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HomeMy WebLinkAbout159-11 RESOLUTIONRESOLUTION NO. 159-11 A RESOLUTION APPROVING A FIVE (5) YEAR PROFESSIONAL SERVICES CONTRACT WITH FIRST SECURITY BANK FOR THE PROVISION OF INVESTMENT MANAGEMENT SERVICES BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF FAYETTEVILLE, ARKANSAS: Section 1: That the City Council of the City of Fayetteville, Arkansas hereby approves a five (5) year professional services contract with First Security Bank for the provision of investment management services. PASSED and APPROVED this 6th day of September, 2011. APPROVED: ATTEST: L NELD J►�'��' N, Mayor By: SOlhrateu RA E. SMITH, City Clerk/Treasurer Paul Becker Submitted By City of Fayetteville Staff Review Form City Council Agenda Items and Contracts, Leases or Agreements City Council Meeting Date Agenda Items Only Admin Services Division Action Required: Finance and Internal Services Department Approval of five year contract with First Security Bancorp and it's subsidiary Crews and Associates to provide investment management services for the City. See attached memo Cost of this request Account Number Project Number Budgeted Item Category / Project Budget Funds Used to Date Remaining Balance Budget Adjustment Attached Program Category / Project Name Program / Project Category Name Fund Name cx. Departme _,;rector Cit ' orney Date r f1-1/ Date Fina ce nd Internal Services Director Date Mayor yeWil Date Previous Ordinance or Resolution # Original Contract Date: Original Contract Number: Received in City 8 -1? -11 P03:45 R C V D Clerk's Office Received in Mayor's Office TERED /9/1 Comments: Revised January 15, 2009 ayeevi _e r., ARKANSAS THE CITY OF FAYETTEVILLE, ARKANSAS To: Thru: From: Date: Mayor and City Council Paul Becker, Finance Director Marsha Hertweck, Accounting Director August 17, 2011 Recommendation Staff recommends approval of a five year contract with First Security Bancorp and its wholly-owned investment banking subsidiary Crews & Associates, Inc. for investment management services. Background In 1999 the State of Arkansas approved Act 1341 which provided for expanded investment opportunities for local municipalities. After the changes to the State Law the City's Investment Policy was amended and City staff felt it was prudent to solicit investment management services. A five year contract was awarded to Garner Asset Management Company, LLC, subsequently Garrison Financial Corporation, in 2001 for a five year period. In 2006, First iSecurity Bank was chosen through a selection process for the next five year period, ending in September 2011. The investment of the City's funds is governed by the City's Investment Policy and City staff works closely with the investment manager to ensure prudent care over the City's assets. There is approximately 67 million dollars in the City's current investment portfolio. Discussion In July 2011, the City formed a selection committee and solicited proposals for investment services. Following the applicable rules and regulations of the procurement process, First Security Bancorp was selected by the committee to provide these services and a contract is being presented at this time for investment management services. Costs The fee for investment management services with First Security Bancorp is 10 basis points of the value of the account assets if the balance is over $25,000,000. This is the same price as the past contract. RESOLUTION NO. A RESOLUTION APPROVING A FIVE (5) YEAR PROFESSIONAL SERVICES CONTRACT WITH FIRST SECURITY BANK FOR THE PROVISION OF INVESTMENT MANAGEMENT SERVICES BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF FAYETTEVILLE, ARKANSAS: Section 1: That the City Council of the City of Fayetteville, Arkansas hereby approves a five (5) year professional services contract with First Security Bank for the provision of investment management services. PASSED and APPROVED this 6th day of September, 2011. APPROVED: ATTEST: By: By: LIONELD JORDAN, Mayor SONDRA E. SMITH, City Clerk/Treasurer �ave..evi THE CITY OF FAYE EVIL E, ARKANSAS CONTRACT Reference Request for Statements of Qualification: RFQ 11-08, Investment Management Services Vendor: First Security Bank and Crews & Associates Term: One (1) year with four (4) renewal options; total possible contract term of five (5) years THIS INVESTMENT MANAGEMENT AGENCY AGREEMENT ("Agreement") is made and entered into by and between the CITY OF FAYETTEVILLE, ARKANSAS, an Arkansas municipal corporation, by its Mayor and City Clerk, duly authorized by action of its City Council (the "City") and FIRST SECURITY BANK, an Arkansas banking corporation, by its Sr. Vice President and Trust Officer, duly authorized by its Board of Directors ("FSB"). WHEREAS, the City of Fayetteville solicited Requests for Statements of Qualifications for Investment Management Services pursuant to its RFQ No. 11-08; and WHEREAS, First Security Bank submitted a response to the Request for Statements of Qualifications which was, after examination of responses received from other qualified persons, accepted by proper action of the City Council of the City of Fayetteville. Now THEREFORE, in consideration of the mutual promises and obligations of the parties hereto, for other good and valuable consideration, and intending to be bound, the parties agree as follows: 01. Appointment of Investment Manager: The City of Fayetteville hereby appoints First Security Bank to act as investment manager with respect to those financial assets of the City of Fayetteville (the "Account Assets"). First Security Bank will furnish an investment program to maximize the financial returns on the Account Assets while adhering to the City of Fayetteville's Investment Policy and consideration of investment risks. 02. Custody of Account Assets: First Security Bank will act as custodian for all of the Account Assets acting through its Trust Division. All Account Assets shall remain in the physical possession of First Security Bank as custodian. First Security Bank shall, during the effectiveness hereof, maintain fiduciary liability insurance with limits of liability not less than $2,000,000. A copy of said policy shall be presented to the City of Fayetteville within ten (10) business days of contract award. 03. Management Authority: The City of Fayetteville hereby authorizes First Security Bank to place orders or otherwise give instructions for the purchase, sale, or exchange of securities on behalf of the City of Fayetteville which are included in the Account Assets without prior consultation or ratification by the City of Fayetteville, giving and granting to First Security Bank, complete discretion as to the nature, amount and timing of all securities transactions, subject only to those restrictions, limitations and guidelines which are set out in the City of Fayetteville, Arkansas, Investment Management Policy which is attached hereto as Exhibit A and made a part hereof by this reference, which is incorporated in Resolution No. 169-99, duly adopted by the City Council of the City on December 21, 1999 (the "Investment Policy"). The City of Fayetteville reserves the right to revise or modify the Investment Policy at any time, and from time to time, provided that, no such revision or modification shall be binding upon First Security Bank until written notice thereof is received by First Security Bank. All purchases of securities which will become a part of the Account Assets shall be on a delivery versus payment basis. 04. Fees: As compensation for its services pursuant hereto, First Security Bank will be paid a fee equal to 14 basis points of the average Account Assets if the average market value of the Account Assets are less than $25 million during a calendar month; and a fee equal to 10 basis points of the average market value of the Account Assets if the average market value of the Account Assets are greater than $25 million during a calendar month. The foregoing fees City of Fayetteville, Arkansas RFQ 11-08, Investment Management Services Page 1 of 4 THE CITY OF FAYE EV! E, ARKANSAS of First Security Bank do not include fees for brokerage services, if incurred, in connection with the purchase or sale of any security which is or is to become a part of the Account Assets. All fees of First Security Bank and any brokerage fees payable with respect to the Account Assets shall be paid from the Account Assets and shall be separately accounted for in all reports provided to the City of Fayetteville. a. Changes in Scope or Price: Changes, modifications, or amendments in scope, price or fees to this contract shall not be allowed without a prior formal contract amendment approved by the Mayor and the City Council in advance of the change in scope, cost or fees. 05. Brokerage: a. Selection of Broker. The City of Fayetteville authorizes First Security Bank to place orders for purchases and sales of securities and financial assets through any broker or dealer it chooses, including a broker or dealer which is affiliated with or under common control with First Security Bank. In selecting a broker or dealer for any transaction or series of transactions, First Security Bank will consider such factors as net price, execution, availability of research, and other factors which First Security Bank reasonably believes to be appropriate for purposes of making that decision. The fact that the fees paid for brokerage services for the broker or dealer selected by First Security Bank are greater than fees for which similar services could be obtained, shall not be a basis for liability to First Security Bank. b. Aggregation of Purchases. The City of Fayetteville agrees that First Security Bank may aggregate sale and purchase orders of securities with similar orders being made simultaneously for other accounts managed by First Security Bank, or for accounts of affiliates of First Security Bank if, in the judgment of First Security Bank, aggregation of such orders will result in a net savings to the City of Fayetteville with respect to the purchase or sale order for the particular security. 06. Monthly Reports: The Custodian shall provide the City of Fayetteville with monthly reports of the Account Assets in a format consistent with the reporting requirements of the Governmental Accounting Standards Board and otherwise reasonably acceptable to the City of Fayetteville. The Custodian and First Security Bank shall provide such other and further information as the City of Fayetteville may reasonably require in connection with the Account Assets. 07. Voting of Equity Securities: Unless otherwise directed by the City of Fayetteville, First Security Bank is authorized, in its discretion, to take such action as it deems appropriate with respect to any proxy received with respect to any equity securities which may be or become a part of the Account Assets from time to time. 08. Investment Risks: The City of Fayetteville acknowledges that there are risks inherent in all investments, and that some investments will result in profits and some investments will result in loss. First Security Bank shall not be liable to the City of Fayetteville for any error of judgment or mistake of law in the execution of its responsibilities hereunder, or for any loss suffered with respect to the Account Assets, or any other matter arising out of this Agreement, excepting only losses suffered as a result of negligence, bad faith, or willful misconduct of First Security Bank. 09. Term and Termination: This Agreement shall be effective upon execution by both parties and shall continue in force until modified by mutual agreement of the parties in writing, or until terminated on thirty (30) days prior written notice by either party to the other. Upon notice to the Custodian of any such termination, the Custodian shall deliver the Account Assets to, or as directed in writing by, the City of Fayetteville. City of Fayetteville, Arkansas RFQ 11-08, Investment Management Services Page 2 of 4 THE CITY OF FAYETTEVILLE, ARKANSAS 10. Miscellaneous Provisions: a. Other Activities of First Security Bank: Nothing in this Agreement shall be deemed to restrict First Security Bank or its affiliates from engaging in any other business or in rendering any other investment agency services to any other person. b. No Assignment: First Security Bank shall not assign this Agreement, or delegate its duties hereunder to any non-affiliated third party without the prior written consent of the City of Fayetteville. c. Notices: All notices required or permitted hereunder shall be in writing, and shall be delivered by U.S. Mail, return receipt requested, or via confirmed facsimile, and addressed as follows: If to the City of Fayetteville City of Fayetteville, Arkansas 113 W. Mountain St. Fayetteville, Arkansas 72701 Attention: Mayor Facsimile: 479-575-8257 With Copy to First Security Bank: First Security Bank 1219 E. Joyce Blvd Fayetteville, Arkansas 72703 Attn: Adam Rutledge Facsimile: 479-527-7001 If to First Security Bank: First Security Bank 314 N. Spring Searcy, AR 72145-1006 Attn: Frank Faust, Sr. Vice President & Trust Officer Facsimile: 501-278-2175 All notices shall be deemed delivered when received, or the first day that delivery is refused. d. Entire Agreement: This Agreement, together with the Exhibit hereto, is the entire agreement of the parties and may be modified only by a writing executed by all parties, except that the City of Fayetteville may modify the Investment Policy at any time, from time to time, without the consent of First Security Bank. e. Governing Law: This Agreement has been executed in and shall be construed under the laws of the state of Arkansas. f. Counterparts: This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which, together, shall be one and the same instrument. Severability: If any one or more of the provisions hereof are determined to be invalid, illegal or otherwise unenforceable, such determination shall have no effect upon the remaining provisions hereof, which shall remain valid and enforceable in accordance with their terms. g. City of Fayetteville, Arkansas RFQ 11-08, Investment Management Services Page 3 of 4 THE CITY OF FAYE EVILLE, ARKANSAS 11. Freedom of Information Act: City of Fayetteville contracts and documents prepared while performing city contractual work are subject to the Arkansas Freedom of Information Act. If a Freedom of Information Act request is presented to the City of Fayetteville, the contractor will do everything possible to provide the documents in a prompt and timely manner as prescribed in the Arkansas Freedom of Information Act (A.C.A. 25-19-101 et. Seq.). Only legally authorized photo coping costs pursuant to the FOIA may be assessed for this compliance. First Security Bank By: Frank ATTEST: st, Sr. Vi 4 esident & Trust Officer ny Secretary '27 N 5X1YVC\ Business Address >, v' City, State 8 Zip Code Date Signed: t/ v (t) City of Fayetteville, Arkansas RFQ 11-08, Investment Management Services Page 4 of 4 City of Fayetteville, Arkansas ATTEST: 6)144L Sondra Smit lerk Date Signed: piadiA)9, Jell \.o`GGRtVTR°oreo F. : FAYETTEVI LLE: O AC -02 Page 1 of 6 CITY OF FAYETTEVILLE, ARKANSAS POLICY AND PROCEDURE Subject: City Investments Policy Number: AC -02 Original Policy Date: December 21, 1999 Effective Date of New/Revised Policy: August 1, 2005 Revision Dates: Replaces ACCT -2 issued July 2, 1996 Custodian: (Division) Accounting Mayor's Signature and Date 11614- 42fr--- AC-2.0 PURPOSE: The purpose of this policy is to provide guidelines for investment of City of Fayetteville operating funds to preserve the safety of principal, to maintain adequate cash flow, and to maximize interest earnings. AC -2.1 SCOPE: This policy applies to the investment of City of Fayetteville operating funds not needed for immediate expenditures. This policy does not govern the investment of employee retirement or pension funds or proceeds of bond issues. AC -2.2 STANDARDS/OBJECTIVES: Investments will be made within the constraints of applicable State laws and this policy, taking into consideration liquidity needs of the City. Investment decisions will be made with judgment and care, under circumstances then prevailing, which persons of prudence, discretion and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived. Investment of the funds of the City of Fayetteville shall be directed to the primary objective of safety of principal; the secondary objective shall be maintaining adequate cash flow; and the final objective shall be maximizing investment yield. AC-02 Page 2 of 6 Except for cash in certain restricted and special funds, the City may consolidate moneys from individual funds to maximize interest earnings. Investment income will be allocated to the various funds based on each fund's participation. AC-2.3 DELEGATION OF AUTHORITY/RESPONSIBILITY: Management of the investment of City funds regulated by this policy shall be the responsibility of the Mayor and the Finance & Internal Services Director. The Mayor and the Finance & Internal Services Director may delegate authority for investment transactions. The Mayor and the Finance & Internal Services Director may, by proper procurement procedures, contract for the services of an asset manager, an investment advisor, or other expert advisor(s) to invest all or a portion of City funds regulated by this policy. Selection of an independent asset manager or investment advisor will be limited to those candidates who have an office within the City of Fayetteville. The Mayor and the Finance & Internal Services Director and their designees are authorized to: open and close accounts with financial institutions in the name of the City; make wire transfers of funds for the City; make deposits of funds for the City; execute collateral, depository and investment agreements for the City; and take any other such actions needed to carry out their responsibilities for the depositing and investing of the City's funds as authorized by State Statues and this policy. The Mayor, the Finance & Internal Services Director, and other City employees assigned to manage the investment portfolio, acting within the intent and scope of this Investment Policy, shall be relieved of personal responsibility for an individual security's credit risk or market risk. Officers and employees involved in the investment process shall refrain from personal business activities that conflict with proper execution of the investment program or impair their ability to make impartial investment decisions. The Mayor and the Finance & Internal Services Director shall establish operating procedures to implement this investment policy. AC-2A AUTHORIZED INVESTMENTS: A. The City will invest only in book entry securities. B. The City may, without limitation, invest in the following instruments, provided, however, that at no time shall assets of the City be invested in any instrument or security not authorized for investment by Arkansas Code Annotated §§ 14-58-309 (Act 1341 of 1999), and further defined in Section 23-47-401 (Investment Powers and Limitations), or by the Local Government Joint Investment Trust Act, Arkansas Code Annotated §§ 19-8-301 et seq., (Local Government Trusts) as they may from time to time be amended: 1. Direct obligations of the United States Government; AC -02 Page3of6 2. Obligations of agencies and instrumentalities created by act of the United States Congress and authorized thereby to issue securities or evidences of indebtedness, regardless of guarantee of repayment by the United States Government; 3. Obligations the principal and interest of which are fully guaranteed by the United States Government or an agency or an instrumentality created by an act of the United States Congress and authorized thereby to issue such guarantee. 4. Obligations the principal and interest of which are fully secured, insured, or covered by commitments or agreements to purchase by the United States Government or an agency or instrumentality created by an act of the United States Congress and authorized thereby to issue such commitments or agreements. 5. General obligations of the states of the United States and of the political subdivisions, municipalities, commonwealths, territories or insular possessions thereof (general obligation bonds); 6. Obligations issued by the Arkansas State Board of Education under authority of the State Constitution or applicable statues; 7. Prerefunded municipal bonds, the principal and interest of which are fully secured by the principal and interest of a direct obligation of the United States Government; 8. Certificates of deposit with banks authorized by State law to receive deposits of public funds, that have branches or main offices within the Fayetteville City limits, with which the City has both a depository agreement and a collateral agreement. 9. Repurchase agreements that are fully collateralized by direct obligations of the United States Government, provided that any such repurchase agreement shall provide for the taking of delivery of such collateral directly or through an authorized custodian; 10. Securities of, or other interest in, any open-end type investment company or investment trust registered under the Investment Company Act of 1940, and which is defined as a "money market fund" under 17 CFR § 270.2a-7, provided that the portfolio of such investment company or investment trust is limited principally to United States Government obligations and to repurchase agreements fully collateralized by United States Government obligations, and, provided further that any such investment company or investment trust shall take delivery of such collateral either directly or through an authorized custodian. 11. Local Government Trusts. AC -02 Page 4 of 6 C. The City may invest no more than twenty percent (20%) of the pooled investments in the following investment types and in accord with certain limitations described in Section VII Investing Parameters: 1. Corporate debt obligations (including commercial paper) of any corporation, with the following credit ratings: investment of City funds in Corporate Bonds will be limited to those rated as Single A minus or better by both Moody's Investor Service and Standard and Poor's; investment of City funds in Commercial Paper will be rated A -1/P-1, 2. Securities of, or other interests in, an open-end or closed-end management type investment company or investment trust registered under the Investment Company Act of 1940, provided that the portfolio. of such investment company or investment trust is limited to United States Government obligations and to repurchase agreements collateralized by the same type of collateral used to collateralize other City deposits, and provided further that any such investment company or investment trust shall take the delivery of such collateral either directly or through an authorized custodian; D. Other Provisions 1. The Finance & Internal Services Director may establish an account with the Federal Reserve Bank to purchase U.S. Government Securities directly from the U.S. Treasury. 2. Any Arkansas state legislative action that provides for additional investment vehicles or further restricts investment vehicles will be incorporated into the City's investment policy and will supersede any previous language. 3. The City will be allowed to hold to maturity any investments existing at the time of enactment of this policy. Reinvestment of such funds will be in accordance with this policy. 4. The Mayor and the Finance & Internal Services Director may set additional limitations on the parameters for various types and concentration of investments. Operating procedures will define requirements to implement this policy. AC -2.5 INVESTMENTS NOT AUTHORIZED: The following investment vehicles, authorized by Act 1341 of 1999, are not considered suitable investments for City of Fayetteville funds: A. Warrants of political subdivision of the State of Arkansas and municipalities thereof having maturities not exceeding one (1) year. B. The sale of federal funds with a maturity of not more than one (1) business day. C. Industrial development bonds for corporate obligors issued through any state of the United States or any political subdivision thereof. AC -02 Page 5 of 6 D. Revenue bond issues of any state of the United States or any municipality or any political subdivision thereof. E. Securities or other interests issued, assumed or guaranteed by the International Bank for Reconstruction and Development, the Inter -American Development Bank, the European Bank for Reconstruction and Development, the Asian Development Bank, or the African Development Bank. F. Uninsured demand, savings, or time deposits or accounts of any depository institution chartered by the United States, any state of the United States, or the District of Columbia. AC -2.6 INVESTING PARAMETERS: A. Diversification The City investments regulated by this policy shall be diversified by: • limiting investments to avoid over concentration in securities from a specific issuer to five percent (5%) of the cost basis of the City's portfolio at the time of purchase, a limit of fifteen percent (15%) of the cost basis of the City's portfolio will apply to each business sector as defined by any recognized rating agency (excluding U.S. Treasury securities and collateralized certificates of deposit), • investing in securities with varying maturities, and • continuously investing a portion of the portfolio in readily available funds to ensure that appropriate liquidity is maintained. B. Maximum Maturities The City will attempt to match investment maturities with cash flow requirements and will utilize investments in readily available funds, when needed, to meet ongoing obligations. The City anticipates a range of maturities of ninety (90) days to five (5) years. The City will invest in securities maturing more than five (5) years from the date of purchase only when the funds are easily defined to be used after five (5) years. AC -2.7 ALLOWED INSTITUTIONS: Security transactions on behalf of the City by an asset manager, or the City itself, will be conducted only with financial institutions and broker/dealers who have offices within Washington County unless otherwise authorized in writing by the Mayor and Finance & Internal Services Director. A list of authorized financial institutions and broker/dealers to be used by an asset manager, an investment advisor, or the City itself, will be maintained by the City and provided to such asset manager or investment advisor on a mutually agreed upon basis. Security broker/dealers on the list will meet or exceed the capital adequacy standards set AC -02 Page 6 of 6 by the Federal Reserve Bank of New York and may include dealers designated as primary dealers by the Federal Reserve Bank of New York or regional dealers that qualify under Securities and Exchange Commission (SEC) Rule 15C3-1 (Uniform Net Capital Rule). AC -2:8 SAFEKEEPING/COLLATERALIZATION: A. Investment of City funds, including cash held for investment, managed under contract of services by an asset manager, investment advisor, or other expert advisor(s) will be placed with a third party custodian approved by the City. All trades, where applicable, will be executed by Delivery vs. Payment (DVP) to ensure that securities are deposited in an eligible financial institution prior to the release of funds. B. The custodian will make reports as requested by the City or advisor(s) and will be accountable for the assets held by the custodian for the City's account. The custodian will be required to maintain an office in Washington County, Arkansas. C. Collateralization will be maintained as required by State law and procedures established by the City. Demand deposits, time deposits, repurchase agreements, and any other investments requiring collateralization shall be collateralized at a level of 102 percent of the market value of principal and accrued interest, less the amount insured by the FDIC.