COUNCIL AGENDA:
FILE:
11/19/24
24-2219
ITEM: 3.4
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TO: HONORABLE MAYOR
AND CITY COUNCIL
FROM: Nora Frimann
City Attorney
SUBJECT: PUBLIC MEMBER APPLICANTS
FOR FEDERATED CITY
EMPLOYEES’ RETIREMENT
PLAN BOARD
DATE: November 6, 2024
BACKGROUND
This Office routinely reviews applications for appointment to City boards and commissions for conflicts of interest, appearance of bias and incompatible office.
The applications generally do not provide complete information; however, they do occasionally disclose potential conflicts of interest or incompatible offices.
The purpose of this memorandum is to summarize our review of the applications submitted by the individuals who will be considered by the City Council for a public member trustee position on the Federated City Employees’ Retirement Plan’s Board.
BOARD DUTIES
In order to analyze potential conflicts, it is necessary to consider the duties of the particular board or commission for which the applicant is seeking appointment.
The Board of Trustees of the Federated City Employees’ Retirement Plan is established under the Municipal Code to manage and administer the plan. The Board’s scope of authority and duties include determining employee eligibility for benefits, establishing contribution rates for employees and the City based on actuarial valuations, commenting on ordinances that propose modifications to the retirement plan and investing retirement funds. The Board is expressly authorized to secure the following types of contractual services:
1. Actuarial service
2. Auditing services
3. Investment management services
4. Investment performance evaluation services
5. Proxy voting services
6. Legal services
7. Other consulting services as the Board deems necessary to carry out its duties and responsibilities under the retirement plan.
Honorable Mayor and City Council
Subject: Federated Retirement Board Conflicts Review
November 6, 2024
SUBSTANCE OF CONFLICTS REVIEW
Incompatible Office
The doctrine of incompatible offices is contained in Government Code section 1099. To fall within the Doctrine of Incompatible Offices, two elements must be present.
• Hold two public offices simultaneously, and
• A potential conflict or overlap in the functions or responsibilities of the two offices must exist.
Appearance of Bias
There may be facts which would not amount to a legal conflict of interest, but which could require a Board trustee to recuse him or herself from a Board vote or discussion, because of an appearance of bias on the part of the Board. City Council policy requires Board members to be free from bias in their decision making, and may require a Board member to recuse him or herself if the facts could reasonably lead one to conclude that the Board member would be biased for or against a person or entity.
Legal Conflicts That May Preclude Board Contracts
Since the Board has independent contracting authority , Board member conflicts of interest preclude the Board from contracting with entities in which a trustee has a financial interest. (Government Code Section 1090) For the Federated City Employees' Retirement Plan Board, it is not adequate for a trustee to recuse him or herself from participating in a Board discussion or from voting on matters coming before the Board. The trustee with the conflict must either resign, or the Board must forgo the contractual opportunity.
While this list is not complete, conflicts generally arise in one or more of the following situations :
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• A trustee has "sources of income" within the 12 months preceding the start of the trustee's term or during the trustee's term, as defined under the Political Reform Act.
• A trustee's spouse or domestic partner has "sources of income" within the 12 months preceding the start of the trustee's term or during the trustee's term, as defined under the Political Reform Act.
Honorable Mayor and City Council
Subject: Federated Retirement Board Conflicts Review
November 6, 2024
• A trustee or trustee's spouse or domestic partner is an Officer or Board Member of an entity other than the Retirement Board and the entity is involved in a matter coming before the Board.
APPLICANTS
Spencer Horowitz
Employer
Retired
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Spouse's Employer
Farmers Insurance District Office Administrative
Conflict of Interest
Mr. Horowitz is a public member on the Board of the Federated City Employees' Retirement Plan and his term expires on November 30, 2024.
He did not identify any organization, association, or entity in which he is active or which he is involved or associated that might be affected by decisions of the Board. He further indicated that he would have no financial interest to disclose other than his interest in his spouse's employment.
Mr. Horowitz did disclose that he was appointed by the Santa Clara Valley Water District to the Public Facilities Financing Corporation (PFFC) and he is a current board member of the PFFC. The PFFC is a nonprofit public benefit corporation whose primary purpose is to provide assistance to the Santa Clara Valley Water District in financing the acquisition, construction and improvement of public buildings, works and equipment for the district, together with site development, landscaping, utilities, furnishings and appurtenance and related facilities . There does not appear to be any legal conflict based solely on the applicant's membership on the board of the PFFC.
Honorable Mayor and City Council
Subject: Federated Retirement Board Conflicts Review
November 6, 2024
John Cleveland
Employer
Retired
Spouse's Employer
Retired
Conflict of Inter.est
Mr. Cleveland did not identify any organization , association, or entity in which he is active or which he is involved or associated that might be affected by decisions of the Board. He further indicated that neither he nor his spouse would have any financial interest to disclose .
LEGAL REVIEW OF RETIREMENT BOARD APPLICANTS
Our office reviewed the applications submitted by the applicants to be considered for the public member position on the Federated City Employees' Retirement Plan Board by the City Council. Our review was limited to the information provided by the applicants and was not intended to be a comprehensive investigation of potential conflicts involving the applicants. The results of our review are as follows:
• The applicants did not disclose any incompatible offices . • The applicants did not disclose an appearance of bias. • The applicants did not disclose an existing conflict of interest, e.g. no disclosure of an existing financial interest in any organization , association, or entity that has an existing contractual relationship with the Federated Retirement Board.
• One applicant indicated that he does not have any financial interests. • One applicant indicated that he would not have any financial interests other than his spouse's employment.
Attachment A is a list of the entities with which the Federated City Employees' Retirement Board has a contractual relationship as of October 9, 2024. We note that some of these are forms of entities (partnerships or private companies) in which it is unlikely that any applicants would have a financial interest if they are not employed by the firm. However, even if an applicant does not currently have a contractual relationship with any firm in which the Board currently has a financial interest, the list of entities with which the Board contracts with changes from time to time and we would expect a Board member's financial interests to 2157605
Honorable Mayor and City Council
Subject: Federated Retirement Board Conflicts Review
November 6, 2024
change over time as well. Thus, both staff and any individual appointed to this Board will need to exercise vigilance to avoid conflicts from arising in the future . cc: Jennifer Maguire, City Manager
Toni Taber, City Clerk
John Flynn, Director Retirement Services
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NORA FRIMANN
City Attorney
By ~~
Sr. Deputy City Attorney
ATTACHMENT A
Retirement Board Contractors
FED ERA TED CITY EMPLOYEES' RETIREMENT SYSTEM
list of Administrative and Investment Vendors as of October 9, 2024 Custodian Bank
Investment Consultant
Absolute Return Consultant
Governance and Joint Personnel
General Counsel
Investment Counsel
Tax Counsel
Actuary
Actuary Auditor
Disability Counsel
Auditor
Risk Advisory Services
Portfolio Overlay Services
Pension Administration System
Medical Providers
Communication Consultant
Temp Agency
Cellular Service
Death Audit
COBRA Administers
Membership
Insurance
Investment Data Processing
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Bank of New York Mellon
Meketa Investment Group
Albourne
Cortex Applied Research
Reed Smith
Hanson Bridget LLP
Ice Miller
Cheiron
Vacant until next year
Saltzman & Johnson
Macias Gini & O'Connell
Verus Advisory
Russell Investments
LRS
Medi ink and Examworks
Communication Advantage - Marty Boyer
Trendtec
Verizon Wireless
Longevity Holding (The Berwyn Group)
West Publishing
P&A Group
CALAPRS
GFOA
SACRS
NCPERS
Liberty Mutual Insurance
Risk Strategies Company
Abel/Noser Corp
Alpine Macro
BCA Research
Bloomberg Finance
Bloomberg Index Services
Burgiss
Dynamo Software
Evestment Alliance
Frank Russell Company
Honorable Mayor and City Council
Subject: Federated Retirement Board Conflicts Review
November 6, 2024
Investments Dues & Subscriptions
Investment Miscellaneous
IT Vendors
Investment Managers:
Aether Investment Partners
AIG Global Real Estate
Angelo Gordon
Arbour Lane
Artisan Partners
BlackRock
Blackstone
Blue Bay Asset Management
Burgundy
Centerbridge
Charlesbank Capital
Clarion Partners
Columbia Threadneedle Investments
Crabel Capital Management
Credit Suisse Asset Management
Crestline Investors
Cross Ocean Partners
Crosslink
DE Shaw
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Institutional Limited Partners Association
JP Morgan Bank
Klarity FX
MSCI
Pension Real Estate Association
Pacific Pension & Investment
Grant Newsletter
WSJ
Financial Times
Deloitte & Touche
SEI Investments Global Fund Services
Caseware International
Granicus
Iron Mountain
J&J Air Conditioning
Greenvelope
Social Sellinator
Pacific Resources First American
Honorable Mayor and City Council
Subject: Federated Retirement Board Conflicts Review
November 6, 2024
Dimensional Fund Advisors
ORA Advisors
Eagle Point Credit Man agement
EQT Exeter
Exeter Property Group
Fin VC
First Eagle
GCP SecureSpace Property
GEM Realty Capital, Inc.
Global Infrastructure Partners
GQG Partners
Great Hill
HIG Realty Partn ers
HPS
Hudson Bay Capital
Hull Street Energy
Innovation Endeavors
Insight Investm ent
Invesco
IPI Partners
JD Capital
Kepos Capital
Kimmeridg e
Kotak India
Lime Rock Partner s
Medley Capital
Mellon Investments Corporation
Morgan Stanley
Mountain Capital
Northern Trust
Oberwei s Asset Management
Octagon Credit Investor s
Orion Capital
Orion Mine Finance
Paine Schwartz Partners
Pantheon Ventures
Partners Group
Pathway
Payden & Rygel
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Honorable Mayor and City Council
Subject: Federated Retirement Board Conflicts Review
November 6, 2024
PE Strategic Partners
Pine River Capital
Praedium Group
Real Asset Coinvest GoExpedi
Ridgewood
Rockpoint
RWC
Scout Energy
Seraya Partners
Silverpoint
SOMA
Strategic Value Partner s
TA Realty
Tembo Capital
Tl Platform
Torchlight Investors
Tristan Capital
Unifi India
Voya Investment Management
Wellington Management
White Oak Global Advisors
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