HomeMy WebLinkAboutItem 4.12 - 2568 Amendment #1 Chandler
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STAFF REPORT
CITY COUNCIL
DATE: April 16, 2019
TO: Honorable Mayor and City Councilmembers
FROM:
Christopher L. Foss, City Manager
SUBJECT:
First Amendment to Services Agreement with Chandler Asset
Management
Prepared by: Jay Baksa, FInancial Analyst
EXECUTIVE SUMMARY:
The City of Dublin’s investment portfolio of approximately $277 million is comprised of
$92 million managed by the City investing funds in two locally pooled money accounts
and $184 million managed by Chandler Asset Management (Chandler). In Fiscal Year
2013-14 Chandler began providing investment services for the City, and has
consistently outperformed the locally pooled money accounts and the performance
benchmark. In order to continue to maximize interest earnings whil e maintaining an
appropriate level of risk and diversity, Staff believes it is beneficial to amend the current
agreement with Chandler to extend the term for three years and add a new tier to the
Fee Schedule, which will result in a decrease in administrative costs for the City.
STAFF RECOMMENDATION:
Adopt the Resolution Approving First Amendment to Services Agreement Between the
City of Dublin and Chandler Asset Management.
FINANCIAL IMPACT:
The cost of the contract, which is tiered according to the total value of assets under
Chandler’s direct management, is estimated at $130,000 per year. The additional
ongoing interest earnings are projected to cover this annual cost.
DESCRIPTION:
In Fiscal Year 2013-14 Chandler began providing investment services for the City,
overseeing approximately $98 million. Within the first year of the contract Chandler
assisted the City in modifying its investment strategy with an enhanced focus on long-
term growth in the portfolio. Since that time the City’s portfolio with Chandler has
grown to $186 million and the long-term investments have performed favorably versus
both the performance benchmark and the Local Agency Investment Fund, one of the
locally-pooled money accounts in which the City holds funds. Since the contract
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inception, the funds managed by Chandler have returned $10,620 more than the
performance benchmark and $18,483 than LAIF, for every $1 million invested (shown in
the table below).
Since Inception / Annualized
Total Return as of 2/28/19
Historical Return of
$1 million Invested
Portfolio 1.16 1,063,396$
Benchmark*0.97 1,052,776$
LAIF Annualized Return 0.83 1,044,913$
Portfolio vs Benchmark 0.19 10,620$
Portfolio vs LAIF 0.33 18,483$
Inception 10/31/13 (please see disclosures)
*Benchmark: ICE BAML 1-5 US Treasury and Agency Index since 12/31/14
*Original Benchmark: ICE BAML 1-3 Year US Treasury and Agency Index
In addition to the generating a higher rate of return in the City’s portfolio, the Chandler
investment team meets with City Finance staff on a quarterly basis to provide an
economic update and discuss the City’s portfolio positioning. Chandler also offers
guidance on an ongoing basis on issues that may affect the City’s portfolio or the City’s
investment policy.
The three-year extension will allow the City and Chandler to continue to implement a
long-term investment strategy, in addition to allowing the City the ability to continue to
shift funds away from the two locally held pools, which historically return less than the
funds managed by Chandler.
The estimated yearly fee for Chandler’s service is $130,000, but this varies based on
the total assets under Chandler’s direct management, which excludes any amounts the
City has invested with the locally-managed pools. The current fee structure for
Chandler’s services is as follows:
• Ten (10) basis points on assets up to $25 million;
• Eight (8) basis points for next $25 million;
• Seven (7) basis points for next $100 million.
The revised fee structure, as detailed in the Resolution, adds an additional, lower-priced
tier for higher balances, as follows:
• Five (5) basis points for assets in excess of $150 million.
Staff believes the continued relationship with Chandler, in conjunction with lower fees
for a larger portfolio, is beneficial to the City’s overall financial health.
STRATEGIC PLAN INITIATIVE:
Strategy 1 - Assure the City's long-term financial sustainability
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NOTICING REQUIREMENTS/PUBLIC OUTREACH:
None.
ATTACHMENTS:
1. Resolution Approving First Amendment to Services Agreement Between the City of
Dublin and Chandler Asset Management
2. Exhibit A to the Resolution - First Amendment to Services Agreement Between the
City of Dublin and Chandler Asset Management
RESOLUTION NO. XXX-19
A RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF DUBLIN
**************
APPROVING FIRST AMENDMENT TO SERVICES AGREEMENT BETWEEN
THE CITY OF DUBLIN AND CHANDLER ASSET MANAGEMENT
WHEREAS, on August 16, 2016, the City of Dublin (hereinafter referred to as
"CITY") and Chandler Asset Management (hereinafter referred to as "CONSULTANT")
entered into a Services Agreement for investment management services (hereinafter
referred to as the “AGREEMENT”); and
WHEREAS, the City’s portfolio has performed well against its benchmarks, and
the City desires to continue to utilize Chandler Asset Management services to
safeguard City assets and maximize interest earnings; and
WHEREAS, the existing AGREEMENT has a three-year term, expiring on
June 30, 2019; and
WHEREAS, the CITY and CONSULTANT mutually desire to extend the Term of
Service to expire on June 30, 2022; to update the tiered fee schedule in Exhibit B of the
Agreement; and to amend section 9 of the Agreement.
WHEREAS, the estimated annual contract cost is $130,000.
NOW THEREFORE, BE IT RESOLVED that the City Council of the City of
Dublin does hereby authorize the City Manager to execute the First Amendment to the
Services Agreement with Chandler Asset Management, as attached hereto as Exhibit
A.
PASSED, APPROVED AND ADOPTED this 16th day of April, 2019, by the
following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
______________________________
Mayor
ATTEST:
_________________________________
City Clerk
Exhibit A to Resolution
FIRST AMENDMENT TO SERVICES AGREEMENT BETWEEN
THE CITY OF DUBLIN AND CHANDLER ASSET MANAGEMENT
WHEREAS, on August 16, 2016, the City of Dublin (hereinafter referred to
as "CITY") and Chandler Asset Management (hereinafter referred to as "CONSULTANT")
entered into a Services Agreement for investment management services (hereinafter
referred to as the "AGREEMENT"); and
WHEREAS, the City's portfolio has performed well against its benchmarks,
and the City desires to continue to utilize Chandler Asset Management services tc
safeguard City assets and maximize interest earnings; and
WHEREAS, the existing AGREEMENT has athree-year term, expiring on
June 30, 2019; and
WHEREAS, the CITY and CONSULTANT mutually desire to extend the
Term of Service to expire on June 30, 2022; to update the tiered fee schedule in Exhibit
B of the Agreement, and to amend section 9 of the Agreement.
NOW THEREFORE, for good and valuable consideration, the sufficiency of
which is hereby acknowledged, the AGREEMENT is amended as follows:
1) Section 4 shall be rescinded in its entirety and replaced with the following:
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
2) Section 9 shall be rescinded in its entirety and replaced with the following:
Nondiscrimination and Equal Opportunity. Consultant shall not discriminate, on
the basis of a person'0 race, sex, gender, religion (including religious dress and
grooming practices), national origin, ancestry, physical or mental disability,
medical condition (including cancer and genetic characteristics), marital status,
age, sexual orientation, color, creed, pregnancy, genetic information, gender
identity or expression, political affiliation or belief, military/veteran status, or any
other classification protected by applicable local, state, or federal laws (each a
"Protected Characteristic"), against any employee, applicant for employment,
subcontractor, bidder for a subcontract, or participant in, recipient of, or applicant
for any services or programs provided by Consultant under this Agreement.
Consultant shall include the provisions of this Subsection in any subcontract
approved by the Contract Administrator or this Agreement.
3) Exhibit B shall be rescinded in its entirety and replaced with the following:
Payment Terms.
City shall compensate Consultant monthly an
value of City' s portfolio, including accrued
schedule:
Assets Under Management
First $ 25 million
Next $ 25 million
Next $100 million
Assets in excess of $150 million
amount calculated on the average market
interest, in accordance with the following
Annual Investment Management Fee
0.10 of 1 % (10 basis points)
0.08 of 1 % (8 basis points)
0.07 of 1 % (7 basis points)
0.05 of 1 % (5 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.
4) Paragraph 16 Integration shall be rescinded in its entirety and replaced with the
following:
16. Integration. This Agreement, including Exhibits A and B, represents
the entire and integrated agreement between City and Consultant and
supersedes all prior negotiations, representations, or agreements, either
written or oral.
5) Except to the extent inconsistent with this First Amendment, the Parties ratify and
confirm all of the terms and conditions of the AGREEMENT.
6) All requisite insurance policies to be maintained by the Consultant pursuant to the
Agreement, as may have been amended from time to time, shall include coverage
for the amended term, as described above.
7) The individuals executing this Amendment and the instruments referenced in it on
behalf of Consultant each represent and warrant that they have the legal power,
right and actual authority to bind Consultant to the terms and conditions of this
Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be
executed as of the date and year first above written.
CITY OF DUBLIN
Dated:
ATTEST:
By:
Caroline Soto, City Clerk
CHANDLER ASSET MANAGEMENT
Dated: a? apt By:
By:
Christopher L. Foss, City Manager
Nicole Dragoo, C