Loading...
The URL can be used to link to this page
Your browser does not support the video tag.
City Council Agenda 08-14-2017
MINUTES OF A REGULAR MEETING OF THE CITY COUNCIL OF THE CITY OF ROLLING HILLS, CALIFORNIA MONDAY, JULY 24, 2017 CALL TO ORDER A regular meeting of the City Council of the City of Rolling Hills was called to order by Mayor Pro Tem Wilson at 7:00 p.m. in the City Council Chamber at City Hall, 2 Portuguese Bend Road, Rolling Hills, California. ROLL CALL Councilmembers Present: Councilmembers Absent: Others Present: Dieringer, Mirsch, Wilson and Mayor Black". Councilmember Pieper (excused). Raymond R. Cruz, City Manager. Michael Jenkins, City Attorney. Terry Shea, Finance Director. Heidi Luce, City Clerk. Marcia Gold, 9 Flying Mane Road. Clint Patterson, 22 Georgeff Road. Jill Smith, 10 Georgeff Road. Carla Routt, 1 Southfield Drive. Michelle Mottola, 7 Flying Mane Road. Janet Leach, 5 Wideloop Road. Dennis Yu, PARS. OPEN AGENDA - PUBLIC COMMENT WELCOME None. CONSENT CALENDAR Arrived at 8:05 p.m. Matters which may be acted upon by the City Council in a single motion. Any Councilmember may request removal of any item from the Consent Calendar causing it to be considered under Council Actions. A. B. C. D. E. Minutes - Regular Meeting of July 10, 2017. RECOMMENDATION: Approve as presented. Payment of Bills. RECOMMENDATION: Approve as presented. Financial Statement for the Month of June 2017. RECOMMENDATION: Approve as presented. Republic Services Recycling Tonnage Report for June 2017. RECOMMENDATION: Receive and file. Approval of an agreement with Animal Pest Management Services, Inc. for up to $14,000 to provide coyote control services. RECOMMENDATION: Approve as presented. Mayor Pro Tem Wilson noted a typographical error on page three of the minutes — in the last sentence of the first paragraph the word substantive is misspelled. Councilmember Mirsch moved that the City Council approve the items on the consent calendar as presented with one correction to the minutes. Councilmember Dieringer seconded the motion, which carried without objection. COMMISSION ITEMS None. -1- PUBLIC HEARINGS None. OLD BUSINESS None. Recognizing that there were several members of the community present with interest in the peafowl matter scheduled later on the agenda, Mayor Pro Tem Wilson stated that the matter will be taken out of order. Hearing no objection, he so ordered. MATTERS FROM STAFF DISCUSSION AND POSSIBLE DIRECTION TO REDUCE PEAFOWL POPULATION IN THE CITY OF ROLLING HILLS. Mayor Pro Tem Wilson introduced the item and asked for staff's comments. City Manager Cruz presented the staff report stating that this matter was agendized for discussion at the request of the City Council after receiving an e-mail from residents Bob and Marcia Gold of Flying Mane Road expressing concern regarding the increased peafowl population in their area of the City and requesting that the City do something to reduce the peafowl population. He stated that several other correspondence expressing similar concern have been received recently and those correspondence are included with the staff report. City Manager Cruz stated that the City has not historically done anything to control peafowl, but when staff receives complaints, residents are informed that they can contract with a licensed trapper to humanely trap the peafowl for relocation. He further reviewed the peafowl management programs used by the Cities of Palos Verdes Estates, Rancho Palos Verdes and Rolling Hill Estates as well as the costs associated with those programs. Discussion ensued concerning the other cites' programs and the associated costs. Mayor Pro Tem Wilson commented that his understanding is that the areas where there are excessive peafowl is the result of the peafowl being fed in that area. He inquired as to the legality of feeding wildlife. In response, City Attorney Jenkins commented that he is not aware of a State law prohibiting the feeding of ALL wildlife, but it would be something that is within the City's police powers to control the feeding of wildlife. Further discussion ensued conceming the vendors used by the other cities for their peafowl trapping programs and the costs associated with those programs. In response to Councilmember Mirsch's inquiry, City Manager Cruz stated the Gold's have reported that they see up to 40 peafowl in the area near Flying Mane Road; and the City is receiving more complaints regarding peafowl recently. Mayor Pro Tem Wilson called for public comment. The following residents addressed the City Council expressing concern regarding the excessive number of peafowl in the community, especially in the areas near Flying Mane Road, Crest Road East and Wideloop Road; and encouraging the City to do something to reduce the population: Marcia Gold, 9 Flying Mane Road; Clint Patterson, 22 Georgeff Road; Jill Smith, 10 Georgeff Road; Carla Routt, 1 Southfield Drive; Michelle Mottola, 7 Flying Mane Road; and Janet Leach, 5 Wideloop Road. Following public comment and discussion, Councilmember Dieringer moved that the City Council direct staff to provide further information regarding the following items: existing City or State regulations prohibiting the feeding of peafowl or other wildlife; examples of regulations prohibiting the feeding of peafowl or other wildlife from other cities; cost proposals/information from other organizations that provide peafowl trapping/relocation services including the trapper used by the City of Rancho Palos Verdes and services provided by Los Angeles County Department of Animal Care and Control. Councilmember Mirsch seconded the motion which carried without objection. Consideration of this matter was continued to the August 14, 2017 meeting of the City Council. Minutes City Council Meeting 07-24-17 -2- • • NEW BUSINESS DISCUSSION AND CONSIDERATION OF AUTHORIZING PARTICIPATION IN PUBLIC AGENCY RETIREMENT SERVICES (PARS) POST -EMPLOYMENT BENEFITS TRUST PROGRAM TO BE ADMINISTERED BY PARS AND U.S. BANK; APPOINTING THE CITY MANAGER AS THE CITY'S PLAN ADMINISTRATOR; AND AUTHORIZING THE CITY MANAGER TO EXECUTE THE DOCUMENTS TO IMPLEMENT THE PROGRAM. AND CONSIDERATION OF RESOLUTION NO. 1214 - A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ROLLING HILLS, CALIFORNIA APPROVING THE ADOPTION OF THE PUBLIC AGENCIES POST -EMPLOYMENT BENEFITS TRUST ADMINISTERED BY PUBLIC AGENCY RETIREMENT SERVICES (PARS). Mayor Pro Tem Wilson introduced the item and asked for staff's comments. Finance Director Shea stated that during the budget adoption process it was discussed that staff should research and come up with a trust mechanism to pre -fund $185,000 of the City's $370,000 unfunded pension liability recognizing the fact that funds were budgeted for that purpose. He presented the staff report stating that staff identified an Internal Revenue Code (IRC) Section 115 Trust as a good mechanism for that purpose. He stated that contributions held in the trust are designated as irrevocable, meaning they must be used to fund the City's retirement obligations and as such, the funds are tax-exempt. He further stated that out of the four firms researched, that offer an IRC Section 115 Trust, staff recommends Public Agency Retirement Services (PARS) for administration of the trust given their experience, history, competitive fee structure at 0.6%; and the fact that they are one of only two firms to have received a favorable Private Letter Ruling (PLR) from the IRS for their Pension Rate Stabilization Program. Dennis Yu, Senior Vice President, PARS addressed the City Council to further explain the PARS Pension Rate Stabilization Program and provide additional background on the organization. He stated that for the total fee of 0.6%, there are three companies involved in administration of the program: (1) PARS who sets up the program and provides administration and compliance services; (2) US Bank, the trustee that physically holds the assets; and (3) High Mark Capital Management (a wholly owned subsidiary of Union Bank) the investment manager tasked to invest the funds based on the risk tolerance level established by the City. Mayor Black arrived and took a seat at the dais, but Mayor Pro Tem continued to preside over the meeting. Discussion ensued concerning the five investment strategy options available based on the City's risk tolerance, which range from conservative to capital appreciation; and the 5 -year and 10 -year returns earned with each of those options. Discussion ensued concerning the oversight for the investment program and the assurance the City has that its investments are protected. Further discussion ensued concerning risk tolerance and various investment strategy options. Mr. Yu further commented that in addition to selecting the investment strategy based on risk tolerance, the City can also choose to use either an active or passive investment management approach. Following discussion, Mayor Black suggested using the moderate investment strategy with the passive investment management approach utilizing index -based securities. The City Council concurred. Following further discussion, Councilmember Mirsch moved that the City Council adopt Resolution No. 1214 approving the adoption of the Public Agencies Post -Employment Benefits Trust administered by Public Agency Retirement Services (PARS) and direct staff to employ the moderate investment strategy utilizing index -based securities. Mayor Black seconded the motion, which carried without objection. CONSIDERATION OF ENTERING INTO AN AGREEMENT WITH MULTI -BANK SECURITIES, INC. AND A CUSTODIAL ACCOUNT WITH PERSHING LLC. Mayor Pro Tem Wilson introduced the item and asked for staff's comments. Finance Director Shea stated that in conformance with the City's investment policy, staff began researching potential broker -dealers for purchasing investments like negotiable certificates of deposits and US Treasury Bonds in order to provide another vehicle for purchasing those investments to increase the City's rate of return. He stated that the Minutes City Council Meeting 07-24-17 -3- • investments will all be under $250,000 and for a term less than two years per the City's investment policy. He further reviewed the process for purchasing the CD's and stated that staff will continue to research and identify additional broker -dealers but at this time is recommending entering into an agreement with Multi - Bank Securities, Inc and a custodial account with Pershing, LLC. Following brief discussion, Councilmember Mirsch moved that the City Council direct staff to execute the documents necessary to enter into an agreement with Multi -Bank Securities, Inc and a custodial account with Pershing LLC for investment services. Councilmember Wilson seconded the motion, which carried without objection. MATTERS FROM THE CITY COUNCIL AND MEETING ATTENDANCE REPORTS Recognizing that this will be City Clerk Luce's last City Council meeting, the City Council thanked her for her service to the City. MATTERS FROM STAFF DISCUSSION AND POSSIBLE DIRECTION TO REDUCE PEAFOWL POPULATION IN THE CITY OF ROLLING HILLS. Taken out of order — see above. CLOSED SESSION None. ADJOURNMENT Hearing no further business before the City Council, Mayor Pro Tem Wilson adjourned the meeting at 8:52 p.m. The next regular meeting of the City Council is scheduled to be held on Monday, August 14, 2017 beginning at 7:00 p.m. in the City Council Chamber at City Hall, 2 Portuguese Bend Road, Rolling Hills, California. Prepared by: Heidi Luce, City Clerk Respectfully submitted, Yvett all Interim City Clerk Approved, James Black. .D. Mayor Minutes City Council Meeting 07-24-17 -4- • A.ITIONAL INFORMATION Agenda Item No: 10-A Mtg. Date: 07/24/17 Friday, July 21, 2017 at 3:12:17 PM Pacific Daylight Time Subject: Fwd: Peafowl Date: Friday, July 21, 2017 at 2:17:27 PM Pacific Daylight Time From: Ray Cruz <rcruz@cityofrh.net> To: Heidi Luce <hluce@cityofrh.net> CC: Ewa Nikodem <enikodem@cityofrh.net> Sent from my iPhone Begin forwarded message: From: Dale Stucker <__ _ Date: July 21, 2017 at 12:17:56 PM PDT To: "/ "a Cc:" t>,' Subject: Peafowl Reply -To: Dale Stucker < RECEiVED JUL 21 2017 City of Rolling Hills By 11 11 My wife and I have been overwhelmed by the growing population of the peafowl. These beautiful, but horribly loud birds have officially become pests as their numbers have swollen to overrun our peaceful community. It's not unusual to have 4 to 10 birds in any yard at any time screeching, pooping, (the smell and mess have become a full time maintenance problem), eating our flowers or squatting on our roofs breaking, cement tiles under their weight. Even waking us several times in the middle of the night! I do not see how this cannot be taken care of by the City. It is a nuisance to all of the residents. If I am successful in ridding them from my yard they just go to my neighbors. Please join Rancho Palos Verdes, Rolling Hills Estates and Palos Verdes Estates to trap and reduce, not eliminate, but rather RELOCATE, our new overwhelming peafowl population. Thank you for you time Dale Stucker 6 Flying Mane Road Rolling Hills, CA 310-200-8946 • • • Monday, July24, 2017 .0:26:52 AM Pacific Daylight Time Subject: Rihaczek of 10 Flying Mane Rd re peafowl Date: Monday, July 24, 2017 at 10:22:48 AM Pacific Daylight Time From: Ewa Nikodem <enikodem@cityofrh.net> To: Ray Cruz <rcruz@cityofrh.net> Ray, Mrs. Rihaczek of 10 Flying Mane Road called to let you know that she supports the trapping however she indicated that she would also want residents to stop feeding the peafowl. Thank you, Ewa. Ewa Nikodem, Administrative Assistant City of Rolling Hills, 2 Portuguese Bend Road, Rolling Hills, CA 90274 310-377-1521 Fax: 310-377-7288 www.Rolling-Hills.org This is a transmission from the City of Rolling Hills. The information contained in this email pertains to City business and is intended solely for the use of the individual or entity to whom it is addressed. If the reader of this message is not an intended recipient, or the employee or agent responsible for delivering the message to the intended recipient and you have received this message in error, please advise the sender by reply email and delete the message. WARNING: Computer viruses can be transmitted by e-mail. The recipient should check this e-mail and any attachments for the presence of viruses. The CITY OF ROLLING HILLS accepts no liability for any damage caused by any virus transmitted by this e-mail. • ECEIVED On 7/24/17, 10:28 AM, "Debi" < > wrote: Dear Mr. Cruz, JUL 242017 City of Rolling Hills By We are unable to attend the City Council meeting tonight (July 24) at which we understand there will be a discussion about the peacock overpopulation in our community. We agree that they have become a nuisance to many residents including ourselves, and their numbers need to be reduced. We trust the council members will find the appropriate solution to this increasing problem ---maybe something similar to the relocation efforts of other cities on the PV Peninsula. We thank you for allowing resident input regarding this community issue. Best Regards, Debi & Gary Fournier 30 Crest Road East Sent from my iPhone R PC E1VE Subject: Peacock Comments for The record Date: Monday, July 24, 2017 1:31 PM From: Leslie Stetson <leslie@bhhscp.com> To: "hluce@cityofrh.net" <hluce@cityofrh.net> To: Our Honorable City Council Members From: Leslie Stetson 71 Saddleback Road Dear Council Members I was pleased to see the topic of Peacocks on the agenda for tonight's meeting at 7:OOpm. I planned to attend but work has interfered so I wanted to voice my support for a Peacock trapping and relocation strategy. I am aware of Palos Verdes Estates having really nice humane traps which they lend to neighbors and then relocate the birds to a different area, off the Peninsula I hope. For the past several years young male peacocks have visited the unfenced portion of my property and considered staying until the dogs and horses chased them away, but this past year I have had several peacock families eating in the barn, pooping on my front driveway and front porch. I have noticed much more noise and I think the vacant lot across the street is part of their habitat now. They really make a mess and get the dog barking. I think they are beautiful birds and would never harm one, although on Crest have often had to swerve and brake for them to cross. I think most residents do that so they are not harmed as we are generally a community of animal lovers with a live and let live attitude. I do think the coyotes have served as keepers of the balance by eating the young flightless babies and I have seen crows with their huge eggs in their beaks too. One very real concern however is the problem I face walking with a large dog on Crest in the early morning with a field full of them by around the 50 Crest East Street numbers where there are several residents feeding them and they even have been nesting on the horse trail in that stretch of road. I walk my dog on a leash but on several occasions have been pulled into the street as the dog forgets her training and special harness hoping to chase them. Caught off guard and lucky timing I have been grateful for the lack of traffic at that time of day. The birds are oblivious and only take flight at the last moment, easy to see why the coyotes have no problems. The beauty of that time of day is the quiet and while we try to keep the peace, hard to do with such tempting things to chase. I think it wold be a shame to not feel comfortable walking in the beautiful, quiet early hours because of the growing numbers of Peacocks everywhere. Thank you for looking into the problem and your capable solutions I am sure as always will guide to a balance. All the best , Leslie JUL 24 2017 City of Rolling Hills By Leslie Stetson Realtor, Ca1BRE #01415902 Cell 310.936.1283 I Direct 310.265.2177 Leslie@bhhscp.com<mailto:Leslie@bhhscp.com> "Happy Trails" Berkshire Hathaway HomeServices California Properties 600 Deep Valley Drive Rolling Hills Estates, CA 90274 • Monday, July 24, 201, 3:52:06 PM Pacific Daylight Time Subject: Susana Luna called re peafowl Date: Monday, July 24, 2017 at 3:51:54 PM Pacific Daylight Time From: Ewa Nikodem <enikodem@cityofrh.net> To: Ray Cruz <rcruz@cityofrh.net> CC: Heidi Luce <hluce@cityofrh.net> Ray, Susana Luna of 5 Crest Road East called this afternoon to let you know that she agrees with her neighbors that there are too many peacocks in our city. She mentioned that she may be able to email you directly before the meeting. Thank you, Ewa' Ewa Nikodem, Administrative Assistant City of Rolling Hills, 2 Portuguese Bend Road, Rolling Hills, CA 90274 310-377-1521 Fax: 310-377-7288 www.Rolling-Hills.org This is a transmission from the City of Rolling Hills. The information contained in this email pertains to City business and is intended solely for the use of the individual or entity to whom it is addressed. If the reader of this message is not an intended recipient, or the employee or agent responsible for delivering the message to the intended recipient and you have received this message in error, please advise the sender by reply email and delete the message. WARNING: Computer viruses can be transmitted by e-mail. The recipient should check this e-mail and any attachments for the presence of viruses. The CITY OF ROLLING HILLS accepts no liability for any damage caused by any virus transmitted by this e-mail. • Subject: Peacock comments for the record Date: Monday, July 24, 2017 4:13 PM From: Abby Douglass <abby@traceww.com> To: "hluce@cityofrh.net" <hluce@cityofrh.net> To: Our Honorable City Council Members Fr: Abby & John Douglass 51 Crest Road East Dear Council Members: Thank you for having the topic of Peacocks on the agenda for tonight's meeting. We are unable to attend but wanted to voice our strong support for Peacock trapping and relocation. We know PVE and RPV have great programs that are safe and humane. • RECEIVED JUL 2 4 ZU1/ City of Rolling Hills By We have lived in several different cities on the Peninsula and I have lived here almost my entire life on the Hill with Peacocks but this past year they have really become not only a nuisance but brazen and unsafe when they literally fly in front of my car/windshield on Crest by our house and have no fear of cars, people or dogs as they come into our yard and peck at our doors. We seem to have a particular problem because we have been told one of the neighbors feeds them... We actually think the birds are beautiful and add a bit of elegance and uniqueness to the area. It just seems like the population is out of control in our neighborhood and it is becoming unsafe not to mention messy and annoying. Thank you for taking the time to evaluate this situation and hopefully find a solution for our beautiful City. We love it here and are so grateful to live in RH. Best, Abby and John Douglass 51 Crest Road East CITY OF ROLLING HILLS PROOF OF SERVICE BY MAIL AND POSTING STATE OF CALIFORNIA ss COUNTY OF LOS ANGELES I am a citizen of the United States. I am over the age of eighteen years and not a party to the within proceeding; my business address is 2 Portuguese Bend Road, Rolling Hills, California. On the 21st day of July, 2017, I serve the within City Council Meeting 07/24/2017 Regular Meeting a copy of which is annexed hereto and made a part hereof, and the person, or persons, named below were emailed or mailed the agenda: E -MAILED MAILED Interested RH Web site listSery Parties Interested parties DropBox City Attorney CouncilMembers Dieringer, Pieper, Black, Mirsch and Wilson DELIVERED City Manager City Council Also posted at City Hall, at www.Rolling-Hills.org and PDF in DropBox. I declare under penalty of perjury, that the foregoing is true and correct. Executed on the 21st day of July, 2017 at Rolling Hills, California. Ewa Nikodem Administrative Assistant gest ail/ralasoff get4 INCORPORATED JANUARY 24, 1957 AGENDA REGULAR MEETING NO. 2 PORTUGUESE BEND ROAD ROLLING HILLS, CA 90274 (310) 377-1521 FAX (310) 377-7288 CITY COUNCIL CITY OF ROLLING HILLS MONDAY, JULY 24, 2017 7:00 P.M. Next Resolution No. 1214 Next Ordinance No. 353 1. CALL TO ORDER 2. ROLL CALL 3. OPEN AGENDA - PUBLIC COMMENT WELCOME This is the appropriate time for members of the public to make comments regarding the items on the consent calendar or items not listed on this agenda. Pursuant to the Brown Act, no action will take place on any items not on the agenda. 4. CONSENT CALENDAR Matters which may be acted upon by the City Council in a single motion. Any Councilmember may request removal of any item from the Consent Calendar causing it to be considered under Council Actions. A. Minutes - Regular Meeting of July 10, 2017. RECOMMENDATION: Approve as presented. B. Payment of Bills. RECOMMENDATION: Approve as presented. C. Financial Statement for the Month of June 2017. RECOMMENDATION: Approve as presented. D. Republic Services Recycling Tonnage Report for June 2017. RECOMMENDATION: Receive and file. E. Approval of an agreement with Animal Pest Management Services, Inc. for up to $14,000 to provide coyote control services. RECOMMENDATION: Approve as presented. 5. COMMISSION ITEMS NONE. 6. PUBLIC HEARINGS NONE. Page 1 of 1 7. OLD BUSINESS NONE. 8. NEW BUSINESS A. DISCUSSION AND CONSIDERATION OF AUTHORIZING PARTICIPATION IN PUBLIC AGENCY RETIREMENT SERVICES (PARS) POST -EMPLOYMENT BENEFITS TRUST PROGRAM TO BE ADMINISTERED BY PARS AND U.S. BANK; APPOINTING THE CITY MANAGER AS THE CITY'S PLAN ADMINISTRATOR; AND AUTHORIZING THE CITY MANAGER TO EXECUTE THE DOCUMENTS TO IMPLEMENT THE PROGRAM. AND CONSIDERATION OF RESOLUTION NO. 1214 - A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ROLLING HILLS, CALIFORNIA APPROVING THE ADOPTION OF THE PUBLIC AGENCIES POST -EMPLOYMENT BENEFITS TRUST ADMINISTERED BY PUBLIC AGENCY RETIREMENT SERVICES (PARS). B. CONSIDERATION OF ENTERING INTO AN AGREEMENT WITH MULTI -BANK SECURITIES, INC. AND A CUSTODIAL ACCOUNT WITH PERSHING LLC. 9. MATTERS FROM THE CITY COUNCIL AND MEETING ATTENDANCE REPORTS 10. MATTERS FROM STAFF A. DISCUSSION AND POSSIBLE DIRECTION TO REDUCE PEAFOWL POPULATION IN THE CITY OF ROLLING HILLS. 11. CLOSED SESSION NONE. 12. ADJOURNMENT Next meeting: Monday, August 14, 2017 at 7:00 p.m. in the Council Chamber, Rolling Hills City Hall, 2 Portuguese Bend Road, Rolling Hills, California. Public Comment is welcome on any item prior to City Council action on the item. Documents pertaining to an agenda item received after the posting of the agenda are available for review in the City Clerk's office or at the meeting at which the item will be considered. In compliance with the Americans with Disabilities Act (ADA), if you need special assistance to participate in this meeting due to your disability, please contact the City Clerk at (310) 377-1521 at least 48 hours prior to the meeting to enable the City to make reasonable arrangements to ensure accessibility and accommodation for your review of this agenda and attendance at this meeting. City Council Agenda 07/24/17 Page 2 of 2 • DRAFT Agenda Item No. 4-A Meeting Date: 07/24/17 MINUTES OF A REGULAR MEETING OF THE CITY COUNCIL OF THE CITY OF ROLLING HILLS, CALIFORNIA MONDAY, JULY 10, 2017 CALL TO ORDER A regular meeting of the City Council of the City of Rolling Hills was called to order by Mayor Pro Tem Wilson at 7:00 p.m. in the City Council Chamber at City Hall, 2 Portuguese Bend Road, Rolling Hills, California. ROLL CALL Councilmembers Present: Dieringer, Mirsch and Mayor Pro Tem Wilson. Councilmembers Absent: Councilmember Pieper and Mayor Black (excused). Others Present: Raymond R. Cruz, City Manager. Michael Jenkins, City Attorney. Yolanta Schwartz, Planning Director. Julia Stewart, Assistant Planner. Heidi Luce, City Clerk. John Hunter, John Hunter & Associates. Richard Colyear, 35 Crest Road West. Sue Breiholz, 6 Upper Blackwater Canyon Road. OPEN AGENDA - PUBLIC COMMENT WELCOME Richard Colyear, 35 Crest Road West addressed the City Council regarding the deadline for the arguments for and against the ballot measure to repeal Measure B that was placed on the November 7, 2017 ballot and expressed his discontent with the fact that the ordinance going before the Planning Commission was not available for review prior to the argument deadline as was indicated in the Citywide newsletter. Mr. Colyear further asserted his opinion that it was purposeful that the draft ordinance was not available before the deadline for arguments. Mayor Pro Tem Wilson assured Mr. Colyear that there was no conspiracy in this matter. Sue Breiholz, 6 Upper Blackwater Canyon Road addressed the City Council on behalf of Caballeros to express concern regarding the fire fuel danger in the City and asked the City Council to agendize a discussion on ways to proactively address the fire fuel danger per the letter that was sent previously by Caballeros. In response to Mr. Colyear's comments, City Attorney Jenkins stated that the Planning Commission has been working on a proposal for a View Ordinance that will come to the City Council for consideration and the intent was that the City Council would consider it before the November election. He commented that 0 DRAFT. what was to be available today was simply a DRAFT that the Planning Commission has not yet seen or acted on and the City is a long way away from having a final ordinance; and for someone to see the DRAFT and assume it was the final product would be a mistake. He further commented that today was simply the deadline for putting in arguments for and against the repeal of Measure B and the deadline was the same for all parties; and both parties had the same information available to them and all the information from previous Planning Commission discussions on this matter are available as a part of the open process. CONSENT CALENDAR Matters which may be acted upon by the City Council in a single motion. Any Councilmember may request removal of any item from the Consent Calendar causing it to be considered under Council Actions. A. Minutes - Regular Meeting of June 26, 2017. RECOMMENDATION: Approve as presented. B. Payment of Bills. RECOMMENDATION: Approve as presented. C. Consideration and Approval of an Updated Operating Policy for the City -owned Automated External Defibrillator (AED). RECOMMENDATION: Approve as presented. D. Consideration of Approval to Replace a Damaged Parking Lot Light Standard. RECOMMENDATION: Approve as presented. Councilmember Dieringer moved that the City Council approve the items on the consent calendar as presented. Councilmember Mirsch seconded the motion, which carried without objection. COMMISSION ITEMS RESOLUTION NO. 2017-09 — A RESOLUTION OF THE PLANNING COMMISSION OF THE CITY OF ROLLING HILLS GRANTING A MODIFICATION TO A PREVIOUSLY APPROVED PROJECT FOR A SITE PLAN REVIEW, CONDITIONAL USE PERMIT, AND VARIANCES FOR GRADING, FOR WALLS OVER 3' IN HEIGHT, AND WHICH WILL NOT AVERAGE OUT TO 2.5' IN HEIGHT, A POOL/SPA, TRELLIS, CONSTRUCTION OF AN 800 SQUARE FOOT RECREATION ROOM, TO LOCATE THE STRUCTURES IN THE FRONT YARD OF THE LOT AND TO EXCEED THE MAXIMUM PERMITTED DISTURBANCE OF THE LOT IN ZONING CASE NO. 897- MODIFICATION, AT 2 HILLSIDE LANE, (LOT 60- RH), (ELKIN). Mayor Pro Tem Wilson introduced the item and asked for staff's comments. Planning Director Schwartz reviewed the applicant's request to modify a previously approved project in Zoning Case No. 897- Modificaiton at 2 Hillside Lane. She stated that the Planning Commission approved the proposed modifications to increase the size of the recreation room and to add a waterslide feature to the pool and the conditions are the same as the previous approval. She stated that is was brought to staff's attention by Councilmember Dieringer that one standard condition of approval that is usually included for all projects was not included in this resolution and it was determined that the condition was inadvertently omitted. She Minutes City Council Meeting 07-10-17 DRAFT. commented that the condition does not affect the concept or scope of the project nor does it enlarge or diminish the project and it was a clerical error that is was not included. She provided the language of the condition which states, "Prior of submittal of final working drawings to Building and Safety Department for issuance of building permits, the plans for the project shall be submitted to City Staff for verification that the final plans are in compliance with the plans approved by the City." She stated that staff proposed to add the condition to the resolution since it is not a sustentative change and the City Attorney concurs and have the Chairman of the Planning Commission re-sign the resolution. Mayor Pro Tem Wilson called for public comment on the resolution. Hearing none, he asked for comments form the City Council. Following brief discussion, Councilmember Dieringer moved that the City Council receive and file Planning Commission Resolution No. 2017-09 granting approval of the applicant's request in Zoning Case No. 897 -Modification at 2 Hillside Lane as amended to add the condition provided by staff. Councilmember Mirsch seconded the motion, which carried without objection. Staff was directed to revise the resolution and have the Chairman of the Planning Commission sign it. PUBLIC HEARINGS None. OLD BUSINESS RESOLUTION NO. 1213 - A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ROLLING HILLS APPROVING A REQUEST FOR A SITE PLAN REVIEW FOR GRADING AND CONSTRUCTION OF A NEW RESIDENTIAL ADDITION WITH BASEMENT, GARAGES, COVERED PORCHES, SWIMMING POOL WITH A SPA, RETAINING WALL; AND REQUEST FOR CONDITIONAL USE PERMIT TO CONSTRUCT A SECOND DRIVEWAY, DETACHED GARAGE, TENNIS COURT, AND STABLE AND CORRAL; AND VARIANCES TO ALLOW EXCEEDANCE OF DISTURBANCE AND GRADING LIMITS FOR A SPORTS COURT, AND ANY RELATED IMPROVEMENTS IN ZONING CASE NO. 917 AT 5 PINE TREE LANE, LOT 94-RH, (SHARNG). AND CONSIDERATION OF A RECOMMENDATION FROM THE TRAFFIC COMMISSION TO APPROVE A NEW DRIVEWAY APRON FOR A SECOND DRIVEWAY AND A NEW PATHWAY APRON FOR ACCESS TO THE STABLE AT 5 PINE TREE LANE. Mayor Pro Tem Wilson introduced the item and asked for staff's comments. Assistant Planner Stewart stated that before the City Council is a resolution approving the project in Zoning Case No. 917 at 5 Pine Tree Lane. She provided a brief overview of the applicant's request for a residential addition including grading, a second driveway, a tennis court, a stable and a second detached garage. She stated that is was brought to staff's attention by Councilmember Dieringer that there was a discrepancy in the language for one of the standard conditions of approval and a handout containing the revised, more detailed language has been placed on the dais for the City Council's consideration. Minutes City Council Meeting 07-10-17 DRAFT Mayor Pro Tem Wilson called for public comment on the resolution and the proposed change. Hearing none, he asked for comments form the City Council. In response to Mayor Pro Tem Wilson regarding the property being for sale or possibly sold, City Attorney Jenkins stated that this is a land use decision and property ownership is not relevant to the decision. He stated that the case should be decided based on the criteria set forth in the Zoning Ordinance — applying the facts against the legal requirements. Following brief discussion and confirmation from the property owner's representative that they are not opposed to the amended condition as presented by staff, Councilmember Mirsch moved that the City Council adopt Resolution No. 1213 granting approval of the applicant's request in Zoning Case No. 917 at 5 Pine Tree Lane and approve a new driveway apron for a second driveway and a new pathway apron for access to the stable per the Traffic Commission's recommendation. Councilmember Dieringer seconded the motion, which carried without objection. NEW BUSINESS CONSIDERATION OF A PROFESSIONAL SERVICES AGREEMENT WITH JOHN HUNTER AND ASSOCIATES FOR MONITORING AND REPORTING FOR THE MACHADO LAKE TRASH TMDL AND SANTA MONICA BAY MARINE TRASH TMDL AND SUBMITTAL OF REQUIRED INVESTIGATION REPORTS TO THE RWQCB. Mayor Pro Tem Wilson introduced the item and asked for staff's comments. Planning Director Schwartz presented the staff report stating that before the City Council is an agreement to renew an agreement with John Hunter and Associates to satisfy some of the City's stormwater management related requirements including monitoring and reporting for the Machado Lake trash TMDL and Santa Monica Bay Marine debris TMDL and submittal of required investigation reports to the Regional Water Quality Control Board. She stated that John Hunter and Associates has provided this service to City since the monitoring requirement began in 2008 and thus far, the City has met all of requirements. She reviewed Mr. Hunter's qualification and other local clients stating that Mr. Hunter is present to answer any questions. Following brief discussion, Councilmember Dieringer moved that the City Council approve a three year professional services agreement with John Hunter & Associates for monitoring and reporting for the Machado Lake trash TMDL and Santa Monica Bay Marine debris TMDL and submittal of required investigation reports to the Regional Water Quality Control Board in an amount not to exceed $9,421.50 annually. Councilmember Mirsch seconded the motion, which carried without objection. MATTERS FROM THE CITY COUNCIL AND MEETING ATTENDANCE REPORTS Councilmember Mirsch requested that a discussion be agendized at the next City Council meeting to consider taking a proactive approach to enforcement of the fire fuel hazard abatement ordinance. Councilmember Dieringer and Mayor Pro Tem Wilson concurred. Councilmember Dieringer suggested that the City Council direct staff to research alternatives for increasing cellular coverage without adding to or increasing the number of cell towers as was discussed during the Crown Castle presentation at the last City Council meeting. Following brief discussion, staff Minutes City Council Meeting 07-10-17 0 DRAFT. was directed as such. Councilmember Dieringer provided information she received requesting a letter in support of a 2017 League of CA Cities Conference Resolution proposed by the City of Whittier regarding Strategies to Improve Negative Impacts of Criminal Law. Staff was asked to agendize this matter for consideration at the next City Council meeting. Councilmember Dieringer also provided a brief summary of the matters presented at the League of California Cities Mayors & Councilmembers Executive Forum which she attended at the end of June including conducting City Manager Evaluations and goal setting; setting strategic goals and priorities; and developing a Code of Conduct which was discussed during a topic regarding creating a governance culture of civility and purpose. She suggested that the City Council may wish to agendize a discussion on some of these topics in the future. Following brief discussion, the City Council did not express interest in agendizing those matters for future discussion at this time. MATTERS FROM STAFF City Manager Cruz reported that at this time, there are no emergent matters for City Council consideration at the meeting scheduled for Monday, July 24, 2017 and it is likely that the meeting will be cancelled for lack of emergent agenda items. City Manager Cruz further explained the process for agendzing matters requested by the public. Following brief discussion concerning a previous correspondence received regarding peafowl in the community, brought to the City Council's attention by City Manager Cruz, the City Council directed staff to agendize a discussion regarding options for controlling peafowl at a future City Council meeting in late August or thereafter. CLOSED SESSION None. ADJOURNMENT Hearing no further business before the City Council, Mayor Pro Tem Wilson adjourned the meeting at 8:04 p.m. The next regular meeting of the City Council is scheduled to be held on Monday, July 24, 2017 beginning at 7:00 p.m. in the City Council Chamber at City Hall, 2 Portuguese Bend Road, Rolling Hills, California. Respectfully submitted, Heidi Luce City Clerk Minutes City Council Meeting 07-10-17 DRAFT Approved, James Black, M.D. Mayor Minutes City Council Meeting 07-10-17 C1ty ofiell,.9 Jh/i Agenda Item No: 4-B Mtg. Date: 07/24/17 INCORPORATED JANUARY 24, 1957 NO. 2 PORTUGUESE BEND ROAD ROLLING HILLS, CALIF. 90274 (310) 377-1521 07/24/2017 -CHECK RUN FAX: (310) 377-7288 CHECK CHECK PAYEE DESCRIPTION AMOUNT NO. DATE — * EFT 07/24/2017 CALPERS UNFUNDED ACCRUED LIABILITY 22,593.00 24915 07/24/2017 1 HOUR PHOTO ETC AND SIGNS&BAN WOODEN SIGN - ONE WAY TRAFFIC 163.12 24916 07/24/2017 ANIMAL PEST MANAGEMENT COYOTE CONTROL 2,500.00 24917 07/24/2017 CITY OF ROLLING HILLS ESTATES 2016 EMERGENCY PREP EXPO 1,000.00 24918 07/24/2017 COUNTY OF LOS ANGELES BUILDING AND SAFETY SERVICES 1,468.57 24919 07/24/2017 COUNTY OF LA DEPT OF AUDITOR- LAFCO ANNUAL PAYMENT 86.22 24920 07/24/2017 DAILY BREEZE PV NEW PUBLICATIONS - LEGAL NOTICES 468.66 24921 07/24/2017 EMERGENCY PLANNING CONSULTANTS HAZARD MITIGATION PLAN 11,000.00 24922 07/24/2017 GOVINVEST, INC. TOTAL LIABILITY CALCULATOR BALANCE 1,425.00 .24923 07/24/2017 HASLER 1ST CLASS POSTAGE 7/17/17 2,000.00 24924 07/24/2017 JENKINS & HOGIN, LLP ATTORNEY SERVICES JUNE 2017 9,950.20 24925 07/24/2017 LA COUNTY SHERIFFS DEPARTMENT LAW ENFORCEMENT SERVICES JUN 2017 25,785.19 24926 07/24/2017 LA COUNTY SHERIFFS DEPARTMENT SUPPL TRAFFIC ENFORCEMENT JUN 2017 2,215.80 24927 07/24/2017 MUNICIPAL CODE COPRORATION ANNUAL WEB HOSTING FY 17/18 550.00 24928 07/24/2017 NEOPOST USA INC TABBING MACHINE MAINT FY 17/18 612.00 24929 07/24/2017 OPUS BANK OFFICE SUPPLIES, LOCC MTG 890.13 24930 07/24/2017 PACIFIC COAST LANDSCAPE LANDSCAPE AND IRRIGATION AT CITY HALL 750.00 24931 07/24/2017 PACIFIC COAST LANDSCAPE LANDSCAPE MAINTENANCE JUL 2017 565.00 24932 07/24/2017 PENINSULA SENIORS PV SENIORS FY 17/18 2,000.00 24933 07/24/2017 PVP COORDINATING COUNCIL ANNUAL MEMBERSHIP & CALENDAR 25.00 24934 07/24/2017 REMOTE SATELLITE SYS INTL SATELLITE PHONES 97.90 24935 07/24/2017 ROGERS, ANDERSON, MALODY ACCOUNTING SERVICES JUNE 2017, ADDTL SERVICES FOR JIM WALKER 11,791.00 24936 07/24/2017 ROLLING HILLS ESTATES CROSSING GUARD 641.00 24937 07/24/2017 THE GAS COMPANY GAS 06/06/17 - 07/06/17 51.92 24938 07/24/2017 USCM DEFERRED COMP 7/7/17 1,598.00 24939 07/24/2017 VANTAGEPOINT TRANSFER AGENTS DEFERRED COMP 7/7/17 364.00 24940 08/01/2017 DELTA DENTAL DENTAL INSURANCE AUGUST 2017 1,125.74 24941 08/01/2017 STANDARD INSURANCE COMPANY LIFE INSURANCE AUGUST 2017 240.16 24942 08/01/2017 VISION SERVICE PLAN - (CA) VISION INSURANCE AUGUST 2017 113.30 * PR LINK 7/7/2017 PR LINK - PAYROLL PROCESSING PROCESSING FEE 53.95 * PR LINK 7/7/2017 PR LINK PAYROLL 14 & PR TAXES PAY PERIOD - JUNE 21, 2017 THROUGH JULY 4, 2017 18,190.09 I, Raymond R. Cruz, City Manager of Rolling Hills, California certify that the above demands are accurate and there is available in the General Fund a balance of $120,314.95for the t of above items. Raymon ft. Cruz, City Manager r * Previously Disbursed $ 120,314.95 102,070.91 Printed on Recycled Paper CITY OF ROLLING HILLS BALANCE SHEET June 30, 2017 Unaudited (Preliminary) ASSETS MUNICIPAL GENERAL & DEPOSIT COPS & COMMUN. SELF- REFUSE TRAFFIC TRANSIT UTILITY CAPITAL FUND FUND CLEEP FACILITIES INSUR. COLLECT. SAFETY PROP A, C, M FUND & TDA Cash & Cash Equivalents $ 4,707,365 $ 1,771 $ 46,718 $ 15,848 $ 260,374 $ 591,986 $ Cash & Cash Equivalents - Capital Project Fund - Poppy Trail Grading Bond 305,000 - Accounts Receivable - - 40,586 Prepaid Expense & Deposits 37,954 - LIABILITIES $ 34,093 $ 1,486,044 TOTAL ASSETS $ 4,745,319 $ 306,771 $ 46,718 $ 15,848 $ 260,374 $ 632,572 $ $ 34,093 $ 1,486,044 Accounts & Contract Payable $ 17,964 $ Employees Benefits Payable 452 - Deposits 18,852 306,771 Deferred Revenues - - FUND BALANCE Unassigned Fund Balance 4,708,051 46,718 15,848 260,374 251,818 TOTAL UNASSIGNED FUND BALANCE 4,708,051 46,718 15,848 260,374 251,818 )TAL UNASSIGNED FUND BALANCE & LLABILITI $ 4,745,319 $ 306,771 $ 46,718 8 15,848 $ 260,374 $ 632,572 $ COMPOSITION OF CASH Petty Cash $ 1,500 Prepare Date OPUS Bank - Checking Account 68,972 / - ,. 2'3 V7 OPUS Bank - Money Market 3,379 Terry he., finance Director OPUS Bank - Interest Checking 1,010,793 Calif. State Local Agency Investment Fund 5,564,555 Apppeayd By: rz, Malaga Bank -Preferred - CD's 495,000 $ 7,144,199 $ $ $ 380,754 $ BEGINNING YTD OF YEAR TOTAL TOTAL $ 7,144,199 $ 6,891,267 305,000 305,000 40,586 185,238 37,954 37,436 $ 7,527,739 $ 7,418,941 398,718 $ 454,364 452 18,305 325,623 325,574 14,012 TOTAL LIABILITIES 37,268 306,771 380,754 Raymon& R. Cruz, City Mana 7//a 7 r 34,093 1,486,044 34,093 1,486,044 $ 34,093 $ 1,486,044 724,793 812,255 6,802,946 6,606,686 6,802,946 6,606,686 $ 7,527,739 $ 7,418,941 RH bal_fy16-17 7/5/2017 5:10 PM CITY OF ROLLING HILLS SUMMARY STATEMENT OF REVENUES AND EXPENDITURES Actual Compared to Annual Budget PRELIMINARY - NOT AUDITED July 1, 2016 to June 30, 2017 GENERAL Fund Revenues Expenditures Net Revenue before transfers Transfers in (out) Net Revenue CITIZENS' OPTION FOR PUBLIC SAFETY (COPS) Revenues Expenditures Net Revenue before transfers Transfers in (out) Net Revenue CAPITAL IMPROVEMENT FUND Revenues Expenditures Net Revenue before transfers Transfers in (out) Net Revenue COMMUNITY FACILITIES Revenues Expenditures Net Revenue before transfers Transfers in (out) Net Revenue MUNICIPAL SELF-INSURANCE Revenues Expenditures Net Revenue before transfers Transfers in (out) Net Revenue REFUSE COLLECTION Revenues Expenditures Net Revenue before transfers Transfers in (out) Net Revenue TRAFFIC SAFETY Revenues Expenditures Net Revenue before transfers Transfers in (out) Net Revenue TRANSIT - PROPOSITION A, C & M & TDA Revenues Expenditures Net Revenue before transfers Transfers in (out) Net Revenue UTILITY FUND TOTAL ALL FUNDS Revenues Expenditures Net Revenue before transfers Transfers in (out) Net Revenue Revenues Expenditures Net Revenue before transfers Transfers in (out) Net Revenue This Year $ 1,824,850 1,488,181 Last Year $ 1,801,727 1,421,966 This Year Better (Worse) $ 23,123 (66,215.00) Annual Budget & Adj. 1,956,600 1,866,260 Remaining Budget $ 131,750 378,079 336,669 379,761 (43,092.00) 90,340 (246,329) (229,613) (250,902) 21,289 (344,050) (114,437) $ 107,056 $ 128,859 $ (21,803) (253,710) $ (360,766) $ 129,324 $ 114,618 $ 14,706 115,125 $ (14,199) 177,003 103,235 (73,768) 164,000 (13,003) (47,679) 11,383 (59,062) (48,875) (1,196) - - - 0 $ (47,679) $ 11,383 $ (59,062) (48,875) $ (1,196) $ - $ _ - $ - - $ - - (10,956) 10,956 - - $ - $ (10,956) $ 10,956 - $ - $ - $ - $ - 100 $ 100 2,434 5,354 2,920 62,700 60,266 (2,434) (5,354) 2,920 (62,600) (60,166) - - 62,600 62,600 $ (2,434) $ (5,354) $ 2,920 - $ 2,434 $ - $ - $ - - $ - 235 235 6,000 6,000 - (235) 235 (6,000) (6,000) $ - $ (235) $ 235 (6,000) $ (6,000) $ 780,811 $ 775,099 $ 5,712 771,900 $ (8,911) 761,508 755,980 (5,528) 761,508 0 19,303 19,119 184 10,392 (8,911) (24,000) (24,000) - (24,000) 0 $ (4,697) $ (4,881) $ 184 (13,608) $ (8,911) $ 32,932 $ - $ 32,932 50 $ (32,882) 36,545 35,858 (687) 55,500 18,955 (3,613) (35,858) 32,245 (55,450) (51,837) 3,613 35,858 (32,245) 55,450 51,837 $ - $ - $ - - $ - $ 85,245 $ 83,919 $ 1,326 85,786 $ 541 190,770 - (190,770) 190,000 (770.00) (105,525) 83,919 (189,444) (104,214) 1,311 $ (105,525) $ 83,919 $ (189,444) (104,214) $ 1,311 $ 53,237 $ - $ 53,237 - $ (53,237) 53,700 33,800 (19,900) 150,000 96,300 (463) (33,800) 33,337 (150,000) (149,537) 250,000 250,000 - 250,000 - $ 249,537 $ 216,200 $ 33,337 100,000 $ (149,537) $ 2,906,399 $ 2,775,363 $ 131,036 2,929,561 $ 23,162 2,710,141 2,356,428 (353,713) 3,255,968 545,827 196,258 418,935 (222,677) (326,407) (522,665) $ 196,258 $ 418,935 $ (222,677) $ (326,407) $ (522,665) RH inc_fy16-170 7/5/2017 5:26 PM CITY OF ROLLING HILLS RESIDENTIAL ALLIED WASTE RECYCLE NOW REPORT Report Date: 2017 MONTH 2017 January RECYCLED (tons) 51.34 February 45.87 March 52.00 April 53.62 May 47.49 June 51.80 July August September October November December Year to Date Totals: 302.12 Average Monthly Totals: 2017 50.35 GREEN WASTE (tons) 83.67 66.88 75.56 155.40 98.65 114.43 594.59 99.10 C&D C&D Disposal Diversion Recycled Disposed Tonnage I 29.80 6.62 133.36 54.07% 6.37 2.13 115.88 50.24% 32.98 11.00 125.65 54.02% 61.17 11.21 129.57 65.74% 106.36 5.80 114.76 67.68% 58.65 7.33 125.18 62.92% - - - 0.00% - - - 0.00% - - - 0.00% - - - 0.00% - - - 0.00% - - - 0.00% 295.33 49.22 44.09 744.41 60.19% 7.35 124.07 59% MONTHLY TOTALS (tons) 304.80 237.13 297.19 410.97 373.06 357.39 0.00 0.00 0.00 0.00 0.00 0.00 1,980.54 330.09 ECEIVED JUL .1 8 2017 City of Roiling Hills By teer olbraf&i0 qee4 INCORPORATED JANUARY 24, 1957 NO. 2 PORTUGUESE BEND ROAD ROLLING HILLS, CA 90274 (310) 377-1521 FAX (310) 377-7288 Agenda Item No.: 4-E Mtg. Date: 07/24/17 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM RAYMOND R. CRUZ, CITY MANAGER (h/2v SUBJECT: APPROVAL OF AN AGREEMENT WITH ANIMAL PEST MANAGEMENT SERVICES, INC. FOR UP TO $14,000 TO PROVIDE COYOTE CONTROL SERVICES. DATE: JULY 24, 2017 ATTACHMENT: Agreement BACKGROUND Historically, the City of Rolling Hills maintains an annual agreement with the Los Angeles County Agricultural Commissioner/ Weights & Measures Dept. (ACWM) for coyote control services. However, the agency's responsiveness is limited because it has only one staff member that eradicates coyotes for one third of the entire County. Thus, Rolling Hills has to wait its turn in the cue regardless of the urgency of its coyote control problem. Therefore, due to the increase in number of aggressive coyotes in the City the last three years, staff was directed to find an alternative to augment the County's services. Staff found a third party vendor, Animal Pest Management Services, Inc., and they have successfully provided the City with supplemental coyote control services over the last three years. DISCUSSION Animal Pest Management Services, Inc. is a very reputable State licensed coyote control vendor, and has provided good coyote control services for the City the last three years. Staff personally has had experience utilizing this firm for coyote control in another City and have found them to be professional, effective and discreet. They are also the only company that staff can find that also utilizes firearms to control coyotes. This has been a very effective method in Rolling Hills when trapping has been ineffective and they 0 have received permission from the Los Angeles County Sheriff's Department to do so after meeting with the Lomita Captain. The company works on a 10 -day work schedule at a cost of $3,500 for trapping and $1,000 minimum and $500 per night for shooting. FISCAL IMPACT The City has budgeted $24,000 for coyote control services for FY 2017/18. Staff plans to utilize Animal Pest Management, Inc. for services up to $14,000 until June 30, 2018. RECOMMENDATION It is recommended that the City Council approve the agreement as presented and authorize the City Manager to execute the agreement. RRC:hl CoyoteControlAgreement_APM 2017-saffreport.docx SERVICES AGREEMENT COYOTE CONTROL SERVICES THIS AGREEMENT FOR COYOTE CONTROL SERVICES ("Agreement") is made and entered into this day of July 2017 by and between the CITY OF ROLLING HILLS, a California municipal corporation (the "CITY") and ANIMAL PEST MANAGEMENT SERVICES, INC., a California corporation (the "CONTRACTOR"). RECITALS A. CITY desires to retain CONTRACTOR to provide coyote control services in the City of Rolling Hills. B. CONTRACTOR is well qualified by reason of qualifications and experience to perform such services; and C. CONTRACTOR is willing to render such services under the terms and conditions set forth herein. NOW, THEREFORE, for and in consideration of the mutual covenants and conditions herein contained, the parties hereto agree as follows: 1. SCOPE OF WORK CONTRACTOR shall perform all work necessary to complete in a manner satisfactory to CITY and in accordance with relevant professional standards and legal requirements the services set forth in the scope of work attached hereto as Exhibit A and incorporated herein by reference. 2. CITY RESPONSIBILITIES CITY shall provide information and documents and access to City facilities as may be necessary to assist with the work. 3. COMPENSATION The CITY agrees to pay CONTRACTOR the fees set forth in Exhibit A upon performance of the work and submission of invoices. CITY will pay uncontested invoices within thirty (30) days of receipt. Fees for services contemplated by this Agreement shall not exceed $14,000.00 without a written amendment to this Agreement. 4. ASSIGNMENT/SUBCONTRACTING CITY has engaged CONTRACTOR by virtue of its specialized expertise and reputation in the field of coyote control. Consequently, CONTRACTOR shall not be permitted to subcontract or assign any portion of this Agreement without the express written consent of the CITY. 5. ACCOUNTING RECORDS CONTRACTOR must maintain accounting records and other evidence pertaining to costs incurred, which records and documents shall be kept available at the CONTRACTOR's California office during the contract period and thereafter for three years from the date of final Page 1 of 5 payment. CONTRACTOR shall provide the CITY access to such records for approval, funding, or auditing the project, during normal business hours upon reasonable notice, the reasonable cost of which shall be borne by the CITY. Nothing herein shall convert such records into public records and they will be available only to the CITY for approval, funding, or audit functions. 6. TERM OF AGREEMENT The term of this Agreement shall commence upon execution by both parties and conclude on June 30, 2018. Extensions of the term of this Agreement shall be made in writing and agreed upon by the CITY and the CONTRACTOR. 7. TERMINATION This contract may be terminated at any time without cause by either party giving thirty (30) days' advance written notice of termination to the other party. All work satisfactorily performed pursuant to the contract and prior to the date of termination may be claimed for reimbursement. In the event of a breach or a default in the performance of this Agreement, the non -defaulting party may terminate the Agreement immediately, provided that the defaulting or breaching party has failed to cure or made reasonable progress towards curing the default within ten (10) of receipt of notice demanding a cure. If this Agreement is terminated pursuant to any of the provisions contained hereinabove, and if requested to do so in writing by the CITY, the CONTRACTOR shall, within fourteen (14) calendar days after receipt of such written request, deliver and turn over to the CITY all of its preparation and work on documents which were done to the date of the receipt of the notice of termination. The terms "preparation" and "work" as used in this paragraph, shall refer to and include all other data and materials of whatever type that have been gathered by the CONTRACTOR, and contemplated to be used or actually used, in the performance of the services. 8. AMENDMENT It is mutually understood and agreed that no alteration or variation of the terms of this agreement, or any subcontract requiring the approval of the CITY shall be valid unless made in writing, signed by the parties hereto, and approved by all necessary parties. 9. INDEMNITY CONTRACTOR shall indemnify, defend with counsel approved by CITY, and hold harmless CITY, its officers, officials, employees and volunteers from and against all liability, loss, damage, expense, cost (including without limitation reasonable attorneys fees, expert fees and all other costs and fees of litigation) of every nature arising out of or in connection with and to the extent of CONTRACTOR'S negligence or other wrongful conduct in CONTRACTOR'S performance of work hereunder or its failure to comply with any of its obligations contained in this AGREEMENT, regardless of CITY'S passive negligence, but excepting such loss or damage which is caused by the sole active negligence or willful misconduct of the CITY. The CONTRACTOR shall promptly pay any final judgment rendered against the CITY (and its officers, officials, employees and volunteers) covered by this indemnity obligation. It is expressly understood and agreed that the foregoing provisions are intended to be as broad and inclusive as is permitted by the law of the State of California and will survive termination of this Agreement. 10. INSURANCE Page 2 of 5 C) A. Without limiting CONTRACTOR'S obligations arising under paragraph 10 - Indemnity, CONTRACTOR shall not begin work under this Agreement until it obtains policies of insurance required under this section. The insurance shall cover CONTRACTOR, its agents, representatives and employees in connection with the performance of work under this Agreement, and shall be maintained throughout the term of this Agreement. Insurance coverage shall be as follows: i. Automobile Liability Insurance with minimum coverage of $300,000 for property damage, $300,000 for injury to one person/single occurrence, and $300,000 for injury to more than one person/single occurrence. ii. Public Liability and Property Damage Insurance, insuring CITY, its elected and appointed officers, agents, and employees from claims for damages for personal injury, including death, as well as from claims for property damage which may arise from CONTRACTOR'S actions under this Agreement, whether or not done by CONTRACTOR or anyone directly or indirectly employed by CONTRACTOR. Such insurance shall have a combined single limit of not less than $1,000,000. iii. Worker's Compensation Insurance for all CONTRACTOR'S employees to the extent required by the State of California. iv. Professional Liability Coverage. The CONTRACTOR shall maintain professional errors and omissions liability insurance for protection against claims alleging negligent acts, errors, or omissions which may arise from the CONTRACTOR's operations under this Agreement, whether such operations be by the CONTRACTOR or by its employees, subCONTRACTORs, or subcontractors. The amount of this insurance shall not be less than one million dollars ($1,000,000) on a claims -made annual aggregate basis, or a combined single -limit -per -occurrence basis. B. Deductibility Limits for policies referred to in subparagraphs A (i) (ii) and (iii) shall not exceed $5,000 per occurrence. C. Additional Insured. City and its elected and appointed officers, agents, and employees shall be named as additional insured on policies referred to in subparagraphs A (i) and (ii). D. Primary Insurance. The insurance required in paragraphs A (i) (ii) and (iv) shall be primary and not excess coverage. E. Evidence of Insurance. CONTRACTOR shall furnish CITY, prior to the execution of this Agreement, satisfactory evidence of the insurance required, issued by an insurer authorized to do business in California, and an endorsement to each such policy of insurance evidencing that each carrier is required to give CITY at least 30 days prior written notice of the cancellation of any policy during the effective period of the Agreement. All required insurance policies are subject to approval of the City Attorney. Failure on the part of CONTRACTOR to procure or maintain said insurance in full force and effect shall constitute a material breach of this Agreement. 11. CONFLICTS OF INTEREST No member of the governing body of the CITY and no other officer, employee, or agent of the CITY who exercises any functions or responsibilities in connection with the planning and carrying out of the program, shall have any personal financial interest, direct or indirect, in this Page 3of5 Agreement; and the CONTRACTOR further covenants that in the performance of this Agreement, no person having any such interest shall be employed. 12. INDEPENDENT CONTRACTOR The CONTRACTOR is and shall at all times remain as to the CITY a wholly independent contractor. Neither the CITY nor any of its officers, employees or agents shall have control over the conduct of the CONTRACTOR or any of the CONTRACTOR's employees, except as herein set forth. The CONTRACTOR shall not at any time or in any manner represent that it or any of its agents or employees are in any manner agents or employees of the CITY. 13. ENTIRE AGREEMENT OF THE PARTIES This Agreement supersedes any and all other agreements, either oral or in writing, between the parties hereto with respect to the employment of CONTRACTOR by CITY, and contains all the covenants and agreements between the parties with respect such employment in any manner whatsoever. Each party to this Agreement acknowledges that no representations, inducements, promises or agreements, orally or otherwise, have been made by any party, or anyone acting on behalf of any party, which are not embodied herein, and that no other agreement or amendment hereto shall be effective unless executed in writing and signed by CITY and CONTRACTOR. 14. ANTI -DISCRIMINATION In the performance of the terms of this Agreement, CONTRACTOR shall not engage in, nor permit subcontractors to engage in discrimination in employment of persons because of the age, race, color, religious creed, sex, sexual orientation, national origin ancestry, physical disability, mental disability, medical condition, or marital status of such persons. Violation of this provision may result in the imposition of penalties referred to in Labor Code Section 1735. 15. NOTICES. All written notices required by, or related to this Agreement shall be sent by Certified Mail, Return Receipt Requested, postage prepaid and addressed as listed below. Neither party to this Agreement shall refuse to accept such mail; the parties to this Agreement shall promptly inform the other party of any change of address. All notices required by this Agreement are effective on the day of receipt, unless otherwise indicated herein. The mailing address of each party to this Agreement is as follows: CITY: City of Rolling Hills No. 2 Portuguese Bend Road Rolling Hills, CA 90254 ATTN: City Manager CONTRACTOR: Animal Pest Management Services, Inc. 13655 Redwood Court Chino, CA 91710-5516 ATTN: Dan Fox 16. GOVERNING LAW Page4of5 This Agreement shall be governed by and construed in accordance with the laws of the State of California, and all applicable federal statutes and regulations as amended. 17. AUTHORITY Both the CITY and the CONTRACTOR covenant that each individual executing this Agreement on behalf of each party is a person duly authorized and empowered to execute contracts for such party. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date and year first above written. CITY OF ROLLING HILLS ANIMAL PEST MANAGEMENT SERVICES, INC. Raymond R. Cruz, City Manager Dan Fox, President DATE: DATE: ATTEST: Heidi Luce, City Clerk APPROVED AS TO FORM: Mike Jenkins, City Attorney Page 5 of 5 i EXHIBIT A Animal Pest Management Services, Inc. Urban Wildlife Professionals as ..3 NAME: CITY OF ROLLING HILLS TRAPPING SERVICE AGREEMENT 90606316 Phone 800344.6567 Fax 909.590.1435 ATM: RAY CRUZ_ DATE: 07/14/2017 STREET: 2 PORTUGUESE BEND ROAD CITY: ROLLING HILLS STATE: CA ZIP: 90274-5171 EMAIL INVOICES TO: HEREBY AUTHORIZES SERVICE AT: CITY OF ROLLING HILLS STREET: VARIOUS LOCATIONS TVITHRil THE CITY CITY: ROLLING HILLS ZIP: PHONE- 310-377-1521 FAX: EMAIL: RCRLZr,CITYOFRH.NET Notice: The customer acknowledges and understands that no guarantee on the number of target animals to be trapped (if any) is given. The customer further agrees that if any of the traps or materials used on the job site are lost, stolen, or damaged, the customer is responsible for reimbursing Animal Pest Management Services. Inc. at the replacement cost indicated (this charge is over and beyond the total cost of the job). TRAPPING PERIOD: AS NEEDED TARGETANLMAIS/PESTS: COYOTE DESCRIPTION OF WORK TRAPS /MATERIALS TO BE USED (AMOUNT AND NUMBER): SNARES OR SHOOTING REPLACEMENT COST: $NIA **TRAPPli\rG TO COMMENCE UPON RECEIPT OFSIGISED CONTRACT. COSTS INITIAL SETUP FEE: S14,000.00 FOR THE FISCAL YEAR FROM JULY 1, 2017 - JUNE 30, 2018 $3,500.00 FOR 10 BUSINESS DAY TRAPPING OR $1,000.00 (MINIMUM CHARGE FOR FIRST TWO NIGHTS) $500.00 PER NIGHT FOR SHOOTING * This minimum charge covers the set-up, use of traps and/or materials for the duration of the trapping period and the trapping and removal of the target animals. ADDITIONAL CHARGES: SN/A for ever trip to remove a target animal that is trapped. SN1A for every trip to remove a non -target animal trapped that must be removed or released. PAYMENT TERMS The initial set-up fee of $3,500.00 for trapping and $500.00 per night for shooting is due at the beginning of the trapping program. Additional charges (if any) are due as they occur. CUSTOMER AGREES TO PAY WHEN BILLED FOR SERVICES DUE. A SERVICE CHARGE OF 13% PER MONTH EQUIVALENT TO AN ANNUAL PERCENTAGE RATE OF 18% WILL BE APPLIED TO PAST DUE ACCOUNT. The customer awes to indemnify Animal Pest Management Services, Inc.. and hold it harmless against any claim, lawsuit or demand, including all reasonable attorney's fees and cosrs, brought by third parties based on environmental issues including, but not limited to, matters related to the California Environmental Quality Act (CEQA) and/or the National Environmental Policy Act (NEPA). Animal Pest Management Services, Inc. agrees to provide trapping services at the described premises according to the terms and conditions set forth under description of work This agreement covers only the premises and target animals specified under description of work. The agreement does not guarantee against present or future pest damage to the property, building or contents of the described premises, or provide compensation therefore. ANIMAL PEST MANAGEMENT ES, INC. Pleas Print Name DATE: 711 `V/7 DATE: CUSTOMER (SIGNATURE) PRESIDENT/ PRINCIPAL URBAN WILDLIFE BIOLOGIST: DAN FOX AREA 7 Corporate Office San Diego County Orange Comity Riverside County PLEASE SIGN AND RETURN ONE COPY 13655 Redwood Conn, Chino, CA 91710.5516 3525 Del Mar Heights, 0760, San Diego, CA 92130-2122 23170 Del Lego Drive, Laguna Hills, CA 92653.1306 PMB 446.31855 Date Palm Drive, Cathedral City, CA 92234.3100 For Over 35 Years, Helping To Make Our World Greener. www.animalpest.com TO: FROM: BY: SUBJECT: te:* 0-/Ra qee4 INCORPORATED JANUARY 24, 1957 NO.2 PORTUGUESE BEND ROAD ROLLING HILLS, CA 90274 (310) 377-1521 FAX (310) 377-7288 Agenda Item No: 8-A Meeting Date: 07/24/17 HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL RAYMOND R. CRUZ, CITY MANAGER pig -- TERRY SHEA, FINANCE DIRECTOR DISCUSSION AND CONSIDERATION OF AUTHORIZING PARTICIPATION IN PUBLIC AGENCY RETIREMENT SERVICES (PARS) POST -EMPLOYMENT BENEFITS TRUST PROGRAM TO BE ADMINISTERED BY PARS AND U.S. BANK; APPOINTING THE CITY MANAGER AS THE CITY'S PLAN ADMINISTRATOR; AND AUTHORIZING THE CITY MANAGER TO EXECUTE THE DOCUMENTS TO IMPLEMENT THE PROGRAM. AND CONSIDERATION OF RESOLUTION NO. 1214 - A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ROLLING HILLS, CALIFORNIA APPROVING THE ADOPTION OF THE PUBLIC AGENCIES POST -EMPLOYMENT BENEFITS TRUST ADMINISTERED BY PUBLIC AGENCY RETIREMENT SERVICES (PARS). DATE: JULY 24, 2017 ATTACHMENTS: Introduction to PARS Pension Rate Stabilization Program High Mark Capital Management PARS Diversified Portfolios Resolution No. 1214 RECOMMENDATION Consider adoption of Resolution No. 1214 authorizing the establishment of the PARS Post -Employment Benefits Trust Program which could be used to pre -fund CalPERS pension obligations. BACKGROUND In order to strengthen the long-term stability of their fund and improve the funding ratio of its retirement plans and reduce the risk of volatile investment markets, the CaIPERS Board of Administration has implemented numerous changes to its actuarial assumptions and methodologies. These changes follow Ca1PERS's portfolio loss of 24% during the last recession (2009) and an average 10 -year return of just 5.03% - far below the 7.5% average annual return required by Ca1PERS's Board and assumed by its internal actuaries. The most significant of these changes includes lowering CalPERS's assumed rate of return (i.e. the discount rate) to 7.0% and increasing the life expectancy of beneficiaries. With these changes, plans will see an increase in normal costs (the cost of benefits accrued by active members in the current year) and the accrued liabilities. These increases will result in higher required employer contribution rates beginning in FY 2018-19. In order to mitigate these rising costs City staff has recommended establishing an Internal Revenue Code (IRC) Section 115 Trust for pension obligations. An IRC Section 115 Trust is a tax-exempt investment tool used to prefund essential government expenses (i.e. retirement plan benefits). Because trust assets are designated for essential government expenses, they are exempt from state mandated investment restrictions placed on the City's internally managed portfolio, and as such the City could expect to earn a long-term rate of return greater than would be attained through the City's investment pool. Funds placed in an IRC Section 115 Trust can remain in the Trust until a point in time when the City chooses to draw down its assets to pay annual benefit obligations. Contributions held in an IRC Section 115 Trust can be drawn down at any time to mitigate Ca1PERS rate impacts to the General Fund. However, the annual withdrawal amount cannot exceed an amount equal to two years' pension costs. In order to remain tax-exempt, assets held in an IRC Section 115 Trust are designated as irrevocable, meaning they must be used to fund the City's retirement obligations. For this reason, withdrawals from a trust may be made to either reimburse the City for current and/or previous year's payments, or to pay Ca1PERS directly. DISCUSSION In 2012, the Government Accounting Standards Board (GASB) issued Statement No. 68, Accounting and Financial Reporting for Pensions. GASB 68 requires that governmental employers that sponsor Defined Benefit plans (i.e., Ca1PERS) must recognize a net pension liability (unfunded accrued liability) on their balance sheet. This is the FU difference between the City's total pension liability (actuarial accrued liability) and actual plan assets. GASB 68 became effective for the 2014-15 fiscal year. To address the GASB 68 net pension liability figure, the City's only prior option was to commit additional funds to CalPERS (in excess of its annual required contributions) to reduce its unfunded liability. IRC Section 115 Irrevocable Trusts have been in existence for many years, they have been adopted as a mechanism for pre -funding public agencies' OPEB liabilities (which the City did in 2011 through a CalPERS sponsored plan) Most recently, they have become a popular tool for pre -funding pension liabilities as a method to address unfunded liabilities and large variances in annual pension contribution rates. This would provide the City with an alternative to sending funds to CalPERS that will allow for greater local control over assets. It will also allow for the funds to be managed by a professional fund investment team selected and monitored by the City, with future excess contributions to be transferred to Ca1PERS at the City's discretion to reduce the City's Net Pension Liability. Staff identified and assessed four firms (i.e. trust administrators) that offer local agencies the opportunity to participate in multiple -employer IRC Section 115 Trusts for pensions, also known as Pension Rate Stabilization Programs (PRSPs). Staff received information regarding investments and fee proposals from PARS, PFM, Keenan & Associates and Robinson Capital, and evaluated their programs based on the following criteria: years of experience, number of clients, historical returns, flexibility of investments, fees and tax exempt status as established through an IRS Private Letter Ruling (PLR). Based on the above criteria staff respectfully recommends PARS as the City's trust administrator, for the following reasons: • PARS, a retirement services provider, has thirty-two years of business experience and is a recognized leader for public employee benefit services. PARS currently has 84 members participating in its Pension Rate Stabilization Program, the most of any known provider. PARS's clients are comprised of cities (36), counties (8), special districts (15) and education districts (25). • PARS offers investment services through HighMark Capital, an investment management firm which offers five diversified portfolios for PARS clients with long-term, mid-term and short-term investment horizons. HighMark's Moderate portfolio has a 12 -month average gross return of 9.67%, and a five year average gross return of 6.34%. PARS is partnered with U.S. Bank, the trustee and plan fiduciary responsible of safeguarding member assets. Under the terms of the trust, U.S. Bank provides legal oversight and holds member assets in trust which protects assets from creditors. • PARS fee structure is comparable to that of the other providers with the exception of the PFM, they have a minimum fee of $26,000. Their fee structure is tiered and calculated as percentage of trust assets - the fee structure is arranged so that fees decline as assets increase. However, based on the City's circumstances our annual fees will be .60% of assets. Fees are deducted from the trust assets on a monthly basis and itemized for services provided by the Trust Administrator (PARS), the Discretionary Trustee (U.S. Bank) and the Investment Manager (HighMark Capital). • Of the four firms evaluated, PARS is one of only two firms to have received a favorable PLR from the IRS for its Pension Rate Stabilization Program, establishing that their trust can be operated on a tax-exempt basis. Expected benefits offered by the PARS PRSP include: • Contributions placed in an exclusive benefit trust could address the City's Net Pension Liability. • Investment flexibility with IRC Section 115 Trust compared to restrictions on general fund investments (Govt. Code 53216). • Increased risk diversification of plan assets through different asset management. • Investments can be tailored to the City's unique demographics. • Oversight and control of fund management selection, monitoring of performance and ability to replace fund management based on performance criteria. • Increased flexibility on use of trust assets (i.e., trust assets can be accessed at any time as long as the assets are used to fund the City's pension obligations). • Lower investment management and administrative expenses compared to Ca1PERS. • Potential for positive rating agency and investor consideration. The program has been established as a multiple employer trust so that public agencies regardless of size can join the program to receive the necessary economies of scale to keep administrative fees low and avoid any setup costs. The trust permits the City, under Federal and State law, to invest in a more diversified array of investments to maximize investment returns long term. FISCAL IMPACT The City Council has approved funding the Plan for $185,000 during fiscal year 2017/18, these funds are from the General Fund Reserve. There are no fees to establish the Trust. The fees to administer the Trust are .25% of the assets and .35% for Investment Management Fees for an annual total of .60% of the value of the assets. The Fee Structure is attached. The Fees on the $185,000 would be approximately $1,200 annually. O CONCLUSION For the above reasons, City Staff respectfully requests that the City Council adopt the attached resolution to authorize participation in the PARS Pension Rate Stabilization Program Section 115 Trust and appoint the City Manager as the City's Plan Administrator. Additionally, it is recommended the City Council authorize the City Manager to execute a professional services agreement with PARS for trust administration services, and authorizing the City Manager to execute all necessary documents with U.S. Bank, the Trustee, and HighMark Capital, the Investment Manager. Staff also requests the City Council establish a Pension Rate Stabilization Fund. THIS PAGE INTENTIONALLY LEFT BLANK INTRODUCTION TO PARS • PARS - Public Agency Retirement Services • 3rd largest multiple employer public retirement system • 850+ member agencies • Over 1,400+ Retirement Plans under PARS administration • Over 375,000+ public employee participants • Over $2.2 billion in trust assets under administration AGENCY RETIREMENT SERVICES PARS TRUST TEAM PARS PUBLIC AGENCY RETIREMENT SERVICES TRUSTADMINISTRATOR & CONSULTANT • Recordkeeping/sub-trust accounting • Actuarial coordination • Monitor contributions/process disbursements • Monitor plan compliance • Ongoing client liaison 33 years (1984 - 2017) Over $2.2 billion PARS trJbank. TRUSTEE • Safeguard plan assets • Oversight protection • Plan fiduciary • Custodian of assets CORPORATE EXPERIENCE 154 years (1863 - 2017) PLANS UNDER ADMINISTRATION 17 HIGHMARK° CAPITAL MANAGEMENT INVESTMENT MANAGER Investment sub -advisor to U.S. Bank • Open architecture • Investment strategy and asset allocation development • Investment policy assistance 1,600+ plans, 850+ public agencies, 400,000+ participants DOLLARS UNDER ADMINISTRATION Over $4 trillion 98 years (1919- 2017) Over $15.9 billion under management CITY OF ROLLING HILLS 1 3 SECTION 115 TRUST • Section 115 Trusts can be used by local governments to fund essential governmental functions (i.e., retiree healthcare, pension) • Any income derived from a Section 115 Trust is tax exempt • The PARS Trust received the first IRS Private Letter Ruling (PLR) in June 2015 to fund both OPEB and Pension Liabilities for a multiple -employer trust • The PARS Trust is setup as a compliant, irrevocable Section 115 Trust to prefund employee benefit plan obligations • Once contributions are placed into The PARS Trust, assets from the Trust can be used for specific benefit plan purposes including: Reimbursing the City for retirement system contributions Transferring assets directly to the retirement system Paying plan expenses (actuarial valuation or audit). PARS CITY OF ROLLING HILLS 14 PUBLIC AGENCY RETIREMENT SERVICES THE PARS SECTION 115 TRUST THE PARS IRS -APPROVED COMBINATION 115 TRUST 4.)prefund • Multiple employer trust structure brings investment and administration economies of scale with no risk sharing • Pension and OPEB assets are segregated through sub -accounting • PRSP can also subaccount by CaIPERS Plan PARS • Address liabilities for Pension (GASB 68) and/or OPEB (GASB 45/75) • Can choose different investment risk tolerance levels for each sub -account • Lower fees due to aggregation of assets (Pension and OPEB) on tiered fee schedule CITY OF ROLLING HILLS 1 5 ADVANTAGES OF THE PARS TRUST. SECURITY • Strong trustee — U.S. Bank — 5th largest commercial bank in the nation, serving 25 states • Discretionary trustee — highest level of fiduciary protection • IRS approval of PARS Combination Trust and compliance with CA Government Code FLEXIBILITY • Investments — 10 asset allocation strategies — 5 active/5 index • Senior Portfolio Manager will make recommendation and assist with Investment Policy Statement (IPS) • Termination — 90 -days out with no fees incurred or immediate with funds transfer to underlying system EFFICIENCY • Easy to adopt master trust • Signature -ready, legally vetted documents • Streamlined process (implementation within 30 days or less) • Agency receives personalized monthly statements with their specific account activity SCALE/SERVICE • Economies of Scale — Combined asset growth without risk -sharing; using lower cost institutional funds and pooled investing • Simple Fee Structure — Asset based, fee schedule declines as assets grow, no minimum fees • Personal service — PARS Consultant & HighMark Capital Management Senior Portfolio Manager dedicated to the City M1RUC AGENCY RETIREMENT SERVICES PARS CITY OF ROLLING HILLS 1 6 PURUC AGB4Cy RETIREMENT SERVICES OPEB/PENSION CLIENT LISTS UPDATED: JUNE 2017 CITIES & TOWNS Alameda Duarte Manhattan Beach Sausalito Alhambra Elk Grove Morgan Hill Solana Beach Atherton Fountain Valley Napa Stanton Bakersfield Fullerton Norwalk Temple City Bell Gardens Galt Novato Tiburon Brea* Half Moon Bay Palo Alto Tustin Brisbane Healdsburg* Rancho Cucamonga* Union City Camarillo Hercules Redding Upland Capitola* Hermosa Beach Redwood City Westminster* Chino Hills Huntington Beach Rialto Woodland Colma La Mesa* Richmond Yountville Commerce La Verne Rohnert Park Yuba City Coronado Lake Forest Rosemead Yucca Valley Covina Lakewood San Leandro Crescent City Livermore Santa Ana Cupertino Lodi Santa Clara Daly City Mammoth Lakes Santa Clarita COUNTIES Amador Contra Costa Humboldt Imperial lnyo Kern Kings PARS Merced Shasta Mono Solano Nevada Sonoma Placer Sutter Plumas Trinity Riverside Yolo San Benito Bolded agencies have adopted PRSP * PRSP only CITY OF ROLLING HILLS 1 7 OPEB/PENSION CLIENT LISTS UPDATED: JUNE 2017 SPECIAL DISTRICTS Bodega Bay Public Utility District Calaveras County Water District California JPIA California Joint Powers RMA Central Contra Costa Sanitary District Central Contra Costa Transit Authority Coastside Fire Protection District Contra Costa MVCD Crestline Village Water District Delta Diablo (Sanitation District) Desert Recreation District Eastern Sierra Community Services District El Dorado Hills County Water District Fallbrook Public Utility District Fresno Irrigation District Fresno Metropolitan Flood Control District Glenn-Colusa Irrigation District Great Basin Unified APCD Hayward Area Recreation & Park District Housing Authority of the County of Contra Costa Housing Authority of the County of San Bernardino Humboldt No. 1 Fire Protection District Menlo Park Fire Protection District Mesa Water District Metropolitan Transportation Commission Mid -Peninsula Water District Mojave DesertAQMD Montecito Fire Protection District Monterey Bay UAPCD Moraga-Orinda Fire Protection District Municipal Water District of Orange County Napa County Mosquito Abatement District Novato Sanitary District Orange County Vector Control District Orange County Water District Placer County Resource Conservation District Rancho Cucamonga Fire Protection District* Rancho Murrieta Community Services District Rowland Water District San Mateo County MVCD Santa Barbara County Law Library Santa Cruz Regional 9-1-1 South Montebello Irrigation District South Coast Water District South Orange County Wastewater Authority South Placer Fire Protection District Southern Marin Fire Protection District Superior Court of CA, County of Contra Costa Superior Court of CA, County of Imperial Superior Court of CA, County of Inyo Superior Court of CA, County of Kern Superior Court of CA, County of Marin Superior Court of CA, County of Merced Superior Court of CA, County of Orange Superior Court of CA, County of San Mateo Superior Court of CA, County of Shasta Superior Court of CA, County of Siskiyou Superior Court of CA, County of Sonoma Three Valleys Municipal Water District Twentynine Palms Water District* Vallejo Sanitation & Flood Control District Ventura Regional Sanitation District Walnut Valley Water District West Bay Sanitary District West County Wastewater District Western Riverside Council of Governments Bolded agencies have adopted IRSP PUBLIC AGENCY RETIREMENT SERVICES PARS CITY OF ROLLING HILLS 1 8 PUBLIC AGENCY REUREMENT SERVICES OPEB/PENSION CLIENT LISTS UPDATED: JUNE 2017 SCHOOL DISTRICTS Auburn Union School District Bass Lake Joint Union Elementary School District Bellflower Unified School District Beverly Hills Unified School District Calistoga Joint Unified School District Compton Unified School District Corning Union Elementary School District Cotati-Rohnert Park Unified School District El Dorado Union High School District Fowler Unified School District Hesperia Unified School District John Swett Unified School District Lakeside Union School District Lemon Grove School District Manteca Unified School District Moreno Valley Unified School District Natomas Unified School District COMMUNITY COLLEGE DISTRICTS Grossmont-Cuyamaca CCD Hartnell CCD* Marin CCD San Bernardino CCD State Center CCD Victor Valley CCD* Yosemite CCD PARS Ocean View School District Ontario -Montclair School District Placer Union High School District Red Bluff Joint Union High School District Red Bluff Union Elementary School District River Delta Unified School District Riverdale Joint Union School District San Bruno Park School District San Marino Unified School District Santa Barbara Unified School District Santa Rita Union School District Trona Joint Unified School District Twin Rivers Unified School District Visalia Unified School District Westside Union School District Whittier City School District Wilsona School District SPECIAL EDUCATION DISTRICTS Intelecom Bolded agencies have adopted PRSP CITY OF ROLLING HILLS 1 9 CITY PENSION FUNDING STATUS As of June 30, 2015, City of Rolling Hill's CaIPERS pension plan is funded as follows: Actuarial Liability ed Liability Employer Contribution Amount (17-18) $2:47 Million PUBLIC AGENCY RETIREMENT SERVICES PARS CITY OF ROLLING HILLS 1 10 PROJECTED EMPLOYER CONTRIBUTIONS (misc.) Projected misc. contributions increase from $54,861 to $116,955 in 6 years PUBLIC AGENCY RETIREMENT SERVICES 26.00% 24.00% - 22.00% 20.00% 18.00% 16.00% 14.00% - 12.00% 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 PARS Projected CaIPERS Rate (7.0%) —Original CaIPERS Rate (7.5%) CITY OF ROLLING HILLS 1 11 WHY PREFUND PENSION OBLIGATIONS? Local Control over Pension Assets Pension Rate Stabilization Program provides an alternative to sending money direcY pension s t ly to, CalPERS to address unfunded liabilities Pension Rate Stabilization transferred City's Assets can be fluctuations Employer plan t the Cit s direction, which can reduce or w eliminate large p y contributions to CaIPERS Emergency source of funds when Employer revenues are impaired based on economic or other conditions Lower Costs The PARS Trust offers flexibility and potentially lower overall administrative and investment management costs compared to the CaIPERS pension program otenti al earnings than the general fund Diversified investment opportunities should enable the trust to earn greater returns than the general fund over the long run PUBLIC AGENCY RETIREMENT SERVICES PARS CITY OF ROLLING HILLS 1 12 SAMPLE CITY FUNDING Et DISTRIBUTION POLICIES Contribute 50% of a given year's realized year end surplus to address pension liability Contribute amount equal to annual PERS employer contribution ($6 million) in order to allow full access to trust assets at all times Contribute $4 million to stabilize PERS employer misc. Rates to 28% and safety rates to 44% through FY 23-24 "One equals five plan" - Contribute $1 million per year for 5 years based on premise that every contribution will save taxpayers!$5 million over 25 years Contribute Employer contribution equal to the 2.8% 5 discount rate (as opposed to the standard 7.5% rate), with the difference going into the Section 115 Trust 7 Transfer proceeds from internal stabilization fund into Section 115 Trust Earmarked' a portion of a recently approved local sales tax measure to,be sets aside for unfunded pension liabilities AGENCY RETIREMENT SERVICES PARS CITY OF ROLLING HILLS 1 13 INVESTMENT FLEXIBILITY City maintains oversight of the investment manager and the portfolio's risk tolerance level • Investment restrictions that apply to the general fund (CA Government Code 53601) are not applicable to assets held in The PARS Section 115 Irrevocable Trust PUBLIC AGENCY RETIREMENT SERVICES Assets held in The PARS Section 115 Irrevocable Trust can be invested per Government Code Section 53216 and 53620 • Investments can be diversified and invested in a prudent fashion • Investments can be tailored to the City's unique demographics and needs • Increased risk diversification PARS CITY OF ROLLING HILLS 1 14 INVESTMENT STRATEGIES PARS ASSET ALLOCATION STRATEGIES PUBLIC AGENCY RETIREMENT SERVICES Expected Model Return Efficient Frontier: Moderately Conservative Conservative Moderate Conservative Moderately Conservative Moderate Balanced Capital Appreciation Capital Appreciation Balanced Investment Objectives Equity Fixed Income Cash 5-20% 20-40% 40-60% 50-70% 65-85% 60-95% 50-80% 40-60% 30-50% 10-30% 0-20% 0-20% 0-20% 0-20% 0-20% PARS EXPECTED MODEL RISK (STANDARD DEVIATION) CITY OF ROLLING HILLS 1 15 HIGHMARK CAPITAL MANAGEMENT RETURNS RETURNS AS OF MARCH 31.2017 PUBLIC AGENCY RETIREMENT SERVICES . i1 t PARS * Past performance is not an predictor or guarantee of future results CITY OF ROLLING HILLS 1 16 RETURNS COMPARED TO CALPERS CERBT The following are the investment returns as of March 31, 2017 comparing the PARS Capital Appreciation Strategy to CaIPERS CERBT Strategy #1. Returns greater than 1 year are annualized. ruBUC AGENCY RETIREMENT SERVICES * Past performance is not an predictor or guarantee of future results PARS CITY OF ROLLING HILLS 1 17 PROGRAM FEES TRUST ADMINISTRATION/CONSULTING FEES Plan Set -Up Fee: None PUBLIC AGENCY RETIREMENT SERVICES PARS TRUSTED SOLUTIONS. LASTING RESULTS. DISCRETIONARY TRUSTEE/INVESTMENT MANAGEMENT FEES Plan Set -Up Fee: None HIGHMARK® CAPITAL MANAGEMENT Ongoing Fees: 0.25% for assets $0-10 million 0.20% for assets $10-15 million 0.15% for assets $15-50 million 0.10% for assets over $50 million Ongoing Fees: 0.35% 0.25% 0.20% 0.15% 0.10% for assets under $5 million for assets $5-10 million for assets $10-15 million for assets $15-50 million for assets over $50 million * PARS does not receive any compensation from the investments or any commissions, back -end loads, or any other forms of compensation. ruwc AGENCY RETIREMENT SERVICES PARS CITY OF ROLLING HILLS 1 18 STEPS TO IMPLEMENTATION ruwC AGENCy RETIREMENT SERVICES 1 2 3 4 5 6 City Council authorizes establishment of The PARS Trust and appoints a Plan Administrator PARS provides legal documents for signature by Plan Administrator City develops investment policy and guidelines for Investment Manager Council approves initial deposit to The PARS Trust Cities develop policies & procedures for future annual contributions and/or disbursements PARS conducts an annual client services review PARS CITY OF ROLLING HILLS 1 19 CONTACTS PUBLIC AGENCY RETIREMENT SERVICES PARS rUstC AGENCY RETIREMENT SERVICES PARS TRUSTED SOLUTIONS. LASTINO RESULTS. DENNIS vu Senior Vice President dyu@pars.org (800) 540-6369 ext. 104 SHAWN TAN Client Services Coordinator stan@pars.org (800) 540-6369 ext. 161 HIGH1VLK® CAPITAL MANAGEMENT HODDY FRITZ Director, Business Development hoddy.fritz@highmarkcapital.com (949) 553-7141 ANNE WIMMER Senior Portfolio Manager anne.wimmer@highmarkcapital.com (310) 550-6457 CITY OF ROLLING HILLS 1 20 HIGHMARK® CAPITAL MANAGEMENT WHY THE PARS DIVERSIFIED CONSERVATIVE PORTFOLIO? Comprehensive Investment Solution HighMark® Capital Management, Inc.'s (HighMark) diversified investment portfolios are designed to balance return expectations with risk tolerance. Key features include: sophisticated asset allocation and optimization techniques, four layers of diversification (asset class, style, manager, and security), access to rigorously screened, top tier money managers, flexible investment options, and experienced investment management. Rigorous Manager Due Diligence Our manager review committee utilizes a rigorous screening process that searches for investment managers and styles that have not only produced above -average returns within acceptable risk parameters, but have the resources and commitment to continue to deliver these results. We have set high standards for our investment managers and funds. This is a highly specialized, time consuming approach dedicated to one goal: competitive and consistent performance. Flexible Investment Options In order to meet the unique needs of our clients, we offer access to flexible implementation strategies: HighMark Plus utilizes actively managed mutual funds while Index Plus utilizes index -based securities, including exchange -traded funds. Both investment options leverage HighMark's active asset allocation approach. Risk Management The portfolio is constructed to control risk through four layers of diversification - asset classes (cash, fixed income, equity), investment styles (large cap, small cap, international, value, growth), managers and securities. Disciplined mutual fund selection and monitoring process helps to drive return potential while reducing portfolio risk. INVESTMENT OBJECTIVE To provide a consistent level of inflation -protected income over the long-term. The major portion of the assets will be fixed income related. Equity securities are utilized to provide inflation protection. Reward (Rate of Return) Efficient Frontier Risk (Standard Deviation) Capital Appreciation Balanced Moderate Moderately Conservative Conservative ASSET ALLOCATION - CONSERVATIVE PORTFOLIO Strategic Range Equity 5 - 20% Fixed Income 60 - 95% Cash 0 - 20% Policy 15% 80% 5% Tactical 15% 79% 6% ANNUALIZED TOTAL RETURNS (Gross of Investment Management Fees, but Net of Embedded Fund Fees) HighMark Plus (Active) Index Pius (Passive) Current Quarter* Blended Benchmark** Year To Date Blended Benchmark 1 Year Blended Benchmark 3 Year Blended Benchmark 5 Year Blended Benchmark 10 Year Blended Benchmark 1.88% 1.43% 1.88% 1.43% 4.07% 3.26% 2.97% 2.99% 3.67% 3.27% 4.25% 3.88% Current Quarter* Blended Benchmark** Year To Date Blended Benchmark 1 Year Blended Benchmark 3 Year Blended Benchmark 5 Year . . . Blended Benchmark 10 Year Blended Benchmark 1.44% 1.43% 1.44% 1.43% 2.91% 3.26% 2.72% 2.99% 3.28% 3.27% 3.81% 3.88% 'Returns Tess than 1 -year are not ann ual¢ed. "Breakdown for Blended Benchmark: 7.5% S&P500, 1.5% Russell Mid Cap, 2.5% Russell 2000,1 % MSCI EM FREE, 2% MSCI EAFE, 52.25% BC US Agg, 25.75% ML 1-3 Yr US Corp/Gov't, 2% US High Yield Master Il. 0.5% Wilshire REIT, and 5% Citi 1 Mth T -Bill. Prior to October 2012, the blended benchmarks were 12% S&P 500: 1% Russell 2000, 2% MSCI EAFE, 40% ML 1-3 Year Corp./Govt. 40% BC Agg, 5% Citi 1 Mth T -Bill. Prior to April 2007, the blended benchmarks were 15% S&P 500.40% ML 1.3Yr Corp/Gov, 40% BC Agg, and 5% Citi 1 Mitt T -Bill. ANNUAL RETURNS HighMark Plus (Active) 2008 2009 2010 2011 2012 2013 2015 2016 PORTFOLIO FACTS HighMark Plus (Active) Inception Data No of Funds in Portfolio Index Pius (Passive) -9.04% 2008 15.59% 2009 8.68% 2010 2.19% 2011 8.45% • 2012 3.69% 2013 3.88% 2014 0.29% 2015 4.18% 2016 Index Plus (Passive) 07/2004 Inception Data 19 No of Funds in Portfolio -6.70% 10.49% 7.67% 3.70% 6.22% 3.40% 4.32% 0.06% 3.75% 07/2004 13 HOLDINGS HighMark Plus (Active) COLUMBIA CONTRARIAN CORE -Z VANGUARD GROWTH & INCOME -ADM DODGE & COX STOCK FUND HARBOR CAPITAL APPRECIA-INST T ROWE PR GROWTH STOCK -I ISHARES RUSSELL MID -CAP ETF NUVEEN REAL ESTATE SECUR-I UNDISC MGRS BEHAV VAL-L T ROWE PR NEW HORIZONS -I NATIONW BAILRD INT EQ-INST DODGE & COX INTL STOCK FUND MFS INTL GROWTH -I HRTFRD SCHR EM MRKT EQ-I VANGUARD SIT INVEST GR-ADM PIMCO TOTAL RETURN FUND-INST PRUDENTIAL TOTAL RETRN BND-Q NATIONW HIGHMARK BND-R6 EATON VAN FL RT & HI INC-INS FIRST AM GOV OBLIG-Z STYLE Index Plus (Passive) (SHARES CORE S&P 500 ETF (SHARES S&P 500 VALUE ETF (SHARES S&P 500 GROWTH ETF ISHARES RUSSELL MID -CAP ETF VANGUARD REIT ETF ISHARES RUSSELL 2000 VALUE E (SHARES RUSSELL 2000 GROWTH (SHARES MSCI EAFE ETF VANGUARD FTSE EMERGING MARKE VANGUARD S/T INVEST GR-ADM (SHARES CORE U.S. AGGREGATE POWERSHARES SENIOR LOAN FIRST AM GOV OBLIG-Z Holdings are subject to change at the discretion of the investment manager. Cash Large Cap Value Real Estate Intl Stocks 5.9% 0.8% Small Cap Mid Cap _ i i -"' 2.o 1. Large Cap Growth 1.2% Large Cap Core 4.7% Short -Term Bond J 12.4% Floating Rate Note J 3.0% \: L Intem6Term Bond 63.7% The performance records shown represent size -weighted composites of tax exempt accounts that meet the following criteria: Composites are managed by HighMark's HighMark Capital Advisors (HCA) with full investment authority according to the PARS Conservative active and passive objectives and do not have equity concentration of 25% or more in one common stock security. The adviser to the PARS portfolios is US Bank. and HighMark serves as sub -adviser to US Bank to manage these portfolios. US Bank may charge clients as much as 0.60% annual management fee based on a sliding scale. As of March 31, 2017, the blended rate is 0.58%. US Bank pays HighMark 60% of the annual management fee for assets sub -advised by HighMark under its sub -advisory agreement with US Bank. The 36 basis points paid to HighMark. as well as other expenses that may be incurred in the management of the portfolio, will reduce the portfolio returns. Assuming an investment for five years, a 5% annual total return, and an annual sub -advisory fee rate of 0.35% deducted from the assets at market at the end of each year. a 10 million initial value would grow to $12.54 million after fees (Net -of -Fees) and 312.76 million before fees (Gross -of -Fees). Additional information regarding the firm's policies and procedures for calculating and reporting performance results is available upon request In Q1 2010, the PARS Composite definition was changed from $750,000 minimum to no minimum. Performance results are calculated and presented in U.S. dollars and do not reflect the deduction of investment advisory fees. custody fees, or taxes but do reflect the deduction of trading expenses. Retums are calculated based on trade -date accounting. Blended benchmarks represent HighMark's strategic allocations between equity, fixed income. and cash and are rebalanced monthly. Benchmark retums do not reflect the deduction of advisory fees or other expenses of investing but assumes the reinvestment of dividends and other earnings. An investor cannot invest directly in an index. The unmanaged S&P 500 Index is representative of the performance of large companies in the U.S. stock market. The MSCI EAFE Index is a free float - adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Free Index is a free float -adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. The Russell Midcap Index measures the performance of the mid -cap segment of the U.S. equity universe. The Russell 2000 Index measures the performance of the small -cap segment of the U.S. equity universe. The US High Yield Master II Index tracks the performance of below investment grade U.S. dollar -denominated corporate bonds publicly issued in the U.S. domestic market. Wilshire REIT index measures U.S. publicly traded Real Estate Investment Trusts. The unmanaged Bloomberg Barclays Capital (BC) U.S. Aggregate Bond Index is generally representative of the U.S. taxable bond market as a whole. The Merrill Lynch (ML) 1-3 Year U.S. Corporate & Govemment Index tracks the bond performance of The ML U.S. Corporate & Government Index with a remaining term to final maturity less than 3 years. The unmanaged Citigroup 1 -Month Treasury Bill Index tracks the yield of the 1 -month U.S. Treasury Bit. HighMark Capital Management, Inc. (HighMark). an SEC -registered investment adviser. is a wholly owned subsidiary of MUFG Union Bank, N.A. (MUB). HighMark manages institutional separate account portfolios for a wide variety of for-profit and nonprofit organizations. public agencies, public and private retirement plans, and personal trusts of all sizes. It may also serve as sub -adviser for mutual funds, common trust funds. and collective investment funds. MUB, a subsidiary of MUFG Americas Holdings Corporation, provides certain services to HighMark and is compensated for these services. Past performance does not guarantee future results. Individual account management and construction will vary depending on each client's investment needs and objectives. Investments employing HighMark strategies are NOT insured by the FDIC or by any other Federal Government Agency, are NOT Bank deposits, are NOT guaranteed by the Bank or any Bank affiliate, and MAY lose value, Including possible toss of principal. ABOUTTHE ADVISER HighiNar caprtral Managemen (Hig Ma overinyear(in c!tiding predecessor organfzatfons of instittitioval'monne9Tanagement experience wi than x15'9 i1Gon in-sletni'VerTklanagernent HighMar ba a o fe n disaptin ppr�oacli to moneymanagement and cthrrentlymanages,assets; o a wide; array' of "'Clients - HIGHMARK® CAPITAL MANAGEMENT WHY THE PARS DIVERSIFIED MODERATELY CONSERVATIVE PORTFOLIO? Comprehensive Investment Solution HighMark® Capital Management, Inc.'s (HighMark) diversified investment portfolios are designed to balance return expectations with risk tolerance. Key features include: sophisticated asset allocation and optimization techniques, four layers of diversification (asset class, style, manager, and security), access to rigorously screened, top tier money managers, flexible investment options, and experienced investment management. Rigorous Manager Due Diligence Our manager review committee utilizes a rigorous screening process that searches for investment managers and styles that have not only produced above -average returns within acceptable risk parameters, but have the resources and commitment to continue to deliver these results. We have set high standards for our investment managers and funds. This is a highly specialized, time consuming approach dedicated to one goal: competitive and consistent performance. Flexible Investment Options In order to meet the unique needs of our clients, we offer access to flexible implementation strategies: HighMark Plus utilizes actively managed mutual funds while Index Plus utilizes index -based securities, including exchange -traded funds. Both investment options leverage HighMark's active asset allocation approach. Risk Management The portfolio is constructed to control risk through four layers of diversification - asset classes (cash, fixed income, equity), investment styles (large cap, small cap, international, value, growth), managers and securities. Disciplined mutual fund selection and monitoring process helps to drive retum potential while reducing portfolio risk. INVESTMENT OBJECTIVE To provide current income and moderate capital appreciation. The major portion of the assets is committed to income - producing securities. Market fluctuations should be expected. Reward (Rate of Return) Conservative Efficient Frontier Capital Appreciation Balanced Moderate oderatety Conservative Risk (Standard Deviation) ASSET ALLOCATION - MODERATELY CONSERVATIVE PORTFOLIO Strategic Range Policy Tactical Equity 20 - 40% 30% 30% Fixed Income 50 - 80% 65% 67% Cash 0 - 20% 5% 3% (Gross of Investment Management Fees, but ANNUALIZED TOTAL RETURNS Net of Embedded Fund Fees) HighMark Plus (Active) Index Plus (Passive) Current Quarter* Blended Benchmark** Year To Date Blended Benchmark 1 Year Blended Benchmark 3 Year Blended Benchmark 5 Year Blended Benchmark 10 Year Blended Benchmark 2.68% Current Quarter* 2.16% 2.21% Blended Benchmark** 2.21% 2.68% Year To Date 2.16% 2.21% Blended Benchmark 2.21% 6.44% 1 Year 5.40% 5.61% Blended Benchmark 5.61% 3.64% 3 Year 3.72% 4.01% Blended Benchmark 4.01 4.85% 5 Year 4.65% 4.82% Blended Benchmark 4.82% 4.73% 10 Year 4.27% 4.57% Blended Benchmark 4.57% • Returns less than 1 -year are not annualized. ""Breakdown for Blended Benchmark: 15.5% S&P500. 3% Russell Mid Cap, 4.5% Russell 20D0, 2% MSCI EM FREE, 4% MSCI EAFE, 49.25% BC US Agg, 14% ML 1-3 Yr US Corp/Gov't.1.75% US High Yield Master II. 1% Wilshire REIT, and 5% Citi 1 Mth T -Bill. Prior to October2012, the blended benchmarks were 25% S&P 500;1.5% Russell 2DDD, 3.5% MSCI EAFE, 25% ML 1-3 Year Corp./Govt, 4D% BC Agg, 5% Citi 1 Mth T -Bill. Prior to April 2007, the blended benchmarks were 30/1.S S&P 500,25% ML 1-3Yr Corp/Gov, 40% BC Agg, and 5% Citi 1 Mth T -Bill. ANNUAL RETURNS HighMark Plus (Active) 2008 2009 2010 2011 2012 t .z 2013 2014 2015 2016 PORTFOLIO FACTS HighMark Plus (Active) Inception Data No of Funds in Portfolio -15.37% 18.71% 10.46% 1.75% 10.88% 7.30% 4.41% 0.32% 4.93% Index Pius (Passive) 2008 2009 F 2010 2011 2012 2013 2014 2015 2016 Index Plus (Passive) 08/2004 Inception Data 19 No of Funds in Portfolio 3.24% 8.24% 6.78% 5.40% -0.18% 5.42% 05/2005 13 150 HOLDINGS High%lark Plus (Active) COLUMBIA CONTRARIAN CORE -Z VANGUARD GROWTH & INCOME -ADM DODGE & COX STOCK FUND HARBOR CAPITAL APPRECIA-INST T ROWE PR GROWTH STOCK -I (SHARES RUSSELL MID -CAP ETF NUVEEN REAL ESTATE SECUR-I UNDISC MGRS BEHAV VAL-L T ROWE PR NEW HORIZONS -I NATIONW BAILRD INT EQ-INST DODGE & COX INTL STOCK FUND MFS INTL GROWTH -I HRTFRD SCHR EM MRKT EQ-I VANGUARD S/T INVEST GR-ADM PIMCO TOTAL RETURN FUND-INST PRUDENTIAL TOTAL RETRN BND-Q NATIONW HIGHMARK BND-R6 EATON VAN FL RT & HI INC-INS FIRST AM GOV OBLIG-Z STYLE Index Pius (Passive) (SHARES CORE S&P 500 ETF (SHARES S&P 500 VALUE ETF (SHARES S&P 500 GROWTH ETF ISHARES RUSSELL MID -CAP ETF VANGUARD REIT ETF (SHARES RUSSELL 2000 VALUE E !SHARES RUSSELL 2000 GROWTH (SHARES MSCI EAFE ETF VANGUARD FTSE EMERGING MARKE VANGUARD S/T INVEST GR-ADM ISHARES CORE U.S. AGGREGATE POWERSHARES SENIOR LOAN FIRST AM GOV OBLIG-Z Holdings are subject to change at the discretion of the investment manager. Large Cap Value , Real Estate 1.4% 2.5% Cash 3.5% Intl Stocks 7.2% Mid Cap 22%�1;.- Large Cap Growth •. . .. . . .. . 2.5% Large Cap Core 9.8% Short -Term Bond 10.1% Floating Rate Note 2.8% Small Cap 4.5% Intern -Term Bond 53.5% The performance records shown represent size -weighted composites of tax exempt accounts that meet the following criteria: Composites are managed by HighMark's HighMark Capital Advisors (HCA) with full investment authority according to the PARS Moderately Conservative active and passive objectives and do not have equity concentration of 25% or more in one common stock security. The adviser to the PARS portfolios is US Bank. and HighMark serves as sub -adviser to US Bank to manage these portfolios. US Bank may charge clients as much as 0.60% annual management fee based on a sliding scale. As of March 31, 2017, the blended rate is 0.58%. US Bank pays HighMark 60% of the annual management fee for assets sub -advised by HighMark under its sub -advisory agreement with US Bank. The 36 basis points paid to HighMark, as well as other expenses that may be incurred in the management of the portfolio, will reduce the portfolio returns. Assuming an investment for five years, a 5% annual total return, and an annual sub -advisory fee rate of 0.36% deducted from the assets at market at the end of each year. a 10 million initial value would grow to $12.54 million after fees (Net -of -Fees) and S12.76 million before fees (Gross -of -Fees). Additional information regarding the firm's policies and procedures for calculating and reporting performance results is available upon request. In 01 2010, the PARS Composite definition was changed from $750,000 minimum to no minimum. Performance results are calculated and presented in U.S. dollars and do not reflect the deduction of investment advisory fees, custody fees, or taxes but do reflect the deduction of trading expenses. Retums are calculated based on trade -date accounting. Blended benchmarks represent HighMark's strategic allocations between equity. fixed income, and cash and are rebalanced monthly. Benchmark returns do not reflect the deduction of advisory fees or other expenses of investing but assumes the reinvestment of dividends and other earnings. An investor cannot invest directly in an index. The unmanaged S&P 500 Index is representative of the performance of large companies in the U.S. stock market. The MSCI EAFE Index is a free ft oat - adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Free Index is a free float -adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. The Russell Midcap Index measures the performance of the mid -cap segment of the U.S. equity universe. The Russell 2000 Index measures the performance of the small -cap segment of the U.S. equity universe. The US High Yield Master II Index tracks the performance of below investment grade U.S. dollar -denominated corporate bonds publicly issued in the U.S. domestic market. Wilshire REIT index measures U.S. publicly traded Real Estate Investment Trusts. The unmanaged Bloomberg Barclays Capital (BC) U.S. Aggregate Bond Index is generally representative of the U.S. taxable bond market as a whole. The Merrill Lynch (ML) 1-3 Year U.S. Corporate & Government Index tracks the bond performance of The ML U.S. Corporate & Government Index, with a remaining tern to final maturity less than 3 years. The unmanaged Citigroup 1 -Month Treasury Bill Index tracks the yield of the 1 -month U.S. Treasury Bill. HighMark Capital Management, Inc. (HighMark), an SEC -registered investment adviser, is a wholly owned subsidiary of MUFG Union Bank, N.A. (MUB). HighMark manages institutional separate account portfolios for a wide variety of for-profit and nonprofit organizations, public agencies, public and private retirement plans, and personal trusts of all sizes. It may also serve as sub -adviser for mutual funds. common trust funds, and collective investment funds. MUB, a subsidiary of MUFG Americas Holdings Corporation, provides certain services to HighMark and is compensated for these services. Past performance does not guarantee future results. Individual account management and construction will vary depending on each client's investment needs and objectives. Investments employing HighMark strategies are NOT insured by the FDIC or by any other Federal Govemment Agency, are NOT Bank deposits, are NOT guaranteed by the Bank or any Bank affiliate, and MAY lose value, Including possible toss of principal. HIGHMARK® CAPITAL MANAGEMENT WHY THE PARS DIVERSIFIED MODERATE PORTFOLIO? Comprehensive Investment Solution HighMark® Capital Management, Inc.'s (HighMark) diversified investment portfolios are designed to balance return expectations with risk tolerance. Key features include: sophisticated asset allocation and optimization techniques, four layers of diversification (asset class, style, manager, and security), access to rigorously screened, top tier money managers, flexible investment options, and experienced investment management. Rigorous Manager Due Diligence Our manager review committee utilizes a rigorous screening process that searches for investment managers and styles that have not only produced above -average returns within acceptable risk parameters, but have the resources and commitment to continue to deliver these results. We have set high standards for our investment managers and funds. This is a highly specialized, time consuming approach dedicated to one goal: competitive and consistent performance. Flexible investment Options In order to meet the unique needs of our clients, we offer access to flexible implementation strategies: HighMark Plus utilizes actively managed mutual funds while Index Plus utilizes index -based securities, including exchange -traded funds. Both investment options leverage HighMark's active asset allocation approach. Risk Management The portfolio is constructed to control risk through four layers of diversification - asset classes (cash, fixed income, equity), investment styles (large cap, small cap, international, value, growth), managers and securities. Disciplined mutual fund selection and monitoring process helps to drive retum potential while reducing portfolio risk. INVESTMENT OBJECTIVE To provide growth of principal and income. It is expected that dividend and interest income will comprise a significant portion of total return, although growth through capital appreciation is equally important. o' E �l Efficient Frontier Capital Appreciation Balanced Moderate Moderately Conservative Conservative Risk (Standard Deviation) ASSET ALLOCATION - MODERATE PORTFOLIO Equity Fixed Income Cash Strategic Range 40- 60% • 40 - 60% 0-20%'.. .... Policy 50% 45% 5% Tactical 50% 47%, 3% ANNUALIZED TOTAL RETURNS (Gross of Investment Management Fees, but Net of Embedded Fund Fees) Index Plus (Passive) • HighMark Plus (Active) Current Quarter* Blended Benchmark** Year To Date Blended Benchmark 1 Year Blended Benchmark 3 Year Blended Benchmark 5 Year Blended Benchmark 10 Year Blended Benchmark 3.72% Current Quarter* 3.20% Blended Benchmark** 3.72% : Year To Date 3.20% Blended Benchmark 9.67% 1 Year 8.96% Blended Benchmark 4.58% 3 Year 521 % Blended Benchmark 6.34% 5 Year 6.79% Blended Benchmark 4.97% 10 Year 5.25% Blended Benchmark 3.08% 3.20% 3.08% 3.20% 8.75% 8.96% 4.67% 5.21% 6.39% 6.79% 5.08% 5.25% Returns less than 1 -year are not annualized. "Breakdown for Blended Benchmark: 26.5% S&P500, 5% Russell Mid Cap, 7.5% Russell 2000, 3.25% MSCI EM FREE. 6% MSCI EAFE, 33.50% BC US Agg, 10% ML 1-3 Yr US Corp/Gov't, 1.50% US High Yield Master II. 115%Wilshire- REIT, and 5% Citi 1 Mth T -Bill. Prior to October 2012, the blended benchmarks were 43% S&P 500: 2% Russell 2000, 5% MSCI EAFE, 15% ML 1-3 Year Corp./Govt, 30%BC Agg, 5% Citi 1 Mth T -Bill. Prior to April 2007, the blended benchmarks were 50% S&P 500, 15% ML 1-3Yr Corp/Gov, 30% BC Agg, and 5% Citi 1 Mth T -Bill. ANNUAL RETURNS HighMark Plus (Active) Index Plus (Passive) 2008 -22.88% . 2008 2009 2010 21.47% 2009 12.42% 2010 2011 0.55% 2011 2012 12.25% 2012 2013 13.06% 2013 2014 4.84% 2014 2015 2016 PORTFOLIO FACTS HighMark Plus (Active) Inception Data No of Funds in Portfolio 0.14% 2015 6.44% 2016 Index Plus (Passive) 10/2004 Inception Data 19 No of Funds in Portfolio -18.14% 16.05% 11.77% 2.29% 10.91% 12.79% 5:72% -0.52% 723% 05/2006 13 HOLDINGS HighMark Plus (Active) Index Plus (Passive) COLUMBIA CONTRARIAN CORE -Z (SHARES CORE S&P 500 ETF VANGUARD GROWTH & INCOME -ADM !SHARES S&P 500 VALUE ETF DODGE & COX STOCK FUND ISHARES S&P 500 GROWTH ETF HARBOR CAPITAL APPRECIA-INST ISHARES RUSSELL MID -CAP ETF T ROWE PR GROWTH STOCK -I VANGUARD REIT ETF !SHARES RUSSELL MID -CAP ETF !SHARES RUSSELL 2000 VALUE E NUVEEN REAL ESTATE SECUR-I ISHARES RUSSELL 2000 GROWTH UNDISC MGRS BEHAV VAL-L (SHARES MSCI EAFE ETF T ROWE PR NEW HORIZONS -I VANGUARD FTSE EMERGING MARKE NATIONW BAILRD INT EQ-INST VANGUARD Sir INVEST GR-ADM DODGE & COX INTL STOCK FUND ISHARES CORE U.S. AGGREGATE MFS INTL GROWTH -I POWERSHARES SENIOR LOAN HRTFRD SCHR EM MRKT EQ-I FIRST AM GOV OBLIG-Z VANGUARD SIT INVEST GR-ADM PIMCO TOTAL RETURN FUND-INST Holdings are subject to change at the PRUDENTIAL TOTAL RETRN BND-Q discretion of the investment manager. NATIONW HIGHMARK BND-R6 EATON VAN FL RT & HI INC-INS FIRST AM GOV OBLIG-Z STYLE Large Cap Value 4.3% Cash 3.1% Intl Stocks 12.5% Mid Cap 3.6% Large Cap Growth 4.3% Large Cap Core 16.4% Floating Rate Note 2.5% Short -Term Bond J 6.3% Real Estate 1.5% Small Cap 7.5% Interm-Tern Bond 38.1% The performance records shown represent size -weighted composites of tax exempt accounts that meet the following criteria: Composites are managed by HighMark's HighMark Capital Advisors (HCA) with full investment authority according to the PARS Moderate active and passive objectives and do not have equity concentration of 25% or more in one common stock security. The adviser to the PARS portfolios is US Bank. and HighMark serves as sub -adviser to US Bank to manage these portfolios. US Bank may charge clients as much as 0.60% annual management fee based on a sliding scale. As of March 31, 2017, the blended rate is 0.58%. US Bank pays HighMark 60% of the annual management fee for assets sub -advised by HighMark under its sub -advisory agreement with US Bank. The 36 basis points paid to HighMark, as well as other expenses that may be incurred in the management of the portfolio, will reduce the portfolio returns. Assuming an investment for five years, a 5% annual total return, and an annual sub -advisory fee rate of 0.36% deducted from the assets at market at the end of each year. a 10 million initial value would grow to $12.54 million after fees (Net -of -Fees) and S12.76 million before fees (Gross -of -Fees). Additional information regarding the 11rris policies and procedures for calculating and reporting performance results is available upon request. In Q1 2010, the PARS Composite definition was changed from $750,000 minimum to no minimum. Performance results are calculated and presented in U.S. dollars and do not reflect the deduction of investment advisory fees, custody fees, or taxes but do reflect the deduction of trading expenses. Returns are calculated based on trade -date accounting. Blended benchmarks represent HighMarks strategic allocations between equity. fixed income, and cash and are rebalanced monthly. Benchmark returns do not reflect the deduction of advisory fees or other expenses of investing but assumes the reinvestment of dividends and other earnings. An investor cannot invest directly in an index. The unmanaged S&P 500 Index is representative of the performance of large companies in the U.S. stock market. The MSC! EAFE Index is a free float - adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Free Index is a free float -adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. The Russell Midcap Index measures the performance of the mid -cap segment of the U.S. equity universe. The Russell 2000 Index measures the performance of the small -cap segment of the U.S. equity universe. The US High Yield Master II Index tracks the performance of below investment grade U.S. dollar -denominated corporate bonds publicly issued in the U.S. domestic market. Wilshire REIT index measures U.S. publicly traded Real Estate Investment Trusts. The unmanaged Bloomberg Barclays Capital (BC) U.S. Aggregate Bond Index is generally representative of the U.S. taxable bond market as a whole. The Merrill Lynch (ML) 1-3 Year U.S. Corporate & Govemment Index tracks the bond performance of The ML U.S. Corporate & Government Index. with a remaining terrn to final maturity less than 3 years. The unmanaged Citigroup 1 -Month Treasury Bill Index tracks the yield of the 1 -month U.S. Treasury Bill. HighMark Capital Management, Inc. (HighMark). an SEC -registered investment adviser, is a wholly owned subsidiary of MUFG Union Bank, N.A. (MUB). HighMark manages institutional separate account portfolios for a wide variety of for-profit and nonprofit organizations. public agencies, public and private retirement plans, and personal trusts of all sizes. It may also serve as sub -adviser for mutual funds, common trust funds, and collective investment funds. MUB, a subsidiary of MUFG Americas Holdings Corporation, provides certain services to HighMark and is compensated for these services. Past performance does not guarantee future results. Individual account management and construction will vary depending on each clients investment needs and objectives. Investments employing HighMark strategies are NOT insured by the FDIC or by any other Federal Government Agency, are NOT Bank deposits, are NOT guaranteed by the Bank or any Bank affiliate, and MAY lose value, Including possible loss of principal. IHIGHMARK® CAPITAL MANAGEMENT WHY THE PARS DIVERSIFIED BALANCED PORTFOLIO? Comprehensive Investment Solution HighMark® Capital Management, Inc.'s (HighMark) diversified investment portfolios are designed to balance return expectations with risk tolerance. Key features include: sophisticated asset allocation and optimization techniques, four layers of diversification (asset class, style, manager, and security), access to rigorously screened, top tier money managers, flexible investment options, and experienced investment management. Rigorous Manager Due Diligence Our manager review committee utilizes a rigorous screening process that searches for investment managers and styles that have not only produced above -average returns within acceptable risk parameters, but have the resources and commitment to continue to deliver these results. We have set high standards for our investment managers and funds. This is a highly specialized, time consuming approach dedicated to one goal: competitive and consistent performance. Flexible Investment Options In order to meet the unique needs of our clients, we offer access to flexible implementation strategies: HighMark Plus utilizes actively managed mutual funds while Index Plus utilizes index -based securities, including exchange -traded funds. Both investment options leverage HighMark's active asset allocation approach. Risk Management The portfolio is constructed to control risk through four layers of diversification - asset classes (cash, fixed income, equity), investment styles (large cap, small cap, international, value, growth), managers and securities. Disciplined mutual fund selection and monitoring process helps to drive retum potential while reducing portfolio risk. INVESTMENT OBJECTIVE To provide growth of principal and income. While dividend and interest income are an important component of the objective's total return, it is expected that capital appreciation will comprise a larger portion of the total return. Reward (Rate of Return) Efficient Frontier Capital Appreciation Balanced Moderate Moderately Conservative Conservative Risk (Standard Deviation) ASSET ALLOCATION - BALANCED PORTFOLIO Equity Fixed Income Cash Strategic Range 50 - 70% 30 - 50% 35% 0-20% 5% Policy Tactical 60% 60% 37% 3% (Gross of Investment Management Fees, but ANNUALIZED TOTAL RETURNS Net of Embedded Fund Fees) HighMark Plus (Active) Current Quarter* Blended Benchmark** Year To Date Blended Benchmark 1 Year Blended Benchmark 3 Year Blended Benchmark 5 Year Blended Benchmark 10 Year Blended Benchmark 3.71% 4.34% 3.71% 11.25% 10.64% 4.86% 5.81% 7.16% 7.80% 5.06% 5.61% Index Plus (Passive) 4.34% Current Quarter* Blended Benchmark** Year To Date Blended Benchmark 1 Year Blended Benchmark 3 Year Blended Benchmark 5 Year Blended Benchmark Inception to Date (114-Mos.) Blended Benchmark 3.57% 3.71% 3.57% 3.71% 10.51% 10.64% 5.14% 5.81% 7.22% 7.80% 4.75% 5.28% Returns less than 1 -year are not annualized. **Breakdown for Blended Benchmark: 32% S&P500, 6% Russell Mid Cap, 9% Russell 2000. 4% MSCI EM FREE. 7% MSCI EAFE.27% BC US Agg. 6.75% ML 1-3 Yr US Corp/Gov't, 1.25% US High Yield Master H. 2% Wilshire REIT, and 5% Citi 1 Mth T -Bill. Prior to October 2012, the blended benchmarks were 51% S&P 500; 3% Russell 2000, 6% MSCI EAFE, 5% ML 1-3 Year Corp./Govt, 30% BC Agg, 5% Citi 1 Mth 7 -Bill. Prior to April 2007, the blended benchmarks were 60% S&P 500. 5% ML 13Yr Corp/Gov, 30% BC Agg, and 5% Citi 1 Mth T -Bill. ANNUAL RETURNS HighMark Plus (Active) 2008 -25.72% 2009 21.36% 2010 14.11% 2011 -0.46% 2012 13.25% 2013 16.61% 2014 4.70% 2015 0.04% 2016 6.82% PORTFOLIO FACTS HighMark Plus (Active) Inception Data 10/2006 No of Funds in Portfolio 19 Index Plus (Passive) 2008 2009 2010 2011 2012 2013 2014 2015 2016 Index Plus (Passive) Inception Data No of Funds in Portfolio 23.22%,_ 17.62% 12.76%' 1.60% 15.63% 6.08%' -0.81% 8.26% 10/2007 13 HOLDINGS High€%lark Plus (Active) COLUMBIA CONTRARIAN CORE -Z VANGUARD GROWTH & INCOME -ADM DODGE & COX STOCK FUND HARBOR CAPITAL APPRECIA-INST T ROWE PR GROWTH STOCK -I (SHARES RUSSELL MID -CAP ETF NUVEEN REAL ESTATE SECUR-I UNDISC MGRS BEHAV VAL-L T ROWE PR NEW HORIZONS -I NATIONW BAILRD INT EQ-INST DODGE & COX INTL STOCK FUND MFS INTL GROWTH -1 HRTFRD SCHR EM MRKT EQ-I VANGUARD S/T INVEST GR-ADM PIMCO TOTAL RETURN FUND-INST PRUDENTIAL TOTAL RETRN BND-Q NATIONW HIGHMARK BND-R6 EATON VAN FL RT & HI INGINS FIRST AM GOV OBLIG-Z STYLE Intl Stocks 15.5% Mid Cap�g 4.5% • Large Cap Growth 5.0% index Plus (Passive) (SHARES CORE S&P 500 ETF (SHARES S&P 500 VALUE ETF (SHARES S&P 500 GROWTH ETF (SHARES RUSSELL MID -CAP ETF VANGUARD REIT ETF (SHARES RUSSELL 2000 VALUE E (SHARES RUSSELL 2000 GROWTH ISHARES MSCI EAFE ETF VANGUARD FTSE EMERGING MARKE VANGUARD S/T INVEST GR-ADM (SHARES CORE U.S. AGGREGATE POWERSHARES SENIOR LOAN FIRST AM GOV OBLIG-Z Holdings are subject to change at the discretion of the investment manager. Large Cap Value Real Estate 5.0 Cash 1.6% _i 2.7% Large Cap Core 19.4% Small Cap 9.0% Intemi-Term Bond 30.8% Floating Rate Note 2.0% Short -Tenn Bond 4.5% The performance records shown represent size -weighted composites of tax exempt accounts that meet the following criteria: Composites are managed by HighMark's HighMark Capital Advisors (MCA) with full investment authority according to the PARS Balanced active and passive objectives and do not have equity concentration of 25% or more in one common stock security. The composite name has been changed from PARS Balanced/Moderately Aggressive to PARS Balanced on 5/1/2013. The adviser to the PARS portfolios is US Bank, and HighMark serves as sub -adviser to US Bank to manage these portfolios. US Bank may charge clients as much as 0.60% annual management fee based on a sliding scale. As of March 31, 2017, the blended rate is 0.58%. US Bank pays HighMark 60% of the annual management fee for assets sub -advised by HighMark under its sub -advisory agreement with US Bank. The 36 basis points paid to HighMark, as well as other expenses that may be incurred in the management of the portfolio, will reduce the portfolio returns. Assuming an investment tor five years, a 5% annual total return, and an annual sub -advisory fee rate of 0.36% deducted from the assets at market at the end of each year. a 10 million initial value would grow to $12.54 million after fees (Net -of -Fees) and S12.76 million before fees (Gross -of -Fees). Additional information regarding the firm's policies and procedures for calculating and reporting performance results is available upon request. In Q1 2010, the PARS Composite definition was changed from 5750,000 minimum to no minimum. Performance results are calculated and presented in U.S. dollars and do not reflect the deduction of investment advisory fees. custody fees, or taxes but do reflect the deduction of trading expenses. Returns are calculated based on trade -date accounting. Blended benchmarks represent HighMark's strategic allocations between equity. fixed income. and cash and are rebalanced monthly. Benchmark retums do not reflect the deduction of advisory fees or other expenses of investing but assumes the reinvestment of dividends and other earnings. An investor cannot invest directly in an index. The unmanaged S&P 500 Index is representative of the performance of large companies in the U.S. stock market. The MSCI EAFE Index is a free float - adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Free Index is a free float -adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. The Russell Midcap Index measures the performance of the mid -cap segment of the U.S. equity universe. The Russell 2000 Index measures the performance of the small -cap segment of the U.S. equity universe. The US High Yield Master II Index tracks the performance of below investment grade U.S. dollar -denominated corporate bonds publicly issued in the U.S. domestic market. Wilshire REIT index measures U.S. publicly traded Real Estate Investment Trusts. The unmanaged Bloomberg Barclays Capital (BC) U.S. Aggregate Bond Index is generally representative of the U.S. taxable bond market as a whole. The Merrill Lynch (ML) 1-3 Year U.S. Corporate & Government Index tracks the bond performance of The ML U.S. Corporate & Govemment Index, with a remaining tern to final maturity less than 3 years. The unmanaged Citigroup 1 -Month Treasury Bill Index tracks the yield of the 1 -month U.S. Treasury Bill. HighMark Capital Management, Inc. (HighMark), an SEC -registered investment adviser. -is a wholly owned subsidiary of MUFG Union Bank, N.A. (MUB). HighMark manages institutional separate account portfolios for a wide variety of for-profit and nonprofit organizations. public agencies, public and private retirement plans, and personal trusts of all sizes. It may also serve as sub -adviser for mutual funds, common trust funds, and collective investment funds. MUB, a subsidiary of MUFG Americas Holdings Corporation, provides certain services to HighMark and is compensated for these services. Past performance does not guarantee future results. Individual account management and construction will vary depending on each clients investment needs and objectives. Investments employing HighMark strategies are NOT insured by the FDIC or by any other Federal Government Agency, are NOT Bank deposits, are NOT guaranteed by the Bank or any Bank affiliate, and MAY lose value, including possible loss of principal. ABOUTTHE ADVISER HighMark CapitarMannagement,l "ighhMarkr,,,e, over 90 years me udmg predecessor organizations o nsti t ona ney manag t experieii with. more than;S15 9 biilio m assets -17n: hMark ermad" '� nay gem nt Hig ha aton�ngt dtsapl�" ine approacho money-managementIneatrim :.manages_ assets fo a wide;arra -of'c rants. ABOUTTHE PORTFOLIO MANAGEMENT TEAM Andrew Bro` w7i7CFAA Semor,Portfolio Manager,. Investment Exp`enence' since 1994_ H ghark Teni M ire since 1997 •Educat o BAA niversit of Southern California, BA7"Universityof:SouthemCalifornia j` HIGHMARK CAPITAL MANAGEMENT WHY THE PARS DIVERSIFIED CAPITAL APPRECIATION PORTFOLIO? Comprehensive Investment Solution HighMark® Capital Management, Inc.'s (HighMark) diversified investment portfolios are designed to balance return expectations with risk tolerance. Key features include: sophisticated asset allocation and optimization techniques, four layers of diversification (asset class, style, manager, and security), access to rigorously screened, top tier money managers, flexible investment options, and experienced investment management. Rigorous Manager Due Diligence Our manager review committee utilizes a rigorous screening process that searches for investment managers and styles that have not only produced above -average returns within acceptable risk parameters, but have the resources and commitment to continue to deliver these results. We have set high standards for our investment managers and funds. This is a highly specialized, time consuming approach dedicated to one goal: competitive and consistent performance. Flexible investment Options In order to meet the unique needs of our clients, we offer access to flexible implementation strategies: HighMark Plus utilizes actively managed mutual funds while Index Plus utilizes index -based securities, including exchange -traded funds. Both investment options leverage HighMark's active asset allocation approach. Risk Management The portfolio is constructed to control risk through four layers of diversification — asset classes (cash, fixed income, equity), investment styles (large cap, small cap, international, value, growth), managers and securities. Disciplined mutual fund selection and monitoring process helps to drive return potential while reducing portfolio risk. INVESTMENT OBJECTIVE The primary goal of the Capital Appreciation objective is growth of principal. The major portion of the assets are invested in equity securities and market fluctuations are expected. m '. 3 Efficient Frontier Capital Appreciation Balanced Moderate Moderately Conservative Conservative Risk (Standard Deviation) ASSET ALLOCATION - CAPITAL APPRECIATION PORTFOLIO Strategic Range Policy Tactical Equity 65 -85% 75% 75% Fixed Income 10 - 30% 20% 23% Cash 0 - 20% 5% 2% (Gross of Investment Management Fees, but ANNUALIZED TOTAL RETURNS Net of Embedded Fund Fees) Current Quarter' Blended Benchmark** Year To Date Blended Benchmark 1 Year Blended Benchmark 4.48% 4.54% 4,48% 4.54% 13.08%' 13.11% 3 Year 5.87% Blended Benchmark 6.48% 5 Year 8.39% Blended Benchmark 8.96% Inception to Date (99-Mos.) 10.46% Blended Benchmark 11.29% • Retums less than 1 -year are not annualized. "Breakdown for Blended Benchmark: 39.5% S&P500, 7.5% Russell Mid Cap. 10.5% Russell 2000, 5.25% MSCI EM FREE, 10.25% MSCI FAFE, 16% BC US Agg, 3% ML 1-3 Yr US Corp/Gov't, 1% US High Yield Master 11. 2% Wilshire REIT, and 5% Citi 1 Mth T -Bill. ANNUAL RETURNS 2008 2009 2010 2011 2012 2013 2014 2015 2016 PORTFOLIO FACTS HighMark Plus (Active) Inception Data No of Funds in Portfolio N/A% 23.77% 12.95% -1.35% 13.87% 20.33% 6.05% -0.27% 8.81% Index Pius (Passive) 01/2009 Inception Data 19 No of Funds in Portfolio NIA 13 HOLDINGS HighMark Plus (Active) COLUMBIA CONTRARIAN CORE -Z VANGUARD GROWTH & INCOME -ADM DODGE & COX STOCK FUND HARBOR CAPITAL APPRECIA-INST T ROWE PR GROWTH STOCK -I !SHARES RUSSELL MID -CAP ETF NUVEEN REAL ESTATE SECUR-I UNDISC MGRS BEHAV VAL-L T ROWE PR NEW HORIZONS -I NATIONW BAILRD INT EQ-INST DODGE & COX INTL STOCK FUND MFS INTL GROWTH -I HRTFRD SCHR EM MRKT EQ-I VANGUARD S/T INVEST GR-ADM PIMCO TOTAL RETURN FUND-INST PRUDENTIAL TOTAL RETRN BND-Q NATIONW HIGHMARK BND-R6 EATON VAN FL RT & HI INC-INS FIRST AM GOV OBLIG-Z STYLE Large Cap Value Cash2 2.2% Intl Stocks 20.1% Mid Cap 5.5% Large Cap Growth r 6.2% Large Cap Core Index Plus (Passive) ISHARES CORE S&P 500 ETF ISHARES S&P 500 VALUE ETF ISHARES S&P 500 GROWTH ETF (SHARES RUSSELL MID -CAP ETF VANGUARD REIT ETF (SHARES RUSSELL 2000 VALUE E !SHARES RUSSELL 2000 GROWTH ISHARES MSCI EAFE ETF VANGUARD FTSE EMERGING MARKE VANGUARD SIT INVEST GR-ADM !SHARES CORE U.S. AGGREGATE POWERSHARES SENIOR LOAN FIRST AM GOV OBLIG-Z Holdings are subject to change at the discretion of the investment manager. Real Estate 1.8% Small Cap 10.5% 24.7% Interm-Term Bond 17.3% Floating Rate Note 1.5% Short -Term Bond 4.0% The performance records shown represent size -weighted composites of tax exempt accounts that meet the following criteria: Composites are managed by HighMark's HighMark Capital Advisors (HCA) with full investment authority according to the PARS Capital Appreciation active and passive objectives and do not have equity concentration of 25% or more in one common stock security. The adviser to the PARS portfolios is US Bank, and HighMark serves as sub -adviser to US Bank to manage these portfolios. US Bank may charge clients as much as 0.60% annual management fee based on a sliding scale. As of March 31, 2017, the blended rate is 0.58°,6. US Bank pays HighMark 60% of the annual management fee for assets sub -advised by HighMark under its sub -advisory agreement with US Bank. The 36 basis points paid to HighMark, as well as other expenses that may be incurred in the management of the portfolio, will reduce the portfolio returns. Assuming an investment for five years, a 5% annual total return, and an annual sub -advisory fee rate of 0.36% deducted from the assets at market at the end of each year, a 10 million initial value would grow to $12.54 million after fees (Net -of -Fees) and S12.76 million before fees (Gross -of -Fees). Additional information regarding the firm's policies and procedures for calculating and reporting performance results is available upon request In 01 2010, the PARS Composite definition was changed from $750,000 minimum to no minimum. Performance results are calculated and presented in U.S. dollars and do not reflect the deduction of investment advisory fees, custody fees, or taxes but do reflect the deduction of trading expenses. Retums are calculated based on trade -date accounting. Blended benchmarks represent HighMark's strategic allocations between equity, fixed income. and cash and are rebalanced monthly. Benchmark retums do not reflect the deduction of advisory fees or other expenses of investing but assumes the reinvestment of dividends and other earnings. An investor cannot invest directly in an index. The unmanaged S&P 500 Index is representative of the performance of large companies in the U.S. stock market. The MSCI EAFE Index is a free float - adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Free Index is a free float -adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. The Russell Midcap Index measures the performance of the mid -cap segment of the U.S. equity universe. The Russell 2000 Index measures the performance of the small -cap segment of the U.S. equity universe. The US High Yield Master II Index tracks the performance of below investment grade U.S. dollar -denominated corporate bonds publicly issued in the U.S. domestic market. Wilshire REIT index measures U.S. publicly traded Real Estate Investment Trusts. The unmanaged Bloomberg Barclays Capital (8C) U.S. Aggregate Bond Index is generally representative of the U.S. taxable bond market as a whole. The Merrill Lynch (ML) 1-3 Year U.S. Corporate & Government Index tracks the bond performance of The ML U.S. Corporate & Govemment Index, with a remaining term to final maturity less than 3 years. The unmanaged Citigroup 1 -Month Treasury Bill Index tracks the yield of the 1 -month U.S. Treasury Bill. HighMark Capital Management, Inc. (HighMark). an SEC -registered investment adviser, is a wholly owned subsidiary of MUFG Union Bank, N.A. (MUB). HighMark manages institutional separate account portfolios for a wide variety of for-profit and nonprofit organizations, public agencies, public and private retirement plans. and personal trusts of all sizes. It may also serve as sub -adviser for mutual funds, common trust funds, and collective investment funds. MUB, a subsidiary of MUFG Americas Holdings Corporation, provides certain services to HighMark and is compensated for these services. Past performance does not guarantee future results. Individual account management and construction will vary depending on each client's investment needs and objectives. Investments employing HighMark strategies are NOT Insured by the FDIC or by any other Federal Govemment Agency, are NOT Bank deposits, are NOT guaranteed by the Bank or any Bank affiliate, and MAY lose value, including possible loss of principal. Ae Wlmme nn f.CFA� .s: �enlo� Portfolio Manager Investm ent�zpenen since tg Ma enur' a si 200 Education BAA m ers of -California RESOLUTION NO. 1214 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ROLLING HILLS, CALIFORNIA APPROVING THE ADOPTION OF THE PUBLIC AGENCIES POST -EMPLOYMENT BENEFITS TRUST ADMINISTERED BY PUBLIC AGENCY RETIREMENT SERVICES (PARS). WHEREAS PARS has made available the PARS Public Agencies Post -Employment Benefits Trust (the "Program") for the purpose of pre -funding pension obligations and/or OPEB obligations; and WHEREAS the City of Rolling Hills ("City") is eligible to participate in the Program, a tax- exempt trust performing an essential governmental function within the meaning of Section 115 of the Internal Revenue Code, as amended, and the Regulations issued there under, and is a tax-exempt trust under the relevant statutory provisions of the State of California; and WHEREAS the City's adoption and operation of the Program has no effect on any current or former employee's entitlement to post -employment benefits; and WHEREAS the terms and conditions of post -employment benefit entitlement, if any, are governed by contracts separate from and independent of the Program; and WHEREAS the City's funding of the Program does not, and is not intended to, create any new vested right to any benefit nor strengthen any existing vested right; and WHEREAS the City reserves the right to make contributions, if any, to the Program. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF ROLLING HILLS, CALIFORNIA, DOES RESOLVE, DECLARE, DETERMINE AND ORDER AS FOLLOWS: 1. The City Council hereby adopts the PARS Public Agencies Post -Employment Benefits Trust, effective , 2017; and 2. The City Council hereby appoints the City Manager, or his/her successor or his/her designee as the City's Plan Administrator for the Program; and 3. The City's Plan Administrator is hereby authorized to execute the PARS legal and administrative documents on behalf of the City and to take whatever additional actions are necessary to maintain the City's participation in the Program and to maintain compliance of any relevant regulation issued or as may be issued; therefore, authorizing him/her to take whatever additional actions are required to administer the City's Program. PASSED, APPROVED AND ADOPTED this day of July, 2017. JAMES BLACK, M.D. MAYOR Resolution No. 1214 -1- ATTEST: HEIDI LUCE CITY CLERK Resolution No. 1214 -2- STATE OF CALIFORNIA COUNTY OF LOS ANGELES CITY OF ROLLING HILLS The foregoing Resolution No. 1214 entitled: SS A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ROLLING HILLS, CALIFORNIA APPROVING THE ADOPTION OF THE PUBLIC AGENCIES POST -EMPLOYMENT BENEFITS TRUST ADMINISTERED BY PUBLIC AGENCY RETIREMENT SERVICES (PARS). was approved and adopted at a regular meeting of the City Council on the day of July, 2017 by the following roll call vote: AYES: NOES: ABSENT: ABSTAIN: Heidi Luce, the City Clerk of the City of Rolling Hills, State of California, hereby certifies that the above foregoing resolution was duly and regularly adopted by said City at a regular meeting thereof held on the , and passed by a vote of said Council. IN WITNESS WHEREOF I have hereunto set my hand and seal this , 2017. HEIDI LUCE CITY CLERK Resolution No. 1214 6(4 atliral&if geek INCORPORATED JANUARY 24, 1957 NO. 2 PORTUGUESE BEND ROAD ROLLING HILLS, CA 90274 (310) 377-1521 FAX (310) 377-7288 Agenda Item No: 8-B Mtg. Date: 07/24/17 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: TERRY SHEA, FINANCE DIRECTOR THRU: RAYMOND R. CRUZ, CITY MANAGER SUBJECT: CONSIDERATION OF ENTERING INTO AN AGREEMENT WITH MULTI -BANK SECURITIES, INC. AND A CUSTODIAL ACCOUNT WITH PERSHING LLC. DATE: JULY 24, 2017 ATTACHMENTS: User Agreement Institutional Suitability Certificate Authorized Signers Cash Account Application Multi -Bank Securities 2017 Due Diligence RECOMMENDATION It is recommended the City Council authorize the Finance Director to purchase negotiable certificates of deposits and other authorized investments from Multi -Bank Securities, and open up a custodial account with Pershing LLC. The authorized signers on the account would be the City Manager and the Finance Director. BACKGROUND The City is currently has two certificate of deposits with Preferred Bank and Malaga Bank paying 1.25% and .6% respectively. The City also has an interest bearing checking account with OPUS Bank paying 1.03%, but the majority of the City's funds are invested in the Local Agency Investment Fund which is currently paying .975%. The City's investments are governed by the City's Investment Policy which was adopted by the City Council and is in accordance with the California Government Code, Sections 53601 et. Seq. DISCUSSION Staff is proposing opening an account with Multi -Bank Securities, Inc. which will allow the City to purchase authorized investments from more than one broker dealer. In order to transact these investments, it is also necessary to establish a separate custodial account with Pershing LLC. Current CD rates available are from 1.45% to 1.70%. All CD's will be below the FDIC insured amount of $250.000 and any additional investments will conform to the City's Investment Policy. FISCAL IMPACT The City will earn additional interest income, the exact amount is not known at this time. There are no fees associated with Multi -Bank Securities, Inc. and Pershing LLC in setting up the accounts, purchasing or holding the investments. The commission is built into the offering price. CONCLUSION In accordance with City's Investment Policy, staff would like to establish a list of financial institutions, including broker/ dealers who are authorized and licensed to provide investment services in the State of California. Staff has been approached by a couple of other firms and will be bringing those firm to the Council at a future meeting. The reason why staff is recommending this action now, Multi -Bank Securities Inc. and Pershing LLC are only firms that the Finance Director is aware of that provide a free on- line program; and where there are no required fees associated with setting up the accounts or purchasing or holding the investments. This will also allow the City to earn additional funds immediately without risking the City's surplus funds. TS:RC:hi Multi -Bank Securities-staffreport.docx econnectd:rect_con User Agreement Contact Information Primary Point of Contact Peter Yanez pyanez@mbssecurities.com (855) 928-0111 Technical Point of Contact Marti Raymus mraymus@mbssecurities.com (S88) 857-3956 Senior Vice President Tim Peacock tpeacock@mbssecurities.com (S00) 967-9041 Powered by Nuiti-3a k ccurities, Inc_ 1000 'Town Center, Suite 2300 Southfield, isMii 48075 300-957-905? 0 TAX ID 94-6000355 This Agreement is between: MULTI -BANK SECURITIES, INC.• a (+ LICENSING AGREEMENT City of Rolling Hills Multi -Bank Securities, Inc. (MBS) and ACCOUNTHOLDER 1000 Town Center, Suite 2300 Southfield, Michigan 48075 2 Portuguese Bend Road Direct STREETADDRESS Rolling Hilts, CA 90274 CITY STATE ZIP This contract governs your use of services, ability to post deposit rates, and access to inventory offered by eConnectDirect£, a registered trademark of Multi -Bank Securities, Inc. and related commerce, products and services corresponding to your access to eConnectDirect.com. You may need to execute additional agreements or provide MBS account numbers if you request additional Opt -in Services in conjunction with your unique eConnectDirecr user name and password. "Opt -in Services" refers to additional trading functionality and supportive services provided through eConnectDirectx or Multi -Bank Securities, Inc. The terms "MBS," "we," "us" and "our" refer to Multi -Bank Securities, Inc. The terms "Subscriber," "you" and "your" refer to the undersigned Account Holder and additional users identified in Schedule A. The term "eConnectDirect" CD" (also known as "Physical CD" or "Listing Service" Deposits) refers to CDs which are transacted directly between the issuing institution and investing entity through eConnectDirectt. The term "Securities," generally refers to all other assets purchased or viewed on eConnectDirect' that are NOT eConnectDirect' CDs. All Securities (ie: Bonds, DTC Eligible CDs) will have a cor,caponding CUSIP number and funds will be settled into a user selected Securities account (Cash or Delivery Versus Payment "DVP"). If your prefeiied safekeeping agent, is something other than a Pershing LLC account, originated through Multi -Bank Securities, Inc., delivery and settlement instructions ("DVP Instructions"), must be provided prior to gaining access to security's inventory monitors. User Access Start Date Start Date: !O / O / / 2017 Your user access and all other rights under this eConnectDirect' Licensing Agreement will commence on the "Start Date" listed above if we have received from you a signed copy of this agreement and a complete set of all duly executed settlement documents required to purchase or issue a CD or security. NIodification/Cancellation NIBS reserves the right to: • modify or cancel any feature of eCornectDirect' at any time. • discontinue user access at anytime for any reason, without penalty, with 30 days written notice, or • immediately suspend user access at anytime as provided below. Subscriber reserves the right to: • discontinue any or all eConnectDirect` services at anytime for any reason, without penalty, by providing written notice to MBS. All changes to the terms, conditions, fees, representations and warranties related to this agreement will be distributed in writing for signature, email consent or online confirmation. If at any time you find these terms unacceptable and do not agree with them, you can let us know that you would like to discontinue your user access without penalty. '?, .. ) .. t ,t �,r'l' \3�i., ,.:..., >ftRI.l) 0 M BS MULTI -BANK SECURITIES, INC.` ACCOUNT ADAIIYISTRATION: Direct The Account Administrator is responsible for maintaining the account profile and approving/assigning additional users and account access. The additional users need to be identified on Schedule A — Authorized User List. All users will be assigned a unique user name and password and will be required to acknowledge and accept the terms, conditions and licensing agreement pertaining to the use of eConnectDirectk upon initial login. Account Administrator Name: Terry Shea Title: Director of Finance Phone: 310-377-1521 Email: terry@ramscpa.net Secondary Contact Name: Raymond R. Cruz Title: City Manager Phone: 310-377-1521 Email: Rcruz@cityofrh.net Licensing/User Fees: Any applicable licensing fees will be disclosed per Schedule B -Licensing Fee Schedule of this agreement and will be billed annually, payable on the amuversauy of the user arress start date and are NON-REFUNDABLE. You will not be liable for any increase in licensing fees or new fees related to your access to eConnectDirect' unless you agree to such change in writing or other authenticated means. NIBS is not responsible for any fees incurred or charged in relationship to an eConnectDirectz CD transaction by the issuing bank, settlementfwire fees, safekeeping charges by your securities' custodian or any other fees related to the purchase, issuance, settlement, or safekeeping of products offered through eConnectDirect`.You are responsible for all such fees. Any applicable fees or selling concessions related to the issuance of DTC eligible CDs are disclosed at the time of trade and per the terms of an executed terms agreement and related Brokerage Agreement. Account Classification and user access: (Additional documentation may need to be submitted depending on your user access request(s) Institution Classification City User Access ❑✓ Investor El Securities O Listing Service Deposits (eConnectDirect' CDs) (Exhibit C Required) ❑ Issuer ❑ DTC Eligible CDs (Brokerage Agreement Required) O Listing Service Offerings (eConnectDirecte CDs) (Exhibit C Required) ❑✓ Securities Safekeeping Agent ❑ Pershing LLC (Only to be used if originated by Multi -Bank Securities) ❑ MT (Delivery -versus -Payment) (Delivery instructions Required) MULTI -BANK SECURITIES, INC.` Direct' Proprietary Rights in the eConnectDirect Software and Database: Restrictions on Use: SUBSCRIBER AGREES THAT IT WILL NOT PERMIT ANY OTHER PERSON INCLUDING, BUT NOT LLVITED TO, ANY INSTITUTION, BROKER OR BUSINESS OF ANY TYPE, ACCESS TO THE SOFTWARE AND DATABASE. License Limitations: This eConnectDirect` Licensing Agreement allows access to eConnectDirect' using a computer and/or web access by a user from any approved browser. Subscriber agrees not to modify, adapt or translate, disassemble, decompile, reverse engineer or otherwise attempt to discover the source code of the software. Subscriber further agrees not to sublicense, assign, transfer, distribute, pledge, lease, rent or share any rights under this license except with prior written permission from MBS. Transaction Settlements: Subscriber agrees to pay for, settle on, deliver or make whole on any approved transaction(s) processed through eConnectDirect' or Multi -Bank Securities, Inc. Failure to pay for a purchase, delivery on a sell or settle on an approved and accepted CD issuance, may result in an IMMEDIATE suspension or cancellation of this user agreement. Immediate Suspension: MBS may immediately suspend user access and all rights under this agreement if MBS has not received payment of the applicable License Fee within 30 days of invoice or NIBS believes the Subscriber has or may violate MBS' proprietary rights or has or may breach any other provision of this agreement. Warranty Disclaimer / Liability: MBS makes no warranty of any kind, express or implied, regarding the timeliness, sequence, accuracy or completeness of data prodded on eConnectDirect'. NIBS will not be liable for any damages whatsoever, whether direct, indirect, general, special, compensatory, consequential and/or incidental, arising out of or relating to your use of eConnectDirect". City of Rolling Hills Multi -Bank Securities, Inc. Accoimt Holder Company Signatures Signature Terry Shea Tim Peacock Name Name Director of Finance Senior Vice President Title Title • MULTI -BANK SECURITIES, INC.` e SCHEDULES, EXHIBITS & SUPPORTING DOCUMENTS SCHEDULE A: AUTHORIZED USERS** (NOTE: The Administrator must be listed) Direct Terry Shea Raymond R. Cruz Director of Finance City Manager 310-377-1521 310-377-1521 terry@ramscpa.net Rcruz@cityofrh.net **Permissions, notifications and account access are set and maintained by the administrator upon loin. Securities trading authorization is only permitted to those approved by the account administrator and in confirmation with a submitted resolution ofauthorized signers SCHEDULE B: LICENSING FEE(S) Applicable licensing fees will apply ALL FEES ARE PAYABLE WITHIN 30 DAYS OF INVOICE AND ARE NON REFUNDABLE; eConnectDirect` Account Access (Including Securities): S 0 per year eConnectDirect' CD Listing Services S Waived per year Special Notes/ Instructions: ?` N. `e _. Vii!': . 0 THIS PAGE INTENTIONALLY LEFT BLANK MBS MULTI -BANK SECURITIES, INC Institutional Suitability Certificate FINRA RULE 2111 Affirmative Indication by Institution — Exercising Independent Judgment In connection with any recommended transaction or investment strategy by a registered broker -dealer, the undersigned acknowledges on behalf of the Institution named below that: 1. It is an "Institutional Account" as defined in FINRA Rule 4512(c); PLEASE CHECK THE APPROPRIATE BOX BELOW ❑ (1) a Credit Union with total assets of $50 Million or more (or any other entity with total assets in excess of $50 Million). If a Credit Union (or any other entity) has total assets LESS THAN $50 Million, check Box 4, and provide your most recent Investment Policy; ❑ . (2) a bank, savings and loan association, insurance company or registered investment company; ❑ (3) an investment adviser registered either with the SEC under Section 203 of the Investment Advisers Act or with a state securities commission (or any agency or office performing like functions); El (4) MBS will determine suitability (Please provide your most recent Investment Policy) 2. It (1) is capable of evaluating investment risks independently, both in general and with regard to all transactions and investment strategies involving a security or securities; and (2) will exercise independent judgment in evaluating the recommendations of any broker -dealer or its associated persons, unless it has otherwise notified the broker -dealer in writing; 3. MBS will be notified by the Institutional Account if anything in this Certificate ceases to be true; 4. He or she is authorized to sign on behalf of the Institutional Account named below. By signing this Certificate, the undersigned affirms that the above statements are accurate but does not waive any rights afforded under U.S. federal or state securities laws, including without limitation, any rights under Section 10(b) of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. This Certificate shall apply with respect to all recommended transactions and investment strategies involving securities that are entered into by the "Institutional Account" named in this Certificate, whether for the account(s) of such Institutional Account or for the account of any beneficial owner that has delegated decision making authority to such Institutional Account. Name Sig42- InstituUonaIAccount thorized Signatory City of Rolling Hills 2 Portuguese Bend Road - FQQ,y S4 e4 Address Name of Authorized Signatory Rolling Hills, CA 90274 F.vANce Orie c7 A City, State. ZIP Title ofAuthorized Signatory 94-6000355 U.S. Tax ID / EIN llfapplicable) terry@ramscpa.net Date 310-377-1521 Email Address Phone Aoo0.Fis 1000 Town Center, Suite 2300 2400 East Commercial Boulevard, Suite 812 Southfield, Michigan 48075 Ft. Lauderdale, Florida 33308 i PHONES 800.967.9045 800.967.9045 248.291.1100 954.351.6930 FAX 248.291.1101 954.351.9197 Member of FINRA & SIP[; MSRB REGISTERED A Veteran -Owned Business THIS PAGE INTENTIONALLY LEFT BLANK City of Rolling Hills Authorized Signers (Exhibit 1) I HEREBY CERTIFY that a meeting of the Board of Directors (or other authorizing body) of City of Rolling Hills a City organized under the laws of the State of CA (Investor), which at said meeting a quorum was present and acting throughout, the following preamble and resolutions were adopted and have been and now are in full force and effect. WHEREAS City of Rolling Hills is duly authorized and permitted by its Charter, Bylaws and/or investment policies to: 1) Engage in cash settlement transactions for the purchase of physical certificates of deposit(s) (CDs) purchased through eConnectDirecta or through any introducing agent. 2) Engage in cash settlement transactions in the form of CDs held in safekeeping at federally insured financial institutions. 3) Engage in cash or DVP (delivery -versus -payment) settlement transactions in securities including, but not limited to: debt instruments, bond debentures, notes, certificates of deposits and other fixed -income securities, including but not limited to: US Government Agency Bonds, Corporate Bonds, Municipal Bonds, Mortgage -Backed Securities, CMOs and Treasury Bonds, notes and bills. 4) Receive on behalf of the Investor or deliver to the Investor or a designated third party, monies, bonds or other securities. 5) Sell, assign or endorse for transfer bonds or other securities registered in the name of the Investor. 6) Establish and maintain safekeeping accounts with Fedwire'' and ACH privileges from which account funds are directly spent, and the responsibility for which is entirely that of the Investor. Said privileges will be limited to the persons designated by the Investor. Each designated person can independently perform the prescribed privileges. NAME Terry Shea TULE Finance Director Raymond R. Cruz City Manager SIGNATURE NOW THEREFORE BE IT RESOLVED that City of Rolling Hills can open an account or accounts in its name with a safekeeping agent, introducing broker, or Federally Insured Financial Institution offering CD rates through eConnectDirectH or through any introducing agent and that the persons named above, or their successors in office, may, on behalf of the Investor or any one of them acting individually, be and they are hereby authorized to (1) give or submit orders in said account(s) for the purchase, sale or other disposition of CDs, bonds and other securities listed on eConnectDirect$ or offered by any introducing broker, (2) make, execute, deliver or submit directly or through the services of eConnectDirect$ any and all written endorsements and documents necessary to effectuate closure or the disbursements of funds of or from the Investor account; (3) may at anytime while the account is open, modify, amend, submit or enter into any other arrangement with the safekeeping agent of its CD or securities. This authorization to each of said officers is to remain in full force and effect until other written notice of revocation is submitted to the safekeeping agent(s) and Multi -Bank Securities Inc. I FURTHER CERTIFY that the signatures of the officers (or others) identified above are authorized by the foregoing resolution to act for City of Rolling Hills Heidi Luce City Clerk NAME TITLE SIGNATURE ' IN WITNESS this 24 day of July , 2017 NAME SIGNATURE I hereby certify that I am authorized to be the sole signing officer (Signature) (Print Name) eConnctDirect.com Rev. 06_24'2013 THIS PAGE INTENTIONALLY LEFT BLANK CASH ACCOUNT APPLICATION 1 (welwoufd tike toopen a bokerage account with Muhl-Bankkztir*'es, Moto Oe coach by Pershrg. ACCOUNT I\'H RMM OY (NOTE ALL INFORMATION MUST BE COMPLETED) PLEASE TYPE OR PPJNT lei MULTI -BANK SECURITIES, INC Account Information ACCOUNT NAVE City of Rolling Hills E SL SSACh'A SS 2 Portuguese Bend Road ATTENTION Terry Shea, Finance Director SOC. Sce.OR TAX Le NO O7Y STATE Rolling Hills CA IP 90274 BUSINESS PROLE 310-377-1521 FAX 310-377-7288 MALTO(Chad me) ® Business O MaLng ❑ P.O. Box U.S. ENTITY M Yes O No I/ALDIGADOPESS fed-demi tan Bush <Ao1va) c Y STS ZIP ATTE mON PANE YOU CRA TalTRADINGAUTNCPoLSION TOANOT eiPARIT7 0 Yes ® No IfYes, Request Trading Atdhoiaation Form and provide name of agent. BankorBrokerage Reference NAVE OF FIRM BR /ICNANDACCOUNTIARJBER Account Type • CASH (Customer Agreemenf on reverse site of this gopLicefon) ❑ MARGLY (RequestMagic and truth in tendmgAgreements) ❑ LLC 0 Trust (Trustee Cara:eon Required) ❑ Patiershlp 0 Corporation (Request Form) ❑opmn Other (Specify.) Municipal Govemment Investment Profile INVESTMENT OBJECTIVE ® Income: An imesanent approach in Mich an investorgenera/1y seeks current inane over Erne. ❑ Long•Term Growth: An investment approach in which an investor generatyseeks caplet appreciation trough buying and ho g seasiLf.s over an extended period otrime. ❑ Short•Term Growth:An investment approach in which an iwesbr generagy seeks she t;am taplal gains through buying and se3ng searTwes over a shat perms of fime. RISK TOLERANCE INS ❑ Medium ❑ "91' Service Instructions MEN 0CURfT ESAPE SOLI O Hold Proceeds 123 Send Proceeds WHEN SECURITIES ARE PURCHASED, THEY WILL BE HELD IN FIRM NAME IYV;%]iCs 0 Hold M Send CONTACT YOUR BROKER FOR FREQUENCY CF 'SEND' Municipal Bond Offerings Official Statements: Municipal bond offering official statements are avadat(e elecxonicaly at httpl error emma.msrb.orgf Are you interested in hard copy delivery of Municipal Bond Official Statements for this account? 0 Yes In No Taxpayer TAXPAYER CERTIRCATIO; t Uthdu penalties of perjuy, I cefvfy that Certification (1) the number shown on this form in Section 111 is my correct Social Security Number or Taxpayer Identification Number (or 1 am waiting for a number to be issued to me); (2)1 am not subject to backup withholding because (a)1 am exempt from backup withholding or (b) 1 have not been notified by the internal Revenue Service (IRS) that 1 am subject to backup withholding as a result of a failure to report aft interest or divdends, or (c) the IRS has notified me that lam no longer subject to backup vithhokliing; and O (3)1 am a U.S. citizen or other U.S. person (defined below). CERTIFICATION INSTRUCTIONS: You must check Item 2 above if you have been notified by the IRS that you are currently subject to backup withholding because you have failed to report all interest and dividends on your tax retum If you are an exempt payee (if you are unsure, ask us for a cemptete set of IRS instructions), write the words 'Exempt Payee' here: Definition of a U.S. person. For federal tax purposes, you are considered a U.S. person if you are: (a) An individual who is a U.S. citizen or U.S. resident alien, (b) A partnership, corporation, company, or association created or organized in the United States or under the Ins of the United States, (c) An estate (other than a foreign estate), or (d) A domestic trust (as defined in Regulations section 301.7701-7). The signature provided below is that of the primary account holler. S'rnatre: Date: Signatures ACCOUNT N0 CTRCCU WEER S:w:xTURE For Office Use Only BY SIGNING THIS APPUCATION, 1 (WE) ACKNOWLEDGE THE FOLLOWING: (1) THAT, IN ACCORDANCE WITH PARAGRAPH #8 OF THE CUSTOMER AGREEMENT, I(Y ( AGREE IN ADVANCE TO ARBITRATE ANY CONTROVERSIES WHICH MAY ARISE WITH EACH OR BOTH OF US, (2) RECEIPT OF A COPY CF THE CUSTOt!ERAGREEMENT ON THE REVERSE SIDE OF THIS APPLICATION AND (3) THE INFORMATION PROVIDED ABOVE IS ACCURATE AND CORRECT. DATE 8-19-/7 RE -P. Lam. DAVE V0IF.'ED 0 Yes 0 No PASCH eese APPRCYs. ATE Multi -Bank Securities, Inc, Member of FINRA & SIPC; MSRB CUSTOMER ACCOUNT AGREEMENT TO. Multi -Bank Securities (My Broker), and Pershing LLC (Pershing) Pershing will be responsib=le for the follo'oing; (1) receiving and delivering customer funds and securities: (2) safekeeping customer funds and securities using ordinary care (while they are in PerShing'S possessionor in, h` purposes of this 1 of (�+ , control) which, for �;rp,,,, s this document, ordinary care means the degree �, care, which an ordinarily prudent and competent person engaged in the same line of business cr endeavor should exercise under similar circumstances in accordance with the rules and regulations of Securities and Exchange Commission and The Financial lnd; stiy Reyulat ry Authority and segregating accpr�.arra e the a � �� a�,n such funds and securities as required by applicable tall (3) preparing and transmitting to the customer conirmation of trades: and (4) preparing and transmitting to the customer account statements. 1, The client executing this Agreement agrees as follows with respect to the Account I have established with you for the purchase, sale or carrying of securities or contracts relating thereto and`or the borrowing of funds. 2. All transactions for my Account shell be subject to the con regulations. andusages of the market and constitution, rules. customs exchange or (,. Pershing, if any) where executed. 3. The client executing this Agreement agrees that, in giving orders to sell, at 'short' sale orders will be designated as "short. and ail long' sale orders will be designated as "long." and that the designation of a seed order as "long is a representation on my part that t own the security, f . „f, and if the security is not in your possession or if it is then impracticable to deliver the security youforthwith, will deliver it soon a to o+ :'rtLn, that I as as 4. Reports of the execution of orders and statements of my account shall be conclusive if not objected to within fie days and ten a` respectively, ..,.. d.. days, after transmittal to me by mail or otherwise. 5. At any time and from time to time you may, at your discretion, without notice tom . apply an+d.'or transfer any securities, commodities, contracts relating thereto, or any property equitytherein, nterchangeab between any of my accounts, whether individual or jointand any f other or 1y �` from of my accounts to any account guaranteed by me. 6. inn consideration of your carrying my account with a Post Office Box Address, sending _ mail third art hereby agree or your se . :n, .y . � s to me in care of a `. ; 4 party. f. I that "all correspondence of any nature e 'whatsoever" sent to me in such address wit have the same force and effect as if it had been delivered to me personally. I have listed my permanent address on the i e,;,v Account Application. (. To help i�government fight the of terrorism and money laundering act.+s;__ Federal law financial to obtain, :if the funding w.• �..cs, .. requires all institutions ., `an. verify, y> and record information that identifies each person who opens an account. What this means for When oe ..i Y you: you c,.Cn an acccunt.'tr._ lr,. ask for your name. address, date of birth, and other information ation that will allow us to identify you. We may ask to ee driver's ense ether also s� see your license or identifying documents. 8. This agreement contains a pre -dispute arbitration clause. By signing an arbitration agreement the parties agree as follows: a. All parties to this agreement are giving up the right to sue each other in court, including the right to a trial by jury, except as provided by the rules of the arbitration forum in which a claim is filed. b. Arbitration awards are generally final and binding; a party's ability to have a court reverse or modify an arbitration award is very limited. c. The ability of the parties to obtain documents, witness statements and other discovery is generally more limited in arbitration than in court proceedings. d. The arbitrators do not have to explain the reason(s) for their award. e. The panel of arbitrators will typically include a minority of arbitrators who were or are affi fated with the securities industry. f. The rules of some arbitration forums may impose time limits for bringing a claim in arbitration. In some cases a claim that is ineligible for arbitration may be brought in court. g. The rules of the arbitration forum in which the claim is filed, and any amendments thereto, shall be incorporated into this agreement. The undersigned agrees, and by carrying andlcr introducing an account of the undersigned you agree, that all controversies which may arise belt een us, including but not limited to those involving any transaction or the construction, performance, or breach of this or any other agreement between us, whether entered into prior, on or subsequent to the date hereof, shall be determined by arbitration. Any arbitration under this agreement shall be conducted before the New the Financial Industry Regulatory Authority. riNRA" and in accordance with its rules then in force. I may elect in the first instance whether tratio conducted before FINRA, but if I fail arbi.._...,n shall be to make such election, by registered letter cr telegram addressed to you at your main office, before the expiration of five days after • receipt of a written request from you to make such election, then you may make such election. Judgment upon the award of arbitrators may be entered in any court, state or federal, having jurisdiction. Class-action matters are excluded from arbitration proceedings conducted by the FINRA. Therefore, it is further agreed that the parties to this agreement shalt not bring a putative or certified class-action to arbitration, nor seek to enforce any predispute arbitration agreement against any person who has initiated in court a putative class-action; or who is member of a putative class who has rot opted out of the class with respect to any claims encompassed by the putative class action until: 0) the class certification is denied; or (ii) the class is decertified; or (iii) the customer is excluded from the class by the court. Such forbearance to enforce an agreement to arbitrate shall not constitute a waiver of any rights under this agreement except to the extent stated herein. g. Investment Objective Definitions: Capital Preservation - a conservative investment strategy f characterized by a desire to avoid risk of loss; Income - strategy focused on current income rather than capital ..,ec ....^,'1 Growth investing in stocks with strong earnings and 'or revenue growth or potential: Speculation - taking larger risks. usually by ° en. trading. viii hope of higher than -average gain. All strategies involve various types and levels of risk, the most common on of which are market. credit, - :lawn. business and interest rate. This Agreement and is t -,'-m shat be bind"' up.,.: Client's successors, ra.d 'iistra.., s:.tp ,. liquidator, receiver, ,.us.- . assignee. custodian. conservator other similar official (succe__u _) In the event of ClientsJ -'inso .e.ncy or bankruptbankruptic.y whetheror not any successors se` of its shall have qualified cr been appointed, until Pershing and My Broker has written notice of Client's insolvency or bankruptcy Pershing ng and My >. .� a pt id Account tt-lTH I`J+er;r ;( continue t operate as though Client were solvent a!,� not b,.;hltrU... and Pershing and ,`�,,7 may liquidate ate its sx i � iJL;T PRIOR WRITTEN TEN NOTICE TO OR DEMAND upon its successors. This Agreement shall to the benefit of Pers in7 s and Lly Broker's successors and assigns. viheter by merger. consolidation or 0 he .vise (and Pershing and My Broker may transfer Client's Account and this Agreement to any such successors and ass ns) WITHOUT NOTICE. Client may r t assic deieg .._..is under this Agreeme without . c s and My Broker's consent MULTI -BANK SECURITIES, INC. 2017 Municipal Due Diligence PETER YANEZ VICE PRESIDENT PHONE/FAX: +1 (855) 928-0111 PYANEZ@MBSSECURITIES.COM 2400 EAST COMMERCIAL BLVD SUITE 812 FT. LAUDERDALE, FL 33308 gtau4 67),I t.-arted./ The information provided in the following pages has been prepared to meet or exceed your regulatory requirements. Member of F/NR4 & SIPC;; MSRB Registered. MSS 2017 Muni DD p eCD. pdf 03.29.17 Contents ' SIPC Protection ;111 Veteran -Owned Business Audited Financials State Registration Investment Policy Compliance ; Pershing MI eConnectDirect' Biography � References r" This page is intentionally left blank. MULTI —BANK SECURITIES, INC! Thank you for your interest in Multi -Bank Securities, Inc. (MBS), an independent, fixed -income securities broker -dealer that has been serving institutional investors across the U.S. for more than 29 years and is a veteran -owned business. We understand you have numerous options for your investment needs and we appreciate you taking the time to learn more about how our Firm can help your institution meet its investment objectives. As a privately held organization providing fixed -income securities, our customers benefit from our: • Stability. MBS has provided a wide range of investment services to our clients for nearly 30 years. We specialize in a broad selection of products and services that allow you flexibility in choosing which options are best suited to meet your needs, including an array of U.S. Treasuries, agencies and CDs. • Focus. MBS dedicates our resources exclusively to the fixed -income sector, providing you with the broad market visibility you should expect from a trusted service provider. • Technology. Dedicated information technology enables MBS to provide timely market information and client services. We also operate our own proprietary online platform, eConnectDirect®, which lets you see the bond and CD markets like never before. • Funding. We offer our clients a variety of brokered and non -brokered solutions to satisfy your liquidity needs, and have placed billions of dollars in deposits in thousands of financial institutions. • Veteran -Owned Status. MBS has been recognized by the National Veteran -Owned Business Association and is proud to count numerous former servicemen among our ranks, including founder and CEO David T. Maccagnone. • Education. In 2016, we introduced the Multi -Bank Securities Institute, an online resource for institutional and public funds investors of all experience and skill levels to create and operate an effective investment program. Explore the site at http://institute.mhssecurities.com. • Safekeeping. Safekeeping, as recommended by the Government Finance Officers Association (GFOA), is through a third party. We have a correspondent relationship with Pershing LLC (Pershing), a BNY Mellon company, which will provide these capabilities for you at no cost. Pershing meets or exceeds all the qualifications recommended by the GFOA. • Location. We are everywhere you need us, with offices established around the country and brokers licensed in all 50 states. We have helped more than 5,000 institutions like yours and are proud of our 29 -year history of addressing our customers' investment goals with personal service, investment expertise and progressive technologies. We encourage you to learn more about our Firm's history through FINRA's BrokerCheck - a free tool available to help you research the professional backgrounds of current and former FINRA-registered brokerage firms with whom you do business - at brokercheck.finra.org. Our CRD number is 22098. Address 1000 Town Center, Suite 2300 Southfield, Michigan 48075 Phone (800) 967-9045 (248) 291-1100 Fax (248) 291-1101 mnww.mbssecurities.com 2017 Due Diligence Packet 2400 East Commercial Boulevard, Suite 812 Member of FINRA € SIPC; MSRB Registered. Ft. Lauderdale, Florida 33308 gicurga, 6Pdettut-atwed.7 (800) 967-9045 (954) 351-6930 (954) 351-9197 3 I hope you will find everything you need in the enclosed document to complete your due diligence on our Firm. We have included information both on MBS and on our clearing firm. For further assistance, please contact your MBS account representative. We look forward to the opportunity to do business with you. Sincerely, Ld David T. Maccagnone Chairman and Chief Executive Officer Multi -Bank Securities, Inc. 2017 Due Diligence Packet 4 Member of FINRA & SIPC; MSRB Registered. MBS MULTI -BANK SECURITIES, INC! THE FOLLOWING INFORMATION IS PROVIDED TO SUPPORT YOUR DUE DILIGENCE REQUIREMENTS: SIPC PROTECTION 7-8 Evidence of SIPC Protection 7 VETERAN -OWNED BUSINESS 9-10 Veteran Business Enterprise Certification 9 AUDITED FINANCIALS 11-24 Statement of Compliance With SEC Annual Report Filing Requirements 11 A Copy of the Most Recently Audited Financial Statement 13 Independent Auditor's Report 15 Statement of Financial Condition 17 Notes to Statement of Financial Condition 18 STATE REGISTRATION 25-26 A Copy of the Multi -Bank Securities, Inc. Registration Statement 25 INVESTMENT POLICY 27-30 Agreement That Specifies the Type of Securities Your Institution Purchases 27 Investment Policy Recommendations and Guidelines 29 COMPLIANCE 31-42 Compliance Information 31 Privacy Policy 32 Business Continuity 34 Statement Regarding SEC, FINRA or State Securities Sanctions 35 BrokerCheck Response 36 AML and CIP: Test Procedures and Internal Audit 37 Code of Ethical Business Conduct 39 IT Security 40 Confirmation of Insurance 41 PERSHING 43-72 Pershing Statement of Financial Condition 43 Pershing Auditor's SOC1 Certification Letter 70 Safety of Customer Assets 71 eConnectDirect 73-74 eConnectDirect Investor Benefits 73 BIOGRAPHY 75 REFERENCES 77 Multi -Bank Securities, Inc. is committed to providing you with the highest quality service available. We hope this packet will meet or exceed your due diligence needs and expectations. 2017 Due Diligence Packet 5 Member of FINRA & SIPC; MSRB Registered. This page is intentionally left blank. SECURITIES INVESTOR PROTECTION CORPORATION 1667 K STREET, N. W., SUITE 1000 WASHINGTON, D.C. 20006-1620 (202) 371-8300 WWW.SIPC.ORG January 11, 2017 Multi -Bank Securities, Inc. Attn: Merlin Elsner 1000 Town Center, Ste. 2300 Southfield, MI 48075 Dear Sirs: In response to your email request today, please be advised that according to SIPC's records, the corporation is registered with the Securities and Exchange Commission as a securities broker or dealer under Section 15(b) of the 1934 Act, (8-39547, 5/6/1988). By operation of the Securities Investor Protection Act of 1970, the corporation is a SIPC member unless (i) its principal business, in the determination of SIPC, taking into account business of affiliated entities, is conducted outside the United States and its territories and possessions; (ii) its business as a broker or dealer consists exclusively of (I) the distribution of shares of registered open end investment companies or unit investment trusts, (II) the sale of variable annuities, (III) the business of insurance, or (IV) the business of rendering investment advisory services to one or more registered investment companies or insurance company separate accounts, or (iii) it effects transactions in security futures products only. Sincerely, Linda McKenzie Siemers Asst. VP — Member Assessments Human Resources & Facilities LMcKS:kew 2017 Due Diligence Packet 7 Member of FINRA & SIPC; MSRB Registered. This page is intentionally left blank. 7 ry 11 r: ?i certicdp March 29, 2016 David Maccagnone Multi -Bank Securities, Inc. 1000 Town Center, Suite 2300 Southfield, MI 48075 Dear David Maccagnone: South Central Texas Regional Certification Agency Your unified ar1ifiratiou source tvtvw scIrca. ot, Lgal We are pleased to inform you that your application for certification in our Small, Minority, Woman, African American. Veteran, and Disabled Individual Business Enterprise (S/M/W/AAN/DI) Program has been approved. Your firm met the requirements of SCTRCA Standards and is currently certified as a: *Veteran Business Enterprise (VBE) Certification Number: 216031567 Certification Renewal: March 31, 2018 Certification Expiration: March 31, 2018 Providing the following products or services: NAICS-523120: SECURITIES BROKERAGES On the two year anniversary date of your certification, you are required to provide a renewal application affirming that no changes have occured affecting your certification status. The SCTRCA will send you a Certification Renewal reminder sixty (60) days prior to your expiration date. The SCTRCA will no longer include a certificate upon certifcation renewals. Your expiration date is March 31, 2018. Please notify this office within thirty (30) days of any changes affecting the size, ownership, control requirements, or any material change in the information provided in the submission of the certification application. Thank you in advance. Interim Executive Director 3201 Cherry Ridge Dr., Building C, Suite #319 San :Antonio TX 78230 2017 Due Diligence Packet 9 Phone: (210) 227--4RCA (4722) Member of FINRA & SIPC; MSRB Registered. This page is intentionally left blank. UNITED STATES SECURITIESANDEXCHANGE COMMISSION Washington, D.C. 20549 ANNUAL AUDITED REPORT FORM X17A-5 PART III OMB APPROVAL OMB Number. 3235-0123 Expires: May 31, 2017 Estimated average burden hours per response. 12.00 SEC FILE NUMBER 8-39547 FACING PAGE Information Required of Brokers and Dealers Pursuant to Section 17 of the Securities Exchange Act of 1934 and Rule 17a-5 Thereunder REPORT FOR THE PERIOD BEGINNING 01/01/16 AND ENDING 12/31/16 MM/DD/YY MM/DD/YY A. REGISTRANT IDENTIFICATION NAME OF BROKER -DEALER: MULTI —BANK SECURITIES, INC. ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.) 1000 TOWN CENTER. SUITE 2300 SOUTHFIELD (No. and Street) MI OFFICIAL USE ONLY FIRM I.D. NO. 48075 (City) (State) (Zip Code) NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT JEFFERY MACCAGNONE 248-291-1100 (Area Code — Telephone Number) B. ACCOUNTANT IDENTIFICATION INDEPENDENT PUBLIC ACCOUNTANT whose opinion is contained in this Report* CARNAGHI & SCHWARK, PLLC (Name — if individual, state last. first. middle name) 30435 GROESBECK HIGHWAY, ROSEVILLE MI 48066 (Address) (City) CHECK ONE: L I Certified Public Accountant Public Accountant Accountant not resident in United States or any of its possessions. (State) (Zip Code) FOR OFFICIAL USE ONLY *Claims for exemption from the requirement that the annual report be covered by the opinion of an independent public accountant must be supported by a statement offacts and circumstances relied on as the basis for the exemption. See Section 240.17a -5(e)(2) SEC 1410 (06-02) 2017 Due Diligence Packet Potential persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number. 11 Member of FINRA & SIPC; MSRB Registered. 2017 Due Diligence Packet OATR OR , AFFIRMATION 1, JEFFERY MACCAGNONE ; swear (or affirtn) that, to the best of my ]onowledge and belief the accompanying financial statement and supporting schedules pertaining to the firm of MULTI -BANK SECURITIES INC as of DECEMBER, 31 16 _0 are .true and correct I further swear (or affirm) that neither the company nor any partner, proprietor, principal officer or director has any proprietary interest in any account classified solely as that of a customer, except as follows: 9 e- #1---L—,___L____ Si mature PRESIDENT Title STEPHANIE M. WOOD Notary Public Notary Public Wayne County, MI This report-* ' contains (check all applicable boxes); IN (a) Facing Page. El (b) ❑ (c) ❑ (a) ❑ (e) My Commission Expires April 9, 2020 Statement of Financial Condition. Acting in the County of Oakland; Statement of Income (Loss): Statement of Changes in Financial Condition. Statement of Changes in Stockholders' Equity or Partners' or Sole Proprietors' Capital. ❑ (f) Statement of Changes in Liabilities Subordinated to Claims of Creditors. ❑ (g) Computation of Net Capital. ❑ (h) Computation for Determination of Reserve Requirements Pursuant to Rule 15c3-3. ❑ (1) Information Relating to the Possession or Control Requirements Tinder Rule 15c3-3. ❑ (j) AReconciliation, including appropriate explanation of the Computation of Net Capital Under Rule 15c3-1 and the Computation for Determination of the ResenT Requirements Under Exhibit A of Rule 15c3-3. • (k) A Reconciliation between the audited and unaudited Statements of Financial Condition with respect to methods of consolidation. ® (1) An Oath or Affirmation. ❑ (m) A copy of the SIPC Supplemental Report ❑ (n) A report describing any material inadequacies found to exist or found to have existed since the date of the previous audit. (o) ,Exemption Report **For conditions of confidential treatment of certain portions of this frying, see section 240.17a -5(e)(3). 12 Member of FINRA & SIPC; MSRB Registered. MULTI -BANK SECURITIES, INC. STATEMENT OF FINANCIAL CONDITION December 31, 2016 Filed Pursuant to Rule 17a -5(e)(3) Under the Securities Exchange Act of 1934 As a Public Document 2017 Due Diligence Packet 13 Member of FINRA & SIPC; MSRB Registered. This page is intentionally left blank. Carnaghi & Schwark, PLLC CERTIFIED PUBLIC ACCOUNTANTS UPTON PROFESSIONAL BUILDING 30435 GROESBECK HIGHWAY ROSEVILLE, MICHIGAN 48066 Anthony L. Carnaghi. CPA (586) 779-8010 Douglas W. Schwark. CPA FAX (586) 771-8970 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Stockholder Multi -Bank Securities, Inc. We have audited the accompanying statement of financial condition of Multi -Bank Securities, Inc. as of December 31, 2016 and the related notes to the financial statement. This financial statement is responsibility of Multi -Bank Securities, Inc.'s management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement of financial condition is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the statement of financial position. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall statement of fmancial position presentation. We believethat our audit provides a reasonable basis for our opinion. In our opinion, the statement of financial condition referred to above presents fairly, in all material respects, the financial condition of Multi -Bank Securities, Inc. as of December 31, 2016 in accordance with accounting principles generally accepted in the United States of America. Roseville, Michigan February 16, 2017 2017 Due Diligence Packet 15 Member of FINRA 8. SIPC; MSRB Registered. 0 This page is intentionally left blank. 0 MULTI -BANK SECURITIES, INC. STATEMENT OF FINANCIAL CONDITION December 31, 2016 ASSETS Assets: Cash $ 23,984,878 Accounts receivable: Brokers, dealers and clearing organization 28,792,702 Deposit - clearing organization 2,000,000 Other 58,882 Securities owned, at fair value 459,865,240 Prepaid Taxes 735,799 Prepaid expenses 312,833 Deferred tax asset (Note 2) 3,740,669 $519,491,003 Other assets: Deferred costs (Note 6) Total assets LIABILITIES AND STOCKHOLDER'S EQUITY 1,998,693 $521,489,696 Liabilities: Accounts payable: Commissions due sales representatives $ 9,921,462 Other 105,782 Securities sold, not yet purchased, at fair value 427,075,618 Amount due to Parent Company (Note 4) 517,557 Accrued interest — subordinated debt 288,333 Accrued expenses 6,195,789 Total current liabilities 444,104,541 Subordinated debt (Note 7) 32,000,000 Deferred compensation (Note 9) 11,001,969 Total long-term liabilities 43,001,969 Total liabilities 487,106,510 Stockholder's equity: Common stock, par value $1.00 per share; 50,000 shares authorized; 16,000 shares issued 16,000 Capital in excess of par value 1,533,000 Retained earnings 32,834,186 Total stockholder's equity 34,383,186 $521,489,696 See accompanying notes. 2017 Due Diligence Packet 17 Member of FINRA & SIPC; MSRB Registered. �1 MULTI -BANK SECURITIES, INC. NOTES TO STATEMENT OF FINANCIAL CONDITION December 31, 2016 Note 1- ORGANIZATION Multi -Bank Securities, Inc. (the "Company") is an institutional fixed -income securities broker -dealer registered with the Financial Industry Regulatory Authority (FINRA) and the U.S. Securities and Exchange Commission. The Company is a wholly owned subsidiary of Multi -Bank Services, Ltd. See Note 4 for transactions with Parent Company. Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Revenue Recognition Securities transactions are recorded on the trade date, as if they had settled. Profit and losses arising from all securities transactions are recorded on a trade date basis. Securities owned and securities sold, not yet purchased are recorded at fair value in accordance with FASB ASC 820, Fair Value Measurements and Disclosures. Management Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Concentrations of Counterparty Credit Risk The Company is engaged in various trading and brokerage activities with counterparties that primarily include broker -dealers, banks, and other financial institutions. In the event the counterparties do not fulfill their obligations, the Company may be exposed to risk. The risk of default depends on the creditworthiness of the counterparty. The Company monitors its exposure to risk through a variety of control procedures, including daily review of trading positions. Market Risk Market risk is the potential loss the Company may incur as a result of changes in the market or fair value of a particular financial instrument. All financial instruments are subject to market risk. The Company's exposure to market risk is determined by a number of factors, including size, duration, composition and diversification of positions held, the absolute and relative level of interest rates, and market volatility and liquidity. The Company manages risk by setting and monitoring adherence to risk limits and by hedging its positions. Federal Income Taxes The Company files a consolidated Federal income tax return with its Parent Company. The provision for Federal income tax for the year ended December 31, 2016 is based on a separate return filing. The amount of current and deferred taxes payable or refundable is recognized as of the date of the financial statements, utilizing currently enacted tax laws and rates. The Company's income tax asset relates primarily to deferred compensation and represents the amount available to reduce income taxes payable in future years. 2017 Due Diligence Packet 18 Member of FINRA & SIPC; MSRB Registered. MULTI -BANK SECURITIES, INC. NOTES TO STATEMENT OF FINANCIAL CONDITION December 31, 2016 (Continued) Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) The Company recognizes and measures its unrecognized tax benefits in accordance with FASB ASC 740, Income Taxes. The primary objective of ASC 740 is to prescribe measurement and disclosure requirements for income tax provisions when uncertainty exists as to whether the reporting entity's tax positions would be sustained in the event of an examination. Company management believes that there are no material uncertainties in which tax positions taken would not be sustained upon examination. Subsequent Events The Company has evaluated events and transactions for potential recognition or disclosure through February 16, 2017, which is the same date the financial statements were available to be issued. Note 3 — FAIR VALUE Fair Value Measurement FASB ASC 820 defines fair value, establishes a framework for measuring fair value, and establishes a fair value hierarchy which prioritizes the inputs to valuation techniques. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market. Valuation techniques that are consistent with the market, income or cost approach, as specified by FASB ASC 820, are used to measure fair value. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels: • Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities the Company has the ability to access. • Level 2 inputs are inputs (other than quoted prices included within level 1) that are observable for the asset or liability, either directly or indirectly. • Level 3 are unobservable inputs for the asset or liability and rely on management's own assumptions about the assumptions that market participants would use in pricing the asset or liability. (The unobservable inputs should be developed based on the best information available in the circumstances and may include the Company's own data.) The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. 2017 Due Diligence Packet Member of FINRA & SIPC; MSRB Registered. MULTI -BANK SECURITIES, INC. NOTES TO STATEMENT OF FINANCIAL CONDITION December 31, 2016 (Continued) Note 3 — FAIR VALUE (Continued) The following table presents the Company's fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 31, 2016. Level 1 Level 2 Level 3 Total Assets: Corporate and other debt $ U.S. government and agency U.S. Treasuries Municipal debt Equities Total securities owned Liabilities: U.S. government and agency U.S. Treasuries Municipal Debt Equities Total securities sold, not yet purchased - $ 39,418,515 $ - 392,041,793 12,171,255 20,136 16,213,541 $ 12,191,391 $447,673,849 - $351,066,925 66,370,293 9,494,200 $75,864,493 144,200 $ 39,418,515 392,041,793 12,171,255 16,213,541 20,136 $459,865,240 $ - $351,066,925 66,370,293 144,200 9,494,200 $351,211,125 $ - $427,075,618 Note 4 - TRANSACTIONS WITH PARENT COMPANY The Parent Company, Multi -Bank Services, Ltd. provides various administrative services to the Company, including furniture and fixtures. For the year ended December 31, 2016, administrative expenses charged to the Company amounted to $300,000. In addition, at various times, each Company makes advances to each other. The net of all inter -company activity resulted in a payable to the Parent Company in the amount of $517,557 at December 31, 2016. Note 5 - NET CAPITAL REQUIREMENTS The Company is subject to the Securities and Exchange Commission's Uniform Net Capital Rule (Rule 15c3-1). Based on the provisions of this rule, the Company must maintain net capital equivalent to the greater of $100,000 or 1/15th of aggregate indebtedness, as defined. At December 31, 2016, the Company's net capital was $51,098,421 and its required net capital was $1,868,727. The ratio of aggregate indebtedness to net capital (which may not exceed 15 to 1) was .55 to 1. 2017 Due Diligence Packet 20 Member of FINRA & SIPC; MSRB Registered. MULTI -BANK SECURITIES, INC. NOTES TO STATEMENT OF FINANCIAL CONDITION December 31, 2016 (Continued) Note 6 — DEFERRED COSTS Deferred costs in the amount of $1,998,692 at December 31, 2016 are summarized as follows: Balance, 12/31/15 Additions Amortization Balance, 12/31/16 Borrowing fees and related costs $ 918,798 (158,399) $ 760,399 Website Development costs $ 1,357,776 (228,000) $ 1,129,776 CRM Development costs $ 120,518 (12,000) $ 108,518 Total $ 2,397,092 (398,399) $ 1,998,693 Borrowing fees and related costs represent amounts paid in connection with the financing of the subordinated debt. These amounts are being amortized over the term of the loan. Website development costs represent amounts paid in connection with the website application and infrastructure development of a web -based platform as a means for financial institutions to research, trade, or obtain both brokered and non -brokered funding alternatives. These costs are being amortized over the estimated useful life of ten years. CRM development costs represent amounts paid in connection with the development and customization of a customer relationship manager application. These costs are being amortized over the estimated useful life of ten years. Note 7 — SUBORDINATED DEBT The Company has a $32,000,000 subordinated loan agreement with a private investment firm. The loan bears interest at 9.375% per annum and matures on November 16, 2021. The debt is subordinate in right of payment to all claims of all other present and future creditors of the Company. The subordinated debt has been approved by the Financial Industry Regulatory Authority (FINRA) and is thus available in computing the Company's net capital under the SEC's net capital rule. In addition, under the terms of the agreement the Company is obligated to pay a $30,000 monthly commitment fee. 2017 Due Diligence Packet 21 Member of FINRA & SIPC; MSRB Registered. 0 MULTI -BANK SECURITIES, INC. NOTES TO STATEMENT OF FINANCIAL CONDITION December 31, 2016 (Continued) Note 8 - EMPLOYEES' BENEFIT PLAN The Company maintains a defined contribution 401(k) benefit plan covering all eligible employees of the Company. Under provisions of the Plan, participating employees can elect to contribute to their account a percentage of their compensation not to exceed the limitations imposed by the Internal Revenue Service. In addition, the Company at its discretion may make a matching contribution, which percentage will be determined each year by the Company. For the year ended December 31, 2016, the Company elected not to make a matching contribution. Note 9 — DEFERRED COMPENSATION PLAN The Company maintains a Deferred Compensation Plan available to a select group of management and highly compensated employees. The plan allows participants each year to elect to defer all or a portion of their salary and bonuses. All deferrals to the participants' accounts vest immediately. Deferred account balances earn interest at 7% per annum. At December 31, 2016 the total deferred compensation is $11,001,969 which includes $1,579,652 of accrued interest. Note 10 - OPERATING LEASE COMMITMENTS The Company leases its primary operating facilities in Southfield, Michigan and Ft. Lauderdale, Florida. They also lease facilities in various other states. The minimum lease payments on these leases are summarized as follows: Years Ended December 31, Amount 2017 539,000 2018 483,000 2019 433,000 2020 433,000 2021 396,000 The lease agreements include escalation clauses that increase the minimum rental payment for increased lessor taxes and operating expenses. For the year ended December 31, 2016, the total lease expense pursuant to the above operating leases amounted to $727,334. Furniture and equipment is provided by the Parent Company, the charge for which is included in the administrative charges paid to the Parent Company, see Note 4. 2017 Due Diligence Packet 22 Member of FINRA & SIPC; MSRB Registered. MULTI -BANK SECURITIES, INC. NOTES TO STATEMENT OF FINANCIAL CONDITION December 31, 2016 (Continued) Note 11— SUBSEQUENT EVENT On January 20, 2017, the Company completed a renegotiation of its current subordinated debt agreement, see Note 7. The Company increased its existing $32,000,000 subordinated loan to $40,000,000. The loan bears interest at 10.5% per annum and matures on November 16, 2021. As with the previous loan, the debt is subordinate in right of payment to all claims of all other present and future creditors of the Company. The subordinated debt has been approved by the Financial Industry Regulatory Authority (FINRA) and is thus available in computing the Company's net capital under the SEC's net capital rule. 2017 Due Diligence Packet 23 Member of FINRA & SIPC; MSRB Registered. 3� This page is intentionally left blank. MULTI -BANK SECURITIES, INC®, DATA CURRENT AS OF: Wednesday, March 1, 2017 CRD#: 22098 REGULATORY, STATE &TERRITORY REGISTRATIONS Jurisdiction/SRO Category Status Status As Of Date AK Broker Dealer Approved 03/27/1997 AL Broker Dealer Approved 11/07/1994 AR Broker Dealer Approved 05/02/1997 AZ Broker Dealer Approved 10/11/2001 CA Broker Dealer Approved 03/30/1994 CO Broker Dealer Approved 04/23/1991 CT Broker Dealer Approved 08/20/1998 DC Broker Dealer Approved 03/30/1994 DE Broker Dealer Approved 10/11/1994 FINRA Broker Dealer Approved 12/23/1988 FL Broker Dealer Approved 02/05/1991 GA Broker Dealer Approved 02/28/1994 HI Broker Dealer Approved 04/05/1995 IA Broker Dealer Approved 03/31/1994 ID Broker Dealer Approved 03/20/1997 IL Broker Dealer Approved 07/13/1989 IN Broker Dealer Approved 03/24/1997 KS Broker Dealer Approved 05/04/1994 KY Broker Dealer Approved 03/08/1994 LA Broker Dealer Approved 09/07/1994 MA Broker Dealer Approved 07/25/1994 MD Broker Dealer Approved 03/11/1994 ME Broker Dealer Approved 05/24/1994 MI Broker Dealer Approved • 08/31/1988 MN Broker Dealer Approved 09/02/1994 MO Broker Dealer Approved 05/02/2002 MS Broker Dealer Approved 03/04/1994 MT Broker Dealer Approved 02/14/1994 NC Broker Dealer Approved 08/02/1994 ND Broker Dealer Approved 04/25/1997 NE Broker Dealer Approved 11/02/1994 2017 Due Diligence Packet 25 C.) Member of FINRA & SIPC; MSRB Registered. DATA CURRENT AS OF: Wednesday, March 1, 2017 (continued) CRD#: 22098 REGULATORY, STATE &TERRITORY REGISTRATIONS Jurisdiction/SRO Category Status Status As Of Date NH Broker Dealer Approved 09/28/1995 NJ Broker Dealer Approved 11/09/1994 NM Broker Dealer Approved 08/02/1994 NV Broker Dealer Approved 05/23/1994 NY Broker Dealer Approved 06/05/1996 OH Broker Dealer Approved 11/21/1994 OK Broker Dealer Approved 06/04/1991 OR Broker Dealer Approved 04/04/1997 PA Broker Dealer Approved 03/07/1994 PR Broker Dealer Approved 02/10/2000 RI Broker Dealer Approved 03/02/1994 SC Broker Dealer Approved 08/04/1994 SD Broker Dealer Approved 03/04/1994 SEC Broker Dealer Approved 05/06/1988 TN Broker Dealer Approved 08/04/1994 TX Broker Dealer Approved 06/29/1990 UT Broker Dealer Approved 01/19/1994 VA Broker Dealer Approved 05/16/1994 VI Broker Dealer Approved 01/30/2012 VT Broker Dealer Approved 06/18/1997 WA Broker Dealer Approved 10/04/1989 WI Broker Dealer Approved 09/06/1991 WV Broker Dealer Approved 01/28/1994 WY Broker Dealer Approved 08/08/1994 2017 Due Diligence Packet 26 Member of FINRA & SIPC; MSRB Registered. March 1, 2017 MULTI -BANK SECURITIES, INC. To Whom It May Concern: This letter is to inform you that we at Multi -Bank Securities, Inc. (MBS) do not give accounting, regulatory, tax or legal advice. However, MBS makes every effort to recommend investments we feel are appropriate for our clients. It is our intention to maintain on file an investment policy from every one of our clients. If you have a written investment policy outlining the types of investments you can and cannot make, please forward it to us at your convenience. We have designed a system of controls to help reduce the risk of inappropriate investments for our clients. Sincerely, DI:4j David T. Maccagnone Chairman and Chief Executive Officer Multi -Bank Securities, Inc. Address 1000 Town Center, Suite 2300 Southfield, Michigan 48075 (800) 967-9045 (248) 291-1100 Phone Fax 2400 East Commercial Boulevard, Suite 812 Member of FINRA & SIPC; MSRB Registered. Ft. Lauderdale, Florida 33308 �h /P (800) 967-9045 (954) 351-6930 (248) 291-1101 (954) 351-9197 www.mbssecurities.com 2017 Due Diligence Packet 27 This page is intentionally left blank. t® T r:;) MULTI -BANK SECURITIES, INC! Municipal Investing Policy Recommendations and Guidelines Your Investment Policy Since 1988, Multi -Bank Securities, Inc. (MBS) has been serving the investment needs of municipalities throughout the U.S. It is with great care that we recommend investment products we feel are appropriate and strictly adhere to your investment policy guidelines. We have systems in place to assist you in reducing the risk of making inappropriate investments. Maintenance of Your Investment Policy It is our policy to review and maintain a copy of your investment policy on file. Should your policy need reviewing, your MBS account representative is ready to help. Our team of highly skilled professionals is required to regularly complete continuing education to ensure a broad understanding of how fixed - income products impact the municipal market. They are well -versed in current regional, state and federal governmental investment statues and policies. Developing Your Investment Policy Information about developing and evaluating an investment policy is available on the Multi -Bank Securities Institute website. This online resource focuses on educating and supporting investment professionals of all experience and skill levels. There is no cost associated with the website, but visitors will have to register to view the Public Funds Investor Guide.* Explore the site at http://institute.mbssecurities.com. National municipal organizations such as the Association of Public Treasurers of the United States & Canada (APT) and the Government Finance Officers Association (GFOA) also make sample investment policy guidelines and recommendations available to governmental entities. To receive a free copy, please contact your MBS account representative. 'There may be fees associated with other products/services offered by MBS. 2017 Due Diligence Packet 29 Member of FINRA & SIPC; MSRB Registered. �t3 This page is intentionally left blank. 0 MULTI -BANK SECURITIES, INC. IMPORTANT COMPLIANCE INFORMATION USA PATRIOT ACT Multi -Bank Securities, Inc. is committed to complying with the U.S. statutory and regulatory requirements designed to combat money laundering and terrorist financing. The USA PATRIOT Act requires all financial institutions to obtain certain identification documents or other information in order to comply with their Customer Identification Procedures (CIP). When you open an account, we will ask you for your name, address, date of birth and other information that will allow us to identify you. We also may ask to see your driver's license or other identifying documents. Until you provide the required information or documents, we may not be able to open an account or effect any transactions for you. For additional information, contact Chief Compliance Officer Merlin Elsner, our designated Anti -Money Laundering Compliance Officer, at 1-800-967-9008. ORDER ROUTING Order routing information for your specific orders is available upon request by contacting your account representative. You can also see the most recent quarterly routing information on our corporate website, www.mbssecurities.conl, by clicking on Order Routing at the bottom of the home page. FINRA BROKERCHECK INFORMATION The FINRA BrokerCheck Program is available at www.finra.org and can be accessed by clicking on Protect Yourself, then clicking on BrokerCheck under Before You Invest. The site gives background information, registration/license status and disciplinary history of brokers and firms. SECURITIES INVESTOR PROTECTION CORPORATION (SIPC) Information about SIPC, including the SIPC brochure, can be obtained by calling SIPC at 1-202-371-8300 or on the SIPC website, www.sipc.org. FIRM CONTACT INFORMATION If you have any concerns about your account, please contact Merlin Elsner at 1-800-967-9008. Updated March 2017 2017 Due Diligence Packet 31 Member of FINRA & SIPC; MSRB Registered. fl MULTI -BANK SECURITIES, INC! PRIVACY POLICY Multi -Bank Securities, Inc. (MBS) respects your right to privacy. We always have been committed to securing the confidentiality and integrity of your personal information. We are proud of our privacy practices and want our current and prospective clients to understand what information we collect and how we use it. WHY WE COLLECT YOUR INFORMATION We gather your information about you and your accounts so we can (1) know who you are and thereby prevent unauthorized access to your information, (2) design and improve the products and services we offer and (3) comply with the laws and regulations that govern the financial industry. WHAT INFORMATION WE COLLECT We may collect the following types of nonpublic personal information about you: • Information about your identity, such as your name, address and Taxpayer Identification Number. • Information about your transactions with us. • Information we receive from you from applications, forms or direct discussions with you. SOURCES FROM WHICH WE OBTAIN YOUR INFORMATION We collect nonpublic personal information about MBS's clients from the following sources: • Information we receive from you from applications, forms or direct discussions with you. • Information we may obtain via the internet. • Information we receive from our clearing firm or any third -party vendor for authentication purposes. WHAT INFORMATION WE DISCLOSE Your securities account is carried by our clearing firm pursuant to clearing agreements. We may disclose to them all the information we collect regarding your account. Our clearing firm is contractually obligated to keep the information we have provided them confidential and use the information only for the services required and as allowed by applicable law or regulation. We also may disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law and noted above. Moreover, we will not release information about our customers or former customers, except as noted above, unless one of the following conditions is met: • We receive your prior written consent. • We believe the recipient to be you or your authorized representative. • We are required by law or regulation to release information to the recipient. 2017 Due Diligence Packet Member of FINRA & SIPC; MSRB Registered. MULTI -BANK SECURITIES, IMC.® PRIVACY POLICY (CONTINUED) CONFIDENTIALITY AND SECURITY We maintain physical, electronic and procedural safeguards to protect your personal account information. We also restrict access to your personal and financial data to authorized associates who have a need for these records. We require all non-affiliated organizations to conform to our privacy standards and are contractually obligated to keep the provided information confidential and used only as requested. Furthermore, we will continue to adhere to the privacy policies and practices described in this notice even after your account is closed or becomes inactive. The examples contained within the Privacy Policy are illustrations and are not intended to be exclusive. If there are material changes to this policy, they will be posted on our website at www.mbssecurities.com. Updated March 2017 2017 Due Diligence Packet 33 Member of FINRA & SIPC: MSRB Registered. MULTI -BANK SECURITIES, INC.® BUSINESS CONTINUITY STATEMENT If you cannot contact us as you usually do through your account representative or your branch office after a significant business disruption, you should call our alternative number, 1-800-967-5094, or go to our website at kvww.mbssecurities.com. If you cannot access us through either of these means, contact our clearing firm, Pershing LLC (Pershing), a BNY Mellon company, directly in one of the following ways: 1. Call 1-201-413-3635. Pershing will process limited trade -related transactions (option No. 1), cash disbursements (option No. 2) and security transfers (option No. 3) on your behalf. 2. Via facsimile at 1-201-413-5368. 3. Via postal service at Pershing LLC, P.O. Box 2065, Jersey City, NJ 07303-2065. OUR BUSINESS CONTINUITY PLAN We plan to quickly recover and resume business operations after a significant business disruption and respond by safeguarding our employees and property, making a financial and operational assessment, protecting the Firm's books and records and allowing our customers to transact business. In short, our business continuity plan is designed to permit our Firm to resume operations as quickly as possible, given the scope and severity of the significant business disruption. Our business continuity plan addresses the following: data backup and recovery; all mission critical systems; financial and operational assessments; alternative communications with customers, employees and regulators; alternate physical location of employees; critical suppliers, contractors, banks and counter -party impact; regulatory reporting; and assuring our customers' prompt access to their funds and securities if we are unable to continue our business. Our clearing firm, Pershing, backs up our important records in a geographically separate area. While every emergency situation poses unique problems based on external factors, such as time of day and the severity of the disruption, we have been advised by our clearing firm that its objective is to quickly restore its own operations and be able to complete existing transactions and accept new transactions and payments. Your orders and requests for funds and securities could be delayed during the restoration period. VARYING DISRUPTIONS Significant business disruptions can vary in their scope, including the business district, the city or the entire region where one or more of our offices are located. Within each of these areas, the severity of the disruption can also vary from minimal to severe. In the event of a disruption to one or more of our offices, we will transfer our operations to an appropriate location when needed and expect to recover and resume full business operations. In the event of a disruption affecting a larger area, we will transfer our operations to a location outside of the affected area when needed and expect to recover and resume full business operations in a timely manner. In either situation, we plan to continue normal business operations, transferring functionality to other offices within our Firm or to our clearing firm if necessary. We will notify our customers in the most prudent and expeditious method. If a significant business disruption is so severe that it prevents us from remaining in business, we will work with our clearing firm to assure our customers receive prompt access to their funds and securities. If you have questions about our business continuity planning, you can contact us at businesscontinuity@mbssecurities.com. Corporate Headquarters 1000 Town Center, Suite 2300, Southfield, MI 48075 1-800-967-9045 phone 1-248-219-1101 fax Updated March 2017 2017 Due Diligence Packet 34 Member of FINRA & SIPC; MSRB Registered. WS March 1, 2017 MULTI -BANK SECURITIES, INC. To Whom It May Concern: This letter is to inform you that as of the date of this letter, (1) there are no current regulatory sanctions outstanding against Multi -Bank Securities, Inc. (MBS) nor any of its account representatives or officers, and (2) MBS has never had a regulatory customer complaint.* Additionally, MBS certifies that it has implemented an anti -money laundering (AML) program in compliance with all applicable AML statutes, rules and regulations, including, without limitation, the USA PATRIOT Act, the BSA and the statutes, rules and regulations administered by OFAC and FinCEN. This AML program includes the following: • The designation of an AML officer • An AML program consisting of written policies, procedures and controls, approved by the Board of Directors on an annual basis • A Customer Identification Program as prescribed in Section 326 of the USA PATRIOT Act • A process designed to comply with requirements of OFAC • An ongoing employee AML training program • An annual independent audit to test the effectiveness of the AML program Sincerely, Merlin Elsner Chief Compliance Officer Multi -Bank Securities, Inc. *Based on information available through our regulators and/or supplied to us by our clearing firm. Address 1000 Town Center, Suite 2300 Southfield, Michigan 48075 Phone (800) 967-9045 (248) 291-1100 2400 East Commercial Boulevard, Suite 812 Member of RNRA & SIPP�iiC; MSRB Registered. Ft. Lauderdale, Ficrda 33308 gycrrrl 6Pck alt-atured., (800) 967-9045 (954) 351-6930 Fax (248) 291-1101 (954) 351-9197 www. m bssecu rit i es. com 2017 Due Diligence Packet 35 MULTI -BANK SECURITIES, INC® Dear Multi -Bank Securities, Inc. Client, Thank you for performing your due diligence on Multi -Bank Securities, Inc. (MBS). We understand that this is a crucial part of building a trusting relationship with your broker, and we are more than happy to provide a response concerning your finding(s). There are three items on our BrokerCheck report we would like to further explain. The first incident was initiated by the State of Alabama on June 16, 1994. The incident occurred when MBS • submitted a broker -dealer application to the State and incorrectly filled out the paperwork in the process. MBS paid a small fine, and Alabama vacated the denial order following the paperwork corrections. The second incident was initiated by the Vermont Securities Division on June 12, 1997. MBS was cited for transacting business as an unregistered broker -dealer in Vermont. We paid a small fine, became registered in the State of Vermont and conduct business there today. Finally, in May 2015, as the result of a sweep, FINRA found that our Firm failed to accurately report to TRACE certain inter -dealer transactions in a timely manner. The citation states, "Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it failed to report the correct time of trade execution for transactions in Trade Reporting and Compliance Engine (TRACE) -eligible securitized products within 15 minutes of the time of execution to TRACE; and failed to show the correct time of execution on the memorandum of brokerage orders." MBS paid a small fine without admitting or denying the facts as presented, and will continue to do business in the market of fixed -income securities. To prevent future events like this, we made changes to our supervisory policies and procedures to reduce redundant supervisory reviews. We reviewed and continue to review our inter -dealer relationships to ensure that trade times are reported, and to ensure that both parties contractually understand and agree to each transaction prior to creating a TRACE reporting obligation. We are proud of our customer compliance record and will continue to provide you the best in customer service. We thank you again for the opportunity to provide you with additional details. Should you have any questions or concerns, I can be reached directly at 1-800-967-9008, or by email at merlin@mbssecurities.com. Sincerely, Merlin Elsner Chief Compliance Officer Multi -Bank Securities, Inc. Address 1000 Town Center, Suite 2300 Southfield, Michigan 48075 Phone (800) 967-9045 (248) 291-1100 Fax (248)291-1101 www.mbssecurities.com 2017 Due Diligence Packet (800) 967-9045 (954) 351-6930 (954) 351-9197 2400 East Commercial Boulevard, Suite 812 Member of FINRA & SIPC: MSRB Registered. Ft. Lauderdale, Florida 33308 gtciatt gdeYat- crrcd 36 MULTI -BANK SECURITIES, INC.® MULTI -BANK SECURITIES, INC. ANTI -MONEY LAUNDERING POLICY TEST PROCEDURES EXECUTIVE SUMMARY Multi -Bank Securities, Inc. (MBS) has in place an anti -money laundering (AML) policy. Merlin Elsner is our chief compliance officer and Michael W Drews is the Florida compliance officer. Management has approved the AML policy as written and all questions are to be directed to Merlin Elsner. The company's AML policy is available to review upon request. Merlin Elsner is responsible for ensuring the review of all new accounts. Additionally, the company's clearing agent, Pershing LLC (Pershing), a BNY Mellon company, also reviews each account. Many MBS accounts (credit unions, banks, municipalities and SEC -registered investment advisors) are exempt from full Customer Identification Procedures (CIP). MBS relies on the fact that each of these exempted institutional entities is independently audited to ensure AML compliance. Whenever practical and/or available, MBS will review external AML policies and independent audit reports made available for compliance with appropriate rules and regulations. MBS engaged the company controller to perform the annual AML IndependentTesting. The company controller operates fully independent of the Compliance Department and reports directly to the CEO. During the annual independent testing of our AML procedures, 10 randomly selected accounts were checked against the Office of Foreign Asset Control (OFAC) list found at www.ustreas.gov/ofac. Further, the controller verified that as of the most recent test (concluded December 31, 2016), none of the randomly selected accounts were found on the OFAC list. The company controller found no material deficiencies for 2016. DAY-TO-DAY OPERATIONS Michael W. Drews and his fellow traders are responsible for making sure that all new accounts have appropriate and sufficient information, including names, addresses and Taxpayer Identification Numbers prior to opening the accounts. The Trading Desk will reject all accounts with improperly filled out forms or forms missing material information. Pershing systems do not allow for customer accounts to be opened without proper identification information. Pershing is responsible for verifying new control lists with all existing accounts. They have assured us that they do this task regularly. MBS screens all accounts on a continuous basis through a third -party vendor established as best industry practice. Merlin Elsner, or his designee, is responsible for deposit and withdrawal review. He follows the AML policy instructions for verifying information and record -keeping. Reviews are performed in a timely manner utilizing in-house customer relationship management (CRM) reports as well as Pershing system reports to capture all information necessary for AML review. MBS does not accept money or securities from clients at any time. MBS account activity is reviewed systematically against a complex series of dynamic logical rules to screen for potential AML activity through the Pershing platform. This platform produces behavior -based reports that are reviewed in addition to internal CRM reports. CRM reports are reviewed on a daily basis by executive management. This two -pronged approach ensures that MBS has in place an adequate policy to guard against and detect potential AML activity. Given the sophistication of MBS's internal client account policies, MBS considers the risk of an actual AML incident to be extremely low. The risk rating of accounts at MBS is presented in a spectrum to be considered in the overall securities market, and while there may be differences in ratings within the Firm, the overall AML risk remains low when considering the overall market. 2017 Due Diligence Packet 37 Member of FINRA & SIPC; MSRB Registered. Merlin Elsner is also responsible for ensuring the review of the biweekly Financial Crimes Enforcement Network (FinCEN) report and compares it to the MBS customer database in a timely fashion. Evidence of these report reviews is kept extremely confidential and is available to review upon request from FINRA and/ or the SEC. MBS screens new accounts (banks, credit unions and municipalities are exempt) against the OFAC database. Pershing screens accounts and transaction beneficiaries against the report for all clearing transactions. MBS performs OFAC screening on an "ongoing" basis in addition to the initial account opening procedures. Merlin Elsner is responsible for AML training of new and existing employees. The company also holds employee meetings to cover sales practice and compliance issues. The company maintains attendance records and has the record book available for review as necessary. Employees must complete Firm Element continuing education training as well as the FINRA-required continuing education. Merlin Elsner coordinates compliance training for all MBS locations. The company has procedures in place to maintain files for at least five years. The company maintains documentation for two years on -site. The company also has an off -site storage facility to maintain documents from previous years. The company controller personally verifies the packaging and storage of all relevant documents. The off -site storage facility is subjected to an inspection by MBS and all associated files are stored in a safe and secure location with extremely limited access. Merlin Elsner is responsible for the Suspicious Activity Report (SAR). He is familiar with the SAR form and Bank Secrecy Act (BSA) e -filing procedures. He will file a SAR immediately as applicable. The company does not accept money from clients and therefore does not maintain a Currency Transaction Report (CTR). All customer checks must be payable to Pershing LLC and all money wires go directly to Pershing. Pershing will not accept funds that originate from outside of the U.S.; this includes, but is not limited to, checks and electronic transfers. Please contact Merlin Elsner at 1-800-967-9008 with any questions related to this AML document. Merlin Elsner Chief Compliance Officer Multi -Bank Securities, Inc. 2017 Due Diligence Packet 38 Member of FINRA & SIPC; MSRB Registered. MULTI -BANK SECURITIES, INC.. CODE OF ETHICAL BUSINESS CONDUCT MISSION STATEMENT Multi -Bank Securities, Inc. is a fixed -income securities Firm focused on delivering value to the institutional markets. We seek to earn and preserve the respect, confidence and loyalty of our employees and customers through integrity, professionalism, investment expertise, progressive technology and exceptional personal service. CODE OF ETHICAL BUSINESS CONDUCT Our Code of Ethical Business Conduct outlines our principles, ethics and standards to help guide our employees. Every person at our Firm is valuable and fulfills a vital role. Each client's objective can be successfully met when all departments work harmoniously with that singular goal in mind. The following are in addition to the rules required by FINRA and other regulatory authorities. Commitment: We have made a commitment to operate ethically and to lead with integrity. We are committed to maintain the trust of fellow employees, clients, business partners and other industry professionals. This commitment is embedded in our core values. Integrity: Is the sum of the collective actions of our employees and how those actions measure up every day to our fundamental values. We are obligated to demonstrate moral and sound judgment in all actions within the office environment and the public. Our reputation is a direct reflection of our culture. Respect: We support an environment that encourages respect. We do not make false or misleading statements about our customers, business partners and competitors, nor do we misrepresent facts in order to gain a competitive advantage or engage in illegal or unethical business practices. Professional Growth: Our representatives are instructed to familiarize themselves with all policies, laws and regulations that apply to their jobs including but not limited to state statues, bylaws and investment policies prior to conducting business. We support our representatives' pursuit of professional licenses and certifications. Accurate Records: It is critical that we properly maintain records and uphold state statutes, bylaws and investment policies at the corporate level as well as in personal files for each customer. These documents will be updated accordingly, or as required by law. Employee Manual: The Employee Manual is provided to assist employees in being successful at their job. The manual outlines our expectations of employment practices and policies, including the Code of Conduct. It is the responsibility of every employee to be familiar with and understand the contents of the manual. A verification receipt is required to be executed by each employee. We should all work to create a positive and diverse workplace that is free from discrimination and harassment. We are committed to a zero tolerance policy against harassment or threatening behavior of any kind. Travel: We strongly encourage building trust and rapport with customers and business partners. Representatives are supported and make every effort to attend board meetings and council/commissioner meetings, including state conferences and chapter meetings, locally and nationally. 2017 Due Diligence Packet 39 Member of FINRA & SIPC; MSRB Registered. MULTI -BANK SECURITIES, INC. INFORMATION SECURITY ATTESTATION LETTER March 1, 2017 In December 2015, Multi -Bank Securities, Inc. (MBS) contracted a Qualified Security Assessor Company to perform an External Penetration Test on MBS's internet-facing systems. The objective of this engagement was to identify vulnerabilities in MBS systems and network security that both internal and external adversaries could exploit. The security engagement occurred during the period from January 11 to January 19, 2016. The testing process began with an information gathering phase in which the vendor's assessment team conducted steps designed to gather all pertinent information surrounding targeted environment. Automated and manual testing techniques were used to assess the target areas to gauge the level of business risk of any discovered vulnerabilities. It was the vendor's overall opinion that MBS had taken the appropriate steps to reduce enterprise risk level and mitigate the probability of such an event. Based on the assessment, MBS has implemented sufficient security controls to ensure the continued operation of business processes. The existing security controls appear to adequately mitigate risks to business processes to ensure the collection of personally identifiable information and critical business data. As of this date, the chief information officer attests that no material changes or events, as they relate to this external vendor, have occurred. Moving forward, MBS will continue diligent efforts on improving its overall security posture. Should you have any questions regarding this matter, please feel free to contact me directly at 1-800-967-9008 or via email at merlin@mbssecurities.com. Sincerely, Merlin Elsner Chief Compliance Officer Multi -Bank Securities, Inc. Address 1000 Town Center, Suite 2300 Southfield, Michigan 48075 Phone (800) 967-9045 (248) 291-1100 2400 East Commercial Boulevard, Suite 812 Member of FINRA & SIPC; MSRB Registered. Ft. Lauderdale, Florida 33308 cudPig 6Pefcicur-Pawed/ (800) 967-9045 (954) 351-6930 Fax (248) 291-1101 (954) 351-9197 v✓ww.mbssecurities.com 2017 Due Diligence Packet 40 CRYSTAL &COMPANY CONFIRMATION OF INSURANCE NAMED INSURED Multi -Bank Securities, Inc. 1000 Town Center Drive, Suite 2300 Southfield, MI 48075 Page 1 of 1 Crystal IBC LLC 32 Old Slip New York, NY 10005-3504 Phone 800 221-5830 FAX 800 383-1852 Original BINDER DATE BINDER NO. 09/19/16 334834 CLIENT CODE POLICY TYPE MULTSE2 Renewal ACCOUNT EXECUTIVE Phyllis Chechile 212-504-5909 EFFECTIVE DATE EXPIRATION DATE POLICY NUMBER INSURER 11/01/16 11/01/17 81940548 Federal Insurance Company COVERAGE DESCRIPTION AND AMOUNTS/LIMITS Coverage: Securities Dealers Bond Effective Date of Change: 11/01/2016 Description of Change: Renewal It is hereby understood and agreed that the renewal of coverage is bound effective 12:01 a.m. on November 1, 2016 for a one year period as follows: Limit of Liability: $2,000,000 per loss Deductible: $20,000 per loss One Year Premium: Terms and conditions remain the same This confirmation of insurance sets forth the general terms, conditions and subjectivites, if any, of placement effected by Crystal & Company on your behalf and at your direction. -This confirmation of insurance will be cancelled, superseded and replaced upon delivery of the insurer's binder of coverage. The insurer's binderwill be in effect and control this placement until the receipt of the insurer's formal policy/bond documentation. In addition to the fees and/or commissions received by Crystal & Company for the placement of insurance, in certain circumstances other parties, including other intermediaries, may earn and retain usual and customary commissions for their role in providing insurance products or services under their separate contracts with insurers and/or reinsurers. Further, in certain - segments of our business, some of our compensation may be derived from supplemental or bonus commissions paid by insurers or intermediaries based on criteria designed by the insurer or intermediary, to value all the policies that we place with it in a particular period. Premium: Confirmed By: Federal Insurance Company Authorized Representative: Program At Crystal & Company Refer To: Phyllis Chechile Admitted: X Non -Admitted: 2017 Due Diligence Packet 41 Member of FINRA & SIPC; MSRB Registered. This page is intentionally left blank. PERSHING LLC (An Indirect Wholly Owned Subsidiary of The Bank of New York Mellon Corporation) Statement of Financial Condition December 31, 2016 (With Report of Independent Registered Public Accounting Firm) 2017 Due Diligence Packet 43 Member of FINRA & SIPC; MSRB Registered. J ` This page is intentionally left blank. PERSHING LLC (An Indirect Wholly Owned Subsidiary of The Bank of New York Mellon Corporation) Statement of Financial Condition December 31, 2016 Table of Contents Report of Independent Registered Public Accounting Firm Statement of Financial Condition Notes to Statement of Financial Condition 2017 Due Diligence Packet 45 Member of FINRA & SIPC; MSRB Registered. This page is intentionally left blank. ce3 KPMG LLP 345 Park Avenue New York, NY 10154-0102 Report of Independent Registered Public Accounting Firm The Board of Managers and Member of Pershing LLC: We have audited the accompanying statement of financial condition of Pershing LLC as of December 31, 2016 (the financial statement). The financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statement based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statement referred to above presents fairly, in all material respects, the financial position of Pershing LLC as of December 31, 2016, in conformity with U.S. generally accepted accounting principles. KIPMv(G LCP February 28, 2017 2017 Due Diligence Packet 47 Member of FINRA & SIPC; MSRB Registered. This page is intentionally left blank. PERSHING LLC (An Indirect Wholly Owned Subsidiary of The Bank of New York Mellon Corporation) Statement of Financial Condition December 31, 2016 (Dollars in millions) Assets Cash and cash equivalents $ 459 Cash and qualified securities segregated for regulatory purposes (cash of $3,382 and 5,437 qualified securities with a contract value of $2,055) Collateralized financing agreements: Securities borrowed 7,149 Securities purchased under agreements to resell 1,780 _ Receivables: Customers 12,959 Broker -dealers and clearing organizations 3,610 Affiliates 555 Intangible assets 19 Financial instruments owned, at fair value 33 Other assets 449 Total assets $ 32,450 Liabilities and Member's Equity Liabilities: Drafts payable $ 504 Collateralized financing agreements: Securities loaned 1,070 Securities sold under agreements to repurchase 4,725 Payables: Customers 19,023 Broker -dealers and clearing organizations 2,610 Affiliates 1,245 Financial instruments sold, not yet purchased, at fair value 1 Accounts payable, accrued expenses and other 363 Total liabilities 29,541 Member's equity: Member's contributions Accumulated earnings Total member's equity Total liabilities and member's equity See accompanying notes to financial statements. 2017 Due Diligence Packet 49 886 2,023 2,909 $ 32,450 Member of FINRA & SIPC; MSRB Registered. This page is intentionally left blank. PERSHING LLC (An Indirect Wholly Owned Subsidiary of The Bank of New York Mellon Corporation) Notes to Statement of Financial Condition December 31, 2016 (1) Organization and Description of Business Pershing LLC (the Company) is a single member Delaware Limited Liability Company and a wholly owned subsidiary of Pershing Group LLC (the Parent), which is a wholly owned subsidiary of The Bank of New York Mellon Corporation (BNY Mellon). The Company is registered as a securities broker -dealer with the Securities and Exchange Commission (SEC) authorized to engage in fully disclosed and omnibus clearing, sales and trading and brokerage services. The Company is a member of the New York Stock Exchange, Inc. (NYSE), Financial Industry Regulatory Authority (FINRA), Chicago Board of Options Exchange, Inc., Securities Investor Protection Corporation (SIPC), and other regional exchanges. (2) Summary of Significant Accounting Policies The Company's statement of financial condition is prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management's best judgment and estimates. Estimates and assumptions that affect the reported amounts in the statement of financial condition and accompanying notes may vary from actual results. (a) Cash and Cash Equivalents The Company defines cash and cash equivalents as highly liquid investments with original maturities of three months or less. (b) Cash and Qualified Securities Segregated for Regulatory Purposes The Company defines cash and qualified securities segregated for regulatory purposes as deposits that have been segregated in special reserve bank accounts for the benefit of customers and the proprietary accounts of brokers (PAB) under Rule 15c3-3 of the SEC. (c) Collateralized Financing Agreements Securities borrowed and securities loaned are fmancing arrangements that are recorded at the amount of cash collateral advanced or received. For securities borrowed, the Company deposits cash or other collateral with the lender. For securities loaned, the Company receives cash collateral that typically exceeds the market value of securities loaned. Securities sold under agreements to repurchase (repurchase agreements) and securities purchased under agreements to resell (resale agreements) are treated as financing arrangements and are carried at their contract amount, the amount at which they will subsequently be resold or repurchased, plus related accrued interest. Repurchase and resale agreements are typically collateralized by cash or government and government agency securities and generally have terms from overnight up to three months. The Company nets repurchase agreements and resale agreements in the statement of financial condition in accordance with Accounting Standards Codification (ASC) Subtopic 210-20, Balance Sheet Offsetting. 2017 Due Diligence Packet 51 (continued) Member of FINRA & SIPC; MSRB Registered. (g) PERSHING LLC (An Indirect Wholly Owned Subsidiary of The Bank of New York Mellon Corporation) Notes to Statement of Financial Condition December 31, 2016 It is the Company's policy to take possession of the underlying collateral, monitor its market value relative to the amounts due under the agreements and, when necessary, require prompt transfer of additional collateral or reduction in the loan balance in order to maintain contractual margin protection. In the event of counterparty default, the financing agreement provides the Company with the right to liquidate the collateral held. (d) Receivables and Payables — Broker -Dealers and Clearing Organizations Receivables from broker -dealers and clearing organizations include amounts receivable for securities not delivered by the Company to a purchaser by the settlement date (fails to deliver), deposits with clearing organizations and the Company's introducing brokers' margin loans. Payables to broker - dealers and clearing organizations include amounts payable for securities not received by the Company from a seller by the settlement date (fails to receive), clearing deposits from introducing brokers and amounts payable to the Company's introducing brokers. (e) Fair Value of Financial Instruments Owned and Sold ASC Topic 820, Fair Value Measurements and Disclosures, defines fair value, establishes a framework for measuring fair value and requires enhanced disclosures about fair value measurements. ASC Topic 820 defines fair value as "the price that would be received to sell an asset and paid to transfer a liability in an ordinary transaction between market participants at the measurement date." Under ASC Topic 820, fair value is generally based on quoted market prices. If quoted market prices are not available, fair value is determined based on other relevant factors, including price activity for equivalent instruments and valuation pricing models. See Note 4 to statement of financial condition for disclosures with respect to ASC Topic 820. (n Fixed Assets and Intangibles Fixed assets are recorded at cost, net of accumulated depreciation. Depreciation is recorded on a straight-line basis over the useful lives of the related assets, generally two to five years. Leasehold improvements are amortized on a straight-line basis over the lesser of the lease term or 10 years. For internal -use computer software, the Company capitalizes qualifying costs incurred during the application development stage. The resulting asset is amortized using the straight-line method over the expected life, which is generally five years. All other nonqualifying costs incurred in connection with any internal -use software projects are expensed as incurred. Identifiable intangible assets are amortized on a straight-line basis over their estimated useful life, which is generally 15 years from the date of acquisition and are assessed annually for impairment indicators pursuant to the provision of ASC Topic 350, Intangibles — Goodwill and Other, and ASC Topic 360, Property, Plant & Equipment. Receivables and Payables - Customers Receivables from and payables to customers include amounts due on cash and margin transactions. Securities owned by customers are held as collateral for receivables. Customer securities transactions are recorded on a settlement date basis, which is generally three business days after trade date. 2017 Due Diligence Packet (continued) 52 Member of FINRA & SIPC; MSRB Registered. PERSHING LLC (An Indirect Wholly Owned Subsidiary of The Bank of New York Mellon Corporation) Notes to Statement of Financial Condition December 31, 2016 Securities owned by customers, including those that collateralize margin or other similar transactions, are not reflected in the statement of financial condition. (h) Restricted Stock Units During the year, BNY Mellon issued restricted stock to employees, including certain Company employees. The Company accounts for this plan in accordance with ASC Topic 718, Compensation — Stock Compensation, and accordingly compensation cost is measured at the grant date based on the value of the award and is recognized over the vesting period. (i) Income Taxes The Company is included in the consolidated federal and combined state and local income tax returns filed by BNY Mellon. In addition, the Company files stand-alone tax returns in certain jurisdictions including New Jersey. Income taxes are calculated using the modified separate return method, and the amount of current tax expense or benefit is either remitted to or received from BNY Mellon, pursuant to a tax sharing agreement between BNY Mellon and the Company. The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes, which generally requires the recognition of tax benefits or expenses on the temporary differences between the financial reporting and the tax basis of the assets and liabilities. If appropriate, deferred tax assets are adjusted by a valuation allowance, which reflects expectations of the extent to which such assets will be realized. In accordance with ASC Topic 740, the Company recognizes the effect of the income tax positions only if those positions are more likely than not of being sustained. A tax position that fails to meet a more -likely than -not recognition threshold will result in either a reduction of the current and deferred tax assets, and/or recording of current or deferred tax liabilities. Receivables from and Payables to Broker -Dealers and Clearing Organizations Amounts receivable from and payable to broker -dealers and clearing organizations include the following (dollars in millions): Receivables: Brokers and dealers $ 2,804 Securities failed to deliver 590 Clearing organizations 216 2017 Due Diligence Packet Total receivables $ 3,610 Payables: Brokers and dealers $ 1,818 Securities failed to receive 792 Total payables 53 $ 2,610 (continued) Member of FINRA & SIPC; MSRB Registered. PERSHING LLC (An Indirect Wholly Owned Subsidiary of The Bank of New York Mellon Corporation) Notes to Statement of Financial Condition December 31, 2016 (4) Financial Instruments ASC Topic 820 applies to all financial instruments that are being measured and reported on a fair value basis. This includes those items currently reported in fmancial instruments owned, at fair value and financial instruments sold, not yet purchased, at fair value on the statement of financial condition. As defined in ASC Topic 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various methods including market and income approaches. Based on these approaches, the Company utilizes certain assumptions that market participants would use in pricing the asset or liability. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observability of the inputs used in the valuation techniques, the Company is required to provide the following information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Financial instrument assets and liabilities carried at fair value have been classified and disclosed in one of the following three categories: Level 1 Quoted market prices in active markets for identical assets or liabilities. Level 2 Observable market based inputs or unobservable inputs that are derived from or corroborated by market data. Level 3 Unobservable inputs that are not corroborated by market data. Level 1 primarily consists of financial instruments whose value is based on quoted market prices such as listed equities. Level 2 includes those financial instruments that are valued using models or other valuation methodologies calibrated to observable market inputs. These models are primarily industry -standard models that consider various assumptions, including discount margins, credit spreads, discounted anticipated cash flows, the terms and liquidity of the instrument, the financial condition, operating results and credit ratings of the issuer or underlying company, the quoted market price of publicly traded securities with similar duration and yield, time value, yield curve, default rates, as well as other measurements. In order to be classified as Level 2, substantially all of these assumptions would need to be observable in the marketplace and can be derived from observable data or supported by observable levels at which transactions are executed in the marketplace. The Company did not have any assets or liabilities classified as Level 2 at December 31, 2016 and there was no change in Level 2 assets or liabilities during the year. Level 3 is comprised of financial instruments whose fair value is estimated based on internally developed models or methodologies utilizing significant inputs that are unobservable from objective sources. The Company did not have any assets or liabilities classified as Level 3 at December 31, 2016 and there was no change in Level 3 assets or liabilities during the year. 2017 Due Diligence Packet 54 (continued) Member of FINRA & SIPC; MSRB Registered. PERSHING LLC (An Indirect Wholly Owned Subsidiary of The Bank of New York Mellon Corporation) Notes to Statement of Financial Condition December 31, 2016 In determining the appropriate levels, the Company performed an analysis of the assets and liabilities that are subject to ASC Topic 820. The following tables present the financial instruments carried at fair value as of December 31, 2016 (dollars in millions): Assets at fair value as of December 31, 2016 Level 1 Level 2 Level 3 Total Financial instruments owned, at fair value Equity Securities 33 33 Total assets at fair value $ 33 — 33 Liabilities at fair value as of December 31, 2016 Level 1 Level 2 Level 3 Total Financial instruments sold, not yet purchased Equity Securities $ 1 Total liabilities at fair value $ 1 1 Estimated Fair Value of Financial Instruments Not Carried at Fair Value The fair values of the other financial assets and liabilities are considered to approximate their carrying amounts because they have limited counterparty credit risk and are short-term, replaceable on demand, or bear interest at market rates. 2017 Due Diligence Packet 55 (continued) Member of FINRA & SIPC; MSRB Registered. PERSHING LLC (An Indirect Wholly Owned Subsidiary of The Bank of New York Mellon Corporation) Notes to Statement of Financial Condition December 31, 2016 The table below presents the carrying value and fair value of Pershing LLC's financial instruments which are not carried at fair value (dollars in millions). The table below therefore excludes items measured at fair value on a recurring basis presented in the table above. In addition, the table excludes the values of non- financial assets and liabilities (dollars in millions). December 31, 2016 Level 1 Estimated Carrying Level 2 Level 3 fair value value Summary of financial instruments: Assets: Cash and cash equivalents $ 459 - 459 459 Cash and qualified securities segregated 3,382 2,055 - 5,437 5,437 for regulatory purposes Securities borrowed 7,149 - 7,149 7,149 Securities purchased under agreements to resell 1,780 1,780 1,780 Receivables from customers - 12,959 12,959 12,959 Receivables from broker - dealers and clearing organizations 3,610 3,610 3,610 Due from Affiliates 555 555 555 Other assets 449 449 449 Total $ 3,841 28,557 - 32,398 32,398 Liabilities: Drafts payable $ 504 - 504 504 Securities loaned 1,070 - 1,070 1,070 Securities sold under 4,725 4,725 4,725 agreements to repurchase Payables to customers 19,023 19,023 19,023 Payables to broker - dealers and clearing organizations 2,610 2,610 2,610 Due to Affiliates 1,245 1,245 1,245 Accounts payable, accrued expenses other 363 363 363 Total $ 29,540 29,540 29,540 Fair value can vary from period to period based on changes in a wide range of factors, including interest rates, credit quality, and market perceptions of value and as existing assets and liabilities run off and new transactions are entered into. 2017 Due Diligence Packet 56 (continued) Member of FINRA & SIPC; MSRB Registered. PERSHING LLC (An Indirect Wholly Owned Subsidiary of The Bank of New York Mellon Corporation) Notes to Statement of Financial Condition December 31, 2016 Offsetting Assets and Liabilities The following table presents financial instruments that are either subject to an enforceable netting agreement or offset by collateral arrangements. There were no financial instruments subject to a netting agreement for which the Company is not currently netting (dollars in millions). Financial assets subject to enforceable master netting agreements Gross amounts Net assets Gross amounts not offset offset in the recognized on (1) statement of the statement Cash Gross assets financial of financial Financial collateral December 31, 2016 recognized condition condition instruments received Net amount Securities borrowed $ 7,149 7,149 6,920 229 Securities purchased under 4,326 491 3,835 3,831 4 agreements to resell (2) Total financial assets subject to enforceable master netting agreement $ 11,475 491 10,984 10,751 233 Financial liabilities subject to enforceable master netting agreements Gross amounts Net liabilities Gross amounts not offset offset in the recognized on (1) Gross statement of the statement Cash liabilities financial of financial Financial collateral recognized condition condition instruments pledged Net amount Securities loaned $ 1,070 — 1,070 1,036 34 Securities sold under agreements 5,216 to repurchase Total financial liabilities subject to enforceable master netting agreement $ 6,286 491 4,725 4,725 491 5,795 5,761 34 (1) The total amount reported in financial instruments is limited to the amount of the related instruments presented in the statement of financial condition and therefore any over-collateralization of these positions is not included. (2) Including qualified securities with a contract value of $2,055 recognized on the statement of financial condition. 2017 Due Diligence Packet 57 (continued) Member of FINRA & SIPC; MSRB Registered. PERSHING LLC (An Indirect Wholly Owned Subsidiary of The Bank of New York Mellon Corporation) Notes to Statement of Financial Condition December 31, 2016 Repurchase Agreements and Securities Lending The following table presents the contract value of repurchase agreements and securities lending transactions accounted for as secured borrowings by the type of collateral provided to counterparties. Repurchase agreements and securities lending transactions accounted for as secured borrowings at December 31, 2016 Remaining contractual maturity of the agreements (in thousands) Repurchase agreements: U.S. Treasury U.S. Government agencies State and political subdivisions Agency RMBS Agency commercial MBS Corporate bonds Other debt securities Equity securities Money market funds Total repurchase agreements Securities Lending: U.S. Government agencies Agency RMBS Agency commercial MBS Corporate bonds Sovereign debt/sovereign guaranteed Equity securities Total securities loaned Total borrowings Overnight and 30 days or continuous Up to 30 days more Total $ 515,448 $ 5,881 $ - $ 521,329 497,131 49,044 - 546,175 145,271 - 341,827 487,098 1,676,583 345,076 - 2,021,659 1,500 - - 1,500 283,585 - 667,291 950,876 - 90,854 90,854 396,144 - 177,551 573,695 - - 22,477 22,477 $ 3,515,662 $ 400,001 $ 1,300,000 $ 5,215,663 $ 38,615 $ - $ 144,079 1,900 76,258 1,165 807,993 $ 1,070,010 $ $ 4,585,672 $ - $ 400,001 $ - $ 38,615 144,079 1,900 76,258 1,165 807,993 - $ 1,070,010 1,300,000 $ 6,285,673 The Company's repurchase agreements and securities lending transactions primarily encounter risk associated with liquidity. The Company is required to pledge collateral based on predetermined terms within the agreements. If the Company were to experience a decline in the fair value of the collateral pledged for these transactions, additional collateral could be required to be provided to the counterparty, thereby decreasing the amount of assets available for other liquidity needs that may arise. (continued) 2017 Due Diligence Packet 58 Member of FINRA & SIPC; MSRB Registered. PERSHING LLC (An Indirect Wholly Owned Subsidiary of The Bank of New York Mellon Corporation) Notes to Statement of Financial Condition December 31, 2016 As of December 31, 2016, the Company has $450 million of collateral related to repurchase agreements that had remaining contractual maturities that exceeded 90 days. (5) Fixed Assets Fixed assets are included in other assets on the statement of financial condition and consists of the following (dollars in millions): Capitalized software $ 183 Leasehold improvements 34 Computer software 22 Computer equipment 10 Other 47 Total 296 Less accumulated depreciation (201) Total fixed assets, net $ 95 (6) Third Party Bank Loans and Lines of Credit The Company has $1.5 billion in uncommitted lines of credit with non-affiliated banks as of December 31, 2016. There were no borrowings against these lines of credit at December 31, 2016. Interest on such borrowings is determined at the time each loan is initiated. (7) Income Taxes The deferred income taxes reflect the tax effects of temporary differences between the financial reporting and tax bases of asset and liabilities. The Company has a gross deferred tax asset of $20.0 million and a gross deferred tax liability of $20.2 million at December 31, 2016. The deferred tax asset is primarily attributable to stock compensation and the deferred tax liability is primarily attributable to deferred intercompany gain. The net deferred tax liability is $0.2 million. The Company has not recorded a valuation allowance because the Company believes it is more likely than not that the deferred tax assets will be realized. Federal taxes payable due to BNY Mellon of $45.9 million is included in payables to affiliates and state taxes payable of $0.6 million is included in account payable, accrued expenses and other on the statement of financial condition. BNY Mellon's federal consolidated income tax returns are closed to examination through 2013. The Company's New York State income tax return examination has been closed through 2012. The Company's New York City income tax return examination has been closed through 2010. The Company's New Jersey income tax returns are closed to examination through 2011. 2017 Due Diligence Packet 59 (continued) Member of FINRA & SIPC; MSRB Registered. PERSHING LLC (An Indirect Wholly Owned Subsidiary of The Bank of New York Mellon Corporation) Notes to Statement of Financial Condition December 31, 2016 (8) Related Party Transactions The Company provides clearing, sales and trading, and brokerage related services to indirect wholly owned subsidiaries of BNY Mellon. Balances due from/to these affiliates were approximately $555.4 million and $51.4 million, respectively. They are included in receivables from affiliates and payables to affiliates, respectively, on the statement of financial condition. The Company has $6.4 billion of unsecured loan facilities with the Parent. At December 31, 2016, there were borrowings against the loan facilities of approximately $840 million included in payables to affiliates. The Company also has loan agreements with three affiliates. At December 31, 2016, there were borrowings against the loans of approximately $126 million, which are included in payables to affiliates. Balances due to BNY Mellon for taxes, payroll, technology and leased equipment were $143.7 million and are included in payables to affiliates on the statement of financial condition. The Company maintains a collateralized financing arrangement with an affiliate associated with repurchase agreements, with the maximum facility of $200 million. At December 31, 2016, the Company had entered into repurchase agreements with the affiliate totaling $84.2 million, which is included in payables to affiliates on the statement of financial condition. For the year ended December 31, 2016, the Company leased furniture and fixtures and computer and other communications equipment from an affiliate. Additionally, the Company contracts through certain related parties acting in their role as agents to facilitate transactions between the Company and certain principal third parties for securities borrowed and tri-party repurchase or reverse repurchase transactions. Any risk assumed in these transactions is solely between the principal third parties and the Company. (9) Employee Benefit Plans BNY Mellon sponsors a 401(k) plan (the Plan) for its active employees. The Plan offers the Company's employees the opportunity to plan, save and invest for their future financial needs. The Company makes periodic contributions to the Plan based on the discretion of management. (continued) 2017 Due Diligence Packet 60 Member of FINRA & SIPC; MSRB Registered. PERSHING LLC (An Indirect Wholly Owned Subsidiary of The Bank of New York Mellon Corporation) Notes to Statement of Financial Condition December 31, 2016 (10) Pledged Assets and Guarantees Under the Company's collateralized financing arrangements and other business activities, the Company either receives or provides collateral. In many cases, the Company is permitted to sell or repledge these securities held as collateral. At December 31, 2016, the fair value of securities received as collateral where the Company is permitted to sell or repledge the securities was $40,633 million and the fair value of the portion that had been sold or repledged was $20,322 million. The details of these sources and the uses of collateral are noted in the below tables (dollars in millions). Source of available collateral — received, borrowed or owned: Financial instruments owned, at fair value $ 33 Securities borrowed 6,958 Securities purchased under agreements to resell 4,222 Margin securities available to sell or re -pledge 29,420 Total source of collateral $ 40,633 Use of available collateral — re -pledged, loaned or sold: Financial instruments sold, not yet purchased, at fair value $ 1 Securities loaned 1,036 Securities sold under agreements to repurchase 5,382 Pledged to clearing corporations 807 Short sale covering 11,045 Qualified securities segregated for regulatory purposes 2,051 Total use of collateral $ 20,322 The Company also conducts a fully paid lending program, in which customers agree to make available their fully paid securities to be loaned to third parties in exchange for a fee. At December 31, 2016, the fair value of the securities borrowed under this program was $116 million and is included in securities borrowed and securities loaned on the statement of financial condition and included in the table above. Obligations under Guarantees The Company has adopted the disclosure and recognition requirements for guarantees in accordance with ASC Topic 460, Guarantees, whereby the Company will recognize a liability at the inception of a guarantee for obligations it has undertaken in issuing the guarantee, including its ongoing obligation to stand ready to perform over the term of the guarantee in the event that certain events or conditions occur. The Company provides guarantees to securities clearinghouses and exchanges. Under the standard membership agreement, members are required to guarantee the performance of other members. Under the agreements, if another member becomes unable to satisfy its obligations to the clearinghouse, other members would be required to meet shortfalls. The Company's liability under these arrangements is not quantifiable or limited and could exceed the cash and securities it has posted as collateral. However, management believes the potential for the Company to be required to make payments under these 2017 Due Diligence Packet 61 (continued) Member of FINRA & SIPC; MSRB Registered. PERSHING LLC (An Indirect Wholly Owned Subsidiary of The Bank of New York Mellon Corporation) Notes to Statement of Financial Condition December 31, 2016 arrangements is remote. Accordingly, no contingent liability is carried on the statement of financial condition for these arrangements. In connection with its securities clearing business, the Company performs securities execution, clearance and settlement services on behalf of other broker -dealer clients. Management believes the potential for the Company to be required to make unreimbursed payments relating to such services is remote due to the contractual capital requirements associated with clients' activity and the regular review of clients' capital. Accordingly, no contingent liability is carried on the statement of financial condition for these transactions. (11) Commitments and Contingences As of December 31, 2016, the Company had commitments with twenty five customers to lend a maximum total of $3.299 billion for various terms. These commitments consisted of outstanding loans of $3.202 billion, and unfunded commitments totaling $97 million. The Company has non -cancelable leases for office space and equipment that expire on various dates through 2021. At December 31, 2016, minimum future rentals on noncancelable operating leases are as follows (dollars in millions): 2017 $22, 2018 $22, 2019 $21, 2020 $19 and $9 for the years thereafter. The Company is involved in various legal proceedings arising in connection with the conduct of the Company's business. The Company believes that based on currently available information and the advice of counsel, the results of all such proceedings in the aggregate, will not have a material adverse effect on the Company's financial condition. The Company intends to defend itself vigorously against all claims asserted against it. In accordance with applicable accounting guidance, the Company establishes reserves for litigation arid settlements when those matters proceed to a stage where they present loss contingencies that are both probable and reasonably estimable. In such cases, there may be a possible exposure to loss in excess of any amounts accrued. The Company will continue to monitor such matters for developments that will affect the amount of the reserve, and will adjust the reserve amount as appropriate. (12) Regulatory Requirements As a registered broker -dealer, the Company is subject to the Uniform Net Capital Rule under Rule 15c3-1 of the Securities Exchange Act of 1934 and has elected to use the alternative method of computing regulatory net capital requirements provided for in that Rule. Under the alternative method, the required net capital may not be less than two percent of aggregate debit items arising from customer transactions or $1.5 million, whichever is greater. At December 31, 2016, the Company's regulatory net capital of approximately $2.31 billion was 13.96% of aggregate debit items and in excess of the minimum requirement by approximately $1.98 billion. Advances to affiliates, repayment of borrowings, dividend payments to Parent and other equity withdrawals are subject to certain notification and other provisions of the Rule 15c3-1 and other regulatory bodies. Pursuant to Rule 15c3-3 of the SEC, the Company may be required to deposit in a Special Reserve Bank Account, cash or acceptable qualified securities for the exclusive benefit of customers. At December 31, 2017 Due Diligence Packet 62 (continued) Member of FINRA & SIPC; MSRB Registered. PERSHING LLC (An Indirect Wholly Owned Subsidiary of The Bank of New York Mellon Corporation) Notes to Statement of Financial Condition December 31, 2016 • 2016, the Company had approximately $5.43 billion of cash and acceptable qualified securities on deposit in such accounts. As a clearing broker, the Company is required to compute a reserve requirement for the proprietary accounts of broker -dealers (the PAB Reserve Formula). As of December 31, 2016, the Company had approximately $195 thousand of cash deposits in cash accounts designated for the exclusive benefit of PAB pursuant to Rule 15c3-3 of the SEC. (13) Financial Instruments and Related Risks (a) Customer Activities Certain market and credit risks are inherent in the Company's business, primarily in facilitating customers' trading and financing transactions in financial instruments. In the normal course of business, the Company's customer activities include execution, settlement, and financing of various customer securities, which may expose the Company to both on and off -balance sheet risk in the event the customer is unable to fulfill its contractual obligations. The Company's customer securities activities are transacted on either a cash or margin basis. In margin transactions, the Company extends credit to customers, which is collateralized by cash and/or securities in the customer's account. In connection with these activities, the Company executes and clears customer transactions involving securities sold but not yet purchased and option contracts. The Company seeks to control risks associated with its customer activities by requiring customers to maintain margin collateral in compliance with various regulatory, exchange and internal guidelines. The Company monitors required margin levels daily; pursuant to such guidelines, the Company requires the customer to deposit additional collateral or to reduce positions, when necessary. Such transactions may expose the Company to significant off -balance sheet risk in the event the collateral is not sufficient to fully cover losses which customers may incur. In the event the customer fails to satisfy its obligations, the Company may be required to purchase or sell the collateral at prevailing market prices in order to fulfill the customer's obligations. The Company's customer financing and securities settlement activities may require the Company to pledge customer securities as collateral in support of various secured financing sources, such as securities loaned. Additionally, the Company pledges customer securities as collateral to satisfy margin deposits of the Options Clearing Corporation. In the event the counterparty is unable to meet its contractual obligation to return customer securities pledged as collateral, the Company may be exposed to the risk of acquiring the securities at prevailing market prices in order to satisfy its obligation. The Company controls this risk by monitoring the market value of securities pledged on a daily basis and by requiring adjustments of collateral levels in the event of excess market exposures. (b) Credit Risk As a securities broker and dealer, the Company is engaged in various securities trading and brokerage activities servicing a diverse group of domestic and foreign corporations, governments, and institutional and individual investors. A substantial portion of the Company's transactions is (continued) 2017 Due Diligence Packet 63 Member of FINRA & SIPC; MSRB Registered. PERSHING LLC (An Indirect Wholly Owned Subsidiary of The Bank of New York Mellon Corporation) Notes to Statement of Financial Condition December 31, 2016 executed with and on behalf of institutional investors including other broker -dealers, banks, U.S. government agencies, mutual funds, hedge funds and other financial institutions. Credit risk is the potential for loss resulting from the default by a counterparty of its obligations. Exposure to credit risk is generated by securities and currency settlements, contracting derivative and forward transactions with customers and dealers, and the holding in inventory of loans. The Company uses various means to manage its credit risk. The creditworthiness of all counterparties is analyzed at the outset of a credit relationship with the Company. These counterparties are subsequently reviewed on a periodic basis. The Company sets a maximum exposure limit for each counterparty, as well as for groups or classes of counterparties. Furthermore, the Company enters into master netting agreements when feasible and demands collateral from certain counterparties or for certain types of credit transactions. (c) Market Risk Market risk is the potential loss the Company may incur as a result of changes in the market or fair value of a particular financial instrument. All financial instruments are subject to market risk. The Company's exposure to market risk is determined by a number of factors, including size, duration, composition and diversification of positions held, the absolute and relative level of interest rates and foreign currency exchange rates, as well as market volatility and liquidity. The Company manages market risk by setting and monitoring adherence to risk limits. Financial instruments sold, not yet purchased represent obligations of the Company to deliver the specified security at the contracted price and thereby, create a liability to purchase the security in the market at prevailing prices. Accordingly, these transactions result in off -balance sheet risk, as the Company's ultimate obligation to satisfy the sale of financial instruments sold, not yet purchased may exceed the amount reflected in the statement of financial condition. (d) Operational Risk In providing a comprehensive array of products and services, the Company may be exposed to operational risk. Operational risk may result from, but is not limited to, errors related to transaction processing, breaches of internal control systems and compliance requirements, fraud by employees or persons outside the Company or business interruption due to systems failures or the other events. Operational risk may also include breaches of the Company's technology and information systems resulting from unauthorized access to confidential information or from internal or external threats, such as cyber attacks. Operational risk also includes potential legal or regulatory actions that could arise as a result of noncompliance with applicable laws and/or regulatory requirements. In the case of an operational event, the Company could suffer a financial loss as well as damage to our reputation. (e) Financial Instruments with Off -Balance -Sheet Risk The Company may enter into various transactions involving derivatives and other off -balance sheet financial instruments. These financial instruments may include forward foreign exchange contracts that are used to meet the needs of customers. Generally, forward foreign exchange contracts 2017 Due Diligence Packet 64 (continued) Member of FINRA & SIPC; MSRB Registered. PERSHING LLC (An Indirect Wholly Owned Subsidiary of The Bank of New York Mellon Corporation) Notes to Statement of Financial Condition December 31, 2016 represent future commitments to purchase or sell foreign currency at specific terms at specified future dates. (14) Subsequent Events The Company has evaluated subsequent events from December 31, 2016 through February 28, 2017, the date the Company's financial statements are available to be issued. 2017 Due Diligence Packet 65 Member of FINRA & SIPC; MSRB Registered. This page is intentionally left blank. lt;CW .tJ J F/ J KPMG LIP 34S Park Avonus Now York NY 10164-0102 Independent Service Auditors' Report To the Executive Committee of Pershing LLC: Scope We have examined Pershing LLC's description of its introducing firm services and prime services operations system for processing user entities' transactions throughout the period October 1, 2015 to September 30, 2016 (description) and the suitability of the design and the operating effectiveness of controls to achieve the related control objectives stated in the description. The description indicates that certain control objectives specified in the description can be achieved only if complementary user entity controls contemplated in the design of Pershing LLC's controls are suitably designed and operating effectively, along with related controls at the service organization. We have not evaluated the suitability of the design or the operating effectiveness of such complementary user entity controls. Pershing LLC uses third-paitysub-service providers for market data, pricing of securities, locates, checks, disbursements, confirm and statement printing, and certain information technology services. Pershing LLC also uses the services of BNY Mellon Client Service Delivery & Client Technology Solutions and Risk & Compliance (referred to as "BNY Mellon CSD&CTS and R&C") to provide information technology infrastructure support and to administer centrally managed information technology controls for some of the Pershing LLC systems. The accompanying description includes only those control objectives and related controls of Pershing LLC, and excludes the control objectives and related controls of the third -party sub -service providers and BNY Mellon CSD&CTS and R&C. Our examination did not extend to controls of the sub -service providers. The infomiation in Section V, "Other Information Provided by Pershing LLC," that describes management response related to the Client and Product Billing exception, business continuity, disaster recovery, and SEC Rule 206(4)-2 "Custody of Funds or Securities of Clients by Investment Advisers" under the Investment Advisers Act of 1940 is presented by management of Pershing LLC to provide additional information and is not a part of Pershing LLC's description of its system made available to user entities during the period October 1, 2015 to September 30, 2016. Information about business continuity, disaster recovery, and SEC Rule 206(4)-2 "Custody of Funds or Securities of Clients by Investment Advisers" under the Investment Advisers Act of 1940 has not been subjected to the procedures applied in the examination of the description of the system and of the suitability of the design and operating effectiveness of controls to achieve the related control objectives stated in the description of the system, and, accordingly, we express no opinion on it. Sensce organization's responsibilities In its description, Pershing LLC has provided an assertion about the fairness of the presentation of the description, the suitability of the design and the operating effectiveness of the controls to achieve the related control objectives stated in the description. Pershing LLC is responsible for preparing the description and for the assertion, including the completeness, accuracy, and method of presentation of the description and the assertion, providing the services covered by the description, specifying the control objectives and stating then in the description, identifying the risks that threaten the achievement of the EIVG UP a a Mims, Sneed Wit,/ puve ,p St* U.S. rre!rpt+ ram of tAAG sew:0W C=407,9 ('iQ1'Ci brass '.itJ7 writ 2017 Due Diligence Packet 67 Member of FINRA & SIPC; MSRB Registered. control objectives, selecting and using suitable criteria, and designing, implementing, and documenting controls to achieve the related control objectives stated in the description. Service auditors' responsibilities Our responsibility is to express an opinion on the fairness of the presentation of the description, the suitability of the design and the operating effectiveness of the controls to achieve the related control objectives stated in the description, based on our examination. We conducted our examination in accordance with attestation standards established by the American Institute of Certified Public Accountants. Those standards require that we plan and perform our examination to obtain reasonable assurance about whether, in all material respects, the description is fairly presented, the controls were suitably designed and the controls were operating effectively to achieve the related control objectives stated in the description throughout the period October 1, 2015 to September 30, 2016. An examination of a description of a service organization's system and the suitability of the design and operating effectiveness of the service organization's controls to achieve the related control objectives stated in the description involves perfonning procedures to obtain evidence about the fairness of the presentation of the description and the suitability of the design and the operating effectiveness of those controls to achieve the related control objectives stated in the description. Our procedures included assessing the risks that the description is not fairly presented and that the controls were not suitably designed or operating effectively to achieve the related control objectives stated in the description. Our procedures also included testing the operating effectiveness of those controls that we consider necessary to provide reasonable assurance that the related control objectives stated in the description were achieved. An examination engagement of this type also includes evaluating the overall presentation of the description and the suitability of the control objectives stated therein, and the suitability of the criteria specified by the service organization and described in management's assertion. We believe that the evidence we obtained is sufficient and appropriate to provide a reasonable basis for our opinion. Inherent limitations Because of their nature, controls at a service organization may not prevent, or detect and correct, all errors or omissions in processing or reporting transactions. Also, the projection to the future of any evaluation of the fairness of the presentation of the description, or conclusions about the suitability of the design or operating effectiveness of the controls to achieve the related control objectives is subject to the risk that controls at a service organization may become inadequate or fail. Basis for gratified opinion Pershing LLC states in its description that it has a peer review performed over the setup and updates of execution, clearance and re -billable rates on the billing systems for any discrepancies between the pricing agreement and setup in the billing system. However, as noted on page 194-200 of the description of tests of controls and results thereof, this control was not operating effectively for the period October 1, 2015 to March 16, 2016. This resulted in the nonachievement of the control objective, "Controls provide reasonable assurance that fees are calculated and billed accurately based on agreed upon terms and that billing adjustments are authorized and processed accurately" for the period October 1, 2015 to March 16, 2016. 2017 Due Diligence Packet 68 Member of FINRA & SIPC; MSRB Registered. Opinion in our opinion, except for the matter described in the preceding paragraph, and based on the criteria described in Peishing LLC's assertion, in all material respects, (1) the description fairly presents the Pershing LLC's introducing firm services and prime services operations system that was designed and implemented throughout the period October 1, 2015 to September 30, 2016, (2) the controls related to the control objectives stated in the description were suitably designed to provide reasonable assurance that the control objectives would be achieved if the controls operated effectively throughout the period October 1, 2015 to September 30, 2016 and user entities applied the complementary user entity controls contemplated in the design of Pershing LLC's controls throughout the period October 1, 2015 to September 30, 2016, and (3) the controls tested, which together with complementary user entity controls referred to in the scope paragraph of this report. if operating effectively, were those necessary to provide reasonable assurance that the control objectives stated in the description in Section IV were achieved. operated effectively throughout the period October 1, 2015 to September 30, 2016. Description oftests of controls The specific controls and the nature. timing, extent, and results of the tests are listed in Section IV. Restricted use This report, including the description of tests of controls and results thereof in Section IV, is intended solely for the information and use of Pershing LLC, user entities of Pershing LLC's introducing fimr services and prime services operations system during some or all of the period October 1, 2015 to September 30, 2016, and the independent auditors of such user entities, who have a sufficient understanding to consider it, along with other information including infonnation about controls implemented by user entities themselves, when assessing the risks of material misstatements of user entities' financial statements. This report is not intended to be and should not be used by anyone other than these specified parties. r<Pw(C- LLP New York, NY December 1, 2016 2017 Due Diligence Packet 69 Member of FINRA & SIPC; MSRB Registered. CGS 0Lf`a January 3,, 2017 To Whom It May Concern: One Pershing Plaza Jersey City. New Jersey 07399 pershing.ccm We have reviewed the internal control environment of Pershing LLC ('Pershing) applicable to the Pershing business described in Pershing's Service Organiurtion Control (SOC 1) Report as of September 30. 2016 and for the period October 1, 2015 through September 30. 2016 which report includes the Independent Service Auditor's Report, KPMG LLP, dated December 1, 2016. To the best of our knowledge there have been no material changes to Pershing's internal controls, as described in the SOC 1 Report, for the period October 1, 2016 through December 31, 2016 which would materially adversely affect our internal control cnvironmcnt. Please note wc did not perform procedures to determine the operating effectiveness of the internal controls fir the period of October 1, 2016 through December 31, 2016. Accordingly, wc express no opinion 011 the operating effectiveness of any aspects of the controls, individually or in the aggregate. The information contained in this letter is confidential and proprietary to Pershing LLC and must be treated in accordance with the standard of care specified in your written agreement with Pershing LLC or its affiliate. You should not disclose this letter or provide a copy of it to any third patty without the prior written consent of Pershing LLC. However, you can provide a copy of this letter to your independent auditors only for the purposes of their examination of the service performed by Pershing LLC as it relates to an audit of your financial statements and for no other purposes. Pershing LLC This letter may not be reproduced without the written permission of Pershing LLC. BNY MELLON 2017 Due Diligence Packet Pershing LLC, n BNY Mellon company Member FINRA. NYSE, SIPC 70 Member of FINRA & SIPC; MSRB Registered. Understanding the Protection of Client Assets 4TN OUARTER 2©10 Pershing LLC (Pershing), a BNY Mellon company, has been a leading global provider of financial business solutions for over 75 years and serves many of the world's most respected financial organizations. We remain committed to the safekeeping, servicing, segregation and reporting of our global client assets. The Protection of Client Assets Remains at the Center of Our Focus 0 SIPC Co.era�e Q Evaluation and Financial Segregation Strenzith of Assets 0 Excess of SIPC Coverage Trough Lloyd's anc Mar commercial insurers - Financial Strength —December 31.201 S Pershing's core fi„ancal strength prov desthe first measure of protection fcr our gtobalctientassets. Our parent company, NY Mellon, is a gob investments ccmpanydedicatod to helping its clients manage and service their financial assets and is the :•rorld's Largest glob,,'rfcustodian.While financiatstrengtltdoe not wrote ct against loss due to ms rke t fluctvation.our internal controls and regulatory oversight he;p maintain our stability and focus. 2017 Due Diligence Packet 71 Pershing, a BNY Mallon company > Approxirnatcty $1.5 trillion in globat client assets > Net capital of approximately S2.0 bi';! en3— well abo'e the minimum requirement BNY Melton > S29.9 trillion m assets tinder c >t:x!y andfo; administration > 516 trillicn in assets und2 mcnagement ' instrtutionel fmr-dstor, Octotcr 2010. Global Gus tcdy Rankngs Pershing LIC and ,ts Elobat a$; iliac cis Pershing LI_C BNY MELLON Member of FINRA & SIPC; MSRB Registered. Segregation and Control of Assets Pershing protects ctientassets through ril-prousinternal control measures.A.n annual audit by a major independent audit firm and the audit tear at our parent company,. BNY Motton, hetpv to monitor controls that am in place tnaddition, a Service Organ izatronsContrctreport conducted b' an independent audit firrr provides acdit:enalefaivaticn of the design and operating effectivenessof r =rsr ing's internal con trots. Clients' fully pair -for assets aresegregated from our own, with quarterly vault inspections conducted In addition, segregate cash androrqualriyingsecurltins in special reser ebank accounts for the exclusive benefit of clients, to protect clients' funds in the unlikely event of Pershing's failure and liquidation. Pershing isa broker -dealer registered with the U.S. Securities and Exchano Comrission,all50states aswell asthe District of Columbia and Commonwealth of Puerto Rico, end certain foreign Rurisdictions_ Securities Investor Protection Corporation (SIPC-) Coverage Pershing is a member of the SIPC, which protects securities customers of its menders up to $6.00.000 (including $250.000 for claims for cash). Explanatory brochure available upon reCuest or at spc.org. Excess of SIPC Coverage Through Underwriters at Lloyd's and Other Commercial Insurers In addition to StPC protection, Pershing provides coverage in excess of SIPC limits from certain underwriters in Lloyd's insurance market and other commercial insurers. The excess of StPCcoverage is valid through February 10.2018 for Pershing LLC accounts. It provides the following protection for Pershing L LC's globsl client assets: > An aggregate loss limit of S1 billion for eligible securit:es— over alt client accounts } A per -client loss limit of SI.9 million for Cash awaiting reinvestment —within the aggregate loss limit of Sl billion 2017 Due Diligence Packet 72 SIPC and the excess of SIP; Coverage do not protect against loss due to market fluctuation. An excess of SIPC claim would only arise if Pershing failed financially ane client assets for covered accounts —as defined bySIPC—cannotbe loco tec due to theft. misplacement, destruction, burglary.robbery. embeszlement,abstraction, failure to obtain or mantarn possession or control of client seCur,tres.or to maintain the special reserve bank account required by applicable rules. Lloyds currently holds an A+ rating from Standard & Pocr's� (S&P}').an A rating from A.M, Best and an AA- rating from Fitch. These ratings are based on the financial strength of the company and aresublect to change by the rating agencies at any time.' For more information about Lloyd's. please see ilodfs.com. Ratings as of 0. wernber 2016'. 02.017 Pershing LLC. Pershing LLC. member FINRA, NYSE. SIPP°,:s a ..wholly owned subsidiary of Tha Bank of NewYotk Mellon Ccrporetion (SHY!,Action). Pershing and your financial 0rgeniretin are partite. unaff,hated compen,es that arc not responsible for each other's aorvices cr polio: es.Tiademarks, service marks and IeFos belong to ths:r respective owners. 1[� ra pershing.com One Pershing Plaza.Jcrsey City, NJ 07399 BNY MELLON Member of FINRA & SIPC; MSRB Registered. 9 EASY :HAVE MORE The National Association of Counties has partnered with Multi -Bank Securities, Inc. (MBS), endorsing eConnectDirect® as an essential tool for members to manage their fixed -income investment needs. This tool gives county treasurers and finance officers visibility to thousands of fixed -income offerings in a market with little transparency. It arms local government investors with the necessary tools and confidence to select offerings within the fixed -income marketplace. While eConnectDirect allows investors to be self-sufficient, the service also allows them to work with a licensed MBS account representative in a dynamic, collaborative way, working side -by -side on investment strategies and decisions. a eConnectDirect is transforming the way local governments invest, allowing treasurers to: • Save Time • View Market Pricing • Have Greater Control of Their Investment Portfolio • Be Even Better Stewards of Taxpayers' Money Why eConnectDirect? • No Subscription Fees* • Nothing to Download • FDIC CD Insurance Scrub • Portfolio Management Tools & Reports eConnectDirect offers access to trillions of dollars of fixed -income investments: • U.S. Agencies • Corporate Bonds • Municipal Bonds • Certificates of Deposit • U.S. Treasuries • New Issue and Secondary DTC Offerings Interested? Schedule a free, personalized webinar to learn more about how eConnectDirect can help your institution meet its investment objectives. Email support@eConnectDirect.com or call (800) 967-9052 today. 'There may be fees associated with other products/services offered by MBS. Powered by MULTI -BANK SECURITIES, INC: 2017 Due Diligence Packet 73 Endorsed by NATIONAL ASSOCIATION COUNTIES Member of FINRA & SIPC; MSRB Registered. This page is intentionally left blank. MULTI -BANK SECURITIES, INC.® Multi -Bank Securities, Inc. is registered in all 50 states. A biography of an account representative licensed in your state will be made available upon request. Address 1000 Town Center, Suite 2300 Southfield, Michigan 48075 Phone (800) 967-9045 (248) 291-1100 Fax (248) 291-1101 ww v.mbssecurities.com 2017 Due Diligence Packet 2400 East Commercial Boulevard, Suite 812 Member of FINRA & SIPC; MSRB Registered. Ft. Lauderdale, Florida 33308 (800) 967-9045 (954) 351-6930 (954) 351-9197 75 4'icud 6 detc-8rnarc[17 This page is intentionally left blank. jr > MULTI -BANK SECURITIES, INC® Peter Yanez Vice President CRD# 2371976 (855) 928-0111 phone/fax pyanez@rnbssecurities.com Peter Yanez joined Multi -Bank Securities, Inc. (MBS) in January 2012 as an account executive serving the investment needs of local, state and regional government institutional clients. Today, he operates as a vice president based in the firm's Fort Lauderdale office. Since joining MBS, Peter has garnered several awards in recognition of his service. He received the company's New Account Leader Award in 2014 and 2015, which he earned by opening more accounts than the firm's 80 -plus other financial account executives. Peter also received the eConnectDirect® Account Executive of the Year award in 2014 and 2015. This award is given each year to the account executive that generates the most new accounts and most revenue on the eConnectDirect platform out of the firm's other account executives nationwide. Prior to MBS, Peter spent more than a decade working in the financial industry with investment banking firms such as Dean Witter Reynolds (now Morgan Stanley), H.J. Meyers & Company and Prudential Bache Securities. In 1998, Peter became part owner of Herman Alexis & Company, one of the first minority -owned, fully -registered FINRA broker -dealer firms headquartered in Los Angeles. Today, he specializes in fixed -income securities such as U.S. government agencies, U.S. Treasuries, certificates of deposit and mortgage -backed securities. Peter attended Santa Monica College, in Santa Monica, Calif. prior to earning both a FINRA General Securities Representative (Series 7) license and a Uniform Securities Agent State Law (Series 63) license. Peter is very active within the California Government Finance Community, with current membership in the California Municipal Treasurers Association, the California Society of Municipal Finance Officers and the Association of California Water Agencies. Peter also has been actively involved with the Hispanic business community and is a member of the Procurement Committee of the Latin Business Association. In addition, Peter has been actively involved in the game of soccer since childhood and is currently an AYSO coach for his son's local youth division. 1000 Town Center, Suite 2300 Southfield, Michigan 48075 800.967.9045 248.291.1100 248.291.1101 2400 East Commercial Boulevard, Suite 812 Member of FINRA & SIPC: MSRB Registered Ft. Lauderdale, Florida 33308 A Veteran -Owned Business 800.967.9045 954.351.6930 954.351.9197 This page is intentionally left blank. TO: FROM: SUBJECT: DATE: ,,a� INCORPORATED JANUARY 24, 1957 NO. 2 PORTUGUESE BEND ROAD ROLLING HILLS, CA 90274 (310) 377-1521 FAX (310) 377-7288 Agenda Item No.: 10-A Mtg. Date: 07/24/17 HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FT RAYMOND R. CRUZ, CITY MANAGER DISCUSSION AND POSSIBLE DIRECTION TO REDUCE PEAFOWL POPULATION IN THE CITY OF ROLLING HILLS JULY 24, 2017 ATTACHMENT: Email correspondence from the following residents: Bob and Marcia Gold, Nina Ritter, Judy Mishkin and Dana Chelf BACKGROUND At the last City Council meeting, staff was asked to bring back an agenda item about controlling the City's peafowl population after receiving an email from residents Bob and Marcia Gold from Flying Mane Road. Their email requested that the City reduce the peafowl population (estimated by the Golds to be 40 peafowl) because of their significant jump in population the last two years that has made living in their neighborhood very difficult. The problems that the peafowl have been causing have included loud cawing that lasts through the late night/early morning hours, damage to their home, and the foul smelling droppings that are left throughout their property. The City has not historically managed the peafowl population that is within the community. When staff receives complaints about peafowl, they inform residents that they can be removed by them only through humane methods via a State certified trapper. The Gold's request is that the City take the responsibility in reducing the peafowl population similar to how it is done in other peninsula cities. DISCUSSION On August 4, 2015, the Rancho Palos Verdes City Council adopted the Peafowl Management Plan (PMP) which is a City -initiated plan to humanely manage the peafowl population within the City. This is achieved by reducing and maintaining the peafowl population to the levels identified in the 2000 Peafowl Census Report (134 total birds citywide.) The PMP supports the coexistence of peafowl within the semi -rural character of the City by encouraging public education and deterrent measures; and humanely trapping and relocating up to 150 birds per year in order to maintain the 2000 peafowl population. The birds trapped are collected by the City's vendor (Wildlife Services) within 24 hours and relocated for adoption to ranches in San Diego, Ventura, and Santa Barbara Counties. City staff approves the locations to which the birds will be relocated for adoption. Furthermore, each year the City is required to conduct a census survey to assess the current peafowl population trends, and based on past census reports, determine whether trapping should resume. The City of Palos Verdes Estates enacted a Management Program in 1986 that establishes two distinct and protected zones: the Malaga Cove Zone, and the Espinosa Circle Zone. Upon request, the City traps and relocates peafowl found outside the zones on private property. Within the zones, the minimum population of 21 birds per flock is assured by a semi-annual census. Upon complaint, peafowl within the zones may be trapped and relocated down to the 21 bird minimum. City staff will provide residents peacock traps and provide them information on how to utilize them. If any are caught, City staff will pick up the peafowl and pen them on City property until a representative from a peafowl sanctuary, ranch or preserve comes and picks one or more up for adoption. The City of Rolling Estates has a trap and removal program, but does not conduct a census. However, peafowl are protected in the Dapplegray neighborhood and cannot be trapped there. The City works with Los Angeles County Department of Animal Care and Control to place large dog traps (baited) for any resident that wants to remove peafowl from their property. When a resident requests a trap, they complete a peafowl removal application and pay a $55 fee. When a peafowl is captured (exception: chicks and peahens with chicks must be released), the resident contacts Animal Control to arrange for an individual that has been identified by the City to adopt the captured peafowl so it can be brought back to a peafowl sanctuary, ranch or preserve. If, in the rare case a quick pick up cannot be arranged with an adopter, Animal Control will take the peafowl back to their Carson facility until a pick up can be arranged. The City typically only responds to residents about 1 or 2 times per year. FISCAL IMPACT To provide the City Council an idea of what a peafowl management program could cost, staff found the following: Rancho Palos Verdes *FY 17/18 budget for Peafowl Trapping Program *Annual peafowl census *Cost for each individual peafowl caught *Reimbursment to vendor for auto and general liability insurance $ 37,000 3,900 175 2,720 Palos Verdes Estates *FY 17/18 budget for Peafowl Trapping Program $ 5,500 *Peafowl census @ $2,500 twice a year $ 5,000 *Budget does not account for staff time it takes to provide traps, pick up of peafowl trapped, and caring for penned peafowl. Rolling Hills Estates *No budget for trapping *No peafowl census *The $55 paid by residents is a cost recovery fee by the City for a trap that Los Angeles County Department of Animal Care and Control places on a property. No refund is issued for the fee paid if no peafowl is trapped. *The City bought two big dog traps for the Animal Control to utilize for peafowl trapping that are stored at the City's corporation yard and cost of $335.50 each. NOTIFICATION Dana Chelf; Bob and Marcia Gold; Nina Ritter; Judy Mishkin Malcolm and Wayne Sharp; and Los Angeles County Department of Animal Care and Control. RC/h1 Peafowl Reduction-staffreport.docx THIS PAGE INTENTIONALLY LEFT BLANK RECEIVED Subject: URGENT: It's time for the city to protect us from Peafowl! Date: Monday, June 26, 2017 9:13 AM From: Bob Gold <bob@bobgoldpr.com> To: "mayor_citycouncil@cityofrh.net" <mayor_citycouncil@cityofrh.net> To Honorable Mayor Jim Black and our entire city council: JUN 262017 City of Rolling Hills By I'm writing about a serious issue on our street. Over the past two years the peafowl population has grown exponentially. We rarely, if ever saw a peacock on our street. But over the past two years it has become a very serious problem. To whit there are about 40 peafowl now prowling our street, on a daily basis. The morning caws used to be one bird. Now there is a chorus — it wakes us up HOURLY through the night, they are so loud. They are all over our roofs, adding considerable stress and likely breaking tiles. And as I can tell you personally, there is nothing worse than waking and shooing away 10 birds in your yard, only to step barefoot into the smelliest and freshest excrement. The city of Rancho Palos Verdes since 2015 has been working diligently to trap these pests and bring the population under a manageable control. http://www.rpvca.gov/511/Peafowl-Census-Trapping-Efforts We don't hope to eliminate these birds — simply reduce their rabbit -like mating behavior and serious detraction from the joys of living in our city. As you can read in the Daily Breeze http://www.dailybreeze.com/environment-and-nature/20170624/theres- fewer-peafowl-in-rancho-palos-verdes-this-year-and-thats-a-good-thing, this is a city issue and must be addressed accordingly. I am happy to offer testimony at a council meeting, as are all off our neighbors in support of trapping peafowl on our street Flying Mane Rd. I will ask our neighbors to also write you if this will move the needle in getting the city to take immediate action. look forward to your prompt response. Sincerely, Bob + Marcia Gold 9 Flying Mane Rd Rolling Hills Bob Gold Bob Gold & Associates 1640 So. Pacific Coast Hwy Redondo Beach, CA 90277 +1-310-320-2010 (cell 310-880-1893) Skype: bobgoldpr www.bobgoldpr.com <http://www.bobgoldpr.com> From: Nina <nina.ritter4(caverizon.net> Date: Monday, June 26, 2017 at 12:55 PM To: "marciaPmarciagold.com" <marciaPmarciagold.com>, "themavor citvcounci1Pcitvofrh.net" <themavor citvcouncil(a)citvofrh.net>, Raymond Cruz <rcruzPcitvofrh.net> Cc: ROUTT Jerry & Carla <LBMPtoaoerPaol.com>, JOHNSON Kellie & Gary <giohnson(a)aceclearwater.com>, 16b -Jack Thourot <JTt)acdbug.com>, MISHKIN Fred & Judy<iudithmishkinPschlossbros.com>, 16b -Julie Bellagamba <!ulie.bellagambaPgmail.com>, 16b-Lavonne & Dale Stucker <iblavonne(ataol.com>, 16b -Michele Mottola <osomellowbugPvahoo.com>, 16c -Fred & Lucille Ripley <lucillerialev0vahoo.com>, 16c -Kathleen & Joshua . Carvalho <kbcarvalho(athotmai!.com>, 16c -Lori & Art Kaiser <kaiserloriPhotmail.com> Subject: Re: What we sent to the City today, FYI Dear Mr. Cruz and Mayor, As you may or may not be aware, I have been writing to the city and complaining about this matter for at least 4 years from different tacks. For example I have pointed out to the City the rising coyote population is due to the rising peafowl population — both of which have increasingly spiraled out of control. Peafowl procreate exponentially and this problem has been allowed to continue until finally other things (traffic and road safety issues/coyotes/excrement) have also taken root and other parts of RH are noticing. Can we please do something now before human or peafowl is injured in a road accident or worse? (or before we go deaf!) I was told when 1 moved here in 2001 that the City had taken action — perhaps in the late 1990s?-- to remove vast quantities of peafowl from the area (at least up in our area of Crest Rd. East) Perhaps someone at the City can look in their files to get information on what and how this was done. Evidently 85 Crest East (the family no longer livest there) declined to participate in the removal and harbored the peafowl which are the antecedents our current crop. Thanks for your'consideration, Nina Ritter RECEIVED Nina Ritter 63 Crest Rd. East Rolling Hills • CA • 90274 nina.ritter4@verizon.net 0 JUN 3 0 2017 City of Rolling Hills By Subject: RE: Peacocks Date: Wednesday, July 19, 2017 1:39 PM From: Leah Mirsch <Imirsch@cityofrh.net> To: Judy Mishkin <judithmishkin@schlossbros.com> Cc: "Raymond R. Cruz" <rcruz@cityofrh.net>, "hluce@cityofrh.net" <hluce@cityofrh.net> Mrs. Mishkin, Thank you for your message regarding your concerns about the peafowl population in the City, especially on Flying Mane. Although you are unable to attend the Council meeting on the 24th when this topic will be discussed, your comments will certainly be considered in our deliberations. Respectfully, Leah Leah Mirsch Councilmember City of Rolling Hills 2 Portuguese Bend Road, Rolling Hills, CA 90274 310-377-1521 Fax: 310-377-7288 www.Rolling-Hills.org ECEIVE JUL 19 2017 City of Rolling Hills By This is a transmission from the City of Rolling Hills. The information contained in this email pertains to City business and is intended solely for the use of the individual or entity to whom it is addressed. If the reader of this message is not an intended recipient, or the employee or agent responsible for delivering the message to the intended recipient and you have received this message in error, please advise the sender by reply email and delete the message. WARNING: Computer viruses can be transmitted by e-mail. The recipient should check this e-mail and any attachments for the presence of viruses. The CITY OF ROLLING HILLS accepts no liability for any damage caused by any virus transmitted by this e-mail. From: Judy Mishkin [judithmishkin@schlossbros.com] Sent: Monday, July 17, 2017 1:56 PM To: Leah Mirsch Subject: Peacocks Dear Ms. Mirsch, I understand that the issue of too many peacocks in Rolling Hills, and particularly on my street, Flying Mane Rd, will be discussed at the meeting Monday, July 24th. Unfortunately I will be out of the country and cannot attend. My children who are in their late forties were visiting this weekend, and we talked about how when we moved into 1 Flying Mane Rd in 1976 we did not have this peacock problem. Now I am chasing them out of my yard daily and berating myself for running after them. It puts me in danger of falling. If I don't chase them out, my dog barks as they mess up my sidewalks and peck at my garden. And the noise they make is unbearable. 0 Last year I polled the neighbors about doing something about the peacocks and got a great deal of support. If our neighboring cities can do it, so can Rolling Hills. It is the city's responsibility because the peacocks are a danger to all the people who drive on the city's streets. Please arrange to trap and remove the peacocks. Sincerely, Judith S. Mishkin 1 Flying Mane Rd. Subject: FW: Peafowl Overpopulation Date: Thursday, July 20, 2017 9:57 AM From: hluce@cityofrh.net <hluce@cityofrh.net> To: "hluce@cityofrh.net" <hluce@cityofrh.net> From: Dana Chelf <danachelf@gmail.com> Date: Tuesday, July 18, 2017 at 4:34 PM To: Raymond Cruz <rcruz@cityofrh.net> Subject: Peafowl Overpopulation Hi Ray, RECEIVED JUL 2 0 2017 City of Rolling Hills By I understand there is a city council meeting on the 24th and that one of the topics up for discussion is the peafowl overpopulation in our community. In the event that I am unable to attend the meeting, I wanted to contact you personally to voice my deep concern on this important issue. Around the area where we live the peafowl have taken over our community and far outnumber the residents. It is truly of epidemic proportion!! We can count as many as 16 peafowl on our property at one time. Right now, there is a peahen with 4 babies that has made our property their home. But that's not all... the entire community of peafowl follow these chicks around as protection against coyotes (which is another problem), hawks and raccoons. They may be pretty birds to look at, but they are not your typical bird. They screech, poop, eat flowers, break tiles on roofs and sit in the flower beds/shake dirt everywhere. It is truly a nightmare. I know I am not alone in my experience as these pests have completely overrun our neighborhood. I am asking, pleading, BEGGING you to do something about it immediately. I am requesting that you hire someone to trap them and humanely relocate them as soon as possible. They are greatly affecting our ability to live on our property in peace. Thank you for your time and consideration. Best, Dana Chelf 59 Crest Road East Dana Chelf 310-567-5855 (mobile) End of Forwarded Message Contacts Thursday, July 20, 2017 Mayeda, Marcia E-mail mmayeda@animalcare.lacounty.gov (Work)