ITEM 6-E

Council Meeting: February 25, 1992     Santa Monica, California

TO:       Mayor and City Council

FROM:     City Staff

SUBJECT:  RECOMMENDATION TO AUTHORIZE CITY MANAGER TO NEGOTIATE
          AND EXECUTE A CONTRACT WITH RNC CAPITAL MANAGEMENT
          COMPANY FOR INVESTMENT MANAGEMENT OF THE CITY'S
          CEMETERY PERPETUAL CARE FUND AND MAUSOLEUM PERPETUAL
          CARE FUND

INTRODUCTION

This report requests that City Council approve the negotiation
and execution  of a contract with RNC Capital Management Company
for investment management of the City's Cemetery Perpetual Care
and Mausoleum Perpetual Care Funds.

BACKGROUND

The City owns and operates the Woodlawn Cemetery and the
Mausoleum located on the cemetery grounds.  A portion of the sale
of each burial plot, crypt, or niche is set aside for perpetual
care purposes and is deposited into the Cemetery Perpetual Care
Fund or Mausoleum Perpetual Care Fund, as appropriate.  The
income from these funds is used to pay for perpetual care costs.
The principal can only be used for investment purposes.  As of
1/31/92, $3.3 million was invested for these two funds.

In 1971, the City Council approved the retention of Scudder,
Stevens, and Clark, Inc. as the Investment Manager for the
Cemetery Perpetual Care Fund.  This was necessary because the
types of investments authorized for these funds such as common
stocks required a degree of investment expertise and continuous
investment monitoring ability not otherwise available to City
staff.  In 1986, the City Council authorized the formal
establishment of the Mausoleum Perpetual Care Fund and the
transfer of these funds to Scudder, Stevens, and Clark for
investment management.  Prior to this, these funds had been
invested by the City under the same guidelines as other City
controlled funds.

Discussion

To ensure that the City was receiving the best investment return
possible for these funds at the lowest investment management
cost, staff sent Requests for Proposals (RFP) to fourteen
investment management companies, including Scudder, Stevens and
Clark, Inc..  Proposals were received from eight firms:

          1)  First Interstate Bank
          2)  Froley, Revy Investment
          3)  NWQ Investment Management Company
          4)  Palley-Needelman Asset Management, Inc.
          5)  Public Financial Management, Inc.
          6)  RNC Capital Management Company
          7)  Scudder, Stevens, and Clark, Inc.
          8)  T. Rowe Price

Of the eight  firms  submitting  RFP's,  First  Interstate  Bank,
Froley,   Revy,   and  Public  Financial  Management,  Inc.  were
eliminated from consideration as these  managers  specialized  in
certain types of securities (fixed income or convertible
securities) that provided  lower  returns  than  the  other  five
managers.  The remaining five managers were rated in each of five
categories according to a weighted average scale based upon  what
staff believes are the relative importance of each category:
experience - 25%, performance  -  25%,  fees  -  25%,  investment
approach  or  philosophy  -  15%,  and  knowledge  of  applicable
regulations - 10%.

Staff then interviewed representatives of the  top  three  ranked
firms.   While  the  interviews  showed  all  three  firms  to be
professional, competent, and capable of performing  the  services
required,  RNC Capital Management Company was selected as the top
ranking firm.

RNC  Capital  Management  Company,  headquartered  in  West   Los
Angeles,  manages  over  $1 billion in assets and has a number of
governmental/municipal clients.  A number of these  clients  have
special  investment  restrictions similar to Santa Monica such as
South Africa-Free and socially responsible guidelines.  They have
a strong reputation in balanced fund investment performance.

BUDGET AND FINANCIAL IMPACT

There is a potential for an  increased  rate  of  return  to  the
Cemetery Perpetual Care and Mausoleum Perpetual Care funds as the
recent  performance  of  RNC  management  has  been  better  than
Scudder, Stevens, and Clark.  Sufficient funds have been included
in the FY1991-92 budget to pay the annual RNC Capital  Management
Company fee:  $18,100.

RECOMMENDATION

It is recommended  that  the  City  Council  authorize  the  City
Manager  to  negotiate  and  execute  a contract with RNC Capital
Management  Company  for  management  of  the   City's   Cemetery
Perpetual Care Fund and Mausoleum Perpetual Care Fund.

Prepared by:  Mike Dennis, Director of Finance
              Ralph Bursey, City Treasurer/Revenue Manager
              David Carr, Assistant City Treasurer