To: Sonoma County Board of Supervisors and Board of Directors of the Sonoma County Agricultural Preservation and Open Space District
Department or Agency Name(s): Auditor-Controller-Treasurer-Tax Collector; Sonoma County Agricultural Preservation and Open Space District
Staff Name and Phone Number: Erick Roeser, Auditor-Controller-Treasurer-Tax Collector, 707-565-3285; Kathleen Parnell, Assistant Auditor-Controller-Treasurer-Tax Collector, 707-565-6124; David Maurice, Investment & Debt Officer, 707-565-2858; Misti Arias, General Manager, 707-565-7264; Julie Mefferd, Administrative and Fiscal Services Manager, 707-565-7368;
Vote Requirement: Majority
Supervisorial District(s): Countywide
Title:
Title
Award of Investment Advisor Services and Changes to County of Sonoma Investment Policy Statement
End
Recommended Action:
Recommended action
A) Authorize the General Manager of the Sonoma County Agricultural Preservation and Open Space District (Ag + Open Space) and the Auditor-Controller-Treasurer-Tax Collector (ACTTC) to execute a professional services agreement with U.S. Bancorp Asset Management, Inc. operating through its division PFM Asset Management (“PFMAM”) for investment advisory services for an amount not to exceed $250,000, and for a term of five (5) years.
B) Adopt a Resolution of the Board of Supervisors to approve ACTTC staff’s recommended changes to the County of Sonoma Investment Policy Statement to allow for investments held in Ag + Open Space’s managed funds to extend beyond five (5) years up to a maximum maturity of twenty (20) years at the time of settlement in U.S. Treasury and U.S. Agency securities only. This change would apply solely to U.S. Treasury and U.S. Agency securities purchased for Ag + Open Space's managed funds by the investment advisor and require a 90-day waiting period pursuant to California Government Code § 53601.
end
Executive Summary:
The Sonoma County Agricultural Preservation and Open Space District (Ag + Open Space) seeks specialized investment advisory services to support the management of the Stewardship Reserve fund, which is designed to support the District’s obligation to provide ongoing stewardship of conservation easements in the event that the special tax supporting the District is not renewed. The objective is to maximize investment returns based upon the specific liquidity needs of the Stewardship Reserve fund within the parameters of the Sonoma County Investment Policy (IPS), while also maintaining prudent risk management. To meet this need, Ag + Open Space partnered with the County Auditor-Controller-Treasurer-Tax Collector (ACTTC) to conduct a competitive procurement process. Following this process, PFM Asset Management (PFMAM), a division of U.S. Bancorp Asset Management, Inc., was selected to provide investment advisory services. Additionally, the County’s IPS is being updated to allow this change in investment services.
Discussion:
The Stewardship Reserve Fund was established to ensure that Ag + Open Space can fulfill its ongoing obligation to monitor and steward conservation easements in perpetuity while Ag + Open Space pursues reauthorization of its voter approved special tax. Unlike Sonoma County’s Treasury Pool, which is designed primarily to meet shorter-term funding needs, the Stewardship Reserve Fund is intended to support expenditures in perpetuity. To better support this long-term purpose, extending the allowable maturity of certain investments from five to twenty years would provide an opportunity to garner a higher rate of return to meet future anticipated expenditures on stewarding land that has been protected forever through conservation easements.
In March of 2026, Ag + Open Space issued a Request for Proposal (RFP) for new investment advisor services. The RFP was sent to suppliers registered in the County of Sonoma Supplier Portal and was noticed to suppliers on the Ag + Open Space and the Sonoma Public Infrastructure Purchasing website. A total of six entities submitted proposals for this RFP. Using a defined set of selection criteria, an evaluation committee comprising Ag + Open Space staff, ACTTC staff, and staff from the Napa County Treasurer-Tax Collector’s office, independently reviewed and scored each written proposal. Through this process, the committee identified the investment advisor that best met Ag + Open Space’s specific service needs while delivering the required expertise at a competitive cost. PFMAM submitted a responsive proposal that clearly addressed the needs of Ag + Open Space and thoughtfully responded to the elements described in the RFP. Based on these factors, as well as PFMAM’s qualifications and experience, PMFAM was unanimously recommended by the evaluation committee for investment advisory services for Ag + Open Space.
The proposed scope of work requires PFMAM to manage the Stewardship Reserve funds in accordance with the laws of the State of California and the County’s Investment Policy Statement (IPS).
To support a long-term investment and liquidity strategy for the Stewardship Reserve funds, ACTTC staff is recommending revisions to the County’s IPS that specifically apply to the Ag + Open Space’s managed funds. The current IPS limits the maturity of U.S. Treasury and Agency securities to five (5) years at the time of purchase. Under California Government Code § 53601, U.S. Treasury and U.S. Agency securities with remaining maturities over five years are permitted if the governing body grants express authority at least three months prior to the investment. Given the endowment-like nature and long-duration objectives of the Stewardship Reserve, and based on an analysis of the anticipated cash flow and liquidity needs within the Stewardship Reserve, an asset-liability matching strategy is recommended, and ACTTC staff proposes amending the IPS to allow for U.S. Treasury and Agency securities to be purchased for Ag + Open Space’s managed funds with maturities of up to twenty (20) years at the time of trade settlement.
This specific revision, for Ag + Open Space’s managed funds only, would enhance the ability of the investment advisor to capture longer-term yields and better align the portfolio with Ag + Open Space's perpetual conservation and stewardship mission. This change does not mean the investment advisor will only be purchasing U.S. Treasury and U.S. Agency securities with those maturity lengths; it is simply a maximum maturity length allowed to provide flexibility to maximize yields, while also ensuring that any investments are subject to the liquidity needs of the managed funds. All other aspects of the County’s IPS would apply to the managed funds, including permissible investments, concentration limits, and minimum credit ratings. This hybrid asset-liability matching, paired with a shorter duration strategy that is focused on liquidity needs, is expected to meet the Stewardship Reserve’s objectives and will be reviewed as cash flow needs evolve. Should the Reserve’s future cash flow needs change sufficiently to support investments in U.S. Treasury and U.S. agency securities with maturities beyond twenty (20) years, staff will return to the Board with an updated recommendation.
PFMAM will construct a Custom Benchmark, against which its performance will be measured. PFMAM will continuously monitor investment opportunities and provide investment research and supervision of the Stewardship Reserve funds. PFMAM will invest the Stewardship Reserve in a manner that produces a long-term return on the funds that is consistent with the long-term goals of the County and Ag + Open Space to meet the perpetual obligation of conservation and fee land stewardship.
PFMAM itself will not take possession or act as a custodian for the funds but solely act as a fiduciary for the Managed Funds of Ag + Open Space. The County will contract with U.S. Bancorp Asset Management, Inc., an affiliate within the U.S. Bank corporate family, through its PFM Asset Management division for investment management services. U.S. Bank, as the current custodial bank for the County’s pooled investment portfolio, will also provide custodial services for the managed funds of Ag + Open Space. This will provide ACTTC a centralized portal to review holdings.
ACTTC will retain responsibility for monitoring compliance with the County’s IPS, providing regular reporting on investment holdings and reviewing the performance of the portfolio.
Ag + Open Space and ACTTC propose a service agreement with PFMAM for investment advisor services beginning in FY 2026-27 for five years for an amount not to exceed $250,000. ACTTC further requests the Board adopt the resolution approving the changes to the County’s IPS to allow for this change in investment services for Ag + Open Space stewardship reserve funds.
Racial Equity:
N/A.
Was this item identified as an opportunity to apply the Racial Equity Toolkit?
No.
Prior Board Actions:
• On September 19, 2023, the Board authorized and directed the General Manager of the Sonoma County Agricultural Preservation and Open Space District to work with the Sonoma County Auditor-Controller-Treasurer-Tax Collector to establish an endowment fund to support Ag + Open Space stewardship activities beyond the end of Measure F, if the measure is not reauthorized; and directed the General Manager to work with state representatives to propose State legislation to allow the endowment fund to earn a higher interest rate than is currently available as part of the County’s investment pool.
• On June 9, 2015, the Board passed a resolution 15-0241, Authorizing The Issuance Of Measure F Sales Tax Revenue Refunding Bonds Series 2015 A (Limited Tax Bonds - Agricultural Preservation And Open Space) And Authorizing The Taking Of Certain Actions In Connection Therewith.
• On August 14, 2014, the Board directed the General Manager to work with state representatives to propose State legislation to allow the endowment fund to earn a higher interest rate than is currently available as part of the County’s investment pool.
Fiscal Summary
|
Expenditures |
FY 26-27 Adopted |
FY 27-28 Projected |
FY 28-29 Projected |
|
Budgeted Expenses |
$25,000 |
$28,000 |
$33,000 |
|
Additional Appropriation Requested |
|
|
|
|
Total Expenditures |
$25,000 |
$28,000 |
$33,000 |
|
Funding Sources |
|
|
|
|
General Fund/WA GF |
|
|
|
|
State/Federal |
|
|
|
|
Fees/Other |
$25,000 |
$28,000 |
$33,000 |
|
Use of Fund Balance |
|
|
|
|
Contingencies |
|
|
|
|
Total Sources |
$25,000 |
$28,000 |
$33,000 |
Narrative Explanation of Fiscal Impacts:
Ag + Open Space has sufficient appropriations in its FY 2026-27 budget to cover the $25,000 annual fee, funded through Sonoma County voter-approved Measure F. Compensation for the consultant under the agreement is based on a percentage of the average daily net assets under management (“AUM”) invested with the Consultant per the agreement section 2.1., with a $25,000 minimum annual fee and a fee in Basis Points (bps) of 6 bps (or 0.06%) for the first $50 million, 5 bps (or 0.05%) for the next $50 million, and 4 bps (or 0.04%) for assets over $100 million. The Stewardship Reserve balance as of October 31, 2026, was nearly $23.6 million.
Narrative Explanation of Staffing Impacts (If Required):
N/A.
Attachments:
Agreement for Investment Advisor Services
County of Sonoma Statement of Investment Policy (redlined)
County of Sonoma Statement of Investment Policy (clean copy)
Resolution to Amend County Investment Policy Statement
Related Items “On File” with the Clerk of the Board:
PFMAM RFP Proposal