This account is the custodial account for the City’s investment safekeeping institution, US Bank.
LAIF is a conservative investment pool managed by the State. The State cannot access these balances to fund its operational expenditures. Staff believe it is still prudent to maintain funds for liquidity in LAIF. LAIF earned 2.831% on the fund in March, which is slightly lower than the City’s earnings of 3.482% in March 2023.
Orange County Investment Pool (“OCIP”) allows local government agencies to voluntarily invest surplus cash to obtain competitive yields while maintaining safety and liquidity, thereby creating a multi-million-dollar County investment pool that enables investments in diversified instruments. OCIP earned approximately
3.253% on the fund as of March 31, 2023.
CAMP is a conservative short-term money market investment pool for a group of local agencies. CAMP earned approximately 4.80% on the fund as of March 31, 2023.
Cash with Fiscal Agent
During the month, cash with the fiscal agent was unchanged.
FISCAL IMPACT:
There is no fiscal impact associated with the recommended action ATTACHMENTS:
Monthly Treasurer’s Report
Item: 6
16 Initiated By: Amy Lewis, Assistant Director of Finance Submitted By: Kevin Shirah, Director of Finance/City Treasurer Approved By: Debra Rose, City Manager
Item: 6
17 ATTACHMENT
Item: 6
18 VALUE OF PORTFOLIO
This Month Last Month
Market Value 160,546,742$ 160,269,268$
Book Value 160,546,742$ 160,269,268$
This Month Last Month
Average Maturity (days) 1 1
Average Maturity to Call (days) 1 1
RETURN
This Month Last Month
Average Annual Return 3.482% 3.322%
Average Annual Return to Call 3.482% 3.322%
1. I hereby certify that the investments are in compliance with the investment policy approved by the City Council on December 21, 2021.
2. Although any investment is impacted by market conditions, the current investments are structured to reduce the impact of market conditions.
3. The market values for the investments are provided by the City's Custodian, US Bank.
Local Agency Investment Fund, California Asset Management Program and
4. The City has the ability to meet its budgeted expenditures for the next six months.
Kevin R. Shirah
Director of Finance / City Treasurer
CITY OF LAKE FOREST
MONTHLY INVESTMENT HIGHLIGHTS
March 31, 2023
Orange County Investment Pool market values are the withdrawal amount. 1 Item: 6
19 SUMMARY OF TRANSACTIONS
Investment Securities*
Activity
Dollar Volume
(Par Value)
Transaction
Count
Purchases -$ -$
Maturities -$ 0
Called - Prior to Maturity -$ -$
Sale - Prior to Maturity -$ -$
* The Investment Securities activity is also included in the account summary below.
LAIF, CAMP, OCIP & Money Market Mutual Fund (MMMF)
Category Deposits Withdrawals
Local Agency Investment Fund -$ -$
California Asset Management Program 179,261$ -$
Orange County Investment Pool 99,154$ 963$
Federated Government Obligations Fund Service Shares 21$ -$ No exceptions.
EXCEPTIONS TO INVESTMENT POLICY
March 31, 2023
CITY OF LAKE FOREST
MONTHLY INVESTMENT HIGHLIGHTS/
March 31, 2023
EXCEPTIONS TO INVESTMENT POLICY
CITY OF LAKE FOREST
2 Item: 6
20 CITY OF LAKE FOREST
CASH AND INVESTMENTS
March 31, 2023
CASH & INVESTMENTS:
Type Market Value
Bank Accounts 22,788,250$
Investments 0
Local Agency Investment Fund 74,634,565
California Asset Management Program 44,173,626
Orange County Investment Pool 41,732,023
Federated Government Obligations Fund Service Shares 6,528 Total 183,334,992$
3 Item: 6
21 CITY OF LAKE FOREST
PORTFOLIO STRUCTURE
March 31, 2023
COMPARISON OF INVESTMENT PORTFOLIO BY TYPE:
Average
% or $ Average Maturity Allowed
Book % or $ Over Maturity to Call Maturity
Type of Instrument Value Portfolio Allowed Limit (in days) (in days) (in days) Local Agency Investment Fund 74,634,565 46.5% $75 MM N/A N/A N/A California Asset Management Program 44,173,626 27.5% 30% N/A N/A N/A Orange County Investment Pool 41,732,023 26.0% 100% N/A N/A N/A Federated Government Obligations Fund Service Shares 6,528 0.0% 10% N/A N/A N/A Totals 160,546,742$ 100.0%
CALLABLES AS PERCENTAGE OF BOOK VALUE:
Federal Agencies - Callable -$ 0.0% 100% 0 0 1825 4 Item: 6
22 INVESTMENT PORTFOLIO BY ISSUER:
Book % of % or $ Over
Issuer Name Value Portfolio Allowed Limit Quality
Local Agency Investment Fund 74,634,565 46.5% $75 MM N/R California Asset Management Program 44,173,626 27.5% 30% N/R Orange County Investment Pool 41,732,023 26.0% 100% N/R Federated Government Obligations Fund Service Shares 6,528 0.0% 10% AAA Totals 160,546,742$ 100.0%
DISTRIBUTION BY SELLING INSTITUTION:
% of
Name of Institution Book Value Total
Local Agency Investment Fund 74,634,565 46.5%
California Asset Management Program 44,173,626 27.5%
Orange County Investment Pool 41,732,023 26.0%
Federated Government Obligations Fund Service Shares 6,528 0.0% Totals 160,546,742$ 100.0%
CITY OF LAKE FOREST
DISTRIBUTION BY SELLING INSTITUTION
March 31, 2023
PORTFOLIO STRUCTURE
5 Item: 6
23 CITY OF LAKE FOREST
PORTFOLIO DETAILS SORTED BY MATURITY DATES 1
March 31, 2023
Market Par Book Coupon Yield to Purchase Maturity
Type of Instrument Issuer Seller Value 2
Value Value Rate Maturity Date Date
LAIF 3 N/A N/A 74,634,565 74,634,565 74,634,565 N/A N/A N/A N/A CAMP 4
N/A N/A 44,173,626 44,173,626 44,173,626 N/A N/A N/A N/A OCIP 5
N/A N/A 41,732,023 41,732,023 41,732,023 N/A N/A N/A N/A Money Market Fund 6
N/A N/A 6,528 6,528 6,528 N/A N/A N/A N/A
Totals 160,546,742$ 160,546,742$ 160,546,742$
1 All investments are held in safekeeping by US Bank.
2 Market values are obtained monthly from US Bank.
3 Local Agency Investment Fund
4 California Asset Management Program
5 Orange County Investment Pool
6 Federated Government Obligations Money Market Fund
6 Item: 6
24 MINUTES OF A REGULAR MEETING
OF THE CITY COUNCIL OF THE CITY OF LAKE FOREST
The regular meeting of the City Council of the City of Lake Forest and the Special Meeting of the Lake Forest Housing Authority was held Tuesday, April 4, 2023, at the Lake Forest City Council Chambers, 100 Civic Center Drive, Lake Forest, California, was called to order at 5:30 p.m. with all members present.
ROLL CALL:
Council Members:
Robert Pequeño
Scott Voigts
Benjamin Yu
Mayor Pro Tem: Mark Tettemer
Mayor: Doug Cirbo
City Manager: Debra Rose
City Attorney: Matthew E. Richardson
City Clerk: Lisa Berglund
CLOSED SESSION
City Attorney Richardson announced that there was an urgency item being added for discussion in closed session.
Proposed Item to be added:
CONFERENCE WITH LEGAL COUNSEL- ANTICIPATED LITIGATION
Initiation of litigation pursuant to Government Code section 54956.9(d)(4) Number of potential cases: 1
MOTION: It was moved by Mayor Pro Tem Tettemer, seconded by Council Member Pequeño, to add a third item of initiating litigation to the Closed Session. The motion was carried by a vote of 5/0 to add the additional matter to the closed session discussion.
1. CONFERENCE WITH LEGAL COUNSEL- ANTICIPATED LITIGATION
SIGNIFICANT EXPOSURE TO LITIGATION PURSUANT TO GOVERNMENT CODE SECTION 54956.9(D)(2)
NUMBER OF POTENTIAL CASES: 1
ACTION: Closed session was conducted.
2. CONFERENCE WITH LEGAL COUNSEL- ANTICIPATED LITIGATION
INITIATION OF LITIGATION PURSUANT TO GOVERNMENT CODE SECTION 54956.9(D)(4)
NUMBER OF POTENTIAL CASES: 1
Item: 7
25 April 4, 2023 LAKE FOREST CITY COUNCIL MEETING MINUTES Page 2 of 8
ACTION: Closed session was conducted.
RECESS: City Council recessed to Closed Session for the purpose of conducting regular City business.
RECONVENE: City Council reconvened to continue regular City business.
ACTION: City Attorney Richardson had no action to report.
PUBLIC COMMENT: Andrew O’Connor expressed his concerns with Best, Best & Krieger.
PUBLIC SESSION:
INVOCATION: The Invocation was provided by Dr. Loujan Matin, Baha’i Community of Lake Forest.
PLEDGE OF ALLEGIANCE: The Pledge of Allegiance to the Flag of our Country was led by Scout Chancellor Hyde, Boys Scouts of America, Troop 1251.
REPORT FROM STUDENT LIAISON: Sam Quiambao, Student Liaison from El Toro High School, delivered his report.
PRESENTATIONS: (Item Nos. 3 – 4)
MOTION: It was moved by Council Member Voigts, seconded by Council Member Yu, to approve Item Nos. 3 – 4. The motion was carried by a vote of 5/0.
3. SHERIFF'S TEAM OF ACTIVE RETIRED SENIORS
City Manager Rose introduced this item and invited Senior Management Analyst Sharlyn de la Paz to provide a presentation. Certificates of recognition were presented to the Sheriff’s Team of Active Retired Seniors (STARS).
Public Comment: Andrew O’Connor thanked the STARS for their work and requested information on which schools were part of the patrol route.
ACTION: Certificates of recognition were presented to the Sheriff’s Team of Active Retired Seniors.
4. INTRODUCTION OF CHIEF OF LAKE FOREST POLICE SERVICES OCSD
CAPTAIN CHRISTINE BERRYMAN
City Manager Rose introduced this item and provided a presentation. Captain Berryman provided brief remarks expressing her gratitude in being selected as Item: 7
26 April 4, 2023 LAKE FOREST CITY COUNCIL MEETING MINUTES Page 3 of 8
the new Chief of Police Services.
Public Comment: Andrew O’Connor congratulated Captain Berryman on her appointment and expressed his concerns with the number of Sheriff Deputies on staff.
ACTION: The presentation was received.
PUBLIC COMMENTS:
Ana Tucci spoke on her concerns with public school safety and on the work of the Parents Against School Shootings (PASS) organization. She requested the City Council consider putting a School Resource Officer (SRO) at every K-12 campus within Lake Forest.
Yev Koch spoke on her concerns with public school safety and on the work of the Parents Against School Shootings (PASS) organization. She requested the City Council consider putting a School Resource Officer (SRO) at every K-12 campus within Lake Forest.
Margie Matsil spoke on the successes of the “Meet the Mayor” event hosted by the Lake Forest Chamber of Commerce.
Andrew O’Connor expressed his concerns with various City practices and spending on various City services and programs.
CONSENT CALENDAR: (Item Nos. 5 – 11)
Public Comment: Andrew O’Connor offered public comment on Item No. 7 and expressed his concerns with payments made to various City vendors and reimbursement to staff.
Andrew O’Connor also offered public comment on Item No. 11 and expressed his concerns with the City’s decision to start a construction project at the El Toro and Portola Parkway intersection.
STATEMENT READ INTO THE RECORD
Mayor Pro Tem Tettemer - There is a warrant on the register to the Irvine Ranch Water District. Additionally, Item 9 on the Consent Calendar involves an agreement to which Irvine Ranch Water District is a party. I am an employee of the Irvine Ranch Water District, but I do not work for the department that generated this warrant or that is involved the agreement that is the subject of Item 9. Because the Irvine Ranch Water District is a public agency and because I do not work for the department in question, I have determined that I have a non-interest in these items and will vote on the warrant and on Item 9.
Item: 7
27 April 4, 2023 LAKE FOREST CITY COUNCIL MEETING MINUTES Page 4 of 8
Council Member Voigts - There are warrants on the register to the County of Orange.
Additionally, Item 9 on the Consent Calendar involves an agreement to which County of Orange is a party. I am an employee of the County of Orange, but I do not work for the department that generated these warrants or that is involved the agreement that is the subject of Item 9. Because the County of Orange is a public agency and because I do not work for the department in question, I have determined that I have a non-interest in these items and will vote on the warrant and on Item 9.
Mayor Cirbo - There is a warrant on the register to All City Management Services. My wife is an employee of the ACMS and I have determined that I have a remote interest in this warrant and will abstain from voting on that warrant.
MOTION: It was moved by Council Member Voigts and seconded by Council Member Yu to approve Consent Calendar Item Nos. 5-11. The motion was carried by a vote of 5/0 with Mayor Cirbo abstaining from the ACMS warrant included in Item No. 7.
5. MOTION TO WAIVE READING OF RESOLUTIONS AND ORDINANCES
ACTION: Said Ordinances and Resolutions which appeared on the public agenda were determined to have been read by title and further reading was waived.
6. MINUTES OF THE REGULAR MEETING OF THE CITY COUNCIL HELD ON MARCH 21, 2023
ACTION: The minutes were approved as submitted.
7. CERTIFICATION OF WARRANT REGISTER
ACTION: The warrant register was approved in the amount of $6,350,219.21.
8. SECOND AMENDMENT TO THE AGREEMENT WITH CROWN FACILITY
SOLUTIONS TO PROVIDE CUSTODIAL MAINTENANCE SERVICES AT THE
LAKE FOREST SPORTS PARK
ACTION: The Second Amendment to the Agreement for Maintenance Services with Crown Facility Solutions to provide custodial maintenance services at the Lake Forest Sports Park was approved. The Mayor was authorized to sign, and the City Clerk to attest, the Second Amendment to the Agreement with Crown Facility Solutions, substantially in the form attached.
9. COOPERATIVE AGREEMENT TO FUND TOTAL MAXIMUM DAILY LOAD
PROGRAMS AND RELATED ACTIVITIES IN THE NEWPORT BAY
WATERSHED, AGREEMENT NO. MA-08-23010376
ACTION: The Cooperative Agreement to Fund Total Maximum Daily Load Item: 7
28 April 4, 2023 LAKE FOREST CITY COUNCIL MEETING MINUTES Page 5 of 8
Programs and Related Activities in the Newport Bay Watershed was approved, substantially in the form attached. The Mayor was authorized to sign and the City Clerk to attest to the Agreement.
10. NOTICE OF COMPLETION FOR THE SAFE STEP IMPROVEMENT PROJECT PW 2021-02
ACTION: All Cities Engineering, Inc. was found to have completed construction of the Safe Step Improvement Project (PW 2021-02). The Notice of Completion was approved and the Mayor was authorized to execute the document on behalf of the City. The City Clerk was authorized to submit the Notice of Completion for recordation to the Office of the County Recorder of Orange County within fifteen days of City Council approval, as required by Section 9204 of the California Civil Code. Staff was authorized to release any unencumbered retention in accordance with California law.
11. CHANGE ORDER #1 FOR EL TORO ROAD & PORTOLA PARKWAY/SANTA MARGARITA INTERSECTION IMPROVEMENTS (PW2019-03)
ACTION: Change Order #1 to the Agreement with MMG Engineering, Inc. for the El Toro Road & Portola Parkway/Santa Margarita Parkway Intersection Improvements (PW2019-03) was approved, and the City Manager was authorized to execute the document in an amount not-to-exceed $500,000.00. Resolution entitled: A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKE FOREST, CALIFORNIA, AMENDING THE 2021-2028 CAPITAL IMPROVEMENT PLAN, AMENDING APPROPRIATIONS FOR FISCAL YEAR 2022-23 was adopted.
DISCUSSION/ACTION ITEMS: (Item Nos. 12 – 16)
12. TRAFFIC AND PARKING COMMISSIONER APPOINTMENT BY COUNCIL
MEMBER VOIGTS
City Manager Rose introduced this item and provided a presentation. Andrew O’Connor offered public comment and expressed his opposition to Council Member Voigts making an appointment. He also expressed his concerns with the transparency of the candidates’ qualifications. Council Member Voigts thanked all the candidates for applying and appointed Mark Armando to serve on the Traffic and Parking Commission. Council Member Yu seconded Council Member Voigts’ appointment.
13. RECOMMENDED DEVELOPMENT PARTNER FOR AFFORDABLE HOUSING
ACQUISITION, AND CONVERSION OR REHABILITATION PROJECTS
Item No. 13 is a companion item to the Housing Authority Special Meeting Item No. 3.
Item: 7
29 April 4, 2023 LAKE FOREST CITY COUNCIL MEETING MINUTES Page 6 of 8
City Manager Rose introduced this item and invited Assistant City Manager Neves to provide a presentation. Madelynn Hirniese, Chief Executive Officer of Families Forward, provided public comment and expressed the need for affordable housing for Lake Forest residents. Andrew O’Connor provided public comment and expressed his concerns with the bidding process for this item.
Council Member questions were asked and answered.
MOTION: It was moved by Council Member Pequeño, seconded by Council Member Yu, to direct staff to negotiate an Exclusive Negotiation Agreement with Families Forward and authorize the City Manager to sign, and the City Clerk to attest the Exclusive Negotiation Agreement and any other relevant documents to progress the project. The motion was carried by a vote of 5/0.
14. SUMMARY RELINQUISHMENT OF VARIOUS PUBLIC SERVICE LANDSCAPE
EASEMENTS
City Manager Rose introduced this item and invited Senior Management Analyst Poole to provide a presentation. No public comment was offered. Council Member questions were asked and answered.
MOTION: It was moved by Council Member Voigts and seconded by Council Member Yu to a
dopt a Resolution entitled: A RESOLUTION OF THE CITY
COUNCIL OF THE CITY OF LAKE FOREST, CALIFORNIA SUMMARILY
VACATING SIX PUBLIC SERVICE EASEMENTS PURSUANT TO
CALIFORNIA
STREETS & HIGHWAYS CODE SECTIONS 8330, ET SEQ. The motion was carried by a vote of 5/0.
15. LEGISLATIVE PLATFORM
City Manager Rose introduced this item and invited Assistant to the City Manager McGovern to provide a presentation. No public comment was offered.
Council Member questions were asked and answered.
MOTION: It was moved by Mayor Pro Tem Tettemer, seconded by Council Member Voigts, to add Proposed Policy Guideline No. 24, The City supports legislation that advances the practice or policy of favoring individuals in hiring and similar contexts based solely on their abilities and personal merits, including education, skills, experience, and other similar factors to the City 2023 Legislative Platform. The motion was carried by a vote of 4/1, with Mayor Cirbo dissenting.
MOTION: It was moved by Council Member Voigts, seconded by Council Member Yu, to add the following amended language to the City 2023 Legislative Platform, “The City supports legislation that invests in, provides for the research of, and promotes the development of new water storage and new water Item: 7
30 April 4, 2023 LAKE FOREST CITY COUNCIL MEETING MINUTES Page 7 of 8
supplies”
The motion was carried by a vote of 4/1, with Council Member Pequeño dissenting.
16. LEGISLATIVE AND REGULATORY MATTERS
City Manager Rose introduced this item and invited Assistant to the City Manager McGovern to provide a presentation. No public comment was offered.
Council Member questions were asked and answered.
MOTION: It was moved by Council Member Voigts, seconded by Council Member Pequeño to receive a report from staff summarizing the status of various legislation with the potential to impact the City of Lake Forest and adopt the policy positions recommended by staff on various legislation with the potential to impact the City of Lake Forest. The motion was carried by a vote of 5/0.
CITY MANAGER'S REPORT: City Manager Rose had nothing further to report.
CITY COUNCIL COMMENTS:
Council Member Pequeño:
Council Member Pequeño reported on his attendance
at the Bunny Blast event and commended City
Manager Rose for appointing Captain Berryman as
Chief of Police Services.
Council Member Yu:
Council Member Yu congratulated Captain Berryman
on being appointed Chief of Police Services. He
invited everyone to a mental health awareness event
hosted by the Asian American Senior Services Center
scheduled for April 14, 3:00 p.m. at the Community
Center. He thanked everyone for their prayers
regarding his stepfather’s terminal illness.
Council Member Voigts:
Council Member Voigts reported on his attendance at
the Bunny Blast event and thanked staff for putting
together a great event. He requested to have the
meeting adjourned in the memory of Noah Christian
Aguilar. Mayor Cirbo agreed to do so.
Mayor Pro Tem Tettemer: Mayor Pro Tem Tettemer reported on his attendance at the Bunny Blast event and attended the Serrano
Intermediate School open house.
Mayor Cirbo:
Mayor Cirbo reported on his attendance at a ribbon
cutting ceremony for The Inspired Boutique and how
Item: 7
31 April 4, 2023 LAKE FOREST CITY COUNCIL MEETING MINUTES Page 8 of 8
inspiring the owner’s story was. He also reported on
his attendance at the Bunny Blast event. He thanked
staff and the leaders of the Lake Forest Chamber of
Commerce for their efforts in the planning of the Meet
the Mayor event. He closed his remarks by wishing
everyone a Happy Easter weekend.
ADJOURNMENT: The Regular Meeting of the City Council and the Special Meeting of the Housing Authority were adjourned in memory of Noah Christian Aguilar at 8:34 p.m.
Respectfully submitted:
APPROVED:
LISA BERGLUND DOUG CIRBO
CITY CLERK MAYOR
Item: 7
32 CITY COUNCIL AGENDA REPORT
MEETING DATE: 4/18/2023
DEPARTMENT: City Clerk
SUBJECT:
RESOLUTION SUPPORTING THE MAKE-A-WISH FOUNDATION BY
DECLARING APRIL 29, 2023, WORLD WISH DAY
RECOMMENDED ACTION(S):
Adopt a Resolution entitled: A RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF LAKE FOREST, CALIFORNIA, SUPPORTING THE MAKE-A-WISH FOUNDATION BY DECLARING APRIL 29, 2023, WORLD WISH DAY.
EXECUTIVE SUMMARY:
The Make-A-Wish Foundation is commemorating 43 years of creating life- changing wishes for children with critical illnesses. This resolution supports the mission of the Make-A-Wish Foundation in Orange County and the Inland Empire to grant wishes to every eligible child and declares April 29, 2023, as “World Wish Day” throughout the city.
FISCAL IMPACT:
There is minimal fiscal impact associated with the recommended action.
ATTACHMENTS:
Make a Wish Foundation Resolution
Initiated By: Thy Merritt, Assistant City Clerk
Submitted By: Lisa Berglund, City Clerk
Approved By: Debra Rose, City Manager
Item: 8
33 ATTACHMENT
Item: 8
34 RESOLUTION NO. 2023-XX
A RESOLUTION OF THE CITY COUNCIL OF
THE CITY OF LAKE FOREST, CALIFORNIA,
SUPPORTING THE MAKE-A-WISH
FOUNDATION BY DECLARING APRIL 29,
2023, WORLD WISH DAY
WHEREAS, every 20 minutes, a child is diagnosed with a critical illness and the Make-A-Wish Foundation has a mission to grant the wish of every eligible child; and
WHEREAS, for every wish we grant, there are three more children with critical illnesses whose wishes need financial support; and WHEREAS, Make-A-Wish Orange County & the Inland Empire celebrates its 40th anniversary of granting over 7,800 wishes to children with critical illnesses in Orange, Riverside, and San Bernardino Counties; and
WHEREAS, “95% of wish alumni felt more hopeful for their future after their wish.” We believe that, just as they have for the last 40 years in Orange County wish experiences will continue to play a vital role in a child’s treatment, serve as an encouragement on a family’s journey and provide a source of inspiration for millions of people; and
WHEREAS, “90% of medical professionals said they have observed children increasing their compliance with treatment after learning they would receive a wish.” Wish parents and families see their child’s wish as a turning point in their treatment, giving their child strength and a sense of empowerment. Medical professionals report that a wish is a necessary part of a child’s treatment; and WHEREAS, World Wish Day is a national Make-A-Wish event that commemorates 43 years since our first wish and celebrates our mission of creating life-changing wishes for children with critical illnesses; and NOW, THEREFORE, BE IT RESOLVED, the City Council of the City of Lake Forest does hereby declare April 29th as “World Wish Day” throughout Lake Forest.
Item: 8
35 PASSED, APPROVED AND ADOPTED this 18th day of April 2023, by the following vote, to wit:
ATTEST:
DOUG CIRBO
MAYOR
LISA BERGLUND, MPA
CITY CLERK
APPROVED AS TO FORM:
MATTHEW E. RICHARDSON
CITY ATTORNEY
Item: 8
36 STATE OF CALIFORNIA )
COUNTY OF ORANGE ) SS.
CITY OF LAKE FOREST )
I, Lisa Berglund, City Clerk of the City of Lake Forest, California, do hereby certify that the foregoing Resolution No. 2023-XX was duly passed and adopted at a regular meeting of the Lake Forest City Council on the 18th of April 2023, by the following vote, to wit:
AYES: COUNCIL MEMBERS:
NOES: COUNCIL MEMBERS:
ABSTAIN: COUNCIL MEMBERS:
ABSENT: COUNCIL MEMBERS:
________________________
LISA BERGLUND, MPA
CITY CLERK
Item: 8
37 CITY COUNCIL AGENDA REPORT
MEETING DATE: 4/18/2023
DEPARTMENT: City Clerk
SUBJECT:
NATIONAL PUBLIC SAFETY TELECOMMUNICATORS WEEK
RECOMMENDED ACTION(S):
Adopt a Resolution entitled: A RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF LAKE FOREST, CALIFORNIA, RECOGNIZING NATIONAL PUBLIC
SAFETY TELECOMMUNICATORS WEEK
EXECUTIVE SUMMARY:
National Public Safety Telecommunications Week recognizes the vital and often unseen work of telecommunication personnel that dedicate their lives to public safety. Public Safety Telecommunicators (“telecommunicators”) are commonly referred to as dispatchers. They are classified as first responders as they are the source of communication between the public and emergency personnel.
Telecommunicators also serve as the vital link between law enforcement, EMS and fire by monitoring radio activities and providing guidance and information to ensure their safety. They contribute to the successful outcomes of critical situations. Emergency Command Centers nationwide operate 24 hours, 7 days a week causing telecommunicators to work long hours, sometimes sacrificing family time and holidays. In recognition of National Public Safety Telecommunicators Week, the City recognizes the individuals serving as public safety telecommunicators and recognizes National Public Safety Telecommunicators Week.
FISCAL IMPACT:
There is no fiscal impact associated with the recommended action.
ATTACHMENTS:
Resolution Recognizing National Public Safety Telecommunicators Week Submitted By: Lisa Berglund, City Clerk
Approved By: Debra Rose, City Manager
Item: 9
38 ATTACHMENT
Item: 9
39 5
1 9
8 0
RESOLUTION NO. 2023-XX
A RESOLUTION OF THE CITY COUNCIL OF
THE CITY OF LAKE FOREST, CALIFORNIA,
RECOGNIZING NATIONAL PUBLIC SAFETY
TELECOMMUNICATORS WEEK
WHEREAS, emergencies can occur at any time that require fire or emergency medical services, and;
WHEREAS, when an emergency occurs the prompt response of firefighters and paramedics is critical to the protection of life and preservation of property, and;
WHEREAS, the safety of our firefighters is dependent upon the quality and accuracy of information obtained from the citizens who telephone the OCFA's Emergency Command Center, and;
WHEREAS, “Public Safety Telecommunicators are the first and most critical contact our citizens have with emergency services, and; WHEREAS, Public Safety Telecommunicators are the single vital link for our firefighters by monitoring their activities by radio, providing them information and ensuring their safety, and;
WHEREAS, Public Safety Telecommunicators of the Orange County Fire Authority have contributed substantially to the apprehension of criminals, suppression of fires and treatment of patients, and;
WHEREAS, each dispatcher has exhibited compassion, understanding and professionalism during the performance of their job in the past year, and NOW, THEREFORE, BE IT RESOLVED, the City Council of the City of Lake Forest does hereby declare, retrospectively, April 9-15, 2023, as “Public Safety Telecommunicators Week” throughout Lake Forest, in honor of the men and women whose diligence and professionalism keep our city and citizens safe.
Item: 9
40 5
1 9
8 0
PASSED, APPROVED AND ADOPTED this 18th day of April 2023, by the following vote, to wit:
ATTEST:
DOUG CIRBO
MAYOR
LISA BERGLUND, MPA
CITY CLERK
APPROVED AS TO FORM:
MATTHEW E. RICHARDSON
CITY ATTORNEY
Item: 9
41 5
1 9
8 0
STATE OF CALIFORNIA )
COUNTY OF ORANGE ) SS.
CITY OF LAKE FOREST )
I, Lisa Berglund, City Clerk of the City of Lake Forest, California, do hereby certify that the foregoing Resolution No. 2023-XX was duly passed and adopted at a regular meeting of the Lake Forest City Council on the 18th of April 2023, by the following vote, to wit:
AYES: COUNCIL MEMBERS:
NOES: COUNCIL MEMBERS:
ABSTAIN: COUNCIL MEMBERS:
ABSENT: COUNCIL MEMBERS:
________________________
LISA BERGLUND, MPA
CITY CLERK
Item: 9
42 CITY COUNCIL AGENDA REPORT
MEETING DATE: 4/18/2023
DEPARTMENT: Public Works
SUBJECT:
SECOND AMENDMENT TO THE AGREEMENT WITH JAMEY CLARK, INC.
FOR ON-CALL FACILITY AND PARK MAINTENANCE SERVICES
RECOMMENDED ACTION(S):
1. Approve the Second Amendment to the Agreement for On-Call Facility and Park Maintenance Services with Jamey Clark, Inc.
2. Authorize the Mayor to sign, and the City Clerk to attest, the Second Amendment substantially in the form attached.
EXECUTIVE SUMMARY:
Jamey Clark, Inc. (“JCI”) provides the City with facility and park maintenance services under an agreement approved by the City Council on June 4, 2019. The three-year Agreement for Maintenance Services with Jamey Clark, Inc. (“Agreement”) allowed for two additional one-year extensions based on performance (Attachment 1). The City Council approved the First Amendment to the Agreement (Attachment 2) on May 17, 2022, which utilized the first extension to extend the term to June 30, 2023 and increased the contract compensation to $458,179.20 The proposed Second Amendment (Attachment 3) utilizes the remaining optional one-year extension to provide an additional year of service at a cost of $126,350.96, which would result in a new total compensation amount of $584,530.16 and a term expiration of June 30, 2024. The proposed Second Amendment includes an increase in contract rates to account for increases to the Consumer Price Index (“CPI”). Sufficient funding would be proposed in the 2023- 2025 Operating Budget to cover the costs of approving the proposed Second Amendment.
BACKGROUND:
On June 4, 2019, the City Council approved the Agreement with JCI for On-Call Facility and Park Maintenance Services after the completion of a competitive Request for Bids (“RFB”) process. The total compensation amount of the Agreement was $337,734.40 with a three-year term expiring June 30, 2022. The Item: 10
43 2
4 8
0 Agreement included two optional one-year extensions. The City Council approved the First Amendment to the Agreement (Attachment 2) on May 17, 2022, which utilized the first extension to extend the term to June 30, 2023, and increased the contract compensation to $458,179.20.
DISCUSSION:
The City currently maintains passive parks and sports parks, structures, and facilities including the Lake Forest Sports Complex and Civic Center campus.
The current Agreement with JCI for facility and park repair services provides for general maintenance of park facilities and includes furnishing all labor, materials, equipment, tools, and incidentals to repair City-owned facilities and equipment at all park locations and at the Civic Center. This also includes a certified playground safety inspection and head impact attenuation testing of playground surfaces.
The proposed Second Amendment with JCI would extend the term of the Agreement to June 30, 2024, thereby utilizing the remaining optional one-year extension described in the Agreement. Additionally, the proposed Second Amendment increases the compensation amount by $126,350.96, for a total compensation amount of $584,530.16, to provide for facility and park maintenance services during the 2023-24 Fiscal Year. The proposed Second Amendment includes an increase to contract rates of 4.9%, which is consistent with consistent with increases in the CPI as identified in the Agreement with JCI.
Staff believes that JCI’s performance has met or exceeded the Agreement’s scope of work relative to the responsibilities associated with facility and park maintenance services. Throughout the term of the Agreement, JCI demonstrated its willingness to respond quickly to requests for service and consistently completed all requested work in a professional manner. JCI provides good customer service and has demonstrated a readiness to assist with emergency and urgent repairs. The chart below provides an overall summary of JCI’s performance over the first one-year extension of the Agreement.
Item: 10
44 2
4 8
0 Jamey Clark, Inc. Performance Assessment
May 17, 2022 through April 18, 2023
Category Rating
Performance of Scope of Services ☐ Unsatisfied ☐ Satisfied ☒ Very Satisfied ☐ N/A
Timeliness ☐ Unsatisfied ☐ Satisfied ☒ Very Satisfied
☐ N/A
Budget Performance ☐ Unsatisfied ☐ Satisfied ☒ Very Satisfied ☐ N/A
Customer Service ☐ Unsatisfied ☐ Satisfied ☒ Very Satisfied ☐ N/A
Consistent with the City’s Purchasing and Contracting Guidelines (“Guidelines”), including vendor assessment, staff recommends approval of the Second Amendment to the Agreement with JCI to ensure that the City retains the ability to continue performing facility and park maintenance and repair services.
FISCAL IMPACT:
The proposed Second Amendment would increase the compensation amount in the Agreement with JCI by $126,350.96, which would bring the total compensation amount to $584,530.16. This includes a 4.9% adjustment for CPI.
Sufficient funding to cover the costs of the proposed Second Amendment would be proposed for the 2023-25 Operating Budget for the cost of Facility and Park Maintenance Services.
ATTACHMENTS:
1. Agreement for On-Call Facility and Park Maintenance Services with Jamey Clark, Inc.
2. First Amendment to the Agreement for On-Call Facility and Park Maintenance Services with Jamey Clark, Inc.
3. Second Amendment to the Agreement for On-Call Facility and Park Maintenance Services with Jamey Clark, Inc.
Initiated By: Jonathan Poole, Senior Management Analyst Submitted By: Thomas E. Wheeler, P.E., Dir. of Public Works/City Engineer Approved By: Debra Rose, City Manager
Item: 10
45 Attachment 1
Item: 10
46 Item: 10
47 Item: 10
48 Item: 10
49 Item: 10
50 Item: 10
51 Item: 10
52 Item: 10
53 Item: 10
54 Item: 10
55 Item: 10
56 Item: 10
57 Item: 10
58 Item: 10
59 Item: 10
60 Item: 10
61 Item: 10
62 Item: 10
63 Item: 10
64 Item: 10
65 Item: 10
66 Item: 10
67 Item: 10
68 Item: 10
69 Item: 10
70 Item: 10
71 Item: 10
72 Item: 10
73 Item: 10
74 Item: 10
75 Item: 10
76 Item: 10
77 Item: 10
78 Item: 10
79 Attachment 2
Item: 10
80 Item: 10
81 Item: 10
82 Item: 10
83 Item: 10
84 Attachment 3
Item: 10
85 55136.00200\31919338.1 - 1 -
CITY OF LAKE FOREST
SECOND AMENDMENT TO
AGREEMENT FOR MAINTENANCE SERVICES
1. PARTIES AND DATE.
This Second Amendment to the Agreement for Maintenance Services (“Second Amendment”) is entered into on the [***INSERT DAY***] day of [***INSERT MONTH***] , [***INSERT YEAR***], by and between the City of Lake Forest, a municipal corporation, organized under the laws of the State of California, with it s principal place of business at 100 Civic Center Drive, Lake Forest, CA 92630 (“City”) and Jamey Clark, Inc., a California corporation, with its principal place of business at 23052 Alcalde Drive, Suite C Laguna Hills, CA 92653 ("Consultant").
City and Consultant are sometimes individually refe rred to herein as "Party" and collectively as "Parties."
2. RECITALS.
2.1 Agreement. The Parties entered into that certain Agreement for Park Inspection and Park Facility Repair Maintenance Services dated June 4, 2019 (“Agreement”).
2.2 First Amendment. The Parties entered into that certain First Amendment in order to extend the term of the Agreement and increase the total compensation under the Agreement dated May 19, 2022 (“First Amendment”).
2.3 Second Amendment. The Parties now desi re to amend the Agreement in order to extend the term of the Agreement and increase the total amount of compensation under the Agreement.
3. TERMS.
3.1 Term. Section 3.1.2 of the Agreement is hereby amended in its entirety to read as follows:
Term. The term of this Agreement shall be from July 1, 2019 to June 30, 2024, unless earlier terminated as provided herein. Contractor shall complete the services within the term of this Agreement, and shall meet any other established schedules and deadlines.
3.2 Compensation. Section 3.3.1 of the Agre ement is hereby amended in its entirety to read as follows:
Contractor shall receive compensation, including authorized reimbursements, for all Services rendered under this Agreement at the rates set forth in Exhibit “C” attached hereto and incorporated herein by reference. The total compensation shall not exceed FIVE
HUNDRED EIGHTY-FOUR THOUSAND FIVE HUNDRED THIRTY
DOLLARS AND SIXTEEN CENTS ($584,530.16) without written approval of the City Council or Cit y Manager as applicable. Extra Work may be authorized, as described below, and if authorized, will
Item: 10
86 55136.00200\31919338.1 - 2 -
be compensated at the rates and manner set forth in this Agreement.
3.3 Remaining Provisions of Agreement. Exce pt as otherwise specifically set forth in this Second Amendment, the remaining provisions of the Agreement shall remain in full force and effect.
CITY OF LAKE FOREST JAMEY CLARK, INC.
By: [AUTHORIZED CITY SIGNATURE]
Doug Cirbo
Mayor
By: [VENDOR SIGNATURE 1]
James L. Clark
President
[If Corporation, TWO SIGNATURES,
President OR Vice President AND Secretary
OR Treasurer REQUIRED]
ATTEST:
By: [CITY CLERK SIGNATURE]
Lisa Berglund
City Clerk
By: [VENDOR SIGNATURE 2]
James L. Clark
Secretary
APPROVED AS TO FORM:
By: [CITY ATTORNEY SIGNATURE]
Best Best & Krieger LLP
City Attorney
Item: 10
87 55136.00200\31919338.1 Attachment “1”-1
ATTACHMENT “1” TO SECOND AMENDMENT TO
AGREEMENT FOR MAINTENANCE SERVICES
EXHIBIT “C”
COMPENSATION
Contractor shall be paid for services rendered in accordance with Section 3.3 of the Agreement and as directed under Exhibit “A” Scope of Maintenance Services, and the not to exceed fee of Five Hundred Eighty-Four Thousand Five Hundred Thirty Dollars and Sixteen Cents ($584,530.16), billed on a time and materials basis utilizing the following rates.
SECOND AMENDMENT
Description UOM Estimated
Quantity
Unit Price
(Effective July
1, 2023)
2nd Amendment
Extended Price
(July 1, 2023-June
30, 2024)
Labor-normal business hours Hour 800 $89.17 $71,336.00
Labor-Holidays/After Hours Hour 120 $133.75 $16,050.00
Park Inspections
Alton Park Each 2 $445.83 $891.66
Baker Ranch Community Park Each 2 $461.56 $923.12
Borrego Canyon Overlook Park Each 2 $401.24 $802.48
Cavanagh Mini Park Each 2 $400.93 $801.86
Cherry Park Each 2 $445.83 $891.66
Concourse Park Each 2 $534.99 $1,069.98
Darin Park Each 2 $401.24 $802.48
El Toro Park Each 2 $534.99 $1,069.98
Etnies Skate Park Each 2 $508.77 $1,017.54
Foothill Ranch Community Park Each 2 $534.99 $1,069.98
Heroes Park Each 2 $445.83 $891.66
Lake Forest Park Each 2 $401.24 $802.48
Lake Forest Sports Park Each 2 $1,064.74 $2,129.48
Montbury Park Each 2 $401.24 $802.48
Mountain View Park Each 2 $713.32 $1,426.64
Nature Park Each 2 $401.24 $802.48
Peachwood Park Each 2 $401.24 $802.48
Pebble Creek Park Each 2 $401.24 $802.48
Pittsford Park Each 2 $534.99 $1,069.98
Rancho Serrano Park Each 2 $490.41 $980.82
Item: 10
88 55136.00200\31919338.1 Attachment “1”-2
Description UOM Estimated
Quantity
Unit Price
(Effective July
1, 2023)
2nd Amendment
Extended Price
(July 1, 2023-June
30, 2024)
Ranchwood Park Each 2 $401.24 $802.48
Regency Park Each 2 $401.24 $802.48
Rimgate Park Each 2 $445.83 $891.66
Serrano Creek Park Each 2 $401.24 $802.48
Sundowner Park Each 2 $401.24 $802.48
Tamarisk Park Each 2 $508.77 $1,017.54
Veterans Park Each 2 $404.07 $808.14
Vintage Park Each 2 $403.87 $807.74
Sub Total Park Inspections $113,972.72
Impact Attenuation Testing
Baker Ranch Community Park Each 1 $928.37 $928.37
Borrego Canyon Overlook Park Each 1 $309.46 $309.46
Cherry Park Each 1 $309.46 $309.46
Darin Park Each 1 $928.37 $928.37
El Toro Park Each 1 $618.91 $618.91
Lake Forest Park Each 1 $309.46 $309.46
Lake Forest Sports Park Each 1 $3,713.46 $3,713.46
Mountain View Park Each 1 $618.91 $618.91
Pebble Creek Park Each 1 $309.46 $309.46
Peachwood Park Each 1 $309.46 $309.46
Pittsford Park Each 1 $1,856.73 $1,856.73
Rimgate Park Each 1 $618.91 $618.91
Serrano Creek Park Each 1 $1,237.82 $1,237.82
Vintage Park Each 1 $309.46 $309.46
Total Additional Compensation
(2nd Amendment)
$126,350.96
Original Total Compensation $337,734.40
First Amendment- Total
Compensation $458,179.20
Second Amendment- Total
Compensation $584,530.16
Item: 10
89 CITY COUNCIL AGENDA REPORT
MEETING DATE: 4/18/2023
DEPARTMENT: Public Works
SUBJECT:
REJECT ALL BIDS AND AUTHORIZE RE-BIDDING FOR STRUCTURAL
STEEL PATIO COVER AT LAKE FOREST CIVIC CENTER SENIOR CENTER (PW 2022-13)
RECOMMENDED ACTION(S):
1. Reject all bids for the Structural Steel Patio Cover Senior Center Project (PW 2022-13).
2. Authorize staff to solicit new bids for this project.
EXECUTIVE SUMMARY:
The Structural Steel Patio Cover at the Lake Forest Civic Center Senior Center project is funded through a Community Development Block Grant (“CDBG-CV Grant”) with a budget of $350,000. On April 12, 2023, the City received bids from thirteen (13) firms, for the Structural Steel Patio Cover at the Lake Forest Civic Center Senior Center. The bids ranged from $1 to $687,000.
In reviewing the bid packages, all but one bidder neglected to include the required federal paperwork in their bid submittal. Staff recommends the City Council reject all bids and rebid the project. There is minor fiscal impact associated with this recommended action.
BACKGROUND:
The Structural Steel Patio Cover at the Lake Forest Civic Center Senior Center project is funded through a Community Development Block Grant (“CDBG-CV Grant”) with a budget of $350,000. The proposed patio cover is a trellis designed with steel beams and steel rafters to match the existing patio covers at the Senior Center. The proposed location is the outdoor area that faces Civic Center Drive.
The City received Federal COVID-19 related funding in the amount of $350,000.
Item: 11
90 DISCUSSION:
On April 12, 2023, the City received bids from thirteen (13) firms, ranging from $1 to $687,000. The apparent low bidder, Harbor Coating and Restoration, contacted the City regarding an error in submitting a bid of $1 and requested their bid be withdrawn.
With the low bidder requesting their bid be withdrawn, staff reviewed the other bidders’ bid packages to determine the lowest responsive, responsible bidder.
The next lowest bidder, Elegant Construction Inc.,("ECI") submitted a bid of $345,000. However, ECI did not include the required federal paperwork in their bid package submittal. Staff reviewed all the other bidders’ bid packages and found that only one of the thirteen bidders included the required federal paperwork with their bid documents. The lowest responsive, responsive bidder, who did include the federal paperwork, is M.S. Construction Management Group with a bid price of $525,260.00, which significantly exceeded the project grant amount.
Given that the City received several bids much lower than the federally compliant bid of $525,260, staff recommends the City Council reject all bids and rebid the project. Staff will revise the bidding documents to make the process clearer.
FISCAL IMPACT:
There is minor fiscal impact for the recommended action.
ATTACHMENTS:
Bid Summary
Initiated By: Douglas Erdman, Assistant City Engineer
Submitted By: Thomas Wheeler, P.E., Director of Public Works/City Engineer Approved By: Debra Rose, City Manager
Item: 11
91 Attachment
Item: 11
92 City of Lake Forest
Bid Results for Project STRUCTURAL STEEL PATIO COVER AT LAKE FOREST CIVIC CENTER SENIOR CENTER (PW 2022‐13) Issued on 03/01/2023
Bid Due on April 12, 2023 10:00 AM (PDT)
Exported on 04/14/2023
Federal Paperwork
Vendor Name
Harbor Coating and Restoration
Elegant Construction Inc.
ZUMA CONSTRUCTION GROUP INC.
Global Builders Inc
D.F. Perez Construction, Inc.
M.S. CONSTRUCTION MANAGEMENT GROUP
HZS Engineering Inc
Bid Amount Included in Bid Package
$1.00 No
Responsive
No
No
No
No
No
Yes
No
No
No
Notes
Bidder requested bid be withdrawn
$345,000.00 No
$408,413.00 No
$468,888.00 No
$496,705.00 No
$525,260.00 Yes
$526,700.00 No
$529,000.00 No
$534,000.00 No
$547,523.00 No
$566,250.00 No
$671,060.00 No
$687,000.00 No
Bedrock Group, Inc.
Horizons Construction Company Int'l Inc.
Metro Builders & Engineers Group, Ltd.
Unix Construction Inc
MLC Constructors
Modern General Contractor Inc.
No
No
No
No
Item: 11
93 CITY COUNCIL AGENDA REPORT
MEETING DATE: 4/18/2023
DEPARTMENT: Finance
SUBJECT:
FISCAL YEAR 2022-23 MID-YEAR BUDGET REVIEW
RECOMMENDED ACTION(S):
Adopt a Resolution entitled: A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKE FOREST, CALIFORNIA, AMENDING THE 2021-2023 OPERATING BUDGET; AMENDING APPROPRIATIONS FOR FISCAL YEAR 2022-23
EXECUTIVE SUMMARY:
The proposed Mid-Year Budget Review would increase General Fund revenues by $3,161,000 and increase appropriations by $115,500. In addition, revenue adjustments in other funds are proposed to reflect activity to date.
Staff believes the proposed adjustments updates the second year (i.e., Fiscal Year 2022-23) of the 2021-2023 Operating Budget utilizing best available information at this time.
DISCUSSION:
This report will cover recommended changes as part of the Mid-Year Budget Review process. These adjustments include a variety of adjustments to the original adopted budget for the current fiscal year.
Fiscal Year 2022-23 Budget Overview
The Mid-Year Budget Review is presented to the City Council to recommend changes to revenue and appropriations estimates for the fiscal year. The City has a strong tradition of responsible fiscal management and planning. To ensure positive financial results, staff has been carefully monitoring levels of spending, major economic indicators, available information from revenue consultants, and permit activity projections related to City revenues.
The budget is continually reviewed for adherence to the City’s long-term financial vision, preservation of the City’s financial integrity, and proper implementation of the City’s Strategic Plan initiatives. During the City’s Mid-Year Review, staff Item: 12
94 1
8 4
1 reviewed the budget for the upcoming fiscal year and assessed the accuracy of the adopted budget to the City’s anticipated financial position and proposed programmatic spending.
The proposed Mid-Year Budget adjustments would increase General Fund revenues by $3.16 million, and General Fund expenditures by $0.12 million.
Staff believes the proposed adjustments would reflect the best available information at this time and update the second year, Fiscal Year 2022-23, of the 2021-2023 Operating Budget.
Summary of Proposed General Fund Revenues
Proposed revenue estimates for Fiscal Year 2022-23 are based on the information and analysis of the current and best available information. An overall increase of 5.49% is proposed for General Fund revenues. Revenue types and changes are depicted below in Table 1. Detailed explanations can be found in Attachment 1.
Table 1: Fiscal Year 2022-23 Revenue Projections
Revenue Type FY 2022-23
Current
Budget
Increase
(Decrease)
FY 2022-23
Proposed % Change
Taxes
Property Taxes $23,514,000
$200,000 $23,714,000 0.85%
Sales and Use
Taxes 18,750,000 - 18,750,000 0.00%
Franchise Fees 2,629,000
164,000 2,793,000 6.24%
Transient
Occupancy Taxes 4,500,000 - 4,500,000 0.00%
Real Property
Transfer Tax 600,000
150,000 750,000 25.00%
Other Taxes 72,000
- 72,000 0.00%
Licenses and
Permits 1,916,000
1,047,000 2,963,000 54.65%
Charges for
Services 4,182,350
(400,000) 3,782,350 -9.56%
Intergovernmental 221,600
- 221,600 0.00%
Use of Money
and Property 383,000
2,000,000 2,383,000 522.19%
Fines and 410,000 410,000 0.00%
Item: 12
95 1
8 4
1 Summary of Proposed General Fund Expenditures by Program As in previous budget documents, each department develops annual goals consistent with the City’s current Strategic Plan. Adjustments to budgeted amounts for program expenditures have been proposed to better reach these strategic goals. Table 2 shows the proposed appropriations for each departmental program. Detailed explanations can be found in Attachment 1.
Table 2: Proposed Departmental Appropriations
General
Fund/Expenditure
Program
FY 2022-23
Current
Budget
Increase
(Decrease)
FY 2022-23
Proposed
% Change
Legislative $124,500 - $124,500 0.00%
General
Government
City Manager 3,047,176 - 3,047,176 0.00%
Information
Technology
2,504,800 - 2,504,800 0.00%
City Clerk 956,327 15,500 971,827 1.62%
City Attorney 1,286,000 - 1,286,000 0.00%
Finance 3,990,421 - 3,990,421 0.00%
Public
Information
856,813 - 856,813 0.00%
Human
Resources
486,990 - 486,990 0.00%
Community
Development
3,591,206 300,000 3,891,206 8.35%
Public Works 13,981,003 (200,000) 13,781,003 -1.43%
Community
Services
3,850,980 - 3,850,980 0.00%
Police Services 21,222,874 - 21,222,874 0.00%
Total $55,899,090 $115,500 $56,014,590 0.21%
The proposed changes to Fiscal Year 2022-23 cost estimates are presented with detailed explanations in Attachment 1. Attachment 2 reflects revenue adjustments for the General Fund. Attachment 3 reflects appropriation Forfeitures -
Developer
Contributions 167,200 - 167,200 0.00%
Other 267,500
- 267,500 0.00%
Total $57,612,650
$3,161,000 $60,773,650 5.49%
Item: 12
96 1
8 4
1 adjustments for the General Fund, and Attachment 4 reflects adjustments for all other funds. Other fund adjustments include changes in revenue in line with the latest information and guidance.
Other Fund Revenues:
The adjustments in Table 3 reflect proposed estimated revenues in other funds:
Table 3: Other Fund Revenue Estimates
Fund Revenue Sources
Adjustment
Increase
(Decrease)
Gas Tax State Shared Revenues $(110,000)
Road Maintenance Rehab
Account
State Shared Revenues
10,000
Measure M2 Local Fair Share County Shared Revenues 275,000 Measure M2 Senior Mobility County Shared Revenues 15,000 Community Facilities Fees Developer Contributions 3,000,000 Community Development Block
Grant
Special Revenues
49,396
Total Net Adjustment $3,239,396
The adjustments in Table 4 reflect proposed estimated appropriations in other funds:
Table 4: Other Fund Appropriation Adjustments
Fund
FY 2022-23
Current
Budget
Increase
(Decrease)
FY 2022-23
Proposed
%
Change
Community
Development Block
Grant $1,356,331 $93,478 $1,449,809 6.89%
Total Net Adjustment $93,478
Conclusion
In conclusion, approving the proposed adjustments would increase General Fund revenues by $3,161,200, and increase expenditures by $115,500. Staff believes the proposed adjustments to revenues and appropriations would update the second year (i.e., Fiscal Year 2022-23) of the 2021-2023 Operating Budget utilizing the best available information at this time.
Item: 12
97 1
8 4
1 A resolution approving the proposed adjustments is provided as Attachment 5.
Staff recommends the City Council approve the attached resolution authorizing the budget adjustments described in this report.
FISCAL IMPACT:
The fiscal impact of the recommended action increases General Fund revenues by $3,161,200 and increases General Fund appropriations by $115,500. This action increases Special Revenue and Capital Improvement fund revenues by $3,239,396 and appropriations by $93,478.
Staff believes the proposed adjustments outlined in the discussion sections above would update the Fiscal Year 2022-23 of the 2021-2023 Operating Budget utilizing best available information.
ATTACHMENTS:
1. Proposed Mid-Year Fiscal Year 2022-23 Changes
2. General Fund Revenue by Source
3. General Fund Appropriations
4. Estimated Revenue/Appropriation Adjustments to Other Funds
5. Proposed Resolution
Initiated By: Amy Lewis, Assistant Director of Finance
Submitted By: Kevin Shirah, Director of Finance/City Treasurer Approved By: Debra Rose, City Manager
Item: 12
98 ATTACHMENT 1
Item: 12
99 Proposed Mid-Year Fiscal Year 2022-2023 Changes
5 0
5 6
8 The proposed changes to the Fiscal Year 2022-23 are shown in Attachment 2, 3, and 4 accompanying this report. Attachment 2 reflects revenue adjustments for the General Fund. Attachment 3 reflects appropriation adjustments for the General Fund, and Attachment 4 reflects adjustments for all other funds.
Overall, proposed General Fund revenue increase totals $3,161,000 and proposed General Fund cost estimates increase totals $115,500.
Proposed Changes to Estimated Revenues
General Fund
(1)Property Tax – VLF- These vehicle license fee (“VLF”) in-lieu estimates are based on property value changes between tax years. Based on the current year’s amended budget the Motor Vehicle in Lieu will exceed the original estimate. It is recommended that the revenue be increased by $100,000.
(2)Other Property Taxes – Other Property Taxes include supplemental taxes as well as unsecured property taxes. Other property tax types are generally unpredictable from year to year so projections are based on most recent activity and do not include growth factors.
(3)Real Property Transfer Taxes - The Real Property Transfer Tax estimates are based on property value upon transfer of ownership. Real Property Transfer Taxes are estimated to be $750,000, and a budget adjustment of $150,000 is proposed to increase the current budget of $600,000.
(4) Franchise Fees –Taxes are assessed as a percentage of cost, with the rising cost of utilities, the Franchise Revenue is estimated to increase by $164,000 to a total of $2,793,000.
(5)Licenses and Permits - The Building and Safety revenue estimates are based on routine building construction and other developments in the City.
Building permits are for both residents and commercial applicants . The proposed adjustment is an increase due to heightened building activity. (6)Charges for Services – Planning and Zoning/Engineering Fees:
Development within the City continues to progress at a slower rate than originally anticipated. These revenues are directly tied to the expenses they incur, so while the overall revenue is decreasing, there are correlating expenses that will also decrease.
Item: 12
100
Proposed Mid-Year Fiscal Year 2022-2023 Changes
5 0
5 6
8 (7)Plan Check – Plan Check revenues fluctuate with the amount of building construction and other development in the City. In conjunction with the Meadows Development, Plan Check fees have remained consistent requiring an increase in revenue estimates.
(8)Investment Income – With rising interest rates and wise investment decisions, increased income has been generated due to the prudent investment of city funds. This growth has increased revenue estimates by $2,000,000.
Proposed Changes to Estimated Expenditures
General Fund
(9)City Clerk – Staff is requesting an increase of $15,500. Citywide membership fees are anticipated to increase based on council approved membership in Association of California Cities of Orange County. (10)Public Works – Staff is requesting a decrease of $200,00. This proposed reduction to appropriations is in agreement with the reduction for reimbursable engineering fee revenues.
(11)Community Development – Staff is requesting a total increase of $300,000 in Community Development. Professional services for the Building and Safety Inspection services of $500,000 is offset by a proposed revenue increase of $1,050,000 under the revenue cost sharing included in the contract. Professional services Planning fees are reduced in conjunction with the reduction of Planning and Zoning revenues.
Other Funds Revenues
(12)State Gas Tax Fund –
Revenue - Current projections for Gas Tax revenue from the State have decreased $110,000 over the prior projection.
.
(13)Road Maintenance Rehab Account
Revenue – Current projections for RMRA revenue from the State have increased $10,000 over the prior projection.
(14)Measure M2 Local Fair Share
Item: 12
101
Proposed Mid-Year Fiscal Year 2022-2023 Changes
5 0
5 6
8 Revenue – Current projections for M2 revenue from the County have increased $275,000 over the prior projection.
(15) Measure M2 Senior Mobility
Revenue – Current projections for M2 Senior Mobility revenue from the County have increased $15,000 over the prior projection. (16)Community Facilities Fees
Revenue – Current projects for Developer based Community Facilities Fees have increased $3,000,000 over the prior projection. This reflects the current year activities within this fund pursuant to the development agreement.
(17)Community Development Block Grant Programs-
Revenue – Current projections with approved action plan for CDBG require a $49,396 increase in revenues.
Expenditures – To remain consistent with the Fiscal Year 2022-23 CDBG action plan, a $93,478 increase in appropriations is required.
Item: 12
102
ATTACHMENT 2
Item: 12
103
City of Lake Forest
General Fund Revenue by Source
Fiscal Year 2022-23
(#) Adopted Budget
Mid-Cycle
Adjustment
Proposed
Amended
Budget % Change
Taxes
Franchise
Cable 760,000 - 760,000 0.00% Gas 155,000 - 155,000 0.00% Electric (4) 1,153,000 150,000 1,303,000 13.01% Refuse (4) 561,000 14,000 575,000 2.50% Total Franchise: 2,629,000 164,000 2,793,000 6.24% Property Taxes
Other (2) 727,000 100,000 827,000 13.76% Motor Vehicle In Lieu (1) 10,250,000 100,000 10,350,000 0.98% Secured 12,537,000 - 12,537,000 0.00% Total Property Taxes: 23,514,000 200,000 23,714,000 0.85% Sales And Use 18,750,000 - 18,750,000 0.00% Transient Occupancy 4,500,000 - 4,500,000 0.00% Real Property Transfer (3) 600,000 150,000 750,000 25.00% Other Taxes-Fees 72,000 - 72,000 0.00% Total Taxes: 50,065,000 514,000 50,579,000 1.03% Licenses and Permits
Building Permits (5) 1,915,000 1,047,000 2,962,000 54.67% Other Permits 1,000 1,000 0.00% Total Licenses and Permits: 1,916,000 1,047,000 2,963,000 54.65% Charges for Services
Community Services
Seniors 18,000 - 18,000 Rentals and Reservations 200,000 - 200,000 0.00% Community Events 52,500 - 52,500 0.00% Recreation 451,000 - 451,000 0.00% Kids Factory 439,950 - 439,950 0.00% Hometown Heros 6,000 - 6,000 0.00% Sports Park 480,000 - 480,000 0.00% Skatepark 230,600 - 230,600 0.00% Total Community Services: 1,878,050 - 1,878,050 0.00% Plan Check (7) 488,000 200,000 688,000 40.98% Planning And Zoning (6) 510,300 (300,000) 210,300 -58.79% Engineering Inspection (6) 1,250,000 (300,000) 950,000 -24.00% Shared Services 56,000 - 56,000 0.00% Total Charges for Services: 4,182,350 (400,000) 3,782,350 -9.56% Intergovernmental
Other Grant 182,600 - 182,600 0.00% Other State 39,000 - 39,000 0.00% Total Intergovernmental: 221,600 - 221,600 0.00% Use of Money and Property
Investment Earnings (8) 250,000 2,000,000 2,250,000 800.00% Lease Income 133,000 - 133,000 0.00% Total Use of Money and Property: 383,000 2,000,000 2,383,000 522.19% Fines and Forfeitures
Motor Vehicle 205,000 - 205,000 0.00% Local Ordinance 205,000 - 205,000 0.00% Total Fines and Forfeitures: 410,000 - 410,000 0.00% Item: 12
104
City of Lake Forest
General Fund Revenue by Source
Fiscal Year 2022-23
(#) Adopted Budget
Mid-Cycle
Adjustment
Proposed
Amended
Budget % Change
Developer Contributions 167,200 - 167,200 0.00% Other 267,500 - 267,500 0.00% TOTAL 57,612,650 3,161,000 60,773,650 5.49% (#) Correlates to the numbered items on Attachment 1.
Item: 12
105
ATTACHMENT 3
Item: 12
106
City of Lake Forest
General Fund Appropriations
Fiscal Year 2022-23
(#)
Adopted
Budget
Mid-Cycle
Adjustment
Proposed
Amended
Budget % Change
General Government
City Attorney
Contract Services 1,286,000 1,286,000 0.00% Total City Attorney: 1,286,000 - 1,286,000 0.00% City Clerk
Personnel 565,207 565,207 0.00% Operations and Maintenance (9) 116,163 15,500 131,663 13.34% Contract Services 274,957 274,957 0.00% Capital Outlay - -
Total City Clerk: 956,327 15,500 971,827 1.62% Finance
Personnel 1,173,089 1,173,089 0.00%
Operations and Maintenance 239,000 239,000 0.00% Contract Services 2,516,241 2,516,241 0.00% Capital Outlay 62,091 62,091 0.00% Total Finance: 3,990,421 - 3,990,421 0.00% Public Information
Personnel 479,900 479,900 0.00% Operations and Maintenance 66,928 66,928 0.00% Contract Services 309,985 309,985 0.00% Capital Outlay - -
Total Public Information: 856,813 - 856,813 0.00% Human Resources
Personnel 341,312 341,312 0.00% Operations and Maintenance 69,346 69,346 0.00% Contract Services 73,694 73,694 0.00% Capital Outlay 2,638 2,638 0.00% Total Human Resources: 486,990 - 486,990 0.00% Information Technology
Personnel 537,100 537,100 0.00% Operations and Maintenance 299,316 299,316 0.00% Contract Services 1,538,067 1,538,067 0.00% Capital Outlay 130,317 130,317 0.00% Total Information Technology: 2,504,800 - 2,504,800 0.00% City Manager
Personnel 889,217 889,217 0.00% Operations and Maintenance 23,800 23,800 0.00% Contract Services 122,369 122,369 0.00% Capital Outlay - -
Total City Manager: 1,035,386 - 1,035,386 0.00% Economic Development
Personnel 228,900 228,900 0.00% Operations and Maintenance 111,100 111,100 0.00% Contract Services 1,361,790 1,361,790 0.00% Capital Outlay 310,000 310,000 0.00% Total Economic Development: 2,011,790 - 2,011,790 0.00% Total General Government: 13,128,527 15,500 13,144,027 0.12% Public Safety
Police Services
Personnel 135,000 135,000 0.00% Operations and Maintenance 126,745 126,745 0.00% Contract Services 20,961,129 20,961,129 0.00% Capital Outlay - -
Total Police Services: 21,222,874 - 21,222,874 0.00% Total Public Safety: 21,222,874 - 21,222,874 0.00% Item: 12
107
City of Lake Forest
General Fund Appropriations
Fiscal Year 2022-23
(#)
Adopted
Budget
Mid-Cycle
Adjustment
Proposed
Amended
Budget % Change
Community Services
Administration
Personnel 216,635 216,635 0.00% Operations and Maintenance 29,078 29,078 0.00% Contract Services 300 300 0.00% Capital Outlay - -
Total Administration: 246,013 - 246,013 0.00% Seniors
Personnel 513,362 513,362 0.00% Operations and Maintenance 99,234 99,234 0.00% Contract Services 23,917 23,917 0.00% Capital Outlay 20,888 20,888 0.00% Total Seniors: 657,401 - 657,401 0.00% Skatepark
Personnel 504,600 504,600 0.00% Operations and Maintenance 60,269 60,269 0.00% Contract Services 9,113 9,113 0.00% Capital Outlay 5,000 5,000 0.00% Total Skatepark: 578,982 - 578,982 0.00% Sports Park And Recreation Center
Personnel 648,743 648,743 0.00% Operations and Maintenance 90,222 90,222 0.00% Contract Services 837,958 837,958 0.00% Capital Outlay - -
Total Sports Park And Recreation Cen: 1,576,923 - 1,576,923 0.00% Special Events
Personnel 129,300 129,300 0.00% Operations and Maintenance 176,302 176,302 0.00% Contract Services 98,348 98,348 0.00% Capital Outlay - -
Total Special Events: 403,950 - 403,950 0.00% Community Center-Performing Arts
Personnel 223,381 223,381 0.00% Operations and Maintenance 31,390 31,390 0.00% Contract Services 132,940 132,940 0.00% Capital Outlay - -
Total Community Center-Performing Arts: 387,711 - 387,711 0.00% Total Community Services: 3,850,980 - 3,850,980 0.00% Public Works
Administration
Personnel 510,500 510,500 0.00% Operations and Maintenance 13,903 13,903 0.00% Contract Services 23,046 23,046 0.00% Capital Outlay - -
Total Engineering Support: 547,449 - 547,449 0.00% Engineering Services
Personnel 501,500 501,500 0.00% Operations and Maintenance 8,000 8,000 0.00% Contract Services (10) 1,314,236 (200,000) 1,114,236 -15.22% Capital Outlay - -
Total Engineering Services: 1,823,736 (200,000) 1,623,736 -10.97% Parks and Landscaping
Personnel 595,714 595,714 0.00% Operations and Maintenance 247,552 247,552 0.00% Item: 12
108
City of Lake Forest
General Fund Appropriations
Fiscal Year 2022-23
(#)
Adopted
Budget
Mid-Cycle
Adjustment
Proposed
Amended
Budget % Change
Contract Services 6,650,541 6,650,541 0.00% Capital Outlay - -
Total Parks and Landscaping: 7,493,807 - 7,493,807 0.00% Environmental Services
Personnel 283,900 283,900 0.00% Operations and Maintenance 144,829 144,829 0.00% Contract Services 478,350 478,350 0.00% Capital Outlay - -
Total Environmental Services: 907,079 - 907,079 0.00% Facilities
Personnel 115,700 115,700 0.00% Operations and Maintenance 37,953 37,953 0.00% Contract Services 1,401,364 1,401,364 0.00% Capital Outlay 12,000 12,000 0.00% Total Facilities: 1,567,017 - 1,567,017 0.00% Street and Traffic Management
Personnel 185,700 185,700 0.00% Operations and Maintenance 78,701 78,701 0.00% Contract Services 1,377,514 1,377,514 0.00% Capital Outlay - -
Total Street and Traffic Management: 1,641,915 - 1,641,915 0.00% Total Public Works: 13,981,003 (200,000) 13,781,003 -1.43% Community Development
Administration
Personnel 362,768 - 362,768 0.00% Operations and Maintenance 8,137 8,137 0.00% Contract Services 20,106 20,106 0.00% Capital Outlay - -
Total Administration: 391,011 - 391,011 0.00% Building
Personnel - -
Operations and Maintenance 12,450 12,450 0.00% Contract Services (11) 1,209,000 500,000 1,709,000 41.36% Capital Outlay 1,350 1,350 0.00% Total Building: 1,222,800 500,000 1,722,800 40.89% Planning
Personnel 749,258 749,258 0.00% Operations and Maintenance 22,357 22,357 0.00% Contract Services (11) 529,000 (200,000) 329,000 -37.81% Capital Outlay - -
Total Planning: 1,300,615 (200,000) 1,100,615 -15.38% Code Enforcement
Personnel 520,976 - 520,976 0.00% Operations and Maintenance 17,350 17,350 0.00% Contract Services 22,700 22,700 0.00% Capital Outlay - -
Total Code Enforcement: 561,026 - 561,026 0.00% Housing
Personnel - -
Operations and Maintenance 1,600 1,600 0.00% Contract Services - -
Capital Outlay 114,154 114,154 0.00% Total Housing: 115,754 - 115,754 0.00% Item: 12
109
City of Lake Forest
General Fund Appropriations
Fiscal Year 2022-23
(#)
Adopted
Budget
Mid-Cycle
Adjustment
Proposed
Amended
Budget % Change
Total Community Development: 3,591,206 300,000 3,891,206 8.35% Legislative
City Council
Personnel 45,600 45,600 0.00% Operations and Maintenance 33,000 33,000 0.00% Contractual - -
Total City Council: 78,600 - 78,600 0.00% Planning Commission
Personnel 7,300 7,300 0.00% Operations and Maintenance 14,500 14,500 0.00% Total Planning Commission: 21,800 - 21,800 0.00% Traffic And Parking Commission
Personnel 7,300 7,300 0.00% Operations and Maintenance 6,500 6,500 0.00% Total Traffic And Parking Commission: 13,800 - 13,800 0.00% Parks And Recreation Commission
Personnel 3,500 3,500 0.00% Operations and Maintenance 6,800 6,800 0.00% Total Parks And Recreation Commission: 10,300 - 10,300 0.00% Total Legislative: 124,500 - 124,500 0.00% TOTAL: 55,899,090 115,500 56,014,590 0.21% (#) Correlates to the numbered items on Attachment 1.
Item: 12
110
ATTACHMENT 4
Item: 12
111
City of Lake Forest
Estimated Revenue/Appropriation Adjustments
Fiscal Year 2022-23
(#)
Revenue
Adjustments
Appropriation
Adjustments
Net Increase/
(Decrease) to
Fund Balance
State Gas Tax Fund
Intergovernmental Revenue (12) (110,000) - Net increase (decrease) in fund balance (110,000)
Road Maintenance Rehab Account Fund
Intergovernmental Revenue (13) 10,000
Net increase (decrease) in fund balance - 10,000 Measure M2 Local Fair Share Fund
Intergovernmental Revenue (14) 275,000
Net increase (decrease) in fund balance 275,000
Measure M2 Senior Mobility Fund
Intergovernmental Revenue (15) 15,000
Net increase (decrease) in fund balance 15,000
Community Facilities Fees Fund
Developer Contributions (16) 3,000,000
Net increase (decrease) in fund balance 3,000,000
CDBG
Revenue (17) 49,396
Rehab Loans (17) 93,478
Net increase (decrease) in fund balance (44,082)
Totals 3,239,396 93,478 3,145,918 (#) Correlates to the numbered items on Attachment 1.
Item: 12
112
5 0
7 2
2 ATTACHMENT 5
Item: 12
113
RESOLUTION NO. 2023-xx
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
LAKE FOREST, CALIFORNIA, AMENDING THE 2021-2023
OPERATING BUDGET; AMENDING APPROPRIATIONS
FOR FISCAL YEAR 2022-23
WHEREAS, the 2021-2023 Operating Budget was adopted by the City Council on June 15, 2021; and
WHEREAS, the appropriations for Fiscal Year 2022-23 was adopted by the City Council on June 21, 2022;
WHEREAS, modifications are now required as a result of changes during Fiscal Year 2022-2023.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF LAKE
FOREST DOES HEREBY RESOLVE, DETERMINE, FIND AND ORDER
AS FOLLOWS:
Section 1. The City Council’s adoption of this Resolution is not a project within the meaning of the California Environmental Quality Act. Specifically, the City’s adoption of the Resolution is an administrative and fiscal function of the City that does not commit the City to any specific project or course of action. (State CEQA Guidelines, sections 15378(b)(4) & (b)(5).) Thus, no environmental review of the Resolution is required. The City Council hereby directs staff to prepare, execute and file with the Orange County Clerk a Notice of Exemption within five working days of the adoption of this Resolution.
Section 2. The appropriations are hereby authorized, and revenue estimates confirmed for Fiscal Year 2022-23 as reflected on Exhibit A to this Resolution.
Section 3. That, for FY 2022-23, the Director of Finance is hereby authorized to move appropriations between line items within departmental budgets in concurrence with Department Directors.
Section 4. That for FY 2022-23, the City Manager is hereby authorized to transfer appropriations from one department to another or between funds within Item: 12
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the Operating Budget with notification to the City Council Audit Committee.
Section 5. That for FY 2022-23, the City Manager is hereby authorized to transfer appropriations from a capital improvement project to another existing project within the adopted Capital Improvement Program with notification to the City Council Audit Committee.
Section 6. The City Clerk shall attest as to the adoption and execution of this Resolution and cause the same to be maintained in the permanent records of the City.
PASSED, APPROVED AND ADOPTED this 18th day of April 2023, by the following vote, to wit:
DOUG CIRBO
MAYOR
ATTEST:
____
LISA BERGLUND, MPA
CITY CLERK
APPROVED AS TO FORM:
____
MATTHEW E. RICHARDSON
CITY ATTORNEY
STATE OF CALIFORNIA )
COUNTY OF ORANGE ) SS
CITY OF LAKE FOREST )
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I, Lisa Berglund, City Clerk of the City of Lake Forest, California, does hereby certify that the foregoing Resolution No. 2023-XX was duly passed and adopted at a regular meeting of the Lake Forest City Council on the 18th day of April 2023, by the following vote, to wit:
NOES: COUNCIL MEMBERS:
ABSENT: COUNCIL MEMBERS:
ABSTAIN: COUNCIL MEMBERS:
LISA BERGLUND, MPA
CITY CLERK
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EXHIBIT A
Revenue Estimates
Fund Name Current Budget
Increase/
(Decrease)
Amended
Budget
General Fund $57,612,650 $3,161,000 $60,773,650
Gas Tax 2,340,187 (110,000) 2,230,187
Road Maintenance
Rehab 1,872,020 10,000 1,882,020
M2 Local Fair Share 1,690,715 275,000 1,965,715
M2 Senior Mobility 82,500 15,000 97,500
Federal Highway Road
Programs 248,199 - 248,199
Air Quality Management
District 110,000 - 110,000
Police Grants 125,000 - 125,000
CDBG 1,955,312 49,396 2,004,708
Housing Authority 322,600 - 322,600
Waste Recycling Grant 46,000 - 46,000
Beverage Recycling
Grant 21,300 - 21,300
Certified Access
Specialist (CASp) 5,000 - 5,000
ARPA 6,387,193 - 6,387,193
OSA Capital Projects 7,739,000 3,000,000 10,739,000
Park Development 409,525 - 409,525
Local Early Action
Planning 93,098 - 93,098
Lake Forest
Transportation Mitigation 149,700 - 149,700
Foothill Circulation
Phasing Plan 1,321,700 - 1,321,700
Cal-Fire LHMP Wildfire
Prevention 82,500 - 82,500
Total $82,614,199 $6,400,396 $89,014,595
General Fund Revenue Estimates by Type
Revenue Type FY 2022-23
Taxes
Property Taxes $23,714,000
Sales and Use Taxes 18,750,000
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Revenue Type FY 2022-23
Franchise Fees 2,793,000
Transient Occupancy Taxes 4,500,000
Real Property Transfer Tax 750,000
Other Taxes 72,000
Licenses and Permits 2,963,000
Charges for Services 3,782,350
Intergovernmental 221,600
Use of Money and Property 2,383,000
Fines and Forfeitures 410,000
Developer Contribution Maintenance Fee 167,200
Other 267,500
Total $60,776,650
General Fund Operating Appropriations
General Fund/Expenditure Program FY 2022-23
Legislative $124,500
General Government
City Manager 3,047,176
Information Technology 2,504,800
City Clerk 971,827
City Attorney 1,286,000
Finance 3,990,421
Public Information 856,813
Human Resources 486,990
Community Development 3,891,206
Public Works 13,781,003
Community Services 3,850,980
Police Services 21,222,874
Total $56,014,590
All Other Funds Operating Appropriations
Fund Name FY 2022-23
General Fund (Capital) $1,804,166
Infrastructure Reserve 500,000
Neighborhood Park Reserve 3,992,881
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Fund Name FY 2022-23
Gas Tax 2,907,023
Road Maintenance Rehab 1,750,549
M2 Local Fair Share 2,001,252
M2 Senior Mobility 82,500
Federal Highway Road Programs 248,199
Air Quality Management District 695,282
Police Grants 225,000
CDBG 2,004,708
ARPA 906,815
Housing Authority 99,700
Waste Recycling Grant 46,000
Beverage Recycling Grant 28,950
SB 1383 Organics 105,483
Certified Access Specialist (CASp) 5,000
Park Development 1,877,031
City Facilities Improvement 252,299
Lake Forest Transportation Mitigation 6,919,138
Foothill Circulation Phasing Plan 3,325,227
Meadows Traffic Improvement 475,900
Cal-Fire LHMP Wildfire Prevention 82,500
Total $30,335,600
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CITY COUNCIL AGENDA REPORT
MEETING DATE: 4/18/2023
DEPARTMENT: Finance
SUBJECT:
ANNUAL REVIEW OF THE STATEMENT OF INVESTMENT POLICY
RECOMMENDED ACTION(S):
Approve the Attached Statement of Investment Policy
EXECUTIVE SUMMARY:
The California Government Code and the City’s Statement of Investment Policy (“Policy”) guide the investment of the City’s funds. The City reviews its Policy each year to ensure the Policy addresses the current needs and conditions that may affect the City’s investment portfolio. Following City Council direction from the most recent annual policy review on December 6, 2022, the City Council awarded a professional services agreement to Chandler Asset Management (“Chandler”) on December 20, 2022. Subsequently, staff began working with Chandler to review and draft revisions to the Policy.
The proposed changes to the Policy would incorporate best practices and achieve the City Council direction to:
1. Expand the allowable investment opportunities to those permitted by California Government Code; and,
2. Allow an investment advisory firm to actively manage the City's investment portfolio.
Substantive revisions to the Policy include:
•Incorporating the California Municipal Treasurer’s Association (“CMTA”) Investment Policy Certification Program standards and best practices into the Policy
•Delegation of authority to an external manager
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•Inclusion of Municipal Securities, Corporate Medium-Term Notes, Asset- Based Securities, Collateralized Mortgage Obligations and Supranational as authorized investments
•Removal of automatic trigger language related to credit downgrades below the City’s policy minimum
•Performance evaluation relative to a market-based benchmark Should the City Council approve the proposed changes, staff will continue to work with Chandler in the transition to having investments actively managed.
Staff recommends the City Council adopt the proposed Policy (Attachment 1).
The City Attorney’s Office has reviewed the proposed Policy to ensure compliance with applicable State law (Attachment 2). The proposed recommended action carries no fiscal impact. However, transitioning to an active investment strategy is anticipated to generate a greater return on investment than the current passive management strategy.
BACKGROUND:
Investment Policies and Objectives
The California Government Code and the City’s Statement of Investment Policy (“Policy”) guide the investment of the City’s funds. The City reviews its Policy each year in accordance with Government Code 53646(a)(2). This ensures the Policy addresses the current needs and conditions that may affect the City’s investment portfolio. In addition, the City Attorney’s Office also completes a review of the Policy and notes recent changes in State law.
The current Statement of Investment Policy was reviewed and adopted by the City Council on December 19, 2021. (Attachment 3)
The City’s investment portfolio is currently managed by the Director of Finance with the assistance of Finance department staff. The Director of Finance serves as the City Treasurer. As of March 31, 2023, the City’s portfolio balance was approximately $160.5 million and includes deposits with the State of California Local Agency Investment Fund (“LAIF”), the Orange County Investment Pool (“OCIP”), and the California Asset Management Program (“CAMP”). Currently, the types of investments authorized for purchase by the City are further restricted in the Policy.
The City’s primary objective in its investment strategy is to achieve a reasonable rate of return on public funds while minimizing the potential for capital losses Item: 13
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arising from market changes. Although the generation of revenue through interest earnings on investments is an appropriate metric, the primary consideration in the investment of City’s funds is capital preservation in the overall investment portfolio. As such, the City’s yield objective is to achieve a reasonable rate of return on City investments rather than a maximum generation of income, which would expose the City to unacceptable risk.
The current Policy contains more restrictive parameters than the California Government Code allows. This approach was adopted shortly after the Orange County bankruptcy and is reflective of concerns about municipal investments prevalent in the mid-1990s. In addition to the restrictions on the overall management of the City’s investments, the Policy also restricts the types of investments that the City may purchase.
City Council Direction
The most recent annual Policy review was conducted on December 6, 2022. At its December 6, 2022, meeting, the City Council directed staff to revise the City's Policy to expand the allowable investment opportunities to those permitted by California Government Code and to allow an investment advisory firm to actively manage the City's investment portfolio.
Through the review of the Policy, the City Council directed staff to revise the policy to allow for the added diversification of investments while still prioritizing the safety of the principal, limiting risk, maintaining appropriate levels of liquidity, and increasing the potential for generating market yield and return in the portfolio.
At its December 20, 2022, meeting, the City Council awarded a professional services agreement to Chandler Asset Management (“Chandler”) for Investment Advisory and Management Services. After conducting competitive procurement staff recommended Chandler to be the City’s professional investment advisor.
Established in 1988, Chandler is a California-headquartered firm that has been providing investment advisory and management services for local governments in the state for over three decades. With experience serving 140 public agencies in California, Chandler serves as a local neighboring partner in developing a tailored, comprehensive investment strategy. Chandler demonstrates extensive knowledge and expertise in all applicable federal laws and the California Government Code that regulate the investment of public funds. Furthermore, they demonstrated an understanding of the City’s goals and priorities that would prioritize enhancing safety and liquidity in a manner that conforms to legal requirements and achieves the City’s goals.
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The Chandler services team includes skilled and experienced key personnel, including an experienced Senior Relationship Manager and an expert investment team. Chandler’s approach includes direct access to the City’s investment advisor, detailed reporting, and policy advisory services to ensure City policies are optimized and compliant. Chandler’s partnership approach demonstrates an understanding that is aligned with the City’s current financial position and reflects the desired level of experience and familiarity in working with California local governments. Chandler’s understanding of the City’s current policies, ongoing practices, and future goals indicate that they would ensure the City’s successful transition to working with a professional investment advisor.
The following agenda report provides context to the strategic reasoning, governing policies, and prudent objectives to implement the policy direction provided by the City Council to bring recommendations to expand the allowable investment opportunities to those permitted by California Government Code and allow an investment advisory firm to actively manage the City's investment portfolio.
DISCUSSION:
In January 2023, Chandler and staff commenced reviewing and drafting revisions to the Policy for this annual review of the investment policy. Through this process, staff determined the adoption of a new model policy is a more efficient way to bring the Policy into line with industry best practices as well as the transition to an actively managed strategy across a broader range of investments. As a result, a red-line version of the current Policy is unavailable.
Staff has provided the current policy (Attachment 3) for reference to allow for comparison of the current and proposed policies and the following discussion highlights key revisions and changes.
Incorporating Best Practices
The Proposed Policy incorporates several best practices from the California Municipal Treasurer’s Association (“CMTA”). The CMTA was founded in 1958 by a handful of Municipal Treasurers in Northern and Southern California whose primary interest was to improve their function in local Government. A few years later this group and others who had joined them sponsored the creation of the Municipal Treasurer’s Association of the United States and Canada.
CMTA is a professional organization made up of active public officials who are representatives of their own local government units. The mission statement of the CMTA is as follows, “To lead in promoting and enhancing the fiduciary responsibility and integrity of individuals response for public funds.” The CMTA provides the industry with best practices and resources to its members to Item: 13
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manage public funds. Both the City and Chandler maintain an active membership in CMTA and both benefit and contribute to carrying out its mission statement.
In addition, the CMTA maintains an Investment Policy Certification Program that provides professional guidance and assistance in developing and/or improving investment policies that meet industry best practices for California’s public sector agencies and districts. The proposed updated Statement of Investment Policy (“Proposed Policy”) (Attachment 1) was developed utilizing the resources available through the certification program. Staff intends to seek certification of the Proposed Policy if approved by the City Council. Benefits of the certification program include the following:
•Trust, confidence and verification that the investment policy has been reviewed and certified by a professional organization in California •Demonstrates due diligence was performed on the investment policy •Ensures California Government Code sections are cited in the investment policy
•Assists to satisfy auditors when reviewing the investment policy during annual audits
•Ensures best practices identified by the CMTA in the following eighteen areas of Investment Policy are addressed:
1. Scope 10. Investment Pools/Mutual Funds
2. Prudence 11. Collateralization
3. Objective 12. Delivery, Safekeeping and
Custody
4. Delegation of Authority 13. Maximum Maturity
5. Ethics and Conflict of Interest 14. Risk Management and Diversification
6. Internal Controls 15. Review of Investment Portfolio
7. Authorized Financial
Institutions, Depositories, and
Broker/Dealers
16. Performance Evaluation
8. Authorized Investments 17. Reporting
9. Prohibited Investment Vehicles
and Practices
18. Review of Investment Policy
The above eighteen areas of investment policy establish the structure of the Proposed Policy and are accompanied by an introductory scope section as well as glossary of investment terms as a resource to provide clarity and definition for Item: 13
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the terms utilized throughout the policy. Staff utilized the CMTA model policy to revise the current Policy and in drafting the Proposed Policy.
Achieving Policy Objectives
In addition to incorporating best practices and policy structures, the Proposed Policy includes substantive revisions that would accomplish City Council direction to expand the allowable investment opportunities to those permitted by California Government Code and to allow an investment advisory firm to actively manage the City's investment portfolio.
Substantive revisions to the Policy include:
•Delegation of authority to an external manager.
oThis would allow the City to benefit from the knowledge, expertise and resources of an investment advisory and management firm. •Inclusion of Municipal Securities, Corporate Medium-Term Notes, Asset- Based Securities, Collateralized Mortgage Obligations and Supranational as authorized investments.
oCurrent Policy investment opportunities are more restrictive than the California Government Code.
•Removal of automatic trigger language related to credit downgrades below the City’s policy minimum.
oSelling an investment due to a credit downgrade may not meet the City’s investment objective, risk tolerance, and investment strategy. •Performance evaluation relative to a market-based benchmark oBenchmarking is an essential tool for risk management for the City to manage the investment portfolio performance, performance, risk, and make informed investment decisions.
The proposed changes to the Policy would incorporate best practices and achieve the City Council direction to:
1. Expand the allowable investment opportunities to those permitted by California Government Code; and,
2. Allow an investment advisory firm to actively manage the City's investment portfolio.
Staff has worked closely with Chandler in the development of the Proposed Policy and believes the recommendations included within would provide the Item: 13
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policy direction necessary to manage the investment portfolio in the most effective and efficient manner ensuring prudent fiscal management of public funds.
The City Attorney’s Office also completed its required review of the Proposed Policy and is included. (Attachment 2)
Next Steps
Following this initial step of reviewing and drafting the revised Policy, staff began working with Chandler to transition to having investments actively managed by making progress on the following action items:
1. Complete a cash flow analysis to ensure that the appropriate amount of funds are available for operational expenses throughout the year.
2. Develop an investment portfolio strategy that prioritizes the safety of the principal, maintains appropriate levels of liquidity as determined in the cash flow analysis, and generates market yield and return.
If the Proposed Policy is approved, staff will move forward with the onboarding process with Chandler and finalize these analyses. Chandler would begin to actively manage the investments on behalf of the City. Throughout the ongoing management of the investment portfolio, the City would receive monthly, quarterly, and annual reports that would be made available to the Audit Committee and City Council as dictated in the Proposed Policy.
The City’s Financial Management and Budgetary Policy and the Risk Based Reserve Analysis provide the foundational policies to guide prudent financial decisions. These policies guide the City’s preparedness for situations of uncertainty and risk and ensure that the City maintains established reserve levels without committing them to City operations or projects. These established reserve levels are not intended to be spent in the near term and may be available for greater strategic investment through an active management strategy by Chandler under the Proposed Policy. Staff recommends the City Council adopt the Proposed Policy.
FISCAL IMPACT:
The recommended action carries no fiscal impact. However, transitioning to an active investment strategy is anticipated to generate a greater return on investment than the current passive management strategy.
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ATTACHMENTS:
1. Proposed Statement of Investment Policy
2. City Attorney Investment Policy Review Approval Letter
3. Current Statement of Investment Policy
Initiated By: Nidia Ruelas, Management Analyst
Submitted By: Kevin Shirah, Director of Finance/City Treasurer Approved By: Debra Rose, City Manager
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Attachment 1
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THE CITY OF LAKE FOREST
STATEMENT OF INVESTMENT POLICY
ADOPTED <DATE>
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CONTENTS
I. INTRODUCTION............................................................................................1 II. SCOPE.........................................................................................................1 III. PRUDENCE..................................................................................................1 IV. OBJECTIVES.................................................................................................2 V. DELEGATION OF AUTHORITY.........................................................................3 VI. ETHICS AND CONFLICTS OF INTEREST.............................................................3 VII. INTERNAL CONTROLS...................................................................................4 VIII. AUTHORIZED FINANCIAL INSTITUTIONS, DEPOSITORIES, AND BROKER/DEALERS.4 IX. AUTHORIZED INVESTMENTS..........................................................................5 X. PROHIBITED INVESTMENT VEHICLES AND PRACTICES.....................................11 XI. INVESTMENT POOLS/MUTUAL FUNDS...........................................................11 XII. COLLATERALIZATION.................................................................................12 XIII. DELIVERY, SAFEKEEPING AND CUSTODY......................................................12 XIV. MAXIMUM MATURITY................................................................................13 XV. RISK MANAGEMENT AND DIVERSIFICATION..................................................13 XVI. REVIEW OF INVESTMENT PORTFOLIO............................................................14 XVII. PERFORMANCE EVALUATION.......................................................................14 XVIII. REPORTING...............................................................................................15 XIX. REVIEW OF INVESTMENT POLICY.................................................................16 GLOSSARY OF INVESTMENT TERMS...........................................................................17 Item: 13
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I. INTRODUCTION
The purpose of this investment policy is to identify various policies and procedures that will foster a prudent and systematic investment program designed to seek the City of Lake Forest objectives of safety, liquidity and return on investment through a diversified investment portfolio. This policy also serves to organize and formalize the City’s investment-related activities, while complying with all applicable statutes governing the investment of public funds. This policy is written to incorporate industry best practices and recommendations from sources such as the Government Finance Officers Association (GFOA), California Municipal Treasurers Association (CMTA), California Debt and Investment Advisory Commission (CDIAC) and the Association of Public Treasurers (APT).
This investment policy was endorsed and adopted by the City’s Governing Body and is effective as of the ______ day of ____________, 20XX, and replaces any previous versions.
II. SCOPE
This policy covers all funds and investment activities under the direct authority of the City, as set forth in the State Government Code, Sections 53600 et seq., with the following exceptions:
•Proceeds of debt issuance shall be invested in accordance with the City’s general investment philosophy as set forth in this policy; however, such proceeds are to be invested pursuant to the permitted investment provisions of their specific bond indentures.
•Any other funds specifically exempted by the Governing Body.
POOLING OF FUNDS
Except for cash in certain restricted and special funds, the City will consolidate cash and reserve balances from all funds to maximize investment earnings and to increase efficiencies with regard to investment pricing, safekeeping and administration. Investment income will be allocated to the various funds based on their respective participation and in accordance with generally accepted accounting principles.
III.PRUDENCE
Pursuant to California Government Code, Section 53600.3, all persons authorized to make investment decisions on behalf of the City are trustees and therefore fiduciaries subject to the Prudent Investor Standard:
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“…all governing bodies of local agencies or persons authorized to make investment decisions on behalf of those local agencies investing public funds pursuant to this chapter are trustees and therefore fiduciaries subject to the prudent investor standard. 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 City, 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 City. Within the limitations of this section and considering individual investments as part of an overall strategy, investments may be acquired as authorized by law.” The Treasurer and other authorized persons responsible for managing City funds acting in accordance with written procedures and this investment policy and exercising due diligence shall be relieved of personal responsibility for an individual security’s credit risk or market price changes provided that the Treasurer or other authorized persons acted in good faith. Deviations from expectations of a security’s credit or market risk should be reported to the governing body in a timely fashion and appropriate action should be taken to control adverse developments.
IV. OBJECTIVES
The City’s overall investment program shall be designed and managed with a degree of professionalism worthy of the public trust. The overriding objectives of the program are to preserve principal, provide sufficient liquidity, and manage investment risks, while seeking a market-rate of return. •SAFETY. Safety of principal is the foremost objective of the investment program. Investments will be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. To attain this objective, the City will diversify its investments by investing funds among a variety of securities with independent returns.
•LIQUIDITY. The investment portfolio will remain sufficiently liquid to meet all operating requirements that may be reasonably anticipated. •RETURN ON INVESTMENTS. The investment portfolio will be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account the investment risk constraints for safety and liquidity needs.
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V. DELEGATION OF AUTHORITY
Authority to manage the City’s investment program is derived from California Government Code, Sections 41006 and 53600 et seq.
The Governing Body is responsible for the management of the City’s funds, including the administration of this investment policy. Management responsibility for the cash management of the City’s funds is hereby delegated to the (Designated Official – i.e. Treasurer).
The Treasurer will be responsible for all transactions undertaken and will establish a system of procedures and controls to regulate the activities of subordinate officials and employees. Such procedures will include explicit delegation of authority to persons responsible for investment transactions. No person may engage in an investment transaction except as provided under the terms of this policy and the procedures established by the Treasurer.
The City may engage the services of one or more external investment advisers, who are registered under the Investment Advisers Act of 1940, to assist in the management of the City’s investment portfolio in a manner consistent with the City’s objectives. External investment advisers may be granted discretion to purchase and sell investment securities in accordance with this investment policy.
The City's overall investment program shall be designed and managed with a degree of professionalism that is worthy of the public trust. The City recognizes that in a diversified portfolio, occasional measured losses may be inevitable and must be considered within the context of the overall portfolio’s return and the cash flow requirements of the City.
VI. ETHICS AND CONFLICTS OF INTEREST
All participants in the investment process shall act as custodians of the public trust.
Investment officials shall recognize that the investment portfolio is subject to public review and evaluation. Thus employees and officials involved in the investment process shall refrain from personal business activity that could create a conflict of interest or the appearance of a conflict with proper execution of the investment program, or which could impair their ability to make impartial investment decisions.
Employees and investment officials shall disclose to the Chief Executive Officer any material interests in financial institutions with which they conduct business, and they shall further disclose any large personal financial/investment positions that could be related to the performance of the investment portfolio. Employees and officers shall refrain from undertaking any personal investment transactions with the same individual with whom business is conducted on behalf of the City.
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VII. INTERNAL CONTROLS
The Treasurer is responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the entity are protected from loss, theft or misuse. The internal control structure shall be designed to provide reasonable assurance that these objectives are met. The concept of reasonable assurance recognizes that (1) the cost of a control should not exceed the benefits likely to be derived; and (2) the valuation of costs and benefits requires estimates and judgments by management.
Periodically, as deemed appropriate by the City and/or the Governing Body, an independent analysis by an external auditor shall be conducted to review internal controls, account activity and compliance with policies and procedures.
VIII. AUTHORIZED FINANCIAL INSTITUTIONS, DEPOSITORIES, AND
BROKER/DEALERS
To the extent practicable, the Treasurer shall endeavor to complete investment transactions using a competitive bid process whenever possible. The City’s Treasurer will determine which financial institutions are authorized to provide investment services to the City. It shall be the City’s policy to purchase securities only from authorized institutions and firms.
The Treasurer shall maintain procedures for establishing a list of authorized broker/dealers and financial institutions which are approved for investment purposes that are selected through a process of due diligence as determined by the City. Due inquiry shall determine whether such authorized broker/dealers, and the individuals covering the City are reputable and trustworthy, knowledgeable and experienced in Public Agency investing and able to meet all of their financial obligations. These institutions may include "primary" dealers or regional dealers that qualify under Securities and Exchange Commission (SEC) Rule 15c3-1 (uniform net capital rule).
In accordance with Section 53601.5, institutions eligible to transact investment business with the City include:
•Institutions licensed by the state as a broker-dealer. •Institutions that are members of a federally regulated securities exchange. •Primary government dealers as designated by the Federal Reserve Bank and non-primary government dealers.
•Nationally or state-chartered banks.
•The Federal Reserve Bank.
•Direct issuers of securities eligible for purchase.
Selection of financial institutions and broker/dealers authorized to engage in transactions will be at the sole discretion of the City, except where the City utilizes Item: 13
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an external investment adviser in which case the City may rely on the adviser for selection.
All financial institutions which desire to become qualified bidders for investment transactions (and which are not dealing only with the investment adviser) must supply the Treasurer with audited financials and a statement certifying that the institution has reviewed the California Government Code, Section 53600 et seq. and the City’s investment policy. The Treasurer will conduct an annual review of the financial condition and registrations of such qualified bidders.
Public deposits will be made only in qualified public depositories as established by State law. Deposits will be insured by the Federal Deposit Insurance Corporation, or, to the extent the amount exceeds the insured maximum, will be collateralized in accordance with State law.
Selection of broker/dealers used by an external investment adviser retained by the City will be at the sole discretion of the adviser. Where possible, transactions with broker/dealers shall be selected on a competitive basis and their bid or offering prices shall be recorded. If there is no other readily available competitive offering, best efforts will be made to document quotations for comparable or alternative securities. When purchasing original issue instrumentality securities, no competitive offerings will be required as all dealers in the selling group offer those securities at the same original issue price.
IX. AUTHORIZED INVESTMENTS
The City’s investments are governed by California Government Code, Sections 53600 et seq. Within the investments permitted by the Code, the City seeks to further restrict eligible investments to the guidelines listed below. In the event a discrepancy is found between this policy and the Code, the more restrictive parameters will take precedence. Percentage holding limits listed in this section apply at the time the security is purchased.
Any investment currently held at the time the policy is adopted which does not meet the new policy guidelines can be held until maturity and shall be exempt from the current policy. At the time of the investment’s maturity or liquidation, such funds shall be reinvested only as provided in the current policy.
An appropriate risk level shall be maintained by primarily purchasing securities that are of high quality, liquid, and marketable. The portfolio shall be diversified by security type and institution to avoid incurring unreasonable and avoidable risks regarding specific security types or individual issuers.
1. MUNICIPAL SECURITIES include obligations of the City, the State of California and any local agency within the State of California, provided that:
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•The securities are rated in a rating category of “A” or its equivalent or better by at least one nationally recognized statistical rating organization (“NRSRO”).
•No more than 5% of the portfolio may be invested in any single issuer. •No more than 30% of the portfolio may be in Municipal Securities. •The maximum maturity does not exceed five (5) years.
2. MUNICIPAL SECURITIES (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.
•The securities are rated in a rating category of “A” or its equivalent or better by at least one nationally recognized statistical rating organization (“NRSRO”).
•No more than 5% of the portfolio may be invested in any single issuer. •No more than 30% of the portfolio may be in Municipal Securities. •The maximum maturity does not exceed five (5) years.
3. U.S. TREASURIES and other government obligations for which the full faith and credit of the United States are pledged for the payment of principal and interest.
There are no limits on the dollar amount or percentage that the City may invest in U.S. Treasuries, provided that:
•The maximum maturity is five (5) years.
4. FEDERAL AGENCIES or United States Government-Sponsored Enterprise obligations, participations, or other instruments, including those issued by or fully guaranteed as to principal and interest by federal agencies or United States government-sponsored enterprises. There are no limits on the dollar amount or percentage that the City may invest in Federal Agency or Government- Sponsored Enterprises (GSEs), provided that:
•No more than 30% of the portfolio may be invested in any single Agency/GSE issuer.
•The maximum maturity does not exceed five (5) years.
•The maximum percent of callable agency securities in the portfolio will be 20%.
5. BANKER’S ACCEPTANCES, provided that:
•They are issued by institutions which have short-term debt obligations rated “A-1” or its equivalent or better by at least one NRSRO; or long-term debt obligations which are rated in a rating category of “A” or its equivalent or better by at least one NRSRO.
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•No more than 40% of the portfolio may be invested in Banker’s Acceptances.
•No more than 5% of the portfolio may be invested in any single issuer. •The maximum maturity does not exceed 180 days.
6. COMMERCIAL PAPER, provided that the securities are issued by an entity that meets all of the following conditions in either paragraph (a) or (b) and other requirements specified below:
a.SECURITIES issued by corporations:
(i) A corporation organized and operating in the United States with assets more than $500 million.
(ii) The securities are rated “A-1” or its equivalent or better by at least one NRSRO.
(iii) If the issuer has other debt obligations, they must be rated in a rating category of “A” or its equivalent or better by at least one NRSRO.
b.SECURITIES issued by other entities:
(i) The issuer is organized within the United States as a special purpose corporation, trust, or limited liability company. (ii) The securities must have program-wide credit enhancements including, but not limited to, overcollateralization, letters of credit, or a surety bond.
(iii)The securities are rated “A-1” or its equivalent or better by at least one NRSRO.
•No more than 10% of the outstanding commercial paper of any single issuer. •No more than 25% of the City’s investment assets under management may be invested in Commercial Paper. Under a provision sunsetting on January 1, 2026, no more than 40% of the portfolio may be invested in Commercial Paper if the City’s investment assets under management are greater than $100,000,000.
•No more than 5% of the portfolio may be invested in any single issuer. •The maximum maturity does not exceed 270 days.
7. NEGOTIABLE CERTIFICATES OF DEPOSIT (NCDS), issued by a nationally or state-chartered bank, a savings association or a federal association, a state or federal credit union, or by a federally licensed or state-licensed branch of a foreign bank, provided that:
•The amount of the NCD insured up to the FDIC limit does not require any credit ratings.
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•Any amount above the FDIC insured limit must be issued by institutions which have short-term debt obligations rated “A-1” or its equivalent or better by at least one NRSRO; or long-term obligations rated in a rating category of “A” or its equivalent or better by at least one NRSRO. •No more than 30% of the total portfolio may be invested in NCDs (combined with CDARS).
•No more than 5% of the portfolio may be invested in any single issuer. •The maximum maturity does not exceed five (5) years.
8. FEDERALLY INSURED TIME DEPOSITS (Non-Negotiable Certificates of Deposit) in state or federally chartered banks, savings and loans, or credit unions, provided that:
•The amount per institution is limited to the maximum covered under federal insurance.
•No more than 20% of the portfolio will be invested in a combination of federally insured and collateralized time deposits.
•The maximum maturity does not exceed five (5) years.
9. COLLATERALIZED TIME DEPOSITS (Non-Negotiable Certificates of Deposit) in state or federally chartered banks, savings and loans, or credit unions in excess of insured amounts which are fully collateralized with securities in accordance with California law, provided that:
•No more than 20% of the portfolio will be invested in a combination of federally insured and collateralized time deposits.
•The maximum maturity does not exceed five (5) years.
10. CERTIFICATE OF DEPOSIT PLACEMENT SERVICE (CDARS), provided that:
•No more than 30% of the total portfolio may be invested in a combination of Certificates of Deposit, including CDARS.
•The maximum maturity does not exceed five (5) years.
11. COLLATERALIZED BANK DEPOSITS. City’s deposits with financial institutions will be collateralized with pledged securities per California Government Code, Section 53651. There are no limits on the dollar amount or percentage that the City may invest in collateralized bank deposits.
12. REPURCHASE AGREEMENTS collateralized with securities authorized under California Government Code, maintained at a level of at least 102% of the market value of the Repurchase Agreement. There are no limits on the dollar amount or percentage that the City may invest, provided that:
•Securities used as collateral for Repurchase Agreements will be delivered to an acceptable third party custodian.
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•Repurchase Agreements are subject to a Master Repurchase Agreement between the City and the provider of the repurchase agreement. The Master Repurchase Agreement will be substantially in the form developed by the Securities Industry and Financial Markets Association (SIFMA). •The maximum maturity does not exceed one (1) year.
13. STATE OF CALIFORNIA LOCAL AGENCY INVESTMENT FUND (LAIF), provided that:
•The City may invest up to the maximum amount permitted by LAIF. •LAIF’s investments in instruments prohibited by or not specified in the City’s policy do not exclude the investment in LAIF itself from the City’s list of allowable investments, provided LAIF’s reports allow the Treasurer to adequately judge the risk inherent in LAIF’s portfolio.
14. LOCAL GOVERNMENT INVESTMENT POOLS
•Other LGIPs permitted by client.
•There is no issuer limitation for Local Government Investment Pools
15. CORPORATE MEDIUM TERM NOTES (MTNS), provided that:
•The issuer is a corporation 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.
•The securities are rated in a rating category of “A” or its equivalent or better by at least one NRSRO.
•No more than 30% of the total portfolio may be invested in MTNs. •No more than 5% of the portfolio may be invested in any single issuer. •The maximum maturity does not exceed five (5) years.
16. ASSET-BACKED, MORTGAGE-BACKED, MORTGAGE PASS-THROUGH
SECURITIES, AND COLLATERALIZED MORTGAGE OBLIGATIONS FROM ISSUERS NOT DEFINED IN SECTIONS 3 AND 4 OF THE AUTHORIZED INVESTMENTS SECTION OF THIS POLICY, provided that:
•The securities are rated in a rating category of “AA” or its equivalent or better by a NRSRO.
•No more than 20% of the total portfolio may be invested in these securities. •No more than 5% of the portfolio may be invested in any single Asset- Backed or Commercial Mortgage security issuer.
•The maximum legal final maturity does not exceed five (5) years.
17. MUTUAL FUNDS AND MONEY MARKET MUTUAL FUNDS that are registered with the Securities and Exchange Commission under the Investment Company Act of 1940, provided that:
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a.MUTUAL FUNDS that invest in the securities and obligations as authorized under California Government Code, Section 53601 (a) to (k) and (m) to (q) inclusive and that meet either of the following criteria:
(i) Attained the highest ranking or the highest letter and numerical rating provided by not less than two (2) NRSROs; or
(ii) Have retained an investment adviser registered or exempt from registration with the Securities and Exchange Commission with not less than five years’ experience investing in the securities and obligations authorized by California Government Code, Section 53601 and with assets under management in excess of $500 million. •No more than 10% of the total portfolio may be invested in shares of any one mutual fund.
b.MONEY MARKET MUTUAL FUNDS registered with the Securities and Exchange Commission under the Investment Company Act of 1940 and issued by diversified management companies and meet either of the following criteria:
(i) Have attained the highest ranking or the highest letter and numerical rating provided by not less than two (2) NRSROs; or
(ii) Have retained an investment adviser registered or exempt from registration with the Securities and Exchange Commission with not less than five years’ experience managing money market mutual funds with assets under management in excess of $500 million. •No more than 20% of the total portfolio may be invested in the shares of any one Money Market Mutual Fund.
c. No more than 20% of the total portfolio may be invested in these securities.
18. SUPRANATIONALS, provided that:
•Issues are US dollar denominated senior unsecured unsubordinated obligations issued or unconditionally guaranteed by the International Bank for Reconstruction and Development, International Finance Corporation, or Inter-American Development Bank.
•The securities are rated in a rating category of “AA” or its equivalent or better by a NRSRO.
•No more than 30% of the total portfolio may be invested in these securities. •No more than 10% of the portfolio may be invested in any single issuer. •The maximum maturity does not exceed five (5) years.
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X. PROHIBITED INVESTMENT VEHICLES AND PRACTICES
•State law notwithstanding, any investments not specifically described herein are prohibited, including, but not limited to futures and options. •In accordance with Government Code, Section 53601.6, investment in inverse floaters, range notes, or mortgage derived interest-only strips is prohibited. •Investment in any security that could result in a zero interest accrual if held to maturity is prohibited. Under a provision sunsetting on January 1, 2026, securities backed by the U.S. Government that could result in a zero- or negative-interest accrual if held to maturity are permitted. •Trading securities for the sole purpose of speculating on the future direction of interest rates is prohibited.
•Purchasing or selling securities on margin is prohibited. •The use of reverse repurchase agreements, securities lending or any other form of borrowing or leverage is prohibited.
•The purchase of foreign currency denominated securities is prohibited. •Agencies that are not Qualified Institutional Buyers (QIB) as defined by the Securities and Exchange Commission are prohibited from purchasing Private Placement Securities. The SEC defines a QIB as having at least $100,000,000 in securities owned and invested.
•The purchase of a security with a forward settlement date exceeding 45 days from the time of the investment is prohibited.
XI. INVESTMENT POOLS/MUTUAL FUNDS
The City shall conduct a thorough investigation of any pool or mutual fund prior to making an investment, and on a continual basis thereafter. The Treasurer shall develop a questionnaire which will answer the following general questions:
•A description of eligible investment securities, and a written statement of investment policy and objectives.
•A description of interest calculations and how it is distributed, and how gains and losses are treated.
•A description of how the securities are safeguarded (including the settlement processes), and how often the securities are priced and the program audited.
•A description of who may invest in the program, how often, what size deposit and withdrawal are allowed.
•A schedule for receiving statements and portfolio listings. •Are reserves, retained earnings, etc. utilized by the pool/fund? •A fee schedule, and when and how is it assessed.
•Is the pool/fund eligible for bond proceeds and/or will it accept such proceeds?
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XII. COLLATERALIZATION
CERTIFICATES OF DEPOSIT (CDS). The City shall require any commercial bank or savings and loan association to deposit eligible securities with an agency of a depository approved by the State Banking Department to secure any uninsured portion of a Non-Negotiable Certificate of Deposit. The value of eligible securities as defined pursuant to California Government Code, Section 53651, pledged against a Certificate of Deposit shall be equal to 150% of the face value of the CD if the securities are classified as mortgages and 110% of the face value of the CD for all other classes of security.
COLLATERALIZATION OF BANK DEPOSITS. This is the process by which a bank or financial institution pledges securities, or other deposits for the purpose of securing repayment of deposited funds. The City shall require any bank or financial institution to comply with the collateralization criteria defined in California Government Code, Section 53651.
REPURCHASE AGREEMENTS. The City requires that Repurchase Agreements be collateralized only by securities authorized in accordance with California Government Code:
•The securities which collateralize the repurchase agreement shall be priced at Market Value, including any Accrued Interest plus a margin. The Market Value of the securities that underlie a repurchase agreement shall be valued at 102% or greater of the funds borrowed against those securities. •Financial institutions shall mark the value of the collateral to market at least monthly and increase or decrease the collateral to satisfy the ratio requirement described above.
•The City shall receive monthly statements of collateral.
XIII. DELIVERY, SAFEKEEPING AND CUSTODY
DELIVERY-VERSUS-PAYMENT (DVP). All investment transactions shall be conducted on a delivery-versus-payment basis.
SAFEKEEPING AND CUSTODY. To protect against potential losses due to failure of individual securities dealers, and to enhance access to securities, interest payments and maturity proceeds, all cash and securities in the City’s portfolio shall be held in safekeeping in the City’s name by a third party custodian, acting as agent for the City under the terms of a custody agreement executed by the bank and the City. All investment transactions will require a safekeeping receipt or acknowledgment generated from the trade. A monthly report will be received by the City from the custodian listing all securities held in safekeeping with current market data and other information.
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The only exceptions to the foregoing shall be depository accounts and securities purchases made with: (i) local government investment pools; (ii) time certificates of deposit, and, (iii) mutual funds and money market mutual funds, since these securities are not deliverable.
XIV. MAXIMUM MATURITY
To the extent possible, investments shall be matched with anticipated cash flow requirements and known future liabilities.
The City will not invest in securities maturing more than five (5) years from the date of trade settlement, unless the Governing Body has by resolution granted authority to make such an investment.
XV. RISK MANAGEMENT AND DIVERSIFICATION
MITIGATING CREDIT RISK IN THE PORTFOLIO
Credit risk is the risk that a security or a portfolio will lose some or all its value due to a real or perceived change in the ability of the issuer to repay its debt. The City will mitigate credit risk by adopting the following strategies:
•The diversification requirements included in the “Authorized Investments” section of this policy are designed to mitigate credit risk in the portfolio. •No more than 5% of the total portfolio may be deposited with or invested in securities issued by any single issuer unless otherwise specified in this policy. •The City may elect to sell a security prior to its maturity and record a capital gain or loss in order to manage the quality, liquidity or yield of the portfolio in response to market conditions or City’s risk preferences. •If a security owned by the City is downgraded to a level below the requirements of this policy, making the security ineligible for additional purchases, the following steps will be taken:
•Any actions taken related to the downgrade by the investment manager will be communicated to the Treasurer in a timely manner.
•If a decision is made to retain the security, the credit situation will be monitored and reported to the Governing Body.
MITIGATING MARKET RISK IN THE PORTFOLIO
Market risk is the risk that the portfolio value will fluctuate due to changes in the general level of interest rates. The City recognizes that, over time, longer-term portfolios have the potential to achieve higher returns. On the other hand, longer- Item: 13
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term portfolios have higher volatility of return. The City will mitigate market risk by providing adequate liquidity for short-term cash needs, and by making longer- term investments only with funds that are not needed for current cash flow purposes.
The City further recognizes that certain types of securities, including variable rate securities, securities with principal paydowns prior to maturity, and securities with embedded options, will affect the market risk profile of the portfolio differently in different interest rate environments. The City, therefore, adopts the following strategies to control and mitigate its exposure to market risk:
•The City will maintain a minimum of six months of budgeted operating expenditures in short term investments to provide sufficient liquidity for expected disbursements.
•The maximum stated final maturity of individual securities in the portfolio will be five (5) years, except as otherwise stated in this policy. •The duration of the portfolio will generally be approximately equal to the duration (typically, plus or minus 20%) of a Market Benchmark, an index selected by the City based on the City’s investment objectives, constraints and risk tolerances.
XVI. REVIEW OF INVESTMENT PORTFOLIO
The Treasurer shall periodically, but no less than quarterly, review the portfolio to identify investments that do not comply with this investment policy and establish protocols for reporting major and critical incidences of noncompliance to the Governing Body.
XVII. PERFORMANCE EVALUATION
The investment portfolio shall be designed to attain a market-average rate of return throughout budgetary and economic cycles, taking into account the City’s risk constraints, the cash flow characteristics of the portfolio, and state and local laws, ordinances or resolutions that restrict investments.
The Treasurer shall monitor and evaluate the portfolio’s performance relative to the chosen market benchmark(s), which will be included in the Treasurer’s quarterly report. The Treasurer shall select an appropriate, readily available index to use as a market benchmark.
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XVIII. REPORTING
MONTHLY REPORTS
Monthly transaction reports will be submitted by the Treasurer to the Governing Body within 30 days of the end of the reporting period in accordance with California Government Code Section 53607.
QUARTERLY REPORTS
The Treasurer will submit a quarterly investment report to the Governing Body which provides full disclosure of the City’s investment activities within 45 days after the end of the quarter. These reports will disclose, at a minimum, the following information about the City’s portfolio:
1. An asset listing showing par value, cost and independent third-party fair market value of each security as of the date of the report, the source of the valuation, type of investment, issuer, maturity date and interest rate.
2. Transactions for the period.
3. A description of the funds, investments and programs (including lending programs) managed by contracted parties (i.e. LAIF; investment pools, outside money managers and securities lending agents)
4. A one-page summary report that shows:
a. Average maturity of the portfolio and modified duration of the portfolio; b. Maturity distribution of the portfolio;
c. Percentage of the portfolio represented by each investment category; d. Average portfolio credit quality; and,
e. Time-weighted total rate of return for the portfolio for the prior one month, three months, twelve months and since inception compared to the City’s market benchmark returns for the same periods;
5. A statement of compliance with investment policy, including a schedule of any transactions or holdings which do not comply with this policy or with the California Government Code, including a justification for their presence in the portfolio and a timetable for resolution.
6. A statement that the City has adequate funds to meet its cash flow requirements for the next six months.
ANNUAL REPORTS
A comprehensive annual report will be presented to the Governing Board. This report will include comparisons of the City’s return to the market benchmark return, suggest policies and improvements that might enhance the investment program, and will include an investment plan for the coming year.
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XIX. REVIEW OF INVESTMENT POLICY
The investment policy will be reviewed and adopted at least annually within 120 days of the end of the fiscal year, to ensure its consistency with the overall objectives of preservation of principal, liquidity and return, and its relevance to current law and financial and economic trends.
Any recommended modifications or amendments shall be presented by Staff to the Governing Body for their consideration and adoption.
Prepared by:
Treasurer
Approved:
___________________________________
<Name>, Attorney at Law
City Attorney
Approved:
_____________________________________
<Name>, <Title>
Governing Body
Date:
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GLOSSARY OF INVESTMENT TERMS
AGENCIES. Shorthand market terminology for any obligation issued by a government- sponsored entity (GSE), or a federally related institution. Most obligations of GSEs are not guaranteed by the full faith and credit of the US government. Examples are:
FFCB. The Federal Farm Credit Bank System provides credit and liquidity in the agricultural industry. FFCB issues discount notes and bonds.
FHLB. The Federal Home Loan Bank provides credit and liquidity in the housing market. FHLB issues discount notes and bonds.
FHLMC. Like FHLB, the Federal Home Loan Mortgage Corporation provides credit and liquidity in the housing market. FHLMC, also called “FreddieMac” issues discount notes, bonds and mortgage pass-through securities.
FNMA. Like FHLB and FreddieMac, the Federal National Mortgage Association was established to provide credit and liquidity in the housing market. FNMA, also known as “FannieMae,” issues discount notes, bonds and mortgage pass- through securities.
GNMA. The Government National Mortgage Association, known as “GinnieMae,” issues mortgage pass-through securities, which are guaranteed by the full faith and credit of the US Government.
PEFCO. The Private Export Funding Corporation assists exporters. Obligations of PEFCO are not guaranteed by the full faith and credit of the US government.
TVA. The Tennessee Valley Authority provides flood control and power and promotes development in portions of the Tennessee, Ohio, and Mississippi River valleys. TVA currently issues discount notes and bonds.
ASSET BACKED SECURITIES. Securities supported by pools of installment loans or leases or by pools of revolving lines of credit.
AVERAGE LIFE. In mortgage-related investments, including CMOs, the average time to expected receipt of principal payments, weighted by the amount of principal expected.
BANKER’S ACCEPTANCE. A money market instrument created to facilitate international trade transactions. It is highly liquid and safe because the risk of the trade transaction is transferred to the bank which “accepts” the obligation to pay the investor.
BENCHMARK. A comparison security or portfolio. A performance benchmark is a partial market index, which reflects the mix of securities allowed under a specific investment policy.
BROKER. A broker brings buyers and sellers together for a transaction for which the broker receives a commission. A broker does not sell securities from their own position.
CALLABLE. A callable security gives the issuer the option to call it from the investor prior to its maturity. The main cause of a call is a decline in interest rates. If interest rates decline, the issuer will likely call its current securities and reissue them at a lower rate of interest.
CERTIFICATE OF DEPOSIT (CD). A time deposit with a specific maturity evidenced by a certificate.
CERTIFICATE OF DEPOSIT ACCOUNT REGISTRY SYSTEM (CDARS). A private placement service that allows local agencies to purchase more than $250,000 in CDs from a single financial institution (must be a participating institution of CDARS) while still maintaining FDIC insurance coverage. CDARS is currently the only entity providing this service. CDARS facilitates the trading of deposits between the California Item: 13
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institution and other participating institutions in amounts that are less than $250,000 each, so that FDIC coverage is maintained.
COLLATERAL. Securities or cash pledged by a borrower to secure repayment of a loan or repurchase agreement. Also, securities pledged by a financial institution to secure deposits of public monies.
COLLATERALIZED BANK DEPOSIT. A bank deposit that is collateralized at least 100% (principal plus interest to maturity). The deposit is collateralized using assets set aside by the issuer such as Treasury securities or other qualified collateral to secure the deposit in excess of the limit covered by the Federal Deposit Insurance Corporation.
COLLATERALIZED MORTGAGE OBLIGATIONS (CMO). Classes of bonds that redistribute the cash flows of mortgage securities (and whole loans) to create securities that have different levels of prepayment risk, as compared to the underlying mortgage securities.
COLLATERALIZED TIME DEPOSIT. Time deposits that are collateralized at least 100% (principal plus interest to maturity). These instruments are collateralized using assets set aside by the issuer such as Treasury securities or other qualified collateral to secure the deposit in excess of the limit covered by the Federal Deposit Insurance Corporation.
COMMERCIAL PAPER. The short-term unsecured debt of corporations.
COUPON. The rate of return at which interest is paid on a bond.
CREDIT RISK. The risk that principal and/or interest on an investment will not be paid in a timely manner due to changes in the condition of the issuer.
DEALER. A dealer acts as a principal in security transactions, selling securities from and buying securities for their own position.
DEBENTURE. A bond secured only by the general credit of the issuer.
DELIVERY VS. PAYMENT (DVP). A securities industry procedure whereby payment for a security must be made at the time the security is delivered to the purchaser’s agent.
DERIVATIVE. Any security that has principal and/or interest payments which are subject to uncertainty (but not for reasons of default or credit risk) as to timing and/or amount, or any security which represents a component of another security which has been separated from other components (“Stripped” coupons and principal). A derivative is also defined as a financial instrument the value of which is totally or partially derived from the value of another instrument, interest rate, or index.
DISCOUNT. The difference between the par value of a bond and the cost of the bond, when the cost is below par. Some short-term securities, such as T-bills and banker’s acceptances, are known as discount securities. They sell at a discount from par and return the par value to the investor at maturity without additional interest. Other securities, which have fixed coupons, trade at a discount when the coupon rate is lower than the current market rate for securities of that maturity and/or quality.
DIVERSIFICATION. Dividing investment funds among a variety of investments to avoid excessive exposure to any one source of risk.
DURATION. The weighted average time to maturity of a bond where the weights are the present values of the future cash flows. Duration measures the price sensitivity of a security to changes interest rates.
FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC). The Federal Deposit Insurance Corporation (FDIC) is an independent federal agency insuring deposits in U.S. banks and thrifts in the event of bank failures. The FDIC was created in 1933 to maintain public confidence and encourage stability in the financial system through the promotion of sound banking practices.
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FEDERALLY INSURED TIME DEPOSIT. A time deposit is an interest-bearing bank deposit account that has a specified date of maturity, such as a certificate of deposit (CD).
These deposits are limited to funds insured in accordance with FDIC insurance deposit limits.
LEVERAGE. Borrowing funds in order to invest in securities that have the potential to pay earnings at a rate higher than the cost of borrowing.
LIQUIDITY. The speed and ease with which an asset can be converted to cash.
LOCAL AGENCY INVESTMENT FUND (LAIF). A voluntary investment fund open to government entities and certain non-profit organizations in California that is managed by the State Treasurer’s Office.
LOCAL GOVERNMENT INVESTMENT POOL. Investment pools that range from the State Treasurer’s Office Local Agency Investment Fund (LAIF) to county pools, to Joint Powers Authorities (JPAs). These funds are not subject to the same SEC rules applicable to money market mutual funds.
MAKE WHOLE CALL. A type of call provision on a bond that allows the issuer to pay off the remaining debt early. Unlike a call option, with a make whole call provision, the issuer makes a lump sum payment that equals the net present value (NPV) of future coupon payments that will not be paid because of the call. With this type of call, an investor is compensated, or "made whole."
MARGIN. The difference between the market value of a security and the loan a broker makes using that security as collateral.
MARKET RISK. The risk that the value of securities will fluctuate with changes in overall market conditions or interest rates.
MARKET VALUE. The price at which a security can be traded.
MATURITY. The final date upon which the principal of a security becomes due and payable.
The investment’s term or remaining maturity is measured from the settlement date to final maturity.
MEDIUM TERM NOTES. Unsecured, investment-grade senior debt securities of major corporations which are sold in relatively small amounts on either a continuous or an intermittent basis. MTNs are highly flexible debt instruments that can be structured to respond to market opportunities or to investor preferences.
MODIFIED DURATION. The percent change in price for a 100-basis point change in yields.
Modified duration is the best single measure of a portfolio’s or security’s exposure to market risk.
MONEY MARKET. The market in which short-term debt instruments (T-bills, discount notes, commercial paper, and banker’s acceptances) are issued and traded.
MONEY MARKET MUTUAL FUND. A mutual fund that invests exclusively in short-term securities. Examples of investments in money market funds are certificates of deposit and U.S. Treasury securities. Money market funds attempt to keep their net asset values at $1 per share.
MORTGAGE PASS-THROUGH SECURITIES. A securitized participation in the interest and principal cash flows from a specified pool of mortgages. Principal and interest payments made on the mortgages are passed through to the holder of the security.
MUNICIPAL SECURITIES. Securities issued by state and local agencies to finance capital and operating expenses.
MUTUAL FUND. An entity which pools the funds of investors and invests those funds in a set of securities which is specifically defined in the fund’s prospectus. Mutual funds can be invested in various types of domestic and/or international stocks, bonds, and money market instruments, as set forth in the individual fund’s prospectus. For most large, institutional investors, the costs associated with investing in mutual Item: 13
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funds are higher than the investor can obtain through an individually managed portfolio.
NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATION (NRSRO).
A credit rating agency that the Securities and Exchange Commission in the United States uses for regulatory purposes. Credit rating agencies provide assessments of an investment's risk. The issuers of investments, especially debt securities, pay credit rating agencies to provide them with ratings. The three most prominent NRSROs are Fitch, S&P, and Moody's.
NEGOTIABLE CERTIFICATE OF DEPOSIT (CD). A short-term debt instrument that pays interest and is issued by a bank, savings or federal association, state or federal credit union, or state-licensed branch of a foreign bank. Negotiable CDs are traded in a secondary market.
PRIMARY DEALER. A financial institution (1) that is a trading counterparty with the Federal Reserve in its execution of market operations to carry out U.S. monetary policy, and (2) that participates for statistical reporting purposes in compiling data on activity in the U.S. Government securities market.
PRUDENT PERSON (PRUDENT INVESTOR) RULE. A standard of responsibility which applies to fiduciaries. In California, the rule is stated as “Investments shall be managed with the care, skill, prudence and diligence, under the circumstances then prevailing, that a prudent person, acting in a like capacity and familiar with such matters, would use in the conduct of an enterprise of like character and with like aims to accomplish similar purposes.”
REPURCHASE AGREEMENT. Short-term purchases of securities with a simultaneous agreement to sell the securities back at a higher price. From the seller’s point of view, the same transaction is a reverse repurchase agreement.
SAFEKEEPING. A service to bank customers whereby securities are held by the bank in the customer’s name.
SECURITIES AND EXCHANGE COMMISSION (SEC). The U.S. Securities and Exchange Commission (SEC) is an independent federal government agency responsible for protecting investors, maintaining fair and orderly functioning of securities markets and facilitating capital formation. It was created by Congress in 1934 as the first federal regulator of securities markets. The SEC promotes full public disclosure, protects investors against fraudulent and manipulative practices in the market, and monitors corporate takeover actions in the United States.
SECURITIES AND EXCHANGE COMMISSION SEC) RULE 15C3-1. An SEC rule setting capital requirements for brokers and dealers. Under Rule 15c3-1, a broker or dealer must have sufficient liquidity in order to cover the most pressing obligations. This is defined as having a certain amount of liquidity as a percentage of the broker/dealer's total obligations. If the percentage falls below a certain point, the broker or dealer may not be allowed to take on new clients and may have restrictions placed on dealings with current client.
STRUCTURED NOTE. A complex, fixed income instrument, which pays interest, based on a formula tied to other interest rates, commodities or indices. Examples include inverse floating rate notes which have coupons that increase when other interest rates are falling, and which fall when other interest rates are rising, and "dual index floaters," which pay interest based on the relationship between two other interest rates - for example, the yield on the ten-year Treasury note minus the Libor rate.
Issuers of such notes lock in a reduced cost of borrowing by purchasing interest rate swap agreements.
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SUPRANATIONAL. A Supranational is a multi-national organization whereby member states transcend national boundaries or interests to share in the decision making to promote economic development in the member countries.
TOTAL RATE OF RETURN. A measure of a portfolio’s performance over time. It is the internal rate of return, which equates the beginning value of the portfolio with the ending value; it includes interest earnings, realized and unrealized gains, and losses in the portfolio.
U.S. TREASURY OBLIGATIONS. Securities issued by the U.S. Treasury and backed by the full faith and credit of the United States. Treasuries are considered to have no credit risk and are the benchmark for interest rates on all other securities in the US and overseas. The Treasury issues both discounted securities and fixed coupon notes and bonds.
TREASURY BILLS. All securities issued with initial maturities of one year or less are issued as discounted instruments and are called Treasury bills. The Treasury currently issues three- and six-month T-bills at regular weekly auctions. It also issues “cash management” bills as needed to smooth out cash flows.
TREASURY NOTES. All securities issued with initial maturities of two to ten years are called Treasury notes and pay interest semi-annually.
TREASURY BONDS. All securities issued with initial maturities greater than ten years are called Treasury bonds. Like Treasury notes, they pay interest semi-annually.
YIELD TO MATURITY. The annualized internal rate of return on an investment which equates the expected cash flows from the investment to its cost.
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ATTACHMENT 2
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Indian Wells
(760) 568-2611
Los Angeles
(213) 617-8100
Ontario
(909) 989-8584
Riverside
(951) 686-1450
Sacramento
(916) 325-4000
San Diego
(619) 525-1300
Walnut Creek
(925) 977-3300
Washington, DC
(202) 785-0600
18101 Von Karman Avenue, Suite 1000, Irvine, CA 92612
Phone: (949) 263-2600 | Fax: (949) 260-0972 | www.bbklaw.com Memorandum
To: Director of Finance File No.: 55136.00600
From: City Attorney
Date: April 12, 2023
Re: City of Lake Forest - Investment Policy Review
I. BACKGROUND
The City of Lake Forest (“City”) reviews its investment policy each year, in accordance with Government Code § 53646(a)(2). This ensures that the policy addresses the current needs and conditions that may affect the City’s investment portfolio.
II. A NALYSIS
This year, a model investment policy is to be reviewed, rather than a redline of the current investment policy as done in prior policy reviews. A model policy confers certain benefits, as it incorporates the latest in industry best practices, including California Municipal Treasurers Association guidelines. The model policy aims to adopt an actively managed strategy for City investments across a broader range of investments.
In December 2022, the City hired Chandler Asset Management (“Chandler”) to manage the City’s investment portfolio. The model investment policy would better reflect Chandler’s active investment management role. In particular, the model policy would reflect:
1. The delegation of authority to an external manager.
2. The inclusion of Municipal Securities, Corporate Medium-Term Notes, Asset- Backed Securities, Collateralized Mortgage Obligations, and Supranationals as authorized investments.
3. The removal of “automatic sell” trigger language related to credit downgrades below the City’s policy minimum.
4. An updated performance evaluation relative to a market-based benchmark.
These items reflect Chandler’s focus on active investment management, a significant change from the City’s current policy, which adopted a “[p]assive investment strategy” as its investment philosophy. By adopting a model policy, all local idiosyncrasies and unusual terms Item: 13
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55136.00600\32223284.3
will be eliminated, and the City will be more in-line with the investment policies of other California cities.
III. C ONCLUSION
The proposed model investment policy would do away with the City’s current policy, which has been periodically updated over time and was last adopted in December 2021. Whereas the current policy favors a passive investment role, the model policy would better align with Chandler’s active investment approach. The presentation of this investment policy is made in accordance with Government Code section 53646(a)(2). Any further change to the policy will require reconsideration by the City Council at a future public meeting.
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THE CITY OF LAKE FOREST
STATEMENT OF INVESTMENT POLICY
I. INTRODUCTION
The City Council of the City of Lake Forest recognizes its responsibility to wisely direct the investment of the City's funds on behalf of the City's existing and future residents. The City Council further recognizes that the City's investment assets are essential to the City's financial strength, the effective implementation of long range financial plans, and ultimately its ability to respond to the needs of the community.
The investment policies and practices of the City of Lake Forest take into consideration the City's particular needs including the City's risk- avoidance, size of portfolio, number and qualifications of staff, and other relevant factors. This Statement of Investment Policy ("Policy") is based upon principles of prudent money management and Federal and State laws. In instances in which the Policy is more restrictive than Federal or State law, the Policy supersedes.
This Policy sets forth procedures and practices which shall govern the investment of the City's funds. The Policy will be used by the City's Treasurer, other City officials and staff, as well as all other third-party providers of investment or investment-related services. Its purpose is to direct the prudent investment and protection of the City's funds and investment portfolio.
II. INVESTMENT GOALS
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The City's investment goals are to:
• Maintain the principal value of assets entrusted to the City.
• Safeguard and protect the City’s investment portfolio and funds.
• Ensure that the City has adequate cash to meet budgeted expenditures, including an additional amount to cover reasonably estimated contingencies.
• Earn a reasonable market rate of return consistent with the primary objectives of safety and liquidity.
• Increase the value of funds within the City’s general fund category over time by reinvesting 100% of the interest earnings into the investment portfolio for the purpose of building a financially-strong City and establishing and maintaining funds required for important future City projects.
• Minimize the City's working capital needs and increase interest earnings by investing a high percentage of idle cash with the exception of compensating balances required to pay the City's primary bank for banking services.
• Assure ongoing compliance with all Federal and State laws governing the investment of moneys under the control of the City Treasurer.
III. DELEGATION OF AUTHORITY
The City of Lake Forest's Resolution No. 92-34 appoints the Director of Finance to serve as the Treasurer. It further authorizes the Treasurer to invest or deposit the City's funds in accordance with California Government Code Sections 53600 and 53630 et seq. and all related State and Federal laws.
In the Treasurer's absence, the Treasurer will assign investment responsibilities to City staff. The Treasurer will provide prior written notification to the City Manager and the City Council regarding the designation of responsibilities. In the event that the Treasurer is unable to assign responsibility, the City Manager will select an interim Treasurer.
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The responsibility for establishing, monitoring, and maintaining a strong system of investment controls and directing an independent audit of the investment function is delegated to the City Manager.
The City Manager's designee(s) may assist in carrying out these functions.
The City Council’s primary responsibilities over the investment function includes establishing investment policies, annually reviewing such policies, reviewing monthly investment reports issued by the Treasurer, authorizing bond documents and other unique financing transactions, and authorizing any deviations from the Policy.
IV. SCOPE
This Policy applies to all funds except investments related to the City's Deferred Compensation Plan. Investments related to debt issued will be governed by Sections I, II, III, and Sections X through XVI unless a separate policy is adopted by the City Council. With regard to the Deferred Compensation Plan, investment decisions are made by the individual participant for their own deferred funds.
All funds, except as noted below in this Section (IV Scope), entrusted to the Treasurer will be aggregated in a diversified fixed income and money market portfolio with the exception of any endowments, trusts or grants or other funds which are legally required to be invested in a segregated investment account. The dollar amount of each of the City's fund's principal investment will be recorded in the City's accounting records. Interest earned or accrued and capital gains or losses will be allocated to the individual funds based on the principal invested and average overall return on the portfolio consistent with governmental accounting standards.
Subject to this Policy, the Treasurer is authorized, at his/her discretion, to make specific investments for specific funds when special funds have been set-aside for long-term purposes.
Investments related to debt issues will be invested by the Treasurer in accordance with each issue's respective bond indenture provisions. Investments related to the City's Deferred Compensation Plan (“Plan”) are managed by a third-party administrator and Item: 13
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investment and mutual fund selection is directed by the individual Plan participants.
V. INVESTMENT PHILOSOPHY
The City's investment philosophy, policies, practices and procedures are conservative in order to minimize risk.
"The City Council or persons authorized to make investment decisions on behalf of the City investing public funds pursuant to Chapter 4 of Division 2 of Title 5 of the Government Code are trustees and therefore fiduciaries subject to the prudent investor standard. When investing, reinvesting, purchasing, acquiring, exchanging, selling, and managing public funds, a trustee shall act with care, skill, prudence, and diligence under the circumstances then prevailing, 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 City.”
Any investment officer exercising his/her authority and acting pursuant to the Prudent Investor Rule, in accordance with the City’s Policy, will not be held personally liable for any individual investment losses or for total portfolio losses.
The fundamental principles of the City's conservative philosophy are:
• Diversification of the portfolio by investment type.
• Limits on the amount which can be invested in any one type of investment and on the maximum which can be invested in any one issuer.
• Minimum quality standards for securities' issuers.
• Limits on the maximum maturity of any one investment and monthly reporting of the weighted average maturity (WAM) of the portfolio.
• Passive investment strategy.
Accordingly, the City's philosophy prohibits speculation; i.e., the purchase of securities with the intent to profit from favorable Item: 13
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changes in market prices or market conditions. Leveraging or borrowing money for the purpose of investing is specifically prohibited.
The City's passive investment strategy results in the practice of purchasing investments with the intent to hold each investment until its stated maturity. However, the City may elect to sell a security prior to its maturity and record a capital gain or loss in order to improve the quality, liquidity or yield of the portfolio in response to market conditions or City needs.
VI. INVESTMENT SELECTION OBJECTIVES
A. Safety / Preservation of Principal
The City's primary objective is to safeguard the principal value of investment assets. The Treasurer selects each investment based primarily on its relative degree of risk of potential loss of invested capital. Only investments which the fixed income markets generally ascribe a relatively low degree of risk compared to other investment alternatives are purchased.
B. Liquidity
The second objective is to meet the liquidity needs of the City of Lake Forest. Consistent with the City's conservative investment philosophy, all investments purchased will be traded in large daily volumes in the secondary market except for non-negotiable time deposits (Certificates of Deposit) and investment pools.
The City will maintain sufficient cash in the form of cash and short-term money market instruments which, together with projected revenues, will cover at least approximately six months of budgeted capital and operating expenses. To the extent possible, the maturity of investments selected will match the City's projected cash flow requirements.
C. Yield / Return on Investment
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The third objective shall be to achieve a return on the funds under the Treasurer’s control. Investments are selected based upon their suitability for a conservative, risk-averse public portfolio. Thus, investments are selected first on the basis of safety, marketability and maturity and lastly based on
reasonable market rate of return based on the characteristics of the portfolio.
The market-average rate of return is defined as the average return on Treasury securities with a maturity which matches the weighted average maturity of the portfolio as tracked by common fixed income indexes.
VII. PORTFOLIO MATURITY LIMITS
The maximum maturity for any single investment purchase may not exceed five years.
Maturities will be selected based on a sufficiently detailed cash flow projection which facilitates selecting investment maturity dates to approximately match the projected dates for budgeted expenditures.
Once cash flow needs are matched, maturity selection is based on a strategy of laddering maturities and the shape of the yield curve.
Additional maturity limits by investment type which may further restrict individual investment purchases are provided in Section VIII "Allowable Investments."
VIII. ALLOWABLE INVESTMENTS, QUALITY AND LIMIT GUIDELINES
All local agencies are governed by the California Government Code, Sections 53600 et seq. However, consistent with the City's conservative investment philosophy, the types of investments authorized for purchase by the City are further restricted. Limits governing the maximum amount by investment type and the maximum amount which can be purchased by a particular issuer are specified below.
Investments other than government bills, notes, bonds, and agencies are limited based on the quality rating of the issuing institution in order to minimize credit risk. It is to be expected that an issuer's rating may be downgraded from time to time. In the event Item: 13
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that an issuer's quality is downgraded two grades below the City's minimum, the City will sell the investment. In the event an issuer's rating has dropped one grade, the Treasurer will use discretion in determining whether to sell or hold the security based on the current maturity, the loss in value, and the economic outlook for the issuer and other relevant factors. In no event will the Treasurer hold on to an investment solely to avoid an investment loss unless specifically authorized or directed by the City Council after full disclosure of the risks and advantages of such action.
A. United States Treasury Bills, Notes and Bonds
These are instruments issued by the U.S. Treasury. They are backed by the full faith and credit of the federal government.
U.S. Treasury issues are considered to be the safest of all investments. These securities are very liquid and marketable and they offer a wide range of available maturities.
Maximum: No limit
B. Federal Agencies
These are instruments issued by federally-owned or
sponsored Agencies of the federal government. They have either the implied or guaranteed backing of the federal government.
Next to U.S. Treasury issues, Federal Agencies are typically considered the safest class of securities available. These securities are very liquid and marketable and they offer a wide range of available maturities.
Acceptable investments only include traditional fixed-income securities (notes and bonds) as more complex, structured products are not permitted.
Issuer Limits: 70% per Federal Agency or Government
Sponsored Agency.
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Maximum: No Limit
C. Bankers' Acceptances (BAs)
Bankers’ Acceptances (BAs) are a suitable short-term
investment because they provide an attractive yield, and they are considered a relatively safe and liquid investment.
The Bankers’ Acceptance is a time draft drawn on and
accepted by a bank for payment, of the shipment or storage, of merchandise. The initial obligation of payment rests with the drawer, but the bank substitutes its credit standing for that of the borrower and assumes the obligation to pay face value at maturity.
Quality: Only issuer's deemed "eligible" for purchase by the Federal Reserve Bank.
Issuer Limit: 5%
Maturity Limit: 180 days
Maximum: 20%
D. Time Deposits (Non-Negotiable Certificates of Deposit)
A Time Deposit is a non-negotiable instrument evidencing a deposit with a financial institution for a fixed period of time and normally for a fixed rate of interest.
The Federal Deposit Insurance Corporation can insure Time Deposits if issued by a bank, or the Federal Savings and Loan Insurance Corporation if issued by a savings and loan
association.
Quality: Top 25% of peer group as independently rated.
Collateral Requirement: Amounts in excess of the $250,000 FDIC-insured amount are collateralized in accordance with the California Government Code.
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Maximum: 30%
E. Negotiable Certificates of Deposit (Negotiable CDs)
A Negotiable Certificate of Deposit (CD) is a negotiable instrument evidencing a time deposit with a bank. Negotiable Certificates of Deposit shall not exceed the FDIC insurance limit of $250,000.
Quality: Top 25% of peer group as independently rated.
Maximum: 30%
F. Repurchase Agreements
Collateral Requirement: Securities acceptable as collateral shall be securities which are fully or de facto guaranteed as to principal and interest by the United States Government or any agency of the United States. The market value of securities that underlay a repurchase agreement must be valued at 102 percent or greater of the funds borrowed against those
securities. Securities values must be marked to market weekly and be equal to their par value plus an additional standard market percentage. A signed master repurchase agreement shall be on file with the City of Lake Forest prior to execution of any repurchase trades.
Repurchase Agreements (Repo’s) are one of the most flexible investments available to invest short-term funds and, when proper guidelines are followed, relatively safe.
A Repurchase Agreement involves two simultaneous
transactions. One transaction involves the sale of securities (collateral) by a borrower of funds, typically a bank or broker/dealer in governments or agencies, to a lender of funds. The lender can be any investor with cash to invest. The second transaction is the commitment by the borrower to repurchase these securities at the same price plus a
predetermined amount of interest on an agreed future date.
Collateral Requirement: Securities acceptable as collateral shall be securities which are fully or de facto guaranteed as to principal and interest by the United States Government or any Item: 13
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agency of the United States. The market value of securities that underlay a repurchase agreement must be valued at 102 percent or greater of the funds borrowed against those
securities. Securities values must be marked to market weekly and be equal to their par value plus an additional standard market percentage. A signed master repurchase agreement shall be on file with the City of Lake Forest prior to execution of any repurchase trades.
Maturity Limit: 92 days
Maximum: 10%
G. Commercial Paper
Commercial Paper is negotiable corporate dept, usually
unsecured, and issued on a continuous basis for short time frames. Commercial Paper can offer some of the most
attractive short-term rates available, odd amounts of funds can be invested and a wide range of maturities are normally available.
Issuer Limit: 5%
Quality: Highest rating category by a nationally-recognized statistical rating organization, and that satisfies California Government Code section 53601, subdivision (h).
Maximum: 25%
Maturity Limit: 270 days or less
H. Local Agency Investment Fund (LAIF)
The Local Agency Investment Fund (LAIF) allows local
government agencies to obtain higher yields while maintaining safety and liquidity through pooling surplus cash with the State’s surplus cash thereby creating a multi-billion dollar money pool and enabling investment in diversified
instruments.
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agencies to pool surplus monies in this fund and utilize the trained personnel in the State Treasurer’s Office for its investments.
LAIF investments in instruments prohibited by or not specified in the City's Policy do not exclude it from the City's list of allowable investments provided that the fund's reports allow the Treasurer to adequately judge the risk inherent in the portfolio.
Maximum: Maximum amount for each permitted investment account in accordance with LAIF requirements
I. ORANGE COUNTY INVESTMENT POOL (OCIP)
The Orange County Investment Pool (OCIP) allows local
government agencies to voluntary invest surplus cash to obtain competitive yields while maintaining safety and liquidity thereby creating a multi-million dollar County investment pool that utilizes the trained personnel in the County’s Treasurer’s Office for its investments.
The Treasurer’s foremost objective in investing public funds is to ensure that public funds are invested in a manner that provides for maximum security of principal and preservation of capital, while conforming to all Federal and State laws, statutes and resolutions government investment of public funds. The second objective is to maintain sufficient liquidity to enable participants to meet their operating cash flow needs.
Liquidity is essential to the safety of principal. The third and least important objective is to obtain a market rate of return throughout budgetary and economic cycles within the
investment policy risk parameters and cash flow needs.
Maximum: No limit
J. Investment Joint Powers Authorities
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comprehensive, timely, monthly reports which include
transaction listings, reports gains and losses, provides market values for securities, provides a quality rating for investment securities, takes delivery of securities prior to payment, third- party safekeeping of all investments, for whom an audit is conducted annually by an independent authority other than the local agency's internal auditors, and that leveraging of the portfolio is not permitted.
Maximum: 30%
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K. Money Market Mutual Fund
Quality: Highest rating from not less than two of the three nationally-recognized rating services.
Maximum: 10%
Meet the criteria contained in Government Code Section
53601(l).
L. Prohibited Investments
State law not withstanding, any investments not specifically described herein including, but not limited to, medium term corporate notes, zero coupon bonds, first mortgages or trust deeds, customized mortgage- and asset-backed securities, derivatives, inverse floaters, common stock, equity
investments, securities that could result in zero-interest accrual, range notes, collateralized mortgage obligations, interest-only strips, reverse repurchase agreements,
unregulated and/or uninsured investment pools or trusts except as specified above, futures, options (excluding callable securities as described in Section VIII B), derivative securities and securities with high price volatility, limited marketability, where the interest accrual could be zero if held to maturity, are prohibited. Investment transactions which would impair public confidence in the Lake Forest City government are to be avoided.
IX. REPORTING
The Treasurer shall render a monthly report to the City Manager and the City Council within thirty (30) days following the end of the month covered by the report. The report shall provide the following information:
• Breakdown of portfolio by type of investment, showing dollar amount and percent of portfolio invested in each.
• Side-by-side comparison of the current portfolio to the Policy limits for type, maturity, issuer and quality.
• Annualized return and the weighted average maturity on portfolio.
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• Annualized return and the weighted average to call on portfolio.
• Summary of market value by type of security and for total portfolio compared to book value.
• Breakdown by issuer within each investment type with actual vs. allowed percentages and most recent quarterly rating of issuer.
• Distribution of investments broken down by selling institution in dollar amount.
• Any funds, investments or programs, including loans, which are under management of contracted parties.
• Detailed listing of current holdings.
▪ Shows book value, market value (with source at valuation), and par value as of the date of the report
▪ Shows coupon or discount rate, yield to maturity, and total return
▪ Shows type, issuer, seller, and safekeeping institution
▪ Shows purchase date, actual maturity date, and projected maturity date
• A statement denoting the ability of the City to meet its expenditure requirements for the next six months.
• Summary of transactions, by category, of all purchases, maturities, and sales for the period.
• Explanation of degree of interest rate sensitivity inherent in the portfolio.
• Treasurer's compliance statement.
• Narrative explanation of any significant changes.
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X. QUALIFICATIONS OF FINANCIAL INSTITUTIONS WHICH SELL
THE CITY INVESTMENTS
The Treasurer will obtain information from qualified financial institutions to determine if the institution makes markets in securities appropriate to the City's needs, can assign qualified sales representatives and can provide written agreement to abide by the conditions set forth in the City of Lake Forest’s Policy. The Treasurer will recommend to the Council three to six institutions for inclusion on the City's approved list. Any changes to the City's approved list of selling financial institutions must be reviewed by the City Council based on documented rationale. The Treasurer shall review the approved list every five (5) years. Investment accounts with all financial institutions are standard non-discretionary accounts and may not be margin accounts.
A. Broker/Dealers
The purchase by the City of any investment other than those purchased directly from the issuer shall be purchased from a broker/dealer firm that is on the City’s approved list. To be considered for placement on the City’s list, the broker/dealer must comply with the following:
1. Minimum capital of $10 million.
2. Be a “primary” or regional dealer and qualify under the Securities and Exchange Commission (SEC) Rule
15c3-1.
3. Be in operation for at least five (5) years.
4. Submit annual audited financial statements.
5. Submit a completed City of Lake Forest Broker/Dealer Questionnaire.
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B. Banks
The City shall purchase securities from banks which are: (1) nationally or State chartered banks, (2) registered as
investment securities dealers, and (3) ranked in the top twenty-five percent (25%) of its peer group as independently rated by a nationally recognized ranking service.
C. The Federal Reserve Bank
Direct purchases of bills, notes, and bonds from the U. S.
Federal Reserve Bank branches are allowed and are exempt from quality requirements.
D. Investment Bankers, Underwriters and Financial Advisors
The purchase by the City of any investments from these
providers in the course of completing a bond transaction must be expressly authorized by the City Council after such a provider discloses their commission, spread, or fee in
approximate dollar amount. Otherwise, the acquisition of such investments must be procured from the broker/dealer
customarily used by the City.
XI. QUALIFICATIONS FOR SAFEKEEPING INSTITUTIONS
The City will safekeep investments only with a Federal or State association (as defined by Section 5102 of the Financial Code), a trust company or state or national bank located within this State or with the Federal Reserve Bank, or with any state or national bank located in any city designated as a reserve city by the Board of Governors of the Federal Reserve System. Such safekeeping institutions must be rated in the top twenty-five percent (25%) of their peer group as ranked by an independent rating service and/or is ranked at least AA or Aa by Standard and Poor’s and Moody’s.
In the event an institution's rating is downgraded two letter rankings or drops in the lower sixty percent (60%) of its peer group, the Treasurer will conduct a Request for Proposal process for an alternative safekeeping bank which meets the City's criteria.
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XII. INVESTMENT CONTROLS
The City Manager will implement and maintain a system of internal investment controls and segregated responsibilities of the investment function in order to prevent fraud, theft, loss of principal, loss of control over funds, inaccurate reporting, negligence, over- reliance on a single employee for investment decisions, controls, transactions, and recording and reporting. In addition to limits related to investment type, quality, maturity and amount, controls will include:
A. Safekeeping of Securities
Third-party safekeeping with an institution is required for all investments. Third-party safekeeping institutions may not act as custodians for any securities which that institution has issued or sold to the City.
Collateral should always be at safekeeping.
Payment procedures for all securities transactions will be delivery vs. payment.
B. Competitive Bidding of Investments
The City's investment procedures require that approved
broker/dealers compete for investment purchases and sales in order that the City obtain the highest yield available in the market for a comparable investment and to ensure that all investment transactions are free from favoritism. A
comparable investment represents a similar instrument
maturing within 90 days of the first quote obtained.
For the purchase of original issuances of Treasury Bills, Notes, and Bonds, the Treasurer shall either rotate among the approved broker/dealers when obtaining one bid or accept the best bid when a minimum of two bids are solicited. For all other investments a minimum of two bids will be solicited. The City Treasurer shall determine the best bid for the City, if any, and act accordingly.
If a specific type of instrument is considered to be necessary for diversification by the City Treasurer, and only one Item: 13
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authorized broker owns the targeted instrument, the City Treasurer shall have the authority to purchase the instrument.
C. Annual Management Review and Audit
An annual audit of the City's Policy, practices, procedures, and portfolio status will be conducted by an independent auditor of all items including, but not limited to, items specified in the Audit Checklist provided in the City’s Procedure Manual.
The auditor will provide the City with written observations and recommendations regarding the adequacy of investment
controls.
D. Segregated Investment, Execution, Record Keeping, and Reporting
The Treasurer's investment execution records will be recorded (input) to the City's Investment System by independent City staff. The monthly reconciliation of the Treasurer's investment records to bank, broker/dealer and safekeeping confirmations will be performed by independent staff.
E. Secondary Approval for All Accounts, Agreements, Contracts, and Services
The City Manager will review and approve the establishment of all investment accounts, relationships with investment providers, and any agreements or contracts related to
investments or investment-related services.
F. Wire Transfer Controls
All City wire transfers will be executed in accordance with a written agreement specifying control procedures required for wire transfers of funds; including establishment of repetitive wires to pay for securities transactions with approved
securities dealers as well as any other routine money
transfers. All other non-repetitive wires require City Manager or Assistant City Manager approval prior to release.
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XIII. QUALIFICATIONS OF THE CITY TREASURER AND STAFF
The Treasurer for the City shall be a City employee. The Treasurer will be selected on the basis of educational background and experience relevant to the Treasury function. The City recognizes the need for and is committed to providing on-going education specific to the investment function for the Treasurer and other City staff and officials involved in the investment process.
XIV. POLICY REVIEW
This Policy shall be reviewed annually by the City Council, at a public meeting, to ensure it meets the changing needs of the City, is consistent with the overall objectives of preservation of principal, liquidity, and return, is relevant to current financial and economic conditions, and to ensure that the City's ongoing investment practices and procedures are consistent with the Policy. The City Manager, City Treasurer, and the City Attorney shall review the Policy for compliance with the State Government Code and other related laws prior to submittal to City Council.
Any changes, whether legislative or internal, which impact the Policy will be promptly reported to the City Council.
XV. CONFLICT OF INTEREST
Any firm proposing to provide any type of investment service to the City shall acknowledge their familiarity with the provisions of the Political Reform Act, (Government Code Section 81000 et seq., and 2 Cal. Code of Regs. 18110 et seq., hereinafter “PRA”) and the provisions limiting contractual conflicts of interest under Government Code Section 1090 et seq. Any firm proposing to provide any type of investment service to the City shall also acknowledge their familiarity with and agree to abide by any Federal or State law, regulation, rule, or policy pertaining to or limiting campaign contributions by such firms, their employees, spouses, and agents.
The provisions of the PRA shall continue to apply to require disclosure and disqualification by any City official or employee and shall apply to require disclosure of the same by any candidate for City office.
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All persons, firms, dealers, brokers and advisors providing investment service or bond issue assistance shall disclose to the City Manager and the Treasurer all fee sharing, fee-splitting, and commission arrangements with other entities or persons prior to the City agreeing to buy an investment, or issuing bonds.
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APPENDIX A
GLOSSARY
BANKER’S ACCEPTANCE (BA)
Banker’s Acceptances (BAs) are instruments which arise from bank letters of credit used by importers to finance purchases of tangible goods from exporters. The letter of credit is transformed into a BA when the exporter’s bank reviews, approves and stamps “accepted” on the draft. A BA is a short-term, negotiable, non-interest bearing note sold at a discount and redeemed by the accepting bank at maturity for full face value. BAs carry the issuer’s pledge to pay, are backed by the underlying goods being financed and also carry the guarantee of the accepting bank. An active secondary market exists in BAs.
BROKER
A middleman who brings buyer and seller together and handles their orders, generally charging a commission for his/her services. In contrast to a “principal” or a “dealer,” the broker does not own or take a position in the security.
BERMUDAN CALL
Securities that may be redeemed according to a pre-specified schedule (e.g., monthly, quarterly or semi-annually) after the initial lockout period.
CALLABLES
Securities that the issuer has the right to redeem prior to maturity.
CAPITAL GAIN/LOSS
Capital is another word for principal. At the purchase of an investment, capital is the cost for the security. It does not include any interest which may have accrued which is included in the total price of the security. At the time of sale, capital is the actual price received for the security. If the price is less than the price paid, a capital loss results. If the price is higher than the original price paid, a principal gain results. Actual or realized gains and losses are only realized at the time of sale, when a bonafide gain or loss occurs. Pursuant to Governmental Accounting Standards Board Statement No. 31 (titled “Accounting and Financial Reporting for Certain Investments and for External Investment Pools”) (GASB #31), a change in Item: 13
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the fair value of investments occurs at the end of the period based on the difference between the fair value (or commonly known as market value) at the beginning of the period and at the end of the period. The change in fair value is essentially an unrealized gain or loss.
CERTIFICATE OF DEPOSIT (CD)
See “Negotiable CDs” and “Non-Negotiable CDs.”
CODE
Refers to California Government Code Sections 53600 and 53630 et seq. and all related State and Federal laws.
COLLATERAL
Securities, evidence of deposit, or other property which a borrower pledges to secure repayment of a loan. Also refers to securities pledged by a bank to secure deposits of public monies. In California, State law requires that repurchase agreements, reverse repurchase agreements, non-negotiable CDs and public deposits be collateralized. Collateral used to secure these investments and public deposits can be any eligible security allowed by State law, ranging from U. S. Treasury securities to mortgages.
COMMERCIAL PAPER
Commercial paper is a promissory note, usually unsecured, issued for a specific amount and maturity on a specific date. Although commercial paper does trade in the secondary market, it is not quite as liquid as treasuries and agencies. Issuers and dealers of commercial paper will, in most cases, buy back their paper. The maximum maturity of commercial paper is 270 days, although, in practice, most maturities range from 1 to 180 days. Commercial paper is normally sold at a discount from face value. Most issuers back their paper with lines of credit from banks to protect investors from the issuer’s potential credit risk. Almost all commercial paper is rated with respect to credit risk.
DEALER
An individual or firm which ordinarily acts as a principal in security transactions. Typically, a dealer buys for his/her own account and sells to a customer from his/her inventory. His/her profit or loss is determined by the Item: 13
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difference between the price he/she pays and the price he/she receives for the same security.
DELIVERY
There are two methods of delivery of securities: delivery vs. payment and delivery vs. receipt (also called free). Delivery vs. payment is delivery of securities with an exchange of money for the securities. Delivery vs. receipt is delivery of securities with an exchange of a signed receipt for the securities.
DERIVATIVE
Derivative securities are investments which are created or derived from other securities. A good example is a Treasury strip. Treasury notes and bonds receive interest every six months. Before electronic record keeping, the interest was represented by coupons attached to the physical note or bond. In order to receive interest, the investor presented the coupons.
Therefore, Treasury notes, bonds and all other securities which pay interest semi-annually became known as “coupon securities.” When the principal and coupon portions of a bond are separated, the resulting parts are known as strips, because the coupons have been “stripped” away.
What remains are two different investment types, the interest only strip and the principal only strip. These investments have very different characteristics than the underlying original security.
Other commonly used derivative securities include forward currency contracts, Treasury futures contracts and stock index futures contracts.
Other commonly used derivatives are options. For example, options to buy or sell Treasury securities. These derivatives are most often used to “hedge” a position. Many of these types of derivatives have been around for twenty years or more.
Exotic derivatives are derivatives which have been developed only over the last few years and are relatively untested. Most are not widely traded and they are frequently customized for a particular customer. This group of securities is therefore very illiquid, difficult to value and subject to volatile price swings. Examples of exotics include a wide variety of investment types whose common characteristic is that the interest rate is tied to a particular benchmark rate, or a relationship between rates.
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ELIGIBLE BANKER’S ACCEPTANCES
In the BA market, an acceptance may be referred to as eligible because it is acceptable by the Federal Reserve Bank (Fed) as collateral at the Fed discount window and/or because the accepting bank can sell it without incurring a reserve requirement.
EUROPEAN CALL
Securities that may be redeemed only one time on a pre-specified date after the initial lockout period.
FEDERAL CREDIT AGENCIES
Agencies of the Federal government set up to supply credit to various classes of institutions and individuals; i.e., S & Ls, small business firms, students, farmers, farm cooperatives and exporters.
FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC)
The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the federal government which preserves and promotes public confidence in the U.S. financial system by insuring deposits in banks and thrift institutions for at least $250,000; by identifying, monitoring and addressing risks to the deposit insurance funds; and by limiting the effect on the economy and the financial system when a bank or thrift institution fails.
FEDERAL HOME LOAN BANKS (FHLB)
The institutions which regulate and lend to savings and loan associations.
The FHLB plays a role analogous to that played by the Fed vis-à-vis member commercial banks.
ISSUER
Any corporation, governmental unit or financial institution which borrows money through the sale of securities.
LIQUIDITY
A liquid asset is one which can be converted easily and rapidly into cash without a substantial loss of value. In the money market, a security is said Item: 13
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to be liquid if the spread between bid and asked price is narrow and reasonable size can be done at those quotes. U. S. Treasury bills are very liquid and are sometimes called “cash.”
LOCKOUT PERIOD
The period of time that an issuer of callable securities cannot call the securities.
MAKING A MARKET
A dealer is said to be making a market in a given security when he/she stands prepared to buy or sell at the bid and offer prices that he/she quotes. The market is maintained when he/she continues to quote bids and offerings over a period of time.
MARKETABILITY
A measure of the ease with which a security can be sold in the secondary market.
MATURITY
The date upon which the principal or stated value of an investment becomes due and payable.
MORTGAGE-BACKED SECURITIES
Investments whose principal and interest are generated by the payment of interest and principal on a group or pool of single-family, multi-family, or mobile homes. There are many types of mortgage-backed securities with varying levels of risk. Some mortgage pools are partly insured by a government agency or a private entity. Some mortgage pools are divided, with mortgage principal repayments first paying off certain investors prior to other investors receiving principal repayments. The total return to the investor varies depending upon the rate of repayment of principal, the relationship between the original mortgage rate and prevailing rates, the number of foreclosures, losses due to fire, flood, earthquake, etc. A prudent investor investigates the particular characteristics of each individual pool to determine the level of risk and thoroughly understands the web of economic variables which affect maturity, price volatility, rate of return, and ultimate repayment of capital invested.
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NEGOTIABLE
A term used to designate a security, the title to which is transferable by delivery.
NEGOTIABLE CERTIFICATE OF DEPOSIT
A large-denomination CD is generally issued in $1 million increments.
They are issued at face value and typically pay interest at maturity, if maturing in less than twelve (12) months. CDs which mature beyond this range pay interest semi-annually. Negotiable CDs are issued by: U. S. banks (domestic CDs); U. S. branches of foreign banks (Yankee CDs) and thrifts. There is an active secondary market for negotiable domestic and Yankee CDs. However, the negotiable thrift CD secondary market is limited. Yields on CDs exceed those on U. S. Treasuries and Agencies of similar maturities. This higher yield compensates the investor for accepting the risk of reduced liquidity (CDs, especially those issued by small and less well-known banks, are less liquid) and the risk that the issuing bank might fail. The Code does not require the collateralization of negotiable CDs.
Bank rating services are available to assist the investor in selecting CDs issued by the most creditworthy banks.
NON-NEGOTIABLE CERTIFICATE OF DEPOSIT
A time deposit with financial institution which earns interest at a specified rate for a specified term. Liquidation of the CD prior to maturity incurs a penalty. There is no secondary market for those instruments. They are not liquid. The Code classifies these investments as public deposits and requires all State financial institutions to provide collateral to secure them.
Generally, financial institutions use mortgages to collateralize these deposits. The collateral is held only by financial institutions authorized by the Superintendent of Banks which administrates the collateral program for public agencies. In the event of a default by the financial institution with whom the time deposit was placed, the local agency would own the underlying collateral which it could sell. In practice, it may be difficult to obtain and sell mortgages quickly because of the length of bankruptcy proceedings and the conditions present in the real estate market.
PORTFOLIO
Collection or group of securities held by an investor.
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PRINCIPAL
Principal describes the original cost of a security. It represents the amount of capital or money which the investor puts up for the investment.
RATE OF RETURN
When an investment matures, the investor receives the original amount invested plus interest. The earnings’ rate, expressed as a percentage, is the yield to maturity. When an investment is sold, the investor receives more or less than the original amount invested plus interest earned. The total amount earned expressed as a percent of the original amount invested is the total rate of return. It takes into consideration principal gains and losses.
RATINGS
An evaluation given by Moody’s, Standard & Poor’s, Fitch, or other rating services of a security’s creditworthiness.
REPURCHASE AGREEMENTS (REPOs)
The purchase of portfolio securities by a public body (or any other investor), with a simultaneous agreement to resell the securities back to the seller on a specific future date, at the original purchase price, plus a negotiated interest payment. California State law requires that repurchase agreements be collateralized.
SAFEKEEPING
A service to customers rendered by banks for a fee whereby securities and valuables of all types and descriptions are held in the bank’s vaults for protection.
SECONDARY MARKET
A market made for the purchase and sale of outstanding issues following the initial distribution. For example, once the U. S. Treasury issues a note, it can be easily bought and sold again in the secondary market.
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SECURED DEPOSITS
Bank deposits of State or local government funds which, under the laws of certain jurisdictions, must be secured by the pledge of acceptable securities (collateral).
TREASURY BILL
A non-interest-bearing discount security issued by the U. S. Treasury to finance the National debt. Most bills are issued to mature in three months, six months or one year.
TREASURY BONDS
Direct debt obligations of the Federal Government, issued by the U.S.
Department of the Treasury with original maturity of a 30 year term.
TREASURY NOTES
Direct debt obligations of the Federal government, issued by the U. S.
Department of the Treasury with original maturity of over one year up to ten years.
WIRE TRANSFER
A computer message system linking major banks. It is used not for effecting payments, but as a mechanism to advise the receiving bank of some action which has occurred; i.e., the payment by a customer of funds into that bank’s account.
YIELD CURVE
When interest rates or yields are plotted across a horizontal axis representing time, for example, three months, six months, one year, etc., the shape which results is called a yield curve. The yield curve is used by investors to assist in the maturity selection process. Since yields are normally higher the longer an investment’s maturity, the shape is usually upward sloping. However, the yield curve moves constantly and may be steep, flat, negatively sloping or some combination of these. Obviously, if a two-year investment yields exactly the same as a three-year investment, a three-year investor is not being compensated for the additional year of credit and interest rate risk.
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ZERO-COUPON BOND
A zero-coupon does not pay any interest until maturity. The coupon of interest portion of the bond is essentially zero percent. These bonds are sold at deep discounts to their par or face value. When the investment matures, the investor receives the full par value.
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APPENDIX B
ILLUSTRATION OF CITY’S DIVERSIFICATION GUIDELINES AND
RELEVANT GOVERNMENT CODE PROVISIONS
City Policy
Investment Type
Government
Code
% Limit of
City’s Total
Portfolio*
City Max. Term
Limit Per
Transaction
Issuer
Limit
U.S. Treasury Bills, Notes,
Bonds
§53601(b); No
limit
No limit
5 years
No limit
Obligations of Federal
Agencies or Government-
Sponsored Enterprises
Federal Home Loan Bank (FHLB)
Federal Farm Credit Bank (FFCB)
Federal Home Loan Mortgage
Corporation (Freddie Mac)
Federal National Mortgage Association
(Fannie Mae)
Federal Agricultural Mortgage
Corporation (Farmer Mac)
Government National Mortgage
Association (Ginnie Mae)
Community Development Corporation
(CDC)
Student Loan Marketing Association
(Sallie Mae)
Small Business Administration (SBA)
Tennessee Valley Authority (TVA)
§53601(f); No
limit
70%
5 years No limit
Banker’s Acceptances §53601(g); 40%
Max.; 180 days
20%
180 days
5%
Time Certificate of Deposit
(Non-negotiable CDs)
§53649; No limit
30%
5 years
FDIC
Insured
or
collatera
lized
Negotiable CDs §53601(i); 30%
Max.
30%
5 years
FDIC
Insured
Repurchase Agreements §53601(j); 1 year 10% 92 days No limit Commercial Paper §53601(h); 25%
Max.; 270 days
25%
270 days
5%
LAIF §16429.1 No limit N/A N/A
OCIP §53684 No limit N/A N/A
Investment Joint Powers
Authorities
30%
N/A
N/A
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§6509.5 and
53601
Money Market Mutual
Funds
§53601(l); 20%
Max.
10%
N/A
N/A
* For conformance with this Policy, all percentage limitations are measured
at the time of purchase.
R 9-1-15
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CITY COUNCIL AGENDA REPORT
MEETING DATE: 4/18/2023
DEPARTMENT: Public Works
SUBJECT:
FIRST AMENDMENT TO THE MEMORANDUM OF UNDERSTANDING
REGARDING SOLID WASTE PROCUREMENT SERVICES BY AND BETWEEN
THE CITY OF LAGUNA HILLS AND THE CITY OF LAKE FOREST
RECOMMENDED ACTION(S):
1. Approve the First Amendment to the Memorandum of Understanding Regarding Solid Waste Procurement Services by and between the City of Laguna Hills and the City of Lake Forest.
2. Authorize the City Manager to execute, and the City Clerk to attest, the proposed First Amendment.
EXECUTIVE SUMMARY:
On September 20, 2021, the City of Lake Forest and the City of Laguna Hills entered into the Memorandum of Understanding Regarding Solid Waste Procurement Services (“MOU”) (Attachment 1). Pursuant to the MOU, the cities of Lake Forest and Laguna Hills are working jointly to develop procurement documents for the provision of solid waste collection, processing, and disposal.
An informal ad-hoc committee consisting of two City Councilmembers and staff from each city has been meeting to discuss policy and scope of work recommendations that will be incorporated in the procurement documents. A list of these recommendations is included as Attachment 2.
The MOU is set to expire when the procurement documents are completed. On November 15, 2022, the City Councils of both Lake Forest and Laguna Hills directed their respective staff to prepare an amendment to the MOU to extend the joint work effort through the procurement and selection phase of a new solid waste services agreement (Attachment 3). To protect the integrity of the procurement process, the RFP will include Process Integrity Rules (Attachment 4). The City Attorney’s Office prepared the proposed First Amendment to the MOU for the City Council’s consideration (Attachment 5). Given the successful collaboration so far and the previous direction of the City Council, staff recommends the City Council approve the First Amendment to the Memorandum Item: 14
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of Understanding Regarding Solid Waste Procurement Services by and between the City of Laguna Hills and the City of Lake Forest.
BACKGROUND:
On March 4, 2014, the City Council awarded the franchise agreement to CR&R Environmental Services, Inc. (”CR&R”) for the collection, transportation, processing, and diversion of recyclable materials and municipal solid waste (”Franchise Agreement”). The original term of the Franchise Agreement was May 1, 2014, through April 30, 2022. The Franchise Agreement included two one-year extensions that CR&R could earn by meeting certain performance goals designed to increase the City’s waste diversion from landfills. The City Council awarded the first one-year extension to the Franchise Agreement with CR&R on February 21, 2017. On April 20, 2021, the City Council extended the Franchise Agreement to June 30, 2024. The City of Laguna Hills holds a franchise agreement for similar solid waste services that also expires on June 30, 2024.
On September 20, 2021, the cities of Lake Forest and Laguna Hills entered into a MOU for the purposes of sharing costs while developing procurement documents (Attachment 1). After a joint selection process with Laguna Hills, the City Council awarded an agreement to EcoNomics, Inc. (“EcoNomics”) on February 1, 2022, to serve as the consulting firm during the solid waste agreement procurement process. The City of Lake Forest is the lead agency for the project. As such, Lake Forest invoices the City of Laguna Hills for 50% of the consultant’s fees.
On April 19, 2022, the Lake Forest City Council created a Solid Waste Procurement Ad-Hoc Committee and appointed the then Mayor and Mayor Pro Tem to serve on the committee. On April 26, 2022, the City of Laguna Hills appointed two City Councilmembers to also serve on the joint Ad-Hoc Committee.
DISCUSSION:
Solid Waste RFP Update
After jointly selecting a consulting firm, EcoNomics, for the project, staff recommended to their respective City Councils to create an ad-hoc committee consisting of two City Councilmembers from each agency and staff. The Lake Forest City Council appointed then-Mayor Robert Pequeño and then-Mayor Pro Tem Doug Cirbo to the Committee, while the Laguna Hills City Council appointed City Councilmember Don Caskey and Councilmember Erica Pezold. The Committee also includes the city managers and staff from both cities.
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The Committee has met five times since July 2022. During these meetings, the Committee discussed numerous policy and scope of work items to be included in the Solid Waste RFP documents. A comprehensive list is included in this report as Attachment 2.
Items of note include:
•Length of contract would be an 8-year term with two 1-year extensions based on performance measurements related to contamination rates. •Regulatory compliance costs in lieu of franchise fees
•Residential 3-cart bundled rate with rates determined by size of trash container
•Residential kitchen pail distribution for organics collection •Single-family residents with handicap placards to receive backyard roll-out service at no charge
•Multi-jurisdictional routing for residential and commercial/multifamily allowed between Lake Forest and Laguna Hills within proscribed methodology
•50% recycling and organics rate incentives for commercial/multifamily customers
•All new collection containers for residential and commercial/multifamily customers with colors in alignment with SB 1383
•Provision of recycling coordinators
•Special programs such as:
oTwo residential bulky item pickups annually with 10 items per pickup oAnnual community bulky item dropoff event
oAnnual household hazardous waste collection event
oTwo compost giveaways and one compost workshop annually •Lightweight vehicles and one electric vehicle for commercial recycling •Technology such as collision avoidance systems, on-boards scales, and cloud-based CRM
•Exclusive temporary roll-off service
•RFP Process Integrity Rules (Attachment 4)
The collaborative spirit of the Committee has proven successful thus far and there is agreement on all policies and scope of work items discussed to date.
EcoNomics is currently developing the procurement documents, which include the RFP and the draft agreement based on the recommendations of the Committee.
MOU Amendment
Under the terms of the MOU, there is no commitment for either City to proceed with the joint process beyond the development of the procurement documents.
The MOU, unless amended, will expire when the procurement documents are Item: 14
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completed. On November 15, 2022, the Lake Forest City Council gave staff direction to prepare an amendment to the MOU that would allow the cities of Lake Forest and Laguna Hills to continue the joint work effort through the procurement and selection phase of a new solid waste services agreement. On November 15, 2022, the Laguna Hills City Council also directed its staff to move forward to prepare the MOU amendment.
The First Amendment to the MOU (Attachment 5) would extend the term of the MOU through the completion of the procurement and selection process. During the procurement process, both cities would participate jointly in all aspects of selecting the solid waste hauler, including the review, rating, and interviews of proposers. The Committee believes continued collaboration between both cities would result in a successful selection process. In addition, the proposed First Amendment states that the cities anticipate awarding separate solid waste agreements to serve each city to a single hauler. The Committee believes the larger combined area and potentially higher contract revenue the hauler would receive through agreements from both cities would attract an increased number of qualified proposers and foster greater competition.
The City Attorney’s Office prepared the proposed First Amendment for the City Council’s consideration. Given the successful collaboration so far and the direction of the City Council on November 15, 2022, staff recommends the City Council approve the First Amendment to the Memorandum of Understanding Regarding Solid Waste Procurement Services by and between the City of Laguna Hills and the City of Lake Forest. The First Amendment is scheduled to be presented for consideration by the City of Laguna Hills City Council in May 2023.
Next Steps
EcoNomics, the City’s project consultant, continues to develop the procurement documents. It is anticipated that staff would bring the procurement documents to the City Council in late summer 2023. Staff would also request the City Council appoint two City Council Members to a new joint Procurement Ad-Hoc Committee consisting of Council Members from both cities. The purpose of this Ad-Hoc Committee is to review staff’s analysis of proposals, interview scores, and vendor recommendation. Based on its review, the Ad-Hoc would recommend a final selection for both City Council’s consideration in late fall 2023.
FISCAL IMPACT:
While the direct costs associated with executing the MOU Amendment is minimal, the proposed First Amendment would continue the assignment of future costs for consultant services to be shared by Lake Forest and Laguna Hills. The Item: 14
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2021-2023 Operating Budget includes sufficient funding to cover the costs of the recommended action.
ATTACHMENTS:
1. Memorandum of Understanding Regarding Solid Waste Procurement Process
2. List of Policy and Scope of Work Recommendations by Ad Hoc Committee
3. Minute Excerpt - November 15, 2022, City Council Meeting
4. Draft RFP Process Integrity Rules
5. Proposed First Amendment to the MOU Regarding Solid Waste Procurement Process
Initiated By: Christine Groves, Senior Management Analyst Submitted By: Thomas Wheeler, P.E., Director of Public Works/City Engineer Approved By: Debra Rose, City Manager
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Attachment 1
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Attachment 2
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Cities of Lake Forest and Laguna Hills Recycling and Solid Waste RFP Recommendations by Joint Ad-Hoc Committee
A. RFP
1 RFP Process Integrity Rules
B. Special Programs
1 2 bulky item collections per year for single-family residential 10 items per collection
Allowance of junk haulers to collect bulky items from residents 2 Bulky Item Collection Day/Week Event - Single-family residential curbside bulky item collection by appointment allowing local charities to have first right to salvage; provide collection containers and staff for bulky item dropoff on same day/week as annual event for all residents
3 Provide one container (e.g. 40-yard bin) for the collection of abandoned property in the City's right-of-way
4 Provide on-call collection of white goods/bulky item from public right-of ways as directed by each City - up to 35 on call collections per year 5 2 u-waste/e-waste/HHW/sharps collections per year for single-family residential 6 1 Annual HHW drop-off event for single-family residents and multifamily residents 7 Mail back program for sharps collection for single-family and multi-family residential; Contractor to provide sharps containers for resident pick up 8 1 backyard compost workshop per year, including discounted home composting kits 9 2 compost giveaways annually
10 Provide trash and recycling collection at bus shelters 11 Provide trash collection and recycling at up 20 City-designated events annually 12 Provide large venue collection and recycling for a charge proscribed in RFP C. Residential Programs
1 Basic Single-Family Residential Rate - 1 trash cart, up to 2 recycling carts, 1 organics cart
2 Variable rate for smaller trash cart, i.e. rate for 35-gallon trash cart is less than 60 and 90-gallon trash carts
3 All new single-family residential carts whole color-coded and labeled in compliance with SB 1383 regulations
4 Single-family and multi-family residential kitchen countertop pails for organics collection
Replacement pails for a fee
5 All New Residential Collection Vehicles with LNG/CNG fuel at a minimum (other fuel options in Tech Innovations Section)
6 Contamination and overflow monitoring - hauler notifies City of instances for City to enforce it Ordinance, hauler not authorized to charge for violations
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Cities of Lake Forest and Laguna Hills Recycling and Solid Waste RFP Recommendations by Joint Ad-Hoc Committee
7 Multijurisdictional Residential Routing between Lake Forest and Laguna Hills allowed, agreement will provide a prescriptive methodology for allocating tonnage between cities.
8 Provide bilingual public education and outreach to residents, including all SB 1383 notification requirements
9 Single-family residents with handicap placard to receive backyard roll-out cart service at no charge, pay for regular collection service
D. Commercial/Multi-Family Programs
1 Contamination and overflow monitoring - hauler notifies City of instances for City to enforce it Ordinance, hauler not authorized to charge for violations 2 All new commercail/mullti-family containers whole color-coded and labeled in compliance with SB 1383 regulations
3 Provide 2-yard, 3-yard, 4-yard split bins for commercial accounts 4 All new commercial/multi-family collection vehicles with LNG/CNG fuel at a minimum (other fuel options in Tech Innovations Section)
5 Multi-Jurisdictional Commercial/Multi-Family Routing - allowed, contract will provide a prescriptive methodology for allocating between cities using onboard scales 6 Provide internal collection containers for commercial and multi-family accounts (i.e. slim jims for commercial accounts and kitchen pails for multi-family accounts) 7 Provide bilingual public education and outreach for commercial and multi-family accounts, including all SB 1383 notification requirements E. Construction & Demolition Debris Programs
1 Temporary container service exclusive to contracted hauler F. Multi-Family Programs not mentioned in other sections 1 10 bulky item collections per trash enclosure for multi-family 10 items per collection
G. Technological Innovations
1 Collision avoidance system on all collection vehicles 2 Lightweight vehicles required for commercial recycling collection 3 On-board scales for commercial collection vehicles
4 One electric collection vehicle
5 Commercial bin sensor pilot program to monitor contamination and overflows; City may elect to activate full-scale program
6 Vehicles required to comply with SCAQMD, Rule 1193 regarding alternative fuel vehicles. Hauler may propose hydrogen-fuel vehicles.
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Cities of Lake Forest and Laguna Hills Recycling and Solid Waste RFP Recommendations by Joint Ad-Hoc Committee
H. Contract Terms
1 Term - 8-year agreement with two 1-year performance-based extensions available based on contamination metrics
2 50% rate incentive for commercial/multifamily recycling and organics collection 3 Proposers to provide rates for composting and anerobic digestion of organics processing. City may direct hauler to utilize County of Orange composting facilities when program becomes available.
4 Contamination monitoring:
2 waste composition audits, per waste stream, per sector, per year (18 total) Lid flipping audits of 5% of residential accounts twice annually (10% total) Recurring commercial lid flipping by Recycling Coordinators Hauler to provide education if contamination found
5 Provide 2 Recycling Coordinators
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Attachment 3
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LAKE FOREST CITY COUNCIL MINUTE EXCERPT PREPARED BY THE OFFICE OF THE CITY CLERK JUNE 15, 2021
Page No. 1
MINUTE EXCERPT
LAKE FOREST REGULAR CITY COUNCIL MEETING
NOVEMBER 15, 2022, ITEM NO. 15
____________________________________________________________
15. SOLID WASTE AD HOC COMMITTEE UPDATE
City Manager Rose introduced this item and invited Senior Management Analyst Christine Groves to provide a presentation on this item. The presentation was received by the Mayor and Council. City Council Members questions were asked and answered by staff.
Council Member Tettemer moved to direct staff to prepare an amendment to the Memorandum of Understanding (MOU) regarding solid waste procurement services and to extend the MOU to include the procurement and selection process of a new solid waste services agreement, and for staff to present the amended MOU to the City Council in January 2023.
Council Member Tettemer’s motion was seconded by Council Member Voigts. The motion was carried by a vote of 4/0 with Mayor Pequeño absent.
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Attachment 4
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1 REQUEST FOR PROPOSALS FOR COLLECTION, PROCESSING AND
DIVERSION OF RECYCLABLE MATERIALS, FOOD SCRAPS/YARD
TRIMMINGS AND OTHER MATERIALS AND FOR COLLECTION AND
DISPOSAL OF MUNICIPAL SOLID WASTE
RFP PROCESS INTEGRITY RULES
Rules To Be Followed By All Proposers
In order to ensure a fair RFP process the City Council has established Process Integrity Rules to govern interactions between the Proposers, the City, and the City’s representatives during the process. All Proposers shall strictly adhere to the following rules:
1. From the date that the City Council authorizes the issuance of the Request for Proposal s (RFP), _______, 20 23, until the City Council awards a contract, all contacts between Proposers and the City shall be through the Cities’ RFP Coordinator, Christine Groves. Contact information for the RFP Coordinator is contained in Section ___ of the RFP. Any attempt to contact, or any contact made to any other person, including an elected or appointed official of the City, is grounds for disqualifi cation of the proposer from the process.
2. All Proposer questions shall be submitted in writing to the RFP Coordinator.
3. Any Communications from the City to a Proposer will be transmitted simultaneously to all Proposers along with answers to written questio ns submitted.
4. All proposals submitted shall be final. No changes or alterations will be accepted after proposal submission.
5. Any proposer contesting any part of the RFP process or fairness of the RFP process shall submit their claim in writing to the City Manager or h er designee for review by the City.
6. Any Proposer who fails to recognize or utilize this process of communications will be notified of its violation and may be disqualified from the selection process at the sole discretion of the City Manager.
All Proposers will be asked to sign a formal acknowledgement indicating receipt of and understanding of these rules, at the mandatory pre-submittal conference.
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Attachment 5
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First Amendment to MOU re Solid Waste Procurement Services – Lake Forest – Laguna Hills Page 1 of 3 1762487.1
FIRST AMENDMENT TO
MEMORANDUM OF UNDERSTANDING
REGARDING SOLID WASTE PROCUREMENT SERVICES
THIS FIRST AMENDMENT TO MEMORANDUM OF UNDERSTANDING (“ First Amendment”) is made and entered into this ____ day of ________, 2023 by and between the City of Laguna Hills (“Laguna Hills”) and the City of Lake Forest (“Lake Forest”) (each individually a “Party” and collectively the “Parties”).
RECITALS
A. Laguna Hills and Lake Forest entered into a Memorandum of Understanding Regarding Solid Waste Procurement Services dated September 20, 202 1, which is incorporated herein by reference as though fully set forth herein (“MOU”), to cooperate in the Procurement (as defined in the MOU) for Services (as defined in the MOU) from a Hauler (as defined in the MOU).
B. The Parties desire to enter into this First Amendment to extend the MOU and to clarify the Parties’ rights and obligations with respect to the Procurement.
TERMS
NOW, THEREFORE, the Parties, in consideration of the mutual promises set forth in this First Amendment, agree as follows:
I. Incorporation of Recitals & Defined Terms. The Recitals set forth above are true, correct, and incorporated herein. Any capitalized term not herein defined shall be given the same meaning as in the MOU.
II. Adjustment to terms for the Selection of Consultant . Section 6.4 of the MOU is hereby added to read in full as follows:
6.4 Selection of Hauler.
Notwithstanding Recital B of the Agreement , the Parties currently anticipate (but have not committed to) awarding separate franchises to serve each Party to a single Hauler, which may include provisions permitting the Hauler to propose and provide one or more collection route(s) serving customers within the Parties. The Procurement and Procurement Documents shall identify this as the preferred result , and the Parties shall jointly participate in all aspects of selecting the Hauler, including but not limited to the review, rating, and interviews of proposers.
III. Extension of MOU Term. Section 9 of the MOU is DELETED in its entirety and is hereby replaced with the following:
9. Term and Termination.
This MOU shall become effective as of the date it is executed by the last of the Parties, and shall continue in full force and effect until the Parties have completed the Item: 14
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Procurement and the governing legislative body of each Party approves a contract with a Hauler. Notwithstanding the foregoing, either Party may at any time terminate this MOU without penalty by giving written notice of intent to terminate thirty (30) calendar days prior to the date of proposed termination . If either Party terminates this MOU before completion of the Procurement, the Parties shall each be responsible for their proportionate share of the consultant costs expended up to the date the notice of intent to terminate is received, including such fu ture costs as cannot be reasonably canceled upon receipt of the notice of intent to terminate. Termination by either Party shall not terminate the Party’s right to access any consultant work product or records as provided in Sections 6 .2 and 6.3 , or the de fense and indemnification obli gations set forth in Section 10.
IV. Miscellaneous Provisions
a. Except as amended by this First Amendment , all provisions of the MOU shall remain in full force and effect and shall govern the actions of the Parties under First Amendment.
In the event of a conflict between this First Amendment and the MOU, the terms of this First Amendment shall prevail. This First Amendment may only be modified in a writing signed by both Parties.
b. This First Amendment is a completely integrated written agreement and supersedes any other agreements, both oral and written, between the Parties concerning the subject matter herein.
c. This First Amendment may be signed in counterparts, each of which shall constitute an original.
d. A manually signed copy of this First Amendment which is transmitted by facsimile, email or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original executed copy of this First Amendment for all purposes. This First Amendment may be signed using an electronic signature.
[SIGNATURE PAGE FOLLOWS]
Item: 14
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IN WITNESS WHEREOF, this First Amendment was executed by the parties hereto as of the date first above written.
CITY OF LAKE FOREST
By:
City Manager
CITY OF LAGUNA HILLS
By:
City Manager
Item: 14
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