REPORT/RECOMMENDATION TO THE BOARD OF SUPERVISORS
OF SAN BERNARDINO COUNTY
AND RECORD OF ACTION
January 23, 2024
FROM
ENSEN MASON, Auditor-Controller/Treasurer/Tax Collector
SUBJECT
Title
Amendment to Agreement with PFM Asset Management LLC for Investment Advisory Services for the San Bernardino County Flood Control District
End
RECOMMENDATION(S)
Recommendation
Approve Amendment No. 1 to Agreement No. 19-12 with PFM Asset Management LLC to extend investment advisory services for the San Bernardino County Flood Control District originally scheduled to end on January 28, 2024, for an additional year, for the total contract period of January 29, 2019, through January 28, 2025, with no change to the annual fee of eight basis points (0.08%).
(Presenter: John Johnson, Assistant Auditor-Controller/Treasurer/Tax Collector, 382-7005)
Body
COUNTY AND CHIEF EXECUTIVE OFFICER GOALS & OBJECTIVES
Operate in a Fiscally-Responsible and Business-Like Manner.
FINANCIAL IMPACT
Approval of this item will not result in the use of additional Discretionary General Funding (Net County Cost). The annual fee, paid in monthly installments, is based on the daily net asset balances under investment management (which may vary on a year-over-year basis due to deposits and drawdowns) at an annual rate of eight basis points (0.08%). Based on current asset balances, the total annual cost is estimated at $131,200. These costs are funded with property taxes received by the San Bernardino County Flood Control District (District). Adequate appropriation has been included in both the Auditor-Controller/Treasurer/Tax Collector’s (ATC) 2023-24 budget and the District’s 2023-24 budget, and will be included in future recommended budgets. The District reimburses ATC for the annual costs incurred.
BACKGROUND INFORMATION
As a result of the issuance of Judgment Obligation Bonds in 2007, a portion of the District’s funds are held outside of the County Treasury Pool and invested pursuant to the Bond Indenture of Trust (Indenture). Per the Indenture, these funds must be invested in instruments that are not permitted under the County’s Investment Policy. The requirement to invest the District’s funds in this manner allows the District to achieve the lowest overall borrowing cost, while also allowing them to maintain sufficient cash balances to respond to flood emergencies. On April 24, 2007 (Item No. 46), the Board of Supervisors (Board) approved an exception to the County Investment Policy on an annual basis to allow the investment of these funds as required in the Indenture.
On September 18, 2007, the County entered into an Investment Advisory Agreement with PFM Asset Management LLC (PFM) via a purchase order, which was reviewed and renewed annually, to allow for the investment of the District’s funds as specified in the Indenture.
As the result of a competitive process, on July 8, 2014 (Item No. 13), the Board approved Agreement No. 14-568 with PFM for investment advisory services for the San Bernardino County Flood Control District at an annual fee of 12 basis points (0.12%), from July 8, 2014, through January 28, 2017, with an option to extend services for two one-year periods. On January 24, 2017 (Item No. 14), the Board approved the first one-year option to extend the agreement through January 28, 2018. On January 23, 2018 (Item No. 20), the Board approved the second one-year option to extend the agreement through January 28, 2019.
As the result of a competitive process, on January 8, 2019 (Item No. 8), the Board approved Agreement No. 19-12 with PFM for investment advisory services for the District at an annual fee of eight basis points (0.08%), commencing on January 29, 2019, with an initial termination date of January 28, 2024.
County Policy 11-05, which may be waived upon approval of the Board, limits the term of all contracts to no more than five years, including any extensions. The recommended amendment increasing the contract term by one year will cause the term of the contract to exceed five years for a total contract term of six years. ATC recommends approval of the amendment and the extended contract term to allow for the continued management and investment of the District’s funds in a cost-effective manner as specified in the Indenture, pursuant to the requirements stipulated when the Judgment Obligation Bonds were issued.
PROCUREMENT
On October 20, 2023, ATC released Request for Proposals (RFP) No. ACT124-ACTT-5155 for Investment Advisory Services for the San Bernardino County Flood Control District for a new agreement. The RFP was posted on the County Electronic Procurement Network (ePro). Issues with noticing the release of the RFP resulted in only one submission by the November 27, 2023, bid closing date. In order to ensure a true competitive process, ATC cancelled the RFP on December 6, 2023, and plans to reissue the RFP following additional outreach to allow for more proposals.
The recommended amendment will extend the current services with PFM for an additional year until a new contract can be procured through a competitive process. The Purchasing Department concurs with a non-competitive justification for a preexisting agreement.
REVIEW BY OTHERS
This item has been reviewed by County Counsel (Kristina Robb, Deputy County Counsel, 387-5455) on December 13, 2023; Public Works (Noel Castillo, Assistant Director, 387-7906) on December 21, 2023, Purchasing (Jessica Barajas, Supervising Buyer, 387-2065) on December 12, 2023; Finance (Penelope Chang, Administrative Analyst, 387-4886) on December 28, 2023; and County Finance and Administration (Paloma Hernandez-Barker, Deputy Executive Officer, 387-5423) on December 29, 2023.