SR 06-28-2022 5A
City Council
Report
City Council Meeting: June 28, 2022
Agenda Item: 5.A
1 of 5
To: Mayor and City Council
From: Gigi Decavalles-Hughes, Director, Finance Department
Subject: Approval of Second Modification to Professional Services Agreement with
RNC Capital Management LLC for investment management services
Recommended Action
Staff recommends that the City Council award RFP 308 to RNC Genter Captial
Management LLC (RNC) and authorize the City Manager to negotiate and execute a
second modification to agreement #10366 (CCS) with RNC to provide investment
management services for the Cemetery and Mausoleum Perpetual Care Funds
extending the term of the agreement for an additional five years for a total term of ten
years and nine months. Management fees are determined by the market value of the
assets under management, which varies over time based on market conditions. The
portfolio value as of April 30, 2022 , was approximately $17.1 million. Assuming an
increase in the portfolio value of 5% per year, staff estimates fees totaling approximately
$600,000 for the additional five-year term.
Executive Summary
The City currently retains RNC Genter Capital Management LLC (RNC) to
provide investment management services for the Cemetery and Mausoleum
Perpetual Care Funds. Investment guidelines for the two funds are established
by City Council and, due to the investment in equities, retention of an investment
manager for these portfolios is required.
Staff recommends a second modification to extend agreement #10366 for an
additional five years. Staff recently posted an RFP for investment management
services, and RNC was the only firm that submitted a proposal.
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As is standard practice for investment management agreements, fees for this
contract are determined as a percentage (0.6%) of the value of the assets
under management. Based on the current asset value of the two funds
(approximately $17.1 million as of April 30, 2022) and assuming 5% annual
growth in the portfolio value, it is estimated that fees for the five-year contract
extension period will be approximately $600,000. The actual fee amount will
vary based on the fluctuating market value of the assets under management.
Discussion
The City owns and operates the Woodlawn Cemetery and the Mausoleum
located on the cemetery grounds. Perpetual Care is sold with each burial plot,
crypt or niche. The funds received for perpetual care are deposited into the
Cemetery Perpetual Care Fund or Mausoleum Perpetual Care Fund as
appropriate. Cemetery and Mausoleum Perpetual Care Funds are private funds
held in trust and managed by the City. These funds are invested by an outside
investment manager under guidelines established by the City Council. The
income from these funds is used to pay for perpetual care costs. The principal
portion of the funds can only be used for investment purposes. A significant
portion of the perpetual care funds are invested in equities (up to 60%), with the
remainder primarily invested in fixed income instruments. The major objective of
the investment portfolio is maximizing portfolio income to pay for perpetual
care costs after first protecting the principal value of the portfolio and
complying with legal guidelines. Investments must also comply with the City’s
Socially Responsible Investing (SRI) guidelines.
Vendor/Consultant Selection
Bidder Recommendation
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Best and Only
Bidder
RNC Genter Capital Management LLC
Evaluation Criteria
Financial stability of vendor, experience/technical
competence, ability to meet work plan/timelines, quality
control, cost of services, cost control, technology solutions for
processing and reporting information and project
collaboration, stability, references, and value added-breadth of
service.
Municipal Code SMMC 2.24.190
RFP Data
Date
Posted Posted On
Advertise In
(City Charter &
SMMC)
Vendors
Downloaded
Date Publicly
Opened
1/13/22 City's Online
Bidding Site
Santa Monica Daily
Press
17 2/14/22
Additional Vendor Outreach & Justification to Award
RNC is recommended as the best bidder because they have experience working
with the City and have met the investment requirements set by Council including
the SRI goals. The firm’s history dates to 1968 and they have focused on the
conservative management of large capitalization equity, balanced and fixed
income investment strategies. In addition, RNC has years of experience working
with municipalities. The City’s current agreement with RNC was executed on
November 15, 2016 and terminates on August 12, 2022.
Staff reached out to several firms for feedback on why they did not submit a
proposal. Many firms that downloaded the proposal later determined that the
scope of service did not fit with their firms’ business. Several firms were
interested but paused because of investment requirements including SRI goals,
the volume of work, or inadvertently missed the deadline.
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Past Council Actions
Meeting Date Description
9/27/2016
(Attachment A)
Award Contract with RNC Capital Management LLC to Provide
Investment Management Services
10/12/2021
(Attachment B)
Approval of First Modification to Professional Services
Agreement with RNC Capital Management LLC to provide
investment management services
Financial Impacts and Budget Actions
Staff seeks authority to approve funding from the Cemetery Fund to
increase the amount of the agreement with RNC Genter Capital
Management LLC to provide investment management services for the
Cemetery and Mausoleum Perpetual Care Funds. This extends the
agreement for an additional five years with an estimated increase in
investment management fees of approximately $600,000. Funding is
available in the adopted FY 2021-22 budget.
Agreement Modification Request
Agreement
#
Estimated
Expenditures
Through Original
Contract Term
Estimated Additional
Fees from Term
Extension
Dept/CIP
Account #
Total Revised
Estimated
Contract Amount
(including
optional years)
10366 $496,206 $600,000
59500001.552010 $1,096,206
Future year funding is contingent on Council budget approval.
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Prepared By: Gigi Decavalles-Hughes, Director
Approved
Forwarded to Council
Attachments:
A. Attachment A - RNC Staff Report
B. Attachment B - RNC First Modification
C. rnc oaks fy21-22
D. RNC Contract No. 10366
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City Council Report
City Council Meeting: September 27, 2016
Agenda Item: 3.J
1 of 4
To: Mayor and City Council
From: Gigi Decavalles-Hughes, Director, Finance Department, Revenue
Subject: Award Contract with RNC Capital Management LLC to Provide Investment
Management Services
Recommended Action
Staff recommends that the City Council authorize the City Manager to negotiate and
execute a five-year professional services agreement with RNC Capital Management
LLC, a California-based company, to provide investment management services for the
Cemetery and Mausoleum Perpetual Care Funds. Fees depend on the value of the
funds under management and additional pass-through amounts for investments in
certain instruments. Based on the value of the portfolio as of June 30, 2016, staff
estimates annual fees would be approximately $69,000.
Executive Summary
The City requires consulting services to manage investment of the Woodlawn Cemetery
and Mausoleum perpetual care funds, which are subject to different requirements than
other City funds. Council approved Nelson Capital Management (Nelson Capital) as the
investment manager in June 2014. RNC Capital Management LLC (RNC) served as
the former investment manager, from 1992 through 2014.
Following operational and ownership changes at Nelson Capital that affect the
consultant’s ability to meet City needs, staff recommends that the City enter into a new
agreement with RNC Capital for perpetual care fund investment management.
The new contract would be for a total of five years, ending in 2021, with a $69,000
estimated annual cost.
Background
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. Perpetual care funds
have a distinct set of investment guidelines, which are set by Council rather than by
5.A.a
Packet Pg. 35 Attachment: Attachment A - RNC Staff Report (5037 : Second Modification with RNC Capital Management LLC for investment management
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State law as is the case for other City investments, and which therefore require the
specialized investment expertise and continuous monitoring of an investment manager.
RNC managed the City’s investments for the Cemetery and Mausoleum perpetual care
funds from 1992 until 2014. On April 8, 2014, Council authorized the City’s current
agreement with Nelson Capital following a competitive process (Attachments A, B). The
current agreement provides a term of five years, ending in 2019.
Discussion
Staff recommended Nelson Capital as the firm best able to meet the City’s needs
following the 2014 Request for Proposal process. Specific decision factors included
Nelson Capital’s approach to developing an investment plan for the portfolio consistent
with the Cemetery and Mausoleum’s long-term goals, the ability to tailor the portfolio to
meet these goals, and the firm’s expertise in the areas of socially responsible investing.
At the time of the agreement, Nelson Capital was a wholly owned but separately
operated subsidiary of Wells Fargo Bank. In May 2016, Nelson Capital advised the City
that it would merge into the Wells Fargo Private Bank Wealth and Management Group
(Wells Fargo) as of June 30, 2016. This change would require the City to modify and
re-sign the agreement, as Nelson Capital no longer exists as an entity, and provides the
option to reconsider and potentially terminate the agreement. The change would also
result in the Cemetery and Mausoleum portfolio and the City’s overall portfolio being
handled by the same custodian. After a review and analysis of the changes that would
occur under new management, and taking into consideration the preference to maintain
some diversification in the City’s various investment activities, staff recommends that
the City enter into a new agreement rather than transferring the current contract. Staff
further recommends that the City enter into a new agreement with RNC Capital
Management LLC (RNC).
The factors leading to the selection of Nelson Capital no longer apply following the
elimination of Nelson Capital and the departure of the Senior Portfolio Manager
responsible for managing these funds. Staff therefore recommends that the City
terminate its current agreement and award the contract for investment services to RNC,
based on the strength of its proposal and long-term, successful relationship with the
5.A.a
Packet Pg. 36 Attachment: Attachment A - RNC Staff Report (5037 : Second Modification with RNC Capital Management LLC for investment management
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City. RNC was the second ranked firm in the June 2014 competitive process, and
managed the Cemetery and Mausoleum portfolios from 1992 through 2014. RNC has
agreed to honor its 2014 proposal terms, including a fee at the current rate of 0.6% of
the value of the portfolio. The term of the contract would be five years.
Vendor Selection
Staff created a qualified list of vendors to provide perpetual care fund investment
services through the 2014 competitive process. Due to this recent process, staff was
able to select from an existing qualified list of vendors, rather than reissuing a request
for proposals.
RNC’s proposal was the second choice of the Selection Committee out of six bidders in
2014 (Attachment C), and has a strong record of investment performance. As a former
manager of the Cemetery and Mausoleum Perpetual Funds from 1992 through 2014,
RNC is very familiar with the goals and objectives of the portfolio, including the socially
responsible guidelines. RNC’s experience during its tenure included implementing prior
divestment of City funds from South Africa, Myanmar, and Arizona based companies,
and the current policy of fossil fuel divestment. RNC currently manages over $4 billion
in assets.
Financial Impacts and Budget Actions
The annual fee for the investment management services will not change from the
current rate of 0.6% of the value of the portfolio. Certain additional pass-through fees
could apply if investments are made in certain products, such as mutual funds. The
value of the account as of June 30, 2016 was approximately $11.5 million. Therefore,
annual fees at the current portfolio value would be approximately $69,000 ($11.5 million
x 0.6%). Fees in subsequent years will vary based on the value of the investment
portfolio.
Funds are available in the FY 2016-17 budget in division 37641. The agreement will be
charged to 37641.555060. Future funding is contingent on Council approval and budget
adoption.
5.A.a
Packet Pg. 37 Attachment: Attachment A - RNC Staff Report (5037 : Second Modification with RNC Capital Management LLC for investment management
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Prepared By: David Carr, Assistant City Treasurer
Approved
Forwarded to Council
Attachments:
A. April 8, 2014 Staff Report
B. January 7, 2014 Request for Proposals
C. RNC Proposal
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Packet Pg. 38 Attachment: Attachment A - RNC Staff Report (5037 : Second Modification with RNC Capital Management LLC for investment management
City Council Report
City Council Meeting: October 12, 2021
Agenda Item: 3.H
1 of 3
To: Mayor and City Council
From: Gigi Decavalles-Hughes, Director, Finance Department, Revenue
Subject: Approval of First Modification to Professional Services Agreement with RNC
Capital Management LLC to provide investment management services
Recommended Action
Staff recommends that the City Council authorize the City Manager to negotiate and
execute a first modification to agreement #10366 (CCS) with RNC Genter Capital
Management LLC to provide investment management services for the Cemetery and
Mausoleum Perpetual Care Funds extending the term of the agreement for an
additional nine months for a total term of five years and nine months. Management fees
are determined by the value of the assets under management. Based on the value of
the portfolio as of June 30, 2021, staff estimates the extension of the term of the
contract will result in an additional $78,600 in fees.
Summary
The City currently retains RNC Genter Capital Management LLC (RNC) to provide
investment management services for the Cemetery and Mausoleum Perpetual Care
Funds. Investment guidelines for the two funds are established by City Council and,
due to the investment in equities, retention of an investment manager for these
portfolios is required.
Staff recommends a first modification to extend agreement #10366 for an additional
nine months. As is standard practice for investment management agreements, fees for
this contract are determined as a percentage (0.6%) of the value of the assets under
management. Based on the current asset value of the two funds (approximately $17.5
million as of June 30, 2021), it is estimated that fees for the nine-month contract
extension period will be approximately $78,600. The revised estimated total for the
extended contract is $496,206. The actual fee amount will vary based on the fluctuating
value of the assets under management. The nine-month extension would ensure that
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Packet Pg. 39 Attachment: Attachment B - RNC First Modification (5037 : Second Modification with RNC Capital Management LLC for investment
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staff has enough time to complete a Request for Proposal (RFP) process for investment
management services.
Discussion
The City owns and operates the Woodlawn Cemetery and the Mausoleum
located on the cemetery grounds. Perpetual Care is sold with each burial plot,
crypt or niche. The funds received for perpetual care are deposited into the
Cemetery Perpetual Care Fund or Mausoleum Perpetual Care Fund as
appropriate. The income from these funds is used to pay for perpetual care costs.
The principal portion of the funds can only be used for investment purposes.
The City’s current five-year agreement with RNC terminates on November 11,
2021. Staff is in the initial steps of conducting an RFP process for
investment management services. The City’s restructuring to mitigate the
financial challenges caused by the COVID-19 pandemic has reduced staff
resources and delayed the RFP process. An extension to the contract is
requested to ensure a judicious selection process and allow adequate time for
contract negotiation and to transition to a new firm, if required.
Past Council Actions
Meeting Date Description
9/27/2016
(Attachment A)
Award Contract with RNC Capital Management LLC to Provide
Investment Management Services
.
Financial Impacts and Budget Actions
Staff seeks authority to extend the term of the agreement with RNC to
provide investment management services for the Cemetery and Mausoleum
Perpetual Care Funds for an additional nine months. This results in an
estimated increase in management fees of $78,600 bringing the total
estimated contract amount to $496,200. The increase in the total estimated
contract amount of $69,000 annually is a function of both the extension of the
contract term as well as the increase in the portfolio value from $11.6 million at
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Packet Pg. 40 Attachment: Attachment B - RNC First Modification (5037 : Second Modification with RNC Capital Management LLC for investment
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the time of contract execution to the current value of $17.5 million (as of June 30,
2021). Funding is available in the adopted FY 2021-23 Biennial Budget in the
Cemetery Fund (Public Works Department). Future year funding is contingent
on Council budget approval.
Agreement Modification Request
Agreement
#
Estimated
Expenditures Through
Original Contract
Term
Estimated
Additional Fees from
Term Extension
Dept/CIP Account #
Total Revised
Estimated
Contract Amount
10366 $417,608 $78,600
59500001.552010 $496,208
Prepared By: David Carr, Assistant City Treasurer
Approved
Forwarded to Council
Attachments:
A. Staff Report 9/27/2016 - Award Contract with RNC Capital Management LLC to
Provide Investment Management Services (Web Link)
B. RNC OAKS FY21-22
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Packet Pg. 41 Attachment: Attachment B - RNC First Modification (5037 : Second Modification with RNC Capital Management LLC for investment
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Packet Pg. 42 Attachment: rnc oaks fy21-22 (5037 : Second Modification with RNC Capital Management LLC for investment management services)
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Packet Pg. 43 Attachment: RNC Contract No. 10366 (5037 : Second Modification with RNC Capital Management LLC for investment management services)
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Packet Pg. 44 Attachment: RNC Contract No. 10366 (5037 : Second Modification with RNC Capital Management LLC for investment management services)
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Packet Pg. 48 Attachment: RNC Contract No. 10366 (5037 : Second Modification with RNC Capital Management LLC for investment management services)
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Packet Pg. 49 Attachment: RNC Contract No. 10366 (5037 : Second Modification with RNC Capital Management LLC for investment management services)
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Packet Pg. 54 Attachment: RNC Contract No. 10366 (5037 : Second Modification with RNC Capital Management LLC for investment management services)
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Packet Pg. 55 Attachment: RNC Contract No. 10366 (5037 : Second Modification with RNC Capital Management LLC for investment management services)
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Packet Pg. 56 Attachment: RNC Contract No. 10366 (5037 : Second Modification with RNC Capital Management LLC for investment management services)
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Packet Pg. 57 Attachment: RNC Contract No. 10366 (5037 : Second Modification with RNC Capital Management LLC for investment management services)
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Packet Pg. 58 Attachment: RNC Contract No. 10366 (5037 : Second Modification with RNC Capital Management LLC for investment management services)
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Packet Pg. 59 Attachment: RNC Contract No. 10366 (5037 : Second Modification with RNC Capital Management LLC for investment management services)
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Packet Pg. 62 Attachment: RNC Contract No. 10366 (5037 : Second Modification with RNC Capital Management LLC for investment management services)
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Packet Pg. 63 Attachment: RNC Contract No. 10366 (5037 : Second Modification with RNC Capital Management LLC for investment management services)
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Packet Pg. 64 Attachment: RNC Contract No. 10366 (5037 : Second Modification with RNC Capital Management LLC for investment management services)
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Packet Pg. 65 Attachment: RNC Contract No. 10366 (5037 : Second Modification with RNC Capital Management LLC for investment management services)