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HomeMy WebLinkAbout4.14 Contract for Investment Services STAFF REPORT CITY COUNCIL DATE:August 16, 2016 TO: Honorable Mayor and City Councilmembers FROM: Christopher L. Foss, City Manager SUBJECT: Approval of Contract with Chandler Asset Management for Investment Services Prepared by: Jay Baksa, Financial Analyst EXECUTIVE SUMMARY: The City of Dublin’s investment portfolio of approximately $203 million is comprised of $55 million managed by the City investing funds in two locally pooled money accounts and $148 million managed by Chandler Asset Management (Chandler). In Fiscal Year 2013-14 Chandler began providing investment services for the City, consistently outperforming the two locally pooled money accounts with the primary focus of safety and liquidity of the funds. Over the past two years the book value of the funds managed by Chandler has returned on average an additional 75 basis points over the two local pools. In order to continue to maximize interest earnings while maintaining an appropriate level of risk and diversity, Staff believes it is beneficial to continue to utilize Chandler Assess Management by engaging in a three-year comprehensive investment services contract. STAFF RECOMMENDATION: Resolution Staff recommends that the City Council adopt the Approving an Agreement with Chandler Asset Management to Provide Investment Management Services. FINANCIAL IMPACT: The cost of the contract, which is tiered according to the total value of assets that would be under Chandler’s direct management, is estimated at $120,000 per year. The additional interest earnings are projected to cover this cost on an on-going basis. DESCRIPTION: Prior to 2013, the City’s investment portfolio was managed internally by City Staff. Due to the continued volatility and low interest markets, Staff reached out to asset management firms, through the issuance of a Request for Proposal (RFP) on July 11, 2013. The primary reason was to take advantage of the expertise of full-time investment specialists, who could bundle purchases with other portfolios for economies of scale, Page 1 of 2 manage the City’s exposure to riskier investments by balancing the City’s portfolio with asset diversity, and maximize returns. Staff reviewed the proposals and ranked the firms according to the selection criteria outlined in the RFP. Ultimately it was agreed that Chandler would be the most appropriate fit for the City’s portfolio’s size, reporting needs, and customer service expectations. Staff has been pleased with service provided by Chandler. As mentioned above, the estimated yearly fee for Chandler’s service is $120,000, but can vary based on the total assets under Chandler’s direct management, which excludes any amounts the City has invested with the locally-managed pools. The fee structure, as detailed in the agreement (Exhibit A to the Resolution) is based on a tiered assessment as follows: ten (10) basis points on assets up to $25 million; eight (8) basis points for $25-$50 million; and seven (7) basis points for assets above $50 million. NOTICING REQUIREMENTS/PUBLIC OUTREACH: None. ATTACHMENTS: 1. Resolution Authorizing the City Manager to Execute an Agreement with Chandler Asset Management to Provide Investment Management Services 2. Exhibit A - Services Agreement Between the City of Dublin and Chandler Asset Management Page 2 of 2 ATTACHMENT 1 RESOLUTION NO. xx - 16 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF DUBLIN * * * * * * * * * APPROVING AN AGREEMENT WITH CHANDLER ASSET MANGEMENT TO PROVIDE INVESTMENT MANAGEMENT SERVICES WHEREAS, the City desires to continue to engage a professional investment management firm with the technical expertise to develop and implement a sophisticated investment strategy; and WHEREAS, Chandler Asset Management specializes in and has extensive experience in public agency investing, including the past three years with the City; and WHEREAS, the City desires to continue to utilize Chandler Asset Management services to safeguard City assets and maximize interest earnings; and WHEREAS, a three-year contract with a tiered fee schedule based on the total asset valuation under Chandler’s direct management has been proposed; and WHEREAS, the estimated annual contract cost is $120,000; and NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Dublin does hereby authorize the City Manager to execute the agreement, attached hereto as Exhibit A, with Chandler Asset Management to provide comprehensive investment management services in an annual contract amount estimated at $120,000. PASSED, APPROVED AND ADOPTED this 16th day of August, 2016, by the following vote: AYES: NOES: ABSENT: ABSTAIN: ______________________________________ Mayor ATTEST: _______________________________________ City Clerk Services Agreement between City of Dublin and Chandler Asset Management Page 1 of 6 SERVICES AGREEMENT BETWEEN THE CITY OF DUBLIN AND CHANDLER ASSET MANAGEMENT This Agreement is made and entered into between the City of Dublin ("City") and Chandler Asset Management (“Consultant”) as of August 16, 2016 (the “Effective Date”). In consideration of their mutual covenants, the parties hereto agree as follows: 1.Scope of Work. Subject to the terms and conditions of this Agreement, Consultant shall provide those services described in Exhibit A. 2.Payment Terms. For the services described in Exhibit A, the City agrees to pay Consultant a total amount as specified in the Compensation Schedule (Exhibit B), which amount shall include all expenses. Consultant shall submit progress billings on a monthly basis, if applicable. Except as specifically authorized by City, Consultant shall not bill City for duplicate services performed by more than one person (reasonable quality control and assurance work as generally recognized as an acceptable practice in this field is accepted). Consultant's bill shall include the following information for the project: a brief description of services performed, the date the services were performed, the number of hours spent and by whom, a brief description of any costs incurred, percent completion to date of each task and subtask, total of prior billings, amount for billing period, total billing to date, and the Consultant’s signature. In no event shall Consultant submit any billing for an amount in excess of the maximum amount of compensation provided for in this section. Consultant is solely responsible for the payment of employment taxes incurred under this Agreement and any similar federal or state taxes. 3.Ownership of Work. All reports, designs, drawings, plans, specifications, schedules, work product, and other materials prepared, or in the process of being prepared, for the services to be performed by Consultant shall be and are the property of City, and City shall be entitled to full access thereto, and copies thereof, during the progress of the work. Any such items remaining in the hands of Consultant or in the hands of any subcontractor upon completion or termination of the work shall be forthwith delivered to City. If any materials are lost, damaged, or destroyed before final delivery to City, Consultant shall replace them at its own expense, and Consultant hereby assumes all risks of loss, damage, or destruction of or to such materials. Consultant may retain a copy of all material produced under this Agreement for its internal use not in conflict in terms of this agreement. Any and all copyrightable subject in all reports, designs, drawings, plans, specifications, schedules, work product and other materials is hereby assigned to City by Consultant. Consultant shall execute any additional documents that may be necessary to evidence such assignment at no additional cost to City. 4.Term of Performance. Consultant shall begin performing the services set forth in Exhibit A as of the Effective Date of this Agreement. Consultant shall thereafter perform and complete all services by June 30, 2019. Exhibit A to Resolution Services Agreement between City of Dublin and Chandler Asset Management Page 2 of 6 5. Independent Contractor. At all times during the term of this Agreement, Consultant, his/her employees and agents shall be independent contractors and not employees or agents of the City. Consultant and his/her employees and agents shall have no authority, express or implied, to bind the City to any obligation whatsoever. 6. Assignment and Subcontracting. Consultant shall not subcontract, assign or transfer any portion of the performance contemplated and provided for in this Agreement without the approval of the City Manager. Consultant shall not subcontract any portion of the performance contemplated and provided for herein without prior written approval of the City. Consultant shall be solely responsible for reimbursing any subcontractors, and City shall have no obligation to them. 7. Indemnification. To the maximum extent allowed by law, Consultant shall indemnify and hold City, its elected and appointed officials, and its employees, agents and representatives harmless against any and all suits, claims or actions arising out of any injury to persons or property including, but not limited to, death that may occur, or that may be alleged to have occurred, in the course of the performance of this Agreement to the extent caused by a negligent act or omission (active or passive negligence) or wrongful misconduct of Consultant or any of its employees, subcontractors, agents, or representatives. Consultant shall defend any and all such actions, suits, or claims and pay all attorneys’ fees and all other costs and expenses arising therefrom or incurred in connection therewith. Consultant ’s responsibility for such defense and indemnity obligations shall survive the termination or completion of this Agreement for the full period of time allowed by law. The defense and indemnification obligations of this Agreement are undertaken in addition to, and shall not in any way be limited by, the insurance obligations contained in this Agreement. If any judgment is rendered against City or any of its elected or appointed officials or any of its employees, agents, and representatives in any such action, suit, or claim, Consultant shall, at its expense, satisfy and discharge the judgment. In the event that Consultant or any employee, agent, or subcontractor of Consultant providing services under this Agreement is determined by a court of competent jurisdiction or the California Public Employees Retirement System (PERS) to be eligible for enrollment in PERS as an employee of City, Consultant shall indemnify, defend, and hold harmless City for the payment of any employee and/or employer contributions for PERS benefits on behalf of Consultant or its employees, agents, or subcontractors, as well as for the payment of any penalties and interest on such contributions, which would otherwise be the responsibility of City. 8. Insurance. a. If Consultant employs any person to perform work in connection with this Agreement, Consultant shall procure and maintain at all times during the performance of the work Workers’ Compensation Insurance in conformance with the laws of the State of California and Federal laws, where applicable. Employers’ Liability Insurance shall not be less than One Million Dollars ($1,000,000) per accident or disease. Consultant shall also procure and maintain at all times during the term of this Agreement General Liability Insurance (including automobile operation) covering Consultant and City for liability arising out of the operations of Consultant and any subcontractors. Each policy shall include coverage for all vehicles, licensed or unlicensed, on or off City’s premises, used by or on behalf of Consultant for the performance of work under this Agreement. Each policy shall provide coverage of not less than Two Million Services Agreement between City of Dublin and Chandler Asset Management Page 3 of 6 Dollars ($2,000,000) per claim, naming as an additional insured, in connection with Consultant’s activities, City , its elected and appointed officials, and its employees, agents, and representatives. b. Each insurer shall agree that its policy is primary insurance and that it shall be liable for the full amount of any loss up to and including the total limit of liability without right of contribution from any other insurance covering City. c. Prior to commencement of work hereunder, Consultant shall deliver to City a certificate of insurance which shall indicate compliance with the insurance requirements of this paragraph 8. City reserves the right to obtain a full certified copy of any insurance policy and endorsements during this time. Failure to exercise this right shall not constitute a waiver of right to exercise later. d. It shall be a requirement under this Agreement that any available insurance proceeds broader than or in excess of the specified minimum insurance coverage requirements and/or limits shall be available to City as an additional insured. Furthermore, the requirements for coverage and limits shall be (1) the minimum coverage and limits specified in this Agreement; or (2) the broader coverage and maximum limits of coverage of any insurance policy or proceeds available to the named insured; whichever is greater. The additional insured coverage under the Consultant’s policy shall be “primary and non-contributory” and will not seek contribution from City’s insurance or self-insurance and shall be at least as broad as CG 20 01 04 12. In the event Consultant fails to obtain or maintain coverage as required by this Agreement, the City at its sole discretion may purchase the coverage required and the cost will be paid by Consultant. Each policy shall include an endorsement providing that it shall not be cancelled, changed, or allowed to lapse without at least thirty (30) days’ prior written notice to City of such cancellation, change, or lapse. e. All self-insured retentions (SIR) and/or deductibles must be disclosed to City for approval and shall not reduce the limits of liability. Policies containing any self-insured retention (SIR) provision or deductibles shall provide or be endorsed to provide that the SIR and/or deductibles may be satisfied by either the named insured or City. f. Consultant shall also procure and maintain at all times during the performance of the work Professional Liability Insurance covering Consultant’s performance under this Agreement. The policy shall provide coverage of not less than One Million Dollars ($1,000,000) per claim. g. Inclusion of City as additional insured shall not in any way affect its rights with respect to any claim, demand, suit, or judgment made, brought or recovered against Consultant . Such policy shall protect Consultant and City in the same manner as though a separate policy had been issued to each, but nothing in the policy shall operate to increase the insurer's liability as set forth in the policy beyond the amount or amounts shown or to which the insurer would have been liable if only one interest had been named as an insured. h. City reserves the right to obtain a full certified copy of any insurance policy and endorsements. Failure to exercise this right shall not constitute a waiver of right to exercise later. i. If the policies of insurance obtained and maintained by Consultant under this Paragraph 8 provide coverage on a claims-made rather than occurrence-based basis, Consultant shall maintain such coverage, or obtain comparable tail coverage, for the period following termination of this Agreement until the expiration of all applicable statutes of limitations. Services Agreement between City of Dublin and Chandler Asset Management Page 4 of 6 j. City and its officers, employees, agents, and volunteers shall be covered as additional insureds with respect to liability arising out of activities performed by or on behalf of Consultant, including the insured’s general supervision of Consultant, as well as products and completed operations of Consultant. 9. Nondiscrimination and Equal Opportunity. During the performance of this Agreement, Consultant shall not discriminate against any employee or applicant for employment because of race, religion, creed, color, national origin, sex, sexual orientation or age. 10. Documents. During the term of this Agreement, Consultant shall permit representatives of City, at all reasonable times, to have access to, examine, and make copies, at City's expense, of Consultant’s books, records, and documents relating to this Agreement. 11. Licenses. If a license of any kind, which term is intended to include evidence of registration, is required of Consultant its employees, agents or subcontractors by federal or state law, Consultant warrants that such license has been obtained, is valid and in good standing, and Consultant shall keep it in effect at all times during the term of this Agreement, and that any applicable bond has been posted in accordance with all applicable laws and regulations. 12. Time is of the Essence. Consultant agrees to diligently prosecute the services to be provided under this Agreement to completion and in accordance with the schedule specified in Exhibit A. In the performance of this agreement, time is of the essence. 13. Termination. At any time City shall have the right to terminate this Agreement immediately by giving written notice to Consultant. For termination not based on default of Consultant, Consultant shall be compensated in accordance with the provisions of Paragraph 2, Compensation, for the services performed and expenses incurred to the date of termination, plus any reasonable costs and expenses which are reasonably and necessarily incurred by Consultant to effect termination. For termination by reason of default of Consultant, City’s maximum obligation shall be to remit final payment to Consultant in an amount to cover only those services performed and expenses incurred in accordance with this Agreement up to the effective date of termination. City shall be entitled to exercise all available remedies arising from said default. Regardless of the cause of termination, City may condition payment of such compensation upon Consultant delivering to City any or all documents, photographs, computer software, video and audio tapes, and other materials provided to Consultant or prepared by or for Consultant or the City in connection with this Agreement. 14. 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. Services Agreement between City of Dublin and Chandler Asset Management Page 5 of 6 15. Contract Administration and Notice. This Agreement shall be administered on behalf of the City by the City Manager. Any written notice between the parties shall be sent to: The City of Dublin 100 Civic Plaza Dublin, CA 94568 16. Integration. This Agreement, together with attached Exhibits__, contains the entire understanding between the parties concerning the subject matter contained herein. There are no representations, agreements, arrangements, or understands, oral or written, between the parties relating to the subject matter of this Agreement that are not fully expressed herein. 17. Attorneys’ Fees. If any legal proceeding is instituted by either party to enforce the terms of this Agreement or to determine the rights of the parties thereunder, the prevailing party in the proceeding shall recover, in addition to all court costs, reasonable attorneys' fees (including, without limitation, post-judgment attorneys’ fees incurred in collecting a judgment or otherwise enforcing the terms thereof). 18. Applicable Law. This Agreement shall be subject to and governed by the law of the State of California. 19. Binding on Successors. Subject to the provisions of Paragraph 6, Assignment and Subcontracting, this Agreement shall inure to the benefit of and be binding upon the parties, their legal representatives, successors, and assigns. 20. Conflict of Interest. Depending on the nature of the work performed, a consultant of City is subject to the same conflict of interest prohibitions that govern City employees and officials (such as The Political Reform Act of 1974 (Government Code Sections 81000 et seq.) and Government Code Section 1090). During the proposal process or the term of this Agreement, Consultant may be required to disclose financial interests. 21. AMENDMENT This Agreement may be modified or amended only by a writing signed by both parties. Services Agreement between City of Dublin and Chandler Asset Management EXHIBIT A EXHIBIT A Scope of Work. Consultant shall provide the following services: Consultant shall provide investment management and advisory services for the City on all funds, as authorized by the City Council and directed by Staff to be managed by Consultant. The Consultant shall provide the additional related services, which shall include but not be limited to the following: a) Assisting the City, as the City deems necessary, in analyzing its cash flow requirements to determine the amount of funds to be invested with Consultant. b) Assisting the City, as the City deems necessary, in determining its investment risk tolerance and appropriate portfolio benchmark. c) Meeting with City staff, from time to time as reasonably requested by City, to review the investment portfolio and performance. d) On an annual basis, reviewing and recommending changes to the City’s Investment Policy based on legislative changes and other relevant market conditions. e) Providing the City with on-line access to real-time information on the City’s investment positions and providing monthly investment reports for the City. f) Providing other investment-related services as agreed upon. Additional Provisions 1. City Representative. In its capacity as investment manager, Consultant shall receive all instructions, directions and other communications on City's behalf respecting City's account from the Representative designated from time to time by the City Manager. The City Manager has designated Colleen Tribby, Administrative Services Director as the Representative. Consultant is hereby authorized to rely and act upon all such instructions, directions and communications from such Representative or any agent of such Representative. 2. Investment Policy. In investing and reinvesting City’s assets, Consultant shall comply with City’s Investment Policy. 3. Authority of Consultant. Consultant is hereby granted full discretion to invest and reinvest all assets under its management in any type of security it deems appropriate, subject to compliance with the Investment Policy and instructions given or guidelines set by the Representative. 4. Electronic Delivery. From time to time, Consultant may be required to deliver certain documents to City such as account information, notices and required disclosures. City hereby consents to Consultant’s use of electronic means, such as email, to make such delivery. This delivery may include notification of the availability of such document(s) on a website, and City agrees that such notification will constitute “delivery”. City further Services Agreement between City of Dublin and Chandler Asset Management EXHIBIT A agrees to provide Consultant with City’s email address(s) and to keep this information current at all times by promptly notifying Consultant of any change in email address(s). City email address(s):admin.service@dublin.ca.gov 5. 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 description of the proxy voting procedures upon request. Consultant will provide information regarding how City’s proxies were voted upon request. To request proxy policies or other information, please contact us by mail at the address provided, by calling 800-317-4747, or by emailing your request to compliance@chandlerasset.com. 6. 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 recognizes the importance of comparing statements received from the appointed custodian to statements received from Consultant. City recognizes that the fees expressed above do not include fees City will incur for custodial services. 7. 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. 8. 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 accordance with the standards set out in Section 1.2 of the Agreement, 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 or other applicable laws. 9. Payment of Commissions. Consultant may place buy and sell orders with or through such brokers or dealers as it may select. It is the policy and practice of Consultant to strive for the best price and execution and for commission and discounts which are competitive in relation to the value of the transaction and which comply with Section 28(e) of the Securities and Exchange Act. Nevertheless, it is understood that Consultant may pay a commission on transactions in excess of the amount another broker or dealer may charge, and that Consultant makes no warranty or representation regarding commissions paid on transactions hereunder. 10. 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 Services Agreement between City of Dublin and Chandler Asset Management EXHIBIT A City's account any securities which it may purchase or sell for other clients. 11. Confidential Relationship. The terms and conditions of this Agreement, and all information and advice furnished by either party to the other shall be treated as confidential and shall not be disclosed to third parties except (i) as required by law, rule, or regulation, (ii) as requested by a regulatory authority, (iii) for disclosures by either party of information that has become public by means other than wrongful conduct by such party or its officers, employees, or other personnel, (iv) for disclosures by either party to its legal counsel, accountants, or other professional advisers, (v) as necessary for Consultant to carry out its responsibilities hereunder, or (vi) as otherwise expressly agreed by the parties. 12. Receipt of Brochure and Privacy Policy. City has received 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 has received a copy of Consultant’s Privacy Policy. Services Agreement between City of Dublin and Chandler Asset Management EXHIBIT B EXHIBIT B Payment Terms. City shall compensate Consultant monthly an amount calculated on the average market value of City’s portfolio, including accrued interest, in accordance with the following schedule: Assets Under Management Annual Investment Management Fee First $25 million 0.10 of 1% (10 basis points) Next $25 million 0.08 of 1% (8 basis points) Assets in excess of $50 million 0.07 of 1% (7 basis points) The fees expressed above do not include any custody fees that may be charged by City’s bank or other third party custodian. The City is not required to pay any start-up or closing fees; there are no penalty fees. There are no additional costs associated with the sale and purchase of securities, other than those that may be imposed by the custodian. Fees shall be prorated to the effective date of termination of the agreement on the basis of actual days elapsed, and any unearned portion of prepaid fees shall be refunded. The fee schedule is all-inclusive for the services that the Consultant will provide the City, including personal visits and education offerings for staff. Fees shall be deducted monthly in arrears from City’s custody account. There is no annual minimum required.