SR-010808-1B~_
City Council Report
City of
Santa Monica
City Council Meeting: January 8, 2008~s,
Agenda Item: ~ °-'/
To: Mayor and City Council
From: Carol Swindell, Director of Finance
Subject: Modification to Existing Contract with RNC Capital Management LLC
Related to Investment Management Services for the Cemetery and
Mausoleum Perpetual Care Funds
Recommended Action
Staff recommends that the City Council authorize the City Manager to negotiate and
execute a modification to the existing agreement with RNC Capital Management LLC
(RNC) for investment management of the Cemetery and Mausoleum Perpetual Care
Funds increasing the maximum contract amount by $60,000 to anot-to-exceed amount
of $130,000.
Executive Summary
RNC Capital Management provides investment management services for the Cemetery
and Mausoleum Perpetual Care Fund. Under the administrative authority of the City
Manager to negotiate and execute Professional Services Agreements up to an amount
of $70,000, the current professional services agreement with RNC (Contract #1380)
was modified in July 2007 to include anot-to-exceed contract amount of $70,000. The
amount was based on the anticipated completion date of the study currently underway
to develop a business plan for the Woodlawn Cemetery and Mausoleum. Since the
Cemetery study is not yet complete and services rendered during the first quarter of
fiscal year 2007/08 resulted in contract costs exceeding the $70,000 threshold, an
increase to the contract is needed which requires Council approval. Staff recommends
that the maximum amount of the agreement be increased by $60,000 to a maximum of
$130,000 from the current authorized amount of $70,000. Subsequent to the
completion of the Cemetery and Mausoleum business plan, an RFP will be issued for
investment management services.
Discussion
The City owns and operates Woodlawn Cemetery and Mausoleum. A portion of the
sale of each burial plot, crypt, or niche is set aside for perpetual care services and is
deposited into the Cemetery or Mausoleum Perpetual care fund, as appropriate. The
income from these funds is used to pay for perpetual care costs. The principal can only
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be used for investment purposes. Investment guidelines are set by the City Council
separately from the City's Investment Policy for pooled funds
In 1971, the City Council approved the retention of an investment manager for these
funds. This was necessary because unlike the City's investment portfolio, a portion of
the perpetual care funds are invested in equities, which require a degree of investment
expertise and continuous monitoring not otherwise available to City staff.
RNC has provided these services since 1992. The current contract with RNC was
executed in October 2006 and modified in July 2007. Prior to the July 2007
modification, City staff informally contacted several investment managers regarding
investment management services for these funds. Based on these discussions, it was
determined that any formal Request for Proposals for these services would be delayed
until a comprehensive business plan for the Cemetery and Mausoleum is completed
since any investment plan would be dependent on the goals of the business plan. As
noted above, a study is currently underway, but not yet completed. The July 2007
modification, executed under the administrative authority of the City Manager, increased
the maximum contract amount to $70,000, but since this amount has now been
exceeded, an increase is necessary at this time. This modification requires Council
authorization as the total contract amount will now exceed City Manager authority of
$70,000 limit. This modification will allow the City to continue to use RNC Capital for
these services until the Cemetery and Mausoleum business plan has been finalized and
an RFP process for investment management services can be conducted. The current
contract provides the City with sufficient flexibility to change investment managers, if
necessary, once the Cemetery and Mausoleum business plan is completed.
Previous Council Actions
As noted above, Council authorized an investment manager for the perpetual care
funds in 1971. Council approved the retention of RNC Capital for these services in
February 1992.
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Financial Impacts & Budget Actions
RNC's annual fee for the investment management services is 0.60% of the total value of
the account, which is currently $8.53 million. Projected annual payments for the next
twelve months will be approximately $60,000. This assumes that the portfolio will grow
at an annualized rate of approximately 8% and also includes the payment of $3,301
currently due. .The $60,000 increase added to the current authorized amount of
$70,000 will bring the total not-to-exceed contract amount to $130,000, covering a
period of thirty months. When the Cemetery business plan is completed, an RFP for
investment management services will be conducted. The existing contract can be
terminated at any time.
These funds are budgeted in the Cemetery Fund in account 37641.555060, so no
budget action is required as a result of this action.
Prepared by:
David R. Carr, Principal Budget Analyst-Investments
Approved:
Forwarded to Council:
Carol Swindell
Director, Finance
Ewell
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Reference Contract
No. 8870 (CCS).