City Council
Report
City Council Meeting: June 28, 2022
Agenda Item: 5.A
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To: Mayor and City Council
From: Gigi Decavalles-Hughes, Director, Finance Department Subject: Approval of Second Modification to Professional Services Agreement with RNC Capital Management LLC for investment management services Recommended Action
Staff recommends that the City Council award RFP 308 to RNC Genter Captial Management LLC (RNC) and authorize the City Manager to negotiate and execute a second modification to agreement #10366 (CCS) with RNC to provide investment management services for the Cemetery and Mausoleum Perpetual Care Funds extending the term of the agreement for an additional five years for a total term of ten years and nine months. Management fees are determined by the market value of the assets under management, which varies over time based on market conditions. The portfolio value as of April 30, 2022 , was approximately $17.1 million. Assuming an increase in the portfolio value of 5% per year, staff estimates fees totaling approximately $600,000 for the additional five-year term.
Executive Summary
The City currently retains RNC Genter Capital Management LLC (RNC) to provide investment management services for the Cemetery and Mausoleum Perpetual Care Funds. Investment guidelines for the two funds are established by City Council and, due to the investment in equities, retention of an investment manager for these portfolios is required.
Staff recommends a second modification to extend agreement #10366 for an additional five years. Staff recently posted an RFP for investment management services, and RNC was the only firm that submitted a proposal. 2 of 5
As is standard practice for investment management agreements, fees for this contract are determined as a percentage (0.6%) of the value of the assets under management. Based on the current asset value of the two funds (approximately $17.1 million as of April 30, 2022) and assuming 5% annual growth in the portfolio value, it is estimated that fees for the five-year contract extension period will be approximately $600,000. The actual fee amount will vary based on the fluctuating market value of the assets under management.
Discussion
The City owns and operates the Woodlawn Cemetery and the Mausoleum located on the cemetery grounds. Perpetual Care is sold with each burial plot, crypt or niche. The funds received for perpetual care are deposited into the Cemetery Perpetual Care Fund or Mausoleum Perpetual Care Fund as appropriate. Cemetery and Mausoleum Perpetual Care Funds are private funds held in trust and managed by the City. These funds are invested by an outside investment manager under guidelines established by the City Council. The income from these funds is used to pay for perpetual care costs. The principal portion of the funds can only be used for investment purposes. A significant portion of the perpetual care funds are invested in equities (up to 60%), with the remainder primarily invested in fixed income instruments. The major objective of the investment portfolio is maximizing portfolio income to pay for perpetual care costs after first protecting the principal value of the portfolio and complying with legal guidelines. Investments must also comply with the City’s Socially Responsible Investing (SRI) guidelines.
Vendor/Consultant Selection
Bidder Recommendation
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Best and Only
Bidder
RNC Genter Capital Management LLC
Evaluation Criteria Financial stability of vendor, experience/technical competence, ability to meet work plan/timelines, quality control, cost of services, cost control, technology solutions for processing and reporting information and project
collaboration, stability, references, and value added-breadth of service.
Municipal Code SMMC 2.24.190
RFP Data
Date
Posted Posted On
Advertise In
(City Charter &
SMMC)
Vendors
Downloaded
Date Publicly
Opened
1/13/22 City's Online
Bidding Site
Santa Monica Daily
Press
17 2/14/22
Additional Vendor Outreach & Justification to Award
RNC is recommended as the best bidder because they have experience working with the City and have met the investment requirements set by Council including the SRI goals. The firm’s history dates to 1968 and they have focused on the conservative management of large capitalization equity, balanced and fixed income investment strategies. In addition, RNC has years of experience working with municipalities. The City’s current agreement with RNC was executed on November 15, 2016 and terminates on August 12, 2022.
Staff reached out to several firms for feedback on why they did not submit a proposal. Many firms that downloaded the proposal later determined that the scope of service did not fit with their firms’ business. Several firms were interested but paused because of investment requirements including SRI goals, the volume of work, or inadvertently missed the deadline. 4 of 5
Past Council Actions
Meeting Date Description
9/27/2016
(Attachment A)
Award Contract with RNC Capital Management LLC to Provide Investment Management Services
10/12/2021
(Attachment B)
Approval of First Modification to Professional Services Agreement with RNC Capital Management LLC to provide
investment management services
Financial Impacts and Budget Actions
Staff seeks authority to approve funding from the Cemetery Fund to increase the amount of the agreement with RNC Genter Capital Management LLC to provide investment management services for the Cemetery and Mausoleum Perpetual Care Funds. This extends the agreement for an additional five years with an estimated increase in investment management fees of approximately $600,000. Funding is available in the adopted FY 2021-22 budget.
Agreement Modification Request
Agreement
#
Estimated
Expenditures
Through Original
Contract Term
Estimated Additional
Fees from Term
Extension
Dept/CIP
Account #
Total Revised
Estimated
Contract Amount
(including
optional years)
10366 $496,206 $600,000 59500001.552010 $1,096,206
Future year funding is contingent on Council budget approval. 5 of 5
Prepared By: Gigi Decavalles-Hughes, Director
Approved Forwarded to Council
Attachments:
A. Attachment A - RNC Staff Report
B. Attachment B - RNC First Modification
C. rnc oaks fy21-22
D. RNC Contract No. 10366