The City has been managing its investment internally in the past years. Due to limited resources and staff experience, the City’s investment options have been limited to Treasury bills and federal agency notes.  These investment types are among the safest, yet they do not provide diversification to allow sufficient liquidity and reasonable return on investments.  A well-structured portfolio should provide safety, liquidity, and yield.  In addition, the City sees a need to improve its cash flow management to ensure liquidity to meet disbursement requirements yet limit idle cash.  Acquiring external services to improve cash flow forecasting and effectively manage the City’s day-to-day operating funds while adhering to the three investment principles is necessary.

A Request for Proposal (RFP) was issued on April 6, 2020 for investment advisory services.  Twelve proposals were received by May 6, 2020, the submission deadline. A comprehensive evaluation of all proposals was performed by a team of two Finance staff members, based on proposer’s qualification, project team’s experience, work plan and cost.  Meeder scored the highest in all four areas among the 12 proposers.

Meeder has been serving public entities for over 25 years, with a client base of more than 250.  Currently Meeder manages over $25 billion of public fund assets.  They have demonstrated a track record of improving investment performance for other Orange County cities including the City of Irvine. 

Meeder will be providing services including investment policy review, portfolio management, report preparation and presentation, credit analysis, and broker/dealer due diligence.  They will incorporate all permissible investments allowable under applicable State statutes into investment strategies best meet the City’s needs.  The entire scope of services is included in Attachment A of the Consultant Agreement between the City and Meeder (Attachment 1).

The contract provides a period of three years of service effective July 1, 2020, with an optional extension of two one-year periods.  The amount of service fees are $72,000 per year for years 1 through 3, $75,000 for year 4 (if extended), and $78,000 for year 5 (if extended).  The initial years’ service fee is approximately 2.88 basis points of our current portfolio with a size of $250,000,000.

The fees for investment advisory services will be included in the Finance Department’s annual operating budget.  For FY2020-21, General Fund’s share will be $57,250.

It is recommended that the City Council:

• Award a contract to Meeder Public Funds, Inc., dba Meeder Investment Management Inc., and

• Authorize the City Manager to execute the contract and two optional years, and to make minor modifications as appropriate, on behalf of the City.