PREPARED BY: ARTURO CASTILLO DATE OF MEETING: 07/07/2025
SUBJECT:
TITLE
CONSIDER ADOPTING RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN PABLO AUTHORIZING THE CITY MANAGER TO EXECUTE A PROFESSIONAL SERVICES AGREEMENT WITH SHUSTER ADVISORY GROUP, LLC, TO SERVE AS THE INVESTMENT ADVISOR FOR THE CITY’S CASH OPERATING RESERVE PORTFOLIO AS PERMITTED UNDER CALIFORNIA GOVERNMENT CODE SECTION 53601
CEQA: This proposed action is not a project as defined by CEQA.
Label
CITY MANAGER RECOMMENDATION
Recommendation
Adopt Resolution
Body
Compliance statements Continue Best Management Practices, Fiscal Excellence, and Fiscal Transparency is an adopted City Council Priority contained in the adopted Fiscal Year 2025-2027 City Council Priority Workplan, effective April 7, 2025.
RECOMMENDATION:
Staff recommends that the City Council adopt a resolution authorizing the City Manager to execute an agreement with Shuster Advisory Group, LLC as the Investment Advisor for the City’s Cash Operating Reserve Portfolio as permitted under California Government Code 53601.
BACKGROUND
Shuster Advisory Group, LLC (“Shuster”) is an independent SEC-Registered Investment Advisor with over $9 billion in assets under management. As a fiduciary, Shuster specializes in serving the unique investment needs of governmental agencies, special districts, and institutional clients, including more than 100 cities and public entities. Shuster provides comprehensive retirement plan consulting and fiduciary investment management services, including investment selection, monitoring, and oversight. In addition, Shuster offers expertise in managing Section 115 Trusts and operating cash assets, helping public agencies optimize liquidity, preserve capital, and enhance yields across reserve and long-term funds. The firm also serves private wealth clients through tailored portfolio management and planning services.
Mark Shuster, Founder and Managing Partner at Shuster, along with members of the Shuster team, has worked closely with City staff through regular meetings to review and evaluate the City's investment portfolio. These discussions have included recommendations to reallocate assets to enhance yield while maintaining appropriate levels of safety and liquidity. More recently, the City engaged Shuster to serve as fiduciary investment advisor for both its 457(b) Deferred Compensation Plan and Section 115 Trust assets.
ANALYSIS
Following a comprehensive review of the City’s investment assets, as reflected in the January 2025 Treasury Report, Shuster identified opportunities to reallocate a portion of shorter-maturity holdings into high-quality fixed income investments. These reallocations are designed to enhance portfolio yield while preserving safety and liquidity.
In light of the inverted yield curve and the broad availability of Joint Powers Authority (JPA) investment pools, Shuster conducted a market analysis to guide the allocation of liquid assets across varying maturities and opportunity sets. This strategic approach positions the City to better respond to interest rate shifts by prudently balancing allocations among LAIF and other JPA pools.
Recognizing the complexity of the fixed income market, Shuster partners with leading institutional bond managers-including BlackRock-to construct resilient portfolios. These portfolios include only investments permissible under California Government Code Section 53601, such as U.S. Treasuries, U.S. Agency bonds, A-rated or better corporate bonds, and AA-rated or better mortgage- and asset-backed securities.
In today’s dynamic interest rate environment, professional bond management provides access to institutional pricing, credit analysis, and market research-allowing the City to capture opportunities arising from market dislocations. Shuster will continue to assist the City in allocating assets between JPA pools and institutional bond managers to optimize yield and ensure compliance with safety and liquidity objectives.
Budget, Fiscal & Legislative Standing Committee (BFLSC) Review
On June 23, 2025, the BFLSC (Pabon-Alvarado; Ponce) reviewed the proposed retention of Shuster Advisory, LLC as the City’s investment advisor, and forwarded a positive recommendation to the City Council for its approval.
FISCAL IMPACT
Based on the January 2025 Treasury Report, Shuster has identified reallocation opportunities projected to generate approximately $302,730 in additional annual interest earnings. This estimate reflects a strategic shift within the City’s existing portfolio and does not include the impact of any new contributions.
The recommended changes involve reallocating assets from shorter-maturity investments-such as LAIF or other JPA pools-into high-quality fixed income securities with 1-5-year maturities, in accordance with California Government Code Section 53601.
In addition to enhanced yield, the reallocation is expected to result in fee savings through access to institutional bond management with wholesale pricing, reducing overall investment costs while maintaining safety and liquidity.
ATTACHMENTS:
Att: A Resolution
Att: B Agreement