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2004-25456 Reso RESOLUTION NO. 2004-25456 A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, ACCEPTING THE RECOMMENDATION OF THE CITY MANAGER PERTAINING TO THE RANKING OF PROPOSALS RECEIVED PURSUANT TO REQUEST FOR PROPOSALS (RFP) NO. 65- 02103 FOR PROVIDING INVESTMENT ADVISORY SERVICES TO THE CITY OF MIAMI BEACH; AUTHORIZING THE ADMINISTRATION TO ENTER INTO NEGOTIATIONS AND CONTRACT WITH THE TOP-RANKED FIRM OF MBIA MUNICIPAL INVESTORS SERVICE CORP.; AND SHOULD THE ADMINISTRATION NOT BE ABLE TO NEGOTIATE AN AGREEMENT WITH THE TOP-RANKED FIRM, AUTHORIZING THE ADMINISTRATION TO NEGOTIATE WITH THE SECOND-RANKED FIRM OF PFM ASSET MANAGEMENT LLC. WHEREAS, the City issued a Request for Proposal (RFP) seeking competitive pricing to direct and manage the City's excess funds in accordance with the City's investment objectives as set forth in the City of Miami Beach's Investment Policy which involves safety of capital, sufficient liquidity to meet requirements and attaining market average rates of return; and WHEREAS, currently the funds available for investment consist of approximately $151 million from operating funds, $106 million from various bond proceeds and $20 million from the Miami Beach Redevelopment Agency (RDA); and WHEREAS, the cost of these services will be paid from additional investment earnings; and WHEREAS, a Request for Proposals (RFP) No. 65-02/03 was issued on August 19, 2003, with a deadline for the receipt of proposals of September 12, 2003, resulting in the receipt of four responsive proposals from the following firms: . Banc of America . MBIA Municipal Investors Service Corp. . PFM Asset Management LLC . Trusco Capital Management WHEREAS, an Evaluation Committee was appointed by the City Manager consisting of the following individuals: * Jeryl (Deede) Weithorn, (Chairperson), Budget Advisory Committee, Independent CPA Ramon Duenas, ExpenditurelTreasury Manager Laura Rubines, Assistant Internal Auditor Marc Jacobson, Budget Advisory Committee Eugene Woodard, Budget Advisory Committee * * * * WHEREAS, the Evaluation Committee convened on December 18, 2003 and unanimously voted to recommend that the Administration be authorized to commence negotiations and contract with the top ranked firm; and WHEREAS, the City Manager has reviewed the Evaluation Committee's recommendation, and herein recommends that the Mayor and City Commission enter into negotiations with the top-ranked firm of MBIA Municipal Investors Service Corp.; and if unsuccessful, negotiate with the second-ranked firm of PFM Asset Management LLC. NOW, THEREFORE, BE IT DULY RESOLVED BY THE MAYOR AND CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, that the Miami Beach City Commission accept the recommendation of the City Manager pertaining to the Request for Proposal (RFP) 65-02/03 received for provision of Investment Advisory services to the City of Miami Beach; authorizing the Administration to enter into negotiations and contract with the top ranked firm, MBIA Municipal Investors Service Corp.; and if unsuccessful in negotiations with the top ranked firm, authorizing the Administration to enter into negotiations with the second ranked firm, PFM Asset Management LLC. PASSED and ADOPTED this 14th d A~r~ CITY CLERK T:\AGENDA \2004\Jan1404\Consent\INVESTMENT RESO.doc APPROVED AS TO FORM & LANGUAGE & FOR EXECUTION it ~ '- , -0) Date CITY OF MIAMI BEACH COMMISSION ITEM SUMMARY ~ --- ~ Condensed Title: A Resolution Accepting the City Manager's Recommendation, Authorizing Negotiations and Execution ofa Contract with MBIA Municipal Investors Service Corp. Relative to the Ranking of the Firms' proposals Pursuant to Re uest for Pro osals RFP No. 65-02/03 for Providin Investment Adviso Services. Issue: Shall the City Commission Adopt the Resolution? Item Summary/Recommendation: RFP No. 65-02103 was issued on August 19, 2003, with an opening date of September 12, 2003. Four (4) responsive proposals were received from the following firms: · Banc of America · MBIA Municipal Investors Service Corp. · PFM Asset Management LLC · Trusco Capital Management An Evaluation Committee appointed by the City Manager convened on December 18, 2003, to rank the four responsive proposals received. During deliberation, the Committee members discussed their individual ranking of the four firms and arrived at the following ranking: · First: MBIA Municipal Investors Service Corp. · Second: PFM Asset Management LLC ADOPT THE RESOLUTION Advisory Board Recommendation: I Financial Information: Amount to be expended: Source of Funds: The cost of these services will be paid from additional investment earnin s. Amount Account Approved D Finance Dept. Total Cit Clerk's Office Le islative Trackin Gus Lopez, ext. 6641 Si n-Ofts: Department Director PDW \2004\Jan1404\Consent\lNVESTM City. Manager JMG .~~- Agenda Item Date C7:J 1-1'1-04 CITY OF MIAMI BEACH CITY HALL 1700 CONVENTION CENTER DRIVE MIAMI BEACH, FLORIDA 33139 www.miamibeachfl.gov To: From: Subject: COMMISSION MEMORANDUM Mayor David Dermer and Date: January 14, 2004 Members of the City Commission Jorge M. Gonzalez J. r;v-~- City Manager 0 A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, ACCEPTING THE RECOMMENDATION OF THE CITY MANAGER PERTAINING TO THE RANKING OF PROPOSALS RECEIVED PURSUANT TO REQUEST FOR PROPOSALS (RFP) NO. 65- 02/03, FOR PROVIDING INVESTMENT ADVISORY SERVICES; AUTHORIZING THE ADMINISTRATION TO ENTER INTO NEGOTIATIONS AND CONTRACT WITH THE TOP RANKED FIRM OF MBIA MUNICIPAL INVESTORS SERVICE CORP.; AND SHOULD THE ADMINISTRATION NOT BE ABLE TO NEGOTIATE AN AGREEMENT WITH THE TOP RANKED FIRM; AUTHORIZING THE ADMINISTRATION TO NEGOTIATE WITH THE SECOND RANKED FIRM OF PFM ASSET MANAGEMENT LLC. ADMINISTRATION RECOMMENDATION Adopt the Resolution. ANAL YSIS The City requested proposals from firms to provide investment advisory services to manage and direct the City's investments. The successful firm will manage and direct the investment of excess funds in accordance with the City's investment objectives as set forth in City of Miami Beach's Investment Policy. The key objectives of the City's investment policy are safety of capital, sufficient liquidity to meet requirements and attaining market- average rates of return. Excess funds are defined as funds not required to meeting short term expenditures of the City. Currently, funds available for investment consist of approximately $151 million from operating funds, $106 million from various bond proceeds, and $20 million from the Miami Beach Redevelopment Agency (RDA). The City will contract with a firm that is highly experienced, a leader and innovator in the management of investments, and able to provide comprehensive investment advisory services. This firm and its affiliates will be restricted from selling to the City, or buying from the City, any securities to or from that firm's own inventory or account. The investment advisor will also be restricted from placing into the City's portfolio any securities for which it, or an affiliate, is the issuer. This firm/investment advisor will not provide custodial services or security safekeeping. RFP No. 65-02/03 January 14, 2004 Page Two ANALYSIS (Cont.) All City investments, except for swap agreements will be held in an independent third party custodial account. Fees for these services are expected to range 6 to 8 basis points (.0006 to .0008) of the value of the total portfolio invested annually. For a $250 million portfolio the annual fees could range from $150,000 to $200,000 which will be paid from additional investment earnings. The contract term will be for two (2) years, with three (3) one (1) year renewal options if mutually agreeable. The City requires that the selected Investment Advisor, at a minimum, provide the following services: Provide full-time management on a daily basis of the City's investment portfolio pursuant to the specific stated investment objectives and the City's Investment Policy. Place all orders for the purchase and sale of securities, communicate settlement information to City staff and assist in coordinating security settlement. Serve as a general resource to City staff for information, advice and training regarding fixed income securities, investment and yield curve analysis. Work with City staff to develop cash flow projections to ensure that the investment strategy is consistent with the City's cash requirements. Provide monthly statements detailing investment activity, earnings, the value of the investment portfolio, a portfolio return, mark to market valuation, and weighted average maturity. The selected investment advisor must maintain accurate reports including portfolio composition showing diversity of investments and compliance with applicable investment policies of the City of Miami Beach and State of Florida Statutes. Develop and implement investment strategies for the Advisory Account that will seek to enhance portfolio performance under current and future market conditions within the parameters of the City's investment policy and cash flow needs. Obtain and document competitive prices for securities transactions. Provide semi-annual and annual portfolio performance reports. Review and update the City's investment policy and written investment procedures. Perform due diligence reviews of current and proposed broker/dealers. Monitor the creditworthiness of the City's depository and custodian bank and investments in the portfolio. RFP No. 65-02/03 January 14,2004 Page Three ANALYSIS (Cont.) Provide client training on investment management subjects. Attend meetings with the City's finance staff and governing body upon request. Provide arbitrage calculations and reports on the investment of bond proceeds. Authorized Investments The City has established a list of authorized types of investments by ordinances 87-2588 and modified by 92-2793. The policy was further modified by ordinance 97-3074 following recommendation by the Finance and Citywide Projects Committee and was approved by the Mayor and City Commission on March 5, 1997. This policy will be reviewed by both our Financial Advisor, William R. Hough & Co. and the Investment Advisor for current applicability and any recommended changes will be referred to the Finance and Citywide Projects Committee for discussion and the Mayor and City Commission for approval. A list of these types of authorized investments is located in Attachment A. Request for Proposals (RFP) No. 65-02/03 was issued on August 19, 2003, with a deadline for the receipt of proposals of September 12, 2003. Bidnet issued thirteen (13) notices to prospective firms. This resulted in the receipt of five proposals of which four were deemed as responsive proposals: 1. Bane of America Capital Management, LLC 2. MBIA Municipal Investors Service Corp. 3. PFM Asset Management LLC 4. Trusco Capital Management, Inc. 5. Smith Barney, Inc. (non-responsive) An Evaluation Committee ("the Committee") was appointed consisting of the following individuals: Jeryl (Deede) Weithorn, Budget Advisory Committee, Independent CPA (Chairperson) Resident Ramon Duenas, Expenditurerrreasury Manager Laura Rubines, Assistant Internal Auditor Marc Jacobsen, Budget Advisory Committee, Resident Eugene Woodard, Budget Advisory Committee, Resident On December 18, 2003, the Committee convened, with all committee members in attendance. The Committee was provided with the project overview and background information. The Committee reviewed references submitted by the proposers, and were briefed on the City's policies and procedures relative to the Cone of Silence Ordinance and the Government in the Sunshine Law. RFP No. 65-02/03 January 14, 2004 Page Four ANALYSIS (Cant.) Furthermore, they discussed the following RFP Evaluation Criteria factors used to evaluate and rank the proposals: . Firms overall experience, qualifications and technical ability - 20 Points . Firms experience in managing fixed income assets for state and local government - 20 Points . Performance of managed portfolios that closely match the City's portfolio in size and governed by similar investment policies - 20 Points . Demonstrate the ability to meet objectives outlined in Scope of Services - 20 Points . Accessibility, availability and professional qualifications of the individuals who would be assigned to manage the City's portfolio - 20 Points BID TABULATION: FIRM FIRM FIRM FIRM COMMITTEE MEMBER BANC OF AMERICA MBIA MUNICIPAL PFM ASSET TRUSCO CAPITAL INVESTORS MANAGEMENT MANAGEMENT DEEDE WEITHORN 75 (4) 98 (1) 92 (2) 87 (3) RAMON DUENAS 65 (4) 96 (1) 79 (2) 70 (3) LAURA RUBINES 50 (4) 100 (1) 65 (3) 75 (2) MARC JACOBSEN 70 (4) 94 (1) 86 (2) 70 (3) I**EUGENE WOODWARD RANKINGS (4) (1 ) (2) (3) ** Recused himself from scoring the Firms as he was not able to review the proposals. CONCLUSION: The Administration recommends that the Mayor and City Commission adopt the Resolution, which accepts the City Manager's recommendation, and authorizes the Administration to enter into negotiations and contract with the top-ranked firm of MBIA Municipal Investors Service Corp.; and should the Administration not be able to negotiate an agreement with the top ranked firm; authorizing the Administration to negotiate with the second ranked firm of PFM Asset Management LLC. T:\AGENDA\2004\Jan1404\Consent\lnvestmentServices.doc Attachment A. Authorized Investments 1 . Time Deposits Du ration NI A Maximum % of Portfolio 1000/0 Maximum % of Combined Asset Group 1000/0 2. Certificates of Deposit Duration Maximum ok of Portfolio Maximum % of combined Asset Group 1-3 yrs 1 000/0 1000/0 3. U. S. Treasury Bills Duration Maximum % of Portfolio Maximum % of Combined Asset Group N/A 1 000/0 1000/0 4. U. S. Treasury Notes Du ration Maximum % of Portfolio Maximum % of Combined Asset Group 0-7 yrs 100% 1 000/0 5. U.S. Government Agency Securities Duration Maximum % of Portfolio Maximum % of Combined Asset Group 0-7 yrs 500/0 500/0 6. Obligations issued by any state or territory of the United States, which are fully insured or rated in one of the two highest rating categories by both Moody's Investors Service, Inc. and Standard and Poor's Corporation or their successors. Duration Maximum % of Portfolio Maximum % of Combined Asset Group 7-10 yrs 500/0 500/0 Attachment A. Authorized Investments 7. Fixed Term Repurchase Agreements Duration Maximum % of Portfolio Maximum % of Combined Asset Group 0-3 yrs 200/0 1 000/0 8. Overnight Repurchase Agreements Du ration Maximum % of Portfolio Maximum % of Combined Asset Group N/A 1000k N/A 9. Bankers Acceptances Duration Maximum % of Portfolio Maximum % of Combined Asset Group N/A 200/0 300/0 10. Commercial Paper with a rating of A-1 or P-1 only, rated by Moody's or Standard & Poor's Duration Maximum % of Portfolio Maximum % of Combined Asset Group N/A 200/0 30%) 11. Corporate notes, corporate bonds, medium term notes, Yankee notes, and Yankee bonds with terns of one year or less rated by 2 of 3 designated rating agencies in one of the two highest rating categories. Maturity 0-20/0 Maximum % of Portfoli01 200/0 Maximum % of Combined Asset Group 300/0 12. Corporate notes, corporate bonds, medium team notes, Yankee notes, and Yankee bonds, with terms of in excess of one with a maximum of 5.0 years rated by 2 of 3 designated rating agencies in one of the two highest rating categories. Duration Maximum % of Portfolio Maximum ok of combined Asset Group 3 -7 yrs 200/0 300/0 Attachment A. Authorized Investments 13. Money market mutual/trust funds which substantially conform with this policy as follows: Duration Maximum % of Portfolio N/A 1 000/0 Maximum % of combined Asset Group 1000/0 a. State of Florida Local Government Surplus Funds Trust Fund b. Mutual/trust funds sponsored by the Florida League of Cities c. Private money market mutual funds backed entirely by "Full Faith and Credit" U.S. Government Securities not to exceed 250/0. 14. Fixed income mutual funds sponsored by the Florida League of Cities which substantially conform with this policy as follows: Du ration N/ A Maximum % of Portfolio Maximum % of combined Asset Group 250/0 250/0 15. Mortgage-backed securities collateralized by first mortgages (or deeds of trust) and asset-backed securities collateralized by consumer or business receivables with a maximum duration of 3.0 years at time of purchase and structured as either collateralized mortgage obligations or unstructured pass-through securities and rated by 2 of 3 designated rating agencies as follows: Maturity Maximum % of Portfolio Maximum ok of combined Asset Group a. Moody's AAA3 higher b. Standard & Poor's - M- or higher c. Fitch M- or higher 3 - 5 yrs 15% 500/0 16. Externally managed funds requiring specific approval by Commission with investment limited to City policy and rating criteria Duration 3-7 yrs Maximum % of Portfolio 20% Maximum % of combined Asset Group 200/0 Attachment A. Authorized Investments 17. Interest rate Swap agreements between the City and a counter party to pay/receive a fixed interest rate payment in exchange for a variable rate payment over a specified term with the requirement that all "Swap" agreements be approved by City Commission prior to execution. Duration Maximum % of Portfolio Maximum % of combined Asset Group N/A 1 00/0 200/0 All repurchase agreements are fully collateralized and the collateral is held in the City's name by a third party custodian. Derivatives (defined as a financial instrument the value of which depends on, or is derived from the value of one or more underlying assets or index of asset values) shall be utilized only if specifically authorized as part of the investment plan and the Finance Director or his designee has sufficient understanding/expertise to invest in derivatives. All proposed derivative investments (including "SWAPS") will be analyzed by the City's Financial Advisor and will be presented to the Capital Improvements/Finance Committee and the City Commission for approval. Repurchase Agreements (an agreement between an investor and a security dealer whereby dealer agrees to buy back the security at a specified price in the future) will be limited to transactions in which the proceeds will be used to provide liquidity. Any investment which is not issued in "Book Entry Only" form is physically held by the City in a secure vaulted area and surrendered only when invested funds and earnings are received by the City at maturity. Prohibited Investments Funds to be invested in cash management investments may not be invested in the following: Common Stock Preferred Stock Convertible Bonds Venture Capital Options and Futures Warrants secu rities Commodities Short Selling Real Estate Private Placements Unregistered or Restricted Stock Margin Trading Limited Partnerships Oil and Gas Wells 10 or PO strips or inverse floater mortgage backed Foreign Exchange Any Inverse Floating Rate Securities Maturity and Liauiditv Reauirements The City selects investments whose terms compliment the need to make the majority expenditures set forth below. 1. Biweekly Payrolls 2. Periodic Debt Service Payments 3. Capital Project Needs For each expenditure event, investments are selected whose maturities occur at a date close to the date that funds will be needed. Investments also are selected based on the highest yield for the particular type of investment. In the case of capital projects, in which the exact date that expenditures will need to be made is unknown, the City selects several investments with varying maturities so that monies are available each month to cover all capital expenditures. Any unused capital investment funds are then placed in investments of one year or more to maximize return potential. As mentioned earlier, the City maintains an overnight investment program of approximately 9,000,000, which provides funds needed to cover daily operating expenses, excluding Items # 1-3 above. Interest yields on these investments are competitive though somewhat lower than longer term instruments. MBIA MUNICIPAL INVESTORS SERVICE CORPORATION Investment Advisory Agreement - Non-Discretionary This Agreement, dated as of the 1 sl day of February 2004 (this "Agreement"), is by and between MBIA Municipal Investors Service Corporation, a Delaware corporation having its principal address at 113 King Street, Armonk, New York 10504 (the "Adviser"), and the City of Miami Beach, Florida, a municipal corporation (the "Client"), The parties agree as follows: 1. Appointment Term The Client hereby appoints the Adviser as the investment adviser of those assets designated by the Client (the "Advisory Account"). 2. Duties of the Adviser The Adviser shall invest the assets of the Advisory Account as directed by the Client in accordance with the written investment objectives, policies and restrictions of the Client. The Client shall provide the Adviser with an initial Investment Policy or list of authorized investments which shall be incorporated in Exhibit A. The Adviser will provide to the Client monthly a written report detailing transactions for the period and an inventory of the investments in the Advisory Account. It is agreed that the Adviser, in the maintenance of records, does not assume responsibility for the accuracy of information furnished by the Client or any other person. Any additional investment management services the Adviser shall provide to the Client are listed in Exhibit B. 3. Non-Discretionary Authority It is agreed that decisions concerning investments subject to this Agreement shall be made by the Client's authorized representative with the assistance of the Adviser, The approval of the Client is required prior to the execution of any investment transaction for the Advisory Account. The Adviser, when expressly instructed by the Client, will buy or sell securities and place orders for the execution of such transactions with or through such brokers, dealers, or issuers as the Adviser may select, subject to approval by the Client. 4. Changes in Investment Policies or Assets in the Account The Client is required to notify the Adviser promptly in writing of any modifications to the investment objectives, policies or restrictions applicable to the Advisory Account. The Client agrees to notify the Adviser promptly of any withdrawal of securities from the Advisory Account initiated by the Client. 5. Allocation of Brokerage When placing orders for the execution of transactions for the Advisory Account, the Adviser will take into consideration not only the available prices but also other relevant factors such as, without limitation, execution capabilities and safekeeping arrangements. The Adviser will exercise good faith in obtaining the best price and execution for each transaction for the Advisory Account. 6. Safekeeping and Custody The Adviser will not have custody or possession of the assets of the Advisory Account of the Client. The Client shall select and authorize a custodian bank or brokerage firm to hold the assets of the Advisory Account in safekeeping for the Client. The Client shall be solely responsible for all fees involved with any custodial arrangements. 7. Fees The compensation of the Adviser for its services throughout the term of this Agreement shall be calculated and paid in accordance with the Fee Schedule in Exhibit C, as the same may be amended from time to time by mutual agreement of the Advisor and the Client. 8. Limitation of Liability The Adviser will not be liable for any error in judgment or any acts or omissions to act except those resulting from the Adviser's gross negligence, willful misconduct or reckless disregard of its duties and obligations under this Agreement. Nothing herein shall in any way constitute a waiver or limitation of any right of any person under the federal and state securities laws. 9. Services to Other Clients It is understood that the Adviser performs investment advisory services for other clients, The Client agrees that the Adviser may give advice and take action with respect to any of its other clients which may differ from advice given, or the timing, or nature of action taken, with respect to the Advisory Account. 10. Representations by the Client The Client represents that the terms of this Agreement do not violate any obligation by which the Client is bound, whether arising by contract, operation of law, or otherwise, and that this Agreement has been duly authorized by appropriate action and is binding upon the Client in accordance with its terms. 11. Acknowledgment of Receipt of Brochure (Form ADV Part II) The Client hereby acknowledges receipt of the Adviser's Brochure (Form ADV Part II) at least 48 hours prior to the date of execution of this Agreement in compliance with Rule 204-3 of the Investment Advisers Act of 1940 ("the Act"), 12. Notice All notices and other communications shall be deemed effective when received, in writing, at the addresses appearing below. Receipt of written notice shall be presumed if mailed postpaid by registered or certified mail, return receipt requested. Each party shall be entitled to presume the correctness of such address until notified in writing to the contrary. Notice Contacts: City of Miami Beach Patricia D. Walker, Chief Financial Officer 1700 Convention Center Drive Miami Beach, FI 33139 MBIA Municipal Investors Service Corporation Mary Donovan, Vice President 1700 Broadway, Suite 2050 Denver, Co 80290 13. Termination; Assignment; Amendment Notwithstanding anything in this Agreement to the contrary, this Agreement may be terminated at any time by either party giving to the other at least thirty (30) days' prior notice written of same. If any fees have been paid in advance, the Adviser will refund to the Client a prorata share of the fee. No assignment, as that term is defined in the Act, of this Agreement shall be made by either party without the consent of the other, This Agreement may be amended or modified at any time by mutual agreement in writing. 14. Counterparts This Agreement may be executed in two or more counterparts, each one of which shall be deemed to be an original. Page 2 15. Governing Law To the extent federal law does not apply, this Agreement shall be construed in accordance with and governed by the laws of the State of Florida. Venue for any action arising out of this Agreement shall be in Miami-Dade County, Florida. 16. Entire Agreement This Agreement constitutes the entire agreement of the parties with respect to the management of the Advisory Account. The Exhibits referenced herein are incorporated into this Agreement. 17. Term ofthe Agreement The term of this Agreement shall be for the three year period February 1, 2004 to January 31, 2007, and may be extended for two one-year periods, upon written mutual agreement. 18. Portfolio Performance and Contract Extension On an annual basis, the City of Miami Beach shall compare the amortized cost return of the Pooled Portfolio managed by MBIA Municipal Investors Service Corporation to the average yield on the one year Treasury and the average return on the Florida State Board of Administration (SBA) Local Government Pool on an amortized cost basis for the year. If the annual amortized cost return of the Pooled Portfolio exceeds both the average yield on the one year Treasury and the average return on the SBA Local Government Investment Pool for the year, the terms of this investment advisory contract shall be extended for one additional year. If the City of Miami Beach establishes a Long Term Investment Portfolio that is managed by MBIA Municipal Investors Service Corporation, the fair value return of the Long Term Portfolio shall be compared to the return of the Merrill Lynch U.S. Treasuries 1 - 3 Year Index on an annual basis. If the annual fair value return of the Long Term Portfolio exceeds the return of the Merrill Lynch U.S. Treasuries 1 - 3 Year Index, the terms of this investment advisory contract shall be extended for one additional year. Contract extensions may be executed upon mutual agreement even if said performance benchmarks are not attained. City of Miami Beach APPROVED BY: have caused this Agreement to be executed by first above written. IN WITNESS WHEREOF, the pa . s their respective representatives a of th --..., ADDRESS: a Mayor 1700 Convention Center Drive ~rhf~~ City Clerk ATTEST MBIA Municipal Investors Servi~~~p'oratitSil\, BY: ~r- Mary Donovan, CFA Vice President ADDRESS: 1700 Broadway, Suite 2050 De~;, CIO 803~1,99 ' ATTEST: ~ {jf/; Secretary Page 3 APPROVED AS TO FORM & LANGUAGE & FOR EXECUTION <+-, Y4J'( Date Exhibit A Authorized Investments Insert a copy of the Client's Investment Policy or a List of Authorized Investments that specifies the types of securities, maximum maturity, credit ratings, diversification or percent of portfolio limits, and any other specified guidelines. Authorized Investments The City has established a list of authorized types of investments. The authorized cash management investments are descried in Chapter 18A of the City Code and are further limited as follows: 1. Time Deposits Duration N/A Maximum % of Portfolio 100% Maximum % of Combined Asset Group 100% 2. Certificates of Deposit Duration Maximum % of Portfolio Maximum % of combined Asset Group 3. U. S. Treasury Bills Duration 1-3 yrs 100% 100% N/A Maximum % of Portfolio 100% Maximum % of Combined Asset Group 100% 4. U. S. Treasury Notes Duration Maximum % of Portfolio Maximum % of Combined Asset Group 5. U.S. Government Agency Securities Duration Maximum % of Portfolio 0-7 yrs 100% 100% 0-7 yrs 50% Maximum % of Combined Asset Group 50% Page 4 6. Obligations issued by any state or territory of the United States, which are fully insured or rated in one of the two highest rating categories by both Moody's Investors Service, Inc, and Standard and Poor's Corporation or their successors. Duration Maximum % of Portfolio Maximum % of Combined Asset Group 7. Fixed Term Repurchase Agreements Duration Maximum % of Portfolio Maximum % of Combined Asset Group 8. Overnight Repurchase Agreements Duration 7-10 yrs 50% 50% 0-3 yrs 20% 100% N/A Maximum % of Portfolio 100% Maximum % of Combined Asset Group N/A 9. Bankers Acceptances Duration N/A Maximum % of Portfolio 20% Maximum % of Combined Asset Group 30% 10. Commercial Paper with a rating of A-1 or P-1 only, rated by Moody's or Standard & Poor's Duration N/A Maximum % of Portfolio 20% Maximum % of Combined Asset Group 30% 11. Corporate notes, corporate bonds, medium team notes, Yankee notes, and Yankee bonds, with terms of one year or less rated by 2 of 3 designated rating agencies in one of the two highest rating categories Duration 3 -7 yrs Maximum % of Portfolio 20% Maximum % of combined Asset Group 30% Page 5 12. Money market mutual/trust funds which substantially conform with this policy as follows: Duration N/A Maximum % of Portfolio 100% Maximum % of combined Asset Group 100% a. State of Florida Local Government Surplus Funds Trust Fund b.' Mutual/trust funds sponsored by the Florida League of Cities c. Private money market mutual funds backed entirely by "Full Faith and Credit" U.S. Government Securities not to exceed 25% 13. Fixed income mutual funds sponsored by the Florida League of Cities which substantially conform with this policy as follows: Duration N/A Maximum % of Portfolio 25% Maximum % of combined Asset Group 25% 15 Mortgage-backed securities collateralized by first mortgages (or deeds of trust) and asset-backed securities collateralized by consumer or business receivables with a maximum duration of 3.0 years at time of purchase and structured as either collateralized mortgage obligations or unstructured pass-through securities and rated by 2 of 3 designated rating agencies as follows: Maturity 3 - 5 yrs Maximum % of Portfolio 15% Maximum % of combined Asset Group 50% a. b. Moody's Standard & Poor's Fitch AAA3 higher AA- or higher AA- or higher c. Page 6 16. Externally managed funds requiring specific approval by Commission with investment limited to City policy and rating criteria Duration 3-7 yrs Maximum % of Portfolio 20% Maximum % of combined Asset Group 20% 17. Interest rate Swap agreements between the City and a counter party to pay/receive a fixed interest rate payment in exchange for a variable rate payment over a specified term with the requirement that all "Swap" agreements be approved by City Commission prior to execution. Duration N/A Maximum % of Portfolio 10% Maximum % of combined Asset Group 20% All repurchase agreements are fully collateralized and the collateral is held in the City's name by a third party custodian. Derivatives (defined as a financial instrument the value of which depends on, or is derived from the value of one or more underlying assets or index of asset values) shall be utilized only if specifically authorized as part of the investment plan and the Finance Director or his designee has sufficient understanding/expertise to invest in derivatives. All proposed derivative investments (including "SWAPS") will be analyzed by the City's Financial Advisor and will be presented to the Capital Improvements/Finance Committee and the City commission for approval. Repurchase Agreements (an agreement between an investor and a security dealer whereby dealer agrees to buy back the security at a specified price in the future) will be limited to transactions in which the proceeds will be used to provide liquidity. Any investment which is not issued in "Book Entry Only" form is physically held by the City in a secure vaulted area and surrendered only when invested funds and earnings are received by the City at maturity, Page 7 Prohibited Investments Funds to be invested in cash management investments may not be invested in the following: Common Stock Private Placements Preferred Stock Convertible Bonds Venture Capital Options and Futures Warrants Commodities Short Selling Real Estate Page 8 Unregistered or Restricted Stock Margin Trading Limited Partnerships Oil and Gas Wells 10 or PO strips or inverse floater mortgage backed securities Foreign Exchange Any Inverse Floating Rate Securities Exhibit B Work to be Performed MBIA-MISC will provide the following services to the City of Miami Beach: . Provide full-time non-discretionary management of the Advisory Account. . Develop and implement investment strategies for the Advisory Account that will seek to enhance portfolio performance under current and future market conditions within the parameters of the City's investment policy and cash flow needs. . Provide technical and fundamental market research, including yield curve analysis. . Place all orders for the purchase and sale of securities, communicate settlement information to the City's staff and assist with trade settlements. . Obtain and document competitive prices for securities transactions. . Provide monthly investment reports for the portfolio detailing investment transaction activity, earnings, securities holdings at cost, amortized cost and fair value, portfolio composition and sector analyses, portfolio return and weighted average maturity, and performance and benchmark information. . Provide semi-annual and annual portfolio performance reports that include customized benchmarks. . Attend meetings with the City's finance staff and governing body upon request. . Provide arbitrage calculations and reports on bond proceeds under management by MBIA. . Perform due diligence reviews of current and proposed broker/dealers. . Monitor the creditworthiness of the City's depository and custodian bank and investments in the portfolio. . Evaluate safekeeping and custodial procedures, agreements and fee schedules. . Work with the City to develop and update cash flow projections. . Review and update the City's investment policy and written investment procedures. . Serve as a general resource to City staff for information, advice and training regarding fixed income securities, investment and yield curve analysis. . Provide client training on investment management subjects. Page 9 Exhibit C Fee Schedule for Investment Advisory Services The annual fee for providing investment advisory services for the City of Miami Beach is charged on a sliding scale in basis points based on a percentage of assets under management and is as follows: Assets First $ 175 million Over $175 million Annual Fee 6.0 basis points 5.0 basis points The fees for investment advisory services are based on the average value (cost basis) of assets under management. A pro rata portion of the annual fee (1/12) is billed each month based on the average asset value of the portfolio for the month. The fee shall be payable upon receipt of billing from the Adviser. The fees will be in effect for the term of the agreement. As mutually agreed between the Adviser and the Client, fees charged by MuniFinancial for providing arbitrage rebate calculations and reporting for bond proceeds portfolios managed by the Adviser shall be paid by the Adviser. Costs for the arbitrage rebate calculations will not be deducted from the Advisory account or charged to the client as an additional fee. Page 10