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HomeMy WebLinkAboutAdopt Resolution No. 2025-68 - Approving the 2026 Investment 2000 Main Street, � • Huntington Beach,CA o9Q 92648 City of Huntington Beach cF.,-„_.,,,.•. \Fo APPROVED 7-0 Cp` File #: 25-877 MEETING DATE: 11/18/2025 REQUEST FOR CITY COUNCIL ACTION SUBMITTED TO: Honorable Mayor and City Council Members SUBMITTED BY: Jason Schmitt, City Treasurer VIA: Jason Schmitt, City Treasurer PREPARED BY: Jason Schmitt, City Treasurer Subject: Adopt Resolution No. 2025-68 approving the 2026 Investment Policy and Receive and File the City Treasurer's Q1 FY2025-2026 Investment Report Statement of Issue: Pursuant to the California Government Code, the Treasurer of the local agency may render an annual statement of investment policy to the legislative body for consideration and adoption. The City Treasurer, with the assistance of the Investment Advisory Board, has prepared the updated investment policy. Receive and File the City Treasurer's Q1 FY2025-2026 Investment Report, pursuant to Section 18.0 of the Investment Policy of the City of Huntington Beach. Financial Impact: Not Applicable. Recommended Action: Adopt Resolution No. 2025-68, "A Resolution of the City Council of the City of Huntington Beach Approving the Statement of Investment Policy 2026." Receive and File the City Treasurer's Q1 FY2025-2026 Investment Report, pursuant to Section 18.0 of the Investment Policy of the City of Huntington Beach. Alternative Action(s): Do not approve recommended action and direct staff accordingly. Analysis: The City Treasurer is responsible for the administration of the investments of the City of Huntington Beach. The purpose of the Investment Policy is to establish cash management and investment guidelines for the investment of the City's unexpended cash balances, which exclude employee retirement funds, funds governed by bond indenture agreements, or other funds managed separately. City of Huntington Beach Page 1 of 2 Printed on 11/12/2025 powered by LegistarT"' 36 File #: 25-877 MEETING DATE: 11/18/2025 This policy shall apply to each investment transaction and the entire portfolio, which must comply with the California Government Code, Section 53600 through 53683, and all other applicable laws and regulations. The City's Investment Policy may be rendered annually to the City Council to ensure its consistency with the overall objectives of preservation of principal, liquidity, and return. The attached Investment Policy has been reviewed by the City's Investment Advisory Board and approved as to form by the City Attorney. The investment policy has been previously reviewed and certified by the California Municipal Treasurer's Association and will be review and certified again this year after Council approval. The CMTA was founded in 1958 with a mission to lead in promotion and enhancing the fiduciary responsibility and integrity of individuals responsible for public funds. The Investment Advisory Board reviewed the policy at its October 23, 2025 meeting. Environmental Status: This project is exempt from the California Environmental Quality Act (CEQA) pursuant to Section 15031c under Class 1 of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential to have a significant effect on the environment. Strategic Plan Goal: Goal 2 - Fiscal Stability, Strategy A - Consider new revenue sources and opportunities to support the City's priority initiatives and projects. For details, visit www.huntingtonbeachca.gov/strategicplan. Attachment(s): 1. Resolution No. 2025-68 2. City of Huntington Beach Investment Policy 2026 4 3. Q1 FY2025-2026 Investment Report 4. Q1 FY2025-2026 City Treasurer Presentation City of Huntington Beach Page 2 of 2 Printed on 11/12/2025 powered by LegistarT" 37 RESOLUTION NO. 2025-68 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH APPROVING THE STATEMENT OF INVESTMENT POLICY 2026 WHEREAS, the City Council of the City of Huntington Beach is required to approve an annual statement of investment policy; and The duly elected City Treasurer has recommended approval of the City of Huntington Beach Statement of Investment Policy, attached hereto as Exhibit"A" and incorporated herein by this reference; and The duly appointed Investment Advisory Board has reviewed the City Treasurer's recommended policy and also recommends approval thereof; and The policy is consistent with California Government Code §53600, et seq. NOW, THEREFORE, the City Council of the City of Huntington Beach does hereby resolve as follows: The City Council of the City of Huntington Beach hereby approves and adopts the attached City of Huntington Beach Statement of Investment Policy for 2026 so long as applied in a manner consistent with state and local law as amended from time to time. PASSED AND ADOPTED by the City Council of the City of Huntington Beach at a regular meeting thereof held on the 18th day of November , 2025. Mayor REVIEWED AND APPROVED: APPROVED AS TO FORM: City Attorney City Manage INITIATED AND APPROVED: ity Treasurer 25-17332/396171 Reso No. 2025-68 Exhibit "A" CITY OF HUNTINGTON BEACH STATEMENT OF INVESTMENT POLICY 2026 1l0" 1� ING . k TABLE OF CONTENTS Page No. I. Policy Statement 3 IL Scope 3 DI Prudent Investor Standard 4 IV. Investment Authority 4 V. Objectives 4 VL Authorized Investments 5 VII. Investment Credit Rating Restrictions 8 VIIL Investment Diversification,Maturity and Duration 8 IX. Prohibited Transactions 9 X. Collateralization 10 XI. Ethics and Conflict of Interest 10 XIL Authorized Broker/Dealers and Financial Institutions 10 XIIL Performance Standards 11 XIV. Performance Evaluation 11 XV. Custody and Safekeeping 12 XVI. Internal Controls 12 XVIL Disaster Recovery Program 12 XVIII. Investment Policy Review 13 XIX. Glossary 14 PURPOSE The City of Huntington Beach Investment Policy ("Policy") provides the structure for the prudent investment of the funds ofthe City of Huntington Beach("City")in order to maximize the efficiency of the City's cash management system while meeting the City's daily cash flow demands. I. POLICY STATEMENT The Policy is prepared in accordance with California State law and based on prudent money management practices. The primary goal is to invest public funds in a manner that will provide the maximum security of principal invested with secondary emphasis on providing adequate liquidity to,meet daily cash flow demands of the City and lastly to achieve a market rate of return within the parameters of prudent risk management while conforming to all applicable statutes and resolutions governing the investment of public funds. II. SCOPE This.Policy governs the investment of funds deposited in the City Treasury with the exception of employee's:pension funds (invested separately by CalPERS),funds invested separately by the City Treasurer ("Treasurer") under bond indenture agreements, and funds invested separately by the Treasurer or trustees under other City Council ("Council") approved agreements (e.g.,. Retiree Medical Trust, Post-Employment Section 115 Trust, Supplemental Pension Trust). Detailed descriptions of these funds are provided in the City's annual financial report with.summary descriptions listed below for reference. It is the City's policy to pool funds.for banking and investment purposes to provide efficiencies and economies of scale. Pooled account banking and investing provides for greater use of funds by allowing for more efficient cash management, reduced transaction costs,and greater market access. This Policy is more restrictive than State law in certain areas. 1. General Fund: Accounts for activity not required to be accounted for in another.fund. 2. Special Revenue Funds: Financial resources that are restricted or committed to expenditure for specified purpose other than debt service or capital projects. These funds include Air Quality, Development Impact, Disability, Drainage, Strand Parking, Gas Tax; Housing, Parks, Automation,and Traffic Impact/Congestion. 3. Capital Project Funds: Financial resources that are restricted,,committed, or assigned to expenditure for major capital outlays, including capital projects and facility construction/ acquisition. These funds include Affordable Housing, Parking, Sewer, Technology, and Lease Capital. 4. Enterprise Funds: Financial resources that are restricted; committed, or assigned to expenditure for business-type activities. These funds include Water, Sewer Service,Refuse,and Hazardous Materials Service. 5. Trust and Agency Funds: Financial resources held by the City in a fiduciary capacity for the benefit of others. These funds include Low/Moderate Income Housing, Community Facilities Districts,and West Orange County Water Board. 6. Debt Service Funds: Financial resources that are restricted, committed, or assigned to expenditure for principal and interest. These funds include the Public Financing Authority. 7. Infrastructure Funds: Financial resources for capital and operating expenditures related to certain designated infrastructure projects. The transfer amount is calculated annually based on the City Charter requirement for 15% of General Fund reserves on a rolling 5-year average be designated for infrastructure. 8. Capital Improvement Reserve Funds: Financial resources established by the fund balance policy for construction/improvement of City infrastructure, usually identified in the City's 5- year capital improvement plan. 9. Any New Fund Created by Legislative Body:All future funds created by a legislative decision unless specifically exempted from investment by the Treasurer. III. PRUDENT INVESTOR STANDARD The Treasurer,as a fiduciary of public funds,adheres to the"prudent investor"standard as stated in California Government Code Section 53600.3. When investing,reinvesting,purchasing,acquiring, exchanging, selling, or managing public funds, the Treasurer shall act with care, skill, prudence, and diligence under the circumstances then prevailing, specifically including, but not limited to, the general economic conditions and the anticipated needs of the City that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims,to safeguard the principal and maintain the liquidity needs of the City. Within the limitation of this Section and considering individual investments as part of an overall investment strategy, investments may be acquired as authorized by law. The Treasurer and authorized designees, as investment officers acting in accordance with written procedures and the Policy and exercising due diligence, shall be relieved of personal responsibility for an individual security's credit risk or market price changes, provided deviations from expectations are reported to Council in a timely fashion and appropriate actions are taken to mitigate adverse developments. All participants in the investment process shall act as custodians of the public trust. The overall program shall be designed and managed with a degree of professionalism that is worthy of the public trust. IV. INVESTMENT AUTHORITY The authority to invest City funds rests with the Council.In accordance with California Government Code Section 53607, Council,delegates investment authority to the Treasurer for one year and that delegation must be renewed annually. Adoption of this Policy constitutes delegation of investment authority to the Treasurer for the next year unless revoked in writing. Daily responsibility for investment of City funds resides with the Treasurer, and the Treasurer may appoint deputies to assist in carrying out this delegated authority in their absence pursuant to California Government Code Section 41006. The Treasurer shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities and procedures of subordinate officials. By City Charter, the Treasurer is custodian of all public City funds. Council members may each appoint one City resident to serve on an Investment Advisory Board ("Board") to advise the Treasurer and Council on the City's investment program. The Board, generally consisting of 7 members, will review the investment portfolio for compliance with the Policy on a quarterly basis and prepare an Annual Report.All Board meetings are publicly held in compliance with the Brown Act and meeting minutes available to the public online. V. OBJECTIVES Investments are made under the terms of conditions of California Government Code Section 53600. The primary investment objectives,presented in their absolute order of priority, are: 1. SAFETY Safety of principal is the foremost investment objective. City investments shall be undertaken in a manner that seeks to ensure preservation of capital in the overall portfolio.The Treasurer shall seek to preserve principal and minimize capital losses by mitigating credit risk and market risk as follows: a) Credit Risk: Defined as an issuer's ability and willingness to repay interest and principal. Credit risk also applies to the overall market perception of the financial strength and capacity of the issuer. Credit risk shall be mitigated by diversifying the portfolio among issues and issuers so that the failure of any one issue or issuer would not unduly harm the City's cash flow or result in a significant loss of income or principal. b) Market Risk: Defined as the risk of market value fluctuations due to changes in the general level of interest rates. As the City's,investment portfolio must remain sufficiently liquid to enable the City to meet all operating requirements that might be reasonably anticipated,the investment portfolio shall be structured such that securities mature as much as possible in conjunction with major cash flows to minimize the need to sell securities prior to their maturity. Occasional market losses on individual securities may occur with.portfolio management and they must be considered within the context of overall investment return. 2. LIQUIDITY Liquidity is essential to the safety of principal.The investment portfolio will maintain sufficient liquidity to meet all daily operating requirements based on reasonably anticipated cash flow needs. Since all possible cash demands cannot be anticipated,the portfolio will invest primarily in securities with active secondary and resale markets. 3. YIELD/RETURN Yield refers to the objective of attaining a market rate of return commensurate with the risk profile and cash flow characteristics of the portfolio throughout budgetary and economic cycles. The City funds entrusted to the Treasurer will be primarily a passively managed portfolio with core investments limited to relatively low risk securities in anticipation of earning a fair return relative to the risk being assumed. Return refers to the actual amount earned. As noted in Government Code Section 53601.6, securities issued by, or backed by,the United States government can result in zero or negative interest accrual if held to maturity,in the event of,and for the duration of, a period of negative market interest rates. VI. AUTHORIZED INVESTMENTS The City is authorized to invest in specific types of securities per the California Government Code. The Treasurer may place orders for executing transactions through periodically selected broker/dealers, banks,.or counterparties, consistent with legal requirements and this Policy. All securities must be United States dollar denominated and investments not specifically listed below are expressly prohibited. 1. U.S. TREASURY SECURITIES United States Treasury bills, notes, bonds, or certificates of indebtedness, for which the full faith and credit of the United States are pledged for the payment of principal and interest. 2. U.S.GOVERNMENT AGENCY SECURITIES Obligations,participations,or other instruments of, or issued by, a federal agency or a United States government-sponsored enterprise. 3. COMMERCIAL PAPER Commercial Paper of"prime"quality of the highest ranking or of the highest letter and number rating as provided for by a Nationally Recognized Statistical Rating Organization ("NRSRO"). Split ratings are not allowable. The entity that issues the commercial paper shall meet either of the following conditions: a) Has total assets in excess of five hundred million dollars($500,000,000), is organized and operating within the United States as a general corporation and has debt other than commercial paper, if any, that is rated "A" or higher by a NRSRO. b) Is organized in the United States as a special purpose corporation,trust, or limited liability company, has program-wide credit enhancements including, but not limited to overcollateralization, letters of credit or a surety bond, and has commercial paper that is rated"A-1" or higher, or the equivalent,by an NRSRO. 4. CERTIFICATES OF DEPOSIT Certificates of deposit issued by a nationally or state-chartered bank, savings association, or a federal association (as defined by Section 5102 of the California Financial Code), or by a federally licensed or state-licensed branch of a foreign bank. 5. REPURCHASE AGREEMENTS Purchase of securities by the Treasurer pursuant to an agreement by which the seller will repurchase the securities on or before a specified date and for a specified amount and will deliver the underlying securities to the City by book entry, physical delivery, or 3rd party custodial agreement. The term of a repurchase agreement shall not exceed one year and have capital of not less than$500,000,000.The securities must be of the same issuer,description,issue date and maturity. To participate in repurchase agreements, a master repurchase agreement must be completed and signed by all parties involved, with the City maintaining a signed copy of the agreement. Repurchase agreements are required to be collateralized by securities or cash. 6. MONEY MARKET MUTUAL FUNDS Shares of beneficial interest issued by diversified management companies that are money market mutual funds registered with the Securities and Exchange Commission under the Investment Company Act of 1940 (15 U.S.C. Sec. 80a-1 et seq.), which only invest in direct obligations in U.S. Treasury bills, notes, and bonds, U.S. Government Agencies, Municipal Debt, and repurchase agreements with a weighted average maturity of 60 days or less. Funds that do not maintain a constant Net Asset Value will be disallowed. Approved money market mutual funds shall meet either of the following criteria: a) Attained the highest ranking or the highest letter and numerical rating provided by at least two NRSROs. b) Retained an investment advisor registered or exempt from registration with the Securities and Exchange Commission with not less than 5 years of experience managing money market mutual funds with assets under management in excess of$500,000,000. 7. STATE AND COUNTY INVESTMENT POOLS The Treasurer may invest in the Local Agency Investment Fund ("LAIF"), a special fund established by the State Treasurer under California Government Code Section 16429.1. Due to its pooled nature,LAW is an allowable investment for local agencies even though some individual investments would not be allowed normally as direct City investments. The City's cement maximumpermissible investment inLAIF is$75,000,000.LAIF has no final stated maturity and will be reported as a one-day maturity. The Treasurer may invest excess funds not required for immediate use into the Orange County Treasury Pooled Funds("OCTPF"). OCTPF is a pooled fund managed by the County Treasurer for County and non-County entities under California Government Code Section 27130. OCTPF is maintained for the purpose of benefitting from economies of scale through pooled investment activities. The City's current maximumpeimissible investment in OCTPF is$75,000,000. OCIP has no final stated maturity and will be reported as a one-day maturity. 8. MUNICIPAL DEBT Such instruments are defined as being issued by a local or state agency, including: a) Bonds issued by the local agency, including bonds payable solely out of the reserves from a revenue-producing property owned, controlled, or operated by the local agency or department,board, agency, or authority of the local agency. b)Registered state warrants, treasury notes, or bonds of this state, including bonds payable solely out of revenues from a revenue-producing property owned, controlled, or operated by the state or department, board, agency, or authority of the state'. c) Bonds, notes, warrants, or other evidences of indebtedness of a local agency in the state, including bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by the local agency, or by a department, board, agency, or authority of the local agency. 9. MEDIUM-TERM NOTES All corporate and depository institution debt securities issued by corporations organized and operating within the United States or by depository institutions licensed by the United States or any,state and operating within the United States. 10. JOINT POWERS AUTHORITY Shares of beneficial interest issued by a joint powers authority organized pursuant to Government Code Section 6509.7,which invests in the securities and obligations as authorized under 53601 (a-o) and that comply with the investment restrictions of California Government Code Sections.53600-53610 and Section 53630. The City may invest up to $75,000,000 per joint powers authority. The Treasurer shall be required to investigate all local government investment pools prior to investing and perform quarterly reviews while the funds are invested in the pool. The analysis shall include but is not limited to the following pool characteristics: eligible investment securities, investment policy/objectives, interest calculations/distributions, securities pricing, maximum maturity, REPO collateral/counter-party, securities safeguarding/settlement processes, pool/fund size, deposit/withdrawal limits, program audits, and expense ratios/fee schedules. 11. S.UPRANATIONAL SECURITIES United States dollar denominated senior unsecured unsubordinated obligations- issued or unconditionally guaranteed by the International Bank for Reconstruction and Development, International Finance Corporation, or Inter-American Development Bank, with a maximum remaining maturity of 5 years or less, and eligible for purchase and_sale within the United States. VII. INVESTMENT CREDIT RATING ESTRICTIONS Credit ratings will be applied at the time of purchase of a security and monitored for changes while owned.A downgrade subsequent to purchase in a security's credit rating will not constitute a.Policy violation. Securities downgraded below the minimum acceptable rating must be reviewed for possible sale by the Treasurer. The credit ratings referenced in this policy must be assigned by one of the following NRSROs: Standard&Poor's Corporation(S&P),Moody's Investors Service,Inc. (Moody's), or Fitch Ratings (Fitch). All investments must have the minimum ratings required below by at least one NRSRO unless listed in the investment type exceptions in this section: a) Short-Term: A-1 for Moody's,P-1 for S&P, and F1 for Fitch b). Long-Term: A3 for Moody's,A- for S&P, and A- for Fitch Exceptions to the general minimum rating requirements include: a) Money Market Mutual funds require the highest ranking or the highest letter and numerical rating provided by at least two NRSROs(Aaa for Moody's,AAA for S&P,and AAA for Fitch) b) Supranationals require the 3rd highest ranking or 3rd highest letter and numerical rating provided by at least one NRSRO (Aa2 for Moody's. AA for S&P, and AA for Fitch) The following investments are not subject to general minimal rating requirements: a) U.S. Treasury and Government Agencies Obligations b) Repurchase Agreements c) OCTPF and LAIF VIII. INVESTMENT DIVERSIFICATION.MATURITY.AND DURATION Investment diversification is required to minimize the risk of loss resulting from assets of a specific maturity, issuer, or class of securities. Diversification strategies shall be established by the Treasurer and periodically reviewed. All issuer or investment type diversification limits are upon settlement date. Should any investments exceed these limits post-purchase (e.g., portfolio fluctuations), the affected securities may be held to maturity at the Treasurer's discretion based in part on the expected time length that the portfolio will remained unbalanced. 1. MATURITY The maximum maturity of any investment purchased will be 5 years absent Council granting express authority to make that investment specifically or as part of an investment program. The settlement date will be used as the date of purchase for measuring maturity limitations.Not more than 25% of City funds may be invested in securities with maturities in excess of 4 years. 2. ISSUER CONCENTRATION Only debt of approved issuers may be purchased.The following diversification limits will also apply at the time of a security's purchase: • California Government Code Limits Policy Limits Investment Type Investment Issuer Maturities Investment Issuer Maturities U.S.Trea su ry Secu riti es 100% None 5Years 100% -None 5Years U.S.Government Agency Securities. 100% None 5Years 100% : None 5Years Commercial Paper 40% 10% 1Year 40% 10% 1Year Certificates of Deposit 30% None 5Years 30% 10% 3Years Repurchase Agreements 100% None 1Year 100% None 90Days Money Market Mutual Funds • 20%of Agency Funds 10%of Agency Funds . N/A 15%of Agency Funds 10%of Agency Funds N/A State and Local Investment Pools $75M per account N/A N/A $75M per account N/A N/A Municipal Debt - 100% None 5Years 100% 10% 5Years Medium-Term Notes 30% None 5Years - 30% 10% 5Years Joint Power Authority - - 100% None N/A $75M . None N/A SupranationalSecurities - 30% None 5Years 30% None 5Years IX. PROHIBITED TRANSACTIONS • All permitted investments shall conform in all respects with this Policy and applicable provisions of the California Government Code, as may be amended from time to time. Investments prohibited by the Government Code are expressly not permitted. The Treasurer must approve in writing as soon as possible any investment transactions that• - violates a credit risk criterion or an allocation limitation.Thereafter, action shall be taken by the Treasurer to correct such matter as soon as practical. If an investment is in compliance at the . time of purchase, a subsequent violation resulting from a change in-market values will not constitute a violation of that restriction. The following transactions are prohibited even if permitted under the California Government - Code or prior version of this Policy: .a) Borrowing for investment purposes ("Leverage").• - b) Reverse Repurchase Agreements, as defined by California Government Code Section 53601(j)(3-4). - . c) Structured Notes (e.g. inverse floaters, leveraged floaters, structured certificates of deposit, equity-linked securities, event-linked securities). This includes all floating-rate, adjustable-rate or variable-rate securities in which a change in interest rates or other variables that can reasonably be foreseen to occur during their term would result in their market value not returning to par at the time of each interest rate adjustment. Simple"floating rate notes,"whose periodic coupon adjustment is based on a short-term (1 year or less) rate index (e.g., Treasury bills, federal funds, prime rate, SOFR) and which have a reasonable expectation of maintaining a value of par at each interest rate adjustment.through final maturity, are exempt from this definition. Additionally, U.S. Treasury and Agency zero coupon bonds.or callable securities that otherwise meet the . quality,maturity, and percent limitations assigned to their respective security category, are exempt from this section. - - d) Structured Investment Vehicles (SW). e) Derivative-Securities(e.g.,options,futures,swaps,swap options,spreads,straddles,caps, floors, collars).- f) Bankers Acceptances. g) Money Market Mutual Funds that do not maintain a constant Net Asset Value(NAV). X. COLLATERALIZATION California banks and other depository institutions are required to secure City deposits by pledging government securities with of a value of 110% of principal and accrued interest under California Government Code or first trust deed mortgage notes have a value of 150% of the City's total deposits. Collateral must be held by an independent 3rd party with whom the City has a current custodial agreement. A clearly marked evidence of ownership (safekeeping/custody receipt) must by supplied to the City and retained.No collateral substitutions may be made without prior approval of the Treasurer. To anticipate market changes and provide a level of security for all repurchase agreement transactions, the market value of securities that underlie a repurchase agreement shall be valued at 102% or greater of the funds borrowed against those securities and the value shall be adjusted no less frequently than daily. Since the market value of the underlying securities is subject to daily market fluctuations,the investments in repurchase agreements shall comply with the market value requirement if the value of the underlying securities is brought back up to 102% no later than the next business day. The Treasurer may waive the collateral requirement for deposits fully-insured by the Federal Deposit Insurance Corporation. XI. FTHICS AND CONFLICT OF INTEREST In addition to state and local statutes relating to conflicts of interest, the Treasurer and all persons involved in the investment process shall refrain from personal business activity that could create a conflict with proper execution of the investment program or could impair their ability to execute impartial investment decisions. The Treasurer and all persons involved in the investment process shall disclose by April 1 SY of each calendar year to the applicable oversight body any material financial interests or investment positions in financial institutions,broker dealers,and vendors that conduct business with the City or any large personal financial/investment positions that could be related to the City's performance (Statement of Economic Interests from the California Fair Political Practices Commission). XII. AUTHORIZED BROKER/DEALERS AND FINANCIAL INSTITUTIONS The Treasurer will maintain a list of broker/dealers and financial institutions authorized to provide investment and/or depository services and products that are authorized to provide investment services in the State of California. No public deposit shall be made except in a qualified public depository as established by state laws. The Treasurer will perform an annual review of the financial condition and registrations of such qualified providers to determine whether they should remain on the approved list and require annual audited financial statements to be on file for each firm. The Treasurer shall endeavor to open an application period every 2 years for new broker/dealers and financial institutions to provide investment services. All applicants will be required to complete a detailed questionnaire and the Treasurer's Office will review any applicant who submits a questionnaire. The City shall annually send a copy of the current Policy to all financial institutions and broker/dealers approved to do business with the City and they shall notify the City in writing of receipt of the Policy. As feasible, all money belonging to or in custody of a local agency, including money paid to the Treasurer or other officials to pay the principal, interest, or penalties on bonds, shall be deposited for safekeeping in national or state-chartered banks, savings associations, federal associations,. credit unions,or federally-insured industrial loan companies in California("Relevant Institutions") selected by the Treasurer or other official having legal custody of the money. To be eligible for receiving local agency money, any Relevant Institution shall have-received an overall rating of not Page 10 of 20 less than"satisfactory"in its most recent evaluation by the appropriate federal fmancial supervisory agency of its record of meeting the credit needs of California's communities,including low-income and moderate-income neighborhoods (Section 2906 of Title 12 of the United States Code). California Government Code sections 53601.5 and 53601.6 shall apply to all investments acquired pursuant to this section. Any permitted investment, not purchased directly from an approved issuer, shall be purchased either from a primary or regional securities broker/dealer qualifying under SEC Rule 15C3-1 (Uniform Net Capital Rule) and meeting the following requirements: a) Experience in institutional/public fund trading practices, b) Familiarity with California Government Code related to City approved investments, c) A California office with a minimum 5 years of operation, and d) Submission of a Broker/Dealer Application with related eligibility documents, including: (a) current audited annual financial statement,(b)U4 form,(c)proof of state registration,(d)proof of FINRA certification, and(e) compliance certification with the City's Policy. XIII. PERFORMANCE STANDARDS The investment strategy is to manage the portfolio with less risk than a comparable benchmark index while using economies of scale to administer the program at a reasonable cost. The Treasurer will make best efforts to observe, review, and react to changing conditions that affect the portfolio. Although the Treasurer may employ certain indices (e.g., 12-month moving average of the interpolated 18-month Constant Maturity Treasury rate) to gauge the fund rates of return, such indices shall be used solely for comparative purposes and do not constitute a guarantee of actual fund performance. Benchmarks will be reviewed periodically based upon changes in market conditions or cash flow requirement changes. The Treasurer's investment strategy is to hold purchased securities until maturity, but changing economic conditions, interest rates, and credit quality may dictate a sale.in advance to minimize market/credit risks or enhance yield. Such sales should consider the short-term and long-term portfolio impact as the core objective of the Treasurer is to preserve principal. Portfolio performance shall be measured on a total return basis and calculated consistent with the Global Investment Performance Standards to ensure fair,transparent, and comparable reporting of results. XIV. PERFORMANCE EVALUATION The Treasurer shall submit a quarterly report("Report")to the Council,City Manager,Chief Financial Officer, and Board within.45 days of the end of the quarter under California Government Code Section 53646 to provide information on the investment portfolio's performance and include other information outlined in State law as noted below.This Report shall be placed on the Council agenda for public review. The Treasurer shall also provide a monthly report of investment transactions for public review under California Government Code Section 53607 as required when the Treasurer is delegated the investing and reinvesting authority. This Report shall contain sufficient information to permit an informed outside reader to evaluate the performance ofthe investment programs and include: a) Type of investment, issuer, date of maturity, par and dollar amount invested on all securities, investments and monies held. b) Description of any of the funds, investments, or programs, that are under the management of Page 11 of 20 contracted parties, including lending programs. c) Current market and book value as of the date of the report and source of the valuation with respect to securities held by the local agency, and under management any outside party that is not a local agency or the LAIF. d) Portfolio compliance to the Policy or manner in which the portfolio is not in compliance. Percentage of portfolio represented by each investment type. e) Statement denoting the ability of the local agency to meet its pool expenditure requirements for the next 6 months or an explanation why sufficient money shall or may not be available. The Treasurer shall provide financial information on investments for disclosure in the City's Annual Fiancial Report, in accordance with Government Accounting Standards Board Statements 31,40, 72 and 84. XV. CUSTODY AND SAFEKEEPING All City investments shall have the City of Huntington Beach as the registered owner and all interest and principal payments/withdrawals shall indicate the City of Huntington Beach as the payee. All securities except insured certificates of deposit, money market funds, Joint Powers Funds, OCTPF, or LAIF will be held with a qualified financial institution contracted by the City or 3rd party custodian with a separate custodial account. The 3rd party custodian shall be required to issue a safekeeping statement to the Treasurer listing the specific instrument,rate, maturity, and other pertinent information. All agreements and statements will be subject to annual external independent auditor review. All securities shall be acquired by the safekeeping institution on a delivery-versus-payment basis. Repurchase agreements may be delivered by book entry, physical delivery, or 3rd party custodial agreement consistent with the California Government Code. The transfer of securities to the counter-party bank's customer book entry account may be used for book entry delivery. The Treasurer or designee shall require a Broker Trade confirmation for all trades. XVI. INTERNAL CONTROLS The Treasurer shall be responsible for all investment transactions undertaken and shall establish a system of written internal controls designed to prevent loss of public funds due to fraud, employee error, misrepresentation by 3rd parties, unanticipated market changes, or imprudent actions by employees. The Treasurer shall develop and maintain written administrative procedures for the investment program's operations related to safekeeping, repurchase agreements, wire transfer agreements, collateral/depository agreements, banking service contracts, and other investment/banking-related activities consistent with this Policy. Such procedures shall include specific duties of authorized personnel responsible for assisting in executing investment transactions. No investment personnel may engage in investment transactions except under the Policy terms and procedures established by the Treasurer. All agreements, statements, and investment trade packets will be subject to review annually by external independent auditors in conjunction with their audit. Account reconciliations and verifications of general ledger balances related to investment purchases/maturations and interest allocations to fund balances shall be performed by the Finance Department. Page 12 of 20 XVII. DISASTER RECOVERY PROGRAM The Disaster Plan includes critical phone numbers and addresses of key treasury and investment personnel, as well as currently approved bankers and broker/dealers. The Disaster Plan is distributed to key City and investment personnel. In the event the Treasurer or authorized staff is unable to invest the portfolio, the Treasurer has an agreement with the custodian for a daily sweep of uninvested cash with the custody bank into a money market mutual fund.Until normal operations of the Treasurer's office have been restored,the limitations on the size of an individual issuer and the percentage restrictions by investment type would be allowed to exceed those approved in this Policy and would be required to be reported to the Council in a timely manner. XVIII. INVESTMENT POLICY REVIEW This Policy shall be reviewed annually by the Treasurer, Board, and Council annually for modification. By virtue of a resolution,the Council shall acknowledge the receipt and filing of this Policy statement for the year. Any California law that further restricts allowable maturities, investment type, percentage allocations, or any other provision of this Policy will; upon effectiveness, be incorporated into this Policy and supersede any and all previous applicable language. Page 13 of 20 XIX. POLICY GLOSSARY This Glossary is for general reference purposes only and does not constitute an exhaustive or exclusive list of terms and definitions applicable to this Policy. The definitions included herein do not modify any of the terms of this Policy or applicable law. ACCREDITED INVESTOR: Defined in the Code of Federal Regulations (CFR) 230.501 (a)(9) as any entity, including a government body that owns "investments," as defined in the CFR 270.2A51 - 1(b)(7)(i), such as cash and cash equivalents, for investment purposes.under the Investment Company Act in excess of$5 million. ACCRUED INTEREST:Interest that is earned but unpaid since the last interest payment date. AMORTIZATION: Systematic reduction of amount owed on debt issue through periodic principal payments. ANNUAL COMPREHENSIVE FINANCIAL REPORT: The City's official annual report that includes combined statements for each individual fund and account group prepared in conformity with Generally Accepted Accounting Principles. The Report includes supporting schedules necessary to demonstrate compliance with finance-related legal and contractual provisions, introductory materials, and a detailed statistical section. ASSET BACKED SECURITIES: Securities issued by corporations organized and operating in the United States supported by pools of installment loans or leases or by pools of revolving lines of credit. AVERAGE LIFE: Average length of time that an issue of serial bonds and/or term bonds with a mandatory sinking fund feature is expected to be outstanding. ASKED PRICE: Price at which securities are offered from a seller. BANKERS ACCEPTANCE: High-grade negotiable money market instruments issued primarily to finance international trade.These are time drafts or bills of exchange in which a bank accepts as its financial responsibility to pay the principal at maturity even if the importer does not. These are effectively bank obligations collateralized by goods being shipped between an exporter and an importer. BASIS POINT: A basis point equals 1/100 of one percent. Basis points are used more often to describe changes in yields on bonds,notes, and other fixed-income securities. BENCHMARK: Comparative base for measuring performance or risk tolerance of the investment portfolio.The benchmark should represent a close correlation to the risk level and average duration of the portfolio's investments. BID PRICE: The price at which a buyer offers to buy a security. BOOK ENTRY: The Federal Reserve system by which most money market securities are. "delivered"to an investor's custodian bank. The Federal Reserve maintains a computerized record of the ownership of these securities and records any changes in ownership corresponding to payments made over the Federal Reserve wire (delivery versus payment), such that the owners of these securities do not receive physical certificates. BOOK VALUE: The original cost of the investment, plus accrued interest and amortization of any premium or discount. BROKER: An individual/institution that brings buyers and sellers together and is compensated for his/her service in the form of a commission. The broker does not take a position. Page 14 of 20 CALL PRICE: The price at which an issuer may redeem a bond prior to maturity. The price is usually a slight premium to the bond's original issue price to compensate the holder for loss of income and ownership. CALL RISK: Risk to a bondholder that a bond may be redeemed prior to maturity. CALLABLE BONDS: Bonds that may be redeemed by the issuing company prior to the maturity date. CAPITAL GAIN/LOSS: The profit or loss realized from the sale of a capital asset. CERTIFICATE OF DEPOSIT: A deposit of funds at a bank for a specified period of time that earns interest at a specified rate as evidenced by a certificate. COLLATERAL: Securities or cash pledged by a borrower to secure repayment of a loan or repurchase agreement. Securities pledged by a financial institution to secure deposits of public monies. COMMERCIAL PAPER: Short-term unsecured promissory notes issued by corporations to raise working capital.These instruments are purchased at a discount or at par value with interest bearing. COUPON: Annual rate of interest that a bond's issuer agrees to pay the bondholder on the bond's face value or certificate attached to a bond evidencing interest due on a payment date. CREDIT QUALITY: The measurement of a bond issuer's financial strength. This measurement helps an investor understand an issuer's ability to make timely interest payments and repay the loan principal upon maturity. Credit quality ratings are provided by nationally recognized statistical rating organizations. CREDIT RISK: Risk that an issuer will default in payment of a security's interest or principal. CREDIT WATCH: Indicates a company's credit is under review and credit ratings are subject to change. Credit watches can be positive(possible upgrade)or negative(possible downgrade). CURRENT YIELD: Annual income from an investment divided by the current market value (rather than the investor's cost). Current yield is unrelated to the return the investor will earn if the security is held to maturity. CUSTODIAN: Bank or financial institution that keeps custody of stock certificates and other assets. DEALER: Acts as a principal in all transactions,buying and selling for their own account. DELIVERY VERSUS PAYMENT (DVP) : Delivery of securities with simultaneous exchange of money for the securities, in contrast to a delivery versus receipt with an exchange of a signed receipt for the securities. DERIVATIVE: Security whose interest rate of principal amount may vary based-upon market index or combination of market indices and may include a leveraging factor. Derivative can also be a financial_contract based on notional amounts whose value is derived from an underlying index or security. DISCOUNT: Difference between par value of bond and the bond's cost when the cost is below par. Some short-term securities (e.g., Treasury bills, Bankers Acceptances) are known as discount securities that sell at a discount from par and return par value to the investor at maturity without additional interest. Other securities that have fixed coupons trade at a discount when the coupon rate is lower than the current market rate for securities of that maturity or quality. DIVERSIFICATION: An investment principle designed to spread the risk in a portfolio by dividing investments among different sectors, industries, and companies to avoid excessive Page 15 of 20 exposure to any one source of risk. DOLLAR-WEIGHTED AVERAGE MATURITY: A calculation that expresses the average maturity of an investment portfolio using each investment's maturity weighted by the size of that investment. DURATION:A measure of the timing for cash flows(e.g.,interest payments,principal repayment) to be received from a given fixed-income security. The duration calculation is based on term to maturity, coupon rate, and yield to maturity. Duration is a useful indicator of price volatility for interest rate changes. FEDERAL CREDIT AGENCIES: Federal government agencies established to supply credit to various classes of institutions (e.g., small businesses, students, farmers, exporters). FEDERAL DEPOSIT INSURANCE CORPORATION: Federal agency that insures bank deposits (current limit of$250,000). FEDERAL FUNDS RATE: Interest rate charged by banks with excess reserves at a Federal Reserve district bank to banks needing overnight loans to meet reserve requirements. A target rate is set by the Federal Open Market Committee. FEDERAL OPEN MARKET COMMITTEE: The committee that sets Federal Reserve guidelines regarding purchases and sales of government securities in the open market as a means of influencing the volume of bank credit and money. The committee consists of 7 members of the Federal Reserve Board and 5 of the 12 Federal Reserve Bank Presidents. FEDERAL RESERVE SYSTEM: United States centralized banking system created by Congress with a 7-member Board of Governors that has supervisory powers over the 12 Federal Reserve banks and 6,000 member banks. National banks are required to be members and state-chartered banks may join if the meet certain requirements. FIXED-INCOME SECURITIES: Securities that return a fixed income over a specified period. FLOATING RATE NOTE (ADJUSTABLE RATE NOTE): A debt security whose interest rate is reset periodically(e.g.,monthly,quarterly,annually)based on a market index(e.g.Treasury bills, Secured Overnight Financing Rate). INTEREST: The amount earned while owning a debt security, generally calculated as a percentage of the principal amount. INTERNAL CONTROLS: A structure designed to provide reasonable assurance that an entity's assets are protected from loss, theft, or misuse. Reasonable assurance recognizes that the control cost should not exceed the benefits likely to be derived and the cost/benefit valuation requires estimates and management judgment. INVESTMENT COMPANY ACT OF 1940: Federal legislation that created the standard regulating investment companies (e.g., mutual funds) in areas like advertising, promotion, performance reporting requirements, and securities valuations. LEVERAGE: Borrowing funds in order to invest in securities that have the potential to pay earnings at a rate higher than the cost of borrowing. LIQUIDITY: The speed and ease with which an investment can be converted to cash without a substantial loss of value. A security is said to be liquid in the money market if the spread between bid and ask prices is narrow and a reasonable size can be done at those quotes. LOCAL AGENCY: County, city, city and county (including a chartered city or county), school district, community college district, public district, county board of education, county superintendent of schools, or any public or municipal corporation. Page 16 of 20 LOCAL GOVERNMENT INVESTMENT POOL: Aggregate of all funds from political sub- divisions that are placed in the State Treasurer's custody for investment and reinvestment. MARK-TO-MARKET: Market valuation for every security in a portfolio used in determining Net Asset Value. MARKET RISK: The risk that changes overall market conditions or interest rate may adversely affect current market prices. MARKET VALUE: The price at which a security is trading and could presumably be purchased or sold. MASTER REPURCHASE AGREEMENT: Written contract between the parties of a repurchase agreement establishing each party's rights in all current and future transactions until termination of the contract by either party. A master agreement will often specify the right of the buyer-lender to liquidate the underlying securities in the event of default by the seller-borrower. MATURITY: Date upon which an investment's principal or stated value becomes due and payable. MEDIUM TERM NOTES: Debt securities issued by a corporation or depository institution with a maturity ranging from 9-60 months.The term refers to the time it takes for an obligation to mature. Medium Term Notes include corporate debt securities originally issued for maturities longer than 5 years that have now fallen in the 5-year maturity range. MONEY MARKET:- The market in which short-term debt instruments (e.g., Treasury bills, discount notes, commercial paper,bankers acceptances) are issued and traded. MONEY MARKET MUTUAL FUNDS: Investment company that pools money from investors and invests in a variety of short-term money market instruments. . MUNICIPAL DEBT: Bonds,notes,and other securities issued by a state,municipality,or county. NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATION: Firms that review-and assess the creditworthiness for the issuers of debt securities or money market instruments and express their opinion in the form of letter ratings(e.g. AAA, AA, A, BBB).The primary rating agencies are Standard&Poor's,Moody's Investor Services,and Fitch,but any credit rating agency to the Securities and Exchange Commission for registration as a Nationally Recognized Statistical Rating Organization. NEGOTIABLE CERTIFICATES OF DEPOSIT: High-grade unsecured obligations,of a bank or financial institution bought at par value with the promise to pay face value plus accrued interest at maturity. Negotiable certificates of deposit pay a higher interest rate than standard certificates of deposit. NET ASSET VALUE: Per-share valuation of a mutual fund based on total assets minus total liabilities. NON-CALLABLE: Bond that cannot be called at the option of the issuer. OFFER PRICE: Price asked by a seller of securities. PAR VALUE:.Principal that must be paid at maturity,normally quoted in$1,000 increments per bond. PHYSICAL DELIVERY: The delivery of an investment to a custodian bank as a physical certificate with supporting documents evidencing the investment (as opposed to book entry delivery). . PORTFOLIO: A group of securities held by an individual or institutional investor. Page 17 of 20 PREMIUM: Difference between par and market value of a bond when the market value is above par. PRICE RISK:Risk that the price of a bond sold prior to maturity will be less than the price at which the bond was originally purchased. PRIMARY DEALER: Banks and securities brokerages authorized to buy and sell government securities in direct dealings with the Federal Reserve Bank of New York in its execution of Federal Open Market Operations. PRIME RATE: Base rate that banks use in pricing commercial loans to their best and most creditworthy customers. PRINCIPAL: Face value or par value of an investment. PROSPECTUS: Legal document that must be provided to any prospective purchaser of a new securities offering registered with the Securities & Exchange Commission. The prospectus can include information on the issuer, the issuer's business,proposed use of proceeds, experience of the issuer's management, and certain certified financial statements. QUALIFIED INSTITUTIONAL BUYER: Defined in CFR Section 230.144A as a class of investors that can be conclusively assumed to be sophisticated and in little need of the protection afforded by the Securities Act's registration provisions.They must own and invest on a discretionary basis at least$100 million in securities of issuers not affiliated with the Buyer. RATE OF RETURN: Yield obtainable on a security based upon its purchase price and current market price, which may be the amortized yield to maturity on a bond the current income return. RATING OUTLOOK: Potential direction of credit rating assigned by a NRSRO for a specific company. REINVESTMENT RISK: The risk that coupon or other payments cannot be reinvested at the same rate as the initial investment. RECEIVABLES-BACKED SECURITIES: Securities collateralized with consumer receivables, such as automobile loans, credit card receivables, or home equity loans. These securities are owned by the issuer but placed with a trustee for the benefit of the investor. RECEIVABLE PASS-THROUGH CERTIFICATE: A debt obligation backed by a portfolio of receivables, normally issued by a bank or financial institution. The interest and principal of the obligation is paid out of the cash flow generated by the receivables portfolio. REFUNDED BOND: A bond secured by an escrow fund that is sufficient to pay off the entire issue of bonds at the next call date (pre-funded) or maturity (escrowed to maturity). REGISTERED STATE WARRANT: Short-term obligation of a state governmental body issued in anticipation of revenue. REPURCHASE AGREEMENT: Purchase of securities on a temporary basis with the seller's simultaneous agreement to repurchase the securities back at a later date at a specified price that includes interest for the buyer's holding period. SAFEKEEPING: Storage and protection of a customer's financial assets,valuables,or documents by banks for a fee. This services is provided by an institution serving as Agent or Custodian where control is delegated by the customer. SECONDARY MARKET: Market created for purchase and sale or outstanding issues following the initial distribution. SECURITIES AND EXCHANGE COMMISSION: The federal agency created by Congress Page 18 of 20 responsible for supervising and regulating the securities industry to protect investors. SINKING FUND: Money accumulated on a regular basis in a separate custodial account used to redeem debt securities or preferred stock issues. SUPRANATIONAL SECURITIES: United States dollar denominated senior unsecured obligations issued or unconditionally guaranteed by entity formed from two or more central governments with the purpose of promoting economic development for the member countries. Examples include the International Bank for Reconstruction and Development, International Finance Corporation,and the Inter-American Development Bank.These Securities must be eligible for purchase and sale within the United States under this Policy. TOTAL RETURN: Sum of all investment income plus changes in the capital value ofthe portfolio. For mutual funds,return on an investment is composed of share price appreciation plus any realized dividends or capital gains. This is calculated by taking the following components during a certain time period: (Price appreciation) + (Dividends paid) + (Capital gains) =Total Return. TRADE DATE: Date and time corresponding to an investor's commitment to buy or sell a security. U. S. GOVERNMENT AGENCY SECURITIES: Debt securities issued by United States Government sponsored enterprises and federally related institutions. These government agencies include: Federal Home Loan Banks, Federal Home Loan Mortgage Corporation, Federal National Mortgage Association,Federal Farm Credit Banks,and Tennessee Valley Authority. U.S. TREASURY SECURITIES: Securities issued by the Treasury and backed by the full faith and credit of the United States. Treasuries are considered to have no credit risk and are the benchmark for interest rates on all other securities in the U.S. and overseas. The Treasury issues both discounted securities and fixed coupon notes and bonds. Treasury bills are non-interest- bearing discount securities issued by the U.S. Treasury to finance the national debt. Treasury notes are interest-bearing obligations of the U.S. Treasury and having initial maturities ranging from 2-10 years from date of issue. Treasury bonds are interest-bearing obligations issued by the U.S. Treasury with maturities of more than 10 years from date of issue. UNIFORM NET CAPITAL RULE (NET CAPITAL RULE): Securities and Exchange Commission requirement that member firms and non-member broker/dealers in securities maintain a maximum ratio of indebtedness to liquid capital of 15:1. Indebtedness covers all money owed to a firm (including margin losses and commitments to purchase securities) and liquid capital includes cash and assets easily converted into cash. VOLATILITY: Degree of fluctuation in the price and valuation of securities when economic conditions or interest rates change. WEIGHTED AVERAGE MATURITY: Average maturity of all securities that comprise a portfolio. WHEN ISSUED: Conditional transaction in which an authorized new security has not been issued. All when issued transactions are settled when the actual security is issued. YIELD: Annual rate of return on a debt investment computed as though held to maturity expressed as a percentage. Income Yield is obtained by dividing the current dollar income by the current market price for a security.Yield to Maturity is the current income yield minus any premium above par or plus any discount from par in purchase price, with the adjustment spread over the period from bond purchase date to bond maturity date. YIELD TO MATURITY: Rate of return earned on an investment considering all cash flows and timing factors including interest earnings, discounts, and premiums above par. ZERO-COUPON BONDS: Bond which represents ownership of a single coupon or principal Page 19 of 20 payment due on a U.S. Treasury bond. These bonds mature at face value at a specified date in the future and make no payments until that date. The bonds always sell at a discount from face value. Page 20 of 20 Res. No. 2025-68 STATE OF CALIFORNIA COUNTY OF ORANGE ) ss: CITY OF HUNTINGTON BEACH ) I, LISA LANE BARNES, the duly elected, qualified City Clerk of the City of Huntington Beach, and ex-officio Clerk of the City Council of said City, do hereby certify that the whole number of members of the City Council of the City of Huntington Beach is seven; that the foregoing resolution was passed and adopted by the affirmative vote of at least a majority of all the members of said City Council at a Regular meeting thereof held on November 18, 2025 by the following vote: AYES: Twining, Kennedy, McKeon, Burns, Van Der Mark, Gruel, Williams NOES: None ABSENT: None ABSTAIN: None 0/14-aot6A'1114--' City Clerk and ex-officio Clerk of the City Council of the City of Huntington Beach, California 4,,,,,........„ Aot- 1 °f I NNG 101 'will'4'bk 4/ 1,, •.•"::cORP ° RATF ••• \ • _�- ••• QI FY25-26 Investment Review . :; vT ; C and 2026 Investment Policy _ _: _ --__ _- Discussion ___ _ _ • S _)4rnipidathatir- ',--;-. , i/Ji. • City Council • + November 18, 2025 ,p, ______,----- -,------------- --•------„. .4. <kir 0 V—� ;•1 •• F 4 .• Q 0 F ,C PoNTHc1 \<c 0 0 111116. 4111110. , SUPPLEMENTAL 4'�I//i COMMUNICATION Bete: 11l1 $ i Agenda Item Imo: 0 (.25 g 11) Investment Policy Principles Our city's investment policy is designed to provide guidelines for the prudent investment of all city cash balances with an absolute investment priority of safety, liquidity, and yield in that order CITY OF HU NTINGT ON BEACH Safety STATENIE\T OF INVESTMENT POLICY 2025 #3 Yield 4AT I NGToy�, O Q Prudent Investor Standard 2026 Investment Policy Review We have revised the 2026 Investment Policy to incorporate upcoming California General Code changes, refine permissible portfolio investments, and simplify language to increase readability (r Process Steps V Ensured complete alignment with 2026 Code revisions CITY OF HUNTINGTON BEACH ✓ Benchmarked policy against 7 California municipalities and 6 Treasurer peer reviews to capture best practices V Solicited Investment Advisory Board feedback STATEMENT OF I:WESTTENT POLICY V Increased transparency and readability of policy Submitting new policy to CMTA and APT for"scoring" 2025 2026 Major Policy Changes 1) State Law: (a) Extend Commercial Paper maturity from 270 -+.y 1INGr©: 365 Days and (b) Eliminate Orange County Treasury Pooled Funds from acceptable investments s 2) Investments: (a) Eliminate Reverse Repurchase Agreements and Bankers Acceptances and (b) Increase Joint Powers \71'6' �g ;., °Q Authority limit to 25% of portfolio from $75 million �'UUNTv GPI, 3) Maturities: Shorten Certificates of Deposit from 5 -- 3 years 4) Portfolio: Reduce allowable portfolio share in 4+year maturities from 50% - 25% 2026 Compliance Requirements Huntington Beach's investment, issuer, and maturity requirements are either in line or more conservative than California Government Code requirements California Government Code Limits Policy Limits Investment Type Investment Issuer Maturities Investment Issuer Maturities U.S.Treasury Securities 100% None 5 Years 100% None 5 Years U.S.Government Agency Securities 100% None 5 Years 100% None 5 Years Commercial Paper 40% 10% 1 Year 40% 10% 1 Year Certificates of Deposit 30% None 5 Years 30% 10% 3 Years Repurchase Agreements 100% None 1 Year 100% None 90 Days Money Market Mutual Funds 20%of Agency Funds 10%of Agency Funds N/A 15%of Agency Funds 10%of Agency Funds N/A Local Agency Investment Fund $75M per account N/A N/A $75M per account N/A N/A Municipal Debt 100% None 5 Years 100% 10% 5 Years Medium-Term Notes 30% None 5Years 30% 10% 5Years Joint Power Authority 100% None N/A 25% None N/A SupranationalSecurities 30% None 5Years 30% None 5Years Investment Performance — Safety As safety of principal is our paramount priority, we have constructed a bond portfolio mix that fully complies with California General Code and ensures that Huntington Beach does not sustain losses City Investment Portfolio Compliance Check ($ Millions) Portfolio Issuer Category Maturity Share Share Quality Overall $391 $410 U.S.Treasury $378 Securities 5 Years Compliant $299 U.S.Government $265 Agency Securities 5 Years Compliant Supranational "AA" (or Securities 5 Years 30% 30% Higher) Compliant Medium-Term "A"(or Notes 5 Years 30% 10% Higher) Compliant Money Market "AAA"(or Mutual Funds 60 Days 15% 10% Higher) Compliant State and Local 9022 2023 202a 2025 Investment Pools $75M $75M Compliant 4 Losses: Portfolio has experienced no losses and Treasurer held lower-yield bonds to ensure no losses • Compliance: Portfolio must pass maturity, category/issuer concentration, and bond ratings checks • Ratings: All holdings rated "A-" or higher with non-corporate bonds all AA+ or AAA (^'80% are AAA/AA rated) • Diversification: Portfolio has no issuer > 10% except US Treasuries, Federal Home Loan Bank, and State Pool \ / Sources of Fund Balance Increases (FY2018-FY2024) Huntington Beach's reserves increased by-'$160M from FY2018-FY2024, with that increase distributed across the General, Infrastructure, Pension, and Internal Services Funds FY2018-FY2024 Fund Balance Changes ($ Millions) $21 $15 $415 $33 $36 W7 w, • Workers Comp: $11 M • Equipment: $8M III • General Liability: $2M • Economic Uncertainty: $24M • Restricted: $15M • HB Recovery: $10M • Pension/GL/115 Trust: $10M FY18 Reserves General Pension Infrastructure Internal Service Other FY24 Reserves City Reserve Funds Investment Performance — Liquidity Accurate cash flow management and a portfolio with ample short-term cash cushion is critical given our large monthly cash flow movements and large capital projects Net Cash Position ($ Millions) Portfolio Mix (%) $35 - $25 +$51 Millioj +$36 Million 21% ❑ < 1 Year $15 ❑ 1-2 Years 39% $5 ❑ 2-3 Years -Wan-24 Apr-24 4 Jan-25 Apr-25 18% ❑ 3-5 Years -$15 -$66 Million 22% -$25 • Cash Flow: Varies across months primarily due to timing of property tax receipts and sales tax true-ups • Cash Cushion: Portfolio contains —$60 million in fully liquid funds and '65% that could be liquidated easily • Cash Flow Modeling: Treasury partnering with all city departments to build detailed 18-month cash flow models and 5-year capital improvement plan model to optimize maturity timing for longer-dated bonds Investment Performance - Yield 7 Financial returns for Huntington Beach's portfolio has increased significantly since 2022 due to increasing interest rates and an inverted yield curve Effective Return (%) Returns Across Maturities (Months) 5% 4.5% - I 4% 3.59% o --� -0.5/o 4.0% 3% V 2.00% 1 .7 /0 3.5% - _� 2% ° CI-1.6% ° 1 .00% 1 .26% 41 /o ° 1% 0.76/0 3.0% —2022 —2025 0% 2.5% - 2013 2015 2017 2019 2021 2023 2025 1 2 F 19 24 36 60 Observations \ • Movement from 1% 4 3% effective returns and reserve expansion since 2022 increased earnings by-$10 million annually • Interest rates returning to historical norms after"free money" period of the Federal Reserve surrounding the pandemic • Current inverted yield curve is an anomaly-2022 curve where longer-term investments have higher returns is the norm -- --------- ----- Investment Performance - Yield / As the yield curve returns to normalcy over the next few years, Huntington Beach has a window to capture some incremental upside from increasing average bond duration and expanding our corporate bond mix Portfolio Years to Maturity Portfolio Share in Corporate Bonds (%) 3.0 - 22% 2.5 - 2.23 2.73 2.0 - 2.45 1.74 81 15% 14% 1 .5 - 11% 1 .0 - 5% 0.5 - 0.0 - 2013 2016 2019 202' 2025 2013 2016 2019 2022 2025 Opportunity to capture —10-20bps without threatening Huntington Beach's liquidity position by: (1) purchasing longer-term bonds with maturities that align with our cash flow troughs and (2) expanding portfolio share of high-grade corporate bonds by 3-5% Q1 FY25-26 Investment Performance Huntington Beach has —$410M in investable reserves across short-term and long-term instruments, yielding a 3.59% return for this quarter versus 3.24% return for FY2024-2025 Portfolio Return (%) Sector Breakdown 3.59% 3.24% $55 $71 $92 $410 $133 $12 $47 Q1 FY25-26 FY24-25 Cash/CDs LGIP Agencies Corps Treasuries Supras Total Compliance Check Portfolio Issuer Category Maturity Share Share Quality Overall 6 purchases ($30 million) and 13 U.S.Treasury Securities 5Years Compliant redemptions ($61 million) U.S.Government Agency • Portfolio meets maturity threshold with Securities 5 Years Compliant < 25% having 4+ year duration Supranational Securities 5 Years 30% 30% "AA"(or Higher) Compliant • City does not have Bankers Medium-Term Notes 5 Years 30% 10% "A"(or Higher) Compliant Money Market Funds 60 Days 15% 10% "AAA"(or Higher) Compliant Acceptances, Repurchase State/Local Investment Pools $75M $75M Compliant \ Agreements, or Certificates of Deposit} Q1 FY25-26 Investment Performance Template - Summary Future City Council presentations will focus on three quarterly investment summary documents — the first will be an overall portfolio return for the period - Larnings Summary(3i3 Days) Fiscal YTU Summary Ij2. I'eriodTr cbons(Par) Net Period Famines S1.245.030.67 Net Period Earnings $3.755.651 19 Redemptions 2 110.000.000 Last FY Period Net Earnings 5946.660.13 Last FY Period Net Earrrirtgs 52,9001378.54 Purchases 4 520.000.000 Aggregate • Avg Daily Book Balance 5410,610,851.89 Avg Daily Book Balance 5420,236,180.94 ' Total Ai.(iv 6 530.000.000 transactions Net Effective Annual Return 3.752% Net Effective Annual Return 3 59316 ► and dollars Fisc YTD Transactions(Par) Redecrw' s 13 $60.875.000 during:- Purchases 6 $30.000.000 quarter Total Activity 19 $90.875,000 City Portfolio Certification certify that the report and the corresponding pages attached accurately reflect all portfolio combined invert.meats and conforms with all California. -statutes and the -1untinglen Beaclr investment policy filed on December 19.2023.The investment program herein shown provides sufficient cash now liquidity to meet t i eat six n intIn op ligati on:.Market values are provided by US Bank via Interactive Data Corp(IDCi Effective return and investment cash "ud4- City Treasurer 09f 30J2025 Jason Schmitt ride natr balance for quarter Portfolio Investments rs Far Value Book Value Market Value nookV.alur Book Yield �" Yrlil MaYto tc� 96 or tort Lontaibution Maturity cast r+'Mrx pry Market 512.097.563.16 S12.097.56.3 16 S12.097.56316 2.96% 3 47% 0 177is 0.00 Local C,ovt Inv Pools'LEAP) S46.760.73286 546,760,732_86 546.760.73236 1L45% 4.26% 0.50% 0.00 Average time left for U.S. 1reacuries 471.000.000.00 $70,533.034.17 V0.951.130.011 17.2696 3.63% 0.63% 2.34 supranatinn al Yss,DODA00.on $54,749.902.26 $55.164,50000 1340% 3 71% O.SO% 2.03 ^,''`.- maturity on U.S.Aeei,cies $132455.000.00 S132.709.169.92 5132,600,938.65 32.45% 3.08% 1.00% 192 Corporates S91.762.000.00 591,694,884.52 592.031.110.44 22.4495 4.189t 0.94% 2.26 investments by type Total $409.075296.04 8408.545.306.91 5409,605.975_13 100_00% 3.6814 L81 Q1 FY25-26 Investment Performance Template - Portfolio Future City Council presentations will focus on three quarterly investment summary documents - the second will be a portfolio breakdown by maturity, investment type, and issuer concentration Portfolio t_haracteristics Maturity Distribution 1 5Yr J I _CASI Weighted Avg 2.45ra / 14.41% Por+tfdaBooKYield .d84 Coupon 3.55% 3-4Yr '"' ` Overall portfolio Portfolio Market Calw nsite Rating AA2 4 Yield investment distribution "umtxr°tsecurities Effective Duration t S2 70 I 61Yr by time to maturity and held 24.9-55 2.3 investment type Weighted Avg Median Security Size .iea 4x s Maturity i Yrc)lVYAI 1.61 Held ¢'' � f 1-1 Ye Weighted Avg Net Asset Value �. ' / Maturity tDayst 681 {NAV:, 51.L7G2610 .1.64r,'i '�..__, ra • i / Back Valium%of Portfolio ssuer Holdings Top 10 Callable Breakdown - + -- I 00% MOMS201113K Coil Refunding . Options options _ :I.Icweir If _. - .. 201:1(1 Onetime ltm 3,67% 0.00% I ] T 17.265E 2244% Local Gout Im Month IDmj 000% 0-00% Pooh f596 LAMP 1 Y.45% � /, 11.415% 131tD +777W Quarltslyt04t d]?e 0:0ue _—USTrosuriat FNMA �;� i` 12Z64G Relatively issuer IAoe- �4_vo% I 122` 0.00% 1- ►a67% 0.00% ,� S� ,���a, bond portfolio US.Asenci or. pran Y�3.527i 32.48 i6 '- 13.4OK Anyd me KO 4.81% 10.89:t FU �2.y69c Hf) 2 49c4 Total 2L95% 10.89% .o oK Q1 FY25-26 Investment Performance Template - Compliance Future City Council presentations will focus on three quarterly investment summary documents - the third will be a comprehensive compliance check relative to our City Investment Policy Uwest-nt C u' Issuer Limit Mazinum Matarit9 edit Rat ngs Overall bond _mit Fc.3al C r'pliant Limit .Actug Compliant .i:nit AMA! Compliant A:L�aIMirFrirghctcaMinRainf Co portfolio iho-tTerm Lon Term compliance check U5.Treasure: :DC.CA! 17161E Ye•. 1OO.D0?t 1725% Ve: 5.00Y•ri 193(ear: (r V-A r:,'A (p based on LJoranatioral 30.30% t3.1C`.f fee 103A0% 7.27% Y.. S.00 Yea, 273(ear: (es V A ALA.'Aaa.4A.A. e< • U.S.Arm ies :OC.00'e 32.4FA Yes 100.0016 moan Ye. 5.00 Yeas 421(ears 'es V'F �;,� .:e investment/issuer Corporate, 35:r. 22.l44% Yes 1C.00% 3.52% Yr. 5.00Yeas 49??ear: (es V-A. A.'4C;A eo limits, maturities, • and credit ratings Cash Compiance Summary -,—____ %cf Compliance Ca-oh Acccunt Account De:criotoi 'onforo �O %n+e:table Dollar Pcrtfclio Mazimcrr Curent 5cok Yalke hvestablt vaLe Conpliart Makmun Portfoliocheck for cash 303-CAME Caifun�&set Mataeemitt Droiram 11.5'R s:5.030.000.30 544761732E6 528239167.14 Yes LCIF 11A5% y4676�75266 Yes • and money 104-FUZXX First American Trea:4ny C)bligatiors 15.00% 296% 12.04% 51209756318 $49,184,232-86 Yes market holdings Cash/Morey Market 15.0096 2.96% 12.04% $12097.56318 Yes (including government pools) Internal and External Initiatives Beyond investment strategy, we are focused on deploying automation in cash collection/disbursement efforts and deploying community programming to help residents achieve their American Dream Internal Initiatives External Initiatives ❑ Adopt technology to streamline collections ❑ Provide overview of Treasurer Office services and increase administrative efficiencies and solicit community feedback ❑ Install self-service kiosks and QR codes to ❑ Introduce workshops and 1-on-1 counseling facilitate electronic payments related to personal finances and investments ❑ Deploy AI-based system to identify for seniors, working age adults, and youth unpermitted short-term rental operators ❑ Partner with Police Department to expand tax, ❑ Partner with bank to simplify processes via investment, and identity scam classes electronic data feeds ❑ Complete collections process for dormant ❑ Expand local access to free tax preparation citations issued during pandemic ❑ Develop short-term rental operator trainings ❑ Comprehensive audits of hotel TOT payments 4,4//I4.4.4„,. la 1N 7,0 4/46, Nk ••.•••�p RPORgT 6••• __J. _ '•. _7 \ QI FY25-26 Investment Review • and 2026 Investment Policy �_ - • - __ z Discussion • •, _ Ii / Q`'i► j November 18, 2025 >'••• •F•8 = :,••-:••• 0 1 P C 0 NT�C C) \'/# /4 1.0. ..,..�.,./ 73 Investment Policy Principles Our city's investment policy is designed to provide guidelines for the prudent investment of all city cash balances with an absolute investment priority of safety, liquidity, and yield in that order CITY OF HUNTING'I'ON BEACH #1 Safety STATEMENT OF INVESTMENT POLICY ' LiquAt 2025 #3 Yield ,,e��NTiNCr04 4”614, ti c 4111,- r 9 Q�`'� Prudent Investor #0$401 CP\ � UNTO, Standard 74 2026 Investment Policy Review We have revised the 2026 Investment Policy to incorporate upcoming California General Code changes, refine permissible portfolio investments, and simplify language to increase readability Process Steps V Ensured complete alignment with 2026 Code revisions CITY OF HUNTINGTON BEACH t V Benchmarked policy against 7 California municipalities and 6 Treasurer peer reviews to capture best practices V Solicited Investment Advisory Board feedback STATEMENT OF INVESTMENT POLICY V Increased transparency and readability of policy Submitting new policy to CMTA and APT for "scoring" 2025 r 2026 Major Policy Changes to1) State Law: (a) Extend Commercial Paper maturity from 270 �j/�\NTIN% 365 Days and (b) Eliminate Orange County Treasury Pooled o.., .. Funds from acceptable investments V ..v ) ';= 2) Investments: (a) Eliminate Reverse Repurchase Agreements Z ;. ..,, � and Bankers Acceptances and (b) Increase Joint Powers 1-�, oQ Authority limit to 25% of portfolio from $75 million Z?CF��U N Pi ,�`1 3) Maturities: Shorten Certificates of Deposit from 5 - 3 years "''' 4) Portfolio: Reduce allowable portfolio share in 4+year maturities from 50% - 25% / 75 2026 Compliance Requirements Huntington Beach's investment, issuer, and maturity requirements are either in line or more conservative than California Government Code requirements California Government Code Limits Policy Limits Investment Type Investment Issuer Maturities Investment Issuer Maturities U.S.Treasury Securities 100% None 5 Years 100% None 5 Years U.S. Government Agency Securities 100% None 5 Years 100% None 5 Years Commercial Paper 40% 10% 1 Year 40% 10% 1 Year Certificates of Deposit 30% None 5 Years 30% 10% 3 Years Repurchase Agreements 100% None 1 Year 100% None 90 Days Money Market Mutual Funds 20%of Agency Funds 10%of Agency Funds N/A 15%of Agency Funds 10%of Agency Funds N/A Local Agency Investment Fund $75M per account N/A N/A $75M per account N/A N/A Municipal Debt 100% None 5 Years 100% 10% 5 Years Medium-Term Notes 30% None 5 Years 30% 10% 5 Years Joint Power Authority 100% None N/A 25% None N/A Supranational Securities 30% None 5 Years 30% None 5 Years 76 ���' f yea , Investment Performance — Safety As safety of principal is our paramount priority, we have constructed a bond portfolio mix that fully complies with California General Code and ensures that Huntington Beach does not sustain losses City Investment Portfolio Compliance Check ($ Millions) Portfolio Issuer 1 Category _ Maturity Share Share Quality Overall $391 $410 U.S.Treasury " $378 Securities 5 Years Compliant $299 U.S. Government $265 Agency Securities 5 Years r .� -4-r-am, * f a:, Compliant Supranational "AA" (or Securities 5 Years 30% 30% Higher) Compliant Medium-Term "A" (or Notes 5 Years 30% 10% Higher) Compliant Money Market "AAA" (or Mutual Funds 60 Days 15% 10% Higher) Compliant State and Local 2021 2022 2023 2024 2025 Investment Pools $75M $75M Compliant Losses: Portfolio has experienced no losses and Treasurer held lower-yield bonds to ensure no losses • Compliance: Portfolio must pass maturity, category/issuer concentration, and bond ratings checks • Ratings: All holdings rated "A-" or higher with non-corporate bonds all AA+ or AAA (-80% are AAA/AA rated) • Diversification: Portfolio has no issuer > 10% except US Treasuries, Federal Home Loan Bank, and State Pool J Sources of Fund Balance Increases (FY2018-FY2024) Huntington Beach's reserves increased by—$160M from FY2018-FY2024, with that increase distributed across the General, Infrastructure, Pension, and Internal Services Funds FY2018-FY2024 Fund Balance Changes ($ Millions) $21 $15 $415 $33 $36 $59 • Workers Comp: $11 M $251 • Equipment: $8M • General Liability: $2M • Economic Uncertainty: $24M • Restricted: $15M • HB Recovery: $10M • Pension/GL/115 Trust: $10M FY18 Reserves General Pension Infrastructure Internal Service Other FY24 Reserves City Reserve Funds 78 Investment Performance — Liquidity i' Accurate cash flow management and a portfolio with ample short-term cash cushion is critical given our large monthly cash flow movements and large capital projects Net Cash Position ($ Millions) Portfolio Mix (%) S35 $25 +$51 Million +$36 Million 21% ❑ < 1Year $15 ❑ 1-2 Years 39% $5 El 2-3 Years -$fin-24 Apr-24 k 4 Jan-25 Apr-25 18% ❑ 3-5 Years -$15 -$66 Million 22% -$25 • Cash Flow: Varies across months primarily due to timing of property tax receipts and sales tax true-ups • Cash Cushion: Portfolio contains —$60 million in fully liquid funds and —65% that could be liquidated easily • Cash Flow Modeling: Treasury partnering with all city departments to build detailed 18-month cash flow • models and 5-year capital improvement plan model to optimize maturity timing for longer-dated bonds 79 Investment Performance - Yield Financial returns for Huntington Beach's portfolio has increased significantly since 2022 due to increasing interest rates and an inverted yield curve Effective Return (%) Returns Across Maturities (Months) 5% 4.5% - 4% 3.59% (II 5% .. 4.0% - 3% - 2.00% 1 .7 /0 3.5% - EF1.6% 1 .26% 41 /o 1 .00% 1% 0.76% 3.0% —2022 -2025 0% 2.5% - 201 3 2015 2017 2019 2021 2023 2025 1 2 3 6 12 24 36 60 Observations • Movement from 1% 4 3% effective returns and reserve expansion since 2022 increased earnings by—$10 million annually • Interest rates returning to historical norms after"free money" period of the Federal Reserve surrounding the pandemic • Current inverted yield curve is an anomaly— 2022 curve where longer-term investments have higher returns is the norm 23U Investment Performance - Yield As the yield curve returns to normalcy over the next few years, Huntington Beach has a window to capture some incremental upside from increasing average bond duration and expanding our corporate bond mix Portfolio Years to Maturity Portfolio Share in Corporate Bonds (%) 3.0 - 22% 2.5 - 2.23 2.73 1 .74 2.0 - 2.45 1 .81 14% 15% 1 .5 - 11% 1 .0 - 5% 0.5 - 0.0 - 2013 2016 2019 2022 2025 2013 2016 2019 2022 2025 Opportunity to capture —10-20bps without threatening Huntington Beach's liquidity position by: (1 ) purchasing longer-term bonds with maturities that align with our cash flow troughs and (2) expanding portfolio share of high-grade corporate bonds by 3-5% 81 Q1 FY25-26 Investment Performance Huntington Beach has -$410M in investable reserves across short-term and long-term instruments, yielding a 3.59% return for this quarter versus 3.24% return for FY2024-2025 Portfolio Return (%) Sector Breakdown 3.59% 3.24% $55 $71 $92 $410 $133 $12 $47 Q1 FY25-26 FY24-25 Cash/CDs LGIP Agencies Corps Treasuries Supras Total Compliance Check Portfolio Issuer Category Maturity Share Share Quality Overall 6 purchases ($30 million) and 13 U.S.Treasury Securities SYears � '"42m Compliant redemptions ($61 million) U.S. Government Agency • Portfolio meets maturity threshold with Securities 5 Years . Compliant < 25 o/o having 4+ year duration Supranational Securities 5 Years 30% 30% "AA"(or Higher) Compliant • City does not have Bankers Medium-Term Notes 5 Years 30% 10% "A"(or Higher) Compliant Money Market Funds 60 Days 15% 10% "AAA" (or Higher) Compliant Acceptances, Repurchase $75M $75M � \ Agreements, or Certificates of De osi� State/Local Investment Pools ;N . 5 ti Compliant g p Q1 FY25-26 Investment Performance Template - Summary Future City Council presentations will focus on three quarterly investment summary documents — the first will be an overall portfolio return for the period ' - Larnings Summary(30 Days) Fiscal Y T U Summary(92 8 I Period Tr _ ction5 1Par} Nest Pe,i,xl raining. 11.245.030.67 Net Period Tar rung, S3.755,651 19 RrtlrmrItkW" 2 $1n.000.000 Last IV Period Net Earnings $948.660.13 Last FY Period Net Earrings $2,900.870.S4 Purchases 4 $20,000.000 Aggregate Avg Daily Book Balance $410,610,8SL89 Avg Daily Book Balance /420.236,180.94 ' Total Aicti ty 6 330.000.000 transactions Net Effcr Lives Annual Return 3.752% Net Effective Annual Return 3.593% Fisc)I YTU Transactions(Par) ► and dollars Red rip' s 13 $60.375,000 during Purchases 6 $30.000,000 quarter Total Activity 19 $90,875,000 City Portfolio Cei tificatian I certify that this report and the corresponding pages attached accurately reflect all portfolio combined investments and conforms with all California..••e statutes and the Finntington Brach imrrstme_nt policy Filed on December 19.2023.The investment program herein shown providr,sufficient cash flow liquidity to meet t t so month's obligations_M2rket values are provided by US Bank via Interactive Data Corp(IOC) Effective return and � � � investment cash�� City Treasurer 0?/30/2O2 S Jason Schmitt ride Dales balance for quarter Portfolio Investments Par Value Cook Value Market Value B'etk Values Book Yield Brink Y icl Years to 1 %of Port CoMatbution Maturity Casts i•Monty Market S 12.097.563 i8 $12.097.563.18 512.097.56318 2.96% 3.97% 0 12% 0 C0 Local Gov't InyPools(LGIP) $46,760.73286 $46,760;73286 S46.760,73206 1L45% 4.36% 0.50% 0.00 Average time left for U.S. treasuries $71.000,000.00 $70,533034.17 470,951,130.00 17.26% 3.63% 0.63% 234 Supranational $55,000.00000 $54,749.902.26 155,154.50000 13.40% 3 71% 0 50% 2 03 \,, maturity on US.Agencies 3132.455.000.00 5132:709.189.92 5132,600,938.65 32_40% 3.06% 1.00% L92 Corporates $9L762.000.00 $91.694.884.52 192.031.110.44 2244% 4.18% 0.94% 2.26 investments by type Total $409,075296.04 $408.545,306_91 $409.605.975.13 100_00% 3.66% 1.01 83 Q1 FY25-26 Investment Performance Template - Portfolio Future City Council presentations will focus on three quarterly investment summary documents — the second will be a portfolio breakdown by maturity, investment type, and issuer concentration Portfolio Characteristics Maturity Distribution I 4-5Yrl CAST We�/Ited Avg 24'96 ' 14..4176 Portfolio Book Yield 3.68% CouponoIl 3.55% 18.171 Overall portfolio YPortffdp Market eld 3.90% Gcaylostte Rating Al? ' _._-► investment distribution Effective[lunation 1.52 Number of Securities 70 --ir Held o.,r by time to maturity and 24.91% 2 3Yr WWhollyeighted nwa Lei Ian Sec unto Sae $5.000.000.00 19.347n investment type Held 1-2'6 Weighted ADav 661 NetNAh set Value $tO0260 2L&4%', Maturity( yst ' gawk Yalu.%of P.rthli. ssuer Holdings Top 10 Callable Breakdown -• • Call Refunding 11096 1U.00% 20.C7U% Options Options r Mwrey Onetime at 16736 0.00% Lorpord« 2.96 T IMMEI 1726% 22.44k %Local Govt Inv (AMP--11.45% Monthly Ong Poo6I5PI lnl 0.0076 0.0076 11.45% lBRD 777% Treat- "S "a� Relatively issuer Qua Italy(Mg &7T:4 O-UO3fi T PIMA- 5.63% 111 u+ve��4.9L% - Setrtps Annual 1TM 96r°t } ► concentration for city's face, 440% Annual COI 3.67% OQ0% bond portfolio US.Agencies _Supranational -M3.6274 32.40% 13.40% Anyll me 1Ct1 4.81% 20.8976 ru 296% HF 2.49% Total 2L95% 10.89% orc 84 Q1 FY25-26 Investment Performance Template - Compliance Future City Council presentations will focus on three quarterly investment summary documents — the third will be a comprehensive compliance check relative to our City Investment Policy 1 I-bldin: CO I, •- InvestmontL. ' Issuer Limit Merriman Maturity edit Rat ngs Overall bond .im+t Actual CnmpKant limit Actual Corrpialt Chit Actual Compliant Actual Min Rating Actual Min Rating Co .nt portfolio Short Term Lang Term compliance check US.Trexures 10003E 17.26% Yes 11515.20% 17.26% Yes 5.00 Years 283 Veers Yes NIA N/A '' based on 5upranational 30.00% 13.40% Yes 100.20% 7.27% Yes 5.00Year; 175 Year: Ye; N/A AAA/Aaa/AAA .• U.S.Agenties 100.CCr% 3246% Yes 107.007E 20.00% Yes 5.00 Years 421 Yeats Yes N/A N/A investment/issuer Corporate: 3200 22.44% Yes 1000% 3.62% Yes 5.00 Years 498 Yeats 'Yes NIA A/A27A Yes CI m its, maturities, • • • • • • and credit ratings Cash Compliance Summary %cf Compliance Cash Account Account Description Portfoln %� %tnrestab a Dollar Portfolio Maximum Current Book Valor Investable Value Compliant Maximum P°r"°�° c h e c k for cash 1.003-CAMP California Asset Ma-merited Program 1145% 5 75.003.000.00 $4o.760.73286 S28239 26714 Yes LGWP 1145% Sa6.760,73285 Yt; • and money LCA-FUZXX F`stAmencan-treastrydfigations 15.00% 2.96K, 1204'6 $12.097.563.18 S44.18423286 Yes market holdings Cash/Morey Market 15.00% 296% 12041E $12,097,563.18 Yes (including government poolg) Internal and External Initiatives Beyond investment strategy, we are focused on deploying automation in cash collection/disbursement efforts and deploying community programming to help residents achieve their American Dream --- r Internal Initiatives External Initiatives ❑ Adopt technology to streamline collections ❑ Provide overview of Treasurer Office services and increase administrative efficiencies and solicit community feedback ❑ Install self-service kiosks and QR codes to ❑ Introduce workshops and 1 -on-1 counseling facilitate electronic payments related to personal finances and investments ❑ Deploy Al-based system to identify for seniors, working age adults, and youth unpermitted short-term rental operators ❑ Partner with Police Department to expand tax, ❑ Partner with bank to simplify processes via investment, and identity scam classes electronic data feeds ❑ Complete collections process for dormant ❑ Expand local access to free tax preparation citations issued during pandemic ❑ Develop short-term rental operator trainings ❑ Comprehensive audits of hotel TOT payments 86