HomeMy WebLinkAboutC-8454-1 - PSA for Investment Management and Advisory ServicesY
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PROFESSIONAL SERVICES AGREEMENT
WITH CHANDLER ASSET MANAGEMENT, INC. FOR
V INVESTMENT MANAGEMENT & ADVISORY SERVICES
THIS PROFESSIONAL SERVICES AGREEMENT ("Agreement") is made and
entered into as of this 28th day of March, 2017 ("Effective Date"), by and between the
CITY OF NEWPORT BEACH, a California municipal corporation and charter city ("City"),
and CHANDLER ASSET MANAGEMENT, INC., a California corporation ("Consultant"),
whose address is 6225 Lusk Boulevard, San Diego, California 92121, and is made with
reference to the following:
RECITALS
A. City is a municipal corporation duly organized and validly existing under the laws
of the State of California with the power to carry on its business as it is now being
conducted under the statutes of the State of California and the Charter of City.
B. City is required to manage its operating portfolio of cash and marketable securities
in accordance with the City's current adopted investment policy, Council Policy F-
1. Council Policy F-1 is attached to this Agreement as Exhibit "A" and incorporated
herein by reference.
C. City desires to engage Consultant to provide investment management & advisory
services ("Project").
D. City has solicited and received a proposal from Consultant, has reviewed the
previous experience and evaluated the expertise of Consultant, and desires to
retain Consultant to render professional services under the terms and conditions
set forth in this Agreement.
E. Consultant represents it is a registered investment advisor under the Investment
Advisers Act of 1940 and possesses the skill, experience, ability, background,
certification and knowledge to provide the services described in this Agreement.
NOW, THEREFORE, it is mutually agreed by and between the undersigned parties
as follows:
1. TERM
The term of this Agreement shall commence on the Effective Date, and shall
terminate on December 31, 2017, unless terminated earlier as set forth herein.
2. SERVICES TO BE PERFORMED
Consultant shall diligently perform all the services described in the Scope of
Services attached hereto as Exhibit B and incorporated herein by reference ("Services"
or "Work"). City may elect to delete certain Services within the Scope of Services at its
sole discretion.
3. TIME OF PERFORMANCE
3.1 Time is of the essence in the performance of Services under this Agreement
and Consultant shall perform the Services in accordance with the schedule included in
Exhibit B. In the absence of a specific schedule, the Services shall be performed to
completion in a diligent and timely manner. The failure by Consultant to strictly adhere to
the schedule set forth in Exhibit B, if any, or perform the Services in a diligent and timely
manner may result in termination of this Agreement by City.
3.2 Notwithstanding the foregoing, Consultant shall not be responsible for
delays due to causes beyond Consultant's reasonable control. However, in the case of
any such delay in the Services to be provided for the Project, each party hereby agrees
to provide notice within two (2) calendar days of the occurrence causing the delay to the
other party so that all delays can be addressed.
3.3 Consultant shall submit all requests for extensions of time for performance
in writing to the Project Administrator as defined herein not later than ten (10) calendar
days after the start of the condition that purportedly causes a delay. The Project
Administrator shall review all such requests and may grant reasonable time extensions
for unforeseeable delays that are beyond Consultant's control.
3.4 For all time periods not specifically set forth herein, Consultant shall
respond in the most expedient and appropriate manner under the circumstances, by
hand -delivery or mail.
4. COMPENSATION TO CONSULTANT
4.1 City shall pay Consultant for the Services on a time and expense not -to -
exceed basis in accordance with the provisions of this Section and the Schedule of Billing
Rates attached hereto as Exhibit C and incorporated herein by reference. Consultant's
compensation for all Work performed in accordance with this Agreement, including all
reimbursable items and subconsultant fees, shall not exceed Seventy Thousand Dollars
and 00/100 ($70,000.00), without prior written authorization from City. No billing rate
changes shall be made during the term of this Agreement without the prior written
approval of City.
4.2 Consultant shall submit monthly invoices to City describing the Work
performed the preceding month. Consultant's bills shall include the name of the person
who performed the Work, a brief description of the Services performed and/or the specific
task in the Scope of Services to which it relates, the date the Services were performed,
the number of hours spent on all Work billed on an hourly basis, a description of any
reimbursable expenditures, and the average monthly market value of assets under
management for the time period for which the fee is assessed and the total fee charged
in accordance with the schedule stated in Exhibit C. City shall pay Consultant no later
than thirty (30) calendar days after approval of the monthly invoice by City staff.
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4.3 City shall reimburse Consultant only for those costs or expenses specifically
identified in Exhibit C to this Agreement or specifically approved in writing in advance by
City.
4.4 Consultant shall not receive any compensation for Extra Work performed
without the prior written authorization of City. As used herein, "Extra Work" means any
Work that is determined by City to be necessary for the proper completion of the Project,
but which is not included within the Scope of Services and which the parties did not
reasonably anticipate would be necessary at the execution of this Agreement.
Compensation for any authorized Extra Work shall be paid in accordance with the
Schedule of Billing Rates as set forth in Exhibit C.
5. PROJECT MANAGER
5.1 Consultant shall designate a Project Manager, who shall coordinate all
phases of the Project. This Project Manager shall be available to City at all reasonable
times during the Agreement term. Consultant has designated Jayson Schmitt to be its
Project Manager. Consultant shall not remove or reassign the Project Manager or any
personnel listed in Exhibit B or assign any new or replacement personnel to the Project
without the prior written consent of City. City's approval shall not be unreasonably
withheld with respect to the removal or assignment of non -key personnel.
5.2 Consultant, at the sole discretion of City, shall remove from the Project any
of its personnel assigned to the performance of Services upon written request of City.
Consultant warrants that it will continuously furnish the necessary personnel to complete
the Project on a timely basis as contemplated by this Agreement.
5.3 If Consultant is performing inspection services for City, the Project Manager
and any other assigned staff shall be equipped with a cellular phone to communicate with
City staff. The Project Manager's cellular phone number shall be provided to City.
6. ADMINISTRATION
This Agreement will be administered by the Finance Department. City's Finance
Director or designee shall be the Project Administrator and shall have the authority to act
for City under this Agreement. The Project Administrator shall represent City in all matters
pertaining to the Services to be rendered pursuant to this Agreement.
7. CITY'S RESPONSIBILITIES
To assist Consultant in the execution of its responsibilities under this Agreement,
City agrees to provide access to and upon request of Consultant, one copy of all existing
relevant information on file at City. City will provide all such materials in a timely manner
so as not to cause delays in Consultant's Work schedule.
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8. STANDARD OF CARE
8.1 All of the Services shall be performed by Consultant or under Consultant's
supervision. Consultant represents that it possesses the professional and technical
personnel required to perform the Services required by this Agreement, and that it will
perform all Services in a manner commensurate with community professional standards
and with the ordinary degree of skill and care that would be used by other reasonably
competent practitioners of the same discipline under similar circumstances. All Services
shall be performed by qualified and experienced personnel who are not employed by City.
By delivery of completed Work, Consultant certifies that the Work conforms to the
requirements of this Agreement, all applicable federal, state and local laws, and legally
recognized professional standards.
8.2 Consultant represents and warrants to City that it has, shall obtain, and shall
keep in full force and effect during the term hereof, at its sole cost and expense, all
licenses, permits, qualifications, insurance and approvals of whatsoever nature that is
legally required of Consultant to practice its profession. Consultant shall maintain a City
of Newport Beach business license during the term of this Agreement.
8.3 Consultant shall not be responsible for delay, nor shall Consultant be
responsible for damages or be in default or deemed to be in default by reason of strikes,
lockouts, accidents, acts of God, or the failure of City to furnish timely information or to
approve or disapprove Consultant's Work promptly, or delay or faulty performance by
City, contractors, or governmental agencies.
9. HOLD HARMLESS
9.1 To the fullest extent permitted by law, Consultant shall indemnify, defend
and hold harmless City, its City Council, boards and commissions, officers, agents,
volunteers and employees (collectively, the "Indemnified Parties") from and against any
and all claims (including, without limitation, claims for bodily injury, death or damage to
property), demands, obligations, damages, actions, causes of action, suits, losses,
judgments, fines, penalties, liabilities, costs and expenses (including, without limitation,
attorneys' fees, disbursements and court costs) of every kind and nature whatsoever
(individually, a Claim; collectively, "Claims"), which may arise from or in any manner relate
(directly or indirectly) to any breach of the terms and conditions of this Agreement, any
Work performed or Services provided under this Agreement including, without limitation,
defects in workmanship or materials or Consultant's presence or activities conducted on
the Project (including the negligent, reckless, and/or willful acts, errors and/or omissions
of Consultant, its principals, officers, agents, employees, vendors, suppliers, consultants,
subcontractors, anyone employed directly or indirectly by any of them or for whose acts
they may be liable, or any or all of them).
9.2 Notwithstanding the foregoing, nothing herein shall be construed to require
Consultant to indemnify the Indemnified Parties from any Claim arising from the sole
negligence or willful misconduct of the Indemnified Parties. Nothing in this indemnity shall
be construed as authorizing any award of attorneys' fees in any action on or to enforce
Chandler Asset Management, Inc. Page 4
the terms of this Agreement. This indemnity shall apply to all claims and liability
regardless of whether any insurance policies are applicable. The policy limits do not act
as a limitation upon the amount of indemnification to be provided by Consultant.
10. INDEPENDENT CONTRACTOR
It is understood that City retains Consultant on an independent contractor basis
and Consultant is not an agent or employee of City. The manner and means of
conducting the Work are under the control of Consultant, except to the extent they are
limited by statute, rule or regulation and the expressed terms of this Agreement. No civil
service status or other right of employment shall accrue to Consultant or its employees.
Nothing in this Agreement shall be deemed to constitute approval for Consultant or any
of Consultant's employees or agents, to be the agents or employees of City. Consultant
shall have the responsibility for and control over the means of performing the Work,
provided that Consultant is in compliance with the terms of this Agreement. Anything in
this Agreement that may appear to give City the right to direct Consultant as to the details
of the performance of the Work or to exercise a measure of control over Consultant shall
mean only that Consultant shall follow the desires of City with respect to the results of the
Services.
11. COOPERATION
Consultant agrees to work closely and cooperate fully with City's designated
Project Administrator and any other agencies that may have jurisdiction or interest in the
Work to be performed. City agrees to cooperate with the Consultant on the Project.
12. CITY POLICY
Consultant shall discuss and review all matters relating to policy and Project
direction with City's Project Administrator in advance of all critical decision points in order
to ensure the Project proceeds in a manner consistent with City goals and policies.
13. PROGRESS
Consultant is responsible for keeping the Project Administrator informed on a
regular basis regarding the status and progress of the Project, activities performed and
planned, and any meetings that have been scheduled or are desired.
14. INSURANCE
Without limiting Consultant's indemnification of City, and prior to commencement
of Work, Consultant shall obtain, provide and maintain at its own expense during the term
of this Agreement or for other periods as specified in this Agreement, policies of insurance
of the type, amounts, terms and conditions described in the Insurance Requirements
attached hereto as Exhibit D, and incorporated herein by reference.
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15. PROHIBITION AGAINST ASSIGNMENTS AND TRANSFERS
Except as specifically authorized under this Agreement, the Services to be
provided under this Agreement shall not be assigned, transferred contracted or
subcontracted out without the prior written approval of City. Any of the following shall be
construed as an assignment: The sale, assignment, transfer or other disposition of any
of the issued and outstanding capital stock of Consultant, or of the interest of any general
partner or joint venturer or syndicate member or cotenant if Consultant is a partnership or
joint -venture or syndicate or co -tenancy, which shall result in changing the control of
Consultant. Control means fifty percent (50%) or more of the voting power or twenty-five
percent (25%) or more of the assets of the corporation, partnership or joint -venture.
16. SUBCONTRACTING
The subcontractors authorized by City, if any, to perform Work on this Project are
identified in Exhibit B. Consultant shall be fully responsible to City for all acts and
omissions of any subcontractor. Nothing in this Agreement shall create any contractual
relationship between City and any subcontractor nor shall it create any obligation on the
part of City to pay or to see to the payment of any monies due to any such subcontractor
other than as otherwise required by law. City is an intended beneficiary of any Work
performed by the subcontractor for purposes of establishing a duty of care between the
subcontractor and City. Except as specifically authorized herein, the Services to be
provided under this Agreement shall not be otherwise assigned, transferred, contracted
or subcontracted out without the prior written approval of City.
17. OWNERSHIP OF DOCUMENTS
17.1 Each and every report, draft, map, record, plan, document and other writing
produced, including but not limited to, websites, blogs, social media accounts and
applications (hereinafter "Documents"), prepared or caused to be prepared by Consultant,
its officers, employees, agents and subcontractors, in the course of implementing this
Agreement, shall become the exclusive property of City, and City shall have the sole right
to use such materials in its discretion without further compensation to Consultant or any
other party. Additionally, all material posted in cyberspace by Consultant, its officers,
employees, agents and subcontractors, in the course of implementing this Agreement,
shall become the exclusive property of City, and City shall have the sole right to use such
materials in its discretion without further compensation to Consultant or any other party.
Consultant shall, at Consultant's expense, provide such Documents, including all logins
and password information to City upon prior written request.
17.2 Documents, including drawings and specifications, prepared by Consultant
pursuant to this Agreement are not intended or represented to be suitable for reuse by
City or others on any other project. Any use of completed Documents for other projects
and any use of incomplete Documents without specific written authorization from
Consultant will be at City's sole risk and without liability to Consultant. Further, any and
all liability arising out of changes made to Consultant's deliverables under this Agreement
by City or persons other than Consultant is waived against Consultant, and City assumes
Chandler Asset Management, Inc. Page 6
full responsibility for such changes unless City has given Consultant prior notice and has
received from Consultant written consent for such changes.
17.3 All written documents shall be transmitted to City in formats compatible with
Microsoft Office and/or viewable with Adobe Acrobat.
18. CONFIDENTIALITY
All Documents, including drafts, preliminary drawings or plans, notes and
communications that result from the Services in this Agreement, shall be kept confidential
unless City expressly authorizes in writing the release of information.
19. INTELLECTUAL PROPERTY INDEMNITY
Consultant shall defend and indemnify City, its agents, officers, representatives
and employees against any and all liability, including costs, for infringement or alleged
infringement of any United States' letters patent, trademark, or copyright, including costs,
contained in Consultant's Documents provided under this Agreement.
20. RECORDS
Consultant shall keep records and invoices in connection with the Services to be
performed under this Agreement. Consultant shall maintain complete and accurate
records with respect to the costs incurred under this Agreement and any Services,
expenditures and disbursements charged to City, for a minimum period of three (3) years,
or for any longer period required by law, from the date of final payment to Consultant
under this Agreement. All such records and invoices shall be clearly identifiable.
Consultant shall allow a representative of City to examine, audit and make transcripts or
copies of such records and invoices during regular business hours. Consultant shall allow
inspection of all Work, data, Documents, proceedings and activities related to the
Agreement for a period of three (3) years from the date of final payment to Consultant
under this Agreement.
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City may withhold payment to Consultant of any disputed sums until satisfaction of
the dispute with respect to such payment. Such withholding shall not be deemed to
constitute a failure to pay according to the terms of this Agreement. Consultant shall not
discontinue Work as a result of such withholding. Consultant shall have an immediate
right to appeal to the City Manager or designee with respect to such disputed sums.
Consultant shall be entitled to receive interest on any withheld sums at the rate of return
that City earned on its investments during the time period, from the date of withholding of
any amounts found to have been improperly withheld.
22. ERRORS AND OMISSIONS
In the event of errors or omissions that are due to the negligence or professional
inexperience of Consultant which result in expense to City greater than what would have
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resulted if there were not errors or omissions in the Work accomplished by Consultant,
the additional design, construction and/or restoration expense shall be borne by
Consultant. Nothing in this Section is intended to limit City's rights under the law or any
other sections of this Agreement.
23. CITY'S RIGHT TO EMPLOY OTHER CONSULTANTS
City reserves the right to employ other Consultants in connection with the Project.
24. CONFLICTS OF INTEREST
24.1 Consultant or its employees may be subject to the provisions of the
California Political Reform Act of 1974 (the "Act"), which (1) requires such persons to
disclose any financial interest that may foreseeably be materially affected by the Work
performed under this Agreement, and (2) prohibits such persons from making, or
participating in making, decisions that will foreseeably financially affect such interest.
24.2 If subject to the Act, Consultant shall conform to all requirements of the Act.
Failure to do so constitutes a material breach and is grounds for immediate termination
of this Agreement by City. Consultant shall indemnify and hold harmless City for any and
all claims for damages resulting from Consultant's violation of this Section.
25. NOTICES
25.1 All notices, demands, requests or approvals, including any change in
mailing address, to be given under the terms of this Agreement shall be given in writing,
and conclusively shall be deemed served when delivered personally, or on the third
business day after the deposit thereof in the United States mail, postage prepaid, first-
class mail, addressed as hereinafter provided.
25.2 All notices, demands, requests or approvals from Consultant to City shall
be addressed to City at:
Attn: Dan Matusiewicz, Finance Director
Finance Department
City of Newport Beach
100 Civic Center Drive
PO Box 1768
Newport Beach, CA 92658
25.3 All notices, demands, requests or approvals from City to Consultant shall
be addressed to Consultant at:
Attn: Jayson Schmitt
Chandler Asset Management, Inc.
6225 Lusk Boulevard
San Diego, CA 92121
Chandler Asset Management, Inc. Page 8
26. CLAIMS
Unless a shorter time is specified elsewhere in this Agreement, before making its
final request for payment under this Agreement, Consultant shall submit to City, in writing,
all claims for compensation under or arising out of this Agreement. Consultant's
acceptance of the final payment shall constitute a waiver of all claims for compensation
under or arising out of this Agreement except those previously made in writing and
identified by Consultant in writing as unsettled at the time of its final request for payment.
Consultant and City expressly agree that in addition to any claims filing requirements set
forth in the Agreement, Consultant shall be required to file any claim Consultant may have
against City in strict conformance with the Government Claims Act (Government Code
sections 900 et seq.).
27. TERMINATION
27.1 In the event that either party fails or refuses to perform any of the provisions
of this Agreement at the time and in the manner required, that party shall be deemed in
default in the performance of this Agreement. If such default is not cured within a period
of two (2) calendar days, or if more than two (2) calendar days are reasonably required
to cure the default and the defaulting party fails to give adequate assurance of due
performance within two (2) calendar days after receipt of written notice of default,
specifying the nature of such default and the steps necessary to cure such default, and
thereafter diligently take steps to cure the default, the non -defaulting party may terminate
the Agreement forthwith by giving to the defaulting party written notice thereof.
27.2 Notwithstanding the above provisions, City shall have the right, at its sole
and absolute discretion and without cause, of terminating this Agreement at any time by
giving no less than seven (7) calendar days' prior written notice to Consultant. In the
event of termination under this Section, City shall pay Consultant for Services
satisfactorily performed and costs incurred up to the effective date of termination for which
Consultant has not been previously paid. On the effective date of termination, Consultant
shall deliver to City all reports, Documents and other information developed or
accumulated in the performance of this Agreement, whether in draft or final form.
28. STANDARD PROVISIONS
28.1 Recitals. City and Consultant acknowledge that the above Recitals are true
and correct and are hereby incorporated by reference into this Agreement.
28.2 Compliance with all Laws. Consultant shall, at its own cost and expense,
comply with all statutes, ordinances, regulations and requirements of all governmental
entities, including federal, state, county or municipal, whether now in force or hereinafter
enacted. In addition, all Work prepared by Consultant shall conform to applicable City,
county, state and federal laws, rules, regulations and permit requirements and be subject
to approval of the Project Administrator and City.
28.3 Waiver. A waiver by either party of any breach, of any term, covenant or
condition contained herein shall not be deemed to be a waiver of any subsequent breach
Chandler Asset Management, Inc. Page 9
of the same or any other term, covenant or condition contained herein, whether of the
same or a different character.
28.4 Integrated Contract. This Agreement represents the full and complete
understanding of every kind or nature whatsoever between the parties hereto, and all
preliminary negotiations and agreements of whatsoever kind or nature are merged herein.
No verbal agreement or implied covenant shall be held to vary the provisions herein.
28.5 Conflicts or Inconsistencies. In the event there are any conflicts or
inconsistencies between this Agreement and the Scope of Services or any other
attachments attached hereto, the terms of this Agreement shall govern.
28.6 Interpretation. The terms of this Agreement shall be construed in
accordance with the meaning of the language used and shall not be construed for or
against either party by reason of the authorship of the Agreement or any other rule of
construction which might otherwise apply.
28.7 Amendments. This Agreement may be modified or amended only by a
written document executed by both Consultant and City and approved as to form by the
City Attorney.
28.8 Severability. If any term or portion of this Agreement is held to be invalid,
illegal, or otherwise unenforceable by a court of competent jurisdiction, the remaining
provisions of this Agreement shall continue in full force and effect.
28.9 Controlling Law and Venue. The laws of the State of California shall govern
this Agreement and all matters relating to it and any action brought relating to this
Agreement shall be adjudicated in a court of competent jurisdiction in the County of
Orange, State of California.
28.10 Equal Opportunity Employment. Consultant represents that it is an equal
opportunity employer and it shall not discriminate against any subcontractor, employee
or applicant for employment because race, religious creed, color, national origin,
ancestry, physical handicap, medical condition, marital status, sex, sexual orientation,
age or any other impermissible basis under law.
28.11 No Attorneys' Fees. In the event of any dispute or legal action arising under
this Agreement, the prevailing party shall not be entitled to attorneys' fees.
28.12 Counterparts. This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original and all of which together shall
constitute one (1) and the same instrument.
[SIGNATURES ON NEXT PAGE]
Chandler Asset Management, Inc. Page 10
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
on the dates written below.
APPROVED AS TO FORM:
CITY ATT RNEY'S OFFICE
Date: L(
By:
Aaro C. ar '
g ttorney
ATTEST-
Date'.
TTEST:Date: o /�
,,y: 4A opf 6w—
Leilani 1. Brown
City Clerk
CITY OF NEWPORT BEACH,
a California municipal corporation
Date:
By: 4" pil/I
F'
a Matusiewicz
ance Director
CONSULTANT: Chandler Asset
Management, Inc., a California
corporation
Date:
Signed in Counterpart
Bv:
Martin D. Cassell
Chief Executive Officer
By: Signed in Counterpart
Nicole Dragoo
Secretary
[END OF SIGNATURES]
Attachments: Exhibit A — Council Policy F-1
Exhibit B — Scope of Services
Exhibit C — Schedule of Billing Rates
Exhibit D — Insurance Requirements
Chandler Asset Management, Inc. Page 11
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
on the dates written below.
APPROVED AS TO FORM:
CITY ATTORNEY'S OFFICE
Harp
ATTEST:"
Date:
By:
Leilani I_ Brown
City Clerk
CITY OF NEWPORT BEACH,
a California municipal corporation
By:
Dan Matusiewicz
Finance Director
CONSULTANT: Chandler Asset
Management, Inc., a California
corporation 3 2 N/7
Date;
By:
Martin D. Cassell
Chief Executive Officer
Date:
By:
Nicole Dragoo
Secretary
[END OF SIGNATURES]
Attachments: Exhibit A — Council Policy F-1
Exhibit B — Scope of Services
Exhibit C — Schedule of Billing Rates
Exhibit D — Insurance Requirements
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EXHIBIT A
COUNCIL POLICY F-1
Chandler Asset Management, Inc. Page A-1
STATEMENT OF INVESTMENT POLICY
PURPOSE:
F-1
The City Council has adopted this Investment Policy (the Policy) in order to establish
the scope of the investment policy, investment objectives, standards of care, authorized
investments, investment parameters, reporting, investment policy compliance and
adoption, and the safekeeping and custody of assets.
This Policy is organized in the following sections:
A. Scope of Investment Policy
1. Pooling of Funds
2. Funds Included in the Policy
3. Funds Excluded from the Policy
B. Investment Objectives
1. Safety
2. Liquidity
3. Yield
C. Standards of Care
1. Prudence
2. Ethics and Conflicts of Interest
3. Delegation of Authority
4. Internal Controls
D. Banking Services
E. Broker/Dealers
F. Safekeeping and Custody of Assets
G. Authorized Investments
1. Investments Specifically Permitted
2. Investments Specifically Not Permitted
3. Exceptions to Prohibited and Restricted Investments
H. Investment Parameters
1. Diversification
2. Maximum Maturities
3. Credit Quality
4. Competitive Transactions
I. Portfolio Performance
J. Reporting
K. Investment Policy Compliance and Adoption
1. Compliance
2. Adoption
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F-1
A. SCOPE OF INVESTMENT POLICY
1. Pooling of Funds
All cash shall be pooled for investment purposes. The investment income
derived from the pooled investment shall be allocated to the contributing
funds, net of all banking and investing expenses, based upon the
proportion of the respective average balances relative to the total pooled
balance. Investment income shall be distributed to the individual funds
not less than annually.
2. Funds Included in the Policy
The provisions of this Policy shall apply to all financial assets of the City
as accounted for in the City's Comprehensive Annual Financial Report,
including;
a) General Fund
b) Special Revenue Funds
c) Capital Project Funds
d) Enterprise Funds
e) Internal Service Funds
f) Trust and Agency Funds
g) Permanent Endowment Funds
h) Any new fund created unless specifically exempted
If the City invests funds on behalf of another agency and, if that agency
does not have its own investment policy, this Policy shall govern the
agency's investments.
3. Funds Excluded from this Policy
Bond Proceeds - Investment of bond proceeds will be made in accordance
with applicable bond indentures.
B. INVESTMENT OBJECTIVES
The City's funds shall be invested in accordance with all applicable City policies
and codes, State statutes, and Federal regulations, and in a manner designed to
accomplish the following objectives, which are listed in priority order:
1. Safety
Preservation of principal is the foremost objective of the investment
program. Investments of the City shall be undertaken in a manner that
seeks to ensure the preservation of capital in the overall portfolio. The
objective shall be to mitigate credit risk and interest rate risk. To attain this
objective, the City shall diversify its investments by investing funds
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F-1
among several financial institutions and a variety of securities offering
independent returns.
a) Credit Risk
The City shall minimize credit risk, the risk of loss due to the
failure of the security issuer or backer, by:
• Limiting investments in securities that have higher credit
risks, pre -qualifying the financial institutions,
broker/dealers, intermediaries, and advisors with which the
City will do business
■ Diversifying the investment portfolio so as to minimize the
impact any one industry/ investment class can have on the
portfolio
b) Interest Rate Risk
To minimize the negative impact of material changes in the market
value of securities in the portfolio, the City shall:
■ Structure the investment portfolio so that securities mature
concurrent with cash needs to meet anticipated demands,
thereby avoiding the need to sell securities on the open
market prior to maturity
• Invest in securities of varying maturities
2. Liquidity
The City's investment portfolio shall remain sufficiently liquid to enable
the City to meet all operating requirements which might be reasonably
anticipated without requiring a sale of securities. Since all possible cash
demands cannot be anticipated, the portfolio should consist largely of
securities with active secondary or resale markets. A portion of the
portfolio also may be placed in money market mutual funds or LAIF
which offer same-day liquidity for short-term funds.
3. Yield
The City's investment portfolio shall be designed with the objective of
attaining a benchmark rate of return throughout budgetary and economic
cycles, commensurate with the City's investment risk constraints and the
liquidity characteristics of the portfolio. Return on investment is of
secondary importance compared to the safety and liquidity objectives
described above. The core of investments is limited to relatively low risk
securities in anticipation of earning a fair return relative to the risk being
assumed.
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F-1
C. STANDARDS OF CARE
1. Prudence
The standard of prudence to be used for managing the City's investment
program is California Government Code Section 53600.3, the prudent
investor standard, which states that "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 agency, 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 agency."
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 no investment is totally without risk and that the
investment activities of the City are a matter of public record.
Accordingly, the City recognizes that occasional measured losses may
occur in a diversified portfolio and shall be considered within the context
of the overall portfolio's return, provided that adequate diversification has
been implemented and that the sale of a security is in the best long-term
interest of the City.
The Finance Director and authorized investment personnel acting in
accordance with established procedures and exercising due diligence shall
be relieved of personal responsibility for an individual security's credit
risk or market price changes, provided that deviations from expectations
are reported in a timely fashion to the City Council and appropriate action
is taken to control adverse developments.
2. Ethics and Conflicts of Interest
Elected officials and employees involved in the investment process shall
refrain from personal business activity that could conflict with proper
execution of the City's investment program or could impair or create the
appearance of an impairment of their ability to make impartial investment
decisions. Employees and investment officials shall subordinate their
personal investment transactions to those of the City. In addition, City
Council members, the City Manager, and the Finance Director shall file a
Statement of Economic Interests each year as required by California
Government Code Section 87203 and regulations of the Fair Political
Practices Commission.
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3. Delegation of Authority
Authority to manage the City's investment program is derived from the
Charter of the City of Newport Beach section 605 (j). The Finance Director
shall assume the title of and act as City Treasurer and with the approval of
the City Manager appoint deputies annually as necessary to act under the
provisions of any law requiring or permitting action by the City Treasurer.
The Finance Director may then delegate the authority to conduct
investment transactions and to manage the operation of the investment
portfolio to other specifically authorized staff members. No person may
engage in an investment transaction except as expressly provided under
the terms of this Policy.
The City may engage the support services of outside investment advisors
with respect to its investment program, so long as it can be demonstrated
that these services produce a net financial advantage or necessary
financial protection of the City's financial resources. Such companies must
be registered under the Investment Advisors Act of 1940, be well-
established and exceptionally reputable. Members of the staff of such
companies who will have primary responsibility for managing the City's
investments must have a working familiarity with the special
requirements and constraints of investing municipal funds in general and
this City's funds in particular. These firms must insure that the portion of
the portfolio under their management complies with various
concentration and other constraints specified herein, and contractually
agree to conform to all provisions of governing law and the
collateralization and other requirements of this Policy. Selection and
retention of broker/dealers by investment advisors shall be at their sole
discretion and dependent upon selection and retention criteria as stated in
the Uniform Application for Investment Advisor Registration and related
Amendments (SEC Form ADV 2A).
4. Internal Controls
The Finance Director is responsible for establishing and maintaining a
system of internal controls. The internal controls shall be designed to
prevent losses of public funds arising from fraud, employee error, and
misrepresentation by third parties, unanticipated changes in financial
markets, or imprudent action by City employees and officers. The internal
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.
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D. BANKING SERVICES
Banking services for the City shall be provided by FDIC insured banks approved
to provide depository and other banking services. To be eligible, a bank shall
qualify as a depository of public funds in the State of California as defined in
California Government Code Section 53630.5 and shall secure deposits in excess
of FDIC insurance coverage in accordance with California Government Code
Section 53652.
E. BROKER/DEALERS
In the event that an investment advisor is not used to purchase securities, the
City will select broker/dealers on the basis of their expertise in public cash
management and their ability to provide service to the City's account.
Each approved broker/dealer must possess an authorizing certificate from the
California Commissioner of Corporations as required by Section 25210 of the
California Corporations Code.
To be eligible, a firm must meet at least one of the following criteria:
1. Be recognized as Primary Dealers by the Federal Reserve Bank of New
York or have a primary dealer within their holding company structure, or
2. Report voluntarily to the Federal Reserve Bank of New York, or
3. Qualify under Securities and Exchange Commission (SEC) Rule 15c3-1
(Uniform Net Capital Rule).
F. SAFEKEEPING AND CUSTODY OF ASSETS
The Finance Director shall select one or more banks to provide safekeeping and
custodial services for the City. A Safekeeping Agreement approved by the City
shall be executed with each custodian bank prior to utilizing that bank's
safekeeping services.
Custodian banks will be selected on the basis of their ability to provide services
for the City's account and the competitive pricing of their safekeeping related
services.
The purchase and sale of securities and repurchase agreement transactions shall
be settled on a delivery versus payment basis. All securities shall be perfected in
the name of the City. Sufficient evidence to title shall be consistent with modern
investment, banking and commercial practices.
All investment securities, except non-negotiable Certificates of Deposit, Money
Market Funds and local government investment pools, purchased by the City
will be delivered by book entry and will be held in third -party safekeeping by a
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City approved custodian bank, its correspondent bank or its Depository Trust
Company (DTC) participant account.
All Fed wireable book entry securities owned by the City shall be held in the
Federal Reserve system in a customer account for the custodian bank which will
name the City as "customer."
All DTC eligible securities shall be held in the custodian bank's DTC participant
account and the custodian bank shall provide evidence that the securities are
held for the City as "customer."
G. AUTHORIZED INVESTMENTS
All investments and deposits of the City shall be made in accordance with
California Government Code Sections 16429.1, 53600-53609 and 53630-53686.
Any revisions or extensions of these code sections will be assumed to be part of
this Policy immediately upon being enacted. The City has further restricted the
eligible types of securities and transactions. The foregoing list of authorized
securities and transactions shall be strictly interpreted. Any deviation from this
list must be pre -approved by resolution of the City Council. In the event an
apparent discrepancy is found between this Policy and the Government Code, the
more restrictive parameter(s) will take precedence.
Where this section specifies a percentage limitation for a particular security type,
that percentage is applicable only at the date of purchase.
1. Investments Specifically Permitted
a) United States Treasury bills, notes, or bonds with a final maturity
not exceeding five years from the date of trade settlement. There is
no limitation as to the percentage of the City's portfolio that may be
invested in this category.
b) Federal Instrumentality (government-sponsored enterprise)
debentures, discount notes, callable and step-up securities, with a
final maturity not exceeding five years from the date of trade
settlement. There is no limitation as to the percentage of the
portfolio that can be invested in this category.
c) Federal Agency Obligations for which the full faith and credit of
the United States are pledged for the payment of principal and
interest and which have a final maturity not exceeding five years
from the date of trade settlement. There is no limitation as to the
percentage of the portfolio that can be invested in this category.
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d) Mortgage-backed Securities, Collateralized Mortgage Obli ag tion
(CMO) and Asset-backed Securities limited to mortgage-backed
pass-through securities issued by a US government agency, or
consumer receivable pass-through certificates or bonds with a final
maturity not exceeding five years from the date of trade
settlement. Securities eligible for investment under this
subdivision shall be issued by an issuer whose debt is rated at least
"A" or the equivalent by a Nationally Recognized Statistical Rating
Organization (NRSRO). The security itself shall be rated at least
"AAA" or the equivalent by an NRSRO. No more than five percent
(5%) of the City's total portfolio shall be invested in any one issuer
of mortgage-backed and asset-backed securities listed above, and
the aggregate investment in mortgage-backed and asset-backed
securities shall not exceed twenty percent (20%) of the City's total
portfolio.
e) Medium -Term Notes issued by corporations 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, with a final maturity not exceeding five years from
the date of trade settlement, and rated at least "A" or the equivalent
by an NRSRO. No more than five percent (5%) of the City's total
portfolio shall be invested in any one issuer of medium-term notes,
and the aggregate investment in medium-term notes shall not
exceed thirty percent (30%) of the City's total portfolio.
f) Municipal Bonds: including bonds issued by the City of Newport
Beach, including bonds payable solely out of the revenues from a
revenue-producing property owned, controlled, or operated by the
City or by a department, board, agency, or authority of the City.
State of California registered warrants or treasury notes or bonds,
including bonds payable solely out of the revenues from a revenue-
producing property owned, controlled, or operated by the state or
by a department, board, agency, or authority of the state.
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.
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Bonds, notes, warrants, or other evidences of indebtedness of a
local agency within California, including bonds payable solely out
of the revenues from a revenue-producing property owned,
controlled, or operated by the local agency, or by a department,
board, agency, or authority of the local agency.
In addition, these securities must be rated at least "A" or the
equivalent by a NRSRO with maturities not exceeding five years
from the date of trade settlement. No more than five percent (5%)
of the City's total portfolio shall be invested in any one municipal
issuer. In addition, the aggregate investment in municipal bonds
may not exceed thirty percent (30%) of the portfolio.
g) Non-negotiable Certificates of Deposit and savings deposits with a
maturity not exceeding two years from the date of trade settlement,
in FDIC insured state or nationally chartered banks or savings
banks that qualify as a depository of public funds in the State of
California as defined in California Government Code Section
53630.5. Deposits exceeding the FDIC insured amount shall be
secured pursuant to California Government Code Section 53652.
No one issuer shall exceed more than five percent (5%) of the
portfolio, and investment in negotiable and nonnegotiable
certificates of deposit shall be limited to thirty percent (30%) of the
portfolio combined.
h) Negotiable Certificates of Deposit only with a nationally or state -
chartered bank, a savings association or a federal association (as
defined by Section 5102 of the Financial Code), a state or federal
credit union, or by a federally licensed or state -licensed branch
of a foreign bank whose senior long-term debt is rated at least
"A", or the equivalent, or short-term debt is rated at least "A-1"
or the equivalent by an NRSRO and having assets in excess of $10
billion, so as to ensure security and a large, well-established
secondary market. Ease of subsequent marketability should be
further ascertained prior to initial investment by examining
currently quoted bids by primary dealers and the acceptability of
the issuer by these dealers. No one issuer shall exceed more than
five percent (5%) of the portfolio, and maturity shall not exceed two
years. Investment in negotiable and non-negotiable certificates of
deposit shall be limited to thirty percent (30%) of the portfolio
combined.
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i) Prime Commercial Paper with a maturity not exceeding 270 days
from the date of trade settlement that is rated "A-1", or the
equivalent, by an NRSRO. The entity that issues the commercial
paper shall meet all of the following conditions in either sub-
paragraph i. or sub -paragraph ii. below:
i. The entity shall (1) be organized and operating in the United
States as a general corporation, (2) have total assets in excess
of $500,000,000 and (3) have debt other than commercial
paper, if any, that is rated at least "A" or the equivalent by
an NRSRO.
ii. The entity shall (1) be organized within the United States as
a special purpose corporation, trust, or limited liability
company, (2) have program wide credit enhancements,
including, but not limited to, over collateralization, letters of
credit or surety bond and (3) have commercial paper that is
rated at least "A-1" or the equivalent, by an NRSRO.
iii. No more than five percent (5%) of the City's total portfolio
shall be invested in the commercial paper of any one issuer,
and the aggregate investment in commercial paper shall not
exceed twenty five percent (25%) of the City's total portfolio.
j) Eligible Banker's Acceptances with a maturity not exceeding 180
days from the date of trade settlement, drawn on and accepted by a
commercial bank whose senior long-term debt is rated at least "A"
or the equivalent by an NRSRO at the time of purchase. Banker's
Acceptances shall be rated at least "A-1", or the equivalent at the
time of purchase by an NRSRO. If the bank has senior debt
outstanding, it must be rated at least "A" or the equivalent by an
NRSRO. The aggregate investment in banker's acceptances shall
not exceed forty percent (40%) of the City's total portfolio, and no
more than five percent (5%) of the City's total portfolio shall be
invested in banker's acceptances of any one bank.
k) Repurchase Agreements and Reverse Repurchase Agreements with
a final termination date not exceeding 30 days collateralized by U.S.
Treasury obligations or Federal Instrumentality securities listed in
items 1 and 2 above with the maturity of the collateral not
exceeding ten years. For the purpose of this section, the term
collateral shall mean purchased securities under the terms of the
City's approved Master Repurchase Agreement. The purchased
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securities shall have a minimum market value including accrued
interest of one hundred and two percent (102%) of the dollar value
of the funds borrowed. Collateral shall be held in the City's
custodian bank, as safekeeping agent, and the market value of the
collateral securities shall be marked -to -the -market daily.
Repurchase Agreements and Reverse Repurchase Agreements shall
be entered into only with broker/dealers and who are recognized
as Primary Dealers with the Federal Reserve Bank of New York, or
with firms that have a Primary Dealer within their holding
company structure. Primary Dealers approved as Repurchase
Agreement counterparties shall have a short-term credit rating of at
least "A-1" or the equivalent and a long-term credit rating of at
least "A" or the equivalent. Repurchase agreement counterparties
shall execute a City approved Master Repurchase Agreement with
the City. The Finance Director shall maintain a copy of the City's
approved Master Repurchase Agreement and a list of the
broker/dealers who have executed same.
In addition, the City must own assets for more than 30 days before
they can be used as collateral for a reverse repurchase agreement.
No more than ten percent (10%) of the portfolio can be involved in
reverse repurchase agreements.
1) State of California's Local Agency Investment Fund (LAIF)
pursuant to California Government Code Section 16429.1.
m) County Investment Funds: Los Angeles County provides a service
similar to LAIF for municipal and other government entities
outside of Los Angeles County, including the City. Investment in
this pool is intended to be used as a temporary repository for short-
term funds used for liquidity purposes. The Finance Director shall
maintain on file appropriate information concerning the county
pool's current investment policies, practices, and performance, as
well as its requirements for participation, including, but not limited
to, limitations on deposits or withdrawals and the composition of
the portfolio. At no time shall more than five percent (5%) of the
City's total investment portfolio be placed in this pool.
n) Money Market Funds registered under the Investment Company
Act of 1940 that (1) are "no-load" (meaning no commission or fee
shall be charged on purchases or sales of shares); (2) have a
constant net asset value per share of $1.00; (3) invest only in the
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securities and obligations authorized in the applicable California
statutes and (4) have a rating of at least AAA or the equivalent by
at least two NRSROs. The aggregate investment in money market
funds shall not exceed twenty percent (20%) of the City's total
portfolio and no more than ten percent (10%) of the City's total
portfolio shall be invested in any one fund.
o) Supranationals which are United States dollar denominated senior
unsecured unsubordinated obligations issued or unconditionally
guaranteed by the International Bank for Reconstruction and
Development (IBRD), International Finance Corporation (IFC), or
Inter -American Development Bank (IADB), with a maximum
remaining maturity of five years or less, and eligible for purchase
and sale within the United States. Investments under this
paragraph shall be rated "AA", its equivalent, or better by at least
one NRSRO.
No more than ten percent (10%) of the City's total portfolio shall be
invested in any one issuer of supranational obligations. Purchases
of supranational obligations shall not exceed twenty percent (20%)
of the investment portfolio of the City.
2. Investments Specifically Not Permitted
Any security type or structure not specifically approved by this policy is
hereby prohibited. Security types, which are thereby prohibited include,
but are not limited to: "exotic' derivative structures such as range notes,
dual index notes, inverse floating rate notes, leveraged or de -leveraged
floating rate notes, interest only strips that are derived from a pool of
mortgages and any security that could result in zero interest accrual if
held to maturity, or any other complex variable or structured note with an
unusually high degree of volatility risk.
The City shall not invest funds with the Orange County Pool.
3. Exceptions to Prohibited and Restricted Investments
The City shall not be required to sell securities prohibited or restricted in
this policy, or any future policies, or prohibited or restricted by new State
regulations, if purchased prior to their prohibition and/or restriction.
Insofar as these securities provided no notable credit risk to the City,
holding of these securities until maturity is approved. At maturity or
liquidation, such monies shall be reinvested as provided by this policy.
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H. INVESTMENT PARAMETERS
1. Diversification
The City shall diversify its investments to avoid incurring unreasonable
risks inherent in over -investing in specific instruments, individual
financial institutions or maturities. As such, no more than five percent
(5%) of the City's portfolio may be invested in the instruments of any one
issuer, except governmental issuers, investment pools and Money Market
Funds. This restriction does not apply to any type of Federal
Instrumentality or Federal Agency Security listed in Sections G1 b and G1
c above. Nevertheless, the asset allocation in the investment portfolio
should be flexible depending upon the outlook for the economy, the
securities markets and the City's anticipated cash flow needs.
2. Maximum Maturities
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 years from the date of trade settlement,
unless the City Council has by resolution granted authority to make such
an investment at least three months prior to the date of investment.
3. Credit Quality
The City shall not purchase any security rated "Al" and / or "A+" or
below if that security has been placed on "credit watch" for a possible
downgrade by an NRSRO.
Each investment manager will monitor the credit quality of the securities
in their respective portfolio. In the event a security held by the City is the
subject of a rating downgrade which brings it below accepted minimums
specified herein, or the security is placed on negative credit watch, where
downgrade could result in a rate drop below acceptable levels, the
investment advisor who purchased the security will immediately notify
the Finance Director. The City shall not be required to immediately sell
such securities. The course of action to be followed will then be decided
on a case by case basis, considering such factors as the reason for the rate
drop, prognosis for recovery or further drop, and market price of the
security. The City Council will be advised of the situation and intended
course of action.
4. Competitive Transactions
Investment advisors shall make best effort to price investment
transactions on a competitive basis with broker/dealers selected
consistent with their practices disclosed in form ADV 2A filed with the
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SEC. Where possible, at least three broker/dealers shall be contacted for
each transaction and their bid or offering prices shall be recorded. If there
is no other readily available competitive offering, the investment advisor
shall make their best efforts to document quotations for comparable or
alternative securities. If qualitative characteristics of a transaction,
including, but not limited to, complexity of the transaction, or sector
expertise of the broker, prevent a competitive selection process,
investment advisors shall use brokerage selection practices as described
above.
I. PORTFOLIO PERFORMANCE
The investment portfolio shall be designed to attain a market rate of return
throughout budgetary and economic cycles, taking into account prevailing
market conditions, risk constraints for eligible securities, and cash flow
requirements. The performance of the City's investments shall be compared to
the total return of a benchmark that most closely corresponds to the portfolio's
duration, universe of allowable securities, risk profile, and other relevant
characteristics. When comparing the performance of the City's portfolio, its rate
of return will be computed consistent with Global Investment Performance
Standards (GIPS).
J. REPORTING
Monthly, the Finance Director shall produce a treasury report of the investment
portfolio balances, transactions, risk characteristics, earnings, and performance
results of the City's investment portfolio available to City Council and the public
on the City's Website. The report shall include the following information:
1. Investment type, issuer, date of maturity, par value and dollar amount
invested in all securities, and investments and monies held by the City;
2. A description of the funds, investments and programs;
3. A market value as of the date of the report (or the most recent valuation as
to assets not valued monthly) and the source of the valuation;
4. A statement of compliance with this Policy or an explanation for non-
compliance
K. INVESTMENT POLICY COMPLIANCE AND ADOPTION
1. Compliance
Any deviation from the policy shall be reported to Finance Committee as
soon as practical, but no later than the next scheduled Finance Committee
meeting. Upon recommendation of the Finance Committee, the Finance
Director shall review deviations from policy with the City Council.
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2. Adoption
The Finance Director shall review the Investment Policy with the Finance
Committee at least annually 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.
The Finance Director shall review the Investment Policy with City Council
at a public meeting if there are changes recommended to the Investment
Policy.
This Policy was endorsed and adopted by the City Council of the City of
Newport Beach on September 8, 2015. It replaces any previous investment
policy or investment procedures of the City.
Adopted - April 6,1959
Amended - November 9,1970
Amended - February 11, 1974
Amended - February 9,1981
Amended - October 27,1986
Rewritten - October 22,1990
Amended - January 28,1991
Amended - January 24,1994
Amended - January 9,1995
Amended - April 22,1996
Corrected - January 27,1997
Amended - February 24,1997
Amended - May 26,1998
Reaffirmed - March 22,1999
Reaffirmed - March 14, 2000
Amended & Reaffirmed - May 8, 2001
Amended & Reaffirmed - April 23, 2002
Amended & Reaffirmed - April 8, 2003
Amended & Reaffirmed - April 13, 2004
Amended & Reaffirmed - September 13, 2005
Amended - August 11, 2009
Amended & Reaffirmed - August 10, 2010
Amended & Reaffirmed - September 28, 2010
Reaffirmed - June 28, 2011
Amended & Reaffirmed - October 9, 2012
Amended - August 13, 2013
Amended - September 8, 2015
15
EXHIBIT B
SCOPE OF SERVICES
The following Services are required:
1. Consultant will provide investment research and supervision of the City's
assets under management and conduct a continuous program of investment,
evaluation and, when appropriate, sale and reinvestment of the City's Managed
Funds assets.
2. Consultant shall continuously monitor investment opportunities of the City's
Funds.
3. All investment advisory services must conform with state law, federal law, the
City's investment policy and the Prudent Expert Standard of care.
4. Annually review investment policy and compare to applicable laws.
Recommend appropriate amendments annually to comply with applicable laws
or minimize risk with respect to stated investment objectives.
5. Develop and execute an investment strategy consistent with the City's stated
investment policy objectives and parameters, applicable laws and an
understanding of the City's cash flow needs.
6. Establish an appropriate performance benchmark and compare historical
results to benchmark.
7. Regularly ensure portfolio structure matches the City's stated investment
objectives.
8. Provide monthly reporting of each portfolio under management showing
deposits, withdrawals, purchases and sales (or maturities) of investments,
earnings received, and the value of assets held on the last business day of the
month. The statement shall be in the format and manner that is mutually
agreed upon in writing by the Consultant and the City.
9. Provide credit analysis of investment instruments in portfolio.
10. Provide assurance of portfolio compliance with applicable policies and laws.
11. Immediately apprise Project Administrator of all instances of non-compliance
with applicable policies and laws.
12. Attend meetings with government officials as needed.
13. Discuss cash flow needs and market strategy with Project Administrator
quarterly.
14. Assist the City with cash flow/maturity analysis as needed.
15. The depository designated by the City (the "Custodian") shall have custody of
cash, assets and securities of the City. The Consultant is not the Custodian of
the assets and shall not take possession of or act as Custodian for the cash,
securities or other assets in the Managed Funds.
16. Consultant will observe the instructions of the City with respect to
broker/dealers who are approved to execute transactions involving the City's
Chandler Asset Management, Inc. Page B-1
Managed Funds and in the absence of such instructions will engage
broker/dealers who are reputable, qualified and financially sound. In
connection with the selection of such brokers and dealers and the placing of
such orders, the Consultant is directed to seek for the City the most favorable
execution and price.
17. Regularly evaluate market risk and develop strategies that minimize the impact
on the portfolio.
18. Immediately apprise staff of significant market events impacting portfolio
security or performance.
19. Interact and communicate effectively with the City's Custodian bank.
Consultant shall provide trade instructions to Custodian Bank at least one
business day prior to settlement.
20. Assist in credit monitoring of financial institutions with which the City conducts
business.
21. Exercise diligence in the selection and use of broker/dealers.
22. All investment transactions shall be conducted competitively. Documentation
of recorded bid or offering prices shall be maintained for a period of at least
three (3) years.
23. Provide for online access to or electronic delivery of monthly statements.
ADDITIONAL SERVICES/TERMS
24. Proxy Voting. Consultant will vote proxies on behalf of City unless otherwise
instructed. Consultant has adopted and implemented written policies and
procedures and will provide City with a copy of the proxy voting procedures
upon request. Consultant will provide information regarding how City's proxies
were voted upon request.
25. Valuation. Consultant will value securities held in portfolios managed by
Consultant no less than monthly. Securities or investments in the portfolio will
be valued in a manner determined in good faith by Consultant to reflect fair
market value.
26. Investment Advice. City recognizes that the opinions, recommendations and
actions of Consultant will be based on information deemed by it to be reliable,
but not guaranteed to or by it. Provided that Consultant acts in good faith, City
agrees that Consultant will not in any way be liable for any error in judgment or
for any act or omission, except as may otherwise be provided for under the
Federal Securities laws, state law or other applicable laws.
27. Other Clients. It is further understood that Consultant may be acting in a similar
capacity for other institutional and individual clients, and that investments and
reinvestments for City's portfolio may differ from those made or recommended
with respect to other accounts and clients even though the investment
objectives may be the same or similar. Accordingly, it is agreed that Consultant
will have no obligation to purchase or sell for City's account any securities,
which it may purchase or sell for other clients.
Chandler Asset Management, Inc. Page B-2
28. Additional Services. If and to the extent that the City requests the Consultant
to render services other than those to be rendered by the Consultant according
to this Agreement, such additional services shall be compensated separately
on terms to be agreed upon between the City and the Consultant.
Chandler Asset Management, Inc. Page B-3
EXHIBIT C
SCHEDULE OF BILLING RATES
UnderAverage Monthly Market Value of
Assets .-Management$0-$25
Tiered Annual Investment
Million
10 basis points (0.10 of 1%
$25-50 Million
8 basis points (0.08 of 1 %)
$50-$100 Million
7 basis points (0.07 of 1%
Greater than $100 Million
6 basis points (0.06 of 1
Monthly fees are based on the schedule above, but at no time shall the monthly fee be
less than $1,250. (This minimum monthly fee will not apply to accounts that are entirely
comprised of proceeds from the sale of bonds.)
The average monthly market value of assets under management are subject to the fees
described in this section but shall exclude any funds invested in a local government
investment pool or registered mutual fund managed by the Consultant ("Pool"). Custody
fees that may be charged by City's bank or other third party custodian are not included in
the above fee schedule.
Fees shall be prorated to the effective date of termination on the basis of actual days
elapsed, and any unearned portion of prepaid fees shall be refunded. City is not required
to pay any start -up or closing fees or penalty fees.
Chandler Asset Management, Inc. Page C-1
EXHIBIT D
INSURANCE REQUIREMENTS — PROFESSIONAL SERVICES
1. Provision of Insurance. Without limiting Consultant's indemnification of City, and
prior to commencement of Work, Consultant shall obtain, provide and maintain at
its own expense during the term of this Agreement, policies of insurance of the
type and amounts described below and in a form satisfactory to City. Consultant
agrees to provide insurance in accordance with requirements set forth here. If
Consultant uses existing coverage to comply and that coverage does not meet
these requirements, Consultant agrees to amend, supplement or endorse the
existing coverage.
2. Acceptable Insurers. All insurance policies shall be issued by an insurance
company currently authorized by the Insurance Commissioner to transact
business of insurance in the State of California, with an assigned policyholders'
Rating of A- (or higher) and Financial Size Category Class VII (or larger) in
accordance with the latest edition of Best's Key Rating Guide, unless otherwise
approved by the City's Risk Manager.
3. Coverage Requirements.
A. Workers' Compensation Insurance. Consultant shall maintain Workers'
Compensation Insurance, statutory limits, and Employer's Liability
Insurance with limits of at least one million dollars ($1,000,000) each
accident for bodily injury by accident and each employee for bodily injury by
disease in accordance with the laws of the State of California, Section 3700
of the Labor Code.
Consultant shall submit to City, along with the certificate of insurance, a
Waiver of Subrogation endorsement in favor of City, its City Council, boards
and commissions, officers, agents, volunteers and employees.
B. General Liability Insurance. Consultant shall maintain commercial general
liability insurance, and if necessary umbrella liability insurance, with
coverage at least as broad as provided by Insurance Services Office form
CG 00 01, in an amount not less than one million dollars ($1,000,000) per
occurrence, two million dollars ($2,000,000) general aggregate. The policy
shall cover liability arising from premises, operations, personal and
advertising injury, and liability assumed under an insured contract (including
the tort liability of another assumed in a business contract).
C. Automobile Liability Insurance. Consultant shall maintain automobile
insurance at least as broad as Insurance Services Office form CA 00 01
covering bodily injury and property damage for all activities of Consultant
arising out of or in connection with Work to be performed under this
Agreement, including coverage for any owned, hired, non -owned or rented
vehicles, in an amount not less than one million dollars ($1,000,000)
combined single limit each accident.
Chandler Asset Management, Inc. Page D-1
D. Professional Liability (Errors & Omissions) Insurance. Consultant shall
maintain professional liability insurance that covers the Services to be
performed in connection with this Agreement, in the minimum amount of ten
million dollars ($10,000,000) per claim and in the aggregate. Any policy
inception date, continuity date, or retroactive date must be before the
Effective Date of this Agreement and Consultant agrees to maintain
continuous coverage through a period no less than three years after
completion of the Services required by this Agreement.
E. Fidelity Insurance. Consultant shall maintain fidelity insurance that covers
the Services to be performed in connection with this Agreement, in the
minimum amount of five million dollars ($5,000,000) limit per claim.
4. Other Insurance Requirements. The policies are to contain, or be endorsed to
contain, the following provisions:
A. Waiver of Subrogation. All insurance coverage maintained or procured
pursuant to this Agreement shall be endorsed to waive subrogation against
City, its City Council, boards and commissions, officers, agents, volunteers
and employees or shall specifically allow Consultant or others providing
insurance evidence in compliance with these requirements to waive their
right of recovery prior to a loss. Consultant hereby waives its own right of
recovery against City, and shall require similar written express waivers from
each of its subconsultants.
B. Additional Insured Status. All liability policies including general liability,
excess liability, pollution liability, and automobile liability, if required, but not
including professional liability, shall provide or be endorsed to provide that
City, its City Council, boards and commissions, officers, agents, volunteers
and employees shall be included as insureds under such policies.
C. Primary and Non Contributory. All liability coverage shall apply on a primary
basis and shall not require contribution from any insurance or self-insurance
maintained by City.
D. Notice of Cancellation. All policies shall provide City with thirty (30)
calendar days' notice of cancellation (except for nonpayment for which ten
(10) calendar days' notice is required) or nonrenewal of coverage for each
required coverage.
5. Additional Agreements Between the Parties. The parties hereby agree to the
following:
A. Evidence of Insurance. Consultant shall provide certificates of insurance to
City as evidence of the insurance coverage required herein, along with a
waiver of subrogation endorsement for workers' compensation and other
endorsements as specified herein for each coverage. Insurance certificates
and endorsement must be approved by City's Risk Manager prior to
commencement of performance. Current certification of insurance shall be
Chandler Asset Management, Inc. Page D-2
kept on file with City at all times during the term of this Agreement. City
reserves the right to require complete, certified copies of all required
insurance policies, at any time.
B. City's Right to Revise Requirements. City reserves the right at any time
during the term of the Agreement to change the amounts and types of
insurance required by giving Consultant sixty (60) calendar days' advance
written notice of such change. If such change results in substantial
additional cost to Consultant, City and Consultant may renegotiate
Consultant's compensation.
C. Enforcement of Agreement Provisions. Consultant acknowledges and
agrees that any actual or alleged failure on the part of City to inform
Consultant of non-compliance with any requirement imposes no additional
obligations on City nor does it waive any rights hereunder.
D. Requirements not Limiting. Requirements of specific coverage features or
limits contained in this Section are not intended as a limitation on coverage,
limits or other requirements, or a waiver of any coverage normally provided
by any insurance. Specific reference to a given coverage feature is for
purposes of clarification only as it pertains to a given issue and is not
intended by any party or insured to be all inclusive, or to the exclusion of
other coverage, or a waiver of any type. If the Consultant maintains higher
limits than the minimums shown above, the City requires and shall be
entitled to coverage for higher limits maintained by the Consultant. Any
available insurance proceeds in excess of the specified minimum limits of
insurance and coverage shall be available to the City.
E. Self-insured Retentions. Any self-insured retentions must be declared to
and approved by City. City reserves the right to require that self-insured
retentions be eliminated, lowered, or replaced by a deductible. Self-
insurance will not be considered to comply with these requirements unless
approved by City.
F. City Remedies for Non -Compliance. If Consultant or any subconsultant fails
to provide and maintain insurance as required herein, then City shall have
the right but not the obligation, to purchase such insurance, to terminate this
Agreement, or to suspend Consultant's right to proceed until proper
evidence of insurance is provided. Any amounts paid by City shall, at City's
sole option, be deducted from amounts payable to Consultant or reimbursed
by Consultant upon demand.
G. Timely Notice of Claims. Contractor shall give City prompt and timely notice
of claims made or suits instituted that arise out of or result from Contractor's
performance under this Contract, and that involve or may involve coverage
under any of the required liability policies. City assumes no obligation or
liability by such notice, but has the right (but not the duty) to monitor the
handling of any such claim or claims if they are likely to involve City.
Chandler Asset Management, Inc. Page D-3
H. Consultant's Insurance. Consultant shall also procure and maintain, at its
own cost and expense, any additional kinds of insurance, which in its own
judgment may be necessary for its proper protection and prosecution of the
Work.
Chandler Asset Management, Inc. Page D-4
CERTIFICATE OF INSURANCE
CHECKLIST
City of Newport Beach
This checklist is comprised of requirements as outlined by the City of Newport Beach. *
Date Received: 3/31/1
Dept./Contact Received From:
Date Completed: 8/29/17 Sent to: Anthony By: Jan / Alicia
Company/Person required to have certificate: Chandler Asset Management
Type of contract: All Other
1. GENERAL LIABILITY
E N/A
EFFECTIVE/EXPIRATION DATE: 9/1/16-9/1/17
❑ No
A.
INSURANCE COMPANY: Travelers Insurance Company
❑ Yes
B.
AM BEST RATING (A-: VII or greater): A++:XV
❑ N/A
C.
ADMITTED Company (Must be California Admitted):
Is Company admitted in California?
E Yes ❑ No
D.
LIMITS (Must be $1 M or greater): What is limit provided?
1M/2M
E.
ADDITIONAL INSURED ENDORSEMENT— please attach
E Yes ❑ No
F.
PRODUCTS AND COMPLETED OPERATIONS (Must
include): Is it included? (completed Operations status does
not apply to Waste Haulers or Recreation)
E Yes ❑ No
G.
ADDITIONAL INSURED FOR PRODUCTS AND
COMPLETED OPERATIONS ENDORSEMENT (completed
Operations status does not apply to Waste Haulers)
E Yes ❑ No
H.
ADDITIONAL INSURED WORDING TO INCLUDE (The City
its officers, officials, employees and volunteers): Is it
included?
® Yes ❑ No
I.
PRIMARY & NON-CONTRIBUTORY WORDING (Must be
included): Is it included?
E Yes ❑ No
J.
CAUTION! (Confirm that loss or liability of the named insured
is not limited solely by their negligence) Does endorsement
include "solely by negligence' wording?
❑ Yes E No
K.
ELECTED SCMAF COVERAGE (RECREATION ONLY):
E N/A ❑ Yes ❑ No
L.
NOTICE OF CANCELLATION:
❑ N/A E Yes ❑ No
11. AUTOMOBILE LIABILITY
EFFECTIVE/EXPIRATION DATE: 9/1/16-9/1/17
A. INSURANCE COMPANY: Travelers Insurance Company
B. AM BEST RATING (A-: VII or greater) A++: XV
C. ADMITTED COMPANY (Must be California Admitted):
Is Company admitted in California?
D. LIMITS - If Employees (Must be $1M min. BI & PD and $500,000
UM, $2M min for Waste Haulers): What is limits provided?
E LIMITS Waiver of Auto Insurance / Proof of coverage (if individual)
(What is limits provided?)
F. PRIMARY & NON-CONTRIBUTORY WORDING (For Waste
IM
N/A
Haulers only):
E N/A
❑ Yes
❑ No
G. HIRED AND NON -OWNED AUTO ONLY:
❑ N/A
❑ Yes
E No
H. NOTICE OF CANCELLATION:
❑ N/A
E Yes
❑ No
WORKERS' COMPENSATION
EFFECTIVE/EXPIRATION DATE: 9/1/16 — 9/1/17
A. INSURANCE COMPANY: Hartford Insurance Group
B. AM BEST RATING (A-: VII or greater): Not Rated
C. ADMITTED Company (Must be California Admitted):
D. WORKERS' COMPENSATION LIMIT: Statutory
E. EMPLOYERS' LIABILITY LIMIT (Must be $1 M or greater)
F. WAIVER OF SUBROGATION (To include): Is it included?
G. SIGNED WORKERS' COMPENSATION EXEMPTION FORM:
H. NOTICE OF CANCELLATION:
ADDITIONAL COVERAGE'S THAT MAYBE REQUIRED
IV. PROFESSIONAL LIABILITY
V POLLUTION LIABILITY
V BUILDERS RISK
HAVE ALL ABOVE REQUIREMENTS BEEN MET?
IF NO, WHICH ITEMS NEED TO BE COMPLETED?
Approved:
Agent of Alliant Insurance Services
Broker of record for the City of Newport Beach
8/29/17
Date
N Yes ❑ No
® Yes ❑ No
1M
® Yes ❑ No
® N/A ❑ Yes ❑ No
❑ N/A ® Yes ❑ No
❑ N/A ® Yes ❑ No
® N/A ❑ Yes ❑ No
® N/A ❑ Yes ❑ No
® Yes ❑ No
RISK MANAGEMENT APPROVAL REQUIRED (Non -admitted carrier rated less than _
Self Insured Retention or Deductible greater than $ ) ❑ N/A ❑ Yes ❑ No
Reason for Risk Management approval/exception/waiver:
Approved:
Risk Management
* Subject to the terms of the contract.
Date