2018 04 11 FAC Special MeetingFINANCIAL ADVISORY COMMISSION 1 APRIL 11, 2018
SPECIAL MEETING
NOTICE OF SPECIAL MEETING
OF THE LA QUINTA FINANCIAL ADVISORY COMMISSION
TO THE COMMISIONERS OF THE LA QUINTA FINANCIAL ADVISORY COMMISSION:
NOTICE IS HEREBY GIVEN that a special meeting of the La Quinta Financial
Advisory Commission is hereby called to be held on Wednesday, April 11, at 4:00 p.m.
at La Quinta City Hall Study Session Room located at 78495 Calle Tampico, La Quinta,
CA 92253 for the following purpose:
ANNOUNCEMENTS, PRESENTATIONS AND WRITTEN COMMUNICATIONS
1.UPDATE ON PUBLIC SAFETY CAMERA SYSTEM REVIEW
2.PROFESSIONALLY MANAGED INVESTMENT PORTFOLIO
CONSENT CALENDAR
1.APPROVE MINUTES OF FEBRUARY 12, 2018
2.RECEIVE AND FILE REVENUE AND EXPENDITURE REPORTS DATED JANUARY 31
AND FEBRUARY 28, 2018
STUDY SESSION
1.DISCUSS THE PRELIMINARY MEASURE G PROJECTIONS AND BUDGET SCHEDULE
FOR FISCAL YEAR 2018/19
2.DISCUSS FISCAL YEAR 2018/19 INVESTMENT POLICY
3.DISCUSS RESERVE ANALYSIS REPORT AND COUNCIL RECOMMENDATION
BUSINESS SESSION
1.APPROVE FISCAL YEAR 2018/19 MEETING DATES
DEPARTMENTAL REPORTS
1.THIRD QUARTER 2017 (JULY – SEPTEMBER 2017) SALES TAX UPDATE FOR THE
CITY OF LA QUINTA
2.REVISIONS TO PURCHASING POLICY UPDATE
3.DEBT MANAGEMENT POLICY UPDATE
COMMISSIONERS’ ITEMS
1.CITY COUNCIL MEETING SUMMARY EMAILS
2.DOCUMENT REVIEW ADVANCE NOTICES
3.UPDATE ON MEETING WITH MAYOR EVANS
Dated: April 6, 2018 /s/ GeorgeBatavick
GEORGE BATAVICK, Chairperson
Attest:
JESSICA DELGADO, Management Assistant
FINANCIAL ADVISORY COMMISSION 2 APRIL 11, 2018
SPECIAL MEETING
DECLARATION OF POSTING
I, Jessica Delgado, Management Assistant, do hereby declare that the foregoing
notice for the Financial Advisory Commission special meeting of April 11, 2018 was
posted on the outside entry to the Council Chamber at 78-495 Calle Tampico and on
the bulletin boards at 51-321 Avenida Bermudas and 78-630 Highway 111 on April 6,
2018.
Jessica Delgado, Management Assistant
FINANCIAL ADVISORY COMMISSION AGENDA 1 APRIL 11, 2018
SPECIAL MEETING
FINANCIAL ADVISORY COMMISSION
AGENDA
CITY HALL STUDY SESSION ROOM
78-495 Calle Tampico, La Quinta
SPECIAL MEETING ON WEDNESDAY, APRIL 11, 2018 AT 4:00 P.M.
ROLL CALL: Commissioners: Johnson, Lopez, Mills, Rosen, Turbow, Twohey,
Chairperson Batavick
PLEDGE OF ALLEGIANCE
PUBLIC COMMENT
At this time members of the public may address the Commission on any matter not
listed on the agenda. Please complete a “Request to Speak” form and limit your
comments to three minutes. The Financial Advisory Commission values your
comments; however in accordance with State law, no action shall be taken on any
item not appearing on the agenda unless it is an emergency item authorized by GC
54954.2(b).
ANNOUNCEMENTS, PRESENTATIONS AND WRITTEN COMMUNICATIONS
1.UPDATE ON PUBLIC SAFETY CAMERA SYSTEM REVIEW
2.PROFESSIONALLY MANAGED INVESTMENT PORTFOLIO
CONFIRMATION OF AGENDA
CONSENT CALENDAR
NOTE: Consent Calendar items are routine in nature and can be approved by one motion.
1.APPROVE MINUTES OF FEBRUARY 12, 2018
2.RECEIVE AND FILE REVENUE AND EXPENDITURE REPORT DATED
JANUARY 31 AND FEBRUARY 28, 2018
Financial Advisory Commission agendas
and staff reports are now available on the
City’s web page: www.laquintaca.gov/
FINANCIAL ADVISORY COMMISSION AGENDA 2 APRIL 11, 2018
SPECIAL MEETING
STUDY SESSION
1.DISCUSS THE PRELIMINARY MEASURE G PROJECTIONS AND BUDGET FOR
FISCAL YEAR 2018/19
2.DISCUSS FISCAL YEAR 2018/19 INVESTMENT POLICY
3.DISCUSS RESERVE ANALYSIS REPORT AND COUNCIL RECOMMENDATION
BUSINESS SESSION
1.APPROVE FISCAL YEAR 2018/19 MEETING DATES
DEPARTMENTAL REPORTS
1.THIRD QUARTER 2017 (JULY – SEPTEMBER 2017) SALES TAX UPDATE FOR
THE CITY OF LA QUINTA
2.REVISIONS TO PURCHASING POLICY UPDATE
3.DEBT MANAGEMENT POLICY UPDATE
COMMISSIONERS’ ITEMS
1.CITY COUNCIL MEETING SUMMARY EMAILS
2.DOCUMENT REVIEW ADVANCE NOTICES
3.UPDATE ON MEETING WITH MAYOR EVANS
ADJOURNMENT
The next regular meeting of the Financial Advisory Commission will be held on May 9,
2018 commencing at 4:00 p.m. at the La Quinta City Hall Study Session Room,
78-495 Calle Tampico, La Quinta, CA 92253.
DECLARATION OF POSTING
I, Jessica Delgado, Management Assistant, of the City of La Quinta, do hereby declare
that the foregoing Agenda for the La Quinta Financial Advisory Commission special
meeting was posted on the City’s website, near the entrance to the Council Chamber
at 78-495 Calle Tampico, and the bulletin boards at 78-630 Highway 111, and the La
Quinta Cove Post Office at 51-321 Avenida Bermudas, on April 6, 2018.
DATED: April 6, 2018
Jessica Delgado, Management Assistant
City of La Quinta, California
FINANCIAL ADVISORY COMMISSION AGENDA 3 APRIL 11, 2018
SPECIAL MEETING
Public Notices
The La Quinta City Hall Study Session Room is handicapped accessible. If special equipment is needed for the hearing
impaired, please call the City Clerk’s office at 777-7103, twenty-four (24) hours in advance of the meeting and
accommodations will be made.
If special electronic equipment is needed to make presentations to the FAC, arrangements should be made in advance by
contacting the City Clerk’s office at 777-7103. A one (1) week notice is required.
If background material is to be presented to the Financial Advisory Commission during a special FAC meeting, please be
advised that five (5) copies of all documents, exhibits, etc., must be supplied to the Management Assistant for distribution.
It is requested that this take place prior to the beginning of the meeting.
Any Writings or documents provided to a majority of the Financial Advisory Commission regarding any item(s) on the
agenda will be made available for public inspection at the Community Development counter at City Hall located at 78-495
Calle Tampico, La Quinta, California, 92253, during normal business hours.
FINANCIAL ADVISORY COMMISSION MINUTES 1 FEBRUARY 12, 2018
REGULAR QUARTERLY MEETING
FINANCIAL ADVISORY COMMISSION
MINUTES
MONDAY, FEBRUARY 12, 2018
CALL TO ORDER
A regular quarterly meeting of the La Quinta Financial Advisory Commission was
called to order at 4:00 p.m. by Chairperson Batavick.
PRESENT: Commissioners Johnson, Lopez, Mills, Rosen, Turbow, Twohey, and
Chairperson Batavick
ABSENT: None
PLEDGE OF ALLEGIANCE
Commissioner Twohey led the audience in the pledge of allegiance.
PUBLIC COMMENT ON MATTERS NOT ON THE AGENDA – None
CONFIRMATION OF AGENDA – Confirmed
ANNOUNCEMENTS, PRESENTATIONS, AND WRITTEN COMMUNICATIONS
Finance Director Campos requested the Commission hold a special meeting on
April 11, 2018, to review the preliminary budget; investment policy; Comprehensive
Annual Financial Report; and announced staff would present an update on proposed
surveillance cameras.
CONSENT CALENDAR ITEMS
1.APPROVE FINANCIAL ADVISORY COMMISSION MINUTES OF NOVEMBER 15,
2017
Motion – A motion was made and seconded by Commissioners’ Johnson/Twohey to
approve Consent Calendar Item No. 1 as submitted. Motion passed unanimously.
2.RECEIVE AND FILE THE SECOND QUARTER FISCAL YEAR 2017/18 TREASURY
REPORTS FOR OCTOBER, NOVEMBER, AND DECEMBER, 2017
Motion – A motion was made and seconded by Commissioners’ Twohey/Lopez to
approve Consent Calendar Item No. 2 as submitted. Motion passed unanimously.
CONSENT CALENDAR ITEM NO. 1
FINANCIAL ADVISORY COMMISSION MINUTES 2 FEBRUARY 12, 2018
REGULAR QUARTERLY MEETING
3. RECEIVE AND FILE REVENUE AND EXPENDITURE REPORTS DATED
OCTOBER 31, NOVEMBER 30, AND DECEMBER 31, 2017
Motion – A motion was made and seconded by Commissioners’ Lopez/Johnson to
approve Consent Calendar Item No. 3 as submitted. Motion passed unanimously.
STUDY SESSION
1. DISCUSS RESERVE POLICY ANALYSIS AND FINDINGS
Finance Director Campos presented the staff report, which is on file in the Finance
Department.
The Commission discussed the scope of analysis; current fund balance descriptions;
reserve/trust recommendations; and additional information needed before final items
are presented to City Council.
2. DISCUSS YEAR END MEASURE G SALES TAX REPORT
Finance Director Campos presented the staff report, which is on file in the Finance
Department.
Staff and Commission discussed year end measure G sales tax report and suggested
keeping the report format consistent; public safety cost and funding; and staffing turn
over.
BUSINESS SESSION
1. APPOINT TWO COMMISSIONERS TO SERVE ON THE SELECTION COMMITTEE
FOR BANKING SERVICES
Finance Director Campos and Chairperson Batavick presented the staff report, which is
on file in the Finance Department.
Commissioner Mills and Chairperson Batavick expressed their willingness to serve on
the selection committee for banking services.
Motion – A motion was made and seconded by Commissioners’ Johnson/Lopez to
appoint Commissioner Mills and Chairperson Batavick to serve on the selection
committee. Motion passed unanimously.
DEPARTMENTAL REPORTS – None
CORRESPONDENCE AND WRITTEN MATERIAL – None
Commissioner Turbow exited the meeting at 5:12 p.m.
FINANCIAL ADVISORY COMMISSION MINUTES 3 FEBRUARY 12, 2018
REGULAR QUARTERLY MEETING
COMMISSIONERS’ ITEMS
1. DISCUSS AUTO DEALERSHIPS’ PROPOSED IMPROVEMENTS ALONG
HIGHWAY 111 FRONTAGE
2. DISCUSS MEASURE G PROJECT SIGNS
3. DISCUSS APPROPRIATION OF FUNDS FROM UNASSIGNED RESERVES TO
THE LAND ACQUISITION FUND FOR PROPERTY ACQUISITION
The Commission discussed future City Council agenda items and meetings. Finance
Director Campos said staff would send the Commission email reminders regarding
upcoming City Council meetings.
Commissioner Mills requested to add the reserve analysis update as an item on the
next agenda.
ADJOURNMENT
There being no further business, it was moved and seconded by Commissioners’
Mills/Johnson to adjourn this meeting at 5:42 p.m. Motion passed: ayes 6, absent 1
(Commissioner Turbow).
Respectfully submitted,
Jessica Delgado, Management Assistant
City of La Quinta, California
City of La Quinta
FINANCIAL ADVISORY COMMISSION MEETING: April 11, 2018
STAFF REPORT
AGENDA TITLE: RECEIVE AND FILE REVENUE AND EXPENDITURE REPORTS DATED
JANUARY 31 AND FEBRUARY 28, 2018
RECOMMENDATION
Receive and file revenue and expenditure reports dated January 31 and February 28,
2018.
FISCAL IMPACT – None.
BACKGROUND/ANALYSIS
Reports
Below is a summary of the column headers used on the Revenue and Expenditure
Summary Reports:
Original Total Budget – represents revenue and expenditure budgets the Council
adopted in June 2017 for fiscal year 2017/18.
Current Total Budget – represents original adopted budgets plus any carryovers
(typically associated with long-term Capital Improvement Projects (CIP)) from the
prior fiscal year, and any Council approved budget amendments.
Period Activity – represents actual revenues received and expenditures outlaid in
the reporting month.
Fiscal Activity – represents actual revenues received and expenditures outlaid YTD.
Variance Favorable/(Unfavorable) - represents the dollar difference between YTD
collections and the budgeted amount.
Percent Used – represents the percentage activity as compared to budget YTD.
The revenue report includes revenues and transfers into funds from other funds (income
items). Revenues are not received uniformly throughout the year, resulting in peaks and
valleys. For example, large property tax payments are usually received in December and
May. Similarly, Redevelopment Property Tax Trust Fund payments are typically received
in January and June.
The expenditure report includes expenditures and transfers out to other funds. Unlike
revenues, expenditures are fairly consistent month to month. However, large debt service
payments or CIP expenditures can cause swings.
CONSENT CALENDAR ITEM NO. 2
January Revenue
MTD YTD YTD Percent of
Budget
General Fund $ 6,561,396 $ 20,032,438 39.37%
All Funds $ 15,998,781 $ 38,737,527 49.41%
Top Five Revenue/Income Sources for January
General Fund Non-General Fund
Property Tax 2,367,517 Successor Agency - Tax Revenue for Bond
Obligations
$7,649,224
Fire Service Tax Credit $1,648,249 Lighting and Landscape Assessments $ 505,066
Transient Occupancy Tax $ 746,181 SilverRock Greens Fees $ 436,689
State Sales tax $ 648,200 Allocated Interest $ 197,630
Measure G Sales Tax $ 539,300 Successor Agency - Tax Revenue for
Administration
$ 125,000
January Expenditures
MTD YTD YTD Percent of
Budget
General Fund $ 2,492,344 $ 17,319,593 32.04%
All Funds $ 3,975,539 $ 34,116,538 36.56%
Top Five Expenditures/Outlays for January
General Fund Non-General Fund
Fire Service Costs $1,393,946 Capital Improvement Plan-
Construction (1)
$ 490,834
Greater Palm Springs Convention
Bureau
$ 66,388 SilverRock Maintenance $ 166,038
Marketing & Tourism Promotions $ 62,103 Successor Agency Administration $ 125,000
MOU/Indio - Ladder Truck $ 54,850 Capital Improvement Plan-
Design (2)
$ 67,200
Parks Landscape Maintenance $ 31,807 Capital Improvement Plan-
Professional Services (3)
$ 65,023
(1) Construction costs include City-wide pavement management plan (PMP) phases 2 & 3 and the landscape conversion in
northern La Quinta.
(2) Design costs include Village complete streets, Civic Center lake/irrigation conversion, and landscape projects.
(3) Professional services costs include Jefferson Street sidewalk project, PMP, and Village complete streets.
February Revenue
MTD YTD YTD Percent of
Budget
General Fund $ 5,207,775 $ 26,870,759 52.80%
All Funds $ 6,367,029 $ 46,735,102 59.49%
Top Five Revenue/Income Sources for February
General Fund Non-General Fund
Property Tax in lieu of VLF $1,981,380 SilverRock Greens Fees $ 561,084
State Sales tax $ 864,100 Developer Transportation DIF Fees $ 70,263
Transient Occupancy Tax $ 806,819 Surface Transportation Program Grant $ 56,184
Measure G Sales Tax $ 719,100 County Sales Tax (Measure A) $ 46,404
Cable Franchise Fees $ 162,518 Gas Tax Loan Repayment $ 46,243
February Expenditures
MTD YTD YTD Percent of
Budget
General Fund $ 1,888,056 $ 33,106,641 38.76%
Payroll (GF) $ 555,788 $ 6,886,824 65.29%
All Funds $ 3,031,958 $ 38,891,319 41.60%
Top Five Expenditures/Outlays for February
General Fund Non-General Fund
Marketing & Tourism
Promotions
$ 48,782 Capital Improvement Plan-
Construction (1)
$ 221,480
Parks Landscape Maintenance $ 31,807 SilverRock Maintenance $ 140,335
Boys and Girls Club $ 19,690 Housing Fund Homelessness
Assistance
$ 78,000
Contract Traffic Engineer $ 18,548 Capital Improvement Plan-Design (2) $ 55,981
League of California Cities –
membership dues
$ 15,152 Capital Improvement Plan-Land
Acquisition (4)
$ 44,688
(1) Construction costs include landscaping/retention basin at Acacia and phase 3 of the pavement
management plan (PMP)
(2) Design costs include Village complete streets, SilverRock Phase II infrastructure, and Dune Palms
bridge projects
(3) Property purchase on Dune Palms for bridge/road widening project
Summary
All funds are generally on target or under budget with regard to expenditures. The timing
imbalance of revenue receipts versus expenditures is funded from the City’s cash flow
reserve.
Prepared by: Rosemary Hallick, Financial Services Analyst
Approved by: Karla Campos, Finance Director
Attachment: 1. Revenue and Expenditure Report for January and February 2018
3/12/2018 10:00:57 AM Page 1 of 4
City Council Month Revenue Report
City of La Quinta, CA Group Summary
For Fiscal: 2017/18 Period Ending: 01/31/2018
Fiscal
Activity
Variance
Favorable
(Unfavorable)
Period
ActivityFun…
Current
Total Budget
Original
Total Budget
Percent
Used
101 - GENERAL FUND 20,032,437.916,561,395.8848,551,600.00 50,887,600.00 -30,855,162.09 39.37 %
201 - GAS TAX FUND 805,123.68125,093.491,415,400.00 1,415,400.00 -610,276.32 56.88 %
202 - LIBRARY & MUSEUM FUND 1,089,568.980.002,254,000.00 2,254,000.00 -1,164,431.02 48.34 %
210 - FEDERAL ASSISTANCE FUND 0.000.00125,800.00 127,451.00 -127,451.00 0.00 %
212 - SLESA (COPS) FUND 89,576.858,333.33100,100.00 100,100.00 -10,523.15 89.49 %
215 - LIGHTING & LANDSCAPING FUND 1,010,647.96505,066.491,448,900.00 1,448,900.00 -438,252.04 69.75 %
218 - CV VIOLENT CRIME TASK FORCE -250.910.000.00 0.00 -250.91 0.00 %
219 - ASSET FORFEITURE -13.330.000.00 0.00 -13.33 0.00 %
220 - QUIMBY FUND 37,442.830.0055,000.00 55,000.00 -17,557.17 68.08 %
221 - AB 939 - CALRECYCLE FUND 18,980.995,153.9962,500.00 62,500.00 -43,519.01 30.37 %
223 - MEASURE A FUND 343,003.2185,847.92724,500.00 724,500.00 -381,496.79 47.34 %
224 - TUMF FUND 70.950.000.00 0.00 70.95 0.00 %
225 - INFRASTRUCTURE FUND 109.760.000.00 0.00 109.76 0.00 %
231 - SUCCESSOR AGCY PA 1 RORF 7,663,262.497,651,131.120.00 0.00 7,663,262.49 0.00 %
235 - SO COAST AIR QUALITY FUND 13,744.870.0050,300.00 50,300.00 -36,555.13 27.33 %
237 - SUCCESSOR AGCY PA 1 ADMIN 125,000.00125,000.000.00 0.00 125,000.00 0.00 %
241 - HOUSING AUTHORITY 683,137.4980,279.92919,000.00 1,012,800.00 -329,662.51 67.45 %
243 - RDA Low-Mod Housing Fund 7,374.590.000.00 0.00 7,374.59 0.00 %
249 - SA 2011 LOW/MOD BOND FUND (Refinanced in 2016)72,571.1252,385.170.00 0.00 72,571.12 0.00 %
250 - TRANSPORTATION DIF FUND 230,495.3322,736.00369,000.00 369,000.00 -138,504.67 62.46 %
251 - PARKS & REC DIF FUND 153,600.0016,384.00200,000.00 200,000.00 -46,400.00 76.80 %
252 - CIVIC CENTER DIF FUND 70,358.007,536.00100,000.00 100,000.00 -29,642.00 70.36 %
253 - LIBRARY DEVELOPMENT DIF 25,800.002,752.0030,000.00 30,000.00 -4,200.00 86.00 %
254 - COMMUNITY CENTER DIF 10,238.661,032.0015,400.00 15,400.00 -5,161.34 66.48 %
255 - STREET FACILITY DIF FUND 11,382.55928.0015,000.00 15,000.00 -3,617.45 75.88 %
256 - PARK FACILITY DIF FUND 3,003.53320.004,000.00 4,000.00 -996.47 75.09 %
257 - FIRE PROTECTION DIF 32,341.003,464.0040,000.00 40,000.00 -7,659.00 80.85 %
270 - ART IN PUBLIC PLACES FUND 17,996.82739.8353,500.00 53,500.00 -35,503.18 33.64 %
299 - INTEREST ALLOCATION FUND 197,629.73197,629.730.00 0.00 197,629.73 0.00 %
310 - LQ FINANCE AUTHORITY DEBT SERVICE 166.100.09671,400.00 671,400.00 -671,233.90 0.02 %
401 - CAPITAL IMPROVEMENT PROGRAMS 2,792,178.510.008,423,900.00 11,757,282.00 -8,965,103.49 23.75 %
501 - FACILITY & FLEET REPLACEMENT 393,371.3821,845.00531,000.00 531,000.00 -137,628.62 74.08 %
502 - INFORMATION TECHNOLOGY 377,648.861,234.00714,000.00 723,000.00 -345,351.14 52.23 %
503 - PARK EQUIP & FACILITY FUND 164,412.010.00680,000.00 680,000.00 -515,587.99 24.18 %
504 - INSURANCE FUND 498,671.450.001,001,000.00 1,001,000.00 -502,328.55 49.82 %
601 - SILVERROCK RESORT 1,764,157.86522,492.924,004,200.00 4,004,200.00 -2,240,042.14 44.06 %
602 - SILVERROCK GOLF RESERVE 2,285.830.0061,300.00 61,300.00 -59,014.17 3.73 %
Report Total:15,998,780.88 38,737,527.0672,620,800.00 78,394,633.00 -39,657,105.94 49.41 %
ATTACHMENT 1
3/12/2018 10:00:33 AM Page 2 of 4
City Council Month Expense Report
City of La Quinta, CA Group Summary
For Fiscal: 2017/18 Period Ending: 01/31/2018
Fiscal
Activity
Variance
Favorable
(Unfavorable)
Period
ActivityFun…
Current
Total Budget
Original
Total Budget
Percent
Used
101 - GENERAL FUND 17,319,593.022,492,344.4048,180,700.00 54,057,113.00 36,737,519.98 32.04 %
201 - GAS TAX FUND 628,254.1572,033.151,435,000.00 1,442,240.00 813,985.85 43.56 %
202 - LIBRARY & MUSEUM FUND 462,268.6720,807.591,947,500.00 2,524,500.00 2,062,231.33 18.31 %
210 - FEDERAL ASSISTANCE FUND 0.000.00125,800.00 127,451.00 127,451.00 0.00 %
212 - SLESA (COPS) FUND 6,525.610.00100,000.00 100,000.00 93,474.39 6.53 %
215 - LIGHTING & LANDSCAPING FUND 758,491.33103,027.071,519,300.00 1,527,920.00 769,428.67 49.64 %
218 - CV VIOLENT CRIME TASK FORCE 3,406.650.000.00 0.00 -3,406.65 0.00 %
219 - ASSET FORFEITURE 55.640.000.00 0.00 -55.64 0.00 %
220 - QUIMBY FUND 412,279.220.000.00 0.00 -412,279.22 0.00 %
221 - AB 939 - CALRECYCLE FUND 1,594.550.0020,000.00 20,000.00 18,405.45 7.97 %
223 - MEASURE A FUND 89,386.820.00787,000.00 787,000.00 697,613.18 11.36 %
225 - INFRASTRUCTURE FUND 0.000.0022,600.00 22,600.00 22,600.00 0.00 %
227 - State Homeland Security Programs (SHSP)2,707.882,707.880.00 0.00 -2,707.88 0.00 %
231 - SUCCESSOR AGCY PA 1 RORF 4,717,897.660.000.00 0.00 -4,717,897.66 0.00 %
235 - SO COAST AIR QUALITY FUND 9,724.169,724.1632,000.00 49,000.00 39,275.84 19.85 %
237 - SUCCESSOR AGCY PA 1 ADMIN 132,809.00130,625.000.00 0.00 -132,809.00 0.00 %
241 - HOUSING AUTHORITY 457,343.9462,432.231,192,100.00 1,192,920.00 735,576.06 38.34 %
243 - RDA Low-Mod Housing Fund 0.000.000.00 259,000.00 259,000.00 0.00 %
249 - SA 2011 LOW/MOD BOND FUND (Refinanced in 2016)0.000.009,400,000.00 9,400,000.00 9,400,000.00 0.00 %
250 - TRANSPORTATION DIF FUND 550,128.050.001,005,100.00 1,230,600.00 680,471.95 44.70 %
252 - CIVIC CENTER DIF FUND 33,408.250.000.00 0.00 -33,408.25 0.00 %
253 - LIBRARY DEVELOPMENT DIF 8,798.500.000.00 0.00 -8,798.50 0.00 %
254 - COMMUNITY CENTER DIF 0.000.00101,600.00 101,600.00 101,600.00 0.00 %
255 - STREET FACILITY DIF FUND 8,980.430.000.00 0.00 -8,980.43 0.00 %
256 - PARK FACILITY DIF FUND 2,682.550.000.00 0.00 -2,682.55 0.00 %
257 - FIRE PROTECTION DIF 1,281.090.000.00 0.00 -1,281.09 0.00 %
270 - ART IN PUBLIC PLACES FUND 62,556.200.00122,000.00 122,000.00 59,443.80 51.28 %
310 - LQ FINANCE AUTHORITY DEBT SERVICE 652,636.75750.00671,400.00 671,400.00 18,763.25 97.21 %
401 - CAPITAL IMPROVEMENT PROGRAMS 3,805,641.49647,652.148,614,400.00 11,947,782.00 8,142,140.51 31.85 %
501 - FACILITY & FLEET REPLACEMENT 317,282.6947,229.011,069,300.00 1,079,300.00 762,017.31 29.40 %
502 - INFORMATION TECHNOLOGY 471,906.5142,107.12914,000.00 917,100.00 445,193.49 51.46 %
503 - PARK EQUIP & FACILITY FUND 126,911.240.00670,000.00 757,000.00 630,088.76 16.77 %
504 - INSURANCE FUND 818,004.816,770.84969,200.00 972,740.00 154,735.19 84.09 %
601 - SILVERROCK RESORT 2,253,980.85337,328.024,003,400.00 4,005,470.00 1,751,489.15 56.27 %
Report Total:3,975,538.61 34,116,537.7182,902,400.00 93,314,736.00 59,198,198.29 36.56 %
4/3/2018 1:14:18 PM Page 3 of 4
City Council Month Revenue Report
City of La Quinta, CA Group Summary
For Fiscal: 2017/18 Period Ending: 02/28/2018
Fiscal
Activity
Variance
Favorable
(Unfavorable)
Period
ActivityFun…
Current
Total Budget
Original
Total Budget
Percent
Used
101 - GENERAL FUND 26,870,758.915,207,775.3548,551,600.00 50,887,600.00 -24,016,841.09 52.80 %
201 - GAS TAX FUND 869,973.8264,850.141,415,400.00 1,415,400.00 -545,426.18 61.46 %
202 - LIBRARY & MUSEUM FUND 1,089,568.980.002,254,000.00 2,254,000.00 -1,164,431.02 48.34 %
210 - FEDERAL ASSISTANCE FUND 0.000.00125,800.00 184,451.00 -184,451.00 0.00 %
212 - SLESA (COPS) FUND 97,910.188,333.33100,100.00 100,100.00 -2,189.82 97.81 %
215 - LIGHTING & LANDSCAPING FUND 1,010,647.960.001,448,900.00 1,448,900.00 -438,252.04 69.75 %
218 - CV VIOLENT CRIME TASK FORCE -250.910.000.00 0.00 -250.91 0.00 %
219 - ASSET FORFEITURE -13.330.000.00 0.00 -13.33 0.00 %
220 - QUIMBY FUND 37,442.830.0055,000.00 55,000.00 -17,557.17 68.08 %
221 - AB 939 - CALRECYCLE FUND 21,828.462,847.4762,500.00 62,500.00 -40,671.54 34.93 %
223 - MEASURE A FUND 389,407.4946,404.28724,500.00 724,500.00 -335,092.51 53.75 %
224 - TUMF FUND 70.950.000.00 0.00 70.95 0.00 %
225 - INFRASTRUCTURE FUND 109.760.000.00 0.00 109.76 0.00 %
231 - SUCCESSOR AGCY PA 1 RORF 7,663,264.431.940.00 0.00 7,663,264.43 0.00 %
235 - SO COAST AIR QUALITY FUND 13,744.870.0050,300.00 50,300.00 -36,555.13 27.33 %
237 - SUCCESSOR AGCY PA 1 ADMIN 125,000.000.000.00 0.00 125,000.00 0.00 %
241 - HOUSING AUTHORITY 799,936.21116,798.72919,000.00 1,012,800.00 -212,863.79 78.98 %
243 - RDA Low-Mod Housing Fund 7,374.590.000.00 0.00 7,374.59 0.00 %
249 - SA 2011 LOW/MOD BOND FUND (Refinanced in 2016)72,571.120.000.00 0.00 72,571.12 0.00 %
250 - TRANSPORTATION DIF FUND 300,757.9970,262.66369,000.00 369,000.00 -68,242.01 81.51 %
251 - PARKS & REC DIF FUND 192,512.0038,912.00200,000.00 200,000.00 -7,488.00 96.26 %
252 - CIVIC CENTER DIF FUND 89,324.2718,966.27100,000.00 100,000.00 -10,675.73 89.32 %
253 - LIBRARY DEVELOPMENT DIF 32,336.006,536.0030,000.00 30,000.00 2,336.00 107.79 %
254 - COMMUNITY CENTER DIF 12,689.662,451.0015,400.00 15,400.00 -2,710.34 82.40 %
255 - STREET FACILITY DIF FUND 14,251.002,868.4515,000.00 15,000.00 -749.00 95.01 %
256 - PARK FACILITY DIF FUND 3,763.53760.004,000.00 4,000.00 -236.47 94.09 %
257 - FIRE PROTECTION DIF 41,060.618,719.6140,000.00 40,000.00 1,060.61 102.65 %
270 - ART IN PUBLIC PLACES FUND 23,317.065,320.2453,500.00 53,500.00 -30,182.94 43.58 %
299 - INTEREST ALLOCATION FUND 232,900.8235,271.090.00 0.00 232,900.82 0.00 %
310 - LQ FINANCE AUTHORITY DEBT SERVICE 166.210.11671,400.00 671,400.00 -671,233.79 0.02 %
401 - CAPITAL IMPROVEMENT PROGRAMS 2,863,043.1870,864.678,423,900.00 11,864,282.00 -9,001,238.82 24.13 %
501 - FACILITY & FLEET REPLACEMENT 413,282.3819,911.00531,000.00 531,000.00 -117,717.62 77.83 %
502 - INFORMATION TECHNOLOGY 379,285.901,637.04714,000.00 723,000.00 -343,714.10 52.46 %
503 - PARK EQUIP & FACILITY FUND 164,412.010.00680,000.00 680,000.00 -515,587.99 24.18 %
504 - INSURANCE FUND 498,671.450.001,001,000.00 1,001,000.00 -502,328.55 49.82 %
601 - SILVERROCK RESORT 2,401,695.91637,538.054,004,200.00 4,004,200.00 -1,602,504.09 59.98 %
602 - SILVERROCK GOLF RESERVE 2,285.830.0061,300.00 61,300.00 -59,014.17 3.73 %
Report Total:6,367,029.42 46,735,102.1372,620,800.00 78,558,633.00 -31,823,530.87 59.49 %
4/3/2018 1:13:33 PM Page 4 of 4
City Council Month Expense Report
City of La Quinta, CA Group Summary
For Fiscal: 2017/18 Period Ending: 02/28/2018
Fiscal
Activity
Variance
Favorable
(Unfavorable)
Period
ActivityFun…
Current
Total Budget
Original
Total Budget
Percent
Used
101 - GENERAL FUND 20,950,472.041,888,055.9848,180,700.00 54,057,113.00 33,106,640.96 38.76 %
201 - GAS TAX FUND 693,755.1565,501.001,435,000.00 1,442,240.00 748,484.85 48.10 %
202 - LIBRARY & MUSEUM FUND 493,939.8131,671.141,947,500.00 2,524,500.00 2,030,560.19 19.57 %
210 - FEDERAL ASSISTANCE FUND 0.000.00125,800.00 184,451.00 184,451.00 0.00 %
212 - SLESA (COPS) FUND 6,525.610.00100,000.00 100,000.00 93,474.39 6.53 %
215 - LIGHTING & LANDSCAPING FUND 828,618.3770,127.041,519,300.00 1,527,920.00 699,301.63 54.23 %
218 - CV VIOLENT CRIME TASK FORCE 3,406.650.000.00 0.00 -3,406.65 0.00 %
219 - ASSET FORFEITURE 55.640.000.00 0.00 -55.64 0.00 %
220 - QUIMBY FUND 412,279.220.000.00 0.00 -412,279.22 0.00 %
221 - AB 939 - CALRECYCLE FUND 2,233.15638.6020,000.00 20,000.00 17,766.85 11.17 %
223 - MEASURE A FUND 89,386.820.00787,000.00 787,000.00 697,613.18 11.36 %
225 - INFRASTRUCTURE FUND 0.000.0022,600.00 22,600.00 22,600.00 0.00 %
227 - State Homeland Security Programs (SHSP)2,707.880.000.00 0.00 -2,707.88 0.00 %
231 - SUCCESSOR AGCY PA 1 RORF 4,717,897.660.000.00 0.00 -4,717,897.66 0.00 %
235 - SO COAST AIR QUALITY FUND 9,724.160.0032,000.00 49,000.00 39,275.84 19.85 %
237 - SUCCESSOR AGCY PA 1 ADMIN 135,809.003,000.000.00 0.00 -135,809.00 0.00 %
241 - HOUSING AUTHORITY 516,436.6159,092.671,192,100.00 1,192,920.00 676,483.39 43.29 %
243 - RDA Low-Mod Housing Fund 78,000.0078,000.000.00 259,000.00 181,000.00 30.12 %
249 - SA 2011 LOW/MOD BOND FUND (Refinanced in 2016)0.000.009,400,000.00 9,400,000.00 9,400,000.00 0.00 %
250 - TRANSPORTATION DIF FUND 550,128.050.001,005,100.00 1,230,600.00 680,471.95 44.70 %
252 - CIVIC CENTER DIF FUND 33,408.250.000.00 0.00 -33,408.25 0.00 %
253 - LIBRARY DEVELOPMENT DIF 8,798.500.000.00 0.00 -8,798.50 0.00 %
254 - COMMUNITY CENTER DIF 0.000.00101,600.00 101,600.00 101,600.00 0.00 %
255 - STREET FACILITY DIF FUND 8,980.430.000.00 0.00 -8,980.43 0.00 %
256 - PARK FACILITY DIF FUND 2,682.550.000.00 0.00 -2,682.55 0.00 %
257 - FIRE PROTECTION DIF 1,281.090.000.00 0.00 -1,281.09 0.00 %
270 - ART IN PUBLIC PLACES FUND 67,206.204,650.00122,000.00 122,000.00 54,793.80 55.09 %
310 - LQ FINANCE AUTHORITY DEBT SERVICE 652,636.750.00671,400.00 671,400.00 18,763.25 97.21 %
401 - CAPITAL IMPROVEMENT PROGRAMS 4,138,688.49333,047.008,614,400.00 12,054,782.00 7,916,093.51 34.33 %
501 - FACILITY & FLEET REPLACEMENT 341,096.0123,813.321,069,300.00 1,079,300.00 738,203.99 31.60 %
502 - INFORMATION TECHNOLOGY 503,778.9031,872.39914,000.00 917,100.00 413,321.10 54.93 %
503 - PARK EQUIP & FACILITY FUND 139,217.1112,305.87670,000.00 757,000.00 617,782.89 18.39 %
504 - INSURANCE FUND 866,064.5648,059.75969,200.00 972,740.00 106,675.44 89.03 %
601 - SILVERROCK RESORT 2,636,104.02382,123.174,003,400.00 4,005,470.00 1,369,365.98 65.81 %
Report Total:3,031,957.93 38,891,318.6882,902,400.00 93,478,736.00 54,587,417.32 41.60 %
City of La Quinta
FINANCIAL ADVISORY COMMISSION MEETING: April 11, 2018
STAFF REPORT
AGENDA TITLE: DISCUSS THE PRELIMINARY MEASURE G REVENUE PROJECTIONS AND
BUDGET SCHEDULE FOR FISCAL YEAR 2018/19
RECOMMENDATION
Discuss preliminary Measure G revenue projections and budget schedule for fiscal year
2018/19.
EXECUTIVE SUMMARY
• As part of their work plan, The Financial Advisory Commission (FAC) reviews
Measure G sales tax revenue and expenses paid with those funds.
• Multiple study sessions regarding the budget will occur over the next two
months with both the FAC and the City Council. The budget will be presented to
Council for adoption on June 19th.
FISCAL IMPACT – None.
BACKGROUND
Preparation for and the results from the January 13th community workshop started
the 2018/19 budget process. Finance has been working with all city staff to ensure
expenditure requests are prudent for the upcoming fiscal year. In addition, revenue
projections have been completed for most Funds.
This study session focuses on the General Fund and in particular Measure G revenue
and expenditures. The FAC provides oversight for Measure G funds. Measure G revenue
projections are $8,455,000 or 95% of Bradley Burns sales tax revenue. The preliminary
budget indicates that approximately $1.7M to $2.2M of the $8.4M will be needed for
police services.
The Design and Development department will be presenting a preliminary five-year
capital improvement plan (CIP) to City Council on April 17th which will include projects
funded with Measure G.
For a greater understanding of the budget process, and to gain awareness of City
Council directives, FAC members are encouraged to attend all public meetings.
STUDY SESSION ITEM NO. 1
Date 2018/ 19 BUDGET SCHEDULE
April 11 FAC preliminary Measure G General Fund budget overview
April 17 City Council - first Capital Improvement budget study session
May 1 City Council - first budget study session focused on the General Fund and
Internal Service Funds
May 9 FAC update on the General Fund and Capital Improvement Budget
May 15
City Council - second budget study session focused on all special funds and
provides an update on the General Fund if needed. A second CIP budget
session may also be included.
June 5 City Council - third budget study session overall update on all funds and
final direction on unfunded requests
June 13 FAC - final review of the General Fund and Capital Improvement Budget
June 19 City Council - Adopt Budget
The following is the 2018/19 budget schedule:
ALTERNATIVES
The purpose of this item is to provide a high-level overview of the preliminary Measure
G revenue and expenditure projections for the 2018/19 General Fund budget.
Prepared by: Karla Campos, Finance Director
City of La Quinta
FINANCIAL ADVISORY COMMISSION MEETING: April 11, 2018
STAFF REPORT
AGENDA TITLE: DISCUSS FISCAL YEAR 2018/19 INVESTMENT POLICY
RECOMMENDATION
Discuss the attached Fiscal Year 2018/19 Investment Policy and provide input.
EXECUTIVE SUMMARY
• As part of their work plan, The Financial Advisory Commission (FAC) is asked to
review the City’s Investment Policy annually.
• Any suggested changes are sent to City Council for consideration by June of
each year.
FISCAL IMPACT - None.
BACKGROUND
There have been no new regulatory changes in FY 2017/18; however, based on the
State Treasurer’s cap on $65 million in Local Agency Investment Fund (LAIF) accounts,
an increase in the maximum allowable LAIF balance is being requested. Staff has also
highlighted some edits, identified as red lined in the attachment, in order to provide
consistency and clarity to the document. The following is a summary of the proposed
changes by section:
• Table of Contents updated to reflect correct page numbers.
• Executive Summary updated with minor verbiage changes.
• Section V updated to match same paragraph in Executive Summary.
• Section VI updated to reflect Prudent Investor Standard and fiduciary duty
requirements in the California Government Code.
• Section X updated with change to permissible LAIF balance and change to
maximum maturity for local agency bonds.
• Appendix A updated to reflect same changes as listed above for Section X, and
also proposed re-design of chart in portrait orientation instead of landscape.
• Appendix E updated formatting to align columns and added the new OPEB trust
account.
• Appendix H proposed re-design of chart in portrait orientation instead of
landscape.
STUDY SESSION ITEM NO. 2
Proposed items for discussion include changes to the maximum allocation allowed for
a professionally managed account, edits to the maximum dollar amounts and/or
percentage of portfolio for US Agency bonds, and additional investment types as
allowed by state code. Additionally, staff is recommending removal of Request for
Proposal and broker application, as these are internal documents subject to change.
Based on input, an amended redlined investment policy will be presented to the FAC
on May 9th before Council approval in June.
ALTERNATIVES
The purpose of this item is to get input from Commissioners; the Commission may
either approve as presented or incorporate further changes.
Prepared by: Rosemary Hallick
Approved by: Karla Campos, Finance Director
Attachment: 1. Draft Investment Policy for Fiscal Year 2018/19 (red-lined)
2018/19 INVESTMENT POLICY
1
CITY OF LA QUINTA
Investment Policy
FlscalYear2017/2018
Table of Contents
Section
I II III IV
V VI VII VIII IX
X
XI
XII
XIII XIV xv XVI XVII
Topic
Executive Summary
General Purpose
Investment Policy
Scope
Objectives
Safety of Principal
Provide Liquidity
Yield A Risk-Based Market Rate Of Return
Maximum Maturities
Prudence
Authority
Ethics and Conflicts of Interest
Authorized Financial Dealers and Institutions
Broker/Dealers
Financial Institutions
Permissible Deposits and Investments
Investment Pools
Payment and Custody
Interest Earning Distribution Policy
Internal Controls and Independent Auditors
Reporting Standards
Financial Assets and Investment Activity Not Subject to this Policy
Investment of Bond Proceeds
Page
2
4
4
4
4
6
6
6
7
7
8
12
13
13
13
14
15
15 XVIII Financial Advisory Commission - City of La Quinta 15
XIX Investment Policy Adoption 16
Appendices Topic Page
A Summary of Permissible Deposits and Investments 17
B City of La Quinta Municipal Code Ordinance 2.70 -Financial Advisory Commission 19
C City of La Quinta Municipal Code Ordinance 3.08 - Investment of Moneys and Funds 20
D Segregation of Major Investment Responsibilities 22
E Listing of Approved Financial Institutions 23
F Broker/Dealer Questionnaire and Certification 24
G Request for Proposal for Professional Portfolio Management Firm 28
H Permissible Investment Chart - Professional Portfolio Management Firm 34
I Investment Management Process and Risk 35
J Glossary 36
Comment [RH1]: All page numbers will be
adjusted on final copy to match placement in
document
2
CITY OF LA QUINTA
Investment Policy
FlscalYear2017/2018
Executive Summary
The general purpose of this Investment Policy is to provide the rules and standards that must be
followed in administering the City of La Quinta's (the “City”) deposits and investments.
The City's Investment Policy conforms to all state and local statutes and applies to all deposits and
investments of the City of La Quinta. (the "City").
It is the City's policy to deposit and invest public funds in a manner that shall provide:
Safety of principal;
Liquidity to meet all of the City's obligations and requirements that may be reasonably
anticipated; and
A risk-based market rate of return.
It is the City's policy to generally hold securities and other investments until maturity. This buy-
and-hold policy shall not prevent the sale of a security to minimize loss of principal when an issuer
or backer suffers declining credit worthiness, when the liquidity needs of the portfolio require that a
security be sold, or when a sale/repurchase is fiscally advantageous based on market conditions
and fits the needs of the portfolio.
Authority to manage the City's investment portfolio is derived from the City Municipal Code.
Management responsibility for the investment program is delegated to the City Treasurer, who shall
establish and implement written procedures for the operation of the City's investment program
consistent with the Investment Policy. The Treasurer shall establish and implement a system of
internal controls to accomplish the following objectives:
Safeguard assets;
Orderly and efficiently conduct its business, including adherence to all City management policies;
Prevent or detect errors and fraud;
Accurately complete all accounting records; and
Timely prepare all reliable financial information.
The System of Internal Controls developed by the City Treasurer shall be reviewed annually by the
independent auditors in connection with the annual audit of the City's financial statements.
The City Manager, City Treasurer and city employees involved in the City's banking and investment
process shall conduct the City's business in an ethical manner and refrain from any activity or
relationship that may be, or have the appearance of, a conflict of interest.
The City Treasurer maintains a listing of financial institutions which are approved for investment
purposes. All Broker/Dealers and financial institutions that provide investment services will be
subject to City Council approval.
The Treasurer will be permitted to invest only in the permissible deposits and investments described
in Section X and Appendix A up to the specified maximum allowable percentages
and/or dollar limitations and, where applicable, through the bid process requirements. Permissible
deposits and investments include, in general:
Comment [RH2]: For consideration: Shorten
this summary to eliminate redundancies
3
FDIC-Insured Checking, Savings, and Sweep Accounts;
Collateralized Bank Deposits; Certificates of Deposit;
Certificates of Deposit (Negotiable and Non-Negotiable);
U.S. Government Agency Securities and Federal Government Securities;
Prime Commercial Paper;
Local Agency Investment Fund (LAIF);
Money Market Mutual Funds;
Corporate Notes; and
Professionally Managed Accounts.
The City's deposits and investments are generally limited to five years maximum maturity. However,
the projected amount of funds not expected to be disbursed within five years may be invested in
notes and bonds maturing between three and five years. Additionally, funds may be invested for up
to ten (10) years as further discussed in Section V.
The City's Investment Policy does not specify a single benchmark as a goal or target yield for a rate
of return on its investment portfolio. As a basis for comparison only, the Treasurer's monthly
quarterly report will display the rates of return on the three-month Bill, six-month Bill, and the one
and two-year U.S. Treasury Note, comparable-periodavailable rates for commercial paper,
and the yield for the State Treasurer's Local Agency Investment Fund (LAIF).
The Investment Policy shall be adopted by resolution of the La Quinta City Council on an annual
basis. The Investment Policy will be adopted before the end of June of each year.
This Executive Summary is only an overview of the City's Investment Policy. Reading this summary
does not constitute a complete review, which can only be accomplished by reviewing all of the pages
herein.
Comment [RM3]: Duplicate
Comment [RM4]: Changed “comparable
period” to “available” because one and two year
rates for commercial paper don’t exist-
Commercial paper is typically only issued for
270 days. See section IV.3
4
City of La Quinta
Statement of Investment Policy
July 1, 2017 through June 30, 2018
Adopted by the City Council on
I GENERAL PURPOSE
The general purpose of this document is to provide the rules and standards that must be followed in
administering the City of La Quinta's deposits and investments.
II INVESTMENT POLICY
It is the policy of the City of La Quinta to deposit and invest public funds in a manner that shall
provide:
Safety of principal;
Liquidity to meet all of the City's obligations and requirements that may be reasonably
anticipated; and
A risk-based market rate of return.
The Investment Policy conforms to all State and local statutes governing the investment of public
funds and sets forth the permissible deposits and investments of the City's funds and the limitations
thereon.
III SCOPE
Except as further detailed in Section XVII, this Investment Policy applies to all deposits and
investments of the City of La Quinta, Successor Agency to the City of La Quinta Redevelopment
Agency and the City of La Quinta Financing and Housing Authorities (hereafter referred to in this
document as the "City"). These funds are reported in the City's Comprehensive Annual Financial
Report (CAFR) and include all funds within the following fund types:
General
Special Revenue
Capital Projects
Debt Service
Enterprise
Internal Service
Trust and Agency
Any new fund types and fund(s) that may be created.
IV OBJECTIVES
The objectives of the City's investment activity, in order of priority and importance, are:
1. Safety of Principal
Safety of principal is the foremost objective of the City's investment program. Investments
shall be undertaken in a manner that seeks to ensure the preservation of principal of the
overall portfolio in accordance with the permissible deposits and investments.
5
The City shall endeavor to preserve its investment principal by making only permissible
deposits and investments, undertaken in a controlled manner to minimize the possibility of
loss or misappropriation through malfeasance or otherwise. Investments not backed by the
full faith and credit of the United States Government shall be diversified by allocating assets
between different types of permissible investments, maturities, and issuers as a means to
mitigate credit risk and interest rate risk.
a. Credit Risk is the risk of loss from the failure of the security issuer or backer. Credit risk
may be mitigated by:
Limiting investments to investment grade securities as permitted in Section X;
and
Diversifying the issuers of the securities in the investment portfolio so that
potential losses due to issuer failure or individual securities downgrades may
be minimized.
b. Interest Rate Risk is the risk that market values of securities in the portfolio will
decline due to changes in general interest rates. Interest rate risk may be mitigated
by:
Structuring the investment portfolio so that securities mature to meet cash
requirements for ongoing operations, thereby avoiding the need to sell
securities on the open market prior to maturity; and
Investing operating funds primarily in shorter-term securities.
c. Liquidity Risk is the risk that a security cannot be liquidated because of its unique
features or structure or because it is thinly traded. Liquidity risk is not a material issue
for the City's portfolio because of the permissible deposits and investments (see
Section X). and because the City maintains a buy-and-hold policy and holds securities
and other investments to maturity. A discussion of the City's investment process and
risk is presented in Appendix I.
2. Provide Liquidity
The investment portfolio shall remain sufficiently liquid to meet all of the City's cash needs
that may be reasonably anticipated. This is accomplished by structuring the portfolio so that
sufficient liquid funds are available to meet anticipated demands. Furthermore, since all
possible cash needs cannot be anticipated the portfolio should be diversified and consist of
securities with active secondary or resale markets.
The City's policy is to generally hold securities and other investments to maturity.
Accordingly, securities shall not be sold prior to maturity with the following exceptions:
A security with declining credit quality can be sold early to minimize loss of principal.
Unanticipated liquidity needs of the portfolio require that one or more securities be sold.
When a sale/repurchase is fiscally advantageous based on market conditions and fits the needs
of the portfolio
3. Yield a Risk-Based Market Rate of Return
The City's investment portfolio shall be structured with the objective of yielding a risk-based
market rate of return throughout budgetary and economic cycles. Return on investment is
less important than the safety and liquidity objectives described above.
The City's Investment Policy does not specify a single benchmark as a goal or target yield for
Comment [RM5]: Removed to match last
year’s update- see next section
6
a rate of return on its investment portfolio. The portfolio's rates of return will be influenced
by several factors, including actions by the Federal Reserve Board, the marketplace, and
overall economic perceptions and conditions. These factors will not affect yield during the
securities' holding period because the City's buy-and-hold policy fixes the securities' yield at
the time of purchase.
As a basis for comparison only, the Treasurer's monthly quarterly reports will display the
rates of return on the three-month Bill, six-month Bill, and one and two-year U.S.
Treasury Note, comparable-period rates for commercial paper, and the yield for the State
Treasurer's Local Agency Investment Fund (LAIF). The Treasurer may use these or any
other published rates of return that the Treasurer deems appropriate for comparison to
the return on the City's investment portfolio.
V MAXIMUM MATURITIES
It is the City's policy to generally hold securities and other investments until maturity. This buy-
and-hold policy shall not prevent the sale of a security to minimize loss of principal when an issuer
or backer suffers declining credit worthiness, when the liquidity needs of the portfolio require that a
security be sold, or when a sale/repurchase is fiscally advantageous based on market conditions
and fits the needs of the portfolio.
It is the City's policy to hold securities and other investments until maturity, thus avoiding the risk of
market value fluctuations with overall market interest rates. This buy-and-hold policy shall not
prevent the sale of a security to minimize loss of principal when an issuer or backer suffers declining
credit worthiness or when the liquidity needs of the City require that a security be sold.
The buy-and-hold policy requires that the City's investment portfolio be structured so that sufficient
liquid funds are available from maturing investments and other sources to meet all reasonably-
anticipated cash needs. To meet anticipated cash needs, it is essential that the Treasurer have
reliable, diligently prepared cash flow projections.
Annually, the Treasurer shall project the amount of funds not expected to be disbursed within ten
years. For FY 2017118 the amount of such funds is projected to be $20 million. Funds up to that
amount may be invested in Local Agency Obligations and California Local Agency Obligations
maturing between 3 and 10 years. For all other funds, investments are limited to five years
maximum maturity.
VI PRUDENCE and FIDUCIARY DUTY
The City shall follow California Government Code Title 5 regarding fiduciary duty and the Prudent
Investment Standard as follows:
53600.3.
Except as provided in subdivision (a) of Section 27000.3, all governing bodies of local agencies or
persons authorized to make investment decisions on behalf of those local agencies investing
public funds pursuant to this chapter are trustees and therefore fiduciaries subject to the prudent
investor standard. When investing, reinvesting, purchasing, acquiring, exchanging, selling, or
managing public funds, a trustee shall act with care, skill, prudence, and diligence under the
circumstances then prevailing, including, but not limited to, the general economic conditions and
the anticipated needs of the agency, that a prudent person acting in a like capacity and familiarity
with those matters would use in the conduct of funds of a like character and with like aims, to
safeguard the principal and maintain the liquidity needs of the agency. Within the limitations of this
Comment [RM6]: Changed to match
executive summary section, page 2
Comment [RM7]: Changed to follow
Government Code as opposed to Probate
Code. Overall definition of Prudent Investor
remains
7
section and considering individual investments as part of an overall strategy, investments may be
acquired as authorized by law
The City shall follow the Uniform Prudent Investor Act as adopted by the State of California in Probate
Code Sections 16045 through 16054.
Section 16053 sets forth the terms of a prudent person which are as follows: Investments shall be
made “using the judgment and care - under circumstances then prevailing - which persons of
prudence, discretion, and intelligence exercise in the professional management of their own
affairs, not for speculation, but for investment, considering the probable income as well as the
probable safety of their capital.”
VII AUTHORITY
Authority to manage the City's investment portfolio is derived from section 3.08 of the City's
Municipal Code. Management responsibility for the investment program is delegated to the City
Treasurer for a period of one year pursuant to the City Council's annual adoption of the Investment
Policy.
The City Treasurer shall establish written procedures for the operation of the investment program
consistent with the Investment Policy. Procedures should include reference to safekeeping, wire
8
transfer agreements, banking service contracts, and collateral/depository agreements. Such
procedures shall include explicit delegation of authority to persons responsible for investment
transactions. No person may engage in an investment transaction except as provided under the
terms of this Investment Policy and the procedures established by the City Treasurer. The City
Treasurer shall be responsible for all transactions undertaken and shall establish a system of controls
to regulate the activities of subordinate officials.
VIII ETHICS AND CONFLICTS OF INTEREST
The City Manager, City Treasurer and city employees involved in the City's banking and investment
process shall conduct the City's business in an ethical manner and refrain from any activity or
relationship that may be, or have the appearance of, a conflict of interest. Any questionable activity
or relationship shall be reported immediately and in compliance with the procedures set forth in
Section 1.40 - Conflicts of Interest and Acceptance of Gifts and other Gratuities of the City of La
Quinta Personnel Manual. Reporting must be made in accordance with the personnel policies of the
City and, until resolved, the officer or employee shall refrain from participating in the City's business
related to the matter.
The City Manager, City Treasurer and City employees may conduct personal business with banks,
brokers, and other financial institutions that are authorized to conduct business with the City
provided that the terms of the activity to the accountholder with the City are the same as those that
are available to the public in general.
IX AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS
The City Treasurer maintains a listing of financial institutions which are approved for direct
investment purposes. In addition, a list will also be maintained of approved broker/dealers selected
by credit worthiness.
1. Broker/Dealers who desire to become bidders for direct investment transactions must supply
the City with the following:
Current audited financial statements;
Proof of Financial Industry Regulatory Authority (FINRA) Certification;
Trading resolution;
Resume of Financial broker; and
Completion of the City of La Quinta Broker/Dealer questionnaire (see Appendix F) which contains
a certification of having read the City's Investment Policy.
The City Treasurer shall evaluate the documentation submitted by the broker/dealer and
independently verify existing reports on file for any firm and individual conducting investment
related business.
The City Treasurer will also contact the following agencies during the verification process:
Financial Industry Regulatory Authority (FINRA) Public Disclosure Report
File (1-800- 289-9999).
State of California Department of Corporations (1-916-445-3062).
The City Treasurer maintains a listing of financial institutions which are approved for
investment purposes. All Broker/Dealers and financial institutions that provide investment
services will be subject to City Council approval.
9
Each securities dealer shall provide monthly and quarterly reports filed pursuant to U.S.
Treasury Department regulations. Each mutual fund shall provide a prospectus and
statement of additional information.
2. Financial Institutions will be required to meet the following criteria in order to receive City
funds for deposit or investment (see Appendix E, "Listing of Approved Financial Institutions"):
a. Insurance - Public Funds shall be deposited only in financial institutions having
accounts insured by the Federal Deposit Insurance Corporation (FDIC).
b. Collateral- The amount of the City's deposits or investments not insured by the FDIC
shall be collateralized by securities with market values of 110%, or by mortgages with
market values 150%, of the amount of invested funds plus unpaid interest earnings.
c. Disclosure - Each financial institution maintaining invested funds in excess of the FDIC
insured amount shall furnish the City a copy of the most recent Call Report.
The City shall not invest in excess of the FDIC insured amount in banking institutions which do
not disclose to the city a current listing of securities pledged for collateralization in public
monies.
X PERMISSIBLE DEPOSITS AND INVESTMENTS
Permissible deposits and investments are summarized below. A more comprehensive list is included
in Appendix A.
Permissible Deposits and
Investments
City
Maximum
Allocation
(Footnote 1)
City
Restrictions
City
Maximum
Maturity
Checking & Savings Accounts (FDIC
Insured) & Sweep Accounts 85% Portfolio Sweep Account: U.S.
Treasuries and/or GSE's
Current/On
Demand
Interest bearing active bank
deposits - non FDIC insured
collateralized by 110% of eligible
securities
60% Portfolio
$40,000,000 per bank
Current /on
Demand
Certificate of Deposit (negotiable
and non-negotiable)
30 % Portfolio <= $250,000 including
interest per institution
5 years
U.S. Treasury Bills, Notes and
Bonds, and Government National
Mortgage Association (GNMA)
securities
100% Portfolio
<=$30,0000,000
maturing 3-5 Yrs.
5
years
U.S. Government Agency Securities
and Federal Government Securities
(except collateralized mortgage
obligations (CMO's) or structured
notes which contain embedded
rate options):
30% of Portfolio
combined
$10 million per purchase
Comment [RH8]: Eliminate chart here- data is
in the paragraphs
10
- Federal National Mortgage
Association (FNMA)
- Federal Home Loan Bank Notes &
Bonds (FHLB)
- Federal Farm Credit Bank (FFCB)
- Federal Home Loan Mortgage
Corporation (FHLMC)
$20,000,000 per issuer
$25,000,000 per issuer
$30,000,000 per issuer
$20,000,000 per issuer
5 years
5 years
5 years
5 years
Prime Commercial Paper
15% Portfolio $5,000,000 per issuer
maximum
90 days
Local Agency Investment Fund
(LAIF)
$5065,000,000 $5065,000,000
per account
Current/On
Demand
Money market mutual funds
regulated by the SEC that consist
only of US Treasury Securities or
Government Sponsored Enterprises
(GSE's)
20% Portfolio
Mutual fund must have
in excess of $500 million
in assets under
management or receive
the highest rating from
at least two of the three
major rating services
90 Days
Corporate Notes
10% Portfolio
$5,000,000 max per
issuer
AA or better rating
3 years 5
years
Corporate Notes - )
20% Portfolio $10,000,000 max per
issuer
3 years
Professionally Managed Account
10% Portfolio
Requires Approved RFP
3 years5
years
Local Agency Bonds/California
Agency Obligations
30%
<=$30,000,0000
10
years5
years
Long-Term Scale
S&P A1 AAA, AA+, AA, AA-, A+, A
Moody's P1 Aaa, Aa1, Aa2, Aa3, A1, A2
Fitch AAA, AA+, AA, AA-, A+, A
Checking. Savings. and Sweep Accounts - The City will only maintain checking, savings, and
sweep accounts with FDIC insured financial institutions. As authorized by the City Council, a
U.S. Treasury and/or U.S. Agency Securities Money Market Sweep Account may be maintained
in conjunction with the checking account.
In addition, the Treasurer may invest in an interest bearing active deposit account as
approved in Government Code Section 53632. The deposit account must be collateralized
with securities that are in accordance with Government Code Sections 53632.5(c). In
addition, the market value of the collateralized securities must be maintained in accordance
with 53652 (a), and be held by a custodian in accordance with the requirements of
Government Code Section 53656. The proposition of the City's share of the deposit account
shall be determined in accordance with Government Code Section 53658.
Certificates of Deposit (Negotiable and Non-negotiable) - As authorized in Government
Comment [RH9]: Consider making this same
dollar amount for all, or percentage of total
Comment [RH10]: Alternative to listing
amount at $65,000,000 would be to say “up to
statutory limits” or similar language
Comment [RM11]: For discussion- should we
increase?
11
Code Section 53601, local governments may invest up to 30% of their portfolios in
Certificates of Deposits and 30% in Negotiable Certificates of deposits. The City's policy is to
limit combined Non-Negotiable and Negotiable Certificates of Deposits to 30% of the overall
portfolio. Each CD is limited to the FDIC or NCUSIF limit of $250,000.
U.S. Treasury Bills. Notes. and Bonds and Government National Mortgage Associations
(GNMA) securities - The City may invest in U.S. Treasury bills, notes, and bonds and GNMA
securities directly issued and backed by the full faith and credit of the U.S. Government. The
City's Investment Policy provides for investments in U.S. Treasury issues and GNMA's of 100%
of the portfolio.
► The City's Investment Policy does not allow investments in state indebtedness.
U.S. Government Agency Securities and Federal Government Securities - The City may
invest in securities issued by U.S. Government instrumentalities and agencies (commonly
referred to as government sponsored enterprises or GSE's). These securities are not backed
by the full faith and credit of the U.S. Government. Publicly owned GSE's include Federal
National Mortgage Association (FNMA), Federal Home Loan Mortgage Corporation (FHLMC)
and Student Loan Marketing Association (SLMA). Non-publicly owned GSE's include the
Federal Home Loan Bank (FHLB), Federal Farm Credit Bank (FFCB), Federal Land Bank (FLB)
and Federal Intermediate Credit Bank (FICB).
The City's Investment Policy allows investment only in securities of FNMA, FHLMC, FHLB and
FFCB. For Fiscal Year 2017118, the maximum face amount per issuer is $20 million. for FNMA
and FHLMC, $25 million for FHLB and $30 million for FFCB. In addition, no more than 30% of
the portfolio surplus may be invested in all GSE's combined, with a maximum $10 million face
amount per purchase.
Prime Commercial Paper -As authorized in Government Code Section 53601(h), a portion of
the City's portfolio may be invested in commercial paper of the highest rating (A1 or P1) as
rated by Moody's or Standard and Poor's. There are a number of other qualifications
regarding investments in commercial paper based on the financial strength of the
corporation and the size of the investment. The City's Investment Policy permits investments
in commercial paper with the following limitations:
Maximum 15% of the portfolio;
Maximum maturity of 90 days; and
Maximum of $5 million per issuer.
Per state code, "Eligible commercial paper shall have a maximum maturity of 270 days or
less. Local agencies, other than counties or a city and county, may invest no more than 25
percent of their moneys in eligible commercial paper. Local agencies, other than counties or
city and county, may purchase no more than 10 percent of the outstanding commercial paper
of any single issuer.
Local Agency Investment Fund (LAIF) -As authorized in Government Code Section 16429.1
and by LAIF procedures, local government agencies are each authorized to invest a
maximum of $50 65 million per account in this investment program administered by the
California State Treasurer. The City Treasurer may not invest more than $50 65 million per
account in LAIF. The City's investment in LAIF is allowable as long as the average maturity of
its investment portfolio does not exceed two years, unless specific approval is authorized by
the City Council.
Comment [RM12]: For simplicity, recommend
$20 mil max or percentage based per issuer.
Also recommend noting rating minimum here as
well (AA)
12
Money Market Mutual Funds - As authorized in Government Code Section 53601(kl),
local agencies are authorized to invest in shares of beneficial interest issued by diversified
management companies (mutual funds) in an amount not to exceed 20% of the agency's
portfolio. There are a number of other qualifications and restrictions regarding allowable
investments in corporate notes and shares of beneficial interest issued by mutual funds
which include (1) attaining the highest ranking or the highest letter and numerical rating
provided by not less than two of the three largest nationally recognized rating services, or (2)
having an investment advisor registered with the Securities and Exchange Commission with
not less than five years' experience investing in the securities and obligations and with assets
under management in excess of five hundred million dollars ($500,000,000).
The City's Investment Policy only allows investments in mutual funds that invest in direct
issues of the U.S. Treasury and/or US Agency Securities with an average maturity of their
portfolio not exceeding 90 days and the City limits such investments to 20% of the portfolio
with the exception of bond proceeds with the fiscal agent which are subject to bond
indentures, not the City's Investment Policy.
Corporate Notes - As authorized in Government Code Section 53601 Uk), local agencies may
invest in corporate notes. The notes must be issued by corporations organized and operating
in the United States or by depository institutions licensed by the United States or any other
state and operating in the United States. The City's Investment Policy allows investment in
corporate notes authorized by the Government Code with the following limitations:
Maximum 10% of the portfolio;
Maturities shall not exceed three five years from date of purchase;
Eligible notes shall be regularly quoted and traded in the marketplace;
Eligible notes shall be rated "AA" or better; and
The maximum aggregate investment shall not exceed $5 million face amount
for each issuer.
This is more restrictive than the State code allowed amounts of 30% of the total portfolio with
maturities up to five years with no per-issuer limitations.
Professionally Managed Account(s)- The City Treasurer may place up to 10% of the portfolio
with a professional portfolio management firm ("PPMF"). The PPMF will be approved by the
City Council based upon the City Treasurer's recommendation pursuant to completion of a
request for proposal (RFP) as outlined in Appendix G. The PPMF shall have:
An established professional reputation for asset or investment management;
Knowledge and working familiarity with State and Federal laws governing and
restricting the investment of public funds;
Substantial experience providing investment management services to local public
agencies whose investment policies and portfolio size are similar to those of the City;
Professional liability (errors and omissions) insurance and fidelity bonding in such
amounts as are required by the City; and
Registration with the Securities and Exchange Commission under the Investment
Advisers Act of 1940.
Before engagement by the City and except as may be specifically waived or
revised, the PPMF shall commit to adhere to the provisions of the City's
Investment Policy with the following exceptions:
The PPMF may be granted the discretion to purchase and sell investment securities in accordance with Appendix I of this Investment Policy;
Comment [RM13]: Discuss. Should this be
higher?
13
The PPMF is not required to adhere to the buy-and-hold policy of the City's Investment Policy; and
The PPMF does not need City Manager or City Treasurer approval to make
permissible investments.
Local Agency Bonds and California Local Agency Obligations - The City may invest in
California local agency obligations pursuant to 56301(a) and 53301(e). 53601(a) pertains to
investing in bonds issued by a local agency, department, board, agency or authority of the
local agency. 53601(e) pertains to investing in bonds and other defined indebtedness of a
locaI agency or department, board, agency or authority of the local agency within the State of
California.
The City's Investment Policy limits investments in Local Agency Bonds and California Local
Agency obligations to 30% of the portfolio with up to a ten five year maximum maturity. In
addition, the Agency obligations must be invested in the long term rating of A, A2, A or better
by S&P, Moody's or Fitch.
In the case of an initial public offering, including refinancings, the Treasurer may purchase
directly from the Bond Underwriter. In the case of secondary issues, the Treasurer will rely on
the approved Broker/Dealers.
XI INVESTMENT POOLS
There are three (3) types of investment pools:
State-run pools (e.g., LAIF);
Pools that are operated by a political subdivision where allowed by law and the political subdivision is the trustee (e.g., County Pools); and
Pools that are operated for profit by third parties.
The City's Investment Policy permits investment only in pools authorized in Section X.
XII PAYMENT AND CUSTODY
The City shall engage qualified third party custodians to act in a fiduciary capacity to maintain
appropriate evidence of the City's ownership of securities and other eligible investments. Such
custodians shall disburse funds, received from the City for a purchase, to the broker, dealer or seller
only after receiving evidence that the City has legal, record ownership of the securities.
Even though ownership is evidenced in book-entry form rather than by actual certificates, this
procedure is commonly accepted as the delivery versus payment (DVP) method for the transfer of
securities.
XIII INTEREST EARNING DISTRIBUTION POLICY
Interest earnings are generated from pooled investments and specific investments. The following
provisions apply to the calculation and distribution of interest earnings.
1. Pooled Investments - It is the general policy of the City to pool all available operating cash of
14
the City of La Quinta, Successor Agency to the City of La Quinta Redevelopment Agency, La
Quinta Financing Authority, and La Quinta Housing Authority, and to allocate interest
earnings in the following order, as follows:
a. Payment to the General Fund of an amount equal to the total annual bank service
charges as incurred by the general fund for all operating funds as included in the
annual operating budget.
b. Payment to the General Fund of a management fee equal to 5% of the annual pooled
cash fund investment earnings.
c. Payment to each fund of an amount based on the average computed daily cash
balance included in the common portfolio for the earning period.
2. Specific Investments - Specific investments purchased by a fund shall incur all earnings and
expenses to that particular fund.
XIV INTERNAL CONTROLS AND INDEPENDENT AUDITOR
The City Treasurer shall establish a system of internal controls to accomplish the following objectives:
Safeguard assets;
The orderly and efficient conduct of its business, including adherence to management
policies;
Prevention or detection of errors and fraud;
The accuracy and completeness of accounting records; and
Timely preparation of reliable financial information.
While no internal control system, however elaborate, can guarantee absolute assurance that the
City's assets are safeguarded, it is the intent of the City's internal control to provide a reasonable
assurance that management of the investment function meets the City's objectives.
The internal controls shall address the following:
Control of collusion. Collusion is a situation where two or more employees are
working in conjunction to defraud their employer.
Separation of transaction authority from accounting and record keeping. By
separating the person who authorizes or performs the transaction from the people
who record or otherwise account for the transaction, a separation of duties is
achieved.
Custodial safekeeping. Securities purchased from any bank or dealer including
appropriate collateral (as defined by State Law) shall be placed with an independent
third party for custodial safekeeping.
Avoidance of physical delivery securities. Book entry securities are much easier to
transfer and account for since actual delivery of a document never takes place.
Delivered securities must be properly safeguarded against loss or destruction. The
potential for fraud and loss increases with physically delivered securities.
Clear delegation of authority to subordinate staff members. Subordinate staff
members must have a clear understanding of their authority and responsibilities to
avoid improper actions. Clear delegation of authority also preserves the internal
control structure that is contingent on the various staff positions and their respective
responsibilities as outlined in the Segregation of Major Investment Responsibilities
15
appendices.
Written confirmation of telephone transactions for investments and wire transfers.
Due to the potential for error and improprieties arising from telephone transactions,
all telephone transactions shall be supported by written communications or
electronic confirmations and approved by the appropriate person. Written
communications may be via fax or email if on letterhead and the safekeeping
institution has a list of authorized signatures. Fax correspondence must be
supported by evidence of verbal or written follow-up.
Development of a wire transfer agreement with the City's bank and third party
custodian. This agreement should outline the various controls, security provisions,
and delineate responsibilities of each party making and receiving wire transfers.
The system of internal controls developed by the City, shall be reviewed annually by the independent
auditor in connection with the annual audit of the City's Financial Statements. The independent
auditor's letter on internal control over financial reporting and compliance as it pertains to cash and
investments, if any, shall be directed to the City Manager who will direct the City Treasurer to provide
a written response to the independent auditor's letter. The auditor's letter, as it pertains, to cash and
investment activities and the City Treasurer's response shall be provided to the City's Financial
Advisory Commission for their consideration. Following the completion of each annual audit, the
independent auditor shall meet with the Financial Advisory Commission and discuss the auditing
procedures performed and the review of internal controls for cash and investment activities. See
Appendix D, "Segregation of Major Investment Responsibilities."
XV REPORTING STANDARDS
The City Treasurer shall submit a monthly Treasurers Report to the City Council and the Financial
Advisory Commission that includes all cash and investments under the authority of the Treasurer.
The Treasurer's Report shall summarize cash and investment activity and changes in balances and
include the following:
A certification by the City Treasurer;
A listing of purchases and sales/maturities of investments;
Cash and Investments categorized by authorized investments, except for LAIF which
will be provided quarterly and show yield and maturity;
Comparison of month end actual holdings to Investment Policy limitations;
Balance Sheet;
Distribution of cash and investment balances by fund;
A two-year list of historical interest rates.
XVI FINANCIAL ASSETS AND INVESTMENT ACTIVITY NOT SUBJECT TO THIS POLICY
The City's Investment Policy does not apply to the following:
Cash and Investments raised from Conduit Debt Financing;
Funds held in trust in the City's name in pension or other post-retirement benefit
programs;
16
Cash and Investments held in lieu of retention by banks or other financial
institutions for construction projects; and
Short or long term loans made to other entities by the City or Agency,
Short term (Due to/from) or long term (Advances from/to) obligations made either
between the City and its funds or between the City and Agency.
XVII INVESTMENT OF BOND PROCEEDS
The City's Investment Policy shall not govern bond proceeds and bond reserve fund investments.
California Code Section 5922 (d) governs the investment of bond proceeds and reserve funds in
accordance with bond indenture provisions.
Arbitrage Requirement - The US Tax Reform Act of 1986 requires the City to perform arbitrage
calculations as required and return excess earnings to the US Treasury from investments of proceeds
of bond issues sold after the effective date of this law. These arbitrage calculations may be
contracted with an outside source to provide the necessary technical assistance to comply with this
regulation. Investable funds subject to the 1986 Tax Reform Act will be kept segregated from other
funds and records will be kept in a fashion to facilitate the calculations.
The City's investment position relative to the new arbitrage restrictions is to continue pursuing the
maximum yield on applicable investments while ensuring the safety of capital and liquidity. It is the
City's position to continue maximization of yield and to rebate excess earnings, if necessary.
XVIII FINANCIAL ADVISORY COMMISSION - CITY OF LA QUINTA
The Financial Advisory Commission (FAC) is a standing board composed of seven members from the
public that are appointed by the City Council. Background information will be requested and
potential candidates must agree to a background check and verification. On an annual basis, in
conjunction with the Political Reform Act disclosure statutes, or at any time if a change in
circumstances warrants, each board member will provide the City Council with a disclosure
statement which identifies any matters that have a bearing on the appropriateness of that member's
service on the board. All board members shall report annually every June to the City Clerk on Form
700, Statement of Economic Interests, any activities, interests, or relationships that may be, or have
the appearance of, a conflict of interest.
The FAC must meet at least quarterly to:
Review at least annually the City's Investment Policy and recommend appropriate changes;
Review at least quarterly the treasury report and note compliance with the Investment Policy
as well as adequacy of cash and investments for anticipated obligations;
Receive and consider other reports provided by the City Treasurer;
Meet with the independent auditor after completion of the annual audit of the City's financial statements, and receive and consider the auditor's comments on auditing procedures, internal controls and findings for cash and investment activities; and
Review at least annually the revenue derived from the one percent (1%) transactions and use tax instituted by voters in November 2016 to ensure these funds are used to provide services, programs, and capital projects in the city of LaQuinta
Serve as a resource for the City Treasurer on matters such as proposed investments, internal controls,
use of or change of financial institutions, custodians, brokers and dealers.
The FAC will report to the City Council after each meeting either in person or through correspondence
at a regular City Council meeting. See Appendix B: "Financial Advisory Commission Provisions."
17
XIX INVESTMENT POLICY ADOPTION
The City's Investment Policy will be reviewed annually by the City's Financial Advisory Commission
and the City Treasurer. The Financial Advisory Commission will forward the Investment Policy with
any revisions to the City Manager and City Attorney for their review and comment. A joint meeting
will be held with the Financial Advisory Commission, City Manager, City Attorney, and City Treasurer
to review the Investment Policy and any comments prior to submission to the City Council for their
consideration. The Investment Policy shall be adopted by resolution of the City Council annually
before the end of June of each year.
17
CITY OF LA QUINTA
SUMMARY OF PERMISSIBLE DEPOSITS AND INVESTMENTS
Appendix A
The City Treasurer will be permitted to invest in the following types of investments subject to the maximum percentage allocation limits and bid
process requirements. All maturities must be less than or equal to the maximum maturity allowed.
Bid
Proces
s
Permissible Deposits and Investments
City
Maximum
Allocatio
n
(Footnote 1)
State
Maximum
Allocation
City
Restrictions
City
Maximum
Maturity
Credit
Quality Surplus
Funds
1 Checking & Savings Accounts (FDIC Insured)
& Sweep Accounts
85%
Portfolio
100%
Portfolio
Sweep Account: U.S. Treasuries
and/or GSE's
Current/On
Demand FDIC Insured
2
Interest bearing active bank deposits - non
FDIC insured collateralized by 110% of
eligible securities
60%
Portfolio
100%
Portfolio
$40,000,000 per bank
Current /on
Demand
Non-FDIC
Insured
2 Certificate of Deposit (Negotiable and Non-
Negotiable)
30%
Portfolio 60 % Portfolio <= $250,000 including interest
per institution 5 years FDIC or
NCUSIF
Insured
3
U.S. Treasury Bills, Notes and Bonds, and
Government National Mortgage Association
(GNMA) securities
100%
Portfolio
100%
Portfolio
<=$30,0000,000 maturing 3-5
Yrs.
3 5
years
3
U.S. Government Agency Securities and
Federal Government Securities (except
collateralized mortgage obligations (CMO's)
or structured notes which contain
embedded rate options):
- Federal National Mortgage Association
(FNMA)
- Federal Home Loan Bank Notes & Bonds
(FHLB)
- Federal Farm Credit Bank (FFCB)
- Federal Home Loan Mortgage Corporation
(FHLMC)
Per
issuer30%
of Portfolio:
$20,000,0
00
$25,000,0
00
$30,000,0
00
$20,000,0
00
30% Portfolio
$10,000,000 maximum
per single purchase.
$20,000,000 combined
maximum per issuer
5 years
5 years
5 years
5 years
AA or better
18
3
Prime Commercial Paper including
Temporary Liquidity Guarantee Program
(TLGP)
15%
Portfolio
25% Portfolio
270 Days
$5,000,000 per issuer maximum
90 days
S&P (A-1)
Moody's (P-
1)
4
Local Agency Investment Fund (LAIF) $650,000,
0 00
$650,000,000
per account
Current/On
Demand
5
Money market mutual funds regulated by
the SEC that consist only of US Treasury
Securities or GSE's and maintain a par value
of $1 per share
20%
Portfolio
20% Portfolio
Mutual fund must have in excess
of $500 million in assets under
management
90 Days
Rated AAA
by 2 of 3
agencies;
assets>=$50
0 million;
SEC reg'd >5
Yrs.
6
Corporate Notes 10%
Portfolio
30% Portfolio
$5,000,000 max per issuer
3 5 years S & Prated
AA or better
6 Corporate Notes - Temporary Liquidity
Guarantee Program (TLGP)
20%
Portfolio
30% Portfolio
$10,000,000 max per issuer
3 years S&P rated
AA or better.
7
Professionally Managed Account
10%
Portfolio
100%
Portfolio
Requires Approved RFP
3 years
SEC Reg'd;
E&O, Fidelity
Insured
8
Local Agency Bonds/California Agency
Obligations
30%
30%
<=$30,000,0000
10 5 years
At least long
term "A, A2,
A" rating
Comment [RM14]: See previous notes;
discuss
19
Bid
Process
Unauthorized Investments
Appendix A (continued)
Periodically conduct a bid process for banking and/or custodian
services. Since banking services and custodian services are so
closely related it isanticipated that the bid process would include the
scope of both services.
1 The financial institutions can be either state or federally chartered and must be insured by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Share Insurance Fund (NCUSIF).
At least two bids from broker/dealers that qualify under Securities and
2 Exchange Commission Rule 15C3-1 listed on the "Listing of Approved
Financial Institutions" in the appendices.
3 City Council Approval.
The City Treasurer will not be permitted to invest in the
following types of investments (see Footnote 2 and "State
Code Permitted Deposits And Investments Not Authorized By
The City's Investment Policy", below).
- Repurchase Agreements
- Bankers Acceptances
- Mutual Funds other than money market mutual funds
- Preferred and Common Stock
- State Indebtedness
- Asset Backed Securities
- Reverse Repurchase Agreements
- Derivatives
The above list of unauthorized deposits and investments is
not meant to be all-inclusive. Only those deposits and
investments listed in the "Permissible Deposits and
Investments" section of the Policy are permissible.
Money Market mutual funds must comply with Government Code Section
4 53601(k). The fund must be registered by the SEC and must include
marking the portfolio to market daily.
At least two bids from broker/dealers that qualify under Securities and
5 Exchange Commission Rule 15C3-1 listed on the "Listing of Approved
Financial Institutions" in the appendices.
The professional portfolio management firm (PPMF) will be approved by
6 the City Council based upon the City Treasurer's recommendation pursuant to completion of a request for proposal (RFP) as outlined in the
appendices. See also Footnote 2.
7 Initial offerings the Treasurer may purchase directly from Bond Underwriter, secondary issues follow bid process 3.
20
Footnote
1
Footnote
2
The City has imposed a maximum limitation based upon the total portfolio of investments. Total portfolio investments are all cash and
investments, including bond proceeds. In addition, the State has adopted limits on the investment of surplus funds.
The City may engage the services of a professional portfolio management firm which may invest in Bankers Acceptances, Mutual Funds, and
Asset Backed Securities not otherwise permissible under the City's Investment Policy.
*************Alternative to landscaped pages is pictured below in portrait style**********************
21
Appendix A
Bid Process
1 - Periodically conduct a bid process for banking and/or custodian services. Since they are closely related, it is anticipated that a
single bid process would scope both services.
2 - The financial institutions can be either state or federally chartered and must be insured by the Federal Deposit Insurance
Corporation (FDIC) or the National Credit Union share Insurance Fund (NCUSIF)
Bid
Process
(see
below)
Permissible Deposits and
Investments
City
Maximum
Allocation
State
Maximum
Allocation City Restrictions
City Maximum
Maturity
Credit
Quality
1
Checking & Savings Accounts (FDIC
Insured) & Sweep Accounts
85% of
Portfolio
100% of
Portfolio Sweep Account: U.S. Treasuries and/or GSE's
Current/On
Demand
FDIC
Insured
2
Interest bearing active bank
deposits - non FDIC insured
collateralized by 110% of eligible
securities
60% of
Portfolio
100% of
Portfolio $40,000,000 per bank
Current /on
Demand
Non-FDIC
Insured
2
Certificate of Deposit (Negotiable
and Non-Negotiable)
30% of
Portfolio
60% of
Portfolio
<=$250,000 (principle plus interest) per
institution 5 years
FDIC or
NCUSIF
Insured
3
U.S. Treasury Bills, Notes and Bonds,
and Government National Mortgage
Association (GNMA) securities
100% of
Portfolio
100% of
Portfolio <=$30,0000,000 maturing 3-5 Yrs.5 years
Backed by
US Gov't
3
U.S. Government Agency Securities
and Federal Government Securities
from the following:
- Federal National Mortgage
Association (FNMA)
- Federal Home Loan Bank Notes &
Bonds (FHLB)
- Federal Farm Credit Bank (FFCB)
- Federal Home Loan Mortgage
Corporation (FHLMC)30% of
Portfolio
30% of
Portfolio
$10,000,000 maximum per single purchase.
$20,000,000 combined maximum per issuer.
No Collaterallized Mortgage Obligations
(CMO's) or structured notes with embedded
rate options allowed.5 years
AA or
better
3 Prime Commercial Paper
15% of
Portfolio
25% of
Portfolio
$5,000,000 per issuer maximum.
Maximum 270 days maturity.90 days
S&P A-1
Moody's P-
1
4
Local Agency Investment Fund
(LAIF)$65,000,000 $65,000,000 per account
Current/On
Demand
5
Money market mutual funds
regulated by the SEC
20% of
Portfolio
20% of
Portfolio
Mutual fund must have in excess of $500
million in assets under management, must
only invest in US Treasury and US Agency
Securities with average maturity not to
exceed 90 days, maintain a PAR value of $1
per share an investment advisor registered
with the SEC.90 Days
Highest
ranking
by 2 of 3
agencies
3 Corporate Notes
10% of
Portfolio
30% of
Portfolio $5,000,000 maximum per issuer.5 years
AA or
better
6 Professionally Managed Account
10% of
Portfolio
100% of
Portfolio
Requires Approved RFP; registered with SEC;
professional liability insurance and fidelity
bonding 5 years
7
Local Agency Bonds/California
Agency Obligations
30% of
Portfolio
30% of
Portfolio <=$30,000,000 5 years
A, A2 or
better
Summary of Permissible Deposits and Investments - City
22
3 - At least two bids from broker/dealers that qualify under the Securities and Exchange Commission Rule 15C3-1 listed on the
"Listing of Approved Financial Institutions" in the appendices.
4 - City Council approval
5 - Money Market mutual funds must comply with Government Code Section 53601(k). The fund must be registered by the SEC
and must include daily mark to market pricing.
6 - The professional portfolio management firm (PPFM) will be approved be the City Council based upon the City Treasurer's
recommendation pursuant to completion of a request for proposal (RFP) as outlined in the appendices.
7 - Initial offerings the Treasurer may purchase directly from Bond Underwriter, secondary issues follow bid process 3.
Unauthorized Investments
The City Treasurer will not be permitted to invest in the following types of investments: repurchase agreements; bankers
acceptances; mutual funds other than money market mutual funds; preferred and common stock; state indebtedness; asset
backed securities; reverse repurchase agreements; derivitives. Note that this list is not meant to be all-inclusive. Only those
deposits and investments listed in the "Permissible Deposits and Investment" section of the Policy are permissible.
Notes
Permissible Investments pursuant to California Government Code Title 5, Division 2, Part 1, Chapter 4, Article 1, Sections 53600-
53610 and Article 2, Sections 53630-53686
The City has imposed maximum limitations based upon the total portfolio of investments (all cash and investments, including
bond proceeds) which may be more stringent than the State code allows.
23
Appendix B
Chapter 2.70 FINANCIAL ADVISORY COMMISSION
Sections:
2.70.010
2.70.020
2.70.030
2.70.040
General rules regarding the financial advisory commission.
Number of members.
Qualifications of members.
Powers and duties.
2.70.010 General rules regarding the financial advisory commission.
Except as set out below, see Chapter 2.06 for general provisions.
2.70.020 Number of members.
The financial advisory commission ("FAC") shall initially consist of seven members appointed by, and
serving at the will of the city council. The city council may increase or decrease the number of
members from time to time but in no event shall the membership exceed nine members or be less
than five members.
2.70.030 Qualifications of members.
A. In addition to the qualification requirements set forth in Section 2.06.040 of this code, a minimum
of three of the members shall be finance professionals and shall have a verifiable background in
finance and/or securities, preferably with knowledge and/or experience in markets, financial controls
and accounting for securities.
B. For those applying for the professional position, background information will be requested and
potential candidates must agree to a background check and verification by the city manager or
designee.
2.70.040 Powers and duties.
A. The principal functions of the FAC are:
1. Review at least annually the city's investment policy and recommend appropriate
changes;
2. Review at least quarterly the treasury report and note compliance with the investment
policy and adequacy of cash and investments for anticipated obligations;
3. Receive and consider other reports provided by the city treasurer;
4. Meet with the independent auditor after completion of the annual audit of the city's
financial statements, and receive and consider the auditor's comments on auditing procedures,
internal controls, and findings for cash and investment activities;
5. Review at least annually the revenue derived from the one percent (1%) transactions and
use tax instituted by voters in November 2016 to ensure these funds are used to provide services,
programs and capital projects in the city of La Quinta.
6. Serve as a resource for the city treasurer on matters such as proposed investments,
internal controls, use of or change of financial institutions, custodians, brokers and dealers.
B. The FAC will report to the city council after each meeting either in person or through
correspondence at a regular city council meeting.
2.70.050 References to the Investment Advisory Board.
If any other chapter(s) or section(s) in this code refers to the Investment Advisory Board, that
chapter(s) or section(s) shall be deemed to refer to the Financial Advisory Commission established by
the ordinance amending chapter 2.70 of this code.
24
Appendix C
City of La Quinta Municipal Code
Chapter 3.08
INVESTMENT OF MONEYS AND FUNDS
Sections:
3.08.010 Investment of city moneys and deposit of securities.
3.08.020 Authorized investments.
3.08.030 Sales of securities.
3.08.040 City bonds.
3.08.050 Reports.
3.08.060 Deposits of securities.
3.08.070 Trust fund administration.
3.08.010 Investment of city moneys and deposit of securities.
Pursuant to, and in accordance with, and to the extent allowed by Sections 53607 and 53608 of
the California Government Code, the authority to invest and reinvest moneys of the city, to sell or
exchange securities, and to deposit them and provide for their safekeeping, is delegated to the
city treasurer, which, for purposes of this chapter, is defined in Section 2.12.010 of this code. (Ord.
529 § 1, 2015; Ord. 2 § 1, 1982)
3.08.020 Authorized investments.
Pursuant to the delegation of authority in Section 3.08.010, the city treasurer is authorized to
purchase, at their original sale or after they have been issued, securities which are permissible
investments under the city council adopted city investment policy and any provision of state law
relating to the investing of general city funds, including, but not limited to, Sections 53601 and
53635 of the California Government Code, as said sections now read or may hereafter be
amended, from moneys in the city treasurer's custody which are not required for the immediate
necessities of the city and as he or she may deem wise and expedient, and to sell or exchange for
other eligible securities and reinvest the proceeds of the securities so purchased. (Ord. 529 § 1,
2015; Ord. 2 § 1, 1982)
3.08.030 Sales of Securities.
From time to time the city treasurer shall sell the securities in which city moneys have been
invested pursuant to this chapter, so that the proceeds may, as appropriate, be applied to the
purchase for which the original purchase money may have been designated or placed in the city
treasury. (Ord.2 § 1 (part),
3.08.040 City bonds.
Bonds issued by the city and purchased pursuant to this chapter may be cancelled either in
satisfaction of sinking fund obligations or otherwise if proper and appropriate; provided, however,
that the bonds may be held uncancelled and while so held may be resold. (Ord. 2 § 1 (part), 1982)
3.08.050 Reports.
The city treasurer shall make a quarterly report to the city council of all investments made
pursuant to the authority delegated in this chapter and as permitted by Section 53646(b)(1) of
25
the Government Code. (Ord. 529 § 1, 2015; Ord. 2 § 1, 1982)
3.08.060 Deposits of securities.
Pursuant to the delegation of authority in Section 3.08.010, the city treasurer is authorized to
deposit for safekeeping, the securities in which city moneys have been invested pursuant to this
chapter, in any institution or depository authorized by the city council adopted investment policy
and terms of any state law, including, but not limited to, Section 53608 of the Government Code,
as it now reads or may hereafter be amended. In accordance with said section, the city treasurer
shall take from the institution or depository a receipt for the securities so deposited and shall not
be responsible for the securities delivered to and receipted for by the institution or depository
until they are withdrawn therefrom by the city treasurer. (Ord. 529 § 1, 2015; Ord. 2 § 1, 1982)
3.08.070 Trust fund administration.
Any departmental trust fund established by the city council pursuant to Section 36523 of the
Government Code shall be administered by the city treasurer in accordance with Section 36523 and
36524 of the Government code and any other applicable provisions of law. (Ord. 2 § 1 (, 1982)
25
Appendix D
SEGREGATION OF MAJOR INVESTMENT RESPONSIBILITIES
Function
Develop and Recommend Modifications
to City's Formal Investment Policy
Review City's Investment Policy
and Recommend City Council Action
Adopt Formal Investment Policy
Implement Formal Investment Policy
Review Financial Institutions & Select Investments
Acknowledge Investment Selections
Execute Investment Transactions
Confirm Wires (if applicable)
Responsible Parties
Financial Advisory Commission
and City Treasurer
City Manager
and City Attorney
City Council
City Treasurer
City Treasurer or Financial
Services Analyst
City Manager or his/her
designee
City Treasurer or City Manager
Senior Accountant or
Financial Services Analyst
Record Investment Transactions in City's Senior Accountant or
Accounting Records
Investment Verification (match broker confirmation
to City investment records)
Reconcile Investment Records
to Accounting Records and Bank Statements
Reconcile Investment Records
to Treasurers Report of Investments
Security of Investments at City
Security of Investments outside City
Review Internal Control Procedures
Accountant
City Treasurer and Financial
Services Analyst
Financial Services Analyst
Senior Accountant or Financial
Services Analyst
Senior Accountant or
Management Assistant
Third Party Custodian
External Auditor
27
Appendix E
LISTING OF APPROVED FINANCIAL INSTITUTIONS
1. Banking Services
2. Custodian Services
3. Deferred Compensation
4. Broker/Dealer Services
5. Government Pool
Wells Fargo Bank, Government Services, Los Angeles,
CA (Banking Services)
Rabobank N.A., Government Banking Group, Roseville,
CA (Collateralized Bank Deposits)
Bank of New York/Mellon/Pershing
International City/County Management Association
Retirement Corporation
Bank of America Securities/Merrill Lynch
Morgan Stanley
CitiGroup
First Empire Securities
State of California Local Agency Investment Fund
6. Bond Trustees 1996 Lease Revenue Bonds - US Bank
1998 RDA Project Area 1&2 - US Bank
2001 RDA Project Area 1 - US Bank
2002 RDA Project Area 1 - US Bank
2003 RDA Project Area 1 - US Bank
2004 Local Agency Rev - US Bank
2013 Successor Agency- US Bank
2016 Successor Agency to the LQ RDA
Assessment Districts - US Bank
No Changes to this listing may be made without City Council approval
28
Appendix E
Listing of Approved Financial Institutions
Banking Services Wells Fargo Bank, Government Services, Los Angeles,
CA (Banking Services)
Rabobank N.A., Government Banking Group, Roseville,
CA (Collateralized Bank Deposits)
Custodian Services The Bank of New York Mellon/Pershing LLC
Deferred Compensation International City/County Management Association
(ICCMA) Retirement Corporation
Broker/Dealer Services Bank of America Securities/Merrill Lynch
Morgan Stanley
CitiGroup
First Empire Securities
Government Pool
State of California Local Agency Investment Fund
(LAIF)
Bond Trustee US Bank (1)
Other Post Employment Benefits (OPEB) Trust California Employers' Retirement Benefits Trust
(CERBT)/CalPERS
(1) US Bank is the fiscal agent for all of the following bonds: 1996 Lease Revenue Bonds; 1998 RDA Project
Area 1&2; 2001 RDA Project Area 1; 2002 RDA Project Area 1; 2003 RDA Project Area 1; 2004 Local Agency
Revenue; 2013 Successor Agency; and 2016 Successor Agency to the La Quinta RDA Assessment Districts.
27
Telephone:(_) _
Telephone: _
Appendix F
BROKER/DEALER QUESTIONNAIRE AND CERTIFICATION
1. Name affirm:---------------------------
2. Address:-----------------------------
3. Telephone:(_) ( _
4. Broker's Representative to the City (attach resume): Name:------------------------------ Title:------------------------------
5. Manager/Partner-in-charge (attach resume): Name:------------------------------ Title:------------------------------
6. List all personnel who will be trading with or quoting securities to City employees (attach
resume) Name:------------------------------ Title:------------------------------
7. Which of the above personnel have read the City's Investment Policy?
8. Which instruments are offered regularly by your local office? (Must equal 100%)
% U.S. Treasuries % Repos
% BA's
% Commercial Paper
%CD's
% Mutual Funds
% Reverse Repos
% CMO's
% Derivatives
% Stocks/Equities
% Agencies (specify): % Other (specify):
9. References -- Please identify your most directly comparable public sector clients in our
geographical area.
Entity
Contact --------
Entity
Contact --------
Telephone ( ) _ Telephone (_) _
Comment [RH15]: Propose eliminating- this
is an internal document
28
Telephone:(_) ( ) _
Client Since------- Client Since
29
10. Have any of your clients ever sustained a loss on a securities transaction arising from a
misunderstanding or misrepresentation of the risk characteristics of the instrument? If so,
explain.
11. Has your firm or your local office ever been subject to a regulatory or state/ federal
agency investigation for alleged improper, fraudulent, disreputable or unfair activities
related to the sale of securities? Have any of your employees been so investigated? If so,
explain.
12. Has a client ever claimed in writing that you were responsible for an investment loss?
Yes No Ifyes, please provide action taken _
Has a client ever claimed in writing that your firm was responsible for an investment loss?
Yes No Ifyes, please provide action taken _
Do you have any current or pending complaints that are unreported to FINRA?
Yes No Ifyes, please provide action taken _
Does your firm have any current, or pending complaints that are unreported to FINRA?
Yes No Ifyes, please provide action taken _
13. Explain your clearing and safekeeping procedures, custody and delivery process.
Who audits these fiduciary responsibilities?
Latest Audit Report Date _
14. How many and what percentage of your transactions failed?
Last month? % $ _
30
Last year?
--- % $-----
15. Describe the method your firm would use to establish capital trading limits for the City of La
Quinta.------------------------------
16. Isyour firm a member in the S.I.P.C. insurance program? Yes No _
If yes, explain primary and excess coverage and carriers. _
17. What portfolio information, if any, do you require from your clients? _
18. What reports and transaction confirmations or any other research publications will the City
receive?------------------------------
19. Does your firm offer investment training to your clients? Yes No _
20. Does your firm have professional liability insurance? Yes No _
If yes, please provide the insurance carrier, limits and expiration date. _
21. Please list your FINRA/NASD Registration Number _
22. Do you have any relatives who work at the City of La Quinta?
Yes No If yes, Name and Department _
23.
24.
Do you maintain an office in California?
Do you maintain an office in La Quinta or Riverside County?
Yes---
Yes---
No----
No----
25. Please enclose the following: ► Latest audited financial statements; ► Samples of reports, transaction confirmations and any other research/publications the City will receive; ► Samples of research reports and/or publications that your firm regularly provides to clients; and ► Complete schedule of fees and charges for various transactions.
30
***CERTIFICATION***
I hereby certify that I have personally read the Statement of Investment Policy of the City of La
Quinta, and have implemented reasonable procedures and a system of controls designed to preclude
imprudent investment activities arising out of transactions conducted between our firm and the City
of La Quinta. All sales personnel will be routinely informed of the City's investment objectives,
horizons, outlooks, strategies and risk constraints whenever we are so advised by the City. We pledge
to exercise due diligence in informing the City of La Quinta of all foreseeable risks associated with
financial transactions conducted with our firm.
By signing this document the City of La Quinta is authorized to conduct any and all background
checks.
Under penalties of perjury, the responses to this questionnaire are true and accurate to the best of
my knowledge.
Broker Representative _
Date------------Title--------------------
Sales Manager and/or Managing Partner
Date------------- Title--------------------
31
Appendix G
Request for Proposals
Professional Portfolio Management Firm
City of La Quinta, CA
The City of La Quinta, CA is soliciting Requests for Proposals (RFP) from interested firms for the
provision of a discretionary investment management services for City of La Quinta, CA. The portfolio
to be managed of the invested assets is will be approximately 10% of the City's investment portfolio
and will be invested between O - 3 years.
The investment of City of La Quinta, CA's funds is guided by the applicable State statutes and the City
of La Quinta, CA's investment policy. A copy of the investment policy is attached for your
information.
Questions regarding this RFP should be directed to:
City of:
Title:
Address:
City, State, Zip Code:
Phone Number:
La Quinta, CA
Finance Director/Treasurer
78-495 Calle Tampico
La Quinta, CA 92253
(760)777-7000
I. CRITERIA FOR EVALUATION AND SELECTION
■ Experience of the firm in providing services to public sector entities of similar size and
with similar investment objectives;
■ Professional experience and qualifications of the individuals assigned to the account;
■ Portfolio management resources, investment philosophy and approach;
■ Responsiveness to the RFP, communicating an understanding of the overall program
and services required;
■ Reporting capabilities;
■ Fees.
II. SELECTION TIMETABLE
A. [Month, Day and Year]
B. [Month, Day and Year]
C. [Month, Day and Year]
Proposals due by [Time] PST.
Proposals evaluated: to be determined
[City of La Quinta, CA] [Board/Council] approves selection
and awards contract.
III. FORMAT FOR PROPOSALS
Please format your response to this RFP in the following manner:
A. Organization
1. Describe your organization, date founded, ownership and other business affiliations.
Provide number and location of affiliated offices. Specify the number of years your
organization has provided investment management service.
Comment [RH16]: Propose eliminating- this
is an internal document, and subject to revision
if/when an RFP is issued
32
2. Describe your firm's revenue sources (e.g., investment management, institutional
research, etc.) and comment on your firm's financial condition.
3. Within the past three years, have there been any significant developments in your
organization (e.g., changes in ownership, new business ventures)? Do you expect any
changes in the near future?
4. Describe any U.S. Securities and Exchange Commission (SEC) censures or litigation
involving your organization, any officer, or employee at any time in the last ten years.
5. Describe the firm's fiduciary liability and/or errors and omissions insurance coverage.
Include dollar amount of coverage.
B. Personnel
1. Identify the number of professionals employed by your firm by classification.
2. Provide an organization chart showing function, positions, and titles of all the
professionals in your organization.
3. Provide biographical information on investment professionals that will be involved in
the decision-making process for our portfolio, including number of years at your firm.
Identify the person who will be the primary portfolio manager assigned to the
account.
4. Describe your firm's compensation policies for investment professionals and address
any incentive compensation programs.
C. Assets Under Management
1. Summarize your institutional investment management asset totals by category for your
latest reporting period in the following table:
Number of
Clients
Operating Funds
Number of
Clients
Other Restrictive
Funds
Governmental $ _ $ _
Governmental Pension $ _ N/A N/A
Non Governmental
Pension
Corporate
High Net Worth Client
$ _
$ _
$ _
N/A N/A
N/A N/A
N/A N/A
33
Endowmental/Foun-
dation _ N/A N/A
2. Provide the number of separate accounts whose portfolios consist of operating
funds.
3. List in the following table the percentage by market value of aggregate assets
under all governmental accounts under management for your latest reporting
period:
Type of Asset
U.S. Treasury securities
Federal Agency obligations
Corporate securities rated AAA-AA
Corporate securities rated A
Corporate securities rated BBB or lower
Other (specify )
Percent by Market
Value
4. Describe the procedures that your firm has in place to address the potential or
actual credit downgrade of an issuer and to disclose and advise a client of the
situation.
5. Provide data on account/asset growth over the past five years. Indicate the number
of government accounts gained and the number of government accounts lost.
6. List your five governmental largest clients. Identify those that are exclusively
operating fund relationships and/or those that are other relationships (e.g., bond fund,
retirement fund).
7. Provide a copy of the firm's Form ADV, Parts I and II (including all schedules).
8. Provide proof of State of California Registration, if your firm is not eligible for SEC
registration.
9. Provide a sample contract for services.
D. Philosophy/ Approach
1. Describe your firm's investment philosophy for public clients, including your firm's
philosophy regarding average duration, maturity, investment types, credit quality, and
yield.
2. Describe in detail your investment process, as you would apply it to City of La Quinta,
CA's portfolio.
3. What are the primary strategies for adding value to portfolios?
4. Describe the process you would recommend for establishing the investment
objectives and constraints for this account.
$
34
5. Describe in detail your process of credit risk management, including how you analyze
credit quality, monitor credits on an ongoing basis, and report credit to governmental
accounts.
6. Describe your firm's trading methodology.
7. Describe your firm's decision-making process in terms of structure, committees,
membership, meeting frequency, responsibilities, integration of research ideas, and
portfolio management.
8. Describe your research capabilities as they would pertain to governmental accounts.
What types of analysis do you use?
9. Describe the firm's approach to managing relationships with the broker-dealer
community.
E. Portfolio Management
1. Are portfolios managed by teams or by one individual?
2. What is the average number of accounts handled per manager?
3. Which professional staff member will be the primary client contact for City of La
Quinta, CA?
4. How frequently are you willing to meet with us?
5. Describe procedures used to ensure that portfolios comply with client investment
objectives, policies, and bond resolutions.
F. Fees Charged
1. Please include a copy of your firm's fee schedule applicable to this RFP.
2. Identify any expenses that would not be covered through this fee structure and
would be required in order to implement the firm's program.
3. Is there a minimum annual fee?
G. Performance Reporting
1. Please report on all accounts under $100 million.
2. Please provide performance history for governmental accounts for the last five
years.
3. Please provide risk measurements for governmental accounts for the last five
years.
4. Indicate whether your returns are calculated and compiled in accordance with the
Association for Investment Management and Research (AIMR/CFA Institute)
35
standards.
5. Do your reports conform to the State of California reporting standards? Are you
willing to customize your reports to meet our specifications?
6. How will you notify us of investment transactions?
7. Are confirmations of investment transactions sent directly by the broker/dealer to the
client?
8. Do your reports include rating information on investments which is required by
GASB 40?
H. References
Provide a list of at least five (5) client references in California. References should be public
agencies with portfolio size and investment objectives similar to City of La Quinta, CA.
Include length of time managing the assets, contact name, and phone number.
I. Insurance Requirements
Exhibit A defines the insurance requirements that will need to be met prior to the
[Board/Council]'s approval of any agreement for services.
J. Submittal of proposals
1. Seven (7) copies of the proposal shall be submitted in a sealed envelope bearing
the caption RFP for (City of La Quinta, CA) and addressed to:
City of La Quinta, CA
78-495 Calle Tampico
La Quinta, CA 92253
Attention: Finance Director/Treasurer
2. Proposal must be received no later than [Time] PST on [Month, Day, and Year].
3. Proposals should be verified before submission. The City of La Quinta, CA shall not
be responsible for errors or omissions on the part of the respondent in preparation
of a proposal. The City of La Quinta, CA reserves the right to reject any and all
proposals, to wave any irregularities, or informalities in the proposals, and to
negotiate modifications to any proposal.
Enclosures: Investment Policy
Treasurers Report
36
Appendix H
City of La Quinta
Permissible Investment Chart - Professional Portfolio Management Firm
(1) (2) (3) (4) (5) (6) (7) (8)
California
Government
Code Section
Investment Category
Maximum
Maturity
Authorized Investment
Limits (% of Portfolio)
Credit
Rating
Limits
Comments
Allowed
per
City Policy
Allowed per
Professional
Portfolio
Management Firm
53601(a) Local Agency Bonds 5 Years None None No No
53601(c) State of California
Obligations 5 Years None None No No
53601(d) CA Local Agency
Obligations 5 Years None Multiple No No
53601(i) Repurchase Agreements 1 Year None None No No
53601(i) Reverse Repurchase
Agreements 92 Days 20% of the base value of
the portfolio None No No
53601(i) Securities Lending
Agreements 92 Days 20% of the base value of
the portfolio None No No
53684 County Pooled
Investments None None None No No
53632 Interest bearing active
deposits None None None Collateralized
110% Yes Yes
53601(f) Bankers Acceptances 180 Days 40% None "AA" or better No Yes
53601(h) Negotiable CD's 5 Years 30% None Yes Yes
53601(k) Mutual Funds None 20% Multiple No Yes
53601(n) Asset Backed Securities 5 Years 20% AA No Yes
Cash and Equivalents None None None Yes Yes
16429.1 LAIF None None None Yes No
53601(b) US Treasuries 5 Years None None Yes Yes
53601(e) US Agencies 5 Years None None Yes Yes
53601(g), 53635 Commercial Paper 270 Days 25% of portfolio A-1/P-1/
F-1
Yes Yes
53601(k) Medium Term Notes 5 Years 30% A Yes Yes
37
Money Market Mutual
Funds None 20% Multiple Yes Yes
53601(m) Time Deposits 5 Years None None Yes Yes
Collateralized Bank
Deposits
(including non-
negotiable CD's)
5 Years
None
None
Yes
Yes
Source of Columns (1) through (5) - Investment: Investment Portfolio Reporting Practices CA Debt and
Investment Advisory Commission (CDIAC).
Note: The Professional Portfolio Mmanagement Firm (PPMF) is not required to adhere to the City's
buy and hold policy and does not need City Manager or City Treasurer approval to make permissible
deposits and investments as detailed in column (8).
*************Alternative to landscaped pages is pictured below in portrait style**********************
38
Appendix H
Investment Category
Maximum
Maturity
Authorized
Investment
Limits as a
Percent of
Portfolio
Credit
Rating
Limits
Allowed
Per City
Policy
Allowed per
Professional
Portfolio
Management
Firm
Local Agency Bonds 5 Years None None No No
State of California Obligations 5 Years None None No No
CA Local Agency Obligations 5 Years None Multiple Yes No
Repurchase Agreements 1 Year None None No No
Reverse Repurchase Agreements 92 Days 20%None No No
Securities Lending Agreements 92 Days 20%None No No
County Pooled Investments None None None No No
Interest bearing active deposits None None None Yes Yes
Bankers Acceptances 180 Days 40%AA No Yes
Negotiable CD's 5 Years 30%None Yes Yes
Mutual Funds None 20%Multiple No Yes
Asset Backed Securities 5 Years 20%AA No Yes
Cash and Equivalents None None None Yes Yes
LAIF None None None Yes No
US Treasuries 5 Years None None Yes Yes
US Agencies 5 Years None None Yes Yes
Commercial Paper 270 Days 25%A-1/P-1/ F-1 Yes Yes
Medium Term Notes 5 Years 30%A Yes Yes
Money Market Mutual Funds None 20%Multiple Yes Yes
Time Deposits 5 Years None None Yes Yes
Collateralized Bank Deposits 5 Years None None Yes Yes
Permissible Investments pursuant to California Government Code Title 5, Division 2, Part 1,
Chapter 4, Article 1, Sections 53600-53610 and Article 2 Sections 53630-53686
A Professional Portfolio Management firm (PPMF) is not required to adhere to the City's buy
and hold policy and does not need City Manager or City Treasurer approval to make
permissible deposits and investments as detailed in this chart.
Summary of Permissible Investments - Professional Portfolio Management Firm
A PPMF may invest in bankers acceptances, mutal fnds, and asset backed securities not
otherwise permissible under the City's Investment Policy.
38
Appendix I
Investment Management Process and Risk
Except as provided for in Section 27000.3, Government Code Section 53600.3 declares as a trustee
each person, treasurer, or governing body authorized to make investment decisions on behalf of local
agencies. Trustees are subject to the prudent investor standard. These persons shall act with care,
skill, prudence, and diligence under the circumstances then prevailing when investing, reinvesting,
purchasing, acquiring, exchanging, selling, and managing funds. Section 53600.5 further stipulates
that the primary objective of any person investing public funds is to safeguard principal; secondly, to
meet liquidity needs of the depositor; and lastly, to achieve a return or yield on invested funds
(Government Code Section 27000.5 specifies the same objectives for county treasurers and board of
supervisors).
Risk is inherent throughout the investment process. There is investment risk associated with any
investment activity and opportunity risk related to inactivity. Market risk is derived from exposure to
overall changes in the general level of interest rates while credit risk is the risk of loss due to the
failure of the insurer of a security. The market value of a security varies inversely with the level of
interest rates. If an investor is required to sell an investment with a five percent yield in a comparable
seven percent rate environment, that security will be sold at a loss. The magnitude of that loss will
depend on the amount of time until maturity.
Purchasing certain allowable securities with a maturity of greater than five years requires approval of
the governing board (see Government Code Section 53601). Part of that approval process involves
assessing and disclosing the risk and possible volatility of longer-term investments
Another element of market risk is liquidity risk. Instruments with unique call features or special
structures, or those issued by little known companies, are examples of "story bonds" and are often
thinly traded. Their uniqueness often makes finding prospective buyers in a secondary market more
difficult and, consequently, the securities' marketability and price are discounted. However, under
certain market conditions, gains are also possible with these types of securities.
Default risk represents the possibility that the borrower may be unable to repay the obligation as
scheduled. Generally, securities issued by the federal government and its agencies are considered
the most secure, while securities issued by private corporations or negotiable certificates of deposit
issued by commercial banks have a greater degree of risk. Securities with additional credit
enhancements, such as bankers acceptances, collateralized repurchase agreements and
collateralized bank deposits are somewhere between the two on the risk spectrum.
The vast majority of portfolios are managed within a buy and hold policy. Investments are purchased
with the intent and capacity to hold that security until maturity. At times, market forces or operations
may dictate swapping one security for another or selling a security before maturity. Continuous
analysis and fine tuning of the investment portfolio are considered prudent investment
management.
The Government Code contains specific provisions regarding the types of investments and practices
permitted after considering the broad requirement of preserving principal and maintaining liquidity
before seeking yield. These provisions are intended to promote the use of reliable, diverse, and safe
investment instruments to better ensure a prudently managed portfolio worthy of public trust.
Chapter II. Fund Management
Local Agency Investment Guidelines 2010
Investment Advisory Commission
Issued by California Debt and
39
Appendix J
GLOSSARY
(Adopted from the Municipal Treasurers Association)
The purpose of this glossary is to provide the reader of the City of La Quinta investment policies with a
better understanding of financial terms used in municipal investing.
AGENCIES: Federal agency securities and/or
Government-sponsored enterprises.
ASKED: The price at which securities are offered.
BANKERS' ACCEPTANCE (BA): A draft or bill or
exchange accepted by a bank or trust company.
The accepting institution guarantees payment of
the bill, as well as the issuer.
BID: The price offered by a buyer of securities.
(When you are selling securities, you ask for a bid.)
See Offer.
BROKER: A broker brings buyers and sellers
together for a commission.
CERTIFICATE OF DEPOSIT (CD): A time deposit with
a specific maturity evidenced by a certificate.
Large-denomination CD's are typically negotiable.
COLLATERAL: Securities, evidence of deposit or
other property which a borrower pledges to secure
repayment of a loan. Also refers to securities
pledged by a bank to secure deposits of public
monies.
COMMERCIAL PAPER: Short-term unsecured
promissory notes issued by a corporation to raise
working capital. These negotiable instruments are
purchased at a discount to par value or at par
value with interest bearing. Commercial paper is
issued by corporations such as General Motors
Acceptance Corporation, IBM, Bank America, etc.
COMPREHENSIVE ANNUAL FINANCIAL REPORT
(CAFR): The official annual report for the City of La
Quinta. It includes five combined statements
for each individual fund and account group
prepared in conformity with GAAP. It also includes
supporting schedules necessary to demonstrate
compliance with finance-related legal and
contractual provisions, extensive introductory
material, and a detailed Statistical Section.
CONDUIT FINANCING: A form of Financing in
which a government or a government agency lends
its name to a bond issue, although it is acting only
as a conduit between a specific project and bond
holders. The bond holders can look only to the
revenues from the project being financed for
repayment and not to the government or agency
whose name appears on the bond.
COUPON: (a) The annual rate of interest that a
bond's issuer promises to pay the bondholder on the
bond's face value. (b) A certificate attached to a
bond evidencing interest due on a payment date.
DEALER: A dealer, as opposed to a broker, acts as a
principal in all transactions, buying and selling for
his own account.
DEBENTURE: A bond secured only by the general
credit of the issuer.
DELIVERY VERSUS PAYMENT: There are two
methods of delivery of securities: delivery versus
payment and delivery versus receipt. Delivery
versus payment is delivery of securities with an
exchange of money for the securities. Delivery
versus receipt is delivery of securities with an
exchange of a signed receipt for the securities.
DERIVATIVES: (1) Financial instruments whose
return profile is linked to, or derived from, the
movement of one or more underlying index or
security, and may include a leveraging factor, or (2)
financial contracts based upon notional amounts
whose value is derived from an underlying index or
security (interest rates, foreign exchange rates,
equities or commodities).
DISCOUNT: The difference between the cost price of
a security and its maturity when quoted at lower
than face value. A security selling below original
offering price shortly after sale also is considered to
be at a discount.
DISCOUNT SECURITIES: Non-interest bearing
money market instruments that are issued a
discount and redeemed at maturity for full face
40
value, e.g., U.S. Treasury Bills.
DIVERSIFICATION: Dividing investment funds
among a variety of securities offering independent
returns.
FEDERAL CREDIT AGENCIES: Agencies of the
Federal government set up to supply credit to
various classes of institutions and individuals, e.g.,
S&L's, small business firms, students, farmers, farm
cooperatives, and exporters.
1. FNMAs (Federal National Mortgage Association)
- Like GNMA was chartered under the Federal
National Mortgage Association Act in 1938.
FNMA is a federal corporation working under
the auspices of the Department of Housing and
Urban Development (HUD). It is the largest
single provider of residential mortgage funds in
the United States. Fannie Mae, as the
corporation is called, is a private stockholder-
owned corporation. The corporation's
purchases include a variety of adjustable
mortgages and second loans, in addition to
fixed-rate mortgages. FNMA's securities are
also highly liquid and are widely accepted.
FNMA assumes and guarantees that all security
holders will receive timely payment of principal
and interest.
2. FHLBs (Federal Home Loan Bank Notes and
Bonds) - Issued by the Federal Home Loan
Bank System to help finance the housing
industry. The notes and bonds provide liquidity
and home mortgage credit to savings and loan
associations, mutual savings banks,
cooperative banks, insurance companies, and
mortgage-lending institutions. They are issued
irregularly for various maturities. The
minimum denomination is $5,000. The notes
are issued with maturities of less than one
year and interest is paid at maturity.
3. FLBs (Federal Land Bank Bonds) - Long-term
mortgage credit provided to farmers by Federal
Land Banks. These bonds are issued at
irregular times for various maturities ranging
from a few months to ten years. The minimum
denomination is $1,000. They carry semi-
annual coupons. Interest is calculated on a
360-day, 30 day month basis.
4. FFCBs (Federal Farm Credit Bank) - Debt
instruments used to finance the short and
intermediate term needs of farmers and the
national agricultural industry. They are issued
monthly with three- and six-month maturities.
The FFCB issues larger issues (one to ten year)
on a periodic basis. These issues are highly
liquid.
5. FICBs (Federal Intermediate Credit Bank
Debentures) - Loans to lending institutions used
to finance the short-term and intermediate
needs of farmers, such as seasonal production.
They are usually issued monthly in minimum
denominations of $3,000 with a nine-month
maturity. Interest is payable at maturity and is
calculated on a 360-day, 30-day month basis.
6. FHLMCs (Federal Home Loan Mortgage
Corporation) - a government sponsored entity
established in 1970 to provide a secondary
market for conventional home mortgages.
Mortgages are purchased solely from the
Federal Home Loan Bank System member
lending institutions whose deposits are insured
by agencies of the United States Government.
They are issued for various maturities and in
minimum denominations of $10,000. Principal
and interest is paid monthly. Other federal
agency issues are Small Business Administration
notes (SBA's), Government National Mortgage
Association notes (GNMA's), Tennessee Valley
Authority notes
(TVA's), and Student Loan Association notes
(SALLIE-MAE's).
FEDERAL DEPOSIT INSURANCE CORPORATION
(FDIC): A federal agency that insures bank
deposits, currently up to $250,000 per deposit
through December 31, 2013.
FEDERAL FUNDS RATE: The rate of interest at which
Fed funds are traded. This rate is currently
pegged by the Federal Reserve through open-
market operations.
FEDERAL HOME LOAN BANKS (FHLB): Government
sponsored wholesale banks (currently 12 regional
banks) which lend funds and provide correspondent
banking services to member commercial banks,
thrift institutions, credit unions and insurance
companies. The mission of the FHLBs is to liquefy
the housing related assets of its members who must
41
purchase stock in their district Bank.
FEDERAL OPEN MARKET COMMITTEE (FOMC):
Consists of seven members of the Federal Reserve
Board and five of the twelve Federal Reserve Bank
Presidents. The President of the New York Federal
Reserve Bank is a permanent member, while the
other Presidents serve on a rotating basis. The
Committee periodically meets to set Federal
Reserve guidelines regarding purchases and sales
of Government Securities in the open market as a
means of influencing the volume of bank credit and
money.
FEDERAL RESERVE SYSTEM: The central bank of the
United States created by Congress and consisting
of a seven member Board of Governors in
Washington, D.C., 12 regional banks and about
5,700 commercial banks that are members of the
system.
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION (GNMA or Ginnie Mae): Securities
influencing the volume of bank credit guaranteed
by GNMA and issued by mortgage bankers,
commercial banks, savings and loan associations,
and other institutions. Security holder is protected
by full faith and credit of the U.S. Government.
Ginnie Mae securities are backed by the FHA, VA or
FMHM mortgages. The term "pass-throughs" is
often used to describe Ginnie Maes.
LAIF (Local Agency Investment Fund) - A special
fund in the State Treasury which local agencies
may use to deposit funds for investment. There is
no minimum investment period and the minimum
transaction is $5,000, in multiples of $1,000 above
that, with a maximum balance of $50,000,000 for
any agency. The City is restricted to a maximum
of ten transactions per month. It offers high
liquidity because deposits can be converted to cash
in 24 hours and no interest is lost. All interest is
distributed to those agencies participating on a
proportionate share basis determined by the
amounts deposited and the length of time they are
deposited. Interest is paid quarterly. The State
retains an amount for reasonable costs of making
the investments, not to exceed one-half of one
percent of the earnings.
LIQUIDITY: A liquid asset is one that can be
converted easily and rapidly into cash without a
substantial loss of value. In the money market, a
security is said to be liquid if the spread between bid
and asked prices is narrow and reasonable size can
be done at those quotes.
LOCAL GOVERNMENT INVESTMENT POOL (LGIP):
The aggregate of all funds from political
subdivisions that are placed in the custody of the
State Treasurer for investment and reinvestment
MARKET VALUE: The price at which a security is
trading and could presumably be purchased or sold.
MASTER REPURCHASE AGREEMENT: A written
contract covering all future transactions between
the parties to repurchase--reverse repurchase
agreements that establishes each party's rights in
the transactions. A master agreement will often
specify, among other things, the right of the buyer-
lender to liquidate the underlying securities in the
event of default by the seller-borrower.
MATURITY: The date upon which the principal or
stated value of an investment becomes due and
payable
MONEY MARKET: The market in which short-term
debt instruments (bills, commercial paper, bankers'
acceptances, etc.) are issued and traded.
OFFER: The price asked by a seller of securities.
(When you are buying securities, you ask for an
offer.) See Asked and Bid.
OPEN MARKET OPERATIONS: Purchases and sales of
government and certain other securities in the open
market by the New York Federal Reserve Bank as
directed by the FOMC in order to influence the
volume of money and credit in the economy.
Purchases inject reserves into the bank system and
stimulate growth of money and credit; sales have
the opposite effect. Open market operations are the
Federal Reserve's most important and most flexible
monetary policy tool.
PORTFOLIO: Collection of all cash and securities
under the direction of the City Treasurer, including
Bond Proceeds.
PRIMARY DEALER: A group of government securities
dealers who submit daily reports of market activity
and positions and monthly financial statements to
the Federal Reserve Bank of New York and are
subject to its informal oversight. Primary dealers
42
include Securities and Exchange Commission (SEC)-
registered securities broker-dealers, banks and a
few unregulated firms.
QUALIFIED PUBLIC DEPOSITORIES: A financial
institution which does not claim exemption from
the payment of any sales or compensating use or
ad valorem taxes under the laws of this state,
which has segregated for the benefit of the
commission eligible collateral having a value ofnot
less than its maximum liability and which has been
approved by the Public Deposit Protection
Commission to hold public deposits.
RATE OF RETURN: The yield obtainable on a
security based on its purchase price or its current
market price. This may be the amortized yield to
maturity on a bond the current income return.
REPURCHASE AGREEMENT (RP OR REPO): A holder
of securities sells these securities to an investor
with an agreement to repurchase them at a fixed
price on a fixed date. The security "buyer" in effect
lends the "seller" money for the period of the
agreement, and the terms of the agreement are
structured to compensate him for this. Dealers use
RP extensively to finance their positions. Exception:
When the Fed is said to be doing RP, it is lending
money that is increasing bank reserves.
REVERSE REPURCHASE AGREEMENTS (RRP or
RevRepo) - A holder of securities sells these
securities to an investor with an agreement to
repurchase them at a fixed price on a fixed date.
The security "buyer" in effect lends the "seller"
money for the period of the agreement, and the
terms of the agreement are structured to
compensate him for this. Dealers use RRP
extensively to finance their positions. Exception:
When the Fed is said to be doing RRP, it is lending
money that is increasing bank reserves.
SAFEKEEPING: A service to customers rendered by
banks for a fee whereby securities and valuables of
all types and descriptions are held in the bank's
vaults for protection.
SECONDARY MARKET: A market made for the
purchase and sale of outstanding issues following
the initial distribution.
SECURITIES & EXCHANGE COMMISSION: Agency
created by Congress to protect investors in
securities transactions by administering securities
legislation.
SEC RULE 15C3-1: See Uniform Net Capital Rule.
STRUCTURED NOTES: Notes issued by Government
Sponsored Enterprises (FHLB, FNMA, SLMA, etc.) and
Corporations which have imbedded options (e.g.,
call features, step-up coupons, floating rate
coupons, and derivative-based returns) into their
debt structure. Their market performance is
impacted by the fluctuation of interest rates, the
volatility of the imbedded options and shifts in the
shape of the yield curve.
SURPLUS FUNDS: Section 53601 of the California
Government Code defines surplus funds as any
money not required for immediate necessities of the
local agency. The City has defined immediate
necessities to be payment due within one week.
TREASURY BILLS: A non-interest bearing discount
security issued by the U.S. Treasury to finance the
national debt. Most bills are issued to mature in
three months, six months or one year.
TREASURY BONDS: Long-term coupon-bearing U.S.
Treasury securities issued as direct obligations of
the U.S. Government and having initial maturities of
more than 10 years.
TREASURY NOTES: Medium-term coupon-bearing
U.S. Treasury securities issued as direct obligations
of the U.S. Government and having initial maturities
from two to 10 years.
UNIFORM NET CAPITAL RULE: Securities and
Exchange Commission requirement that member
firms as well as nonmember broker-dealers in
securities maintain a maximum ratio of
indebtedness to liquid capital of 15 to 1; also called
net capital rule and net capital ratio. Indebtedness
covers all money owed to a firm, including margin
loans and commitments to purchase securities, one
reason new public issues are spread among
members of underwriting syndicates. Liquid capital
includes cash and assets easily converted into cash.
UNIFORM PRUDENT INVESTOR ACT: The State of
California has adopted this Act. The Act contains
the following sections: duty of care, diversification,
review of assets, costs, compliance determinations,
43
delegation of investments, terms of prudent
investor rule, and application.
YIELD: The rate of annual income return on an
investment, expressed as a percentage. (a)
INCOME YIELD is obtained by dividing the current
dollar income by the current market price for the
security. (b) NET YIELD or YIELD TO MATURITY is
the current income yield minus any premium
above par or plus any discount from par in
purchase price, with the adjustment spread over
the period from the date of purchase to the date of
maturity of the bond.
City of La Quinta
FINANCIAL ADVISORY COMMISSION MEETING: April 11, 2018
STAFF REPORT
AGENDA TITLE: DISCUSS RESERVE POLICY ANALYSIS REPORT AND COUNCIL
RECOMMENDATION
RECOMMENDATION
Discuss Reserve Policy Analysis Report, findings, and Council recommendation.
EXECUTIVE SUMMARY
• Council requested an analysis of the City’s reserves by the Financial Advisory
Commission (FAC).
• The FAC established a subcommittee that prepared a Reserve Policy Analysis
Report (Report).
BACKGROUND/ANALYSIS
During the 2017/18 budget process Council requested an analysis of the City’s reserves.
Three members of the FAC joined the Finance staff to conduct an in-depth analysis with
additional hours of independent research. The scope of the analysis included review of:
• current reserve policy and funding;
• reserve categories;
• Coachella Valley wide comparison of reserves and funding;
• best practices recommended by accounting standards boards;
• City demographics, revenues, expenditure volatility, other funds dependency on
the General Fund, growth projections, and unfunded capital projects;
• risk mitigation - including a review of insurance policies; and
• City infrastructure and vulnerability to extreme events.
The Report (Attachment 1) outlines recommendations to establish four reserve categories
and a Pension Trust Fund (Attachment 2). Finance also updated the 10-year cash flow
projections to incorporate identified capital improvement project priorities and outlined how
the City may fund the recommended reserves over a period of time (Attachment 3).
ALTERNATIVES
None, the Council has approved the Report and has given staff direction to draft a Reserve
Policy.
Prepared by: Karla Campos, Finance Director
Attachment: 1. Reserve Policy Analysis Report
2. Reserve Categories and Allocation Methods
3. Reserve Funding Options and Five-Year Projections
STUDY SESSION ITEM NO. 3
City of La Quinta
Reserve Policy Analysis
DRAFT Interim Report
Financial Advisory Commission
Reserve Policy Subcommittee
AprilFebruary 2018
This Page Intentionally Left Blank
TOC-i
Table of Contents
Contents
Executive Summary ....................................................................................................................................... 1
1.0 Background .............................................................................................................................................. 3
1.0 Financial Advisory Commission & Reserve Analysis Subcommittee ...................... 3
1.1 Reserve Policy Subcommittee ............................................................................................... 3
2.0 Reserve Policy ....................................................................................................................................... 3
2.1 Background .................................................................................................................................... 3
2.2 Current Reserve Policy................................................................................................................ 4
2.3 Guiding Principles, City of La Quinta Reserves .................................................................... 5
2.4 Ten-Year Financial Projection .................................................................................................. 6
2.5 Reserves versus Fund Balances ............................................................................................... 7
3.0 General Fund Reserves ........................................................................................................................ 8
3.1 Emergency Reserve ..................................................................................................................... 8
3.1.1 Natural Disaster Component .................................................................................................. 9
3.1.2Economic Disaster Component .............................................................................................. 10
3.2 Cash Flow Reserve ..................................................................................................................... 11
3.3 CIP Sinking Fund Reserve ........................................................................................................ 13
3.4 Unfunded Pension Liability ..................................................................................................... 14
1
City of La Quinta
Financial Advisory Commission
Reserve Policy Sub-Committee
Interim Report
Executive Summary
The City of La Quinta (City) formed the La Quinta Financial Advisory Commission
(FAC) in June 2017 to replace the long-standing Investment Advisory Board (IAB).
At the regular FAC meeting on August 9, 2017, the FAC appointed Commissioners
Dick Mills, Daniel Twohey and Mark Johnson to serve on a sub-committee to
analyze and recommend improvements to the City’s Reserve Policy.
The Reserve Policy Subcommittee met with City Finance Staff sixfour times and
met/communicated together as a group on several occasions. The Subcommittee
focused on developing a pragmatic methodology to determine the appropriate
reserve levels as opposed to utilizing a percentage. This process establishes a
rationale and protocol that allows for an annual review of reserves based on actual
economic conditions.
The following interim recommendations were reviewed and approved by the FAC
on November 15, 2017. This updated Report will be presented to the FAC on April
11, 2018.
Recommendations
The following Reserve Policy changes are recommended and summarized in Table 1:
1. Utilize a Ten-Year Projection to evaluate the City’s financial condition and
update it annually.
2. Fund Balances and Reserves should be referenced separately in presentations
to eliminate confusion and give true picture of Reserves.
3. Emergency Reserve with two components: Natural Disaster and Economic
a. Emergency Reserve Natural Disaster Component
i. Modify the City Ordinance to simplify access to the Emergency Reserve.
ii. Utilizendertake a comprehensive Asset/Risk/Insurance/Government
Funding Study (Study), which is essential to setting this reserve level.
2
Reserve/Trust Reserve
Target
Current
Funding
Over/(Under)
Funded Annual Target
Emergency Reserve
Natural Disaster 10,000,000 16,534,000 6,534,000 1,500,000
Economic Disaster 11,000,000 - (11,000,000) 1,000,000
Total 21,000,000 16,534,000 (4,466,000) 2,500,000
Cash Flow Reserve 5,000,000 4,134,000 (866,000) -
Capital Replacement 10,000,000 - (10,000,000) 1,000,000
Total Reserves 36,000,000 20,668,000 (15,332,000) 3,500,000
Pension Trust Fund 10,000,000 - (10,000,000) 1,000,000
Unassigned Reserves - 14,865,926 14,865,926 -
Overall Total 46,000,000 35,533,926 (10,466,074) 4,500,000
iii. Establish an Asset Management Program as part of this Study to better
track, maintain and replace assets and develop a long-term Capital
Improvement Program (CIP).
iv. Fund this reserve initially with $1.5 million and set the reserve level after
the Study is complete.
b. Emergency Reserve Economic Disaster Component-set at $11 million and
fund with $1.0 million annually, and define use of funds.
4. Cash Flow Reserve. Set at $5 million initially and, reset annually using the
formula.
5. Capital ReplacementIP Sinking Fund Reserve. Set at $10 million and fund with
$1.0 million annually.
6. CalPERS Pension Trust. Form an irrevocable trust and fund with $1 million
annually for 10 years as a General Fund Expense.
7. Current Unassigned Reserves-utilize to fund the recommended Reserve/Trust
targets and/or operating expenses at the discretion of the Council.
Table 1-Reserve/Trust Recommendations
3
1.0 Background
1.0 Financial Advisory Commission & Reserve Analysis Subcommittee
The principal functions of the FAC are: (1) review at least annually the City's
investment policy and recommend appropriate changes; (2) review monthly
treasury reports and note compliance with the investment policy and adequacy
of cash and investments for anticipated obligations; (3) receive and consider
other reports provided by the City Treasurer; (4) meet with the independent
auditor after completion of the annual audit of the city's financial statements,
and receive and consider the auditor's comments on auditing procedures,
internal controls, and findings for cash and investment activities; (5) review
annually the revenue derived from the one percent (1%) transactions and use
tax (Measure G) instituted by voters in November 2016 to ensure these funds are
used to provide services, programs and capital projects in the City, and (6) serve
as a resource for the City treasurer on matters such as proposed investments,
internal controls, use of financial institutions, custodians, brokers and dealers.
The current FAC members include; George Batavick (Chairman), Richard (Dick)
Mills (Vice-Chairperson), Steven Rosen, Javier Lopez, Sherwyn Turbow, Daniel
Twohey and Mark Johnson.
1.1 Reserve Policy Subcommittee
At the regular FAC meeting on August 8, 2017, the FAC appointed Dick Mills,
Daniel Twohey and Mark Johnson to serve on a sub-committee to analyze and
recommend improvements to the City’s Reserve Policy.
2.0 Reserve Policy
2.1 Background
Financial Reserves provide the City with financial flexibility and strength to deal with
planned and unplanned expenditures. Reserve levels must balance realistic financial
need and risk. The Reserve Policy should strive to establish reserve levels that are not
over or under-funded, specify the intended use of reserves, and the replenishment of
underfunded reserves.
4
Reserve/Fund Balance Amount ($)
Non-Spendable
Prepaid Costs 10,578
Land Held for Resale 8,320,000
Advances to Other Funds 15,022,660
Due from Other Governments 29,154,040
Total Non-Spendable 52,507,278
Committed
Working Capital Reserve (10%)4,134,000
Emergency Reserve (40%) 16,534,000
Post Retirement Health Benefits 1,523,400
Carryovers 120,000
Total Committed 22,311,400
Assigned
Public Safety Fire Services 9,371,699
Capital Projects 6,322,570
Total Assigned 15,694,269
Unassigned 16,949,526
TOTAL FUND BALANCE 107,462,473
2.2 Current Reserve Policy
The current Reserve Policy includes the following major Reserve Fund Balance
Descriptions:
• Non-spendable: not available to fund operating expenditures of the
organization because they are in the form of land and receivables.
• Restricted: limited to special purpose funds such as Measure A (transportation),
Gas Tax Fund (streets) and Quimby Funds (parks).
• Committed: cash flow (currently working capital), emergency, and operating
carryovers.
• Assigned: constrained by the City’s intent to use funds for public safety or
capital projects.
• Unassigned (Unappropriated): net reserves available after satisfying the other
reserve categories.
Table 2 depicts the General Fund Reserve/Fund Balances as of June 30, 2017.
Table 2 - General Fund Reserve/Fund Balances-6/30/17
5
Current Reserve Policy includes the following targets:
• Working Capital Reserve: 10% of Adopted Operating Budget
• Emergency Reserve: 40% of Adopted Operating Budget
The General Accounting Standards Board (GASB) is the organization that establishes
standards for accounting and financial reporting for state and local governments.
GASB provides that it is common practice for governments to put aside resources to be
used in a financial emergency or for cash flow purposes. Reserve funds are crucial to
the financial viability and stability of a municipality.
Deferred maintenance, increased debt, and cash flow problems are common
indicators of weak reserve balances. While strong reserve funds:
• manage cash flows and volatility in revenue and expenditures
• address unexpected economic fluctuations with long-term solutions
• provide needed money if a municipality should find itself facing unexpected
financial difficulties
• reduce the cost of borrowing money.
There is no guidance for a “maximum” reserve limit but rather each organization
should evaluate reserves depending upon their unique circumstances. There will
always be more needs and unanticipated events than there are resources; therefore,
governments must balance the need to be fiscally responsible with what are
reasonable reserves. The amount of reserves a municipality maintains is determined
by the community’s risk tolerance; a low-risk tolerance will result in higher reserves
while a high-risk tolerance will result in lower reserves.
2.3 Guiding Principles, City of La Quinta Reserves
The City follows the following budgetary and cash management principles:
• One-time revenues should not be utilized for on-going expenditures. One-
time revenues should be put into reserves or appropriated for one-time
expenditures.
• Reserves for capital improvements, equipment replacement, and
infrastructure should be part of the on-going budget process. Based on
depreciation, or other relevant criteria, contributions should be made
annually (into a revolving fund) as part of the budget process toward
replacement of equipment, buildings, infrastructure, etc.
• When authorizing the use of reserves, developing a plan to replenish those
reserves should also be considered.
6
• The Reserve Policy can be amended by resolution and requires a 4/5th
approval of the Council.
2.4 Ten-Year Financial Projection
A Ten-Year Financial Projection is essential to aid in determining an appropriate
Reserve Policy. The La Quinta Advisory Committee 1 developed this tool to analyze
various Revenue and Expenditure Scenarios in FY 2015/16. Updated Ten-Year Financial
Projections (Exhibits 1 and 2) are in the Appendix.
The Ten-Year Financial Projection is an Excel model that utilizes the FY 2017/18
Budget as the Base Year and applies a specific inflator (growth projection) for most
revenue and expenditure line items to each of the remaining ten years.
The Model includes the following key features:
• 14 Revenue line items: All revenue line items have a 1% inflator except for
Motor Vehicle In-Lieu, Fire Service Credit, Property Tax, and Transient
Occupancy Tax which have a 2% inflator. The largest revenue line items are
Property Tax, Sales Tax, and Transient Occupancy Tax (TOT).
• 13 Expenditure line items: Most expenditure line items have a 2% inflator
except for Salaries and Medical Insurance Costs which have a 3% inflator and
Police Contract which has an 8% inflator (Exhibit 1) to resemble historical
increases or a 10% inflator (Exhibit 2) based on current police contract
projections. The Capital Improvements line item is not inflated as these costs
represent the annual minimum General Fund contribution for road
maintenance to secure Measure A and SB1 Gas Tax Funding (restricted funds
for road improvements). The Fire Service Contract is anticipated to increase by
4% annually.
• Additional Revenue Sources: These revenues include (1) Measure G Sales Tax
and (2) Redevelopment Agency (RDA) payback (ending in FY 2029/30). Please
note, any potential TOT tax increase was not used for this analysis.
The Model shows that before any Additional Revenue Sources are applied, there is a
cumulative Revenues/Expenditure deficit of -$58.82.1 million at the end of the ten-
year period (Exhibit 1) or a deficit of -$88.72 million (Exhibit 2).
After the Additional Revenue Sources are applied and $3 million a year for capital
improvements is applied, there is a cumulative +$24.151.8 million
Revenues/Expenditure surplus (Exhibit 1) or -$5.7+$21.9 million deficit (Exhibit 2).
1 The La Quinta Advisory Committee Report of January 2016 is a good reference for the City’s financial
system.
7
The Ten-Year Projection demonstrates the importance of the RDA loan repayment and
the impact of Measure G sales tax to the City’s financial future. It also shows that
there is about $5 million/year available to fund the Reserve accounts during the next
five yearsis Ten-Year period (Exhibit 1). However, if Police Contract services escalate to
10% increases the available funding is reduced to an average of $4 $21.9 million or
$2.19 million annually over the next five years (Exhibit 2).
In addition to the projected Ten-Year surplus (Exhibit 1), as of June 30, 2017the city
currently hads an unassigned fund balance of approximately $16.9 million. These
funds are non-restrictive and can be used to fund the recommended Reserve/Trust
targets, capital projects, or operating expenses at the discretion of the Council.
The Ten-Year Projection provides an easy tool for the City to periodically analyze its
financial condition as new information becomes available. One can easily glean the
impact on City finances by simply changing an inflator assumption or line item
starting balance. It is clear that small changes in some of the inputs can result in
significant changes in the financial projections.
Recommendation: Utilize a Ten-Year Projection to evaluate the City’s financial
condition and evaluate reserve funding optionsupdate the reserve levels/policy. The
Ten-Year Projection should be updated annually.
Recommendation: Utilize Current Unassigned Reserves to fund the recommended
Reserve/Trust targets and/or operating expenses at the discretion of the Council.
2.5 Reserves versus Fund Balances
The financial terminology utilized for the current Reserve Policy can be confusing, but
is regulated by GASB Statement No. 54. The terms “reserve” and “fund balance” are
used interchangeably and can lead to a misunderstanding of actual financial
condition. For example, Table 2 shows a total General Fund Reserve/Fund Balance of
$107 million at the end of FY 2016/17. The only line items in Table 2 classified as
“reserves” are Emergency Reserve ($16.5 million) and Cash Flow Reserve ($4.1 million)
for a total of $20.6 million. Therefore, true “reserves” are much less than the reported
$107 million level.
Recommendation: To eliminate this confusion, the following classifications are
suggested and should be re-categorized to place actual reserves together (at the
top) in the Committed Fund Balance category:
8
General Fund Balances
• Non-Spendable
General Fund Committed Reserves2
• Emergency
• Cash Flow (replaces Working Capital)
• Capital Improvement Program (CIP) Sinking Fund
• Carryovers
This provides a grouping representation of reserves by re-categorizing the items of
which there is no reserve funding potential. Fund balance reporting is governed by
GASB. The GASB regulation is intended to provide a uniform method for reporting
reserved and unreserved fund balances for all government agencies. Fund balances
are reported in classifications that comprise a hierarchy based primarily on the extent
to which the government is bound to honor constraints on the specific purpose for
which amounts in those funds can be spent. The proposed General Fund Reserve line
items are further discussed in Section 3 of this report.
3.0 General Fund Reserves
The subcommittee focused on developing a pragmatic methodology to determine the
appropriate reserve levels as opposed to utilizing a percentage-based methodology.
This process establishes a rationale and protocol that allows for an annual review of
reserves based on actual economic conditions.
3.1 Emergency Reserve
As defined in the City’s municipal code (§ 2.20.020 A), the terms emergency and
disaster mean:
“ The actual or threatened existence of conditions of disaster or of extreme peril to the
safety of persons and property within this City caused by such conditions as air
pollution, fire, flood, storm, epidemic, riot, earthquake or other conditions, including
conditions resulting from war or imminent threat of war but other than conditions
resulting from a labor controversy, which conditions are or are likely to be beyond the
control of the services, regular personnel, equipment and facilities of the City and which
may require the combined forces of other political jurisdictions to combat.”
Fiscal emergencies can be caused by natural disasters or swings in the economy.
2 Note the Post-Retirement Health Benefits Fund is now an OPEB Trust being funded directly from the
General Fund Budget.
9
Recommendation: One Emergency Reserve with two components---Natural Disaster
and Economic. Modify the city ordinance to simplify access to the Emergency
Reserve.
3.1.1 Natural Disaster Component
The Emergency Reserve-Natural Disaster component will provide funding for floods,
earthquakes and other natural disasters. The determination of the level of this
reserve component requireds the following analysis:
1. Capital Asset Inventory & Valuation: What do we have and what is it
worth?
2. Capital Asset Risk Assessment: Which assets are more critical in a disaster?
3. Insurance Coverage: How do we evaluate risk versus premium?
4. Government Disaster Funding: How much will Federal, state and/or county
government contribute in a disaster?
The City conducted a comprehensive Asset/Insurance/Government Funding Study
(Study) analyzing these four items. Exhibit 4 summarizes the results from the Study.
The City’s insured assets total $366 million. In an emergency, individual assets with
insurance coverage do not qualify for federal or state reimbursement. Furthermore,
federal reimbursement is limited to 75% and state reimbursement is limited to
18.75% of total expenditures. Based on current insurance coverage the potential city
liability could be $19.2 million.
Assets that are not covered by insurance or government natural disaster funding are
depicted in the column labeled require 100% reserve funding. Non-critical assets
require 50% reserve funding for a total recommended reserve of $10 million. A proper
Emergency Reserve-Natural Disaster component cannot be established until these
four items are researched and analyzed.
Recommendation: Undertake a comprehensive Asset/Risk/Insurance/Government
Funding Study as soon as possible. Establish an Asset Management Program to
expand on the as part of this Study to better track, maintain and replace assets and
develop long-term Capital Improvement Program (CIP). Consider hiring a consultant
to perform these functions.
Once the Study is complete, the Subcommittee will reconvene, evaluate, and
recommend an Emergency Reserve-Natural Disaster component reserve level.
Recommendation: Fund this reserve initially with the current Emergency Reserve
balance. $1.5 million annually and set the reserve level after the Study is complete.
10
3.1.2 Economic Disaster Component
The Emergency Reserve-Economic Disaster component will provide funding to respond
to a downturn in the economy.
To establish this reserve level, the City’s financial data was analyzed from 2000 to
2017 as this period included probably the worst economic downturn since the Great
Depression. Figure 1, on the following page, (Long-Term Economic History) plots
Revenue, Expenditures and Net Income adjusted for inflation during this period.
The Net Income line is the key data as this gives a good indication of the financial
health of the City in any given year. A linear regression line was applied to the Net
Income data to establish the normalized level of Net Income for this Seven-Year
period. Any Net Income below the Linear Regression curve indicates the need for
economic input to recover. During the period from 2008 to 2014, there are two
troughs. The period between 2008 and 2011 (economic recession) would require
approximately $10 million to recover and the period from 2011 to 2014
(redevelopment dissolution) would require $11 million to recover. This was a very
unusual economic period and back-to-back downturns are unlikely in the future.
Access to this reserve should be granted for economic stabilization and volatility as a
direct result of economic conditions during periods of unanticipated economic
downturns or unanticipated spikes in operating costs. Use of emergency reserves due
to economic pressures should be limited to maintaining essential day-to-day services,
such as public safety or responding to adverse circumstances, while the City
formulates a longer-term strategy.
Use of the economic disaster reserves should be defined in policy and may include:
• Used to balance the budget if revenues are projected to be 10% less
than prior year actual revenues
• Or if operating expenses are projected to be 10% more than prior year
actual expenses.
11
Figure 1-Long-Term Economic History
Recommendation: Set the Emergency Reserve-Economic Disaster component at $11
million, fund with $1.0 million annually and define the intended use of funds.
3.2 Cash Flow Reserve
The Cash Flow Reserve replaces the existing terminology and calculation of Working
Capital Reserve (currently based on 10% of the operating budget). This reserve covers
the inherent mismatch of revenues versus expenditures due primarily to tax revenue
receipts. This reserve also serves as a funding source for capital projects with various
state and federal grants, which are typically reimbursement based. Reserves allows
for capital projects to incur costs and stay on track with reimbursement, typically
within 90-180 days.
12
Figure 2-Cash Flow Imbalance for FY 2016/17
It is recommended that the Cash Flow Reserve be updated annually by calculating the
prior fiscal year monthly surplus/(deficit) of revenues versus expenditures; with the
largest cumulative deficit becoming the updated Cash Flow Reserve. Figure 2 above
shows the monthly cash imbalances whereby revenues are not received uniformly
throughout the year, which results in peaks and valleys depending upon large
payments that are received throughout the year. For example, large property tax
payments are usually received in December and May. Similarly, transient occupancy
tax payments increase during months with large festivals and events. The timing
imbalance of revenue receipts versus expenditures is funded from the City’s cash flow
reserves. For FY 2016/17 this analysis yielded a $4.7 million cash flow imbalance.
Recommendation: Set Cash Flow Reserve at $5 million initially and fund annually
subject to the calculation.
$-
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
$8,000,000
$9,000,000
$10,000,000
Revenue
Expenditures
13
3.3 Capital ReplacementIP Sinking Fund Reserve
Exhibit 3 (Appendix) is page 47 from the FY 2016/17 Comprehensive Annual Financial
Report (CAFR) describing the City’s capital assets. Table 3 below summarizes the
Depreciable Assets from this information.
Table 3-Depreciable Assets
The total Ten-Year Capital Improvement Program (CIP) budget utilized for Exhibits 1
and 2 includes minimum funding to secure Measure A and Gas Tax revenue for road
improvements ($1.5 million annually). Capital expenses are typically supplemented
with restricted funds such as those for road improvements, Quimby Funds for parks,
developer impact fees (DIF), and grant funds. In addition to the General Fund, the City
also maintains ten-year revenue and expenditure projections on these additional CIP
funding sources.
For FY 2017/18 General Fund capital expenses budgeted total $6.53 million or
approximately 73% of depreciation (6.53/9.00=73) and are a reasonable barometer
for evaluating the proper level of investment in capital assets. Additionally, $2.3
million is budgeted under special funds, for a total CIP budget of $8.83 or 98% of
depreciation (8.83/9=98).
Special revenue funds are derived from gas tax sales, property tax valuations, and
developer impact fees; these revenue projections can vary greatly from year to year.
Ideally, it would be desirable to match annual depreciation with capital spending,
therefore it is recommended to establish a Capital ReplacementIP Sinking Fund
Reserve to set aside funds to supplement funding gaps.
Recommendation: Set Capital ReplacementIP Sinking Fund Reserve at $10 million
and fund with $1.0 million annually.
14
3.4 Unfunded Pension Liability
As of June 30, 2017, the CalPERS Net Pension Liability was $10.8 million (7.65%
discount rate). Exhibits 1 and 2 shows the actual CalPERS Unfunded Liability cost of
$454,756 in FY 2016/17. However, the CalPERS Net Pension Liability is a moving target
and is dependent on the CalPERS discount rate. For example, if the discount rate
lowers to 6.65%, the Net Pension Liability increases to $16.5 million.
In December 2016, CalPERS lowered the discount rate (rate of return for investments)
from 7.5% to 7%, which will increase the CalPERS total unfunded pension liability for
all participating agencies, including the city. The City’s annual unfunded pension
liability payment will further increase starting in FY 2018/19 continuing through
2021/22. In addition, every four years CalPERS evaluates all pension plans to ensure
financial stability. This evaluation has been completed and was presented to the
CalPERS Board on November 13-15, 2017. Results from this valuation confirmed
lowering the discount rate to 7%.
Eliminating or reducing the CalPERS Net Pension Liability is prudent as it will improve
the financial condition of the City and send a message that the City is addressing this
issue in a fiscally responsible manner.
Assuming the CalPERS Net Pension Liability is $10 million (between $8.7 and $14.0
million), the liability could be eliminated or reduced in this Ten-Year period by
contributing another $1.0 million/year.
If the city chose to open and fund a pension trust, any additional discretionary
payments would offset the unfunded pension liability and could be used for future
contributions.
In general, paying earlier reduces long-term pension costs because additional
contributions have more time to compound investment returns, reducing the need for
future contributions. The extent to which any additional contributions would lower
future payments would depend largely on realized investment returns.
Recommendation: Form an irrevocable CalPERS Pension Trust, and set at $10 million
target, and fund with $1.0 million annually as a General Fund Expense.
15
Appendix
16
List of Exhibits
Exhibit 1–Ten-Year Financial Projection with an 8% Increase in Police Service Contract
Exhibit 2–Ten-Year Financial Projection with a 10% Increase in Police Service Contract
Exhibit 3–FY 2016/17 CAFR Page 47-Capital Assets
Exhibit 4 – Summary of All Insured City Assets
City of La Quinta As of March 23 2018ActualGrowthAdjusted Budget2018/19 to 2027/282016/17 Projections 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 2026/27 2027/28TOTAL1. Cash ReceiptsSales Tax - Bradley Burns8,597,655$ 1% 8,776,100$ 8,863,861$ 8,952,500$ 9,042,025$ 9,132,445$ 9,223,769$ 9,316,007$ 9,409,167$ 9,503,259$ 9,598,291$ 9,694,274$ 92,735,598$ Property Tax9,237,781 2%8,579,100 8,750,682 8,925,696 9,104,210 9,286,294 9,472,020 9,661,460 9,854,689 10,051,783 10,252,819 10,457,875 95,817,526 Transient Occupancy Tax8,933,184 2%8,516,900 8,687,238 8,860,983 9,038,202 9,218,966 9,403,346 9,591,413 9,783,241 9,978,906 10,178,484 10,382,054 95,122,832 Fire Service Property Tax ᵃ5,480,897 2%6,726,000 6,860,520 6,997,730 7,137,685 7,280,439 7,426,047 7,574,568 7,726,060 7,880,581 8,038,193 8,198,956 75,120,780 Fire Property Tax Reserves138,680 281,438 432,650 592,709 762,027 941,029 1,130,161 1,329,889 1,540,696 1,763,088 8,912,365 Motor Vehicle In-Lieu3,813,213 2%3,708,000 3,782,160 3,857,803 3,934,959 4,013,658 4,093,932 4,175,810 4,259,326 4,344,513 4,431,403 4,520,031 41,413,597 Other Revenue/Intergovernmental ᵇ1,190,129 1%1,735,600 1,452,956 1,467,486 1,482,160 1,496,982 1,511,952 1,527,071 1,542,342 1,557,765 1,573,343 1,589,077 15,201,134 Franchise Fees1,725,851 1%1,553,000 1,568,530 1,584,215 1,600,057 1,616,058 1,632,219 1,648,541 1,665,026 1,681,676 1,698,493 1,715,478 16,410,294 Charges for Services1,021,336 1%1,258,200 1,270,782 1,283,490 1,296,325 1,309,288 1,322,381 1,335,605 1,348,961 1,362,450 1,376,075 1,389,836 13,295,191 Development Related Permits759,969 1%936,700 946,067 955,528 965,083 974,734 984,481 994,326 1,004,269 1,014,312 1,024,455 1,034,700 9,897,954 Document Transfer Tax585,333 1%531,000 536,310 541,673 547,090 552,561 558,086 563,667 569,304 574,997 580,747 586,554 5,610,989 Business Licenses/Permits358,943 1%321,000 324,210 327,452 330,727 334,034 337,374 340,748 344,155 347,597 351,073 354,584 3,391,954 Fines and Assessments348,345 1%246,000 248,460 250,945 253,454 255,989 258,548 261,134 263,745 266,383 269,047 271,737 2,599,441 SilverRock Resort Net Revenue ᶜ531,400 1,260,000 2,500,000 2,960,000 2,842,000 3,222,000 3,540,000 3,575,400 3,611,154 24,041,954 2. Total Revenue$42,052,635$42,887,600 $43,430,456 $44,818,337 $46,424,627 $48,564,157 $49,946,182 $50,773,379 $52,122,447 $53,434,111 $54,488,518 $55,569,397 $499,571,6113. Cash Paid OutPolice Services Contract ᵈ14,417,358 8% 15,879,100 17,149,428 18,521,382 20,003,093 21,603,340 23,331,607 25,198,136 27,213,987 29,391,106 31,742,394 34,281,786 248,436,260 Fire Service Contract ᵈ5,643,880 4%6,730,000 6,999,200 7,279,168 7,570,335 7,873,148 8,188,074 8,515,597 8,856,221 9,210,470 9,578,888 9,962,044 84,033,145 Salaries (Full-Time Employees)4,989,399 3%5,527,700 5,693,531 5,864,337 6,040,267 6,221,475 6,408,119 6,600,363 6,798,374 7,002,325 7,212,395 7,428,767 65,269,952 Maintenance & Operations ᵉ4,029,463 2%4,613,700 4,705,974 4,800,093 4,896,095 4,994,017 5,093,898 5,195,776 5,299,691 5,405,685 5,513,799 5,624,075 51,529,102 Other Contract Services3,821,091 2%3,206,000 3,270,120 3,335,522 3,402,233 3,470,278 3,539,683 3,610,477 3,682,686 3,756,340 3,831,467 3,908,096 35,806,902 Capital Expenses ᶠ3,937,135 1,567,000 1,552,000 1,552,000 1,552,000 1,552,000 1,552,000 1,552,000 1,552,000 1,552,000 1,552,000 1,552,000 15,520,000 Employee Medical Insurance Costs880,980 3%1,373,300 1,414,499 1,456,934 1,500,642 1,545,661 1,592,031 1,639,792 1,688,986 1,739,655 1,791,845 1,845,600 16,215,646 Transfers Out ᶢ1,372,300 1,219,500 1,219,500 819,500 819,500 819,500 819,500 819,500 819,500 819,500 819,500 819,500 8,595,000 Other Personnel Costs618,674 2%896,100 914,022 932,302 950,948 969,967 989,367 1,009,154 1,029,337 1,049,924 1,070,922 1,092,341 10,008,286 PERS Unfunded Pension Liabilityͪ454,756 592,784 711,814 866,600 986,100 1,138,800 1,272,600 1,348,200 1,348,248 1,375,213 1,402,717 1,430,772 11,881,064 PERS Normal Payroll Costs348,821 2%363,816 605,238 617,343 629,690 642,283 655,129 668,232 681,596 695,228 709,133 723,315 6,627,187 Salaries (Part-Time/Temporary)143,123 2%340,400 347,208 354,152 361,235 368,460 375,829 383,346 391,013 398,833 406,810 414,946 3,801,831 1996 Bond Debt Service678,100 671,400 668,200 668,200 4. Total Operational Expenses$41,335,079$42,980,800 $45,250,734 $46,399,334 $48,712,138 $51,198,930 $53,817,838 $56,540,572 $59,361,639 $62,396,279 $65,631,870 $69,083,241 $558,392,5755. Yearly Operating Cash Position(2 minus 4) 717,556 (93,200) (1,820,278) (1,580,997) (2,287,511) (2,634,774) (3,871,656) (5,767,193) (7,239,191) (8,962,168) (11,143,352) (13,513,844) (58,820,964)6. Measure G Sales Tax Revenue(95% of Sales Tax Bradley Burns)1,462,6508,000,000 8,420,668 8,504,875 8,589,923 8,675,823 8,762,581 8,850,207 8,938,709 9,028,096 9,118,377 9,209,56188,098,818 7. Cash Position After Measure G(5 plus 6)$2,180,206 7,906,800$ 6,600,390$ 6,923,878$ 6,302,412$ 6,041,049$ 4,890,925$ 3,083,014$ 1,699,517$ 65,928$ (2,024,975)$ (4,304,284)$ 29,277,854$ 8. Measure G UsesPolice Services Contract ᶜ100,000 - Capital Expenses990,873 4,969,464 3,731,561 3,859,103 3,764,599 3,000,000 3,000,000 3,000,000 3,000,000 3,000,000 3,000,000 3,000,00032,355,263 Measure G Reserves471,777 330,500- Public Safety Fund300,000 - 9. Total Measure G Uses1,462,650$ 5,699,964$ 3,731,561$ 3,859,103$ 3,764,599$ 3,000,000$ 3,000,000$ 3,000,000$ 3,000,000$ 3,000,000$ 3,000,000$ 3,000,000$ 32,355,263$ 10. Cash Position After Measure G Uses(7 minus 9)717,556 2,206,836 2,868,829 3,064,775 2,537,813 3,041,049 1,890,925 83,014 (1,300,483) (2,934,072) (5,024,975) (7,304,284) (3,077,409) 11. RDA Loan RepaymentRepayment based on Last & Final ROPS1,826,881 2,441,620 2,490,453 2,540,262 2,591,066 2,642,888 2,695,746 2,749,661 2,804,654 2,860,747 2,917,962 2,976,321 27,269,760 12. Cash Position After RDA Repayment(10 plus 11)2,544,437$ 4,648,456$ 5,359,282$ 5,605,037$ 5,128,879$ 5,683,937$ 4,586,671$ 2,832,675$ 1,504,171$ (73,325)$ (2,107,013)$ (4,327,963)$ 24,192,351$ OPERATING BUDGET NOTES:a - Fire Property Tax Reserve account balance as of June 30, 2017 is $9,371,699. These funds are held in trust by the County of Riverside and restricted for fire services. b - Intergovernmental revenue will experience a decrease of $300,000 in 18/19 due one-time revenue in 17/18 and lower administrative reimbursements from Redevelopment dissolution resulting from an approved last and final repayment schedule. c - SilverRock Resort Net Revenue includes revenue derived from sales tax, property tax, transient occupancy tax and development fees. d - Police and Fire services are provided by the County of Riverside and subject to the County's annual budget for services. e - Maintenance and operations includes utilities and internal services charges. f - Capital expenses for 16/17 included the Eisenhower Drive retention basin land purchase. Ongoing projections include minimum capital funding for street and sidewalk improvements required to secure Measure A and Gas Tax funding. g - Transfers Out support the Gas Tax Fund for street improvements, the Landscape and Lighting District, and SilverRock golf course. A decrease in 19/20 is anticipated due to the scheduled disposition of SilverRock. h - PERS unfunded pension liability projections are based on CalPERS actuarial valuations as of June 30, 2016. GENERAL FUND FINANCIAL PROJECTIONSOPERATING BUDGETThe Adjusted Budget for 17/18 includes anticipated mid-year changes. Revenue projections are based on current economic conditions and historical trends. All assumptions include positive growth with no economic downturns. Expenditure projections are based on current operations, regulatory requirements, and anticipated increases. Measure G Uses Include:FY 16/17 Approved Uses:Eisenhower Dr. retention basin, Calle Tampico drainage improvementsFY 17/18 Approved Uses:Citywide drainage improvements, Village road diet, N. LQ landscape improvements, police servicesFY 18/19 Proposed Uses:Citywide drainage improvements, N. LQ landscape improvementsFY 19/20 & 20/21 Proposed Uses:N. LQ landscape improvements, corporate yard facilityFY 21/22 & beyond CIP TBDMEASURE G SALES TAX BUDGETRDA LOANRDA loan repayments end in 29/30. Additional revenue totals $5,784,105. EXHBIT 1
City of La Quinta As of March 23, 2018ActualGrowthAdjusted Budget2018/19 to 2027/282016/17 Projections 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 2026/27 2027/28TOTAL1.Cash ReceiptsSales Tax - Bradley Burns8,597,655$ 1% 8,776,100$ 8,863,861$ 8,952,500$ 9,042,025$ 9,132,445$ 9,223,769$ 9,316,007$ 9,409,167$ 9,503,259$ 9,598,291$ 9,694,274$ 92,735,598$ Property Tax9,237,781 2%8,579,100 8,750,682 8,925,696 9,104,210 9,286,294 9,472,020 9,661,460 9,854,689 10,051,783 10,252,819 10,457,875 95,817,526 Transient Occupancy Tax8,933,184 2%8,516,900 8,687,238 8,860,983 9,038,202 9,218,966 9,403,346 9,591,413 9,783,241 9,978,906 10,178,484 10,382,054 95,122,832 Fire Service Property Tax ᵃ5,480,897 2%6,726,000 6,860,520 6,997,730 7,137,685 7,280,439 7,426,047 7,574,568 7,726,060 7,880,581 8,038,193 8,198,956 75,120,780 Fire Property Tax Reserves138,680 281,438 432,650 592,709 762,027 941,029 1,130,161 1,329,889 1,540,696 1,763,088 8,912,365 Motor Vehicle In-Lieu3,813,213 2%3,708,000 3,782,160 3,857,803 3,934,959 4,013,658 4,093,932 4,175,810 4,259,326 4,344,513 4,431,403 4,520,031 41,413,597 Other Revenue/Intergovernmental ᵇ1,190,129 1%1,735,600 1,452,956 1,467,486 1,482,160 1,496,982 1,511,952 1,527,071 1,542,342 1,557,765 1,573,343 1,589,077 15,201,134 Franchise Fees1,725,851 1%1,553,000 1,568,530 1,584,215 1,600,057 1,616,058 1,632,219 1,648,541 1,665,026 1,681,676 1,698,493 1,715,478 16,410,294 Charges for Services1,021,336 1%1,258,200 1,270,782 1,283,490 1,296,325 1,309,288 1,322,381 1,335,605 1,348,961 1,362,450 1,376,075 1,389,836 13,295,191 Development Related Permits759,969 1%936,700 946,067 955,528 965,083 974,734 984,481 994,326 1,004,269 1,014,312 1,024,455 1,034,700 9,897,954 Document Transfer Tax585,333 1%531,000 536,310 541,673 547,090 552,561 558,086 563,667 569,304 574,997 580,747 586,554 5,610,989 Business Licenses/Permits358,943 1%321,000 324,210 327,452 330,727 334,034 337,374 340,748 344,155 347,597 351,073 354,584 3,391,954 Fines and Assessments348,345 1%246,000 248,460 250,945 253,454 255,989 258,548 261,134 263,745 266,383 269,047 271,737 2,599,441 SilverRock Resort Net Revenue ᶜ531,400 1,260,000 2,500,000 2,960,000 2,842,000 3,222,000 3,540,000 3,575,400 3,611,154 24,041,954 2.Total Revenue$42,052,635$42,887,600 $43,430,456 $44,818,337 $46,424,627 $48,564,157 $49,946,182 $50,773,379 $52,122,447 $53,434,111 $54,488,518 $55,569,397 $499,571,6113.Cash Paid OutPolice Services Contract ᵈ14,417,358 10% 15,879,100 17,467,010 19,213,711 21,135,082 23,248,590 25,573,449 28,130,794 30,943,874 34,038,261 37,442,087 41,186,296 278,379,155 Fire Service Contract ᵈ5,643,880 4%6,730,000 6,999,200 7,279,168 7,570,335 7,873,148 8,188,074 8,515,597 8,856,221 9,210,470 9,578,888 9,962,044 84,033,145 Salaries (Full-Time Employees)4,989,399 3%5,527,700 5,693,531 5,864,337 6,040,267 6,221,475 6,408,119 6,600,363 6,798,374 7,002,325 7,212,395 7,428,767 65,269,952 Maintenance & Operations ᵉ4,029,463 2%4,613,700 4,705,974 4,800,093 4,896,095 4,994,017 5,093,898 5,195,776 5,299,691 5,405,685 5,513,799 5,624,075 51,529,102 Other Contract Services3,821,091 2%3,206,000 3,270,120 3,335,522 3,402,233 3,470,278 3,539,683 3,610,477 3,682,686 3,756,340 3,831,467 3,908,096 35,806,902 Capital Expenses ᶠ3,937,135 1,567,000 1,552,000 1,552,000 1,552,000 1,552,000 1,552,000 1,552,000 1,552,000 1,552,000 1,552,000 1,552,000 15,520,000 Employee Medical Insurance Costs880,980 3%1,373,300 1,414,499 1,456,934 1,500,642 1,545,661 1,592,031 1,639,792 1,688,986 1,739,655 1,791,845 1,845,600 16,215,646 Transfers Out ᶢ1,372,300 1,219,500 1,219,500 819,500 819,500 819,500 819,500 819,500 819,500 819,500 819,500 819,500 8,595,000 Other Personnel Costs618,674 2%896,100 914,022 932,302 950,948 969,967 989,367 1,009,154 1,029,337 1,049,924 1,070,922 1,092,341 10,008,286 PERS Unfunded Pension Liabilityͪ454,756 592,784 711,814 866,600 986,100 1,138,800 1,272,600 1,348,200 1,348,248 1,375,213 1,402,717 1,430,772 11,881,064 PERS Normal Payroll Costs348,821 2%363,816 605,238 617,343 629,690 642,283 655,129 668,232 681,596 695,228 709,133 723,315 6,627,187 Salaries (Part-Time/Temporary)143,123 2%340,400 347,208 354,152 361,235 368,460 375,829 383,346 391,013 398,833 406,810 414,946 3,801,831 1996 Bond Debt Service678,100 671,400 668,200 668,200 4. Total Operational Expenses$41,335,079$42,980,800 $45,568,316 $47,091,663 $49,844,127 $52,844,180 $56,059,679 $59,473,230 $63,091,526 $67,043,434 $71,331,563 $75,987,751 $588,335,4695.Yearly Operating Cash Position(2 minus 4) 717,556 (93,200) (2,137,860) (2,273,326) (3,419,501) (4,280,024) (6,113,498) (8,699,851) (10,969,078) (13,609,323) (16,843,045) (20,418,354) (88,763,859)6.Measure G Sales Tax Revenue(95% of Sales Tax Bradley Burns)1,462,6508,000,000 8,420,668 8,504,875 8,589,923 8,675,823 8,762,581 8,850,207 8,938,709 9,028,096 9,118,377 9,209,56188,098,818 7.Cash Position After Measure G(5 plus 6)$2,180,206 7,906,800$ 6,282,808$ 6,231,549$ 5,170,423$ 4,395,799$ 2,649,083$ 150,356$ (2,030,370)$ (4,581,227)$ (7,724,668)$ (11,208,793)$ (665,041)$ 8.Measure G UsesPolice Services Contract ᶜ100,000 - Capital Expenses990,873 4,969,464 3,731,561 3,859,103 3,764,599 3,000,000 3,000,000 3,000,000 3,000,000 3,000,000 3,000,000 3,000,00032,355,263 Measure G Reserves471,777 330,500- Public Safety Fund300,000- 9. Total Measure G Uses1,462,650$ 5,699,964$ 3,731,561$ 3,859,103$ 3,764,599$ 3,000,000$ 3,000,000$ 3,000,000$ 3,000,000$ 3,000,000$ 3,000,000$ 3,000,000$ 32,355,263$ 10.Cash Position After Measure G Uses(7 minus 9)717,556 2,206,836 2,551,247 2,372,446 1,405,824 1,395,799 (350,917) (2,849,644) (5,030,370) (7,581,227) (10,724,668) (14,208,793) (33,020,304) 11. RDA Loan RepaymentRepayment based on Last & Final ROPS1,826,881 2,441,620 2,490,453 2,540,262 2,591,066 2,642,888 2,695,746 2,749,661 2,804,654 2,860,747 2,917,962 2,976,321 27,269,760 12.Cash Position After RDA Repayment(10 plus 11)2,544,437$ 4,648,456$ 5,041,700$ 4,912,708$ 3,996,890$ 4,038,687$ 2,344,829$ (99,983)$ (2,225,716)$ (4,720,480)$ (7,806,706)$ (11,232,473)$ (5,750,544)$ The Adjusted Budget for 17/18 includes anticipated mid-year changes. Revenue projections are based on current economic conditions and historical trends. All assumptions include positive growth with no economic downturns. Expenditure projections are based on current operations, regulatory requirements, and anticipated increases. Measure G Uses Include:FY 16/17 Approved Uses:Eisenhower Dr. retention basin, Calle Tampico drainage improvementsFY 17/18 Approved Uses:Citywide drainage improvements, Village road diet, N. LQ landscape improvements, police servicesFY 18/19 Proposed Uses:Citywide drainage improvements, N. LQ landscape improvementsFY 19/20 & 20/21 Proposed Uses:N. LQ landscape improvements, corporate yard facilityFY 21/22 & beyond CIP TBDRDA loan repayments end in 29/30. Additional revenue totals $5,784,105. OPERATING BUDGET NOTES:a - Fire Property Tax Reserve account balance as of June 30, 2017 is $9,371,699. These funds are held in trust by the County of Riverside and restricted for fire services. b - Intergovernmental revenue will experience a decrease of $300,000 in 18/19 due one-time revenue in 17/18 and lower administrative reimbursements from Redevelopment dissolution resulting from an approved last and final repayment schedule. c - SilverRock Resort Net Revenue includes revenue derived from sales tax, property tax, transient occupancy tax and development fees. d - Police and Fire services are provided by the County of Riverside and subject to the County's annual budget for services. e - Maintenance and operations includes utilities and internal services charges. f - Capital expenses for 16/17 included the Eisenhower Drive retention basin land purchase. Ongoing projections include minimum capital funding for street and sidewalk improvements required to secure Measure A and Gas Tax funding. g - Transfers Out support the Gas Tax Fund for street improvements, the Landscape and Lighting District, and SilverRock golf course. A decrease in 19/20 is anticipated due to the scheduled disposition of SilverRock. h - PERS unfunded pension liability projections are based on CalPERS actuarial valuations as of June 30, 2016. GENERAL FUND FINANCIAL PROJECTIONSOPERATING BUDGETMEASURE G SALES TAX BUDGETRDA LOANEXHIBIT 2
CITY OF LA QUINTA, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2017
47
NOTE 4: CAPITAL ASSETS
Capital asset activity for governmental activities for the year ended June 30, 2017, is as follows:
Beginning Ending
Balance at Balance at
July 1, 2016 Additions Deletions Transfers June 30, 2017
Governmental activities:
Capital assets, not being depreciated:
Land 69,816,674$ 4,500,000$ -$ -$ 74,316,674
Right of way 284,928,794 - - - 284,928,794
Construction-in-progress 8,692,612 4,587,553 - (3,310,670) 9,969,495
Total Capital Assets,
Not Being Depreciated 363,438,080 9,087,553 - (3,310,670) 369,214,963
Capital assets, being depreciated:
Buildings and improvements 74,176,560 199,856 - 264,395 74,640,811
Equipment and furniture 3,442,965 39,957 --3,482,922
Vehicles 1,751,819 452,067 329,500 - 1,874,386
Infrastructure 218,399,541 - - 3,046,275 221,445,816
Total Capital Assets,
Being Depreciated 297,770,885 691,880 329,500 3,310,670 301,443,935
Less accumulated depreciation for:
Buildings and improvements 28,159,909 2,361,480 - - 30,521,389
Equipment and furniture 2,216,710 237,744 - - 2,454,454
Vehicles 1,563,715 68,123 329,500 - 1,302,338
Infrastructure 108,789,321 6,506,746 - - 115,296,067
Total Accumulated
Depreciation 140,729,655 9,174,093 329,500 - 149,574,248
Total Capital Assets,
Being Depreciated, Net 157,041,230 (8,482,213) - 3,310,670 151,869,687
Governmental Activities
Capital Assets, Net 520,479,310$ 605,340$ -$ -$ 521,084,650
Depreciation expense was charged to the following functions in the Statement of Activities:
General governments 634,400$
Planning and development 115,832
Community services 1,820,841
Public works 6,603,020
9,174,093$
EXHIBIT 3
EXHIBIT 4
Natural Disaster
Reserve
% of
City Coverage
Asset
Estimated
Replacement
Value
Recommended
Coverage
Recommended
Coverage FEMA/State City Coverage
14 Parks 19,966,204 ‐ ‐18,718,316 1,247,888 623,944 50%
0%94%6%
12 City Buildings 60,322,936 31,197,068 52,562,286 1,678,125 111,875 111,875 100%
52%87%3%0.19%
SilverRock 6,317,571 3,034,645 2,592,501 3,651,397 243,426 121,713 50%
48%41%58%4%
Streets, Signals, 266,775,219 ‐ 823,394 248,557,904 16,570,527 8,285,263 50%
Signs, Landscaping 0%0.31%93%6%
Fleet Vehicles 693,182 693,182 ‐‐693,182 693,182 100%
100%0%100%
Housing Assets 12,059,000 12,059,000 5,199,000 6,431,250 428,750 428,750 100%
100%43%53%4%
TOTALS 366,134,112 46,983,895 61,177,181 279,036,992 19,295,648 10,264,728
Percentage of Total Value 13%17%76%5%3%
Property Coverage
(Flood, Fire, Wind)
Earthquake
Coverage
Estimated Replacement Costs
Funding Sources
SUMMARY OF ALL INSURED CITY ASSETS
Reserve Category Current Allocation
Method
Alternative Allocation
Method Additional Considerations
Natural Disaster 40% of annual operating
budget
Comprehensive Asset
Management Study performed
every 5 years
Modify City Ordinance to simply access to
funds.
Economic Disaster N/A
10 year historical financial
analysis of the General Fund
using revenue, expenditures and
net income adjusted for inflation
- Define access to funds in City Ordinance -
economic downturns.
* Used to balance the budget if revenues
are projected to be 10% less than prior year
actual revenues
* Used to balance the budget if expenses
are projected to be 10% more than prior
year actual expenses
- Intended to maintain essential daily
operations while a long-term recovery
strategy is formulated
Cash Flow Reserve 10% of annual operating
budget
Update annually by calculating
the prior fiscal year monthly
surplus/deficit of revenues versus
expenditures; with the largest
cumulative deficit becoming the
reserve target
With budget adoption prior to the end of the
fiscal year, a lag of one fiscal year would be
required.
Capital Replacement
Reserve N/A
Annual depreciation from total
depreciable General Fund assets
- Audited financial statements are
completed six months after the fiscal year-
end, a lag of one fiscal year would be
required.
- City also uses restricted funds for
infrastructure improvements
- Define access to funds in City Ordinance
* Matching CIP grant funds, supplement
CIP funding gaps
Pension Trust Fund N/A
- Target based on current
CalPERS net pension liability
- Subject to CalPERS actuarial
studies, asset allocations,
investment returns, and policies
- Pension obligations will
continue to increase
- Funds available for reimbursement of up
to two years of pension costs at any time
($2.2M today)
- Section 115 Trust, restricted for pension
obligations
- All funds available for transfer to CalPERS
at any time
Unassigned Reserves GASB 54 GASB 54
- Unrestricted funds available to the City
- Funding comes from annual savings (total
revenue - total expenses) or budget
surpluses
- Has been used for:
*Matching CIP funds
*Land purchases
*Cover minor or temporary anticipated
budget shortfalls
Reserve Categories and Allocation Methods
OPTIONS -
A - Keep the current allocation method.
B - Implement the alternative allocation method.
C - Keep the current allocation methods and use the alternative method for verification.
Reserve CategoryTarget Funding Current Funding Over/(Under) BalanceOther Funding SourcesFunding Sources Funding OptionsOver/(Under) Funding2017/18 2018/19 2019/20 2020/21 2021/22Estimated Over/(Under) FundingNatural Disaster 10,000,000 16,534,000 6,534,000 FEMA, State of CA, Special Funds-20% of realized year end surplus- - - - - - - - Economic Disaster 11,000,000 - (11,000,000) N/A-Reallocate overage from natural disaster- 20% of realized year end surpluses -One time $6,534,000-One time $1,000,000 (A) (3,466,000) 488,324 498,091 508,052 799,378 807,737 (364,418) Cash Flow Reserve 5,000,000 4,134,000 (866,000) N/A-Lump sum from unassigned reserves -One time $866,000 (B) - - - - - - - Capital Replacement Reserve 10,000,000 - (10,000,000) Special Funds-CIP savings - Measure G funds -One time $1,051,966 (C)-One time Measure G reserve $717,556 (8,230,478) 2,206,836 2,551,247 1,977,928 - - - -20% of realized year end surpluses 488,324 498,091 508,052 Pension Trust Fund 10,000,000 - (10,000,000) N/A-Annual salary and employee benefits savings-20% of realized year end surplus -One-time FY 16/17 savings $315,621 (J)-One-time $1,000,000 (D) (8,684,379) 488,324 498,091 508,052 799,378 807,737 (5,582,797)Unassigned - 14,865,926 14,865,926 N/A-20% of realized year end surplus -Allocate $3,917,966 of unassigned reserves 10,947,960 976,648 996,181 1,410,623 2,398,134 2,423,212 - Total 46,000,000 35,533,926 (10,466,074) (9,432,897) 4,648,456 5,041,700 4,912,708 3,996,890 4,038,687 (5,947,214)E F G H I No allocation of year end surplus for fully funded reserves. Surplus would remain in unassigned reserves. Surplus includes General Fund savings and unassigned RDA loan repayments which end in FY 2029/30.2016/17 2017/18 2018/19 2019/202021/222022/23EFG H ISurplus/(Deficit)* 2,544,437 4,648,456 5,041,700 4,912,708 3,996,890 4,038,687 14,865,926 Measure G (717,556) (2,206,836) (2,551,247) (2,372,446) (1,000,000)AS & B Savings (J) (315,621) (866,000)BAvailable for allocation 1,511,260 2,441,620 2,490,453 2,540,262 3,996,890 4,038,687 (1,051,966)C20% allocation20% 20%20%20%20%20% (1,000,000)DReserve Distribution 302,252 488,324 498,091 508,052 799,378 807,737 (3,917,966)Reserve Funding Options and Five-Year Projections* Based on General Fund 10-Year Projections, subject to change. Economic DisasterCash Flow ReserveCIP Sinking FundPension Trust FundOne-time Allocation of Unassigned ReservesCurrent Unassigned BalanceUse of Unassigned ReservesAnticipated Unassigned Balance 10,947,960 ATTACHMENT 3
City of La Quinta
FINANCIAL ADVISORY COMMISSION MEETING: April 11, 2018
STAFF REPORT
AGENDA TITLE: APPROVE FISCAL YEAR 2018/19 MEETING DATES
RECOMMENDATION
Approve of meeting dates for the Financial Advisory Commission for fiscal year 2018/19.
EXECUTIVE SUMMARY
•Annually the Financial Advisory Commission (FAC) and staff discuss and select
meeting dates for the following fiscal year.
•The FAC shall meet quarterly with the ability to schedule special meetings as needed
throughout the year.
FISCAL IMPACT
FAC members are eligible to receive $75 per member, per meeting attended. The
proposed 2018/19 budget will be $3,150 for four regularly scheduled quarterly meetings
plus an allowance for two special meetings per year for a seven-member Commission.
BACKGROUND/ANALYSIS
The FAC shall meet quarterly and may schedule additional special meetings as needed.
The meeting dates for the current fiscal year 2017/18 are as follows:
August 9, 2017 - Wednesday
November 15, 2017 – Wednesday
February 12, 2018 – Monday
April 11, 2018 – Wednesday, proposed special meeting date
May 9, 2018 – Wednesday
June 13, 2018 – Wednesday, proposed special meeting date
Proposed meeting dates for fiscal year 2018/19 are as follows:
August 8, 2018 - Wednesday
November 14, 2018 – Wednesday
February 13, 2019 – Wednesday
April 10, 2019 – Wednesday, proposed special meeting date
May 15, 2019 – Wednesday
June 12, 2019 – Wednesday, proposed special meeting date
ALTERNATIVES
Amend the proposed meeting dates.
Prepared by: Karla Campos, Finance Director
BUSINESS SESSION ITEM NO. 1
DEPARTMENTAL REPORT ITEM NO. 1 City of La Quinta
FINANCIAL ADVISORY COMMISSION MEETING
DEPARTMENT REPORT
TO: Honorable Chair and Financial Advisory Commissioners
FROM: Rosemary Hallick, Financial Services Analyst
DATE: April 11, 2018
SUBJECT: Third Quarter 2017 (July – September 2017) Sales Tax Update for the City
of La Quinta
The attached report was prepared by HdL Companies, the City’s sales tax consultant,
as an update of sales tax receipts for second quarter sales from July to September
2017.
Highlights
• Generally all major business groups experienced an increase in sales in
comparison to the third quarter of 2016, with the exception of
restaurants/hotels and autos/transportation.
• City of La Quinta sales per capita were higher than the county average and
about flat with the state average, which has been the case for all third quarters
(consisting of July –September) since 2014.
• General consumer goods (such as department stores) and restaurants/hotels
made up 56% of sales tax revenue during this quarter.
• La Quinta’s overall adjusted sales increase was 1.9%, which compares to
Riverside County at 5.1% and Southern California at 3.1%.
• Overall increases are being driven by rising fuel prices, demand for building
materials and county pool receipts (from online shopping).
• Allocation of sales tax continues to be based on the basic principles of location
and ownership. County pools benefit if the sale is negotiated and the goods are
shipped from out of state or if a fulfillment center is in California, but the
inventory is not owned by the seller. Local jurisdictions benefit when the seller
owns the inventory and it is delivered from inside California.
The City continuously monitors local development, statewide economic conditions,
international impacts on travel and trade, as well as significant shifts in sales to non-
traditional sources (such as online purchases).
Measure G Update
• Measure G transaction taxes continue to come in above our conservative
estimates, and a budget adjustment was approved at mid-year to reflect the
increase in revenues.
• General consumer goods (such as department stores) and restaurants/hotels
made up 54% of transaction tax revenue during this quarter, a similar share to
sales taxes.
• The autos and transportation sector made up 16% of transaction tax revenue
as opposed to only 12% of sales tax revenue.
• A transaction tax, such as our Measure G, is based on the place of purchase. As
an example, automobile transaction taxes go to the jurisdiction in which the
buyer’s vehicle is registered, not the location of the dealership.
• Our top 25 transactions tax producers predominately consisted of LA Quinta
businesses; however there was activity from online retailers as well as several
auto dealerships located outside of City limits.
City staff will continue to monitor Measure G activity to establish baselines for future
budgeting purposes. Updated projections were provided by the consultants at this
most recent meeting for budget year 2018/19.
Attachment 1: City of La Quinta Sales Tax Update
MEMORANDUM
TO: Financial Advisory Commission
FROM: Jessica Delgado, Management Assistant
DATE: April 11, 2018
SUBJECT: Departmental Report Item Nos. 2 and 3
2.REVISED PURCHASING POLICY – Verbal Update
Reference materials – April 3, 2018, Council meeting – Business Session
Item No. 4 staff report
3.DEBT MANAGEMENT POLICY – Verbal Update
Reference materials – April 3, 2018, Council meeting – Business Session
Item No. 3 staff report
City of La Quinta
CITY COUNCIL MEETING: April 3, 2018
STAFF REPORT
AGENDA TITLE: ADOPT A RESOLUTION TO APPROVE REVISIONS TO THE CITY’S
PURCHASING AND CONTRACTING POLICY
RECOMMENDATION
Adopt a resolution to approve revisions to the City’s Purchasing and Contracting Policy.
EXECUTIVE SUMMARY
The last update to the City’s Purchasing and Contracting Policy (Policy) was
October 2015. A review of the Policy was conducted to align it with other City
policies, and to incorporate necessary regulatory requirements.
Staff, City Attorney, and two independent auditing firms have reviewed the
proposed Policy revisions. The Policy conforms to current laws, risk
management, and governmental accounting best practices.
FISCAL IMPACT – None.
BACKGROUND
In October 2015, the Council amended the City’s Purchasing and Contracting Policy to
adopt Resolution No. 2015-45 setting forth policies and procedures regulating
purchasing and contracting. Staff has identified areas of the Policy that require
amendments to provide consistency, clarification, meet regulatory requirements, and
would facilitate a more efficient process. Exhibit A to the resolution has been redlined,
showing the changes to the previous policy.
The primary updates and additions include:
The addition of the Administrative Guidelines section to address fraud
protection, vendor limit, and vendor preferences;
The expansion of the Equal Bids section to clarify the process of award
selection;
The definition of Maintenance and Repair services;
Additional definitions under the Emergency Purchases section to clarify
purchasing requirements in the event of an emergency;
BUSINESS SESSION ITEM NO. 4
109
The addition of General Procurement Standards (Section VII) to comply with the
Office of Management and Budget’s (OMB) new guidance requirement Uniform
Administrative Requirements, Cost Principles, and Audit Requirements for Federal
Awards, Title 2 U.S. Code of Federal Regulations Part 200.
To ensure compliance with current laws and regulatory requirements, the amended
Policy was reviewed by staff, City Attorney, and two independent governmental
accounting auditing firms.
ALTERNATIVES
Council may approve as presented, incorporate changes, or request further review.
Prepared by: Claudia Martinez, Senior Accountant
Approved by: Karla Campos, Finance Director
110
RESOLUTION NO. 2018 -
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LA
QUINTA, CALIFORNIA, ADOPTING A PURCHASING AND
CONTRACTING POLICY
WHEREAS, purchasing and contracting policies provide a guideline to city
employees for purchasing and contracting for goods, services and projects to support,
enhance and supplement city operations, and
WHEREAS, purchasing and contracting policies provide transparency and
consistency, and
WHEREAS, purchasing and contracting policies enable the Finance department
to maintain a system of financial controls for the efficient use and expenditure of
public funds.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of La Quinta,
California, as follows:
SECTION 1. The purchasing and contracting policy attached hereto as Exhibit A and
incorporated herein by reference shall govern the purchase of city supplies, goods,
equipment, services and construction projects.
SECTION 2. This policy, as applicable, shall constitute the procedures and rules
governing the solicitation of bids and award of contracts for public works projects
pursuant to Chapter 3.12, and shall constitute the procedures and rules governing the
solicitation and selection of firms for services pursuant to Chapter 3.12, of the La
Quinta Municipal Code.
SECTION 3. Resolution No. 2015-045 is hereby repealed. This Resolution supersedes
and replaces Resolution No. 2015-045.
SECTION 4. Severability. If any provision of this Resolution or the application thereof
to any person or circumstance is held invalid, such invalidity shall not affect other
provisions or applications of this Resolution which can be given effect without the
invalid provision or application, and to this end the provisions of this Resolution are
severable. The City Council hereby declares that it would have adopted this Resolution
irrespective of the invalidity of any particular portion thereof.
SECTION 5. This Resolution shall become effective upon adoption. The Purchasing and
Contracting Policy adopted by this Resolution shall go into effect immediately.
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PASSED, APPROVED, and ADOPTED at a regular meeting of the La Quinta City
Council held on this 3rd day of April 2018 by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
__________________________
LINDA EVANS, Mayor
City of La Quinta, California
ATTEST:
________________________________________
SUSAN MAYSELS, City Clerk
City of La Quinta, California
(CITY SEAL)
APPROVED AS TO FORM:
_______________________________________
WILLIAM H. IHRKE, City Attorney
City of La Quinta, California
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EXHIBIT A
CITY OF LA QUINTA, CALIFORNIA
PURCHASING AND CONTRACTING POLICY
I. GENERAL RULES; EXCEPTIONS.
This Purchasing and Contracting Policy (Policy) shall apply for the solicitation and
selection of all purchases and contracts within the City of La Quinta (City). Any
exceptions to this Policy must be approved by the City Council. The City Council may,
by majority vote and in accordance with its fiduciary responsibilities, approve
expenditures of any amount, for any length of term, not otherwise inconsistent with
any applicable law.
A. ADMINISTRATIVE GUIDELINES
1. Vendor Limit. Combined purchase orders cannot exceed $50,000 per vendor, per
fiscal year except in the case of major expenditures in which a vendor has
participated in a public formal bidding process.
2. Change Orders or Amendments. A change order or amendment is a change in a
contract term, other than as specifically provided for in the contract, that
authorizes or necessitates any increase or decrease of the cost of the contract or
in the time of completion that can be authorized by the City Manager or
Department Director. A valid request for a change order or amendment must
meet the following criteria:
a. the change was not reasonably foreseeable at the time that the contract
was signed;
b. the change must be relevant to the original contract; and
c. the change is authorized by the contract provisions and in the best
interest of the City.
3. Conflict of Interest. No employee, officer, Councilmember, or agent shall
participate in the selection, award, or administration of a contract if he or she has
a real or apparent conflict of interest. Such a conflict of interest would arise when
the employee, officer, Councilmember, agent, or any member of his or her
immediate family, his or her partner, or an organization which employs or is
about to employ any of the parties indicated, herein, has a financial or other
interest in or a tangible personal benefit from a firm considered for a contract.
Nothing in this Policy does or is to be construed as limiting the applicability of any
other federal, state, or local laws and regulations governing prohibitions against
financial conflicts of interest, including but not limited to the Political Reform Act
(Government Code Section 81000 et seq.) and implementing regulations from the
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Fair Political Practices Commission (Title 2, Section 18110 et seq., of the California
Code of Regulations), and Government Code Sections 1090-1999 and 1126. All
such laws and regulations shall apply to every employee, officer, Councilmember,
and agent of the City.
4. Local Vendors. Purchasing goods and services from local vendors which
stimulate the local economy is encouraged but not required.
5. Green Purchasing Practices. The City is committed to Green Purchasing practices
in obtaining goods and services. The City shall consider environmentally-
preferable products when appropriate. Nothing in this policy requires the
procurement of products that do not adequately perform their intended use,
requires procurement that excludes adequate competition, or requires the
procurement of products that are unavailable at a reasonable price or at a
reasonable time. An environmentally-preferable product means a product that
meets any of the following criteria:
a. is durable, repairable, reusable, or recyclable;
b. has minimal packaging, toxic content, or chemical-hazard potential;
c. is resource or energy efficient in any or all phases of its manufacture,
use, or disposal; or
d. its use or disposal minimizes or eliminates the City’s potential
environmental liability.
II. EXPENDITURE CATEGORIES
Purchases, which include those made by purchase order (PO), written agreement,
amendment or change order that require city expenditures, are classified into five
categories based on the anticipated expenditure amount. Each category establishes
an authorization level, procurement method, and maximum term, which shall apply
unless specifically exempted in accordance with this Policy.
A. Expenditures of $50 or less (petty cash)
B. Expenditures of $51 to $5,000 (operational)
C. Expenditures of $5,001 to $15,000 (minor)
D. Expenditures of $15,001 to $50,000 (intermediate)
E. Expenditures over $50,001 (major)
A. EXPENDITURES OF $50 OR LESS
Authorization: Department Director, who may delegate to a department manager
Procurement: No bids or PO necessary; petty cash advances or reimbursement
Term Limit: N/A
Note: These transactions take the place of ordinary ongoing purchases and shall
be limited in use.
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A cash disbursement or reimbursement may be obtained from the Finance
department and must not exceed $50. A petty cash request form shall be completed
and signed by the department director before submittal. The form shall include the
date, description of the item to be purchased, and account number. Petty cash
amounts will be advanced to accommodate miscellaneous minor expenditure
amounts of $50 or less and for which normal payment provisions are not practical.
The Finance department will periodically audit petty cash expenditures as to form and
regulations and may confirm purchases.
B. EXPENDITURES OF $51 to $5,000 DURING THE INITIAL TERM1
Authorization: Department Director, who may delegate to a department manager4
Procurement: No PO necessary; 3 informal bids/proposals2 whenever possible
Term Limit: 3 years plus one 3-year extension
C. EXPENDITURES OF $5,001 to $15,000 DURING THE INITIAL TERM
Authorization: Department Director
Procurement: PO required plus 3 written informal bids/proposals
Term Limit: 3 years plus one 3-year extension
D. EXPENDITURES OF $15,001 to $50,000 DURING THE INITIAL TERM
Authorization: City Manager
Procurement: PO required plus 3 written informal bids/proposals plus city contract3
Term Limit: 3 years plus one 3-year extension
E. EXPENDITURES OVER $50,001
Authorization: City Council
Procurement: PO required plus formal bids/proposals plus city contract
Term Limit: no limit, any term approved by majority vote of the City Council
III. PROCUREMENT PROCEDURES - MAJOR EXPENDITURES (over $50,001)
For purposes of this Policy, the “Initial Term” shall be either (i) a term under the contract or PO not to exceed one year, or (ii) a
term longer than one year but not to exceed the maximum number of years authorized under a “Term Limit” (set forth below) as
long as the contract includes a continuing obligation for performance by a contracting party and the City has an obligation for
payment only for the services actually performed and accounted for by invoice or other monthly or regular periodic documentation
acceptable to the City. Under any contract or PO, either the contracting party or City may terminate the contract or PO prior to the
expiration of the Initial Term for the other party’s nonperformance.
2 “Informal” bid/proposal means verbal or written, via telephone, e-mail or other casual medium.
3 The city’s templates for contracts, agreements, amendments and change orders shall be used for category D and E purchases. The
City Manager may allow for modifications of these templates or use of other contracts, agreements, amendments and change
orders, or may require use of city templates for category B and C purchases when the City Manager determines it is prudent due to
the level of risk exposure to the city, the need to spell out a complex scope of work, or any other reason s/he believes to be in the
best interest of the city. To meet prevailing wage requirements any maintenance or repair project over $15,000 or construction
project over $25,000 will require a written contract.
4 Designee must have signature authorization form on file with the Finance department, or active designation letter for a specific
date range.
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A. FORMAL BIDS FOR MAJOR PUBLIC WORKS PROJECTS AND MAJOR SUPPLIES AND
EQUIPMENT PURCHASES. Major public works projects and supplies and equipment as
referenced in Chapter 3.12 of the La Quinta Municipal Code, are defined as purchases
and projects having an actual or estimated value of greater than fifty thousand and
one dollars ($50,001). The solicitation and selection of bids and award of contracts
shall comply with Section 3.12.030 of the La Quinta Municipal Code (public works
contracts), and this Policy, and shall be administered through each City Department,
according to the following procedures:
1. Invitation for bids. An invitation for bids (the “invitation”) shall be published in a
newspaper, electronic bulletin board or online submission source, City website,
World Wide Web site or other generally-recognized source of local public works
contract information, at least ten days prior to the date of the opening of bids.
Invitations shall include general descriptions of the work to be performed, the
time and place of the opening of bids, the place where bidders may obtain bid
documents, the amount of bid security required, and the amount and nature of
performance and labor materials security that will be required.
2. Form of bids. Bids conforming to the requirements of the invitation shall be
submitted to the Department Director (the “Director”) in sealed packages or by
other means which will prevent the divulging of bids prior to the stated time for
opening of bids, all as specified in the invitation or the bid documents. Unopened
bids should be clearly marked or otherwise identifiable as bids for the project to
which they apply.
3. Bid security for public works projects. Bids for public works projects shall be
accompanied by cash, cashier’s check, certified check, surety bond, or other form
of security stated in the invitation or bid documents, in a sum equal to at least
ten percent (10%) of the amount of the bid.
4. Opening of bids. At the time and place stated in the invitation, the bids shall be
publicly opened and announced. The bid amounts shall be tabulated and the
tabulation shall be available for public inspection at the Public Works Department
during regular business hours for a period of not less than thirty (30) calendar
days after the bid opening.
5. Review of bids. The Director shall review all bids received for completeness,
accuracy, responsiveness to the invitation and the bid documents, and the City’s
experience with or knowledge of the qualification and reliability of each bidder
and shall prepare a recommendation to the City Council. Written amounts shall
take precedence over associated numeric amounts. Mathematical errors, if
found, shall be corrected and shall not disqualify a bid. The corrected total shall
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be the bid amount considered in determining the lowest responsible bidder and
shall be the contract amount awarded if the bid is selected.
6.Award of contract. Contracts shall be awarded by the City Council to the lowest
responsible bidder. Determination of the lowest responsible bidder shall be at the
sole discretion of the City Council pursuant to findings and recommendations
presented by the Director at the time of the award of contract.
7.Equal bids. If two or more equal low bids are received, the City Council may
award the contract to any one of the equal low bidders by the following:
a.Select one bid; or
b.Reject all bids and re-solicit for bids; or
c.Reject all bids and authorize negotiated agreement if consistent with
federal and state laws; or
d.Select one bid, which is the most responsible bidder; or
e.Take any other action that the City Council deems to serve the best
interest of the City.
8.No bids. When no bids are received from responsible firms, the City Council may
accomplish the project in any manner it sees fit.
9.Rejection of bids. The City Council may reject any or all bids presented and may
then direct that the project be re-advertised, may authorize negotiation of a
contract with one or more responsible firms, or may resolve that the project can
be performed more economically by City forces, day labor, time and materials
contract, or other method.
10.Execution of contract. The successful bidder shall execute the contract and
furnish required performance security and labor and materials security when
required pursuant to the bid document.
11.Forfeiture of bid security for public works projects. If the successful bidder fails to
execute the contract and furnish security within the stated time, and said failure
is not primarily due to actions or omissions of the City or to acts of god, the
bidder shall forfeit the bid security provided. The City Council may then consider
the bid of the next lowest responsible bidder.
12.Release of bid security for public works projects. Bidders are entitled to the
return of their bid security unless forfeited as provided herein. The City shall
retain all bid security until a contract has been executed or until the City Council
rejects all bids at which time all bid security not forfeited shall be returned to the
appropriate bidders.
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13. Disposition of forfeited bid security for public works projects. The City shall retain
forfeited bid security until a contract is awarded to another firm or the project is
cancelled. The City shall retain an amount equal to the difference between the
forfeiting firm’s bid and the new contract amount, if any, and an additional
amount equal to administrative and other costs incurred as a result of the failure
of the forfeiting bidder to enter into a contract and provide required security, and
shall return any remaining amount of the bid security to the forfeiting bidder.
14. Performance security and labor and materials security for public works projects.
The bidder to whom the contract is awarded (the “successful bidder”) shall
furnish performance security and labor and materials security in amounts
specified in the Invitation or Bid Documents.
B. FORMAL PROPOSALS FOR MAJOR PROFESSIONAL AND TECHNICAL SERVICES.
Major professional and technical services are defined as services having an actual or
estimated value of greater than fifty thousand and one dollars ($50,001). The
solicitation and selection of proposals and award of contracts shall comply with
Section 3.12.020 of the La Quinta Municipal Code (service contracts), and this Policy,
and shall be administered through each City Department, according to the following
procedures:
1. Maintenance and Repair Services. Services intended to preserve and/or restore a
public work to a clean, safe, efficient, and/or continually usable condition.
Maintenance and repair services include, but are not limited to: carpentry,
electrical, painting, plumbing, glazing, and other craftwork to preserve a facility in
the condition for which it was intended; repairs, cleaning and other operations on
machinery and other equipment permanently attached to a facility as fixtures;
the mowing, pruning, and trimming of lawns, grass, trees, shrubs, bushes and
hedges; and the regular removal or relocation of by-products or waste products
accumulated at City facilities as the result of ongoing environmental processes.
2. The City Manager shall approve the preparation and release of all Requests for
Proposals (RFP) and Requests for Qualifications (RFQ).
3. City staff shall determine, based on professional judgment, whether an RFP or an
RFQ process best suits its needs and City staff, or a city-authorized consultant,
shall prepare the RFP/RFQ document.
4. City staff, or a city-authorized consultant, or both shall prepare a list of suitable
firms from known registries, professional organizations, and/or any other source.
5. City staff shall issue the RFP/RFQ to suitable firms, and may also advertise for
competitive proposals.
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6. City staff shall form a selection committee, which may include private
consultants, to review the RFPs/RFQs received, and the selection committee may
conduct interviews and/or hold discussions with proposing firms.
7. The selection committee shall rank the proposing firms according to the criteria
specified in LQMC Section 3.12.020 (service contracts) and City staff shall notify
firms of their position in the ranking. For design-build projects, the selection
committee may also take into account the criteria for selection of public works
contacts specified in LQMC Section 3.12.030.
8. City staff, or a city-authorized consultant, shall negotiate with the top-ranked
firm to arrive at mutually-acceptable contract terms.
9. City staff, or its authorized consultant shall terminate negotiations and begin
negotiations with the next-ranked firm if an agreement cannot be reached and
continue this process until negotiations are successfully concluded or until the
list of qualified firms submitting proposals is exhausted and an agreement
cannot be reached.
10. The City Council shall award or reject the contract negotiated by City staff.
IV. PROCUREMENT PROCEDURES – NON-MAJOR EXPENDITURES ($50,000 & under)
INFORMAL BIDS OR PROPOSALS - Intermediate, Minor, and Operational Expenditure
category projects, including minor public works projects, supplies, goods, equipment
and minor services as referenced in Chapter 3.12 of the La Quinta Municipal Code, are
defined as projects having an actual or estimated value of fifty thousand dollars
($50,000) or less. The solicitation and selection of bids and award of contracts shall
comply with Section 3.12.030 of the La Quinta Municipal Code (public works projects),
Section 3.12.020 of the La Quinta Municipal Code (service contracts), and this Policy,
and shall be administered through each City Department, according to the following
procedures:
1. Informal bids shall be obtained verbally or in writing as dictated by this Policy
from the open market and a written record of informal bids shall be kept with the
related PO.
2. Bid security. Security and labor and material security shall conform to the
requirements for major public works projects but may be modified or waived by
the City staff person authorized to make the purchase if warranted and in the
best interest of the City.
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3. Execution and Award of Contracts. The City Council, may award contracts, or the
City Manager, or designated City Director, or staff personnel may award and
execute contracts, set forth in Categories A, B, C or D of Section II above, may
award and execute contracts and may waive competitive bidding requirements if
in the best interest of the City, provided there are unencumbered appropriations
in the fund accounts against which the expenses are to be charged.
V. EXEMPTION TO ANY PROCUREMENT METHOD
Justification for exemption to any required procurement method may be submitted to
the City Manager or in the case of a major expenditure, to the City Council under the
following circumstances:
a. Sole-source or select-source purchase. To determine that a sole-source or
select-source purchase exists, rationale and/or proof must be provided in the
purchase requisition.
Acquisition of brand name to insure compatibility with other city products
and equipment. For example standardization of fleet inventory (select-
source).
Change orders - additions to an original scope of work when the original
source is the only reasonable one to provide the additional goods,
construction work or service needed (select-source).
Only one manufacturer or vendor makes and/or sells the required
equipment (sole-source).
b. State, County, or other public agency cooperative purchasing program or
contracts utilizing funding or other participation from agencies which require
conformance with state, federal or other contracting regulations.
c. The City does not require a contract for equipment purchases such as a specific
type or brand of supply or part necessary for acceptable operation of a machine
or device, or as required by warranty or contract on the machine or device;
written documentation supporting a purchase must be provided.
d. Emergency purchases made necessary by an immediate threat to life or
property or a substantial disruption of a vital public service.
In advance of any local emergency, the City seeks to retain a list of
available local businesses willing to provide necessary supplies, materials,
equipment, services, food, care or shelter to the City through the Office of
Emergency Management. Once the Emergency Operations Center (EOC) is
activated, these memorandums will be activated.
In the event of an emergency, the City Manager or designee may make
immediate purchases of goods and services. Emergency purchases include
any purchase required to prevent imminent danger or to prevent or
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mitigate the loss or impairment of life, health, property, or essential public
services. Every effort shall be made to obtain advance approvals or to
obtain approvals as soon as possible following the purchase.
The City is not required to engage in either formal or informal competitive
bidding in an emergency. The City Council delegates to the City Manager
and City Manager’s designee the authority to waive any procedures in the
Policy that are not statutorily mandated when making emergency purchase
of supplies, equipment, materials or services.
The City Council shall ratify emergency suspension of procedures at the
next properly noticed Council meeting following the emergency
procurement and consider whether further suspension of procedures is
required to abate the impacts of the emergency.
e. The awarding officer(s) may waive irregularities in formal or informal bids
received provided that it is in the best interest of the City to do so, and it does
not result in unfair advantage to any bidder.
e. The City Council may authorize the award and execution of contracts without
competitive bidding provided that such award is in the best interest of the City,
or of the public health, safety and welfare.
VI. CITY CREDIT CARD USE
A. Authorization and Acknowledgement. Approval to use, issue and revoke a City
credit card is at the discretion of the City Manager. Unless otherwise authorized by the
City Manager, City credit cards shall have a credit limit of $5,000. The City Manager
shall have the authority to set credit limits on a case by case basis up to $25,000.
City credit cards shall be kept by the Finance Department and/or City Manager’s Office
for safekeeping and prudence. Users authorized by the City Manager or designee
(“Authorized Users”) must be City employees. Authorized Users may check credit
cards in and out as necessary, but are encouraged to limit usage only when necessary.
All credit cards shall be returned to Finance or the City Manager’s Office in a timely
manner after use.
The Finance Department requires Authorized Users to sign a Signature Authorization
Form acknowledging his/her understanding of the policies and procedures for the use
of the City credit card and acknowledging the receipt of the credit card.
B. Appropriate City Credit Card Use. City credit cards may be used for the following:
1. Traveling on City business;
2. Purchasing goods and services from vendors where use of a check is not practical,
such as the case with many internet purchases in which no actual storefront exists;
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3. Securing reservations and locations for various City activities, meetings and
conference fees, community events, honoree luncheons, marketing promotions,
and sales missions;
4. Paying for meals in conjunction with official City business such as meetings with
City Council, developers, or consultants.
C. Inappropriate City Credit Card Use. The credit card shall not be used for the
following:
1. Cash advances, money orders, wire transfers, etc.;
2. Routine gasoline purchases;
3. Alcoholic beverages, tobacco products, and prescription drugs;
4. Political or religious organizations;
5. Firearms or ammunition;
6. Gifts including gift cards, flowers, etc.;
7. Long-term rentals or lease agreements;
8. Heavy-duty machinery that requires a maintenance agreement;
5. Use of the City credit card is not intended to replace effective procurement
planning which enables volume discounts or to circumvent established competitive
purchasing procedures. This means no purchases for goods or services should be
made that would otherwise require competitive bidding;
6. Employees shall not use City credit cards for personal expenses. Charging personal
items, services, entertainment or expenses of any kind on City cards is a misuse of
City funds and a serious breach of City’s ethics policy. Doing so will result in
disciplinary action, up to and including termination. Employees should use care in
selecting between using their business and personal credit cards.
D. Travel, Meetings, & Conferences. The uses of the City credit card for travel, local
meetings, and conferences shall at all times comply with the standards and practices
set forth within the City travel and meeting policy. All credit card charges must be
supported by detailed charge receipts and submitted on an expense report within ten
(10) days of return from a business trip to the Finance Department upon return from a
business trip.
E. Obtaining Goods and Services. Authorized purchases may be made in person, via
approved internet site, or by telephone. Authorized Users must require vendors to
itemize the receipt/invoice. An itemized receipt/invoice consists of the following
information:
Date of purchase
Detailed description of goods or services purchased
Price per item
Amount of sales tax and total amount
Shipping charges, if any
Upon completing the credit card transaction, the employee shall submit the itemized
receipt with appropriate account numbers to the Finance Department.
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F. Monthly Statement. At the end of a billing cycle, the Finance Department will
provide to Authorized Users a statement showing all transactions made during the
billing cycle for which receipts/invoices have not already been turned into the Finance
Department. Authorized Users are responsible to review and reconcile monthly credit
card statements. Once reconciled, the Authorized User will attach the supporting
detailed charge receipts and related invoices to the monthly credit card statement
and turn it into the Finance Department within two (2) working days of receipt.
Falsification of receipts will subject the employee to disciplinary action, up to and
including termination of employment. The Finance Director reserves the right to
review each credit card statement and determine if the expenses were purchased in
accordance with the City policy.
G. Disputed Charges. Authorized Users are responsible for ensuring that the vendor,
the issuing bank, and the Finance Director are notified immediately of any disputed
charges. Authorized Users will be responsible for resolving the disputed charge
directly with the credit card company.
H. Returned Items. If items purchased with the credit card are found defective or
the repair or services faulty, the cardholder has the responsibility to return the item to
the merchant for replacement or credit to the card. Cash refunds or store credit will
not be permitted.
I. Timely Payment. Based on the statement cycle date, the Finance Department will
ensure timely payments. Credit card charges will be paid once reconciled by the
Authorized Users and approved by the Finance Department.
To avoid late fees and finance charges, the Finance Department reserves the option to
pay all credit card charges, even if supporting documentation is not yet received.
When subsequently received, the supporting documentation will be retroactively
reconciled to the payment.
J. Lost or Stolen Cards. Authorized Users are responsible for ensuring that the
issuing bank and the Finance Department are notified immediately if the card is lost or
stolen. Failure to do so may result in holding the Authorized User responsible for any
fraudulent use of the card.
K. Disciplinary Action. The City Manager Human Resources department is
responsible for all disciplinary action surrounding misuse of cards, including
cancellation of card privileges.
L. Surrender upon Request or Separation. The credit card will be immediately
surrendered upon separation from City employment, retirement, termination or upon
request of the City Manager. Use of the credit card for any purpose after its surrender
is prohibited.
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FEDERALLY FUNDED PROCUREMENTS
This section pertains to federal-funded projects and purchases.
VII. GENERAL PROCUREMENT STANDARDS
A. Code of Conduct. As representatives of the City of La Quinta, all employees are
expected to conduct themselves in a professional and ethical manner, maintaining
high standards of integrity and the use of good judgement. Employees are
expected to be principled in their business interactions and act in good faith with
individuals both inside and outside the City. The following Code of Conduct shall
govern the performance, behavior and actions of the City, including employees,
directors, appointed or elected officials, volunteers, or agents who are engaged in
any aspect of procurement, including, but not limited to, purchasing goods and
services, awarding contracts and grants, and the administration and supervision of
contracts:
1. No employee, director, appointed or elected official, volunteer, or agent of the City
shall participate in the selection, award, or administration of contracts supported
by a federal award if a conflict of interest is real or apparent to a reasonable
person.
2. Conflicts of interest may arise when any employee, officer, or agent of the City, any
member of his or her immediate family, his or her partner, or an organization
which employs or is about to employ any of the parties indicated herein, has a real
or apparent financial or other interest in or a tangible personal benefit form a firm
considered for the contract.
3. No employee, director, appointed or elected official, volunteer, or agent of the City
shall do business with, award contracts to, or show favoritism toward a member of
his or her immediate family, spouse’s family, or to any company, vendor,
contractor, or parties to subcontractors who either employ or has any relationship
to a family member; or award a contract or bid which violates the spirit or intent of
federal, state and local procurement laws and policies established to maximize
free and open competition among qualified vendors.
4. The City’s employees, directors, appointed or elected officials, volunteers, or agents
shall neither solicit nor accept gratuities, favors, gifts, consulting fees, trips, or
anything having a monetary value in excess of twenty-five dollars ($25.00) from a
vendor, potential vendor, family or employees of a vendor, contractor or parties to
subcontractors.
5. Disciplinary measures for violations of the Code of Conduct by employees, directors,
appointed or elected officials, volunteers, or agents who are engaged in any aspect
of procurement, including, but not limited to, purchasing goods and services,
awarding contracts and grants, and the administration and supervision of
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contracts could lead to disciplinary measures, up to and including possible
termination of employment.
B. Solicitation Procedures
1. Acquisition of unnecessary or duplicative items must be avoided. Consideration
should be given to consolidating or dividing procurements to obtain a more
economical purchase. When appropriate, an analysis will be made of lease versus
purchase alternatives, and any other appropriate analysis to determine the most
economical approach.
2. To foster greater economy and efficiency, and in accordance with efforts to
promote cost-effective use of shared services, the City shall enter into state and
local intergovernmental agreements or inter-entity agreements where appropriate
for procurement or use of common or shared goods and services.
3. Procuring federal excess and surplus property in lieu of purchasing new equipment
and property whenever such use is feasible and reduces project costs shall be
utilized.
4. Value engineering clauses may be used in contracts for construction projects of
sufficient size to offer reasonable opportunities for cost reductions. Value
engineering is a systematic and creative analysis of each contract item or task to
ensure that its essential function is provided at the overall lower cost.
5. Contracts shall only be awarded to responsible contractors possessing the ability
to perform successfully under the terms and conditions of a proposed
procurement. Consideration will be given to such matters as contractor integrity,
compliance with public policy, record of past performance, and financial and
technical resources.
6. Records will be maintained sufficient to detail the history of procurement. These
records will include, but are not necessarily limited to the following: rationale for
the method of procurement, selection of contract type, contractor selection or
rejection, and the basis for the contract price. The City Clerk will be the repository
for said records and shall be maintained for period of no less than seven (7) years.
7. Time and material type contracts (open-ended) may be used only after a
determination that no other contract is suitable. Time and material type contract
means a contract where the cost to the City is the sum of the actual cost of
materials and direct labor hours charged at fixed hourly rates that reflect wages,
general and administrative expense, and profit. Each time and material contract
will set a ceiling price that the contractor exceeds at its own risk. A higher degree
of oversight is required in order to obtain reasonable assurance that the contractor
is using efficient methods and effective cost controls.
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6. The City alone will be responsible, in accordance with good administrative practice
and sound business judgment, for the settlement of all contractual and
administrative issues arising out of procurements. These issues include, but are not
limited to, source evaluation, protests, disputes, and claims. These standards do
not relieve the City of any contractual responsibilities under its contracts. The
federal awarding agency will not substitute its judgment for that of the City unless
the matter is primarily a federal concern. Violations of law will be referred to the
local, state, or federal authority having proper jurisdiction.
C. Competition
1. All procurement transactions must be conducted in a manner providing full and
open competition. In order to ensure objective contractor performance and
eliminate unfair competitive advantage, contractors that develop or draft
specifications, requirements, statements of work, and invitations for bids or
requests for proposals will be excluded from competing for such procurements.
Some of the situations considered to be restrictive of competition include, but are
not limited to:
a. Placing unreasonable requirements on firms in order for them to qualify
to do business;
b. Requiring unnecessary experience and excessive bonding;
c. Noncompetitive pricing practices between firms or between affiliated
companies;
d. Noncompetitive contracts to consultants that are on retainer contracts;
e. Organizational conflicts of interest;
f. Specifying only a brand name product instead of allowing an equal
product to be offered and describing the performance or other relevant
requirements of the procurement; and
g. Any arbitrary action in the procurement process.
2. Procurements shall be conducted in a manner that prohibits the use of statutorily
or administratively imposed state or local geographical preferences in the
evaluation of bids or proposals, except in those cases where applicable federal
statutes expressly mandate or encourage geographic preference. Nothing in this
section preempts state licensing laws. When contracting for architectural and
engineering (A/E) services, geographic location may be a selection criterion
provided its application leaves an appropriate number of qualified firms, given the
nature and size of the project, to compete for the contract.
3. All solicitations will incorporate a clear and accurate description of the technical
requirements for the material, product, or service to be procured. Such description
must not, in competitive procurements, contain features which unduly restrict
competition. The description may include a statement of the qualitative nature of
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the material, product or service to be procured and, when necessary, must set
forth those minimum essential characteristics and standard to which it must
conform if it is to satisfy its intended use. Detailed product specifications should be
avoided if at all possible. When it is impractical or uneconomical to make a clear
and accurate description of the technical requirements, a brand name or
equivalent description may be used as a means to define the performance or other
relevant requirements of procurement. The specific features of the named brand
which must be met by offers must be clearly stated.
4. Bids and proposals shall identify all the requirements which the offerors must fulfill
and all other factors to be used in evaluation bids or proposals
D. Methods of Procurement. In addition to the City’s purchasing policy approval
limits, one of the following methods should be used:
1. Micro-purchase: Purchases where the aggregate dollar amount does not exceed
$3,500, or the current limitation set by the Federal Acquisition Regulation at 48 CFR
Subpart 2.1, where this threshold is periodically adjusted for inflation.
2. Small purchase: Purchases up to the Simplified Acquisition threshold, which is
currently $150,000. Informal purchasing procedures are acceptable, but price or
rate quotes must be obtained from an adequate number of sources.
3. Sealed bid: Purchases over the Simplified Acquisition threshold, which is currently
$150,000. Under this purchase method, formal solicitation is required, and the
fixed price (lump sum or unit price) is awarded to the responsible bidder who
conformed to all material terms and is the lowest in price. This method is the
preferred procurement method for construction contracts, if the following
conditions apply:
a. A complete, adequate, and realistic specification or purchase description is
available;
b. Two or more responsible bidders are willing and able to compete effectively
for the business, and,
c. The procurement lends itself to a firm fixed price contract and the selection
of the successful bidder can be made principally based on price.
If this method is used, the following requirements shall apply:
d. The invitation for bids will be publicly advertised and bids must be solicited
from an adequate number of known suppliers, providing them sufficient
response time prior to the date for opening the bids;
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e. The invitation for bids, which will include any specifications and pertinent
attachments, must define the terms or services in order for the bidder to
properly respond;
f. All bids will be publicly opened at the time and place prescribed in the
invitation for bids;
g. A firm fixed price contract award will be made in writing to the lowest
responsive and responsible bidder. Where specified in bidding documents,
factors such as discounts will only be used in determining which bid is
lowest. Payment discounts will only be used to determine the low bid when
prior experience indicates that such discounts are usually taken advantage
of; and
h. Any or all bids may be rejected if there is a sound documented reason.
4. Competitive proposals: Purchases over the Simplified Acquisition threshold, which
is currently $150,000. This procurement method requires formal solicitation, fixed-
price or cost-reimbursement contracts, and is used when sealed bids are not
appropriate. The contract should be awarded to the responsible firm whose proposal is
most advantageous to the program, with price being one of the various factors. If this
method is used, the following requirements apply:
a. Requests for proposals must be publicized and identify all evaluation
factors and their relative importance. Any response to publicized
requests for proposals must be considered to the maximum extent
practical;
b. Proposals must be solicited from an adequate number of qualified
sources;
c. The methods for conducting technical evaluations of the proposals
received and for selecting recipients may include, but not limited to: oral
interviews, references, past performance, availability to perform work,
and certifications as determined by project scope.
d. Any response that takes exception to any mandatory items in this
proposal process may be rejected and not considered;
e. Contracts must be awarded to the responsible firm whose proposal is
most advantageous to the program, with price and other factors
considered; and,
f. Competitive proposal procedures may be used for qualifications-based
procurement of architectural/engineering (A/E) professional services
whereby competitors’ qualifications are evaluated and the most
qualified competitor is selected, subject to negotiation of fair and
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reasonable compensation. The method, where price is not used as a
selection factor, can only be used in procurement of A/E professional
services. It cannot be used to purchase other types of services, though
A/E firms are a potential source to perform the proposed effort.
5. Noncompetitive proposals: Also known as sole-source procurement, this may be
appropriate only when one or more of the following criteria are met:
a. The item is available only from a single source;
b. The public emergency for the requirement will not permit a delay
resulting from competitive solicitation;
c. The Federal awarding agency or pass-through entity expressly authorizes
noncompetitive proposals in response to a written request from the non-
federal entity; or
d. After solicitation of a number of sources, competition is determined
inadequate.
E. Contract Cost and Price. A cost or price analysis shall be performed in connection
with every procurement action in excess of the Simplified Acquisition threshold
($150,000) including contract modifications. The method and degree of analysis is
dependent on the facts surrounding the particular procurement situation, but as a
starting point, independent estimates shall be made prior to receiving bids and
proposals.
1. Profit shall be negotiated as a separate element of the price for each contract in
which there is a no price competition and in all cases where cost analysis is
performed. To establish a fair and reasonable profit, consideration must be given to
the complexity of the work to be performed, the risk borne by the contractor, the
contractor’s investment, the amount of subcontracting, the quality of its record of
past performance, and industry profit rates in the surrounding geographical area for
similar work.
2. Costs or prices based on estimated costs for contracts under the federal award are
allowable only to the extent that costs incurred or cost estimates included in
negotiated prices would be allowable for the City under Subpart E- Cost Principles of
Part 200- Uniform Administrative Requirements, Cost Principles, and Audit
Requirements for Federal Awards.
3. The cost plus a percentage of cost and percentage of construction cost methods of
contracting shall be used.
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F. Federal Awarding Agency or Pass-Through Entity Review.
1. The City shall make available, upon request of the federal awarding agency or pass-
through entity, technical specifications on proposed procurements where the federal
awarding agency or pass-through entity believes such review is needed to ensure that
the item or service specified is the one being proposed for acquisition. This review
generally will take place prior to the time the specification is incorporated into a
solicitation document. However, if the City desires to have the review accomplished
after a solicitation has been developed, the Federal awarding agency or pass-through
entity may still review the specifications, with such review usually limited to the
technical aspects of the proposed purchase.
2. The City will make available upon request, for the Federal awarding agency or pass-
through entity pre-procurement review, procurement documents, such as requests for
proposals or invitations for bids, or independent cost estimates, when:
a. Procurement procedures or operations fails to comply with the procurement
standards in this part;
b. The procurement is expected to exceed the Simplified Acquisition Threshold
($150,000) and is to be awarded without competition or only one bid or offer is
received in response to a solicitation;
c. The procurement, which is expected to exceed the Simplified Acquisition
Threshold, specifies a “brand name” product;
d. The proposed contract is more than the Simplified Acquisition Threshold and is
to be awarded to other than the apparent low bidder under a sealed bid
procurement; or
e. A proposed contract modification changes the scope of a contract or increases
the contract amount by more than the Simplified Acquisition Threshold.
3. The City is exempt from the pre-procurement review in paragraph 2 of this section if
the federal awarding agency or pass-through entity determines that its procurement
systems comply with the standards of this part.
4. The City may request that its procurement system be reviewed by the federal
awarding agency or pass-through entity to determine whether its system meets these
standards in order for its system to be certified. Generally, these reviews must occur
where there is continuous high-dollar funding, and third-party contracts are awarded
on a regular basis;
5. The City may self-certify its procurement system. Such self-certification must not
limit the federal awarding agency's right to survey the system. Under a self-
certification procedure, the federal awarding agency may rely on written assurances
from the City that it is complying with these standards. The City must cite specific
policies, procedures, regulations, or standards as being in compliance with these
requirements and have its system available for review.
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G. Bonding Requirements. For construction or facility improvement contracts or
subcontracts exceeding the Simplified Acquisition Threshold ($150,000), the federal
awarding or pass-through entity may accept the bonding policy and requirements of
the City provided that the federal awarding agency or pass-through entity has made a
determination that the federal interest is adequately protected. If such a
determination has not been made, the minimum requirements must be as follows:
1. A bid guarantee from each bidder equivalent to five percent (5%) of the bid price.
The bid guarantee must consist of a firm commitment such as a bid bond, certified
check, or other negotiable instrument accompanying a bid as assurance that the
bidder will, upon acceptance of the bid, execute such contractual documents as may
be required within the time specified;
2. A performance bond on the part of the contractor for 100 percent (100%) of the
contract price. A performance bond is one executed in connection with a contract to
secure fulfillment of all the contractor’s obligations under such contract; and,
3. A payment bond on the part of the contractor for 100 percent (100%) of the
contract price. A payment bond is one executed in connection with a contract to
assure payment as required by law of all persons supplying labor and material in the
execution of the work provided for in the contract.
H. Contract Provisions. All federal funding source compliance provisions shall include
the following:
1. Equal Employment Opportunity- All contracts, when funded in whole or partly by
monies derived from the federal government (either directly or indirectly), shall
contain a provision requiring compliance with Equal Employment Opportunity.
2. Davis-Bacon Act- Applies to construction contracts in excess of $2,000. It requires
contracts to pay laborers and mechanics wages not less than the prevailing wage as
determined by the Secretary of Labor and must be required to pay wages not less
than once a week. Each bid solicitation published by the City must contain the current
prevailing wage determination. Any award of the contract must be conditioned on
contractor’s acceptance of that wage determination and suspected or reported
violations of this act shall be immediately reported to the Federal awarding agency.
3. Copeland “Anti-Kickback” Act- Applies to construction contracts in excess of $2,000.
It prohibits kickbacks in construction contracts funded with Federal monies.
Contractors and subcontractors or subrecipients shall be prohibited from inducing any
person employed in the construction, completion, or repair of public work, to give up
any part of the compensation to which he or she is otherwise entitled and suspected
or reported violations shall be immediately reported to the Federal awarding agency.
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4. Clean Air Act & Federal Water Pollution Control Act- Applies to contracts and sub
grants in excess of $150,000. Contractor shall be required to comply with all
applicable standards, orders or regulations issued pursuant to the Clean Air Act and
the Federal Water Pollution Control Act. Suspected or reported violations must be
reported to the Federal awarding agency and the Regional Office of the Environmental
Protection Agency (EPA).
5. Debarment and Suspension- Contracts funded with federal grant monies may not
be awarded to contractors that have been debarred or suspended from receiving
federal monies pursuant to the System for Award Management (SAM).
6. Byrd Anti-Lobbying Amendment- Contractors that apply or bid for an award of
$100,000 must certify that they will not and have not used federal funds to pay any
person or organization for influencing or attempting to influence an officer or
employee of any agency, a member of Congress, officer or employee of Congress, or
an employee of a member of Congress in connection with obtaining any Federal
contract, grant or any other award.
I. Contracting with small and minority business, women’s business enterprises, and
labor surplus area firms. All necessary affirmative steps will be taken to assure that
minority business, women’s business enterprises, and labor surplus area firms are
used when possible. Affirmative steps include:
1. Placing qualified small and minority businesses and women’s business enterprises
on solicitation lists;
2. Assuring that small and minority businesses and women’s business enterprises are
solicited whenever they are potential sources;
3. Dividing total requirements, when economically feasible, into smaller tasks or
quantities to permit maximum participation by small and minority businesses and
women’s business enterprises;
4. Establishing delivery schedules, where the requirement permits, which encourage
participation by small and minority businesses and women’s business enterprises;
5. Using the services and assistance, as appropriate, of such organizations as the
Small Business Administration and the Minority Business Development Agency of the
Department of Commerce; and,
6. Requiring the prime contractor, if subcontracts are to be let, to take the affirmative
steps listed in paragraphs (1) through (5) of this section.
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City of La Quinta
CITY COUNCIL MEETING: April 3, 2018
STAFF REPORT
AGENDA TITLE: ADOPT A RESOLUTION TO APPROVE A DEBT MANAGEMENT POLICY
RECOMMENDATION
Adopt a resolution to approve a Debt Management Policy.
EXECUTIVE SUMMARY
•The Debt Management Policy (Policy) provides guidelines for debt issuance practices,
management of debt, and adherence to various laws and regulations.
•The Policy governs all current and future debt issued by the City or its related
entities.
•The City does not plan to issue bonds at this time and any future bonds would
require voter approval.
•Staff, City Attorney, and two independent auditing firms have reviewed the proposed
Policy. The Policy conforms to current laws.
FISCAL IMPACT - None
BACKGROUND/ANALYSIS
Debt management policies are written guidelines, allowances, and restrictions that guide
the debt issuance practices, management of debt, and adherence of various laws and
regulations. The policy signals to rating agencies and the capital markets that the City is
well managed and likely to meet its debt obligations in a timely manner.
Senate Bill 1029 requires issuers of debt to formally adopt debt management policies
addressing:
•The purpose for which the debt proceeds may be used;
•The types of debt that may be issued;
•The relationship of the debt to, and integration with, the issuer’s capital
improvement program or budget;
•The policy goals related to the issuer’s planning goals and objectives; and
•The internal control procedures that the issuer has implemented to ensure that the
proceeds of debt issuance will be directed to their intended use.
The City does not plan on issuing bonds at this time and any future general obligation
bonds would require voter approval. However, the City currently has one general obligation
lease revenue bond, which matures in October 2018. The Successor Agency to the former
Redevelopment agency holds four tax allocation bonds, which are not General Fund debt
BUSINESS SESSION ITEM NO. 3
95
obligations. This policy governs all debt issued by the City or its related entities for which
the governing body consists of the same individuals as the City Council of the City
(including, but not limited to, the La Quinta Finance Authority, Successor Agency to the La
Quinta Redevelopment Agency, and the Housing Authority of the City of La Quinta).
To ensure compliance with current laws and regulatory requirements, the proposed Policy
was reviewed by staff, City Attorney, and two independent governmental accounting
auditing firms.
ALTERNATIVES
The Council may approve as presented, incorporate changes, or request further review.
Prepared by: Karla Campos, Finance Director
Approved by: Chris Escobedo, Acting City Manager
96
RESOLUTION NO. 2018 -
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LA
QUINTA, CALIFORNIA, ADOPTING A DEBT MANAGEMENT
POLICY
WHEREAS, the Debt Management Policy sets forth debt management
objectives and guidelines for the issuance and administration of debt and other
financing obligations of the City of La Quinta; and
WHEREAS, the debt management policy provides transparency and
consistency; and
WHEREAS, debt management policies demonstrate a commitment to long-
term capital and financial planning for the efficient use and expenditure of public
funds.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of La Quinta,
California, as follows:
SECTION 1. The debt management policy attached hereto as Exhibit A and
incorporated herein by reference shall govern debt issuance guidelines, allowances,
and restrictions.
SECTION 2. This policy is consistent, with Section 8855(i) of the California Government
Code as amended by SB 1029 enacted as Chapter 307, Statues of 2016.
SECTION 3. Severability. If any provision of this Resolution or the application thereof
to any person or circumstance is held invalid, such invalidity shall not affect other
provisions or applications of this Resolution which can be given effect without the
invalid provision or application, and to this end the provisions of this Resolution are
severable. The City Council hereby declare that it would have adopted this Resolution
irrespective of the invalidity of any particular portion thereof.
SECTION 4. This Resolution shall become effective upon adoption. The Debt
Management Policy adopted by this Resolution shall go into effect immediately.
PASSED, APPROVED, and ADOPTED at a regular meeting of the La Quinta City
Council held on this day of April 2018 by the following vote:
AYES:
NOES:
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Adopted:
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ABSENT:
ABSTAIN:
__________________________
LINDA EVANS, Mayor
City of La Quinta, California
ATTEST:
________________________________________
SUSAN MAYSELS, City Clerk
City of La Quinta, California
(CITY SEAL)
APPROVED AS TO FORM:
_______________________________________
WILLIAM H. IHRKE, City Attorney
City of La Quinta, California
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Exhibit A to Council Resolution No. 2018-
Debt Management Policy
Adopted:
Page 1 of 10
DEBT MANAGEMENT POLICY
1.PURPOSE: This Debt Management Policy (the "Policy") sets forth debt management
objectives and guidelines for the issuance and administration of debt and other financing
obligations of the City of La Quinta and its related entities for which the governing body
consists of the same individuals as the City Council of the City (including, but not limited to,
the La Quinta Finance Authority, Successor Agency to the La Quinta Redevelopment Agency,
and the Housing Authority of the City of La Quinta). As used in this Policy, "City" shall
mean the City and/or the City and its related entities, as the context may require.
As used in this Policy, "debt" shall be interpreted broadly to mean bonds, notes, certificates
of participation, financing leases, or other financing obligations, but the use of such term
in this Policy shall be solely for convenience and shall not be interpreted to characterize
any such obligation as an indebtedness or debt within the meaning of any constitutional
debt limitation where the substance and terms of the obligation comport with exceptions
thereto.
Prudent management of the City's debt program is necessary to achieve cost effective
access to capital markets.
2.SCOPE: This Policy establishes the policies of the City of La Quinta and its related
entities with respect to the issuance and administration of debt.
3.GENERAL POLICY:
Objectives:
This section of the Policy sets forth certain equally important objectives for the City and
establishes overall parameters for responsibly issuing and administering the City's debt.
Additionally, this Policy is intended to facilitate compliance by the City, and is consistent,
with Section 8855(i) of the California Government Code as amended by Senate Bill 1029
("SB 1029"), enacted as Chapter 307, Statutes of 2016.
•Minimize debt service and issuance costs
•Maintain access to cost-effective borrowing
•Achieve and maintain highest reasonable credit rating
•Full and timely repayment of debt
•Maintain compliance with financial disclosure and reporting undertakings
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Exhibit A to Council Resolution No. 2018-
Debt Management Policy
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•Ensure compliance with state and federal laws and regulations
4.RELATIONSHIP TO CAPITAL IMPROVEMENT PROGRAM OR BUDGET, PLANNING GOALSAND OBJECTIVES
The City is committed to long-term financial planning, maintaining appropriate reserves
levels and employing prudent practices in governance, management and budget
administration. The City may issue debt for the purposes stated in this Policy and to
implement policy decisions incorporated in the City's annual operations and capital budgets
and the City's five-year capital improvement plan. This Policy is intended to ensure that debt
levels and their related annual costs will advance the City's planning goals and objectives.
5.GOVERNING AUTHORITY AND RESPONSIBILITY
Pursuant to the provisions of the City of La Quinta Charter and sections 37209
and 40805.5 of the Government Code of the State of California, the Finance Director shall be
responsible for all of the financial affairs of the City. This Policy grants the Finance Director
the authority to select the financing team (subject to City Council approval, if required),
coordinate the administration and issuance of debt, communicate with the rating agencies,
as well as to fulfill all the pre-issuance and post-issuance disclosure information.
The Finance Director or its designee will use the Request for Proposal (RFP) process to
select various Financing Team Members. Requests for Proposals for Financial Advisors
should be done on a periodic basis not to exceed ten (10) years but is subject to review
after four (4) years. Below is a brief description of the main Financing Team, along with
their functions.
The typical Debt Financing Team consists of:
A. Financial Advisor
•Assists with capital planning and long term financial planning.
•Coordinates the financing and debt issuance process.
•Helps evaluate underwriter proposals and provides financial analysis and
recommendations.
•Assists with the securing of other professional services and other members of the
financing team.
•Monitors and evaluates market conditions for opportunities to issue debt at low interest
rates.
•Works with the City and underwriter to develop investor outreach and market approach.
•Manages competitive bid process.
•Ensures negotiated prices are fair and reasonable in the marketplace.
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B. Bond Counsel
•Prepare an approving legal opinion.
•Provide expert and objective legal opinion and advice.
•Prepare and review documents necessary to authorize, issue, sell and deliver the
bonds, as well as coordination of the authorization and execution of closing
documents.
•Review legal issues relating to the structure of the bond issue.
•Prepare election proceedings or pursue validation proceedings if necessary.
•Review or prepare those sections of the official statement that relate to the bonds,
financing documents, bond counsel opinion, and tax exemption.
•Assists the City with presenting information to bond rating organizations and credit
enhancement providers relating to legal issues affecting the issuance of the bonds.
•Review or prepare the Notice of Sale or Bond Purchase Contract for the bonds and
review or draft the continuing disclosure undertaking of the City.
•Post-issuance advice for bond covenant compliance.
C. Underwriter
•Serves as the original purchaser of the bonds and assumes the risk of selling the
bonds to the public.
•Provides the City with market knowledge.
•Assist with credit analysis and preparation.
•Premarketing of the bonds.
•Pricing and original purchase of bonds from the City.
•Sale to public market of the bonds.
D. Placement Agent
•Usually a registered underwriter acting in the more limited capacity of placement
agent when a direct placement is used as the method of sale.
•Provides the City with proposed financial institutions eligible for direct purchase.
•Assist the City with requests for proposals for direct purchase by financial institutions.
E. Trustee/Fiscal Agent/Paving Agent
•Establishes and holds the funds and accounts relating to the bond issue.
•Maintains the list of names and addresses of all registered owners of the bonds and
recordings of transfers and exchanges of the bonds.
•Acts as the authenticating agent.
•Acts as the paying agent.
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Exhibit A to Council Resolution No. 2018-
Debt Management Policy
Adopted:
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•Protects the interests of the bondholders by monitoring compliance with covenants and
acts on behalf of the bondholders in the event of default.
•As the escrow agent holds proceeds or the investments acquired with the proceeds
of a refunding bond issue and uses those funds, or payments received on those
investments, to pay debt service on the refunded bonds.
6.TYPES OF DEBT
The City recognizes that there are numerous types of financing structures and funding
sources available, each with specific benefits, risks, and costs. All potential funding
sources are reviewed by management within the context of this Policy and the overall
portfolio to ensure that any financial product or structure is consistent with the City's
objectives. Regardless of what financing structure(s) is utilized, due diligence review must be
performed for each transaction, including the quantification of potential risks and benefits,
and analysis of the impact on City creditworthiness and debt affordability and capacity.
Prior to the issuance of debt or other financing obligations to finance a project, the City will
carefully consider the overall long-term affordability of the proposed debt issuance and
alternative financing sources, such as grants. The City shall not assume debt or other
financing obligations without conducting an objective analysis of the City's ability to
assume and support additional debt service payments. The City will consider its long-term
revenue and expenditure trends and the impact on operational flexibility. The evaluation
process shall include a review of generally accepted measures of affordability and will
strive to achieve and or maintain debt levels consistent with its current operating and
capital needs. In addition, the City’s future borrowing capability is limited by the debt
coverage ratio and debt limitations required by bond covenants.
The following are the types of debt the City could issue:
A. New Money Bonds
New Money bonds are bonds issued to finance the cost of capital improvement projects or
other large and extraordinary costs as approved by the City Council.
B. Refunding Bonds
Refunding bonds are bonds issued to refinance (refund) previously issued outstanding debt.
The City may issue refunding bonds to refinance the principal of and interest on
outstanding bonds or other debt to achieve debt service savings, restructure scheduled
debt service, convert from or to a variable or fixed interest rate, change or modify the
source(s) of payment and security for the refunded debt, or modify covenants otherwise
binding upon the City. Refunding bonds may be issued either on a current or advance
basis. See also the "Refunding" subsection contained in Section 7 of this Policy.
C. Revenue Bonds and Certificates of Participation
102
Exhibit A to Council Resolution No. 2018-
Debt Management Policy
Adopted:
Page 5 of 10
Revenue Bonds are generally issued by enterprise funds that are financially self-sustaining
without the use of taxes and therefore rely on the revenues collected by the enterprise
fund to repay the debt. Sometimes, Certificates of Participations ("COPs") are issued
instead of revenue bonds, which in this case would typically be secured by an installment
sale arrangement between the City and another public entity and by the revenues collected
from the enterprise fund. Each COP represents a fractional share of an issuer's installment
payment to be received by the investor.
D. Assessment Bonds
The Improvement Bond Act of 1915 (Streets and Highways Code Section 8500 et seq.)
allows the City to issue bonds to finance the "special benefit" improvements on the real
property within its jurisdiction provided by the City. Assessment installments typically are
collected through the secured property tax roll of the county.
E. Community Facilities District
Mello-Roos is a form of financing for a variety of local agencies, including but not limited to
cities and joint powers authorities. Mello-Roos Community Facilities Districts (referred to as
"CFDs") raise money through special taxes that must be approved by 2/3rds of the voters
within the district. While a CFD may be formed to finance public improvements and services
within the district, bonds cannot be issued to pay for services financed through a CFD. The
taxes are secured by a continuing lien and typically are levied annually against property
within the district through the secured property tax roll of the county.
F. General Obligation (GO) Bonds
In California, GO Bonds require a 2/3 voter approval. GO Bonds are secured by a dedicated,
voter-approved property tax override rate (i.e., a property tax more than the 1% basic ad
valorem property tax rate) in amounts sufficient to meet debt service requirements. While
the dedicated revenue stream to repay the debt makes GO Bonds an attractive option,
additional considerations for this financing mechanism include the time and expense of an
election, the possibility that the electorate will not approve the ballot measure, and the
legal bonding capacity limit for GO Bonds.
G. General Fund-Supported Debt
General Fund Supported Debt generally includes Certificates of Participation (COPs) and
Lease Revenue Bonds (LRBs) that are lease obligations secured by a lease-back arrangement
between the City and another public entity. Typically, the City appropriates available General
Fund moneys to pay the lease payments to the other public entity and, in turn, the public
entity uses such lease payments received to pay debt service on the bonds or COPs.
General Fund Supported Debt may also include bonds issued to refund obligations
imposed by law, such as judgments obligation bonds (JOBs), unfunded accrued actuarial
liabilities for pension plans (pension obligation bonds (POBs), or operating leases (such as
computers, printers, hardware). These obligations do not constitute indebtedness under the
state constitutional debt limitation and, therefore, are not subject to voter approval.
103
Exhibit A to Council Resolution No. 2018-
Debt Management Policy
Adopted:
Page 6 of 10
Payments to be made under valid leases are payable only in the year in which use, and
occupancy of the leased property is available, and lease payments may not be accelerated.
Lease financing requires the fair market rental value of the leased property to be equal to or
greater than the required debt service or lease payment schedule. The lessee (City) is
obligated to include in its annual budget and appropriate the rental payments that are due
and payable during each fiscal year the lessee has use of the leased property.
H. Tax Increment Financing
Tax Increment Financing is a financing method whereby a portion of ad valorem property
taxes (commonly called the "tax increment") is allocated to an entity, such as a successor
agency to redevelopment agency (Successor Agency), an enhanced infrastructure financing
district (EIFD), or a community revitalization and investment authority (CRIA), and the
entity is permitted to incur debt payable from and secured by the tax increment revenues.
Tax increment debt for redevelopment agencies and Successor Agencies is entitled to the
benefits of Article XVI, Section 16, of the California Constitution.
I. Fixed vs. Variable Rate Debt
Fixed interest rate debt is typically preferred to maintain a more predictable debt service
burden.
Variable rate debt obligations ("VRDOs") can be utilized on a limited basis when the
potential advantages of capturing the lowest interest rates available in the current market
outweigh forecasted risks (including interest rate risk, remarketing risk, liquidity risk, and risk
of expiration of credit support instruments prior to the final maturity of the VRDOs).
While VRDOs sometimes can provide a lower cost of borrowing in the short run, they
generally involve greater medium-term or long-term risk. Due diligence review must be
performed for each transaction, including the quantification of potential risks and benefits,
analysis of the impact on City creditworthiness and debt affordability and capacity, and
an evaluation of the ability of the City to withstand the medium-term or long-term risk
attendant to VRDOs, including the feasibility of exit strategies.
J. Derivative Products
The use of certain derivative products, such as interest rate swaps, may be considered
to hedge the risks of VRDOs, to the extent the City has such debt outstanding or under
consideration. The City will exercise extreme caution in the use of derivative instruments
for hedging purposes and will consider their utilization only when sufficient understanding
of the products and sufficient expertise for their appropriate use has been developed.
K. Conduit Debt
Conduit financing provides for the issuance of securities by a government agency to finance a
project of a third party, such as a non-profit organization or other private entity. The City
may sponsor conduit financings for those activities that have a general public purpose and
104
Exhibit A to Council Resolution No. 2018-
Debt Management Policy
Adopted:
Page 7 of 10
are consistent with the City's overall service and policy objectives. Unless a compelling
public policy rationale exists, such conduit financings will not in any way pledge the City's
faith and credit.
L. Interfund Borrowing
The City may borrow internally from other funds with surplus cash in lieu of issuing bonded
debt. Purposes, warranting the use of this type of borrowing could include short-term cash
flow imbalances due to grant terms, interim financing pending the issuance of bonds, or
capital financing in lieu of bonds. Interfund loans will be evaluated on a case by case basis.
Any borrowing between two City funds which exceeds 12 months require a repayment
schedule approved by City Council and shall include an interest rate based on market
conditions at the time the loan was taken out.
M. Joint Powers Authority (JPA)
In addition to some of the long and short-term financing instruments, the City may also
consider joint arrangements with other governmental agencies when a project serves the
public interest beyond City boundaries.
7.PURPOSE OF DEBT
Long-term Debt - Long-term debt may be used to finance the purchase or improvement
of land, infrastructure, facilities or equipment when it is appropriate to spread these costs
over more than one budget year. Long term debt may also be used to fund capitalized
interest, costs of issuance, required reserves, and any other financing related costs which
may be legally capitalized. Long-term debt may not be used to fund City operating costs.
Short-term Debt - Short-term debt, such as notes, commercial paper, and lines of credit,
will be studied as an interim source of funding in anticipation of long term borrowing.
Short-term debt may be issued for the same purpose as long-term debt, including
capitalized interest and other financing related costs. In addition, short-term debt
borrowing may be considered to address justifiable cash flow requirements to meet
short term operating needs to provide necessary public services, subject to applicable
restrictions in California law.
Refunding - Periodic reviews of existing debt will be undertaken to identify refunding
opportunities. Refunding will be considered (within state law and federal tax law
constraints) if and when there is a net benefit of the refunding. Non-economic refunding
may be considered to achieve City goals relating to changes in covenants, call provisions,
operational flexibility, tax status, or the debt service profile. The City may purchase its bonds
in the open market for the purpose of retiring the obligation when the purchase is cost
effective.
Except for instances in which a bullet payment or spike in debt service is being refinanced,
the City will generally seek to achieve debt service savings which, on a net present value
105
Exhibit A to Council Resolution No. 2018-
Debt Management Policy
Adopted:
Page 8 of 10
basis, are at least 3% of the debt being refinanced. Refunding’s which produce a net
present value savings of less than 3% will be considered on a case-by-case basis.
Notwithstanding the foregoing, a refunding of Successor Agency bonds shall be
determined based on the requirements of Health and Safety Code Section 34177.5.
8.MANNER OF SALE
There are several market factors that will affect the success of a bond offering, and
each should be carefully considered before selecting a method of sale. These factors
include, but are not limited to, the following: 1) market perception of the City's credit
quality, 2) interest rate volatility, 3) size of the proposed issue, 4) complexity of the
proposed issue, and 5) competition with other issuers for investor interest (bond supply).
Competitive Sales of Bonds
The terms and prices of the bonds are determined by the City, with the assistance of its
financial advisor, through a bidding process by which the City publishes a notice of sale for
the bonds, and interested underwriters submit bids for the respective terms upon which
they propose to purchase the bonds. The sale is awarded to the underwriter judged to
have submitted the best bid that offers the lowest interest rate, considering underwriting
spread, interest rates and any discounts or premiums.
Negotiated Sale of Bonds
A method of sale for bonds, notes, or other financing vehicles in which the City selects in
advance, based on proposals received or by other means, one of more underwriters to work
with it in structuring, marketing and finally offering an issue to investors. The negotiated
sale method is often used when the proposed debt is a first-time sale by a issuer (a new
credit), the issuer of the debt is a relatively small entity, the proposed debt involves a
complex security structure, such as a variable rate transaction, the proposed debt is an
unusually large issue, or in a highly volatile or congested market.
Direct or Private Placement
A direct placement or private placement is a variation of a negotiated sale in which the
City, with the help of a financial advisor and a placement agent, will attempt to place the
entire new issue directly with an investor (typically, a financial institution). The investor will
negotiate the specific terms and conditions of the financing before agreeing to purchase
the issue. Direct or private placements are someti mes undertaken when the transaction is
complex or unique, requiring direct negotiations with the investor, when market
conditions indicate that a direct or private placement may result in a lower interest rate on
the debt, or because the issue is small, and a direct offering provides economies of scale.
9.PERFORMANCE STANDARDS
The City of La Quinta strives to maintain 'investment grade' ratings in the municipal
market of “A” (without regard to numerical or "+" or "-" modifiers within the "A" category).
Ratings assigned by a nationally-recognized statistical rating organization of "BBB"
106
Exhibit A to Council Resolution No. 2018-
Debt Management Policy
Adopted:
Page 9 of 10
or higher are considered an adequate investment grade.
10.MARKET RELATIONSHIPS
The Finance Director will be responsible for maintaining relationships with investors, credit
analysts, and rating agencies.
11.ON-GOING DEBT ADMINISTRATION
The Finance Director will regularly review the City's outstanding obligations, particularly
in declining interest rate environments. When rates begin to approach levels at which
refunding is cost-effective, the City shall select a financing team to begin preparations for
a refunding issue.
Continuing Disclosure
The Finance staff will ensure that the City's annual financial statements and associated
reports are posted on the City's web site. The City will also contract with Consultant(s) to
comply with its contractual undertakings entered into pursuant to the Securities and
Exchange Commission Rule 15c2-12 by filing its annual financial statements, disclosure
material events, and other financial and operating data for the benefit of its bondholders on
the Electronic Municipal Market Access (EMMA) website of the Municipal Securities
Rulemaking Board (MSRB).
Arbitrage Rebate Compliance and Reporting
The use and investment of bond proceeds must be monitored to ensure compliance with
applicable arbitrage restrictions. Existing regulations for tax exempt debt require that
issuers calculate rebate liabilities related to any bond issues, with rebates paid to the
Federal Government every five years and as otherwise required by applicable provisions
of the Internal Revenue Code and regulations. The Finance Director shall contract and work
with a specialist to ensure that proceeds and investments are tracked in a manner that
facilitates accurate, complete calculations, and if necessary, timely rebate payments.
Compliance with Other Bond Covenants
In addition to financial disclosures and arbitrage, the City is also responsible for verifying
compliance with all undertakings, covenants, and agreements of each bond issuance on an
ongoing basis. This typically includes ensuring:
•Annual appropriation of revenues to meet debt service payments;
•Taxes/fees are levied and collected where applicable;
•Timely transfer of debt service payments to the trustee; and
•Compliance with insurance requirements.
The City shall comply with all covenants and conditions contained in governing law and any
legal documents entered into at the time of the bond offering. The Finance Director will
coordinate verification and monitoring of covenant compliance.
12.INTERNAL CONTROL PROCEDURES REGARDING USE OF DEBT PROCEEDS
107
Exhibit A to Council Resolution No. 2018-
Debt Management Policy
Adopted:
Page 10 of 10
One of the City's priorities in the management of debt is to assure that the proceeds of
the debt will be directed to the intended use for which the debt has been issued. In
furtherance of this priority, the following procedures shall apply:
A. The Finance Director shall retain a copy of each annual report filed with the
California Debt and Investment Advisory Commission (CDIAC) pursuant to Section 8855(k)
of the California Government Code concerning (1) debt authorized during the applicable
reporting period (whether issued or not), (2) debt outstanding during the reporting period,
and (3) the use during the reporting period of proceeds of issued debt.
B. In connection with the preparation of each annual report to be filed with CDIAC
pursuant to Section 8855(k) of the California Government Code, the Finance Director or the
designee of the Finance Director shall keep a record of the original intended use for which
the debt has been issued, and indicate whether the proceeds spent during the applicable
one-year reporting period for such annual report conform with the intended use (at the
time of original issuance or as modified pursuant to the following sentence). If a change in
intended use has been authorized after the original issuance of the debt, the Finance
Director or the designee of the Finance Director shall indicate in the record when the
change in use was authorized and whether the City Council, City Manager, or another City
official has authorized the change in intended use. The Finance Director shall report
apparent deviations from the intended use in debt proceeds to the City Manager for
further discussion, and if the City Manager determines appropriate in consultation with
legal counsel (which may be bond counsel, if applicable, or the City Attorney), to the City
Council. Additionally, an annual update of all outstanding debt and its adherence to this
policy shall be reported to the City Council with the Comprehensive Annual Financial Report.
C. If the debt has been issued to finance a capital project and the project timeline
or scope of project has changed in a way that all or a portion of the debt proceeds cannot
be expended on the original project, the Finance Director shall consult with the City
Manager and legal counsel (which may be bond counsel, if applicable, or the City Attorney)
as to available alternatives for the expenditure of the remaining debt proceeds (including
prepayment of the debt). If deemed advisable by the City Manager after such consultation,
direction of the City Council may be sought as to an alternative for the expenditure or
use of such remaining debt proceeds.
13.DEBT MANAGEMENT POLICY REVIEW
The Finance Director shall review this Policy at a minimum of every five (5) years and
recommend any changes to the City Manager and City Council.
108
POWER POINTS
FAC
SPECIAL
MEETING
APRIL 11, 2018
1
Financial Advisory Commission
Special Meeting
April 11, 2018
Financial Advisory Commission
April 11, 2018
S1‐Discuss the Preliminary Budget for Fiscal Year 2018/19
C3‐Receive and File the 4th Quarter Fiscal Year
2
Measure G Revenue Projections
•95% of Bradley Burns Sales Tax
•$8,455,000 for 18/19
•5% increase from current budget of $8M
•15% of total General Fund Revenue
Proposed Measure G Expenses
•Police Services – $1.7M to $2.2M
•Capital Improvement Projects
–Citywide Drainage $1,166,500
–N. La Quinta Landscape ‐$2,129,61
$ 8,455,000 Total Revenue
‐$ 5,496,113 Anticipated Expenses
$ 2,958,887 Measure G Resources
3
Date 2018/19 BUDGET SCHEDULE
April 11 Financial Advisory Commission preliminary Measure G General Fund
budget overview
April 17 City Council - first Capital Improvement budget study session
May 1 City Council - first budget study session focused on the General Fund and
Internal Service Funds
May 9 Financial Advisory Commission update on the General Fund and Capital
Improvement Budget
May 15
City Council - second budget study session focused on all special funds and
provides an update on the General Fund if needed. A second CIP budget
session may also be included.
June 5 City Council - third budget study session overall update on all funds and
final direction on unfunded requests
June 13 Financial Advisory Commission - final review of the General Fund and
Capital Improvement Budget
June 19 City Council - Adopt Budget
Budget
Timeline
Discussion and Questions
4
Financial Advisory Commission
April 11, 2018
S2‐Discuss Fiscal Year 2018/19 Investment Policy
C3‐Receive and File the 4th Quarter Fiscal Year
Overview of Redlined Changes
•Table of contents‐align to correct page
numbers
•Verbiage updates to ensure cohesiveness
between sections
•Turn landscaped charts portrait
•Appendix E – added the OPEB trust account
5
Items for Discussion
•Change maximum allocation for
professionally managed accounts
•Change maximum dollars allowable for agency
bonds (consider percentage base)
•Add investment types allowed per State code
•Address redundancies in executive summary
Items for Possible Removal
•Request for Proposal sample
•Broker questionaire
•Charts
6
Discussion and Questions
Financial Advisory Commission
April 11, 2018
S3‐Reserve Analysis Report and Council Recommendation
C3‐Receive and File the 4th Quarter Fiscal Year
7
Where We Left Off?
•Presented the process
•Scope of the analysis
•Current fund balance descriptions & balances
•Proposed reserve/trust categories
•Presented initial recommendations
Recommendations
•Follow current guiding principles
•Maintain 10‐year Long Range Financial Plan
•Two components of Emergency Reserves –
Economic and Natural Disasters
•Add economic downturn definition to allow
access to reserves
8
Recommendations
•Cash flow reserve based on annual revenue
and expenditure review
•Establish Capital Replacement Fund
•Establish trust for unfunded pension liability
•Utilize unassigned reserves to fund
recommendations
Natural Disaster Reserve
•Update asset inventory & values
–Undervalued or Missing
•Thorough risk‐versus‐cost analysis
–Likelihood of full or partial destruction
–Importance of the asset to City functions
–Cost of coverage at various percentage
levels
9
Summary of All City Assets
Natural Disaster
Reserve
% of
City Coverage
Asset
Estimated
Replacement
Value FEMA/State City Coverage
14 Parks 19,966,204 18,718,316 1,247,888 623,944 50%
94%6%
12 City Buildings 60,322,936 1,678,125 111,875 111,875 100%
3%0.19%
SilverRock 6,317,571 3,651,397 243,426 121,713 50%
58%4%
Streets, Signals, 266,775,219 248,557,904 16,570,527 8,285,263 50%
Signs, Landscaping 93%6%
Fleet Vehicles 693,182 ‐ 693,182 693,182 100%
100%
Housing Assets 12,059,000 6,431,250 428,750 428,750 100%
53%4%
TOTALS 366,134,112 279,036,992 19,295,648 10,264,728
Percentage of Total Value 76%5%3%
Estimated Replacement Costs
Funding Sources
Summary of Recommendations
Reserve/Trust Reserve
Target
Current
Funding
Over/(Under)
Funded Annual Target
Emergency Reserve
Natural Disaster 10,000,000 16,534,000 6,534,000 1,500,000
Economic Disaster 11,000,000 - (11,000,000) 1,000,000
Total 21,000,000 16,534,000 (4,466,000) 2,500,000
Cash Flow Reserve 5,000,000 4,134,000 (866,000) -
Capital Replacement 10,000,000 - (10,000,000) 1,000,000
Total Reserves 36,000,000 20,668,000 (15,332,000) 3,500,000
Pension Trust Fund 10,000,000 - (10,000,000) 1,000,000
Unassigned Reserves - 14,865,926 14,865,926 -
Overall Total 46,000,000 35,533,926 (10,466,074) 4,500,000
10
Next Steps
Write Write a Reserve Policy for
formal adoption
Decide Decide reserve funding
options (Attachment 3)
Decide
Decide the allocation
method (Attachment 2)
•% based to analytics based
Decide
Decide on reserve categories
(Attachment 2)
•From 2 to 5
Reserve Categories
Natural Disaster –fire, flood,
earthquake, extreme peril to safety
Exists as
Emergency
Reserve
Economic Disaster – revenue declines
or expense spikes
New
Cash Flow Reserve – cash imbalances Exists
Capital Replacement –matching CIP
funds, supplement grant funds
New
Pension Trust Fund – unfunded
pension obligations
New
11
Allocation Method
CURRENT ALTERNATIVE
Natural
Disaster
40% of budget
$16,534,000
Asset Study every 5 years
$10,000,000
Economic
Disaster
New 10 year revenue/expense
$11,000,000
Cash
Flow
10% of budget
$4,134,000
Prior year cash activity
$5,000,000
Capital
Replace.
New Annual depreciation
$10,000,000
Pension
Trust
New Unfunded pension Liab.
$10,000,000
Summary of Funding Options
•Use $4M of unassigned as one‐time funding
•Allocate any new unassigned reserves in 20%
increments at the five reserve categories
•Allocate Measure G revenue to Capital
Replacement Reserve
•Allocate annual salary & benefits savings to the
Pension Trust
12
Discussion and Questions
Financial Advisory Commission
April 11, 2018
B1‐Approve Fiscal Year 2018/19 Meeting Dates
C3‐Receive and File the 4th Quarter Fiscal Year
13
Proposed Meeting Dates
Wednesday August 8Quarterly
Wednesday November 14 Quarterly
Wednesday February 13 Quarterly
Wednesday April 10 Special
Wednesday May 15 Quarterly
Wednesday June 12 Special
Financial Advisory Commission
April 11, 2018
Commissioners’ Items
1. City Council Meeting Summary Emails
2. Document Review Advance Notices
3. Update on Meeting with Mayor Evans
C3‐Receive and File the 4th Quarter Fiscal Year
14
Financial Advisory Commission
Next Meeting is on
May 9, 2018
4/11/2018
1
Finance Commission Meeting
April 11, 2018
City-Wide Camera System
In October 2016, an Ad Hoc Committee was established to assess the
potential use of public safety camera systems to increase efficiencies
and control costs in the public safety sector.
•Ad Hoc formed October 2016
•Survey complete March 2017
•On July 5, 2017, staff provided Council an update on the survey results.
Council requested staff to gather further community feedback.
•To date, Ad Hoc has conducted: 4 Community Outreach Meetings, 2 Focus
Groups.
Purpose
2
Ad Hoc Committee
Ad Hoc
Robert
Radi,
Council
Member Chief
Grace,
LQPD
Assist.
Chief
Manning,
LQPD
Battalion
Chief
LaClair,
LQ Fire
Kris
Gunterson,
Traffic
Signal
Analyst
Jesus
Gamino,
COLQ
Onsite IT
Specialist
Anthony
Moreno,
Public
Safety
Analyst
Martha
Mendez,
Public
Safety
Manager
Chris
Escobedo,
Dir. of
Comm.
Resources
Timeline
Ad Hoc Formed
(Oct. 2016)
Survey Issued
(Feb.- Mar.
2017)
Council Input
(July 5, 2017)
GEM Article
(Sept. 2017)
Community
Meetings
(Oct. to Nov.
2017)
Focus Groups
(Jan. to Feb.
2018)
Council Update
(March 6, 2018)
Commission
Meetings
(March to April
2018)
Grant &
Technical
Requirements
Council Update
(June 2018)
3
Focus Groups
Community Outreach Results
0% 20% 40% 60% 80% 100%
In Support
Against
Undecided
In Support Against Undecided
Survey 83% 13% 3%
Focus #1 94% 6%
Focus #2 80% 20%
4
City of Moreno Valley
•Camera System Video
Infrastructure & Grant Opportunity
•Highway Safety Improvement Grant
Program
•$1.87 million
•Completion mid-year 2018
•Tie in opportunity
5
Questions
1
City of La Quinta
Investment Management Services
April 11, 2018
Carlos Oblites
Senior Vice President
Portfolio Strategist
Mia Corral Brown
Senior Vice President
Relationship Manager
For One‐on‐One Presentation Only
SECTION 1
SECTION 2
SECTION 3
SECTION 4
SECTION 5
Chandler Asset Management | 1
Table of Contents
Partnering with Chandler Asset Management
City of La Quinta
Investment Approach
Client Service, Compliance and Reporting
Biographies and Disclosures
2
Section |1 Partnering with Chandler Asset Management
Chandler Asset Management | 3
Specializing in Investment Management for Public Agencies
“We believe if we do what is right for our clients, our own success will follow.”
Assets Under Management
$13.7 Billion
Chandler Asset Management Assets as of December 31, 2017
California Based, Independent & Employee‐Owned
•Fixed income specialist since 1988
•Founded by public investment professionals
•Serve institutions with public sector focus
•Headquartered in San Diego, CA
Custom Investment Programs
•Investment solutions based on your risk profile and
return goals
•Strategies for operating, short and long term
reserves
•Direct contact with investment management team
Stable Team of Investment Professionals
•Team of investment professionals average over 21
years portfolio management experience
•Disciplined, repeatable investment philosophy and
process
•Proprietary investment analysis
Corporate
1%
Healthcare
18%
Non‐Profit
1%
Sub‐Advisory
3%
Public Agency
77%
3
Chandler Asset Management | 4
Our Experienced Team is a Resource for the City
Investment Professionals Responsibility Industry Experience Firm Tenure
Martin Cassell, CFA
CEO, Chief Investment Officer Leads the investment team, firm oversight 1987 1991
William Dennehy II, CFA
EVP, Portfolio Manager
Implements portfolio strategies, credit analysis and head of Credit
Committee 1992 2011
Jayson Schmitt, CFA
EVP, Portfolio Manager
Implements portfolio strategies, credit analysis and head of Quantitative
Analysis Committee and Economic and Market Analysis Committee 1994 1995
Ted Piorkowski, CFA
SVP, Portfolio Manager
Implements portfolio strategies, credit analysis and head of Sector
Committee 1987 1999
Genny Lynkiewicz, CFA
VP, Portfolio Manager Implements portfolio strategies and credit analysis 2000 2015
Jeff Probst, CFA
VP, Portfolio Manager Implements portfolio strategies and credit analysis 2010 2012
Scott Prickett, CTP
EVP, Portfolio Strategist
Implements portfolio strategies, monitors alignment with client objectives
and policies and head of Portfolio Strategy 1987 2014
Julie Hughes
SVP, Portfolio Strategist
Implements portfolio strategies and monitors alignment with client
objectives and policies 1993 2014
Carlos Oblites
SVP, Portfolio Strategist
Implements portfolio strategies and monitors alignment with client
objectives and policies 1995 2017
Shelly Henbest, CFA
VP, Credit Analyst Research and credit analysis 2000 2009
Devin Weinstein
Portfolio Management Associate Assists with implementation of portfolio strategies 2015 2018
Client Service and Operations Responsibility Industry Experience Firm Tenure
Kay Chandler, CFA
President, Founder
Strategic planning and client service 1975 1988
Don Penner
EVP, Director of Business Development Leads the client service, marketing and relationship management team 2001 2010
Mia Corral Brown
SVP, Relationship Manager
Client service and relationship management 1997 2004
Jeannie Palmero
VP, Client Service Client service manager 1994 2007
Nicole Dragoo, IACCP
COO, Chief Compliance Officer
Responsible for regulatory compliance, directly manages investment
operations and oversees firm’s administrative functions 2000 2001
Chandler Asset Management | 5
•Adams, CO
•Alpine, CA
•Denver, CO
•Lakewood, CO
•Mendocino, CA
•Routt, CO
•Tulare, CA
Representative List of Institutional Relationships
5Sample listing of the firm’s public agency clients shown in alphabetical order. This list includes discretionary and non‐discretionary clients that have given
permission to be listed. It is not known whether the listed clients approve or disapprove of Chandler Asset Management or the services provided.
•Agoura Hills, CA
•American Canyon,CA
•Arcata, CA
•Boulder, CO
•Brea, CA
•Breckenridge, CO
•Buena Park, CA
•Camarillo, CA
•Chino Hills, CA
•Corona, CA
•Costa Mesa, CA
•Danville, CA
•Dublin, CA
•Imperial Beach, CA
•Indio, CA
•La Habra, CA
•La Mirada, CA
•Lakewood, CO
•Leesburg, FL
•Long Beach, CA
•Louisville, CO
•Menifee, CA
•Monterey, CA
•Moreno Valley, CA
•Mountain View, CA
•National City, CA
•Newport Beach, CA
•Perris, CA
•San Clemente, CA
•San Jacinto, CA
•San Leandro, CA
•San Marcos, CA
•So. San Francisco, CA
•Truckee, CA
•Westminster, CA
•Alameda Corridor Transportation Authority, CA
•Authority for CA Cities Excess Liability, CA
•California Insurance Pool Authority , CA
•California Joint Powers RMA, CA
•California Western School of Law, CA
•Colorado Springs Utilities, CO
•CSAC EIA, CA
•University of Denver, CO
•Eagle River Water & Sanitation District, CO
•E‐470 Public Highway Authority, CO
•First 5 Alameda County, CA
•Fontana POA Retiree Benefit Trust, CA
•LA County Metropolitan Transportation Auth., CA
•Moulton Niguel Water District, CA
•Orange County Sanitation District, CA
•Rancho California Water District, CA
•Redwood Empire Municipal Insurance Fund, CA
•San Bernardino Municipal Water District, CA
•San Diego County Water Authority, CA
•South Coast Water District, CA
•South Metro Fire Rescue Authority, CO
•Transportation Corridor Agencies, CA
•Three Valleys Municipal Water District, CA
•Walnut Valley Water District, CA
•WestEd, CA
•Western Municipal Water District, CA
•Whittier Area Schools Insurance Authority, CA
•Yolo County Public Agency RMIA, CA
•Delaware
Cities
Counties
States
Other Entities
4
Chandler Asset Management | 6
Commitment to Region
The list includes sample Inland Empire area clients as of December 31, 2017 that have given permission to be listed. It is not known whether the clients listed
approve or disapprove of Chandler Asset Management and the advisory services provided. Includes discretionary and non‐discretionary relationships.
NeighboringPublic Agency Clients
Client Managed Since
City of Chino Hills 2011
City of Corona 2006
Elsinore Valley MunicipalWater District 2017
Fontana POA 2010
City of Indio 2008
City of Menifee 2009
City of Moreno Valley 2010
Rancho California Water District 1996
San Bernardino Municipal Water District 2013
City of San Jacinto 2012
Three Valleys Municipal Water District 2009
Walnut Valley Water District 2009
Western Municipal Water District 2001
Section |2 City of La Quinta
5
Chandler Asset Management | 8
LAIF
56.0%
Agency
13.0%
Cash
2.0%
Corporates
2.0%
Certificate of
Deposit
13.0%
US Treasury
14.0%
Sector Allocation
City of La Quinta’s Portfolio as of December 31, 2017
Source: City of La Quinta Portfolio Management Summary December 31, 2017. *Not rated includes LAIF, Savings Accounts and Certificate of
Deposits below $250,000.
Portfolio Characteristics
Yield to Maturity 1.42%
Modified Duration 0.84 Years
Maturity 0.96 Years
Market Value $122,960,914
68%
7%7%
13%
5%
0.0%
20.0%
40.0%
60.0%
80.0%
0‐1 Year 1‐2 Years 2‐3 Years 3‐4 Years 4‐5 Years
Maturity Distribution
Not Rated
70.9%
AA
13.9%
AAA
15.2%
Credit Ratings*
Chandler Asset Management | 9
City’s Balances Are Seasonal
Source: City of La Quinta Treasurer’s Report, 2015‐2017.
Seasonality Analysis
Monthly Average % of Average
Average 91,080,549.67 100.0%
January 90,353,332.72 99.2%
February 87,255,344.11 95.8%
March 86,213,668.74 94.7%
April 87,616,203.02 96.2%
May 88,118,754.89 96.7%
June 105,861,634.09 116.2%
July 107,857,629.35 118.4%
August 88,209,092.65 96.8%
September 87,861,824.62 96.5%
October 87,174,941.44 95.7%
November 87,568,791.54 96.1%
December 88,875,378.83 97.6%
City of La Quinta
Seasonality of Investment Balances
(Average % Change 2015‐2017)
90.0%
95.0%
100.0%
105.0%
110.0%
115.0%
120.0%
6
Chandler Asset Management | 10
City of La Quinta ‐Historical Balances
Source: City of La Quinta Treasurer’s Report, 2015‐2017
■City’s cash and investments increased at a compound annual growth rate of 8.9% since January 2015.
■The City currently maintains approximately $52 million invested in longer‐term securities.
■Approximately $33 million more could be invested in longer‐maturity investments.
$0
$20
$40
$60
$80
$100
$120
Jan‐15 Apr‐15 Jul‐15 Oct‐15 Jan‐16 Apr‐16 Jul‐16 Oct‐16 Jan‐17 Apr‐17 Jul‐17 Oct‐17MillionsCity of La Quinta Cash and Investments
Amount available for
longer‐term
investments
Actual Portfolio of Securities
($51.7 million as of December 31, 2017)
Minimum needed to cover
outflows + 10% Cushion
$33.2 million
currently not
optimized
Chandler Asset Management | 11
3‐Year Forecast of Balances
■Assuming 5% annual growth, total balances are expected to reach as high as $130 million over the next 36
months.
■Funds available for longer‐term investments will range between $85 million to $96 million.
Total Estimated Balances:
•$130 million peak in July 2020
•$107 million by Dec. 2020
Source: City of La Quinta Treasurer’s Report, 2015‐2017.
$0
$20
$40
$60
$80
$100
$120
$140
Jan‐15 Jul‐15 Jan‐16 Jul‐16 Jan‐17 Jul‐17 Jan‐18 Jul‐18 Jan‐19 Jul‐19 Jan‐20 Jul‐20MillionsCity of La Quinta Forecasted Balances
Forecast Balances
Forecast amount available for longer‐term investments
($85 million ‐$96 million over the next three years)
Actual Portfolio of Securities
($51.7million on December 31, 2017)
7
Section |3 Investment Approach
Chandler Asset Management | 13
Investment Advisers
•Regulated by the SEC under the Investment Advisers Act of 1940
•Acts as a fiduciary for client assets
•Decisions based on compliance with policy and objectives
•Emphasis on the entire portfolio, rather than individual transactions
•Provide comprehensive investment management services
•Compensated on the basis of assets under management, not transactions
Broker/Dealers
•Brokers ‐bring buyers and sellers together; don’t take positions
•Dealers ‐take positions; inventory
•“Know your client” standard vs. fiduciary standard of investment adviser
•Recommendations based on “suitable” investments vs. compliance
•Generally transaction driven
Investment Advisers vs. Broker/Dealers
8
Chandler Asset Management | 14
We work with You on All Aspects of Your Program
Development and
Review of your
Investment Policy Establish
Appropriate
Investment
Benchmarks
Credit Analysis of
Instruments in your
Portfolio
Discretionary
Portfolio
Management
Monitor Compliance
with your Policy
Meetings with your
Staff and Council
Members
Staff Training,
Educational
Newsletter
Reconcile Holdings
with your Custodian
Monthly, Quarterly,
Annual Reporting in
Accordance with
GASB
Online Access to
your Portfolio
Chandler Asset Management | 15
Safety Comes First
Consistent application of a disciplined, conservative investment process
Our approach focuses on:
•Safety of principal*
•Appropriate levels of liquidity
•Diversification of risk
•Compliance with statutes, policies and objectives
•Generating market yield and return
Our approach utilizes investment processes and strategies we have managed for
three decades
While Chandler focuses on safety of principal by investing in conservative investment-grade quality bonds, investors should be aware that bonds and other fixed income
securities do carrysome degree ofrisk andwe cannotensurea profit norguarantee againstloss.
9
Chandler Asset Management | 16
Segmenting the Portfolio for Optimal Structure
Local Government Investment Pool (LGIP)
Matching maturities to known
expenditures
•Money market instruments
o Agency Discount Notes
o Commercial Paper
o Certificates of Deposit
Target generally to a higher duration to
enhance the potential to increase earnings
•Invest in securities allowed by Code:
o U.S. Treasury Securities
o U.S. Agency Securities
o High‐Grade Credit
Total Portfolio
Reserve PortfolioLiquidity Portfolio
Chandler Asset Management | 17
Adding Value and Controlling Risk
Four Key Elements of Our Approach
Portfolio
Duration
Portfolio
Duration
Constraining
portfolio
duration
relative to the
benchmark
Constraining
portfolio
duration
relative to the
benchmark
Sector
Allocation
Sector
Allocation
Strategic
allocations to
key sectors
with value‐
based rotation
Strategic
allocations to
key sectors
with value‐
based rotation
Term
Structure
Term
Structure
Positioning
securities
along the yield
curve to
capture value
across
maturities
Positioning
securities
along the yield
curve to
capture value
across
maturities
Security
Selection
Security
Selection
Selecting
bonds that we
believe are
undervalued
and offer the
greatest
potential for
risk‐adjusted
return
Selecting
bonds that we
believe are
undervalued
and offer the
greatest
potential for
risk‐adjusted
return
10
Chandler Asset Management | 18
Facilitating Communication and Decision‐Making
Investment Management Committee
Martin Cassell, CFA
CEO and Chief Investment Officer
William Dennehy II, CFA
Executive Vice President,
Portfolio Manager
Jayson Schmitt, CFA
Executive Vice President,
Portfolio Manager
Ted Piorkowski, CFA
Senior Vice President,
Portfolio Manager
Genny Lynkiewicz, CFA
Vice President,
Portfolio Manager
Jeff Probst, CFA
Vice President,
Portfolio Manager
Scott Prickett, CTP
Executive Vice President,
Portfolio Strategist
Julie Hughes
Senior Vice President,
Portfolio Strategist
Carlos Oblites
Senior Vice President,
Portfolio Strategist
Shelly Henbest, CFA
Vice President,
Credit Analyst
Devin Weinstein
Portfolio Management
Associate
Economic and Market Analysis
Committee
Economic Outlook
Market Analysis
Develops Interest Rate
Scenario Inputs for HAM
Quantitative Analysis
Committee
Reviews Committee Data
Produces HAM Analysis
Produces Quantitative Analysis
for all Committees
Improves Model Technology
and Methods
Credit Committee
Fundamental Credit Analysis
Security Relative Value
Analysis
Maintains Approved List
Sector Committee
Sector Valuation
New Sector Analysis
Develop Valuation Inputs
Chandler Asset Management | 19
Implementing a Disciplined, Repeatable Investment Process
Chandler’s Horizon Analysis Model
•Proprietary quantitative Horizon Analysis Model suggests target duration, sector allocation and
term structure.
•The security selection process employs quantitative tools and rigorous qualitative analysis to
determine relative value.
11
Chandler Asset Management | 20
Chandler’s Credit Process
The diagram above reflects the typical credit process applied to Chandler’s strategies. At any given time, other criteria may affect the process.
CREDIT
COMMITTEE INVESTMENT
COMMITTEE &
CIO REVIEW
CHANDLER STRATEGIESCHANDLER STRATEGIES
Issuer‐specific
fundamental
analysis
Industry
research and
fundamental
analysis
Macro‐
economic
research
•Research reports
•Relative value
analysis
•Investment
recommendations
•Maintains Approved
Issuer List
Chandler’s Credit Committee provides continuous oversight and monitoring of credit issues and issuers
•Evaluate fundamentals
•Determine relative value
•Segment issuers into three tiers
•Establish suitability by strategy
Chandler Asset Management | 21
Sector Allocation Sector Allocation
Agency
34.8%
Comm. Paper
1.6%
Negotiable CD
2.4%
US Treasury
27.9%
Municipal
Bonds
0.6%
CMO
1.1%
US Corporate
22.0%
ABS
4.7%
Supranational
4.7%
MMKT
0.2%
ABS
2.0%
Commercial
Paper
2.5%
US Treasury
25.7%
MMKT
0.5%
US Corporate
21.4%
Negotiable CD
2.5%
Supra
2.1%
Agency
43.3%
Chandler’s Limited Maturity Strategy
As of December 31, 2017
Chandler’s Short Term Bond Strategy
As of December 31, 2017
Portfolio Characteristics
0.0
10.0
20.0
30.0
40.0
50.0
0 ‐ 11 ‐ 33 ‐ 5
Maturity Distribution
Chandler’s Limited Maturity and Short Term Bond Strategies
Average Final Maturity 1.81 years
Average Duration 1.72 years
Average Market Yield 1.91%
Average Quality (S&P) AA
Average Coupon 1.49%
Based on Chandler’s Limited Maturity and Short Term Bond composites as of 12/31/2017. Past performance is not indicative of future results. Credit Quality
equivalent of composite/average of S&P, Moody’s and Fitch ratings. The composite characteristic information presented above is supplemental information
pursuant to GIPS®. Please see the GIPSdisclosures at the end of this presentation for complete details.
Portfolio Characteristics
0.0
10.0
20.0
30.0
40.0
50.0
60.0
0 ‐ 11 ‐ 33 ‐ 5
Maturity Distribution
Average Final Maturity 2.60 years
Average Duration 2.42 years
Average Market Yield 2.03%
Average Quality (S&P) AA
Average Coupon 1.66%
12
Chandler Asset Management | 22
Investment Strategies Provided for Three Decades
•Consistent, stable, risk‐adjusted returns over a market cycle across a wide range of possible investing
conditions
•Tightly controlled duration, sector allocation, term structure and security selection differentiates our
performance
•Strategies have historically outperformed client benchmarks in rising, falling and stable rate
environments
One
Year
Three
Years
Five
Years
Ten
Years
Since
Inception
Limited Maturity (inception: Sep 1988)0.85% 0.90% 0.77% 1.86% 4.71%
ICE BAML 1‐3 Year US Treasury Index 0.43% 0.61% 0.56% 1.44%4.40%
Short Term Bond (inception: Sep 1995)1.08% 1.17% 0.99% 2.39% 4.17%
ICE BAML 1‐5 Year US Treasury & Agency Index 0.67% 0.90% 0.76% 2.05%3.88%
Based on Chandler’s Limited Maturity and Short Term Bond composites as of December 31, 2017. Past performance is not indicative of
future results. Performance is presented gross of investment management fees. Gross performance does not reflect payment of advisory
fees and other expenses which will reduce performance. Investment advisory fees are described in the firm’s Form ADV, Part 2A brochure.
Performance greater than one year is annualized. Please see the GIPS® disclosures for complete details. For One‐on‐One presentation only.
Composite Performance –Gross of Fees
as of December 31, 2017
Chandler Asset Management | 23
Developing Solutions that Meet Your Goals
Providing Value Over Time
Chandler Investment Styles
10‐Year Net of Fee Performance*
December 2007 – December 2017
Investment Style Portfolio
Duration
Annualized Total Return
10 Year Period
10‐Year Growth of $80
Million Portfolio
Chandler Added
Value Over LAIF
LAIF 0.51 0.81% $86.7 million N/A
ChandlerLimited
Maturity 1.72 1.78% $95.4 million $8.7 million
Chandler Short
Term Bond 2.42 2.31% $100.5 million $13.8 million
*Net performance for Chandler investment styles based on sample fee of 0.083 of 1% calculated for a $80 million portfolio, relative to LAIF. LAIF returns include an administrative fee charged to
investors by the California State Treasurer. LAIF duration estimated based on average maturity in days, as of December 31, 2017, divided by 365 days. Past performance is not a guarantee of future
results. Please see the GIPS and benchmark disclosures at the end of this presentation for further details. *For one‐on‐one presentation only.
13
Section |4 Client Service, Compliance and Reporting
Chandler Asset Management | 25
Commitment to Excellence in Service and Communication
Investment Management•Direct access to
Investment
Management
Team
•Regular meetings
with City’s
finance staff
•Daily monitoring
of portfolio
•Initial and
ongoing Policy
review
•Cash Flow
Analysis
•Direct access to
Investment
Management
Team
•Regular meetings
with City’s
finance staff
•Daily monitoring
of portfolio
•Initial and
ongoing Policy
review
•Cash Flow
Analysis Client Service•Relationship
Manager and
Assigned Client
Service Team
•Ensures directives
are executed
•Proactively
schedule
meetings
•Training and
education
•General resource
on best practices
•Relationship
Manager and
Assigned Client
Service Team
•Ensures directives
are executed
•Proactively
schedule
meetings
•Training and
education
•General resource
on best practices Compliance Reporting•Compliance
monitored daily;
pre/post trade
compliance
testing
•Monthly
statement of
compliance
•Daily and
monthly bank
reconciliation
•Disaster Recovery
and Cybersecurity
•Compliance
monitored daily;
pre/post trade
compliance
testing
•Monthly
statement of
compliance
•Daily and
monthly bank
reconciliation
•Disaster Recovery
and Cybersecurity Efficiency/Transparency•Investment
reports by 3rd
business day
•Reports designed
to save staff
resources
•Daily
documentation of
best execution for
transactions
•Secure online
report access
•Efficiency and
transparency of
investment
program
•Investment
reports by 3rd
business day
•Reports designed
to save staff
resources
•Daily
documentation of
best execution for
transactions
•Secure online
report access
•Efficiency and
transparency of
investment
program
Client Communication across the entire Team
14
Chandler Asset Management | 26
Adhering to your Investment Guidelines
Investment Guidelines
State Legal Requirements
Your Investment Policy
Your Management Directives
Chandler Guidelines
Bloomberg AIM
Concentration Limits
Credit Quality
Issuer Exposure
Prohibited Transactions
Compliance Check
Approved
Warning
Prohibited
Only a compliance officer can
override a “prohibited” alert
Define Your Parameters Code Rules into Bloomberg Pre‐Trade Compliance
Audit Trail
Type of Violation
Status of Violation
Chandler Asset Management | 27
Assets managed by Chandler Asset Management are in full compliance with California Government Code and with the Client’s investment policy.
Category Standard Comment
Treasury Issues No limitation Complies
Agency Issues No limitation Complies
Supranationals 30% maximum; 5% max issuer; 5 years max maturity; Issued by
IBRD, IFC, or IADB only; “AA” rated or higher by a NRSRO Complies
Banker’s Acceptances 40% maximum; 5% max issuer; <180 days maturity; A‐1 rated equivalent by at
least one NRSRO; “A” rated or better by one NRSRO on long‐term debt Complies
Commercial Paper
25% maximum; 5% max issuer; <270 days maturity; A‐1 rated or higher by at
least one NRSRO; “A” rated or higher by one NRSRO on long‐term debt; Issuer is
a corporation organized and operating within U.S. with assets in excess of $500
million
Complies
Negotiable Certificates of Deposit 30% maximum; 5% max issuer; <180 days maturity; A‐1 rated equivalent by at
least one NRSROs; “AA” rated or better by two NRSROs on long‐term debt Complies
Medium Term Notes 30% maximum; 5% max issuer; “A” rated or better by one NRSRO Complies
Money Market Mutual Funds 20% maximum; 10% per fund; Highest rating by two NRSROs Complies
Federally Insured Certificates of Deposit
(CDs)/Time Deposit (TDs)
30% maximum (combined FDIC insured and collateralized TD/CD), 1 year max
maturity Complies
Collateralized Certificates of Deposit
(CDs)/Time Deposit (TDs)
30% maximum (combined FDIC and collateralized TD/ CD); A‐1, rated
higher by 2 NRSROs; "A" rated or higher by one NRSRO, if long‐term
debt
Complies
Mortgage Pass‐throughs, CMOs and Asset
Backed Securities
20% maximum; 5% max issuer; "AA" rated or higher by a NRSRO; "A"
rated issuer or higher by a NRSRO; 5 years max maturity Complies
Local Agency Investment Fund (LAIF) Program limitation; Currently not used by investment adviser Complies
Repurchase Agreement 90 day max maturity; 102% collateral; Currently not used by investment adviser Complies
California State and Local Agency Obligations 30% maximum; 5% max issuer; “A” rated or better by one NRSRO Complies
Other State Obligations 30% maximum; 5% max issuer; “A” rated or better by one NRSRO Complies
Prohibited Securities Inverse floaters; Ranges notes, interest‐only strips from mortgaged backed
securities; Zero interest accrual securities; stocks, financial futures, options, Complies
Max Per Issuer 5% (except U.S. government, its Agencies and GSEs, Money Market Fund or LGIP)Complies
Maximum maturity 5 years Complies
This sample report is being provided for illustrative purposes to demonstrate Chandler Asset Management’s reporting capabilities. Elements of the
Compliance Report are representative of investment guidelines promulgated by State Law or the entity’s investment policy.
Compliance with Investment Policy
15
Chandler Asset Management | 28
Transparency through Reporting and Communication
Monthly statements available by the 3rd business day
Reports designed for use by management
Portfolio summary, compliance statement, reconciliation summary, holdings report, transactions
ledger, income earned, cash flow report
Quarterly Reports in person with investment management team
Economic overview
This sample report is being provided for illustrative purposes to demonstrate Chandler Asset
Management's reporting capabilities. References to specific securities and their characteristics
are examples of securities held in the portfolio and are not intended to be, and should not be
interpreted as an offer, solicitation or recommendation to purchase or sell any financial
instrument, an indication that the purchase of such securities was or will be profitable, or
representative of the composition or performance of the portfolio. The information contained in
this sample presentation was obtained from sources we believe to be reliable, but we do not
guarantee its accuracy.
Account profile
Objectives and compliance statement
Portfolio summary, sector distribution,
issuer report, quality distribution,
duration distribution and investment
performance
Holdings Report, Transactions Ledger
Annual Reporting
GASB 40 and 72
Chandler Asset Management | 29
Best Execution for Transactions
This sample report is being provided for illustrative purposes to demonstrate Chandler Asset Management's reporting capabilities. References to specific securities and their characteristics are
examples of securities held in the portfolio and are not intended to be, and should not be interpreted as an offer, solicitation or recommendation to purchase or sell any financial instrument, an
indication that the purchase of such securities was or will be profitable, or representative of the composition or performance of the portfolio.
SAMPLE ISSUER
SAMPLE CUSIP
Process is documented for
transparency
Transactions are executed on
a competitive basis
We seek multiple price
quotations on all purchases
and sales
Block trade execution and
pricing saves you money
SAMPLE ISSUER
SAMPLE CUSIP
16
Chandler Asset Management | 30
The Chandler Client Portal for Increased Efficiency
24/7 Access to Your Information
Mobile Enabled Website
Customizable Holdings Reports
Security Details
Exporting Customized Fields
Documents
Chandler Asset Management | 31
What Can Working with Chandler Asset Management Offer You?
The Chandler Difference
Stability
SEC‐registered independent, employee owned firm. We share our
clients fiduciary responsibility without conflicts from affiliated
business lines.
Experience Established Investment team and process with 3 decades of
experience providing fixed income solutions to the public sector.
Discipline Time‐tested, repeatable investment process designed to seek
consistent returns through different market cycles.
Team
An experienced team focused on public agencies with direct access
to your Relationship Manager, Investment Management Team,
Operations and Support.
Specialized Reporting
We deliver monthly portfolio statements no later than by the 3rd
business day, including accounting, compliance and performance.
We provide quarterly and annual reports.
17
Section |5 Biographies and Disclosures
Chandler Asset Management | 33
Biographies
33
Mia Corral Brown
Senior Vice President, Relationship Manager
Mia Corral Brown is Senior Vice President, Relationship Management. She joined the firm in 2004 and has 21 years of experience
providing client service to institutional clients. Mia’s area of focus is on the development of client relationships in the public sector
and serves as relationship manager for existing clients throughout Southern California. Prior to joining Chandler, Mia was employed
at Nicholas Applegate Capital Management as an Assistant Marketing Manager. Mia is an active member of the California Society of
Municipal Finance Officers, the Government Finance Officers Association, California Municipal Treasurers Association and the
California Association of Joint Power Authorities. Mia is a graduate of San Diego State University where she earned her B.A. in
speech communication with an emphasis in business communications.
Carlos Oblites
Senior Vice President, Portfolio Strategist
Carlos Oblites is a Senior Vice President and Portfolio Strategist at Chandler Asset Management. He is responsible for building and
maintaining client relationships with public agencies along with participating actively in the portfolio management process. Carlos
has over 20 years of investment and financial experience, focused largely on managing short‐term fixed income and pension
strategies for governmental and institutional non‐profit clients. Prior to joining Chandler, Carlos served as the Administrative
Services Manager at Central Marin Sanitation Agency (CMSA), and was responsible for all aspects of the Agency’s financial, human
resources, administrative support, and information systems activities. He also has significant expertise in serving California public
agencies, healthcare, and insurance clients through his roles as Director at PFM Asset Management, and as a Principal at Wells
Capital Management. Carlos holds a Bachelor of Arts degree in History from the University of California, Santa Barbara, and earned
a Master’s degree in Business Administrationfrom San Francisco State University.
18
Chandler Asset Management | 34
GIPS® Compliant Verification Statement
Chandler Asset Management | 35
GIPS®Disclosures –Limited Maturity
1. Chandler Asset Management is an independent investment adviser registered as such with the Securities and Exchange Commission under the Investment Adviser’s Act of 1940. Registration with the SEC does not
imply a certain level of skill or training. Since 1988, Chandler Asset Management has provided fixed income investment management services to the public sector, as well as to foundations, endowments,
individuals and corporations. A complete list and description of all of the firm’s composites is available upon request.
2. The Limited Maturity Composite is a composite of individually managed accounts with an average modified duration approximately equal to the modified duration of the ICE Bank of America Merrill Lynch 1‐3 Year
US Treasury Index and a final stated maturity of individual securities of five years. The minimum account size required to be included in this composite is $2 million. This composite was created September 1988.
The name of this composite was changed from Short‐Term Fixed Income effective June 30, 2009.
3. The ICE BAML 1‐3 Year US Treasury Index is comprised of US Treasury securities issued by the US Government. All securities in the index must have fixed coupon rates and have at least one year but not greater than
three years to maturity regardless of any call features. Indexes are referred to for comparative purposes only and are not intended to parallel the risk or investment style of the portfolios in the Composite. Indexes
do not utilize leverage. Index calculations do not reflect fees, brokerage commissions or other expenses of investing. Investors may not make direct investments into any index. Index data contained herein (and all
trademarks related thereto) are owned by the indicated index provider, and may not be redistributed. The information herein has not been approved by the index provider.
4. Valuations are computed and performance reported in U.S. Dollars.
5. Performance is calculated using a time‐weighted total rate of return, which links performance monthly, and is reported gross of investment management fees and custodial fees, but after all trading expenses.
Results reflect the reinvestment of income, dividends and other earnings, and include realized and unrealized gains and losses and interest accrued through the last day of each month. Results do not reflect the
potential impact of taxes. Past performance is not indicative of future results. Fees charged by Chandler Asset Management will reduce performance.
6. Net‐of‐fees performance returns are calculated by reducing the monthly gross performance by one‐twelfth (1/12) of the actual maximum applicable fee of 0.25%, which is representative of our current fee schedule
for this composite. These monthly returns are then geometrically linked to produce annual returns which are presented before custodial fees but after management fees and all trading expenses. Fees are
negotiable and additional information regarding Chandler's fees is included in our Part 2A of Form ADV.
7. Dispersion is calculated using the asset weighted standard deviation for all accounts in the composite for the year. For those years when less than six portfolios were included in the composite for the full year, no
dispersion measure is presented. The three‐year annualized standard deviation measures the variability of the composite and the benchmark returns over the preceding 36‐month period and is required by GIPS
for periods beginning after Jan. 1, 2011. Policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request.
Source ice Data Indices, LLC ("ICE"), used with permission. ICE PERMITS USE OF THE ICE INDICES AND RELATED DATA ON AN "AS IS" BASIS; ICE, ITS AFFILIATES AND THEIR RESPECTIVE THIRD PARTY SUPPLIERS DISCLAIM
ANY AND ALL WARRANTIES AND REPRESENTATIONS, EXPRESS AND/OR IMPLIED, INCLUDING ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSEORUSE,INCLUDINGTHEINDICES,INDEX
DATA AND ANY DATA INCLUDED IN, RELATED TO, OR DERIVED THEREFROM. NEITHER ICE DATA, ITS AFFILIATES OR THEIR RESPECTIVE THIRD PARTY PROVIDERS GUARANTEE THEQUALITY,ADEQUACY,ACCURACY,
TIMELINESS OR COMPLETENESS OF THE INDICES OR THE INDEX DATA OR ANY COMPONENT THEREOF, AND THE INDICES AND INDEX DATA AND ALL COMPONENTS THEREOF ARE PROVIDED ON AN "AS IS" BASIS AND
LICENSEE'SUSEISATLICENSEE'SOWNRISK.ICEDATA,ITSAFFILIATESANDTHEIRRESPECTIVETHIRDPARTYDONOTSPONSOR,ENDORSE,ORRECOMMENDCHANDLERASSET MANAGEMENT, OR ANY OF ITS PRODUCTS
OR SERVICES.
Annual Rates of Return 2008 through 2017
Returns 3 Year Annualized Dispersion Assets
Year Total Total Standard Deviation Asset Wtd Number of Composite % of Firm Firm
End Gross Net Index Composite Index Std. Dev. Portfolios (MM) Assets (MM)
2008 6.82% 6.56% 6.61% n/a n/a 0.20% 8 202 5.53% 3,655
2009 2.10% 1.85% 0.78% n/a n/a 0.34% 9 224 4.51% 4,965
2010 2.96% 2.70% 2.35% n/a n/a 0.38% 8 201 3.50% 5,755
2011 1.88% 1.62% 1.55% 1.02% 1.02% 0.31% 9 222 3.74% 5,929
2012 1.16% 0.91% 0.43% 0.78% 0.73% 0.06% 15 474 7.37% 6,431
2013 0.30% 0.05% 0.36% 0.59% 0.50% 0.08% 18 797 11.12% 7,165
2014 0.87% 0.61% 0.62% 0.54% 0.43% 0.09% 21 879 9.88% 8,894
2015 0.74% 0.49% 0.54% 0.63% 0.56% 0.07% 27 1,328 11.31% 11,747
2016 1.11% 0.86% 0.88% 0.74% 0.76% 0.06% 31 1,081 8.39% 12,882
2017 0.85% 0.60% 0.43% 0.71% 0.74% 0.08% 32 1,178 8.60% 13,698
Chandler Asset Management claims compliance with
the Global Investment Performance Standards (GIPS®)
and has prepared and presented this report in
compliance with the GIPS standards.
Chandler Asset Management has been
independently verified by ACA Performance
Services for the period of July 1, 1997 through
March 31, 2017. The verification report is available
upon request. Verification assesses whether (1) the
firm has complied with all the composite
construction requirements of the GIPS standards
on a firm‐wide basis and (2) the firm’s policies and
procedures are designed to calculate and present
performance in compliance with the GIPS
standards. Verification does not ensure the
accuracy of any specific composite presentation.
19
Chandler Asset Management | 36
GIPS®Disclosures –Short Term Bond
1. Chandler Asset Management is an independent investment adviser registered as such with the Securities and Exchange Commission under the Investment Adviser’s Act of 1940. Registration with the SEC does not
imply a certain level of skill or training. Since 1988, Chandler Asset Management has provided fixed income investment management services to the public sector, as well as to foundations, endowments,
individuals and corporations. A complete list and description of all of the firm’s composites is available upon request.
2. The Short Term Bond Composite is a composite of individually managed accounts with an average modified duration approximately equal to the modified duration of the ICE Bank of America Merrill Lynch 1‐5 Year
US Treasury & Agency Index and a maximum final stated maturity of individual securities of five years. The minimum account size required to be included in this composite is $2 million. This composite was created
in September 1995. The name of this composite was changed from 1‐5 Year Government Fixed Income effective June 30, 2009.
3. The ICE BAML 1‐5 Year US Treasury & Agency Index is comprised of securities issued by entities of the US Government, including the US Treasury and Agencies such as Fannie Mae, Resolution Trust Funding and the
Federal Home Loan Bank. Corporate or foreign debt guaranteed by the US Government, such as USAID securities, may also be included in the index. All securities in the index must be investment grade, have fixed
coupon rates or rates that change according to a predetermined schedule, and have at least one year but not greater than five years to maturity regardless of any call features. Indexes are referred to for
comparative purposes only and are not intended to parallel the risk or investment style of the portfolios in the Composite. Indexes do not utilize leverage. Index calculations do not reflect fees, brokerage
commissions or other expenses of investing. Investors may not make direct investments into any index. Index data contained herein (and all trademarks related thereto) are owned by the indicated index provider,
and may not be redistributed. The information herein has not been approved by the index provider.
4. Valuations are computed and performance reported in U.S. Dollars.
5. Performance is calculated using a time‐weighted total rate of return, which links performance monthly, and is reported gross of investment management fees and custodial fees, but after all trading expenses.
Results reflect the reinvestment of income, dividends and other earnings, and include realized and unrealized gains and losses and interest accrued through the last day of each month. Results do not reflect the
potential impact of taxes. Past performance is not indicative of future results. Fees charged by Chandler Asset Management will reduce performance.
6. Net‐of‐fees performance returns are calculated by reducing the monthly gross performance by one‐twelfth (1/12) of the actual maximum applicable fee of 0.25%, which is reflective of our current fee schedule for
this composite. These monthly returns are then geometrically linked to produce annual returns which are presented before custodial fees but after management fees and all trading expenses. Fees are negotiable
and additional information regarding Chandler's fees is included in our Part 2A of Form ADV.
7. Dispersion is calculated using the asset weighted standard deviation for all accounts in the composite for the year. For those years when less than six portfolios were included in the composite for the full year, no
dispersion measure is presented. The three‐year annualized standard deviation measures the variability of the composite and the benchmark returns over the preceding 36‐month period and is required by GIPS
for periods beginning after Jan. 1, 2011. Policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request.
Source ice Data Indices, LLC ("ICE"), used with permission. ICE PERMITS USE OF THE ICE INDICES AND RELATED DATA ON AN "AS IS" BASIS; ICE, ITS AFFILIATES AND THEIR RESPECTIVE THIRD PARTY SUPPLIERS DISCLAIM
ANY AND ALL WARRANTIES AND REPRESENTATIONS, EXPRESS AND/OR IMPLIED, INCLUDING ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSEORUSE,INCLUDINGTHEINDICES,INDEX
DATA AND ANY DATA INCLUDED IN, RELATED TO, OR DERIVED THEREFROM. NEITHER ICE DATA, ITS AFFILIATES OR THEIR RESPECTIVE THIRD PARTY PROVIDERS GUARANTEE THEQUALITY,ADEQUACY,ACCURACY,
TIMELINESS OR COMPLETENESS OF THE INDICES OR THE INDEX DATA OR ANY COMPONENT THEREOF, AND THE INDICES AND INDEX DATA AND ALL COMPONENTS THEREOF ARE PROVIDED ON AN "AS IS" BASIS AND
LICENSEE'SUSEISATLICENSEE'SOWNRISK.ICEDATA,ITSAFFILIATESANDTHEIRRESPECTIVETHIRDPARTYDONOTSPONSOR,ENDORSE,ORRECOMMENDCHANDLERASSET MANAGEMENT, OR ANY OF ITS PRODUCTS
OR SERVICES.
Annual Rates of Return 2008 through 2017
Returns 3 Year Annualized Dispersion Assets
Year Total Total Standard Deviation Asset Wtd Number of Composite % of Firm Firm
End Gross Net Index Composite Index Std. Dev. Portfolios (MM) Assets (MM)
2008 7.65% 7.40% 8.37% n/a n/a 0.53% 22 1,202 32.90% 3,655
2009 2.80% 2.50% 0.91% n/a n/a 0.35% 29 1,554 31.29% 4,965
2010 3.97% 3.70% 3.46% n/a n/a 0.11% 33 1,906 33.12% 5,755
2011 2.90% 2.64% 3.19% 1.47% 1.65% 0.07% 32 1,866 31.48% 5,929
2012 1.80% 1.54% 0.98% 1.18% 1.27% 0.26% 38 2,133 33.17% 6,431
2013 0.04%‐0.21%‐0.16% 1.02% 1.10% 0.08% 39 2,168 30.26% 7,165
2014 1.42% 1.17% 1.24% 0.96% 0.99% 0.07% 40 2,325 26.14% 8,894
2015 1.15% 0.90% 0.96% 1.11% 1.18% 0.07% 44 3,403 28.97% 11,747
2016 1.30% 1.04% 1.08% 1.24% 1.39% 0.05% 49 4,131 32.07% 12,882
2017 1.08% 0.83% 0.67% 1.19% 1.34% 0.11% 48 3,783 27.62% 13,698
Chandler Asset Management claims compliance with
the Global Investment Performance Standards (GIPS®)
and has prepared and presented this report in
compliance with the GIPS standards.
Chandler Asset Management has been
independently verified by ACA Performance
Services for the period of July 1, 1997 through
March 31, 2017. The verification report is available
upon request. Verification assesses whether (1) the
firm has complied with all the composite
construction requirements of the GIPS standards
on a firm‐wide basis and (2) the firm’s policies and
procedures are designed to calculate and present
performance in compliance with the GIPS
standards. Verification does not ensure the
accuracy of any specific composite presentation.
Chandler Asset Management | 37
Benchmark Disclosures
ICE BAML 1‐3 Year US Treasury Index
The ICE BAML 1‐3 Year US Treasury Index tracks the performance of US dollar denominated sovereign debt publicly issued by the US
government in its domestic market. Qualifying securities must have at least one year remaining term to final maturity and less than three
years remaining term to final maturity, a fixed coupon schedule and a minimum amount outstanding of $1 billion. Qualifying securities
must have at least 18 months to final maturity at the time of issuance. (Index: G1O2. Please visit www.mlindex.ml.com for more
information).
ICE BAML 1‐5 Year US Treasury & Agency Index
The ICE BAML US Treasury & Agency Index tracks the performance of US dollar denominated US Treasury and nonsubordinated US agency
debt issued in the US domestic market. Qualifying securities must have an investment grade rating (based on an average of Moody’s, S&P
and Fitch). Qualifying securities must have at least one year remaining term to final maturity and less than five years remaining term to
final maturity, at least 18 months to maturity at time of issuance, a fixed coupon schedule and a minimum amount outstanding of $1
billion for sovereigns and $250 million for agencies. (Index: GVA0. Please visit www.mlindex.ml.com for more information).
Source ice Data Indices, LLC ("ICE"), used with permission. ICE PERMITS USE OF THE ICE INDICES AND RELATED DATA ON AN "AS IS" BASIS;
ICE, ITS AFFILIATES AND THEIR RESPECTIVE THIRD PARTY SUPPLIERS DISCLAIM ANY AND ALL WARRANTIES AND REPRESENTATIONS,
EXPRESSAND/ORIMPLIED,INCLUDINGANYWARRANTIESOFMERCHANTABILITYORFITNESSFORAPARTICULARPURPOSEORUSE,
INCLUDING THE INDICES, INDEX DATA AND ANY DATA INCLUDED IN, RELATED TO, OR DERIVED THEREFROM. NEITHER ICE DATA, ITS
AFFILIATES OR THEIR RESPECTIVE THIRD PARTY PROVIDERS GUARANTEE THE QUALITY, ADEQUACY, ACCURACY, TIMELINESS OR
COMPLETENESS OF THE INDICES OR THE INDEX DATA OR ANY COMPONENT THEREOF, AND THE INDICES AND INDEX DATA AND ALL
COMPONENTS THEREOF ARE PROVIDED ON AN "AS IS" BASIS AND LICENSEE'S USE IS AT LICENSEE'S OWN RISK. ICE DATA, ITS AFFILIATES
AND THEIR RESPECTIVE THIRD PARTY DO NOT SPONSOR, ENDORSE, OR RECOMMEND CHANDLER ASSET MANAGEMENT, OR ANY OF ITS
PRODUCTS OR SERVICES.