APPROVAL TO EXECUTE SECOND AMENDMENT TO CONTRACT WITH THE BANK OF NEW YORK MELLON FOR FINANCIAL CUSTODIAN AND SECURITIES LENDING SERVICES

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1 CLAIRE BARTELS DIRECTOR of FINANCE CITY TREASURER CITY OF LOS ANGELES CALIFORNIA OFFICE OF FINANCE 200 N. SPRING ST. ROOM CITY HALL LOS ANGELES, CA (844) September 12, 2016 ERIC GARCETTI MAYOR The Honorable Members of the Budget and Finance Committee City of Los Angeles 200 N. Spring St., Room 340 Los Angeles, CA C/O City Clerk Attn: Richard Williams RE: APPROVAL TO EXECUTE SECOND AMENDMENT TO CONTRACT WITH THE BANK OF NEW YORK MELLON FOR FINANCIAL CUSTODIAN AND SECURITIES LENDING SERVICES The Office of Finance (Finance) requests approval to execute the attached proposed Amendment No. 2 to Contract C with the Bank of New York Mellon (BNY). BNY provides custody, securities lending and related services under the contract executed October 10, The purpose of the amendment is to extend services until March 30, A Request for Proposals (RFP) was released in June, 2015, and BNY was the successful proposer. The requested extension would allow Finance to complete contract negotiations with BNY and execute a new contract pursuant to the RFP. Finance, in cooperation with representatives from the Office of the City Attorney and the City Administrative Officer, is negotiating contract terms related to the City s Standard Provisions for City Contracts with BNY. FISCAL IMPACT Funds to pay for this extension are provided for under the current fiscal year s budget. Therefore, no additional funding is required. A copy of the current contract is also attached for your reference. The average annual cost for the contract is approximately $111,211 which is more than offset by the average annual revenue of approximately $444,860. Funds for this contract have been budgeted in the Office of Finance Account 4040, Bank Service Fees. RECOMMENDATIONS The Office of Finance respectfully requests that the City Council authorize the Director of Finance to execute Amendment No. 2 to Contract No. C , subject to final review as to form and legality by the Office of the City Attorney. AN EQUAL OPPORTUNITY-AFFIRMATIVE ACTION EMPLOYER

2 BNYM Amendment No. 2 September 12, 2016 Page 2 If you require any further information regarding this request, please contact Tom Juarez, Chief Investment Officer, at (213) or Tom.Juarez@lacity.org. Respectfully, Oua~ Claire Bartels Director of Finance/City Treasurer Attachments cc: Matt Szabo, Deputy Mayor of Budget and Innovation Zara Bukirin, Office of the City Administrative Officer

3 AMENDMENT NO. 2 TO CONTRACT No. C BETWEEN THE CITY OF LOS ANGELES AND THE BANK OF NEW YORK MELLON TRUST COMPANY, NATIONAL ASSOCIATION This Second Amendment to Contract No. C between the City of Los Angeles (hereinafter City ) and THE BANK OF NEW YORK MELLON TRUST COMPANY, NATIONAL ASSOCIATION (hereinafter CONTRACTOR ) is entered into with reference to the following: WHEREAS, on October 10, 2012 the parties entered into Contract No. C wherein CONTRACTOR agreed to provide Custody, Securities Lending and related services; and WHEREAS, Contract No. C expires September 30, 2016; and WHEREAS, City would be in violation of California Government Code Section which states that all securities owned by the City shall be held in safekeeping by the City s custodial bank and would face the loss of significant revenue if there were a lapse in Custody, Securities Lending and related services; and WHEREAS, Office of Finance released a Request For Proposal for Custody, Securities Lending and Related Services and contract negotiations are underway; and WHEREAS, the City and the Contractor now agree to continue the CONTRACTOR S services to the City to allow sufficient time for the Office of Finance to complete the Request for Proposal process and subsequent negotiation of a new contract without a lapse in service. NOW THEREFORE, the parties hereby covenant and agree as follows: ARTICLE I - AMENDMENTS TO THE CONTRACT 1. Section 2 - Representatives of the Parties, on Page 3 of the CONTRACT is hereby amended in its entirety to read: A. Representatives of the Parties: The representatives of the respective parties authorized to administer this AGREEMENT, and to whom formal notices, demands, and communications shall be given are as follows: 1) The representative of the CITY shall be, unless otherwise stated in this AGREEMENT: Tom Juarez City of Los Angeles, Office of Finance 200 North Spring Street, Room 220, City Hall

4 Amendment 2 Contract No. C Los Angeles, CA ) The representative of the CONTRACTOR shall be, unless otherwise stated in this AGREEMENT: Linda McAtee BNY Mellon Asset Servicing 400 South Hope Street, Suite 400 Los Angeles, CA Section 3 - Term, on Page 3 of the CONTRACT is hereby amended in its entirety to read: The term of this AGREEMENT shall commence on October 1, 2012, and end on March 30, 2017 subject to the termination provisions herein. 3. Appendix B - Fee Schedule, of the CONTRACT is hereby amended to be replaced with the attached, updated Fee Schedule. ARTICLE II - GENERAL PROVISIONS Except as amended by this SECOND AMENDMENT, all other provisions of Contract No. Cl21154 shall remain in full force and effect. Signature page follows. Page 2 of 3

5 Amendment 2 Contract No. C IN WITNESS THEREOF, the parties hereto have caused this instrument to be signed by their respective duly authorized officers: Approved Corporate Signature Methods (please sign in blue ink): a) Two signatures: one by Chairman of Board of Directors, President or Vice President; and one by Secretary, Assistant Secretary, Chief Financial Officer or Assistant Treasurer. OR b) One signature by Corporate designated individual together with properly attested resolution of Board of Directors authorizing person to sign on the company behalf. City Of Los Angeles The Bank of New York Mellon Trust Company, National Association Date: CLAIRE BARTELS Director of Finance / City Treasurer Name: Title: Signature Printed/ Typed Printed /Typed Signature Name: Printed / Typed Title: Printed /Typed Date: APPROVED AS TO FORM: MICHAEL N. FEUER City Attorney ATTEST: HOLLY L. WOLCOTT City Clerk Assistant City Attorney Deputy City Clerk Date: Date: Bank Of New York Contract - C Amend No Draft Page 3 of 3

6 APPENDIX B CUSTODY SERVICES INDICATIVE FEE SCHEDULE

7 Fee Schedule Basis Points Basis Points x Assets Assets = Charge Flat Annual Fee Domestic Custody and Related Services *$100,000 'Comments Fee assumes BNY Mellon is the primary securities lending agent and collateral manager and may lend your entire pool of assets. Charge Per Item Items Charge Per Item x Item Charge Structural Charges (annual fees based on monthly valuation) Investment Pool Accounting Per Separate Account Per Separate Account with any OTC Derivatives Per Line Item (Real Estate, LP, Commingled Fund, Mutual Fund, Hedge Fund, Gift Processing) Per Collateral Account Per Cash Portfolio $2, $3, $1, $2, $ Transaction Fee Domestic * Per Depository Eligible Transaction (includes purchases, sales, free receipts, free deliveries and maturities) Per P&l, PayupyPaydown Per Repo Transaction/Collateral Per Leg of Futures, Options or Swap Transaction Per Physical trades and Mutual Fund Transactions (Non NSCC) Per Other Transaction (i.e. Not-in-bank) $10.00 $10.00 $15.00 $25.00 $25.00 $25.00 Included in fiat fee I * Cancels will be treated as a transaction and charged as such (if arising from action of client or investment manager) Other Per Incoming/Outgoing US Wire Per Manual Check Request Per Margin Variation Per Third Party Securities Lending Agent (Applicable Transaction fees would also apply) Per FIX Not Executed At BNY Mellon (Developed Markets) Per FIX Not Executed At BNY Mellon (Emerging Markets - A higher fee may apply for Restricted Currencies) Per Manual Transaction where automated solutions exists (in addition to Transaction fee) $10.00 $35.00 $12.00 $100, $35.00 $35.00 $ BNY MELLON ASSET SERVICING

8 Proxy Services Per Ballot Issue Per Incoming Vote Per Manual Instruction Any other Proxy Service Charges $5.00 $10.00 $25.00 Pass through + 10% Independent Valuation (OTC Derivative Pricing) Daily valuation, per position per vendor per day Daily valuation, per centrally dearerd position per day Monthly valuation, per position per vendor per month $3.25 $2.00 $45.00 Cash Investment Sweep Dreyfus Cash Management Funds See Prospectus Per 3rd Party Cash Management (STIF) Sweep (Waived tor sweeps into BNY Mellon supported funds) $12, Securities Lending 80% of the income earned from lending the assets will be remitted to City of Los Angeles and the remaining 20% will be retained by BNYMellon with a 2 bps fee for the administration of the collateral. Programming / Information Technology Custom Programming and Reporting Requirements - per hour rate $150,00 TOTAL $100,000 BNY MELLON ASSET SERVICING