Report Prepared by: Kuljit Singh, Deputy Finance Officer
Title
SUBJECT: Approval of an Investment Management Agreement with Chandler Asset Management Inc. to Provide Investment Portfolio Management Services for Three Years with an Additional Two One (1) Year Extensions
REPORT IN BRIEF
Considers approval of an Investment Management Agreement with Chandler Asset Management Inc. to provide investment portfolio management services for three years with an additional two one-year extensions.
RECOMMENDATION
City Council - Adopt a motion:
A. Approving an Investment Management Agreement with Chandler Asset Management Inc. for Investment Portfolio Management Services for three years with an additional two one-year extensions; and,
B. Authorizing the City Manager to execute all necessary documents.
Body
ALTERNATIVES
1. Adopt the motion as recommended by staff; or
2. Modify the action (specify in motion); or
3. Deny the action.
AUTHORITY
Section 1118 of Article XI of the Charter of the City of Merced.
CITY COUNCIL PRIORITIES
As provided for in the 2024-25 Adopted Budget.
DISCUSSION
The Finance Officer is designated as the city’s investment officer and is responsible for all investment decisions. The Finance Officer also has the responsibility of developing and maintaining administrative procedures for the operation of the investment program to be consistent with the City’s investment policy.
The City’s investment policy objectives are the safety of principal, maintaining a sufficient liquidity level to meet operating needs and to secure an average rate of return equal to or greater than three-month U.S. Treasury bills or the average rate on Federal funds.
On March 5, 2018, after an extensive request for proposals process, the City Council awarded Chandler Asset Management Inc. a three (3) year agreement with two (2) one (1) year options for renewal to provide investment portfolio management services. On March 5, 2021, the City of Merced and Chandler agreed to a first amendment to extend the agreement for additional two year to March 4, 2023. Additionally, on March 05, 2023, City Council approved a second amendment to the agreement for additional two years bringing the contract expiration date to March 4, 2025. Since the inception of the original agreement in 2018, staff has maintained a great working relationship with Chandler and the City has seen substantial increases initially and steady investment earnings in addition to meeting local and state compliance.
Chandler Asset Management Inc. is an SEC registered investment advisor who focus on fixed income portfolios for public agencies and is based out of San Diego, California with several offices and representatives located in Novato, California to service the City’s needs. They serve over hundreds of local and state governments with over $36.2 billion in assets under their management.
This new agreement with Chandler Asset Management Inc. is for three years with an additional two one-year extensions. The cost of the services per the proposed fee schedule will be determined by the value of the assets under management. Based on the significance of the business relationship, Chandler has reduced their fees and restructured the fee schedule from the original agreement which will lower the cost for the City. Based on City’s current investment portfolio and additional investments, the estimated annual cost for fiscal year 2025-26 is $200,000. The actual fees will vary depending upon the City’s holdings and the portfolio investment earnings.
The investment earnings on the portfolio (pooled investments) will be allocated to all funds.
IMPACT ON CITY RESOURCES
There are sufficient funds within the Fiscal Year 2024-25 budget to cover the cost of this agreement. Funding for future years will be included in the annual budget process.
ATTACHMENTS
1. Proposed Agreement
2. Second Amendment to Agreement
3. First Amendment to Agreement
4. Original Agreement