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their experience with California municipalities, were invited to a panel interview. After <br />careful consideration of the proposals, interview results, and reference checks, staff is <br />recommending PFM Asset Management, LLC. <br /> <br />It is important to note that since an investment advisor would be following the same <br />policy limits and objectives as staff, it is not likely that the City would see a significant <br />increase in investment returns (net of expenses) from this change alone, although the <br />change in investment maturities and types recommended above is expected to provide <br />an opportunity for modestly higher returns. It is recommended that PFM Asset <br />Management manage $150 million of the City’s portfolio, with the City keeping the <br />remaining funds of approximately $60-70 million in the County Pool and Local Agency <br />Investment Fund (LAIF) for liquidity purposes. <br /> <br />Staff recommends the use of the advisor to provide greater expertise in investment <br />management and to relieve some staff time to improve oversight of other important <br />areas of financial management. In addition, the proposed changes to the Investment <br />Policy will require increased monitoring and reporting. City staff do not have the <br />expertise or the tools needed to monitor the market and/or investment instruments as <br />thoroughly or as regularly as required by the new policy. <br /> <br />ALTERNATIVES <br />The Council can direct staff to make other changes to the policy, or retain the current <br />policy. The Council can also direct staff to continue to manage the City’s investment <br />portfolio rather than using an external advisor. <br /> <br />FISCAL IMPACT <br />The annual gross fee for managing the $150M is approximately $100,000, fixed for <br />three years, adjusted for CPI thereafter. Fees are a percentage of the funds managed. <br />After considering the value of staff time freed up for other important work and the <br />potential for a marginally higher return, it is expected that the net cost for this service, if <br />any, will not be significant. To cover expected fees, $75,000 is included in the Fiscal <br />Year 2016-17 budget across funds, with about $7,000 in the General Fund. <br /> <br />ENVIRONMENTAL REVIEW <br />This activity is not a project under CEQA as defined in CEQA Guidelines, section <br />15378, because it has no potential for resulting in either a direct or reasonably <br />foreseeable indirect physical change in the environment. <br /> <br /> <br />ATTACHMENTS <br />1. Current Investment Policy <br />2. Draft Proposed Investment Policy <br />3. Agreement for professional services with PFM Asset Management, LLC <br /> <br /> <br /> <br />6.1.I. - Page 5