Consideration and Approval of Contract: A Cooperative Purchase Contract with U.S. Bancorp Asset Management, Inc. for Investment Management Services in the amount not to exceed $160,000, annually.
 

1. Approve the Cooperative Purchase Contract with U.S. Bancorp Asset Management, Inc. for Investment Management Services in an amount not to exceed $160,000, annually; and
2. Authorize the City Manager to execute the necessary documents.

The City currently has approximately $117 million in City funds invested in a one to five year portfolio.  The previously investments were managed by PFM Asset Management Services, LLC (PFMAM).  In the Fall of 2024, PFMAM consolidated client accounts under its parent company, U.S. Bancorp Asset Management, Inc. (USBAM).  With this change, the City looked to continue investment management services under USBAM.  The City identified a recent formal procurement completed by the City of Yuma, which entered into a contract with USBAM to provide investment management services. This contract allows other cities to receive the same terms and conditions via a "cooperative purchase contract."  The City's proposed cooperative purchase agreement with USBAM will commence on June 1, 2025 and will allow for annual extensions up to four additional years.  

Utilizing a Investment Management Service allows for an actively managed investment portfolio that should yield higher investment returns for the City.  These investment revenues support all of the funds within the City of Flagstaff. 

The cost of the contract is based on the balance in size of our investment portfolio, also known as assets under management. 

Assets Under Management	Annual Fee in Basis Points (bps)
On the first $100,000,000	7.0 bps (0.07%)
On the next $100,000,000	6.0 bps (0.06%)
On the next $200,000,000	5.0 bps (0.05%)
On all assets over $400,000,000	4.0 bps (0.04%)

Based on a $120,000,000 balance in our investment portfolio (assets under management), the annual fee would be $82,000.  This is approximately $10,000 less than the previous contract with PFMAM.  The City does intend on increasing our investment portfolio amounts and could have annual fees in excess of $100,000.  
 

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• Approve the Investment Management Services as submitted.
• Amend the Investment Management Services and ask USBAM to accept amendments.
• Do not approve the Investment Management Services and ask staff to complete a formal procurement for investment options. 

Prior to July 2011, the city managed our investment portfolio through internal management and the Local Government Investment Pool (LGIP).  The internal management process had City staff investing primarily in government issues (bonds) and in certificates of deposits (CDs) and were considered a very safe investment practice for the City.  LGIP management is done through the State of Arizona’s Treasury Department and as with internally management investments, LGIP investments are considered reasonably safe for a governmental entity.  

In 2011, the City completed a Request for Proposal for investment management services and awarded the contract PFMAM.  The City of Flagstaff has had a successful relationship with PFMAM and renewed the contract in 2016.  The relationship has been exceptional and grown over the past 10 years. We continue to invest additional funds with PFMAM and as of December 31, 2024, the City of Flagstaff has invested over $118 million dollars with PFMAM. PFMAM is now operating under USBAM and we expect the same great service as we have seen in the past and will be keeping our current investment managers.  The returns tend to be greater than the average measured against the ICE BofA 1-5 Year U.S. Treasury/Agency Index as published by Bloomberg Financial LP.  As of December 31, 2024, our 1-Year portfolio return as 3.67% as compared to the benchmark of 3.42%.  

High Performing Governance: Maintain the organization's fiscal stability through strong financial policies and best practices. 

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