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HomeMy WebLinkAbout09 - Award of PSA for Investment Advisor ServicesTO: FROM: CITY OF NEWPORT BEACH City Council Staff Report December 13, 2022 Agenda Item No. 9 HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL Michael Gomez, Deputy Finance Director — 949-644-3124, mgomez@newportbeachca.gov PREPARED BY: Michael Gomez, Deputy Finance Director, mgomez@newportbeachca.gov PHONE: 949-644-3124 TITLE: Award of Professional Services Contract to Chandler Asset Management for Investment Advisor Services ABSTRACT: The City of Newport Beach (City) issued a Request for Proposals (RFP) for investment advisor services for the five-year period ending December 31, 2027. Based on the results of the competitive selection process, it is recommended that the City enter into a professional services agreement with Chandler Asset Management for investment advisor services. RECOMMENDATION: a) Determine this action is exempt from the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines because this action will not result in a physical change to the environment, directly or indirectly; b) Approve a five-year Professional Services Agreement with Chandler Asset Management for investment advisor services for the five-year period ending December 31, 2027, and a total not to exceed amount of $750,000; and c) Authorize the Mayor and City Clerk to execute the Agreement. DISCUSSION: The City has contracted with investment advisors to oversee its investment portfolio. The portfolio is valued at approximately $290 million. Chandler Asset Management is the current investment advisor. The consultant's current contract is at the end of its five-year term. The City solicited and evaluated proposals to oversee the City's investment portfolio for the next five-year period. 9-1 Award of Professional Services Contract to Chandler Asset Management for Investment Advisor Services December 13, 2022 Page 2 On August 5, 2022, the City posted a Request for Proposals (RFP) for investment advisory services. By the RFP due date, the City had four firms submit a proposal, including Chandler Asset Management, Public Trust Advisors, LLC, PFM Asset Management, LLC, and Government Portfolio Advisors. Under the coordination of the finance director, proposals were reviewed and ranked by a three -person selection committee comprised of the finance director, deputy finance director, and finance manager. The written technical proposals were reviewed and ranked by the selection committee before the sealed cost bids were opened and scored. All firms met the minimum requirements for their proposals to be evaluated and staff evaluated and ranked each proposal based on the following criteria: • Organizational information and qualifications • Experience and references • Proposer's approach and methodology • Answers to industry and experience related questions • Proposed cost The results of the selection committee's technical score and cost ratio analysis is summarized in the table below: Proposer Chandler Asset Management Proposal Score 87.55 Public Trust Advisors, LLC 85.83 PFM Asset Management, LLC 85.74 Government Portfolio Advisors 83.33 Based on the results of the competitive selection process, it is recommended that the City enter into a professional services agreement with Chandler Asset Management for investment advisor services for the five-year period ending December 31, 2027. Chandler Asset Management has been in business since 1988 providing investment management services primarily to public agencies. Chandler focuses on serving public agencies who share similar objectives for safety, liquidity and yield. FISCAL IMPACT: Based on the fee schedule associated with a five-year contract, the total annual cost for the services may range between $125,000 and $150,000 per year depending on the total assets managed per year. There is sufficient funding for this contract. Since cash and investments are pooled together for investment management purposes, the fees are initially expensed to a non -departmental "Investment Advisor Services" account, which is then netted against investment earnings before earnings are shared and allocated to each fund based on its proportionate cash balance. 9-2 Award of Professional Services Contract to Chandler Asset Management for Investment Advisor Services December 13, 2022 Page 3 ENVIRONMENTAL REVIEW: Staff recommends the City Council find this action is not subject to the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly. NOTICING: The agenda item has been noticed according to the Brown Act (72 hours in advance of the meeting at which the City Council considers the item). ATTACHMENT: Attachment A — Professional Services Agreement 9-3 Attachment A Professional Services Agreement PROFESSIONAL SERVICES AGREEMENT WITH CHANDLER ASSET MANAGEMENT, INC. FOR DISCRETIONARY INVESTMENT ADVISORY SERVICES THIS PROFESSIONAL SERVICES AGREEMENT ("Agreement") is made and entered into as of this 1st day of January, 2023 ("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 advisory services and execute an investment strategy consistent with the City's investment policy objectives and parameters. ("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, 2027, 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" 9-5 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 Seven Hundred Fifty Thousand Dollars and 00/100 ($750,000.00), 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, and a description of any reimbursable expenditures. City shall pay Consultant no later than thirty (30) calendar days after approval of the monthly invoice by City staff. Chandler Asset Management, Inc. Page 2 9-6 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. Chandler Asset Management, Inc. Page 3 9-7 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 9-8 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. Chandler Asset Management, Inc. Page 5 9-9 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 9-10 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. 21. WITHHOLDINGS 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 Chandler Asset Management, Inc. Page 7 9-11 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") and/or Government Code §§ 1090 et seq., which (1) require such persons to disclose any financial interest that may foreseeably be materially affected by the Work performed under this Agreement, and (2) prohibit such persons from making, or participating in making, decisions that will foreseeably financially affect such interest. 24.2 If subject to the Act and/or Government Code §§ 1090 et seg., Consultant shall conform to all requirements therein. 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: 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 Chandler Asset Management, Inc. Page 8 9-12 San Diego, CA 92121 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. Chandler Asset Management, Inc. Page 9 9-13 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 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 9_14 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 Date: '�k By: (�d Harp kwK, City Attorney ATTEST: Date: : Leilani I. Brown City Clerk Attachments: Exhibit A Exhibit B Exhibit C Exhibit D CITY OF NEWPORT BEACH, a California municipal corporation Date: By: Kevin Muldoon Mayor CONSULTANT: Chandler Asset Management, Inc., a California corporation Date: 1 / %D %/ ZOZZ- By: // / Gtcm� / "s� Gartin(D. Cassell Chief Executive Officer Date:��— By: ��'v / Nicole Dragoo Secretary [END OF SIGNATURES] Council Policy F-1 Scope of Services Schedule of Billing Rates Insurance Requirements Chandler Asset Management, Inc. Page 11 9-15 EXHIBIT A COUNCIL POLICY F-1 Chandler Asset Management, Inc. Page A-1 9-16 F-1 STATEMENT OF INVESTMENT POLICY PURPOSE: 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 4. Investment Objectives 5. Safety 6. Liquidity 7. Yield B. Standards of Care 1. Prudence 2. Ethics and Conflicts of Interest 3. Delegation of Authority 4. Internal Controls C. Banking Services D. Broker/ Dealers E. Safekeeping and Custody of Assets F. Authorized Investments 1. Investments Specifically Permitted 2. Investments Specifically Not Permitted 3. Exceptions to Prohibited and Restricted Investments G. Investment Parameters 1. Diversification 2. Maximum Maturities 3. Credit Quality 4. Competitive Transactions H. Portfolio Performance I. Reporting J. Investment Policy Compliance and Adoption 1 9-17 F-1 1. Compliance 2. Adoption 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 I NMI F-1 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 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 LAW 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. 3 9-19 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. 3. Delegation of Authority n 9-20 F-1 Authority to manage the City's investment program is derived from the Charter of the City of Newport Beach section 605 G). 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. D. BANKING SERVICES Banking services for the City shall be provided by FDIC insured banks 5 9-21 F-1 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 0 9-22 F-1 safekeeping by a 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 the a 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 or minimum credit rating for a particular security type, that percentage or credit rating minimum 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. No more than thirty percent (30%) of the portfolio may be invested in any single Federal Instrumentality/GSE issuer. The maximum percentage of callable Federal Instrumentality/GSE securities in the portfolio will be twenty percent (20%.) c) Federal Agency Obligations for which the full faith and credit of 7 9-23 F-1 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. d) Mortgage -backed Securities, Collateralized Mortaaae Obligation Cl MO) and Asset -backed Securities from issuers not defined sections a, band c of the Investments Specifically Permitted section of this investment policy are limited to bonds with a final maturity not exceeding five years from the date of trade settlement. 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 in at least the "A" category 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, 8 9-24 F-1 or operated by a state or by a department, board, agency, or authority of any of the other 49 states, in addition to California. 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 in at least the "A" category 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 in at least the "A" category, 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 I 9-25 F-1 limited to thirty percent (30%) of the portfolio combined. 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: 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 in at least the "A" category 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 collateral ization, 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. Under a provision sunsetting on January 1, 2026, no more than forty percent (40%) of the portfolio may be invested in commercial paper if the City's assets under management are greater than $100,000,000. 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 in at least the "A" category 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 in at least the "A" category 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. 10 9-26 F-1 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 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. 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 11 9-27 F-1 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) Mutual Funds and Money Market Mutual Funds registered under the Investment Company Act of 1940, provided that: MUTUAL FUNDS that invest in the securities and obligations as authorized under California Government Code, Section 53601 (a) to (k) and (m) to (q) inclusive and that meet either of the following criteria: a. Attained the highest ranking or the highest letter and numerical rating provided by not less than two (2) NRSROs; or b. Have retained an investment adviser registered or exempt from registration with the Securities and Exchange Commission with not less than five years' experience investing in the securities and obligations authorized by California Government Code, Section 53601 and with assets under management in excess of $500 million. c. No more than 10% of the total portfolio may be invested in shares of any one mutual fund. ii. MONEY MARKET MUTUAL FUNDS registered with the Securities and Exchange Commission under the Investment Company Act of 1940 and issued by diversified management companies and meet either of the following criteria: a. Have attained the highest ranking or the highest letter and numerical rating provided by not less than two (2) NRSROs; or b. Have retained an investment adviser registered or exempt from registration with the Securities and Exchange Commission with not less than five years' experience managing money market mutual funds with assets under management in excess of $500 million. c. No more than 20% of the total portfolio may be invested 12 NMI F-1 in Money Market Mutual Funds. iii No more than 20% of the total portfolio may be invested in these securities. o) Suoranationals 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 in the 11 AA1 1 category, its equivalent, or better by at least oneNRSRO. 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. Under a provision sunsetting on January 1, 2026, securities backed by the U.S. Government that c.ould result in a zero or negative interest accrual if held to maturity are permitted. 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 13 9-29 F-1 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. 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, supranationals, investment pools, mutual funds and money market funds, or unless otherwise specified in this investment policy. 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 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 downgraded to a level below the requirements of this policy, making the security ineligible for additional purchases, the following steps will be taken: Any actions taken related to the downgrade by the investment manager will be communicated to the Finance Director in a timely manner. If a decision is made to retain the security, the credit quality will be monitored and reported to the City Council. 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 14 9-30 F-1 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. 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 15 9-31 F-1 Committee, the Finance Director shall review deviations from policy with the City Council. 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 28, 2021. 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 16 9-32 F-1 Amended - September 8, 2015 Amended- March 28, 2017 Amended - January 28, 2020 Amended - September 28, 2021 17 9-33 EXHIBIT B SCOPE OF SERVICES Consultant shall perform the following services: Provide full-time, discretionary investment research and advisory services of the City's assets under management and conduct a continuous program of monitoring, investment, evaluation and, when appropriate, sale and reinvestment of the City's Managed Funds assets. 2. Provide discretionary investment advisory services which conform with state law, federal law, as well as ordinances, resolutions and the City's investment policy and the Prudent Expert Standard of care. 3. Be available in a timely manner, in person, by telephone, fax or e-mail, for consultation or advice. Meet with and provide information to City finance staff, and if requested, to other interested parties such as the Finance Committee, City Council and senior management. Meet periodically with City staff, including on -site meetings not less than twice annually, to review and refine portfolio strategy and performance. All documents are to be in PDF and provided in advance of in -person meetings. 4. Provide detailed reports in PDF at least monthly of investment portfolio activity, performance, holdings by type, maturity, broker, duration, and benchmark comparables. Such statements shall be furnished to the City within five (5) calendar days after the close of each month. Include earnings and accounting methodology. Reports shall follow Generally Accepted Accounting Principles (GAAP) and Governmental Accounting Standards Board (GASB) True -Value reporting and Deposit & Investment Risk Disclosure, and any other reports that may now or later be required. Provide separate quarterly and annual portfolio performance reports based on the City's fiscal year. Quarterly reports are to include summaries of that period's economic environment. 5. Provide assistance in developing and implementing investment strategies that will maintain or enhance portfolio quality and performance within the parameters of the City's investment policies and cash flow needs, taking into consideration the primary objective, the preservation of principal. 6. Work with City staff to assure coordination of investment trades, delivery of the securities and availability of funds. Assist with trade settlements. Provide technical and fundamental market research including yield curve analysis and swap analysis. Obtain and document competitive prices for securities transactions, and with hard copy and electronic (in PDF) monthly reports, provide documentation to confirm competitive pricing, with the City's preference for at least three (3) quotes per trade. (If less than three, provide rationale.) 7. The successful Proposer will make recommendations to the City as to changes, including the acquisition and sale of securities held in the account as the successful Proposer from time to time deems appropriate and permissible under the laws governing the City and as specified in the Investment Policies. Chandler Asset Management, Inc. Page B-1 9-34 8. Annually assist in reviewing and recommending any appropriate amendments to City's 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. 9. Assist in reviewing investment internal controls. 10. Assist in reviewing investment procedures and portfolio documentation with a goal of process improvement. 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. 11. Establish an appropriate performance benchmark and compare historical results to benchmark. 12. Regularly ensure portfolio structure matches the City's stated investment objectives. 13. 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. 14. Provide assurance of portfolio compliance with applicable policies and laws. 15. Immediately apprise Project Administrator of all instances of non-compliance with applicable policies and laws. 16. Discuss cash flow needs and market strategy with Project Administrator quarterly. 17. Assist the City with cash flow/maturity analysis as needed. 18. Annually monitor (and provide supporting documentation to the City) the creditworthiness of the financial institutions with which the City does business, except for those with balances at or below the Federal Deposit Insurance Corporation's limits. Assist in keeping the authorized financial institutions list updated. Monitor the creditworthiness of the City's depository and custodian bank and investments in the portfolio. Provide annual bank ratings report (more frequently if City's depository banks have ratings changes), except for those banks with balance at or below the Federal Deposit Insurance Corporation's limits. 19. Observe the instructions of the City with respect to broker/dealers who are approved to execute transactions involving the City's 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. 20. Regularly evaluate market risk and develop strategies that minimize the impact on the portfolio. Chandler Asset Management, Inc. Page B-2 9-35 21. Immediately apprise City staff of significant market events impacting portfolio security or performance. 22. Assist in the selection and review of third -party safekeeping/custodial services. Interact and communicate effectively with the City's Custodian bank. 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. 23. Provide for online access to and electronic delivery of monthly statements. 24. Vote proxies on behalf of City unless otherwise instructed. 25. Value securities held in portfolios managed by Consultant no less than monthly. 26. Monitor repurchase agreement documentation to maintain the necessary paperwork. 27. Allow City to query data and generate internal reports and to be exportable to Excel. 28. Participate in City's evaluation, selection and review of any investment software the City uses or considers using. 29. Provide City finance and treasury staff investment training and technical advice as needed. 30. Provide periodic status reports on the services provided by the firm. 31. Provide itemized invoices of charges either monthly or quarterly, as agreed upon in the contract. Additional Terms: 1. Proxy Voting. 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. 2. Valuation. Securities or investments in the portfolio will be valued in a manner determined in good faith by Consultant to reflect fair market value. 3. Custody of Securities and Funds. Consultant shall not have custody or possession of the funds or securities that City has placed under its management. City shall appoint a custodian to take and have possession of its assets. City shall compare statements received from the appointed custodian to statements received from Consultant. 4. 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. Chandler Asset Management, Inc. Page B-3 9-36 5. 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. 6. Receipt of Brochure and Privacy Policy. City hereby acknowledges receipt of the disclosure statement or "brochure" and "brochure supplement" also known as Part 2A and Part 2B of Form ADV, required to be delivered pursuant to Rule 204- 3 of the Investment Advisers Act of 1940 (Brochure). City further acknowledges receipt of Consultant's Privacy Policy, as required by Regulation S-P. 7. 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-4 9-37 EXHIBIT C SCHEDULE OF BILLING RATES First $200 million Assets over $200 million 0.06 of 1% (6 basis points) 0.03 of 1% (3 basis points) The fee schedule is all-inclusive for the services that Consultant provides, including technological resources, onboarding and implementation, online access to the Consultant's Chandler Client Portal, comprehensive reporting, meetings, and educational offerings for staff, as well as the investment management and treasury management support services as needed according to the Scope of Services. Pooled investment vehicles are excluded from fee calculations. Since the Consultant calculates fees based on the average balance of assets under its direct management (market value including accrued interest), fees will fluctuate based on portfolio value. Chandler Asset Management, Inc. Page C-1 9_38 L�1�42W- KAX 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 9-39 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 one million dollars ($1,000,000) per claim and two million dollars ($2,000,000) 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 Chandler Asset Management, Inc. Page D-2 9-40 commencement of performance. Current certification of insurance shall be kept on file with City at all times during the term of this Agreement. The certificates and endorsements for each insurance policy shall be signed by a person authorized by that insurer to bind coverage on its behalf. At least fifteen (15) days prior to the expiration of any such policy, evidence of insurance showing that such insurance coverage has been renewed or extended shall be filed with the City. If such coverage is cancelled or reduced, Consultant shall, within ten (10) days after receipt of written notice of such cancellation or reduction of coverage, file with the City evidence of insurance showing that the required insurance has been reinstated or has been provided through another insurance company or companies. 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. Right to Review Subcontracts. Consultant agrees that upon request, all agreements with subcontractors or others with whom Consultant enters into contracts with on behalf of City will be submitted to City for review. Failure of City to request copies of such agreements will not impose any liability on City, or its employees. Consultant shall require and verify that all subcontractors maintain insurance meeting all the requirements stated herein, and Consultant shall ensure that City is an additional insured on insurance required from subcontractors. For CGL coverage, subcontractors shall provide coverage with a format at least as broad as CG 20380413. D. 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. E. 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. Chandler Asset Management, Inc. Page D-3 9-41 F. 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. G. 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. H. Timely Notice of Claims. Consultant shall give City prompt and timely notice of claims made or suits instituted that arise out of or result from Consultant's performance under this Agreement, 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. 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 9-42