HomeMy WebLinkAboutC-2275CITY OF ARCADIA
INVESTMENT ADVISOR SERVICES AGREEMENT
This Agreement is made and entered this 8 °i day of March, 2007, by and between the CITY OF
ARCADIA (the "CITY "), a municipal corporation organized under the laws of the State of California,
and MBIA MUNICIPAL INVESTORS SERVICE CORPORATION, (the "MBIA "), incorporated under
the laws of the State of Delaware.
RECITALS
WHEREAS, CITY is authorized by Section 53060 of the California Government Code to contract
with and employ persons for the furnishing of special services and advice in financial, economic,
accounting, engineering, legal or administrative matters, if such persons are specially trained and
experienced and competent to perform the special services required by CITY in this Agreement; and
WHEREAS, MBIA is an investment advisor registered under the Investment Advisers Act of
1940, as amended, and is licensed in the State of California, and is specially trained and experienced and
competent to perform the special services required by CITY;
NOW THEREFORE, the parties agree as follows:
1.0 SCOPE OF WORK. Services to be provided by MBIA:
1.1 MBIA will provide discretionary investment advisory services for the financial assets
which are described on Exhibit "A" ( "Accounts "). The scope of investment advisory
services shall be as set forth on the attached Exhibit "B" ( "Services ") and shall be
conducted in accordance with the initial investment policy of City which is attached
hereto as Exhibit "C" ( "Investment Policv"). The Investment Policy may be revised at
any time by City upon five (5) business days notice to MBIA. All Services shall be
conducted in accordance with the Investment Policy and the requirements and limitations
with respect to the investment of public funds which are contained in the Government
Code of the State of California.
1.2 To the extent that MBIA requests CITY's execution of any ancillary form or application
in connection with the services to be provided pursuant to this Agreement, this
Agreement shall at all times remain the master agreement between the parties and in the
event of any conflict, inconsistency or ambiguity created by such ancillary documents,
the terms of this Agreement shall prevail.
1.3 MBIA shall furnish, at MBIA'S own expense, all labor, materials, equipment, supplies,
and other items necessary to complete the services under this Agreement. MBIA shall
perform all services in accordance with the Investment Policy and current and generally
accepted principles and practices ofMBIA'S profession.
2.0 TERM. The term of this Agreement shall commence on the deposit of CITY funds with MBIA
and continue until terminated in accordance with this Section.
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2.1 This Agreement may be terminated by the CITY at any time with or without cause by
giving written notice to the MBIA no less than thirty (30) days prior to the requested
termination date. Fees shall be prorated to the date of termination.
2.2 This Agreement may be terminated by MBIA at any time with or without cause by giving
written notice to the CITY no less than sixty (60) business days prior to the requested
termination date. In such event, MBIA shall cooperate with CITY to provide for the
smooth transition of CITY funds as directed by the CITY.
3.0 COMPENSATION, EXPENSES AND INVOICING.
3.1 CITY shall pay MBIA for the Services in accordance with the fee schedule attached
hereto as Exhibit "D ", as the same may be amended from time to time by mutual
agreement of CITY and MBIA ( "Fee Schedule ").
3.2 MBIA shall not be entitled to reimbursement of any costs or expenses except as set forth
on the Fee Schedule,
4.0 INDEMNIFICATION. MBIA and its successors or assigns agree to indemnify, defend and hold
harmless the CITY and its elected officials, officers, employees and agents from and against any
and all liabilities, costs, penalties, fines, forfeitures, demands, claims, causes of action, suits, and
costs and expenses related thereto (including reasonable attorney's fees) which any or all of them
may thereafter suffer, incur, be responsible for or pay out as a result of or arising from: (a) the
negligent acts, errors, or omissions of MBIA or MBIA'S sub - contractors, agents or employees;
(b) any violations of federal, state, or local laws, rules and regulations; or (d) MBIA'S breach of
its obligations under this Agreement.
The rights and obligations created by this indemnification provision shall survive termination or
expiration of this Agreement.
5.0 INSURANCE. MBIA agrees to maintain, during the performance of the services covered by this
Agreement, and for period of not less than one year following the expiration of this Agreement, at
its sole expense, the following insurance coverage with limits of not less than those designated
below:
(a) Workers' Compensation: Statutory Form.
(b) Employers' Liability: $1,000,000 per occurrence; and
(c) Professional Liability Insurance: $1,000,000 per occurrence and $5,000,000 in the
aggregate.
The foregoing insurance coverages shall be primary and non - contributing with respect to any
other insurance which may be maintained by the CITY.
5.1 The CITY does not represent or warrant that the types or limits of insurance adequately
protect MBIA'S interest or sufficiently cover MBIA'S liability. Failure by MBIA to
maintain the insurance coverages specified herein shall be considered a material breach
of this Agreement.
5.2 Prior to commencing work, MBIA will furnish CITY with properly endorsed certificates of
insurance acceptable to CITY.
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5.3 No payments will be made to MBIA until current and complete certificate(s) of insurance
are on file with the Administrative Services Department of CITY.
6.0 INDEPENDENT CONTRACTOR. MBIA, in the performance of this AGREEMENT, shall be
and act as an independent contractor. MBIA understands and agrees that MBIA'S employees
shall not be considered officers, employees or agents of CITY, and are not entitled to benefits of
any kind or nature normally provided employees of CITY. MBIA assumes the full responsibility
for MBIA'S acts or liabilities including those of MBIA'S employees or agents as they relate to
the services performed under this Agreement. MBIA shall assume full responsibility for payment
of all federal, state, and local taxes or contributions, including unemployment insurance, social
security, and income taxes, with respect to MBIA'S employees. The CITY will not withhold
taxes for MBIA or MBIA'S employees or independent sub - contractors. MBIA agrees to
indemnify, defend and hold CITY harmless from and against any and all liability arising from any
failure of MBIA to pay or withhold any applicable tax when due.
7.0 KEY PERSONNEL. MBIA represents that it shall use its best efforts to maintain continuity in
the individuals who are assigned to manage the Accounts. CITY shall have the right without
cause to request that an individual be removed from CITY's Accounts if CITY is unsatisfied with
such individual's performance.
8.0 CONFLICT OF INTEREST. MBIA shall not hire any officer or employee of the CITY to
perform any service covered by this Agreement. MBIA affirms that to the best of MBIA'S
knowledge there exists no actual or potential conflict between MBIA's business or financial
interests and the services provided under this Agreement, and in the event of change in either
private interests or service under this Agreement, any question regarding possible conflict of
interest which may rise as a result of such change will be raised with CITY. MBIA shall not be
in a reporting relationship to a CITY employee who has any affiliation with MBIA, whether
financially or by reason of family relationships.
9.0 ORIGINALITY OF SERVICES. MBIA agrees that it has the right to all software,
technologies, formulae, procedures, processes, methods, writings and ideas used in the
performance of this Agreement or in materials prepared for, written for, or submitted to CITY,
and that none of the foregoing shall infringe upon the intellectual property rights of any third
party.
10.0 COMPLIANCE WITH APPLICABLE LAWS. MBIA agrees to comply with all federal, state,
and local laws, rules, regulations, and ordinances that are now or may in the future become
applicable to MBIA, MBIA's business, equipment, and personnel engaged in operations covered
by this Ag=reement or accruing out of the performance of such operations.
10.1 MBIA and all of MBIA'S employees and agents shall secure and maintain in full force
such permits and licenses as are required by law in connection with performing the
Services under this Agreement.
11.0 ACCESS TO RECORDS AND CONFIDENTIALITY.
11.1 CITY shall have access to and the right to examine any pertinent books, documents,
papers, and records of MBIA involving transactions and work related to this Agreement
until the expiration of five years after final payment hereunder. MBIA shall retain such
records for a period of five years from the date of final payment.
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11.2 MBIA shall keep confidential all information regarding the performance of the services
on behalf of CITY (except as necessary to comply with applicable laws and regulations,
including regulatory examinations applicable to MBIA), as well as any information
provided by CITY and marked "Confidential Information," or any oral information
conveyed to MBIA by CITY and followed by a written communication within thirty (30)
days that said information shall be considered Confidential Information. This non-
disclosure provision shall not apply to any of the following: (i) information which the
MBIA can demonstrate by written records was known to MBIA prior to the effective date
of this Agreement; (ii) is currently in, or in the future enters, the public domain other than
through a breach of this Agreement or through other acts or omissions of MBIA; or (iii)
is obtained lawfully from a third party.
12.0 SERVICES TO OTHER CLIENTS. It is understood that MBIA performs investment advisory
services for other clients. CITY agrees that MBIA may give advice and take action with respect
to any of its other clients which may differ from advice given, or the timing, or nature of action
taken, with respect to CITY's Account.
13.0 REPRESENTAIONS BY CITY. CITY represents that the terms of this Agreement do not
violate any obligation by which CITY is bound, whether arising by contract, operation of law, or
otherwise, and that this Agreement has been duly authorized by appropriate action and is binding
upon CITY in accordance with its terms.
14.0 DISPUTES. All claims, disputes, and other matters in question between the parties arising out of
or relating to this Agreement or the breach thereof shall be addressed in the following manner.
(a) The parties shall enter into good faith negotiations to reach an equitable settlement.
(b) If a good faith settlement cannot be reached, the parties may agree to select a method of
dispute resolution other than litigation, such as arbitration, mediation, mini - trial, or
other method of alternative dispute resolution. In the event that the parties are unable
to agree on a method of dispute resolution other than litigation, suit may be brought in
the appropriate federal or state court located in the County of Los Angeles and the
parties hereby submit to the jurisdiction of such court.
(c) Should it be necessary for either parry to initiate legal proceedings to resolve disputes
arising out of or relating to this Agreement, the prevailing party shall be entitled to
receive from the other party all costs and expenses, including reasonable attorney's
fees, incurred in such proceedings.
(d) Notwithstanding the fact that a dispute, controversy or question shall have arisen in
the interpretation of any provision of this Agreement, the performance of any work,
the delivery of any material, the payment of any moneys to MBIA, or otherwise,
MBIA agrees that it will not directly or indirectly stop or delay the work directed by
CITY, or any part thereof, or stop or delay the delivery of the Services required to be
furnished hereunder, pending the determination of such dispute or controversy,
regardless of whether such dispute, controversy, or question is or may be subject to
litigation or other form of dispute resolution.
15.0 GOVERNING LAW. The terms and conditions of this Agreement shall be governed by the laws
of the State of California with venue in the County of Los Angeles, California.
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16.0 ASSIGNMENT AND APPROVAL TO SUBCONTRACT. This Agreement is for the
exclusive services of MBIA. The obligations of MBIA pursuant to this Agreement shall not be
assigned or subcontracted to another entity or individual by MBIA without the express written
approval of CITY.
17.0 NON - WAIVER. The failure of CITY or MBIA to seek redress for violation of, or to insist upon, the
strict performance of any term or condition of this Agreement shall not be deemed a waiver by that
party of such term or condition, or prevent a subsequent similar act from again constituting a violation of
such term or condition.
18.0 NO TIHRD -PARTY RIGHTS. Nothing in this Agreement is intended to make any person or entity
who is not signatory to the Agreement a third -party beneficiary of any right created by this Agreement or
by operation of law.
19.0 SEVERABILITY. If any term, condition, or provision of this Agreement is held by a court of
competent jurisdiction to be invalid, void, or unenforceable, the remaining provisions will
nevertheless continue in full force and effect, and shall not be affected, impaired, or invalidated in
any way.
20.0 COMMUNICATIONS. CITY has authorized the individuals set forth in Exhibit "E" to provide
MBIA with instructions. Instructions with respect to securities transactions may be given by
CITY to MBIA orally, by wire or electronically and, if provided orally, must be confirmed in
writing as soon as practicable. Notices required to be given under this Agreement shall be
deemed given when made in accordance with the terms of Section 23.
21.0 DISCLOSURE STATEMENT. As required by Rule 204 -3 under the Investment Advisers Act
of 1940, CITY acknowledges receipt of MBIA'S Disclosure Statement prior to the date shown
below of CITY'S execution of this Agreement. If CITY shall have received MBIA'S Disclosure
Statement less than 48 hours prior to the date of execution of this Agreement, CITY shall have
the option to terminate this Agreement without penalty within five business days after the date of
execution; provided, however, that if prior to such termination MBIA has taken any investment
action for the Account which is consistent with the Investment Policy, the market risk of that
investment action shall be at the CITY'S risk.
22.0 ENTIRE AGREEMENT. This Agreement, and any attachments or exhibits incorporated by
reference, constitute the entire and integrated agreement between CITY and MBIA and
supersedes all prior negotiations, representations or agreements, either written or oral. This
Agreement may be modified only by a writing signed by both CITY and MBIA.
22.1 This Agreement and any attachments or exhibits incorporated by reference are
complementary and what is required by one shall be as binding as if required by all. In
the case of conflict or inconsistency, this Agreement shall control over any such
attachments or exhibits.
23.0 NOTICE. Any notice or demand may be served upon one party by the other (a) by delivering it,
in writing, to the other's representative at the address as set forth on the signature page below, or
(b) by sending it via a reputable overnight courier service (such as Federal Express), or (c) by
sending a facsimile of it to the other's representative at the facsimile number set forth below.
Notice shall be effective upon receipt.
(signature page follows)
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In witness whereof, CITY and MBIA have executed this Agreement on the date first written above,
CITY:
City of Arcadia
UR
WN8 t0#1
William R. Kelly
City Manager
240 West Huntington Drive
Arcadia, California 91006
Phone (626) 574 -5425
Approved as to form:
City Attorney
By: Qti II 4"_ a"—
Stephen Dietsch, Partner
Best Best & Krieger LLP
MBIA
MBIA Municipal Investors Service Corporation,
a Delaware corporation
By:
Name: Mary Donovan, CFA
Title: Vice President
Address:
1700 Broadway, Suite 2050
Denver, Colorado 80290
Phone (303) 864 -7410
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Concur:
Administrative Services Director
By: JL " '=�,4° —
Tracey L. ause
City of Arcadia
0
EXHIBIT "A"
DESCRIPTION OF ACCOUNTS
CUSIP
Asset Name /Rate /Maturity
3128X4JX0
FHLMC NTS
4.125% 4/02107
31339Y5E8
FHLB
2.280% 4/16/07
3133X5NM6
FHLB BDS
2.620% 4/23/07
3128X06P9
FHLMC SER MTN 3.250% 4/30/07
3133MYVA2
FHLB
3.000% 6/05/07
31339XTW4
FHLB BDS
2.500% 7/09/07
31331QV61
FFCB BDS
2.625% 9/24/07
3136F5MQ1
FNMA NTS
2.790% 10/12/07
3133MTQB7
FHLB BDS
3.500% 11/15/07
3133X4KB6
FHLB BDS
3.375% 12/24/07
3133XEFR5
FHLB BKS BDS
5.000% 1128/08
3133XEQ69
FHLB BDS
5.010% 2/13/08
3133XEJ83
FHLB BDS
5.000% 2/15/08
31331QV79
FFCB
2.800% 3/25108
3133XFC53
FHLB BDS -2
5.250% 4/25/08
3128X1 FB8
FHLMC
3.100% 5/27108
3133MYVN4
FHLB
3.300% 5128/08
31339X6Q2
FHLB
3.050% 6/12/08
31339X6Q2
FHLB
3.050% 6/12/08
31339XDU5
FHLB BDS
3.170% 6119108
3128X1KS5
FHLMC MTN3
3.070% 6/26/08
3136F7RA7
FNMA NTS
5.000% 7/18/08
31339YWB4
FHLB
3.505% 8114/08
31359M2G7
FNMA NTS
5.250% 11/20/08
31331XPH9
FFCB BDS
5.250% 2/13/09
3136F5PF2
FNMA NTS
3.750% 4/16/09
3128X5C30
FHLMC NTS
5.300% 8/13/09
3128X5C30
FHLMC NTS
5.300% 8/13/09
3128X4K26
FHLMC NTS
5.500% 9/01/09
31331VML7
FFCB BDS
5.400% 7/06/10
3136F7RH2
FNMA BDS
5.000% 2/01/11
3128X5JJ8
FHLMC NTS
5.450% 9/02/11
31359MY49
FNMA NTS
5.375% 10/11/11
3128X5NT1
FHLMC NTS
5.350% 11/14/11
Total
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1*
Shares /Units
2,000,000.00
2,000,000.00
2,000,000.00
1,000,000.00
2,000,000.00
2,000,000.00
1,000,000.00
2,000,000.00
2,000,000.00
1,000,000.00
2,000,000.00
1,000,000.00
2,000,000.00
1,000, 000.00
2,000,000.00
1,000,000.00
2,000,000.00
2,000,000.00
2,000,000.00
2,000,000.00
2,000,000.00
1,000,000.00
1,000,000.00
1,000,000.00
2,000,000.00
1,000,000.00
1,000, 000.00
1,000, 000.00
1,000, 000.00
1,000, 000.00
1,000,000.00
1,000,000.00
1,000,000.00
1,000,000.00
50,000,000.00
0
EXHIBIT "B"
0
SCOPE OF INVESTMENT ADVISORY SERVICES
MBIA shall be responsible for providing the following services to the CITY:
MBIA shall develop an investment strategy consistent with the written investment objectives, risk
tolerance, ratios, restrictions and limitations for the Accounts as set forth in the Investment
Policy. MBIA may recommend changes to the Investment Policy in its professional judgment,
provided, however, that adoption of such changes shall remain in the sole discretion and be the
sole responsibility of CITY. CITY shall have the right to revise the Investment Policy at any
time, provided that CITY shall give MBIA prompt written notice of such revisions. MBIA shall
further recommend changes to the Investment Policy from time to time as necessary to remain in
compliance with applicable federal and state law. If CITY refuses in implement a recommended
compliance change, then MBIA shall have the right to (i) refuse to execute any transactions
which are non - compliant; or (ii) give written notice to the CITY that any transactions made in
reliance on the existing Policy shall be non - compliant and MBIA shall have no liability to CITY
with respect to same.
2. MBIA shall recommend a list of brokers, dealers and issuers to be approved by CITY for
transactions involving the Accounts. MBIA shall not receive any fee or compensation in
connection with such recommendation or for transactions involving the Accounts.
3. Subject to compliance with the Investment Policy and any other written instructions of City,
MBIA shall have the authority and discretion to invest the Accounts, to buy or sell securities and
place orders for the execution of such transactions with or through approved brokers, dealers or
issuers.
4. When placing orders for the execution of transactions for the Accounts, MBIA will take into
consideration not only the available prices but also other relevant factors such as, without
limitation, execution capabilities and safekeeping arrangements. MBIA shall exercise good faith
in obtaining the best price and execution for each transaction for the Accounts.
5. Notwithstanding the authority granted to MBIA hereunder, City shall have the authority to (i)
remove or withdraw assets from the Accounts at any time; (ii) order MBIA or the custodian of the
Account to suspend trading on any Account or any particular security or class of investments; or
(iii) order MBIA to execute or halt transactions on the Accounts at any time. MBIA shall use its
reasonable best efforts to comply with the instructions of City, provided, however, that City shall
be solely responsible for any costs or losses incurred in connection with executing such
instructions and MBIA shall have no liability to City with respect to same.
6. At no time shall MBIA be the custodian of the Accounts. CITY will appoint a custodian to take and
have possession of the Accounts and advise the custodian in writing to accept instructions regarding
investment transactions from MBIA. A suggested format for this notification is shown in Exhibit
"F". CITY shall be responsible for all fees and charges of the custodian or custodians of the
Accounts.
MBIA shall:
(a) provide CITY with both pre -sales and post -sales analysis of all major account activity,
including risk analysis. Furthermore, MBIA will send CITY an inventory of the
investments of the Accounts as soon as reasonably possible after the end of each monthly
period. Copies of confirmations of transactions executed will be sent promptly to the
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custodian. MBIA does not assume responsibility for the accuracy of information
furnished by CITY or by any agent of CITY;
(b) prepare quarterly and annual investment performance reports. All performance reports
shall include a statement by MBIA that all investments of CITY funds in the period
covered by the report were in compliance with the Investment Policy and with applicable
law;
(c) Report, via telephone, and, as needed, at meetings of the CITY's City Council or
investment committee;
(d) Account for, and report investment activity showing additions, fees, deductions, realized
and unrealized gains and total balances, including the performance of the investments in
relationship to any relevant benchmarks.
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EXHIBIT "C"
CITY OF ARCADIA
STATEMENT OF INVESTMENT POLICY
FY 2006 -2007
PURPOSE
This statement is intended to provide guidelines for the prudent investment of the City's Funds
and outline the policies for maximizing the efficiency of the City's cash management system.
The ultimate goal is to enhance the economic status of the City while protecting its funds.
OBJECTIVE
The City's cash management system is designed to accurately monitor and forecast expenditures
and revenues, thus enabling the City to invest funds to the fullest extent possible. The City
Treasurer attempts to obtain the highest yield obtainable as long as investments meet the criteria
established for safety and liquidity.
POLICY
A. The City Treasurer operates the City's cash investment under the prudent man rule.*
This affords the City a broad spectrum of investment opportunities as long as the
investment is deemed prudent and is allowable under current legislation of the State of
California and other imposed legal restrictions.
B. City investments may be made in, but not limited to, the following instruments:
- Certificates of Deposit purchased from banks or savings and loan institutions.
- Banker Acceptance
- Treasury Bill and Notes
- Government Agency Securities (e.g. Federal National Mortgage Association,
Government National Mortgage Association, Federal Farm Credits)
- Commercial Paper
- Repurchase Agreements
- State Local Agency Investment Funds
- Passbook Savings Account
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*The prudent man rule states, in essence, that " in investing...... property for the benefit of
another, a trustee shall exercise the judgment and care, under the circumstances then prevailing,
which men of prudence, discretion and intelligence exercise in the management of their own
affairs.
C. Criteria for selecting investments and the order of priority are:
1. Safe . The safety and risk associated with an investment refers to the potential
loss of principal, interest or a combination of these amounts. The City Treasurer
only places City funds in those investments that are considered very safe.
2. Liquidity. This refers to the ability to "cash in" at any moment in time with a
minimal chance of losing some portion of principal or interest. Liquidity is an
important investment quality especially when the need for unexpected funds
occurs occasionally.
3. Yield. Yield is the potential dollar earnings an investment can provide, and
sometimes is described as the rate of return.
D. Safekeeping
Securities purchased from broker /dealers shall be held in a third party safekeeping by the
trust department of the bank or other designated third party trustee of the local agency,
and shall be under the agency's name and control whenever possible.
REPORTING
The Treasurer shall render a monthly report to the Administrative Services Director, the City
Manager and the City Council within two weeks following the end of the month covered by the
report. The report shall provide the following information:
A. Breakdown of portfolio by type of investment, showing dollar amount and percent of
portfolio invested in each.
B. Weighted average maturity and monthly weighted yield of the portfolio.
C. Detailed listing of current holdings.
1. Shows book values, market value (with source of valuation) and par value as of
the date of the report.
2. Shows coupon or discount rate, yield to maturity and total return.
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3. Shows type, issuer, seller.
4. Shows purchase date and maturity date.
D. Comparison of projected receipts, and expenditures for the next month and next six
months demonstrating the adequacy of projected revenues and proceeds from maturing
investments to meet expected expenditures.
E. Treasurer's compliance statement.
QUALIFICATIONS OF FINANCIAL INSTITUTIONS WHICH SELL THE CITY
INVESTMENTS
The Treasurer will obtain information from qualified financial institutions to determine if the
institution makes markets in securities appropriate to the City's needs and can assign qualified
sales representatives. The Treasurer will recommend to the Administrative Services Director
and City Manager three to six institutions for inclusion on the City's approved list. Investment
accounts with all financial institutions will be standard non - discretionary accounts and may not
be margin accounts.
QUALIFICATIONS FOR SAFEKEEPING INSTITUTION
The City will safekeep investments only with institutions that demonstrate financial soundness
and are ranked AA or Aa by Standard and Poor's and Moody's. In addition, they shall be a
trust company or state or national bank located within this state or with the Federal Reserve
Bank or with any state or national bank located in any city designated as a reserve city by the
Board of Governors of the Federal Reserve System.
INVESTMENT CONTROLS
The Treasurer, (with review and direction by the Administrative Services Director) will
implement and maintain a system of internal investment controls and segregated responsibilities
of the investment function in order to assist in the prevention of fraud, theft, loss of principal,
loss of control, and inaccurate reporting.
POLICY REVIEW
This policy shall be reviewed annually by the City Council, at a public meeting to ensure it
meets the changing needs of the City, is consistent with the overall objectives of preservation of
principal, liquidity, and return and to ensure that the City's ongoing investment practices and
procedures are consistent with the Policy.
DELEGATION OF AUTHORITY
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As assigned by the Director of Administrative Services, the Financial Services
Manager /Treasurer is responsible for the investment of the City's idle cash subject to review and
approval by the Administrative Services Director and City Manager. In his /her absence, or
incapacity, the Administrative Services Director will assume the duties and responsibility, for
investment of City funds. In his /her absence, or incapacity, the City Manager will assume the
duties and responsibility, for investment of funds.
The City Council's primary responsibilities over the investment function includes establishing
investment policies, annually reviewing such policies, reviewing monthly investment reports
and authorizing any deviations from the City's Investment Policy.
PROHIBITED INVESTMENTS
State law not withstanding prohibited investments shall include zero coupon bonds, inverse
floaters, collateralized mortgage obligations, interest only strips, reverse repurchase agreements,
futures and options, and derivative securities.
INVESTMENT PORTFOLIO GUIDELINES:
A. An average amount of two week's warrants and one payroll to be maintained in
immediately available investments, such as the State Treasurer's Local Agency
Investment Fund or a similar liquid instrument. This may include commercial paper or
repurchase agreements acquired through the City's bank.
Weekly analysis of cash flow will serve as a basis for determining the maturity date of
investments.
B. Investment Transaction. Every investment transaction must be authorized, documented
and reviewed by the City Treasurer.
C. Pooled Cash. Whenever practical, the City's cash will be consolidated into one bank
account and invested on a pooled concept basis. Interest earnings will be allocated
according to fund cash and investment balances.
D. Competitive Bids. Purchase and sale of securities should be made on the basis of
competitive offers and bids when practical.
E. Liquidity. The marketability (salability) of a security should be considered at the time of
purchase, as the security may have to be sold at a later date to meet unanticipated cash
demand.
F. Long Term Maturities. Longer term maturities having a remaining term to maturity of
four (4) to five (5) years will not represent a significant percentage of the total portfolio
(60 %), as the principal risk involved can outweigh the potential for higher earnings.
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RVBUS \GPRIC E \72711 1.3
G. Diversification. The portfolio should consist of a mix of various types of securities,
issuers and maturities.
H. State Investment Limitations. Security purchases and holdings shall be maintained
within statutory limits imposed by the State of California Government Code.
Current limits based on Section 53601 are: Bankers Acceptance — 40 %; Commercial Paper —
25 %; and Negotiable Certificate of Deposit — 30 %; Repurchase Agreement — on any investment
authorized in this policy, with the term of one year or less.; Medium Term Corporate Note —
30 %; Shares of Beneficial Interest — 20% Mortgage Securities — 20 %.
Arcadia Guidelines by Type of Investment.
In addition to the general investment limitations imposed by the State, the following more
specific, and in some cases more conservative, guidelines by type of investment will be
followed:
Certificate of Deposit. Cash will be invested only in FDIC or FSLIC insured
certificates, with institutions having a branch located within the City's boundaries.
The City will not invest in any institution less than five years old.
The institution must maintain a net worth asset ratio of at least 3 %, and a positive
earning record.
2. Bankers Acceptances. A Banker Acceptance is a time draft which has been
drawn on and accepted by a bank. It is considered more secure than a Certificate
of Deposit but less secure than a Government Agency instrument. The City will
only invest through the 15 largest banks in the United States or the 100 largest
banks in the world (in terms of assets). The maximum investment with any one
institution will not exceed $3 million.
Treasury Bills, Notes and Bonds. The City will require safekeeping
documentation of the treasury instrument in an acceptable safekeeping account in
the City's name.
4. Government Agency Securities. The City will require delivery of these securities
to an acceptable safekeeping account in the City's name. Examples of these
securities include Government National Mortgage Association, Federal National
Mortgage Association, Federal Land Bank and Federal Farm Credit Banks.
Commercial Paver. Commercial paper is an unsecured loan made by the City to
an institution. The City will require safekeeping documentation of the security in
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R V B U S \GPRICB \727111.3
9
an acceptable safekeeping account in the City's name. Commercial paper will be
used solely as a short-tern investment not to exceed 15 days. It is anticipated that
this type of investment will be used only a few times during the year when other
short-term investments are not available. A rating of Standard and Poors A -1 or
Moodys P -1 is required. The City will only invest in the largest 15 banks (in
terms of total assets) in the United States. The investment in any one institution
will not exceed. $1,000,000.
6. Repurchase Agreements ( Repos). Repurchase Agreements are loans made by the
City to financial institutions secured by collateral posted by the borrowing
institution. The City will require physical delivery of the securities backing the
repo or safekeeping documentation in an acceptable safekeeping account in the
City's name, depending on the type of security. Repos will be used solely as a
short-term investment not to exceed 30 days. The institution from which the City
purchases a repo must transfer on an ongoing basis sufficient securities to
compensate for changing market conditions and insure that adequate collateral is
maintained in the City's safekeeping account to cover the principal invested.
Repos will only be purchased through the 15 largest banks in the United States.
The investment in any one institution will not exceed $1,000,000.
7. State Local Agency Investment Fund. LAIF is an investment fund established by
the State of California to assist smaller cities in increasing their investment
earnings. Cities deposit funds with the State Treasurer's office which are then
pooled with the State's fund and invested. The investment with LAIF may not, by
State regulation, exceed $40 million per agency.
8. Passbook Savings Accounts. Saving account shall be maintained for accounts
under $100,000 that are received too late in the day to invest in other instruments.
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RVBUSVGPRICEV727111.3
0
EXHIBIT "D"
FEESCHEDULE
0
The annual fee for providing investment advisory services for the City of Arcadia is as follows:
Assets Annual Fee
Up to and including the first $20 million 10 basis points (.10 %)
Amounts over $20 million 7 basis points (.07 %)
The fees for investment advisory services are based on the average value (cost basis) of assets under
management (excluding balances in local government investment pools). A pro rata portion of the annual fee
(1/12) is billed each month based on the average asset value of the portfolio for the month. The fee shall be
payable upon receipt of billing from the Adviser.
Monthly fees are based on the schedule outlined above, but at no time shall the monthly fee be less than
$1,000. (This minimum monthly fee will not apply to accounts that are entirely comprised of proceeds from
the sale of bonds.)
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aveus\a1'a1Cev271 1 i.3
EXHIBIT "E"
AUTHORIZED REPRESENTATIVES OF CITY
1. William R. Kelly, City Manager
2. Don Penman, Assistant City Manager /Development Services Director
3. Tracey L. Hause, Administrative Services Director
4. Shannon Huang, Financial Services Manager /City Treasurer
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RVBUSVCPRICBA7271 11.3