CITY OF POMONA
COUNCIL REPORT
May 6, 2024
To: Honorable Mayor and Members of the City Council
From: Anita D. Gutierrez, City Manager
Submitted By: Andrew Mowbray, Finance Director/City Treasurer SUBJECT: ENTER INTO A CONTRACT WITH CHANDLER ASSET MANAGEMENT TO PROVIDE INVESTMENT ADVISORY SERVICES FOR THE CITY OF POMONA RECOMMENDATION:
It is recommended that the City Council take the following actions:
Enter into a contract effective November 2023 with Chandler Asset Management (“CAM”) for a three-year (3) period with the option to renew for two (2) additional years, in one (1) year increments, not to exceed five (5) years, to perform investment advisory services; Authorize the City Manager or her designee to execute a three-year agreement with two one-year renewal options with CAM to provide Investment Advisory services.
EXECUTIVE SUMMARY:
Professional investment management of public funds is a “best practice” that provides substantial benefits to the City. These benefits include day-to-day monitoring of investment yields available in the market; re-balancing of the portfolio's duration (average maturity) to take advantage of interest rate trends; credit monitoring and analysis; investment selection; and competitive shopping of investments to obtain the best rates. Finance Staff recommends that City Council enter into a contract to CAM for professional investment advisory services (See Attachment 1).
SB1439/GOVERNMENT CODE §84308 APPLICABILITY:
☒When this box is checked, it indicates the agenda item is subject to the Levine Act SB1439 requirements. Councilmembers are reminded to check their campaign contributions and determine whether they have received a campaign contribution of $250 or more that would require disclosure and/or recusal from discussing or acting on this agenda item. Campaign contributions of $250 or more made 1) by any person or entity who is identified in the agenda report as the applicant or proposer; or 2) on behalf of the applicant or participant, including a parent, subsidiary or otherwise related business entity; or 3) by any person who has a financial interest in the agenda item requires a councilmember to comply with SB1439.
FISCAL IMPACT:
For Fiscal Year ended June 30, 2023 the City earned approximately $4.3 Million of interest revenue from investing activities. The investments with CAM earned 57.23% of the interest revenue. CAM performed better than the other investment vehicles held by the City. Please see below for CAM’s Fee Schedule. Fees are determined by the total dollar value of the investment balance and the City currently holds over $150 million with Chandler. Fees are collected net of interest revenues on a monthly basis.
PUBLIC NOTICING REQUIREMENTS:
Per the City of Pomona Purchasing Ordinance, Sec 2-993.2(8) The City Manager or designee shall have the authority to approve specialty services related to fiscal and/or personnel related matters. Therefore, this service was excluded from the formal bidding process.
PREVIOUS RELATED ACTION:
On September 10, 2018, the City Council awarded contract to CAM.
DISCUSSION:
Historically, the City had invested a majority of its funds in the Local Agency Investment Fund (“LAIF”). LAIF offers local agencies the opportunity to participate in a major portfolio, which invests hundreds of millions of dollars. LAIF offers liquidity but at cost of lower yields than other investment vehicles. In 2018, the City decided to contract with CAM to achieve a higher rate of return on investments.
It is important that the City optimize the investment returns while still making certain that safety and liquidity are maintained. As of June 30, 2023 the City had approximately $254.4 Million of unrestricted cash invested in three different investment platforms:
1. CitizensTrust ($21.7 Million invested in various short term and long term investments) 2. Local Agency Investment Fund “LAIF” ($50.4 Million)
3. Chandler Asset Management (CAM) ($182.3 Million)
These investments generated approximately $4.3 million of interest revenue for fiscal year 2022-23. Interest revenue of $4.3 was the highest amount of interest earned by the City in a fiscal year. Since the commencement of CAM’s services in 2018, the interest revenue increased by $3.0 million from fiscal year 2017-18 to fiscal year 2022-23. While those returns were significant, staff believes with the continued professional guidance of Chandler, interest revenue will continue to increase over the years (subject to the market/economy). Many public agencies rely on investment managers to advise and/or invest funds on behalf of the public agency. The advantages of choosing such an option include:
1. A large resource of licensed, knowledgeable and experienced investment managers, which is unlikely to exist with Cities that have limited resources.
2. A disciplined investment process allowing the interpretation of macro-economic data to incorporate into model portfolios on a timely basis.
3. A systematic process to achieve consistent results in all market environments.
4. A process that allows an agency to maximize yield, while reducing risk and maintaining adequate liquidity.
5. The cost for the investment advisory services is low compared to the estimated return on investment.
6. Availability of additional services, such as cash flow analysis, preparation of investment reports and Investment Policy review, without additional cost.
7. Public agencies benefit from the economies of scale when securities and other investments are purchased in bulk.
The previous CAM agreement concluded at the end of October 2023. The City continued services with CAM during the six month lapse due to City investments and the necessity of them to continue to function normally and earn the City investment income. The contract is to be back dated to commence November 1, 2023.
With the execution of the contract, the Finance department and CAM will continue to work on developing every aspect of an investment program, including analysis of risk and return, investment policy improvements and review, and cash flow analysis and forecasting. CAM will assist in implementing investment strategies that meet the City’s risk and return requirements, provide comprehensive investment reporting to save staff time, and conduct education and training for staff enrichment.
Exceptions to the informal and formal procedures (Sections 2-993 and 2993.1) may be waived in the some instances. Per the City of Pomona Purchasing Ordinance, Sec 2-993.2(8) The City Manager or designee shall have the authority to approve specialty services related to fiscal and/or personnel related matters.
Prepared by: Raul Marquez, Principal Accountant
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Raul Marquez
Principal Accountant
ATTACHMENT(S):
Attachment No. 1 – Chandler Asset Management Investment Advisory Services Contract Enter into a Contract with Chandler Asset Management