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SR-120208-1JCity Council Meeting: December 2, 2008 Agenda Item: Ta Mayor and City Council From: Carol Swindell, Director of Finance Subject: 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 changing the terms of the contract to month-to-month terminating no later than February 28, 2009. Executive Summary RNC Capital Management provides investment. management services for the Cemetery and Mausoleum Perpetual Care Fund. The current modified contract, which includes a not to exceed maximum amount of $130,000, terminates on December 31, 2008. This maximum amount was based on the anticipated completion date of a study to develop a business plan for the Woodlawn Cemetery and Mausoleum and a subsequent RFP process to select an investment manager for the funds. Although the Cemetery study has not yet been finalized, Staff believes it is prudent to go forward with the investment manager selection process at this time. However, since the selection process will not be completed by the contract termination date of December 31, 2008, a contract extension is required. Staff proposes the extension to be on a month-to-month basis terminating no later than February 28, 2009. 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 be used for investment purposes. Investment guidelines, which are set by the City Council, require retention of an investment manager for these funds since, unlike the 1 City's investment portfolio, a significant 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 and March 2008. Staff had originally believed it prudent to delay the investment manager selection process until a comprehensive business plan for the Cemetery and Mausoleum is completed since any investment plan would be partially dependent on the goals of the business plan. However, since the completion date of the plan is not known, Staff now recommends going forward with the selection process. The current contract expires on December 31, 2008. Based on the current portfolio size ($7,141,488 as of October 31, 2007), the current maximum contract amount of $130,000 should be sufficient through the end of February. The proposed contract modification extending the contract until February 28, 2009 .will allow the City to continue to use RNC Capital. for these services until the RFP process for investment management services is conducted. 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. The contract was modified in July 2007 and March 2008 to extend the term of the contract and increase the contract maximum amount. 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 $7.14 million. The proposed contract modification 2 provides the City with sufficient flexibility to change investment managers, if necessary, once the selection process is completed. Funds for the investment management of Cemetery and Mausoleum. Perpetual Care Funds are included in the Cemetery Fund budget in account 37641.555060, so no budget change is required as a result of this action. Prepared by: David R. Carr, Principal BudgetAnalyst-Investments Approved: Forwarded to Council: ~ti arol Swindell P amont EN Director of Finance ity Manager 3 Reference Amendment to Contract No. 8870 (CCS).