HomeMy WebLinkAboutItem 12d - Investment Advisory Services
DATE: August 17, 2021
TO: Honorable Mayor and City Council
FROM: Hue C. Quach, Administrative Services Director
By: Henry Chen, Financial Services Manager/City Treasurer
SUBJECT: PROFESSIONAL SERVICES AGREEMENT WITH PFM ASSET
MANAGEMENT LLC FOR INVESTMENT ADVISORY SERVICES IN AN
AMOUNT NOT TO EXCEED $45,000
Recommendation: Approve
SUMMARY
Staff issued a request for proposal for investment advisory services in July 2021 and
received 2 responses. After an extensive review of both proposals, it is recommended
the City contract with PFM Asset Management LLC for three years, with the option of
renewing the contract for two (2) additional one-year extensions. The annual cost for
management of a $50 million investment portfolio is estimated to be up to $45,000
annually.
DISCUSSION
The City is currently under contract with PFM Asset Management LLC (“PFMAM”) to
manage up to $50 million of the City’s investment portfolio. PFMAM has been the
investment advisor since 2016. Although staff is satisfied with their services, it is
prudent to solicit proposals from other firms providing similar service to ensure that the
City receives the best services at the most competitive costs. Thus, a request for
proposal was sent to qualified firms and published on the California Society of Municipal
Finance Officers Association’s and City’s websites. The scope of investment advisory
services includes:
• Review of the City’s current investment program and provide recommendations
for its Investment Policy, best practices to liquidity management, means to
achieving the City’s investment objectives, and the selection of an appropriate
performance benchmark measurement, based on the City’s investment policy.
Professional Services Agreement for
Investment Advisory Services
August 17, 2021
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• Manage, on a daily basis, the City’s investment portfolio(s) in accordance with
the parameters of the California Government Code and the City Investment
Policy.
• Place all orders for the purchase and sale of securities, communicate settlement
information to City staff and coordinate security settlement with the City’s
custodian. The investment advisor WILL NOT provide custodial services or
security safekeeping.
• Provide the City with investment reports that shall include, but not be limited to,
the following:
o Monthly statements with all the information required by the California
Government Code and Governmental Accounting Standards Board.
These reports must include detailed portfolio holdings including accrued
interest, amortized cost, market values, security ratings transaction
details, principal and interest payments, yield to costs, and portfolio
summary statistics.
o Provide quarterly investment reports including a description of market
conditions, investment strategies employed, performance, and suggested
changes to investment strategy. The performance numbers shall be
presented as required by Global Investment Performance Standards.
• On an annual basis, review the City’s Investment Policy and recommend
changes in compliance with governing California Government Code as well as
incorporating best practices that are followed by local, state, and national
organizations.
• Serve as investment advisor to City staff for strategic information, analysis, and
training relating to fixed-income investments.
Investment Advisory Proposals
The City received proposals from PFMAM and Chandler Asset Management. Both
firms are eminently qualified and have extensive experience servicing local municipal
governments in California.
After a thorough review of the proposals, PFMAM was selected as the most qualified
firm due to their experience working with cities in California and their excellent
investment returns over the past 10 years. Below is a summary of the return from both
firms compared to the benchmark US Treasury Indexes.
Professional Services Agreement for
Investment Advisory Services
August 17, 2021
Page 3 of 4
Both firms beat the index over each timeframe by a meaningful amount but PFMAM’s
performance was slightly better.
Staff has had an opportunity to work with PFMAM the last five years and have been
impressed with their investment results, diligence, and customer service. The proactive
investment approach adopted by PFMAM has provided the City with excellent
investment returns the past several years during a period of sustained low interest rate
environment. This has especially been the case during the COVID-19 pandemic, which
caused increased volatility on the fixed income market.
In today’s low but potentially increasing interest rate environment, fixed-income portfolio
returns are driven in part by diligent market analysis and prudent yield curve placement.
PFMAM has consistently shown their acumen in monitoring the market for opportunities
to rebalance the City’s portfolio among sectors and/or maturities that could safely add
value and enhance investment performance. PFMAM has been able to capture
incremental value without exposing the City’s portfolio to unnecessary risks.
The City was notified at the end of July that PFMAM has agreed to be acquired by U.S.
Bancorp Asset Management (“USBAM”), a subsidiary of U.S. Bancorp. PFMAM will
become a wholly owned subsidiary of USBAM but will operate as a separately
registered investment advisor and as a division of USBAM. The City will continue to be
serviced by the existing team at PFMAM and they have assured Staff that the high level
Chandler 1 Year *3 Years *5 Years *10 Years*
Limited Maturity 1.09%2.85%1.83%1.45%
ICE BAML 1-3 Year US Treasury Index 0.25%2.77%1.71%1.29%
Outperform/(Underperform)0.84%0.08%0.12%0.16%
Short Term Bonds 1.20%3.36%2.06%1.84%
ICE BAML 1-5 Year US Treasury Index -0.09%3.26%1.90%1.73%
Outperform/(Underperform)1.29%0.10%0.16%0.11%
PFM 1 Year *3 Years *5 Years *10 Years*
PFM 1-3 Year Fixed Income Composite 1.41%2.98%1.96%1.50%
ICE BAML 1-3 Year US Treasury Index 0.25%2.77%1.71%1.29%
Outperform/(Underperform)1.16%0.21%0.25%0.21%
PFM 1-5 Year Fixed Income Composite 1.35%3.52%2.18%1.99%
ICE BAML 1-5 Year US Treasury Index -0.09%3.26%1.90%1.73%
Outperform/(Underperform)1.44%0.26%0.28%0.26%
*Performance results are as of March 31, 2021
Professional Services Agreement for
Investment Advisory Services
August 17, 2021
Page 4 of 4
of service that we have received will continue under USBAM. The transaction is
expected to close by the end of the year.
Investment Advisory Fees
Both firms proposed similar costs, which are as follows based on a $50 million portfolio.
ENVIRONMENTAL ANALYSIS
The proposed action does not constitute a project under the California Environmental
Quality Act (“CEQA”), and it can be seen with certainty that it will have no impact on the
environment. Thus, this matter is exempt under CEQA.
FISCAL IMPACT
PFMAM’s fees are based on the amount of assets under management. The annual
contract cost is not to exceed $45,000, which has been budgeted in Fiscal Year 2021-
22 Operating Budget.
RECOMMENDATION
It is recommended that the City Council determine that this action does not constitute a
project and is therefore, exempt under, the California Environmental Quality Act
(“CEQA”); and approve, direct, and authorize the City Manager to execute a
Professional Services Agreement with PFM Asset Management LLC for investment
advisory services in an amount not to exceed $45,000 annually for three years, with the
option of renewing the contract for two (2) additional one-year extensions.
Attachment: Proposed Professional Services Agreement
Proposer Annual Fees
PFMAM $ 45,000
Chandler $ 45,000
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CITY OF ARCADIA
PROFESSIONAL SERVICES AGREEMENT FOR
INVESTMENT ADVISORY SERVICES
1. PARTIES AND DATE.
This Agreement is made and entered into this ____ day of ___________, 2021
by and between the City of Arcadia, a charter city organized under the Constitution and
laws of the State of California with its principal place of business at 240 West
Huntington Drive, Arcadia, California 91066-6021 ("City") and PFM Asset Management
LLC, a Limited Liability Corporation with its principal place of business at 601 South
Figueroa Street, suite 4500, Los Angeles, CA 90017 ("Consultant"). City and
Consultant are sometimes individually referred to as “Party” and collectively as
“Parties.”
2. RECITALS.
2.1 Consultant.
Consultant desires to perform and assume responsibility for the provision of
certain professional services required by the City on the terms and conditions set forth
in this Agreement. Consultant represents that it is experienced in providing Investment
Advisory services to public clients, is licensed in the State of California, and is familiar
with the plans of City.
2.2 Project.
City desires to engage Consultant to render such services for the City’s
investment portfolio (“Project”) as set forth in this Agreement.
3. TERMS.
3.1 Scope of Services and Term.
3.1.1 General Scope of Services. Consultant promises and agrees to
furnish to the City all labor, materials, tools, equipment, services, and incidental and
customary work necessary to fully and adequately supply the professional Investment
Advisory services necessary for the Project ("Services"). The Services are more
particularly described in Exhibit "A" attached hereto and incorporated herein by
reference. All Services shall be subject to, and performed in accordance with, this
Agreement, the exhibits attached hereto and incorporated herein by reference, and all
applicable local, state and federal laws, rules and regulations.
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3.1.2 Term. The term of this Agreement shall be from September 1,
2021 to August 30, 2024 with the option of two one-year extensions unless earlier
terminated as provided herein. Consultant shall complete the Services within the term
of this Agreement, and shall meet any other established schedules and deadlines.
3.2 Responsibilities of Consultant.
3.2.1 Control and Payment of Subordinates; Independent Contractor.
The Services shall be performed by Consultant or under its supervision. Consultant will
determine the means, methods and details of performing the Services subject to the
requirements of this Agreement. City retains Consultant on an independent contractor
basis and not as an employee. Consultant retains the right to perform similar or
different services for others during the term of this Agreement. Any additional personnel
performing the Services under this Agreement on behalf of Consultant shall also not be
employees of City and shall at all times be under Consultant's exclusive direction and
control. Consultant shall pay all wages, salaries, and other amounts due such
personnel in connection with their performance of Services under this Agreement and
as required by law. Consultant shall be responsible for all reports and obligations
respecting such additional personnel, including, but not limited to: social security taxes,
income tax withholding, unemployment insurance, disability insurance, and workers'
compensation insurance.
3.2.2 Schedule of Services. Consultant shall perform the Services
expeditiously, within the term of this Agreement, and in accordance with the Schedule of
Services set forth in Exhibit "B" attached hereto and incorporated herein by reference.
Consultant represents that it has the professional and technical personnel required to
perform the Services in conformance with such conditions. In order to facilitate
Consultant's conformance with the Schedule, City shall respond to Consultant's
submittals in a timely manner. Upon request of City, Consultant shall provide a more
detailed schedule of anticipated performance to meet the Schedule of Services.
3.2.3 Conformance to Applicable Requirements. All work prepared by
Consultant shall be subject to the prior written approval of City.
3.2.4 Substitution of Key Personnel. Consultant has represented to City
that certain key personnel will perform and coordinate the Services under this
Agreement. Should one or more of such personnel become unavailable, Consultant
may substitute other personnel of at least equal competence upon prior written approval
of City. In the event that City and Consultant cannot agree as to the substitution of key
personnel, City shall be entitled to terminate this Agreement for cause. As discussed
below, any personnel who fail or refuse to perform the Services in a manner acceptable
to the City, or who are determined by the City to be uncooperative, incompetent, a
threat to the adequate or timely completion of the Project or a threat to the safety of
persons or property, shall be promptly removed from the Project by the Consultant at
the request of the City. The key personnel for performance of this Agreement are as
follows: Sarah Meacham, Managing Director, as the City’s Engagement Manager and
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Richard Babbe, Senior Managing Consultant, as the Day-to-Day Contact. The Portfolio
Strategy and Management team consists of Brian Raubenstine, CFA, and Bob
Cheddar, CFA.
3.2.5 City’s Representative. The City hereby designates Henry Chen,
City Treasurer, or his or her designee, to act as its representative for the performance of
this Agreement (“City’s Representative”). City’s Representative shall have the power to
act on behalf of the City for all purposes under this Contract. Consultant shall not
accept direction or orders from any person other than the City’s Representative or his or
her designee.
3.2.6 Consultant’s Representative. Consultant hereby designates Sarah
Meacham, Director, or his or her designee, to act as its representative for the
performance of this Agreement (“Consultant’s Representative”). Consultant’s
Representative shall have full authority to represent and act on behalf of the Consultant
for all purposes under this Agreement. The Consultant’s Representative shall supervise
and direct the Services, using his best skill and attention, and shall be responsible for all
means, methods, techniques, sequences and procedures and for the satisfactory
coordination of all portions of the Services under this Agreement.
3.2.7 Coordination of Services. Consultant agrees to work closely with
City staff in the performance of Services and shall be available to City's staff,
consultants and other staff at all reasonable times.
3.2.8 Standard of Care; Performance of Employees. Consultant shall
perform all Services under this Agreement in a skillful and competent manner,
consistent with the standards generally recognized as being employed by professionals
in the same discipline in the State of California. Consultant represents and maintains
that it is skilled in the professional calling necessary to perform the Services. Finally,
Consultant represents that it, its employees and subcontractors have all licenses,
permits, qualifications and approvals of whatever nature that are legally required to
perform the Services, including a City Business License, and that such licenses and
approvals shall be maintained throughout the term of this Agreement. As provided for in
the indemnification provisions of this Agreement, Consultant shall perform, at its own
cost and expense and without reimbursement from the City, any services necessary to
correct errors or omissions which are caused by the Consultant’s failure to comply with
the standard of care provided for herein. Any employee of the Consultant or its sub-
consultants who is determined by the City to be uncooperative, incompetent, a threat to
the adequate or timely completion of the Project, a threat to the safety of persons or
property, or any employee who fails or refuses to perform the Services in a manner
acceptable to the City, shall be promptly removed from the Project by the Consultant
and shall not be re-employed to perform any of the Services or to work on the Project.
3.2.9 Laws and Regulations. Consultant shall keep itself fully informed of
and in compliance with all local, state and federal laws, rules and regulations in any
manner affecting the performance of the Project or the Services, including all Cal/OSHA
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requirements, and shall give all notices required by law. Consultant shall be liable for all
violations of such laws and regulations in connection with Services. If the Consultant
performs any work knowing it to be contrary to such laws, rules and regulations and
without giving written notice to the City, Consultant shall be solely responsible for all
costs arising therefrom. Consultant shall defend, indemnify and hold City, its officials,
directors, officers, and employees free and harmless, pursuant to the indemnification
provisions of this Agreement, from any claim or liability arising out of any failure or
alleged failure to comply with such laws, rules or regulations.
3.2.9.1 Immigration Reform and Control Act. Consultant
acknowledges that Consultant, and all subcontractors hired by Consultant to perform
services under this Agreement, are aware of and understand the Immigration Reform
and Control Act ("IRCA"). Consultant is and shall remain in compliance with the IRCA
and shall ensure that any subcontractors hired by Consultant to perform services under
this Agreement are in compliance with the IRCA. In addition, Consultant agrees to
indemnify, defend and hold harmless the City, its directors, officials, officers and
employees, from any liability, damages or causes of action arising out of or relating to
any claims that Consultant's employees, or the employees of any subcontractor hired by
Consultant, are not authorized to work in the United States for Consultant or its
subcontractor and/or any other claims based upon alleged IRCA violations committed
by Consultant or Consultant's subcontractor(s).
3.2.10 Insurance.
3.2.10.1 Time for Compliance. Consultant shall not
commence Work under this Agreement until it has provided evidence satisfactory to the
City that it has secured all insurance required under this section. In addition, Consultant
shall not allow any subcontractor to commence work on any subcontract until it has
provided evidence satisfactory to the City that the subcontractor has secured all
insurance required under this section; provided, however, that in lieu thereof, the
Consultant may provide evidence to the City that all subcontractors are additional
insureds under the Consultant’s policies of insurance.
3.2.10.2 Minimum Requirements. Consultant shall, at its
expense, procure and maintain for the duration of the Agreement insurance against
claims for injuries to persons or damages to property which may arise from or in
connection with the performance of the Agreement by the Consultant, its agents,
representatives, employees, subcontractors and volunteers. Consultant shall also
name and obtain insurer’s consent to naming City, its directors, officials, officers, and
employees as an additional insured with proof of certificate of insurance that they are an
additional insured. Such insurance shall meet at least the following minimum levels of
coverage:
(A) Minimum Scope of Insurance. Coverage shall be
when commercially available (occurrence based) at least as broad as the latest version
of the following: (1) General Liability: Insurance Services Office Commercial General
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Liability coverage for premises and operations, contractual liability, personal injury,
bodily injury, independent contractors, broadform property damage, explosion, collapse,
and underground, products and completed operations; (2) Automobile Liability:
Insurance Services Office Business Auto coverage for any auto owned, leased, hired,
and borrowed by Consultant or for which Consultant is responsible; and (3) Workers’
Compensation and Employer’s Liability: Workers’ Compensation insurance as required
by the State of California and Employer’s Liability Insurance.
The City, its directors, officials, officers, and employees shall be listed as additional
insured. Any deductibles or self-insured retentions must be declared to and approved
by City and conform to the requirements provided in Section 3.2.10.6 herein.
(B) Minimum Limits of Insurance. Consultant shall
maintain limits no less than: (1) General Liability: $1,000,000 combined single limit per
occurrence for bodily injury, personal injury and property damage, with an aggregate
limit of $2,000,000. If Commercial General Liability Insurance or other form with general
aggregate limit is used, either the general aggregate limit shall apply separately to this
Agreement/location or the general aggregate limit shall be twice the required
occurrence limit; (2) Automobile Liability: $1,000,000 combined single limit per accident
for bodily injury and property damage; and (3) Workers’ Compensation and Employer’s
Liability: Workers’ Compensation limits as required by the Labor Code of the State of
California. Employer’s Liability limits of $1,000,000 per accident for bodily injury or
disease.
3.2.10.3 Professional Liability. Consultant shall procure and
maintain, and require its sub-consultants to procure and maintain, for a period of three
(3) years following completion of the Project, errors and omissions liability insurance
appropriate to their profession. Such insurance shall be in an amount not less than
$1,000,000 per claim and shall be endorsed to include contractual liability.
3.2.10.4 Insurance Endorsements. The insurance policies
shall contain the following provisions, or Consultant shall provide endorsements on
forms supplied or approved by the City to add the following provisions to the insurance
policies:
(A) General Liability. The general liability policy shall be
endorsed to state that: (1) the City, its directors, officials, officers, and employees shall
be covered as additional insured with respect to liability arising out of Services
operations and for completed operations performed by or on behalf of the Consultant,
including materials, parts or equipment furnished in connection with such work; and (2)
the insurance coverage shall be primary insurance as respects the City, its directors,
officials, officers, and employees, or if excess, shall stand in an unbroken chain of
coverage excess of the Consultant’s scheduled underlying coverage. Any insurance or
self-insurance maintained by the City, its directors, officials, officers, employees and
volunteers shall be excess of the Consultant’s insurance and shall not be called upon to
contribute with it in any way.
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(B) Automobile Liability. The automobile liability policy
shall be endorsed to state that: (1) the City, its directors, officials, officers, and
employees shall be covered as additional insureds with respect to the ownership,
operation, maintenance, use, loading or unloading of any auto owned, leased, hired or
borrowed by the Consultant or for which the Consultant is responsible; and (2) the
insurance coverage shall be primary insurance as respects the City, its directors,
officials, officers, and employees, or if excess, shall stand in an unbroken chain of
coverage excess of the Consultant’s scheduled underlying coverage. Any insurance or
self-insurance maintained by the City, its directors, officials, officers, and employees
shall be excess of the Consultant’s insurance and shall not be called upon to contribute
with it in any way.
(C) Workers’ Compensation and Employers Liability
Coverage. The insurer shall agree to waive all rights of subrogation against the City, its
directors, officials, officers, and employees for losses paid under the terms of the
insurance policy which arise from work performed by the Consultant.
(D) All Coverages. Each insurance policy required by this
Agreement shall be endorsed to state that: (A) coverage shall not be, reduced or
canceled except after thirty (30) days prior written notice by certified mail, return receipt
requested of cancellation, of intended non-renewal or endorsement reduction in limit or
scope of coverage; provided, however, that in the event of cancellation due solely to
non-payment of premium, ten (10) days’ notice of cancellation for non-payment of
premium may instead be given to the City.; and (B) any failure to comply with reporting
or other provisions of the policies, including breaches of warranties, shall not affect
coverage provided to the City, its directors, officials, officers, and employees.
3.2.10.5 Separation of Insureds; No Special Limitations. All
insurance required by this Section shall contain standard separation of insureds
provisions. In addition, such insurance shall not contain any special limitations on the
scope of protection afforded to the City, its directors, officials, officers, and employees.
3.2.10.6 Deductibles and Self-Insurance Retentions. Any
deductibles or self-insured retentions must be declared to and approved by the City.
Consultant shall guarantee that, at the option of the City, either: (1) the insurer shall
reduce or eliminate such deductibles or self-insured retentions as respects the City, its
directors, officials, officers, and employees; or (2) the Consultant shall procure a bond
guaranteeing payment of losses and related investigation costs, claims and
administrative and defense expenses.
3.2.10.7 Acceptability of Insurers. Insurance is to be placed
with insurers with a current A.M. Best’s rating no less than A:VII, admitted or approved
to do business in California, and satisfactory to the City.
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3.2.10.8 Verification of Coverage. Consultant shall furnish City
with complete and accurate copies of current certificates of insurance and
endorsements effecting coverage required by this Agreement on forms satisfactory to
the City. The certificates and endorsements for each insurance policy shall be signed
by a person authorized by that insurer to bind coverage on its behalf, and shall be on
forms provided by the City if requested. Copies of all certificates and endorsements
must be received and approved by the City before work commences. The City reserves
the right to require complete, certified copies of all required insurance policies, at any
time.
3.2.10.9 Safety. Consultant shall execute and maintain its
work so as to avoid injury or damage to any person or property. In carrying out its
Services, the Consultant shall at all times be in compliance with all applicable local,
state and federal laws, rules and regulations, and shall exercise all necessary
precautions for the safety of employees appropriate to the nature of the work and the
conditions under which the work is to be performed. Safety precautions as applicable
shall include, but shall not be limited to: (A) adequate life protection and life saving
equipment and procedures; (B) instructions in accident prevention for all employees and
subcontractors, such as safe walkways, scaffolds, fall protection ladders, bridges, gang
planks, confined space procedures, trenching and shoring, equipment and other safety
devices, equipment and wearing apparel as are necessary or lawfully required to
prevent accidents or injuries; and (C) adequate facilities for the proper inspection and
maintenance of all safety measures.
3.2.10.10 Material Breach. Lack of insurance does not negate
Consultant’s obligations under this Agreement. Maintenance of proper insurance
coverage is a material element of this Agreement and failure to maintain or renew
coverage or to provide evidence of renewal may be treated by the City as a material
breach of the Agreement.
3.3 Fees and Payments.
3.3.1 Compensation. Consultant shall receive compensation, including
reimbursements which receive the City’s prior written authorization, for all Services
rendered under this Agreement at the rates set forth in Exhibit "C" attached hereto and
incorporated herein by reference. The total compensation shall not exceed Forty Five
Thousand Dollars annually ($45,000) without written approval of the City Manager.
Extra Work may be authorized, as described below, and if authorized, will be
compensated at the rates and manner set forth in this Agreement.
3.3.2 Payment of Compensation. Consultant shall submit to City a
monthly itemized statement which indicates work completed and hours of Services
rendered by Consultant. The statement shall describe the amount of Services and
supplies provided since the initial commencement date, or since the start of the
subsequent billing periods, as appropriate, through the date of the statement. City
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shall, within forty-five (45) days of receiving such statement, review the statement and
pay all approved charges thereon.
3.3.3 Reimbursement for Expenses. Consultant shall not be reimbursed
for any expenses unless prior written authorization is obtained from the City.
3.3.4 Extra Work. At any time during the term of this Agreement, City
may request that Consultant perform Extra Work. As used herein, "Extra Work" means
any work which is determined by City to be necessary for the proper completion of the
Project, but which the parties did not reasonably anticipate would be necessary at the
execution of this Agreement. Consultant shall not perform, nor be compensated for,
Extra Work without prior written authorization from City's Representative.
3.4 Accounting Records.
3.4.1 Maintenance and Inspection. Consultant shall maintain complete
and accurate records with respect to all costs and expenses incurred under this
Agreement. All such records shall be clearly identifiable. Consultant shall allow a
representative of City during normal business hours to examine, audit, and make
transcripts or copies of such records and any other documents created pursuant to this
Agreement. 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 under this Agreement.
3.5 General Provisions.
3.5.1 Termination of Agreement.
3.5.1.1 Grounds for Termination. City may, by written notice
to Consultant, terminate the whole or any part of this Agreement at any time and without
cause by giving written notice to Consultant of such termination, and specifying the
effective date thereof, at least seven (7) days before the effective date of such
termination. Upon termination, Consultant shall be compensated only for those services
which have been adequately rendered to City, and Consultant shall be entitled to no
further compensation. Consultant may not terminate this Agreement except for cause.
A termination without cause by City shall not act as or be deemed a waiver of any
potential known or unknown City claims associated with Consultant’s performance prior
to the date of termination.
3.5.1.2 Effect of Termination. If this Agreement is terminated
as provided herein, City may require Consultant to provide all finished or unfinished
Documents and Data and other information of any kind prepared by Consultant in
connection with the performance of Services under this Agreement. Consultant shall be
required to provide such document and other information within fifteen (15) days of the
request.
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3.5.1.3 Additional Services. In the event this Agreement is
terminated in whole or in part as provided herein, City may procure, upon such terms
and in such manner as it may determine appropriate, services similar to those
terminated.
3.5.2 Delivery of Notices. All notices permitted or required under this
Agreement shall be given to the respective parties at the following address, or at such
other address as the respective parties may provide in writing for this purpose:
Consultant:
Sarah Meacham
PFM Asset Management LLC
601 South Figueroa Street, Suite 4500
Los Angeles, CA 90017
City:
City of Arcadia
240 West Huntington drive
Arcadia, CA 91007
Attn: Henry Chen, City Treasurer
Such notice shall be deemed made when personally delivered or when mailed, forty-
eight (48) hours after deposit in the U.S. Mail, first class postage prepaid and
addressed to the party at its applicable address. Actual notice shall be deemed
adequate notice on the date actual notice occurred, regardless of the method of service.
3.5.3 Ownership of Materials and Confidentiality.
3.5.3.1 Documents & Data; Licensing of Intellectual Property.
This Agreement creates a non-exclusive and perpetual license for City to copy, use,
modify, reuse, or sublicense any and all copyrights, designs, and other intellectual
property embodied in plans, specifications, studies, drawings, estimates, and other
documents or works of authorship fixed in any tangible medium of expression, including
but not limited to, physical drawings or data magnetically or otherwise recorded on
computer diskettes, which are prepared or caused to be prepared by Consultant under
this Agreement (“Documents & Data”). Consultant shall require all subcontractors to
agree in writing that City is granted a non-exclusive and perpetual license for any
Documents & Data the subcontractor prepares under this Agreement. Consultant
represents and warrants that Consultant has the legal right to license any and all
Documents & Data. Consultant makes no such representation and warranty in regard
to Documents & Data which were prepared by design professionals other than
Consultant or provided to Consultant by the City. City shall not be limited in any way in
its use of the Documents and Data at any time, provided that any such use not within
the purposes intended by this Agreement shall be at City’s sole risk.
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3.5.3.2 Confidentiality. Except as otherwise required by
California law, all ideas, memoranda, specifications, plans, procedures, drawings,
descriptions, computer program data, input record data, written information, and other
Documents and Data either created by or provided to Consultant in connection with the
performance of this Agreement shall be held confidential by Consultant. Such materials
shall not, without the prior written consent of City, be used by Consultant for any
purposes other than the performance of the Services. Nor shall such materials be
disclosed to any person or entity not connected with the performance of the Services or
the Project. Nothing furnished to Consultant which is otherwise known to Consultant or
is generally known, or has become known, to the related industry shall be deemed
confidential. Consultant shall not use City's name or insignia, photographs of the
Project, or any publicity pertaining to the Services or the Project in any magazine, trade
paper, newspaper, television or radio production or other similar medium without the
prior written consent of City.
3.5.4 Cooperation; Further Acts. The Parties shall fully cooperate with
one another, and shall take any additional acts or sign any additional documents as
may be necessary, appropriate or convenient to attain the purposes of this Agreement.
3.5.5 Indemnification.
3.5.5.1 To the fullest extent permitted by law, Consultant shall
defend, indemnify and hold the City, its officials, officers, and employees free and
harmless from any and all claims, demands, causes of action, costs, expenses, liability,
loss, damage or injury, in law or equity, to property or persons, including wrongful death,
in any manner arising out of or incident to any alleged acts, omissions or willful
misconduct of Consultant, its officials, officers, employees, agents, consultants and
contractors arising out of or in connection with the performance of the Services, the
Project or this Agreement, including without limitation the payment of all consequential
damages and attorney’s fees and other related costs and expenses. Notwithstanding
the foregoing, to the extent Consultant’s Services are subject to Civil Code Section
2782.8, the above indemnity shall be limited, to the extent required by Civil Code
Section 2782.8, to claims that arise out of, pertain to, or relate to the negligence,
recklessness, or willful misconduct of the Consultant. Consultant shall defend with
Legal Counsel of City’s choosing, at Consultant’s own cost, expense and risk, any and
all such aforesaid suits, actions or other legal proceedings of every kind that may be
brought or instituted against City, its directors, officials, officers, and employees.
Consultant shall pay and satisfy any judgment, award or decree that may be rendered
against City or its directors, officials, officers, and employees, in any such suit, action or
other legal proceeding arising from Consultant’s performance of the Services, the
Project or this Agreement; except to the extent that liability is caused by the active
negligence or willful misconduct by the City or its directors, officials, officers, and
employees. Consultant shall reimburse City and its directors, officials, officers, and
employees, for any and all legal expenses and costs incurred by each of them in
connection therewith or in enforcing the indemnity herein provided. Consultant’s
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obligation to indemnify shall not be restricted to insurance proceeds, if any, received by
the City, its directors, officials, officers, and employees, and shall take effect
immediately upon execution of this Agreement.
3.5.5.2 The duty to defend and to hold harmless, as set forth
above, shall include the duty to defend as established by Section 2778 of the California
Civil Code, and the duty to defend shall arise upon the making of any claim or demand
against the City, its respective officials, officers, agents, employees and representatives,
notwithstanding that no adjudication of the underlying facts has occurred, and whether
or not Consultant has been named in the claim or lawsuit.
3.5.6 Entire Agreement. This Agreement contains the entire Agreement
of the Parties with respect to the subject matter hereof, and supersedes all prior
negotiations, understandings or agreements. This Agreement may only be modified by
a writing signed by both Parties.
3.5.7 Attorney’s Fees. If either party commences an action against the
other party, either legal, administrative or otherwise, arising out of or in connection with
this Agreement, the prevailing party in such litigation shall be entitled to have and
recover from the losing party reasonable attorneys’ fees and all other costs of such
action.
3.5.8 Governing Law. This Agreement shall be governed by the laws of
the State of California. Venue shall be in Los Angeles County.
3.5.9 Time of Essence. Time is of the essence for each and every
provision of this Agreement.
3.5.10 City's Right to Employ Other Consultants. City reserves right to
employ other consultants in connection with this Project.
3.5.11 Successors and Assigns. This Agreement shall be binding on the
successors and assigns of the Parties.
3.5.12 Assignment or Transfer. Consultant shall not assign, hypothecate,
or transfer, either directly or by operation of law, this Agreement or any interest herein
without the prior written consent of the City. Any attempt to do so shall be null and void,
and any assignees, hypothecates or transferees shall acquire no right or interest by
reason of such attempted assignment, hypothecation or transfer.
3.5.13 Construction; References; Captions. Since the Parties or their
agents have participated fully in the preparation of this Agreement, the language of this
Agreement shall be construed simply, according to its fair meaning, and not strictly for
or against any Party. Any term referencing time, days or period for performance shall
be deemed calendar days and not work days. All references to Consultant include all
personnel, employees, agents, and subcontractors of Consultant, except as otherwise
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specified in this Agreement. All references to City include its elected officials, officers,
and employees except as otherwise specified in this Agreement. The captions of the
various articles and paragraphs are for convenience and ease of reference only, and do
not define, limit, augment, or describe the scope, content, or intent of this Agreement.
3.5.14 Amendment; Modification. No supplement, modification, or
amendment of this Agreement shall be binding unless executed in writing and signed by
both Parties.
3.5.15 Waiver. No waiver of any default shall constitute a waiver of any
other default or breach, whether of the same or other covenant or condition. No waiver,
benefit, privilege, or service voluntarily given or performed by a Party shall give the
other Party any contractual rights by custom, estoppel, or otherwise.
3.5.16 No Third Party Beneficiaries. There are no intended third party
beneficiaries of any right or obligation assumed by the Parties.
3.5.17 Invalidity; Severability. If any portion of this Agreement is declared
invalid, illegal, or otherwise unenforceable by a court of competent jurisdiction, the
remaining provisions shall continue in full force and effect.
3.5.18 Prohibited Interests. Consultant maintains and warrants that it has
not employed nor retained any company or person, other than a bona fide employee
working solely for Consultant, to solicit or secure this Agreement. Further, Consultant
warrants that it has not paid nor has it agreed to pay any company or person, other than
a bona fide employee working solely for Consultant, any fee, commission, percentage,
brokerage fee, gift or other consideration contingent upon or resulting from the award or
making of this Agreement. For breach or violation of this warranty, City shall have the
right to rescind this Agreement without liability. For the term of this Agreement, no
member, officer or employee of City, during the term of his or her service with City, shall
have any direct interest in this Agreement, or obtain any present or anticipated material
benefit arising therefrom.
3.5.19 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 of race, religion, color, national origin,
handicap, ancestry, sex, sexual orientation or age. Such non-discrimination shall
include, but not be limited to, all activities related to initial employment, upgrading,
demotion, transfer, recruitment or recruitment advertising, layoff or termination.
Consultant shall also comply with all relevant provisions of City's Minority Business
Enterprise program, Affirmative Action Plan or other related programs or guidelines
currently in effect or hereinafter enacted.
3.5.20 Labor Certification. By its signature hereunder, Consultant certifies
that it is aware of the provisions of Section 3700 of the California Labor Code which
require every employer to be insured against liability for Worker's Compensation or to
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undertake self-insurance in accordance with the provisions of that Code, and agrees to
comply with such provisions before commencing the performance of the Services.
3.5.21 Authority to Enter Agreement. Consultant has all requisite power
and authority to conduct its business and to execute, deliver, and perform the
Agreement. Each Party warrants that the individuals who have signed this Agreement
have the legal power, right, and authority to make this Agreement and bind each
respective Party.
3.5.22 Counterparts. This Agreement may be signed in counterparts,
each of which shall constitute an original.
3.5.23 Exhibits and Recitals. All Exhibits and Recitals contained herein
are hereby incorporated into this Agreement by this reference.
3.6 Subcontracting.
3.6.1 Prior Approval Required. Consultant shall not subcontract any
portion of the work required by this Agreement, except as expressly stated herein,
without prior written approval of City. Subcontracts, if any, shall contain a provision
making them subject to all provisions stipulated in this Agreement.
In witness whereof the Parties have executed this Professional Services
Agreement on the date set forth below.
[SIGNATURES ON THE NEXT PAGE]
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CITY OF ARCADIA PFM ASSET MAMAGEMENT LLC
By __ By ____________________________
Dominic Lazzaretto Signature
City Manager
Date: ______________________ ______________________________
Print Name and Title
ATTEST: Date: _________________________
___________________________ By____________________________
City Clerk Signature
APPROVED AS TO FORM: ______________________________
Print Name and Title
___________________________ Date: _________________________
Stephen P. Deitsch
City Attorney CONCUR:
______________________________
Hue Quach
Administrative Services Director
A-1
EXHIBIT "A"
SCOPE OF SERVICES
The Consultant shall perform the following tasks:
Investment Program Review and Strategy Development:
Consultant will review the City’s Investment Policy to confirm that it meets the
requirements of the California Government Code, and to ensure the City’s Investment
Policy is an effective tool for managing the investment program, regardless of market
conditions, and incorporates best practices.
Consultant will also make recommendations regarding allowable investments, maximum
maturities, credit requirements and procedures to ensure portfolio diversification. This
review shall be performed at the beginning of the engagement and annually thereafter.
The review shall focus on the following policy factors:
• Statement of Objectives – documents the goals and objectives of the City’s
investment program.
• Permitted Investments – describes the security types permitted in the
portfolio.
• Investment Guidelines – establishes the maximum maturity and sector and
issuer percentage limits to promote diversification.
• Credit Quality – establishes minimum credit quality allowed and specifies
actions to handle downgraded securities.
• Safekeeping of Assets – proscribes the manner in which the assets are held
in custody.
• Reporting of Investment Activity and Results – states the procedure and
frequency for reviewing investment objectives, investment performance, and
execution of security transactions.
Consultant will analyze and produce a cash flow forecast by modeling the City’s
historical use of cash.
Consultant will work with the City to develop a long term investment strategy that will
form the framework for all the investment decisions. The strategy will incorporate the
City’s Investment Policy, expected cash flow requirements and risk tolerance, and
provide enough flexibility to allow the City to meet realistic performance objectives. The
Consultant will also implement the investment strategy and execute transactions on
behalf of the City.
A-1
Consultant will work with the City to select a benchmark that reflects the City’s
investment objectives and risk-return preferences.
Ongoing Management of Investments:
Consultant’s portfolio management team will assess and monitor the market and the
performance of City’s investment portfolio through a disciplined, analytical approach
utilizing the strategies listed below.
• Consultant will regularly monitor the yield relationships between all permitted
investment sectors (e.g., U.S. Treasury, Federal Agency, and credit
instruments) and select investments that offer the best relative value. The
Consultant will select individual investments to enable the overall portfolio to
capitalize the opportunities that exist at each market environment.
• Consultant will recommend a target duration for the portfolio based on the
City’s cash flow expectations, risk tolerance, and Policy limitations. Then, a
long-term portfolio strategy will be developed to improve the return of the
portfolio. The strategy will create the framework for managing the portfolio’s
duration and re-balancing the portfolio’s duration to take advantage of
opportunities for greater potential portfolio earnings presented by rising
interest rates and the shape of the yield curve. Disciplined duration
management will help to enhance the portfolio’s long-term performance and
reduce the portfolio’s volatility.
• Consultant will work to optimize the City’s portfolio yield through a series of
analytical models where we identify those maturities that offer the greatest
value with limited risk. This assessment takes into account the steepness of
the yield curve as well as any fundamental, technical, or macroeconomic
factors that may influence future yield trends.
• Consultant will select securities that are both of high quality and offer high
return potential.
• Consultant will monitor the markets on an ongoing basis, looking for
opportunities to rebalance the City’s portfolio among sectors and/or maturities
that could safely add value and enhance investment performance. When
opportunities arise, the Consultant will sell a security in one sector for a
security in another sector or between maturity ranges to capture incremental
value in the market without exposing the portfolio to unnecessary risks.
Consultant pursues an aggressive and intensive effort to obtain the best bid/offer
available for the particular security by soliciting bids/offers from several financial
institutions. The Consultant will only transact business with firms whose financial
conditions have been assessed and are on its list of approved firms.
A-1
Consultant will monitor the creditworthiness of all investments held in the City’s portfolio,
utilizing its own proprietary credit research as well as on the research of Nationally-
Recognized Statistical Rating Organizations (NRSROs).
Communication and Reporting:
Consultant will provide the City with comprehensive monthly and quarterly reports to
keep staff and policy makers informed of the status of the City’s investments and
strategy. The reports detail holdings, transactions, market and amortized values,
interest earnings, and performance. It is also designed to be Council-ready, and help
City staff easily book earnings and track portfolio activity.
Consultant shall provide excellent client service through a dedicated client service team,
including Sarah Meacham, Managing Director, as the City’s Engagement Manager and
day-to-day contact, Richard Babbe, CCM. Brian Raubenstine and Bob Cheddar, CFA,
will be the portfolio strategy and management team.
City staff will be available as a general resource to provide advice and training on a
wide variety of investment and other public finance topics.
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Exhibit "B"
SCHEDULE OF SERVICES
Consultant shall perform those services described in Exhibit “A” (Scope of Services)
from September 1, 2021 through to August 30, 2024.
C-1
Exhibit "C"
COMPENSATION
Asset Under
Management
Annual Fee
First $25 million 0.10%
Next $25 million 0.08%
Next $50 million 0.07%
Assets over $100 million 0.06%