City of Sacramento
Personnel and Public Employees Committee Report
915 I Street Sacramento, CA 95814
www.cityofsacramento.org
File ID: 2023-00913 7/25/2023 Discussion Item 5.
Annual Report and Performance Evaluation for City Council Appointive Officer - City Treasurer
File ID: 2023-00913
Location: Citywide
Recommendation: Receive annual report and pass a Motion forwarding to the City Council for review.
Contact: John Colville, City Treasurer, (916) 808-8297, [email protected], Office of the City Treasurer
Presenter: John Colville, City Treasurer, (916) 808-8297, [email protected], Office of the City Treasurer
Attachments:
1-Description/Analysis
2-Appointed Officer Evaluation - City Treasurer
3-Compliance with Council Staff Linkage Policy - City Treasurer Description/Analysis
Issue Detail: The mayor and city council is committed to performing regular annual reviews of its appointive officers.
The annual report and appointed officer evaluation is intended to move forward to the city council.
The city council will meet in closed session, per Government Code section 54957(b), to provide feedback on past accomplishments and to give direction on the workplan for the upcoming year.
Policy Considerations: Council Rules of Procedure, Chapter 18.
Economic Impacts: Not applicable.
Environmental Considerations: Not applicable.
File ID: 2023-00913 7/25/2023 Discussion Item 5.
Sustainability: Not applicable.
Commission/Committee Action: Not applicable.
Rationale for Recommendation: Clear communication and performance metrics are at the core of the work of the council and the city. To evaluate council appointive officers on a consistent basis, the Personnel and Public Employee (P&PE) Committee has the role and responsibility of developing and leading annual performance metrics and evaluations.
Financial Considerations: Not applicable.
Local Business Enterprise (LBE): Not applicable.
Performance Evaluation of John Colville, City Treasurer –April 15, 2023 Page 1 of 6 City Council Appointive Officer Evaluation – City Treasurer 2023
Performance Evaluation of John Colville, City Treasurer Review Period: April 15, 2022, through April 15, 2023
Overview
The city treasurer performs executive management duties by overseeing the activities and functions of the Office of the City Treasurer, including the supervision of a professional staff, the investment and management of all city funds, issuance and management of city debt, and the coordination and administration of the city’s banking operations.
City of Sacramento Charter § 73 City Treasurer mandates the following:
The city treasurer shall be responsible for the deposit and investment of all funds of the city treasury not made subject to the control of others pursuant to this Charter. The city treasurer shall keep the city council fully advised as to the deposit and investment of funds subject to his control. The city council shall prescribe the qualifications, additional duties, and compensation of the city treasurer. The city treasurer shall appoint, subject to the civil service provisions of this Charter, such deputies and employees as the council may by resolution prescribe.
The City Treasurer is responsible for the following:
Banking
o Serve as the Citywide Lead/Program Manager and principal liaison between the city’s business units and the city’s banking vendor.
o Establish and administer a variety of banking services for the receipt, disbursement, and safekeeping of city monies and investments.
o Responsible for the implementation and sustainability of the city’s Compliance Program for Payment Card Industry Data Security Standard (PCI DSS). o Formulate and implement policies, programs, and procedures of banking operations including armor car services, PCard, ACH, and electronic payments. o Provide, coordinate, and conduct training for city departments on internal and external banking activities and compliance issues.
Debt Management
o Responsible for the planning, coordination, and issuance of all city debt (public or private placement).
o Work with Finance Department and City Attorney's Office staff, as well as external staff to develop the Rate and Method of Apportionment of Special Tax related to new Mello- Roos Districts.
o Manage the pre-issuance process of all financings, whether public or direct placement. o Manage the feasibility analysis of potential projects (such as small-equipment lease or enterprise revenue bond issues), working in conjunction with various city departments. o Manage communication between the city and rating agencies and current bondholders.
Performance Evaluation of John Colville, City Treasurer –April 15, 2023 Page 2 of 6 o Review and provide material edits to all draft rating agency credit reports or rating surveillance publications.
o Manage the levy development process for land-secured districts. o Evaluate and determine collections of land-secured districts; if necessary, initiate accelerated foreclosure proceedings.
o Manage the delinquency process; including stripping parcels from the secured roll (in accordance with bond covenants) and seek payment for bondholders. o Manage the reconciliation for special tax collections to determine sufficiency of covering necessary debt service payments and administrative costs of land-secured districts. o Review and approve reserve fund valuation as prepared by the trustees. o Review and approve all debt service payments, including sweeps of the reserve fund or supplants of the reserve fund.
o Review and approve all continuing disclosure filings, annual filings, event filings, and voluntary filings before the filings are uploaded to MSRB's EMMA system.
Investments
o Manage the city’s Pool A ($1.6B) and SHRA’s Pool D ($136 mm) short-term investment portfolios for principal preservation, liquidity, and income. o Portfolio Manager for the Sacramento City Employees’ Retirement System (SCERS) which includes equities, fixed-income, and equity option securities. o Manage endowment and trust funds that were bequeathed to the city:
Ann Land/Bertha Henschel Endowment ($4.5mm) – Poor and indigent citizens Ethel Hart Memorial Endowment ($3.0mm) – Senior citizens George H. Clark Memorial Scholarship ($1.7mm) – Sacramento high school student scholarships
o Participate on the Defined Contribution Committee which conducts advisory activities for the city’s 401A and 457 defined contribution programs. o Oversee and monitor the daily cash management to ensure adequate liquidity for the city.
o Prepare monthly, quarterly, and annual reports for the council and portfolio participants to ensure transparency.
o Complete all reporting in compliance with SEC regulations.
Evaluation Period Accomplishments
In addition to the statutory responsibilities of the City Treasurer, over this evaluation period the following are significant accomplishments:
Banking
o Banking Operations continues to manage the City’s Merchant Services Program. Monitoring over 70+ Merchant Accounts, with gross sales averaging $186M, equating to more than 3.5M transactions, annually.
Performance Evaluation of John Colville, City Treasurer –April 15, 2023 Page 3 of 6 Despite limited public counter operations, gross sales increased by 22% from the prior fiscal year, due primarily to offering more online options. o Coordinated and co-led team in a Clean Report of Compliance, using established Payment Card Industry Data Security Standard (PCI DSS) Policy and Procedures, while continuing to streamline the annual audit by improving monitoring and compliance gaps that ensure the City remains compliant with all new and ongoing payment card regulations.
o Negotiated and renewed the Master Depository Banking, Merchant, and Custodial Services Agreements.
Pricing for banking and merchant continued without any price increases. PCard rebate increase from 1.20 to 1.70 bps (benefit to city) Small increase in custody services of $140k annually, due to market rates. o Worked with city council staff and CBOs to explore the concept of a Public Bank to facilitate funding for affordable housing, climate initiatives, small business loans, and other mayor and council objectives.
o Partnered with Finance to develop and implement a citywide Wire Transfer Policy to mitigate fraud and streamline money transfers.
o Assisted Finance in renewing the city’s Armored Car Service contract as well as the implementation of the citywide cashiering project.
Debt Management
o Completed the issuance of the Delta Shores CFD (Improvement Area No. 2) in the amount of $10.23 million.
o Completed the issuance of the Railyards CFD in the amount of $30 million. o Received an upgrade from Standard & Poor for North Natomas CFD from BBB+ to A-.
The credit rating for all other issuances were affirmed with a stable outlook. This was substantial given the fallout from the pandemic and the U.S. economic slowdown. o Worked with DOU to develop the Designated Reserve Policy for the city’s Water, Wastewater, and Storm Drainage funds.
o Facilitated the comprehensive update of the Transient Occupancy Tax (TOT) forecast to determine the city’s ability to issue additional TOT bonds for eligible projects. o Worked with the City Manager, City Attorney, and SHRA to develop the Middle-Income Housing Bond Policy.
o Assisted the Parking Division in assessing the financial feasibility of a new parking garage in the Railyards.
o Worked with DOU to review their rate model and provided cost driver recommendations.
Investments
o The Investment Staff manages over $1.6 billion in the City’s Pool A account. The portfolio is consistently ranked in the top tier of California cities with similar populations and pool sizes. Staff also manages over $136 million in the SHRA Pool (D) account. These pools' main objectives in order of importance are principal preservation, liquidity, and yield. For the most recent fiscal year ending June 30, 2023, the Pool A Performance Evaluation of John Colville, City Treasurer –April 15, 2023 Page 4 of 6 portfolio had an annual 5-year average return of 1.81% vs the 5-year average annual return of the Local Agency Investment Fund (LAIF) at 1.37%. Based on the average portfolio size over the last 5 fiscal years of $1.3 billion, this equates to an additional $5.7mm in additional earnings per year.
o The Investment Staff manages over $250 million in multiple asset classes in the SCERS plan. The plan has just 828 active participants and 1 current employee. The plan has an annual actuarial target of 6.0%. Through fiscal year ending June 30, 2023, the plan has a 10-year average annual return of 7.58%. This outperformance equates to approximately $2.9mm of additional earnings per year based on an average portfolio size of $250mm.
The funding status of the system is nearly 100%.
o Worked with the council to facilitate the removal of fossil fuel securities from the city’s portfolios.
Appointive officer comments.
Performance Evaluation of John Colville, City Treasurer –April 15, 2023 Page 5 of 6 Evaluation Process
The Mayor and Councilmembers are asked to evaluate the City Treasurer based on the criteria set forth in the Council Staff Linkage: City Treasurer document established by the council’s Governance Committee that was chaired by previous council Member Larry Carr in 2018. This document has been included as an attachment.
Additional Mayor and Council Member Comments
Provide additional comments regarding the performance of the City Treasurer over the past evaluation period.
Mayor/councilmember comments listed here.
Performance Evaluation of John Colville, City Treasurer –April 15, 2023 Page 6 of 6 Strategic Goals and Objectives for the Upcoming Evaluation Period List and describe the strategic goals and objectives that are expected to be achieved in the upcoming evaluation period.
Banking
o Issue an RFQ for a Public Bank to determine feasibility. o Work with DOU on implementing a digital bill payment solution. o Complete and implement citywide banking policies and procedures to streamline workflow and mitigate fraud.
Debt Management
o Complete the refunding of North Natomas CFD 4, Series E bonds to realize an estimated savings of $4 million.
o Complete the partial refunding of the Water Revenue Refunding Bonds, Series 2020 to realize an estimated savings range of $6 – 10 million.
o Re-initiate the issuance of Greenbrier CFD (Improvement Area No. 2), Series 2024 bonds.
o Re-initiate the issuance of Delta Shores CFD (Improvement Area No.1), Series 2024 bonds.
o Facilitate the issuance of additional TOT bonds for eligible projects that may include Old Sacramento, the 102 acres in Meadowview, and the Granite Regional Park.
Investments
o Transition the Treasury Accounting Management System to provide the investment staff real time information to make more effective decisions.
Miscellaneous
o Continue to work with the Council and City Manager to find creative financing solutions for affordable housing projects, climate initiatives, economic development (Aggie Square, Railyards etc.) and other strategic objectives.
Council Staff Linkage: City Treasurer
Scope: Council Directed
Policy Number: 006
Date of Adoption: 06-26-2018
Resolution No.: 2018-0259
Monitoring Method: City Treasurer Report
Frequency: Annually, based on appointment date
During the 2022-23 fiscal years, I have met all the subjective criteria and exceeded all of the investment performance objectives.
A. The City Treasurer provides recommendations and advice to the City Council and City Manager regarding fiscal matters and project financings. The Treasurer manages the city’s investment portfolio, endowment funds, and the city’s debt.
I have worked with the City Council and City Manager on many fiscal matters and project financings including gap funding strategies for affordable housing projects, a Middle Income Housing Policy, loan strategies for a potential MLS arena, and redefining the allowable uses of TOT revenues to facilitate the development of more inclusive and diverse city projects, including a sports facility in Meadowview. At the Council’s request I worked with Finance to conduct a City General Fund Stress Test to determine the feasibility of issuing additional debt to fund the Housing Trust Fund. In addition, my team has found funding solutions for infrastructure for the development of Delta Shores, Greenbrier, the Railyards, and Aggie Square. The CTO currently manages over $2.0 billion in SCERS’, Pool A, and endowment funds as well as $1.8 billion in city debt.
B. The City Treasurer reports directly to the City Council. The City Council is responsible for hiring, evaluating, and terminating the City Treasurer.
C. The City Treasurer shall not cause or allow any practice, activity, decision, or organizational circumstance that is illegal, unethical, imprudent, or in violation of commonly accepted business and professional ethics.
I have not allowed any practice, activity, or organizational circumstance that is illegal, unethical, imprudent, or in violation of commonly accepted business or professional ethics. The department goes through an annual audit as part of the City’s audit overview.
2 Council Staff Linkage: City Treasurer
D. The City Treasurer shall provide applicable monitoring reports to the City Manager for consolidation into a comprehensive citywide report.
The CTO is responsible for the accounting for all city investments and disclosures. We provide all required information for the City’s ACFR and external auditors as well as all industry disclosures for the City’s debt issuances.
E. The City Treasurer shall treat the council as a whole and be responsive to individual council members except where substantial resources are required to fulfill a request.
I have been extremely responsive to requests made of the CTO by the council body. I have been responsive to individual members only when substantial resources were not required including analyzing concepts like a Public Bank, Middle Income Housing, development of the 102 acres and Granite Park. I have made a point to the members that if significant resources would be necessary, I would like the direction to come from the entire council.
F. Investments
1. Pool A
a. Manage the portfolio within the guidelines of the investment policy and California
Pool A is managed within the guidelines of CA State Investment Code 53601. This is confirmed annually by the City’s external auditor.
b. Maintain a high level of interest income (yield in top 10 California municipalities).
Pool A continues to maintain one of the highest investment yield of the top 10 California municipalities. The Pool’s 2.79% return outperformed an average of these pools by 20 basis points over the fiscal year, which equates to about $3.25 million in excess earnings.
c. Provide a yield return above the State’s Local Area Investment Fund (LAIF).
Pool A’s 2.79 % return trailed the State of California’s Local Agency Investment Fund (LAIF) by 37 basis points (typical of when the yield curve is severely inverted, as it is currently), which equates to about $6.0 million in lagging earnings. For the last 5 years, however, Pool A has outperformed LAIF by 32 basis points, which equated to about $24.0m in excess earnings over the last 5 years.
3 Council Staff Linkage: City Treasurer
2. Sacramento City Employees’ Retirement System
a. Implement and maintain an approved asset allocation with the expectation of achieving the retirement system’s actuarial assumption.
The investment staff works with Segal Marco Advisors, the retirement plan’s consultant, to set an annual asset allocation strategy to meet the 6.0% (reduced from 6.5% on 7/1/21) actuarial assumption. SCERS’ returned 10.13% for the fiscal year and outperformed the overall Custom Benchmark (8.56%) by 157 bps which equated to over $3.7 million in excess performance. We expect the funding status to remain at nearly 100% when the next actuarial report is released in the Fall. As a result of the high funded status, the current annual city contribution is approximately $1.5million annually. In comparison, the City’s annual contribution averaged around $10 million annually 10 years ago.
b. Maintain a risk profile in which active risk does not exceed 200 basis points of attribution away from the custom benchmark.
The SCERS’ portfolios are managed such that the active risk within each portfolio is less than their corresponding benchmark. We do this to insulate the plan assets against significant portfolio losses. This is confirmed in the quarterly investment reports from the consultant that show each portfolio’s Risk and Return Index, Beta Measurement, and Market Capture Report.
G. Endowment Funds
1. Ann Land/Bertha Henschel Endowment – Generate $140K annually.
Although the stated target is to generate $140k annually, staff has been able to slowly increase the funding in each of the last 5 years. The current estimated funding allocation for the upcoming grant cycle will be $170K. These funds are used for grants to help the poor and indigent in Sacramento.
2. Hart Endowment – Generate $400K over a five-year period.
Generated the required funding for the senior citizens of Sacramento. The $400k requirement was established in 1993 when bond yields and dividends were much higher. In spite of interest rate volatility, the recent upwards trend in rates gives staff the ability to continue to meet this funding target. Going forward, this income target will become more challenging as interest rates begin to moderate, and the funding target may need to be revisited.
3. George H. Clark Scholarship Fund – Generate $20K annually.
Generated the $20K annually to fund the four college scholarships for Sacramento Unified High School seniors.
H. Debt Management
1. Comply with bond covenants for tax-exempt financings.
The CTO complied with all bond covenants.
4 Council Staff Linkage: City Treasurer
2. Maintain or improve on the City’s targeted issuer credit ratings of AA- or Aa2.
The city received an upgrade from Standard & Poor’s for North Natomas CFD to A- from BBB+. The City’s credit ratings from all other issuances were affirmed with a stable outlook.
This is substantial given the conclusion of the pandemic and the slowdown in the U.S. economy.
We have met with Moody’s (Aa2) and Standard and Poor’s (AA-) during the year to seek upgrades given the City’s Economic Uncertainty Reserve (EUR) policy and the City Council’s fiscally responsible stance.
3. Maintain debt service coverage levels that satisfy the requirements of the applicable bond covenants.
The CTO has maintained, and in many cases exceeded debt service coverage on all bonds.
4. Ensure compliance with the guidelines in the City’s Debt Management Policy.
The CTO complied with the City’s Debt Management Policy. The policy was revised in May 2023.