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Agenda Item 25.

City Council Meeting

Meeting Date:	08/16/2022
FROM:	Bill Gallardo

Subject:

Investment Policy Guidelines for the City of Brea's Employee Benefits Fund Pension Plan

RECOMMENDATION

Review and approve the Investment Policy Guidelines for the City of Brea’s Employee Benefits Fund Pension Plan through Public Agency Retirement Services (PARS).

BACKGROUND/DISCUSSION

On November 17, 2015, the City Council approved participation within the Public Agencies Post-Employment Benefit Trust Program that established the City of Brea's Employee Benefits Fund Pension Plan ("Plan"). The Plan is administered by Public Agencies Retirement Services (PARS) to assist the City in "pre-funding" its pension obligations in an irrevocable Section 115 Trust account. Some of the benefits of participating in the program are summarized below:

City maintains oversight of investment management and control over the risk tolerance level of the portfolio;
Assets held in the PARS Section 115 Trust account allow for greater investment flexibility and risk diversification compared to the City's General Fund investments;
Assets could be accessed to offset unexpected CalPERS rate increases (rate stabilization);
Potential to improve an agency's bond rating; and
Flexibility to access assets at any time as long as it is used to pay employer's pension obligations.

The investment strategies for these assets are defined within the City's Investment Policy Guidelines that were developed and evaluated by PARS, HighMark Capital Management (the Plan’s Investment Advisory Firm) and the City's Investment Advisory Committee (IAC). The purpose of the Investment Policy Guidelines is to facilitate communication and confirm the City's investment objectives for the Plan. It also helps maintain a long-term perspective when market volatility is caused by short-term market movements. The policy also details the Plan's Trustee, the Investment Manager and the Investment Advisory Committee's roles and responsibilities.

Annually, the Investment Advisory Committee, including PARS and HighMark Capital Management, review the Investment Policy Guidelines and provides recommendations (if any) on any changes for the upcoming annual review period. This includes reviewing the investment objectives offered through PARS/HighMark Capital Management which includes Conservative, Moderately Conservative, Moderate, Balanced and Capital Appreciation. The asset allocation for each investment objective incrementally shifts from fixed income to equity. The current investment objective is a "Balanced Objective" which has a dual goal to seek growth of income and principal.

With the exception of minor formatting changes, there are no recommended changes to the Investment Policy Guidelines (Attachment A) as part of the 2022 annual review.

COMMISSION/COMMITTEE RECOMMENDATION

On July 25, 2022, the Investment Advisory Committee reviewed the Investment Policy Guidelines and recommended for City Council approval.

FISCAL IMPACT/SUMMARY

There is no fiscal impact for approving the Investment Policy Guidelines.

RESPECTFULLY SUBMITTED:

William Gallardo, City Manager
Prepared by: Alicia Brenner, Senior Fiscal Analyst
Concurrence: Kristin Griffith, Administrative Services Director

Attachments
Attachment A - Proposed 2022 Employee Benefits Fund Pension Plan Investment Policy Guidelines