CITY COMMISSION AGENDA ITEM

Department:	Finance		Commission Meeting Date:  February 14, 2017
Staff Contact:	Bryan Kidney, Finance Director
Recommendations/Options/Action Requested:
Authorize the City Manager to enter into negotiations with Columbia Capital Management, LLC for the purpose of providing investment management services for the City.
Executive Summary:		In December of 2016, City staff issued a Request for Proposal (RFP) for investment management services. Currently, all investment activities are handled within the City’s Finance Department but, due to budget staffing constraints, staff feels that the City would get a greater benefit from contracting a firm to manage City investments. It is estimated that contracting investment management services will greatly increase the amount of interest income over what can be accomplished with-in the Finance Department. After comparing the City’s investment portfolio with comparable municipal portfolios, it was determined that the City’s investment income was less than one-third of the comparable portfolios in 2015. The City generated $115,000 in portfolio income, with an approximate rate of .15%, while comparable portfolios generated $450,000 with a rate of .60%. If the City would have generated the same yield to maturity of comparable portfolios, the City would have realized a 290% increase in investment income. In addition to increased revenue, an investment management firm will provide the City with investment policy review against changes in state law and best practices, tracking of collateral banks pledge in accordance with state law, provide financial reporting using high quality accounting and reporting software, and the use of Bloomberg investment tools. Typically, by contracting investment management services, cities give their investment firms full discretion over investment strategy and process. Staff will allow the investment firm to have broad discretion. However, we must pre-approve all investment transactions. The City received four (4) submittals including one from Kansas. There were no responses located in Lawrence. One submittal fees were too high for consideration. A team of Finance staff and an independent investment consultant, from Springsted Investment Advisors, reviewed the three remaining proposals. Several criteria were used in evaluating the proposals, including; fees, experience of firm, client services and management philosophy, investment and risk philosophy, and investment process. After reviewing the submittals the review team reached a consensus to recommend the proposal submitted by Columbia Capital Management, LLC of Overland Park, KS. Columbia Capital submitted a competitive fee and they have significant experience managing municipal investments in the State of Kansas.
Strategic Goal Area:		Other
Fiscal Impact (Amount/Source):		The fiscal impact to the City would be positive. The fees for Columbia Capital Management, LLC to provide the scope of services sought by the City would be the greater of $80,000 per year or .09% per annum on the total portfolio of the City.  After netting the cost of the service against the estimated interest income increase the City should receive a net gain in interest income. The funding source for the contract will be interest income with the City realizing increased revenue from investments.
Attachments:		Evaluation Forms Agreement

Reviewed By: (for CMO use only)

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