Resolution No. 2024-011RESOLUTION NO. 2024-11
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF VERNON
APPROVING AN ANNUAL STATEMENT OF INVESTMENT POLICY FOR
FISCAL YEAR 2024-2025 AND DELEGATING INVESTMENT
AUTHORITY TO THE DIRECTOR OF FINANCE/CITY TREASURER OR
DEPUTY CITY TREASURER
SECTION 1. Recitals.
A. Pursuant to California Government Code Section 53646(a)(2), the City Treasurer
may annually render to the City Council an Annual Statement of Investment Policy which
the City Council shall consider at a public meeting.
B. Pursuant to Resolution No. 2023-12, the City Council approved the Annual
Statement of Investment Policy for Fiscal Year 2023-2024, which delegated investment
authority to the Director of Finance/City Treasurer, and granted the Director of
Finance/City Treasurer express authority, as limited by Section 5.1 of the Policy, to make
investments of City funds in securities maturing more than five years from the date of
purchase as part of an investment program.
C. The City has continued to follow the Annual Statement of Investment Policy
approved by Resolution No. 2023-12 for Fiscal Year 2023-2024.
D. The City Council desires to approve an updated investment policy and approve the
Annual Statement of Investment Policy for Fiscal Year 2024-2025.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY
OF VERNON AS FOLLOWS:
SECTION 2. The City Council of the City of Vernon hereby finds and determines
that the above recitals are true and correct.
SECTION 3. The City Council hereby approves the Annual Statement of
Investment Policy (Investment Policy), for Fiscal Year 2024-2025, a copy of which is
attached hereto as Exhibit A.
SECTION 4. The City Council hereby delegates to the Director of Finance/City
Treasurer, or Deputy City Treasurer, the authority to implement the Investment Policy and
select the instruments for the City’s investment portfolio in accordance with the
Investment Policy. In the event of a prolonged absence or vacancy in the Director of
Finance/City Treasurer position, City Council authorizes staff to engage independent
investment managers to assist in the investment of the City’s financial assets in
accordance with the Investment Policy.
Resolution No. 2024-11
Page 2 of 2
_______________________
SECTION 5. The City Council hereby grants, as part of the City’s investment
program, to the Director of Finance/City Treasurer, or authorized designee, express
authority, as limited by Section 5.1 of the Policy, to invest in securities maturing more than
five years from the date of purchase, and consistent with Government Code 53601, this
authority shall become effective no less than three months from the effective date of this
Resolution.
SECTION 6. If any section or part of this Resolution is found to be unenforceable
by operation of law, the remaining sections or parts of this Resolution shall be in full force
and effect.
SECTION 7. This Resolution shall become effective July 1, 2024.
SECTION 8. The Deputy City Clerk shall certify the passage and adoption of this
resolution and enter it into the book of original resolutions.
APPROVED AND ADOPTED June 18, 2024.
________________________
JUDITH MERLO, Mayor
ATTEST:
YONNIE PARKER, Deputy City Clerk
(seal)
APPROVED AS TO FORM:
_________________________________
ZAYNAH N. MOUSSA, City Attorney
I CERTIFY THAT RESOLUTION NO. 2024-11 was passed and adopted by the City
Council of the City of Vernon at the Regular Meeting on June 18, 2024, by the following
vote:
AYES: 5 Council Members: Larios, Lopez, Rivera, Ybarra, Merlo
NOES: 0
ABSENT: 0
ABSTAIN: 0
________________________________
YONNIE PARKER, DEPUTY City Clerk
(seal)
CITY OF VERNON
ANNUAL
STATEMENT OF
INVESTMENT POLICY
FISCAL YEAR 2024/2025
Joaquin Leon
Deputy City Treasurer
July 1, 2024
Resolution No. 2024-11
3 of 20
____________________
Table of Contents
0.0 PREFACE ............................................................................................................................ - 3 -
1.0 SCOPE ................................................................................................................................. - 3 -
2.0 PURPOSE ............................................................................................................................ - 3 -
3.0 OBJECTIVE ........................................................................................................................ - 4 -
4.0 DELEGATION OF AUTHORITY...................................................................................... - 5 -
5.0 INVESTMENT PROGRAM ............................................................................................... - 6 -
6.0 INSTRUMENTS AUTHORIZED FOR INVESTMENT ................................................... - 6 -
7.0 DESIGNATED ENTITIES FROM WHOM THE CITY MAY PURCHASE
AUTHORIZED INVESTMENTS ................................................................................ - 13 -
8.0 PROHIBITED INVESTMENTS ....................................................................................... - 13 -
9.0 ALLOWABLE HEDGABLE TRANSACTIONS ............................................................. - 14 -
10.0 STATEMENTS OF INVESTMENT ACTIVITIES ........................................................ - 16 -
11.0 CONFLICT OF INTEREST ............................................................................................ - 16 -
12.0 PUBLIC INQUIRY ......................................................................................................... - 17 -
13.0 ANALYSIS OF PROSPECTIVE INVESTMENTS ....................................................... - 17 -
14.0 SAFEKEEPING ............................................................................................................... - 17 -
15.0 BROKER/DEALER AND DEPOSITORY INSTITUTION RELATIONSHIPS ........... - 17 -
Resolution No. 2024-11
4 of 20
____________________
Page 3 of 18
Investment Policy 2024/2025
0.0 PREFACE
This Annual Statement of Investment Policy (the "Investment Policy") sets forth the course of
action necessary to guide the decision-making of the City Council, and to the extent authorized
under Section 4.0 hereof, City Treasurer and all persons authorized to make investment decisions
on behalf of the City of Vernon (the “City”) in the administration of the City's investment portfolio.
While some portions of this Investment Policy are a restatement of the laws of the State of
California (the “State”), it is viewed that these restatements are integral to the purpose and flow of
this Investment Policy. In most instances the use of future tense throughout this Investment Policy
is intended to mean a continued practice or a practice which shall be continued.
The following statements are intended to ensure the achievement of the purpose, the goals and
objectives in an orderly and accurate manner. However, there is no guarantee that problems, errors
or losses will not arise in the course of administering the investment of idle or surplus funds.
Among the obstacles and deterrents in achieving the goals and objectives of the portfolio are:
unforeseen national or international events or crises, deviation of actual cash flow from forecasted
cash flow, unforeseen demands on cash flow, policies made with regard to investment in local
depositories, errors in data or advice used to make decisions, as well as any other unanticipated
event that may have an effect on local, national or international financial markets, economies or
politics which in turn has a decided effect upon the portfolio.
This Investment Policy is designed to achieve, keeping in mind the obstacles and deterrents in
pursuing portfolio goals and objective, the safety of the principal of all City funds, consistent with
limited risk and prudent investment practices.
1.0 SCOPE
This Investment Policy governs the deposit, safekeeping and investment of the funds of the
Treasury, as well as all related transactions and investment activities. The investment of bond
proceeds and amounts held under indentures and other security agreements with respect to bonds
as provided in Section 6.12 will be governed by the provisions of the relevant bond documents.
2.0 PURPOSE
The purpose of the Investment Policy is to facilitate accomplishment of the goals and objectives
of the Treasurer with regard to the investment of surplus funds (funds not required for the
immediate needs of the City), to provide a framework within which to carry out the business of
administering and investing the surplus funds of the Treasury, and to improve communications at
all levels between those involved and those interested in the process of investing and administering
the surplus funds of the Treasury.
Resolution No. 2024-11
5 of 20
____________________
Page 4 of 18
Investment Policy 2024/2025
3.0 OBJECTIVE
3.1 Legal Compliance
All investments shall be made in accordance with this Investment Policy, California Government
Code Section 53600 et seq., and any forthcoming amendments or additions to the California
Government Code in relation to the investment of local agency surplus funds.
3.2 Prudence
The administration of surplus funds of the City Treasurer, as a fiduciary trustee, shall be performed
in accordance with the prudent investor standard pursuant to California Government Code Section
53600.3.
The City Treasurer and the City Council of the City and all persons authorized to make investment
decisions on behalf of the City are "trustees" and therefore fiduciaries subject to the prudent
investor standard. When investing, reinvesting, purchasing, acquiring, exchanging, selling, or
managing public funds, a trustee of the City shall act with care, skill, prudence, and diligence under
the circumstances then prevailing, 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 satisfy the liquidity needs of the City. Within the limitations of this
Investment Policy and Section 53600.3 of the California Government Code and considering
individual investments as part to an overall strategy, the City Treasurer and all persons authorized
to make investment decisions on behalf of the City are authorized to acquire investments as
authorized by law.
As prudence shall be applied in the context of portfolio management, investment officers and their
advisors, acting in accordance with written procedures and exercising due diligence, shall report
deviations from expectation in an individual security’s performance to the Treasurer in a timely
fashion evaluate and appropriate action to be taken to control adverse developments.
3.3 Investment Criteria Goals
The Treasurer's primary goals for the investment of surplus funds (in the City's Treasury or monies
in a sinking fund) are, in order of priority pursuant to California Government Code Section
53600.5:
3.3.1 Safety -- Safety of capital shall mean the safeguarding of capital through the
selection of investments and investing procedures to best protect against loss,
whether arising from various investment risks (such as interest rate risk, market
risk, counterparty risk, etc.) or from default, fraud, or error.
3.3.2 Liquidity -- The City's portfolio shall be invested so as to always have the ability
to convert sufficient securities in the portfolio to cash, with little or no loss in value,
to cover cash flow needs of the City to meet contingency needs.
Resolution No. 2024-11
6 of 20
____________________
Page 5 of 18
Investment Policy 2024/2025
3.3.3 Yield -- Yield refers to earning a reasonable rate of return and shall take into
consideration current market conditions, the present phase of the market cycle, both
present and future cash flow needs, and the other primary goals of Safety and
Liquidity.
3.4 Performance Measurement
The investment portfolio will be managed in accordance with the parameters specified within this
Investment Policy. The methods of measuring investment performance and performance
benchmarks shall be articulated in the internal policies of the City Treasurer's Department.
3.5 Maintenance of Public Trust
As the Treasurer has been entrusted with the safekeeping of public monies received from all
sources, the Treasurer, in managing the investment portfolio, shall exercise a high degree of
professionalism to ensure and sustain public confidence, remembering that both the investment
instruments and the methods of transacting investment business are subject to public review and
scrutiny.
4.0 DELEGATION OF AUTHORITY
The management responsibility for the City's investment program is hereby delegated to the City
Treasurer in accordance with California Government Code Section 53607. Pursuant to California
Government Code Sections 53601, the City Treasurer shall be responsible for the investment of
the City's funds (including the purchase, sale, or exchange of securities), the monitoring and
reviewing of all investments for consistency under this Investment Policy, and the establishment
of a system of controls to regulate the activities of subordinate officials.
The Treasurer shall have the responsibility to execute investment transactions on a day to day
basis. When circumstances warrant, the responsibility to execute investment transactions may be
delegated to the Deputy City Treasurer or to the City Treasurer's authorized designee. Each and
every transaction must be approved by the City Treasurer. However, the City Council hereby
authorizes the Deputy City Treasurer, in the absence of the City Treasurer, to report directly to the
City Council, subject to the provisions of the Charter of the City of Vernon, or the Code of the
City of Vernon, or as prescribed by the City Council and to assume such other powers, duties and
responsibilities of the City Treasurer as necessary concerning investment transactions or any other
transaction provided for under the laws of the State of California, the Government Code of the
State of California and such other powers and duties as prescribed by resolutions or ordinances
adopted by the City Council.
Any persons authorized to make investment decisions on behalf of the City, shall be subject to
daily oversight and monitoring by the City Treasurer or the Treasurer's Office in order to insure
full and complete compliance with this Investment Policy and the Government Code of the State
of California, relating to the deposit and investment of funds and local agency finances.
NO PERSON MAY ENGAGE IN AN INVESTMENT TRANSACTION EXCEPT AS
PROVIDED UNDER THE LIMITS OF THIS POLICY.
Resolution No. 2024-11
7 of 20
____________________
Page 6 of 18
Investment Policy 2024/2025
5.0 INVESTMENT PROGRAM
5.1 Investment in Long Term Securities
The City Treasurer and the authorized designees of the City Treasurer shall actively manage the
City's portfolio of investments in order to take advantage of changing economic conditions and to
insure that the liquidity needs of the City are satisfied. As part of the City's investment program,
the City Treasurer has the express authority to make investments in securities that have a term, or
a term remaining to maturity, at the time of investment, in excess of five years, as long as such
investments, taken in the aggregate in relation to the City's entire investment portfolio, do not
adversely impact the ability to satisfy the liquidity needs of the City and its funds and enterprises.
Notwithstanding anything contained in this Investment Policy to the contrary, it is the policy of
the City to limit the investment of money in the Electric Fund, including operating, reserve and
surplus funds, in an amount up to one hundred million dollars ($100,000,000), to investments
otherwise permitted for such Fund under this Investment Policy which mature no later than five
years from the time of such investment.
5.2 Active Portfolio Management
The City Treasurer has the express authority to sell, as he deems prudent, any securities in the
City's portfolio of investments prior to the maturity date of the particular security. The City
Treasurer has the express authority to invest in, as he deems prudent, any security authorized by
this Investment Policy with the objective of selling that same security prior to its maturity date.
The City Treasurer's authority to buy and sell securities for investment on behalf of the City
includes the authorization to buy and sell the same security on the same trading day.
6.0 INSTRUMENTS AUTHORIZED FOR INVESTMENT
The City, having money in a sinking fund of, or surplus money in, its treasury not required for the
immediate needs of the City may invest any portion of the money that it deems wise or expedient
in those investments set forth below. If the City purchases or obtains any securities prescribed in
this Section 6.0, in a negotiable, bearer, registered, or nonregistered format, the City shall require
delivery of the securities to the City, including those purchased for the City by financial advisors,
consultants, or managers using the City's funds, by book entry, physical delivery, or by third party
custodial agreement. The transfer of securities to the Counterparty bank's customer book entry
account may be used for book entry delivery. For purposes of this Section 6.0, "Counterparty"
means the other party to the transaction. A Counterparty bank's trust department or separate
safekeeping department may be used for the physical delivery of the security if the security is held
in the name of the City.
Investments may be made in any security authorized by this Section 6, and by Section 53601 of
the California Government Code, that has at the time of investment, a term, or a term remaining
to maturity, in excess of five years, as long as such investment comports with the policies and
objectives of this Investment Policy and the provisions of the California Government Code.
Resolution No. 2024-11
8 of 20
____________________
Page 7 of 18
Investment Policy 2024/2025
6.1 Bonds Issued by the City
Bonds issued by the City, including bonds payable solely out of the revenues from a
revenue-producing property owned, controlled, or operated by the City or by a department, board,
agency, or authority of the City.
6.2 United States Treasury Bonds
United States Treasury notes, bonds, bills, or certificates of indebtedness, or those for which the
faith and credit of the United States are pledged for the payment of principal and interest.
6.3 Bonds of the State of California
Registered State warrants or treasury notes or bonds of the State, including bonds payable solely
out of the revenues from a revenue-producing property owned, controlled, or operated by the State
or by a department, board, agency, or authority of the State.
6.4 Bonds of State of California Local Agencies
Bonds, notes, warrants, or other evidences of indebtedness of any local agency within this 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.
6.5 Obligations Issued by Federal Agency or United States Government - Sponsored
Enterprises
Federal agency or United States government-sponsored enterprise obligations, participations, or
other instruments, issued by, or fully guaranteed as to principal and interest by federal agencies or
United States government-sponsored enterprises.
6.6 Bills of Exchange
Bankers’ acceptances otherwise known as bills of exchange or time drafts that are drawn on and
accepted by a commercial bank. Purchases of bankers’ acceptances may not exceed 180 days
maturity or 40 percent of the City's surplus money that may be invested pursuant to this Section 6.
However, no more than 30 percent of the City's money may be invested in the bankers’ acceptances
of any one commercial bank pursuant to this Investment Policy.
6.7 Commercial Paper
Commercial paper of "prime" quality of the highest ranking or of the highest letter and numerical
rating as provided for by Moody's Investors Service, Inc. ("Moody's"), or the Standard & Poor's
Corporation ("S&P") or Fitch Financial Services, Inc. ("Fitch"). The corporation that issues the
commercial paper shall be organized and operating within the United States, shall have total assets
in excess of five hundred million dollars ($500,000,000) and shall issue debt, other than
Resolution No. 2024-11
9 of 20
____________________
Page 8 of 18
Investment Policy 2024/2025
commercial paper, if any, that is rated "A" or higher by Moody's, S&P or Fitch. Eligible
commercial paper shall have a maximum maturity of 270 days or less. The City may invest no
more than 25% of its money in eligible commercial paper. The City may purchase no more than
10 percent of the outstanding commercial paper of any single corporate issue.
6.8 Negotiable Certificates of Deposit
Negotiable 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),
a state or federal credit union, or by a state-licensed branch of a foreign bank. Purchases of
negotiable certificates of deposit may not exceed 30 percent of the City's money which may be
invested pursuant to this Investment Policy. For purposes of this Section 6.8, negotiable
certificates of deposit do not come within Article 2 of the California Government Code
(commencing with Section 53630), except that the amount so invested shall be subject to the
limitations of California Government Code Section 53638 concerning maximum deposits. The
City Council of the City and the City Treasurer or other official of the City having legal custody
of the money are prohibited from investing City funds, or funds in the custody of the City, in
negotiable certificates of deposit issued by a state or federal credit union if a member of the City
Council of the City, or any person with investment decision making authority in the City
Administrator's Office, Budget-Auditor's Office, Treasurer's Office or Finance Department of the
City, also serves on the board of directors, or any committee appointed by the board of directors,
or the credit committee or the supervisory committee of the state or federal credit union issuing
the negotiable certificates of deposit.
6.9 Repurchase, Reverse Repurchase and Securities Lending Agreements
6.9.1 Investments in repurchase agreements or reverse repurchase agreements or
securities lending agreements of any securities authorized by this Section 6, as long
as the agreements are subject to this Section 6.9, including, the delivery
requirements specified in this Section 6.9.
6.9.2 Investments in repurchase agreements may be made, on any investment authorized
in Section 6, when the term of the agreement does not exceed one year. The market
value of securities that underlay a repurchase agreement shall be valued at 102
percent or greater of the funds borrowed against those securities and the value shall
be adjusted no less than quarterly. Since the market value of the underlying
securities is subject to daily market fluctuations, the investments in repurchase
agreements shall be in compliance if the value of the underlying securities is
brought back up to 102 percent no later than the next business day.
6.9.3 Reverse repurchase agreements or securities lending agreements may be utilized
only when all of the following conditions are met:
6.9.3.1 The security to be sold on reverse repurchase agreement or securities
lending agreement has been owned and fully paid for by the City for a
minimum of 30 days prior to sale.
Resolution No. 2024-11
10 of 20
____________________
Page 9 of 18
Investment Policy 2024/2025
6.9.3.2 The total of all reverse repurchase agreements and securities lending
agreements on investments owned by the City does not exceed 20 percent
of the base value of the portfolio.
6.9.3.3 The agreement does not exceed a term of 92 days, unless the agreement
includes a written codicil guaranteeing a minimum earning or spread for the
entire period between the sale of a security using a reverse repurchase
agreement or securities lending agreement and the final maturity date of the
same security.
6.9.3.4 Funds obtained or funds within the pool of an equivalent amount to that
obtained from selling a security to a counterparty by way of a reverse
repurchase agreement or securities lending agreement, shall not be used to
purchase another security with a maturity longer than the maturity of the
reverse repurchase agreement or securities lending agreement.
6.9.4 Investments in reverse repurchase agreements, securities lending agreements or
similar investments in which the City sells securities prior to purchase with a
simultaneous agreement to repurchase the security, may only be made upon prior
approval of the City Council of the City and shall only be made with primary
dealers of the Federal Reserve Bank of New York or with a nationally or state-
chartered bank that has or has had a significant banking relationship with the City.
6.9.4.1 For purposes of this Section 6.9, "significant banking relationship" means
any of the following activities of a bank:
6.9.4.1.1 Involvement in the creation, sale, purchase, or retirement of
the City's bonds, warrants, notes, or other evidence of
indebtedness.
6.9.4.1.2 Financing of the City's activities.
6.9.4.1.3 Acceptance of the City's securities or funds as deposits.
6.9.5 Definitions
6.9.5.1 Repurchase Agreement
Repurchase Agreement means a purchase of securities by the City pursuant
to an agreement by which the counterparty seller will repurchase the
securities on or before a specified date and for a specified amount and the
counterparty will deliver the underlying securities to the City by book entry,
physical delivery, or by third party custodial agreement. The transfer of
underlying securities to the counterparty bank's customer book-entry
account may be used for book-entry delivery.
Resolution No. 2024-11
11 of 20
____________________
Page 10 of 18
Investment Policy 2024/2025
6.9.5.2 Securities
Securities mean securities of the same issuer, description, issue date, and
maturity.
6.9.5.3 Reverse Repurchase Agreement
Reverse Repurchase Agreement means a sale of securities by the City
pursuant to an agreement by which the City will repurchase the securities
on or before a specified date and includes other comparable agreements.
6.9.5.4 Securities Lending Agreement
Securities Lending Agreement means an agreement under which the City
agrees to transfer securities to a borrower who, in turn, agrees to provide
collateral to the City. During the term of the agreement, both the securities
and the collateral are held by a third party. At the conclusion of the
agreement, the securities are transferred back to the City in return for the
collateral.
6.9.5.5 Base Value
Base Value of the City's pool portfolio shall be that dollar amount obtained
by totaling all cash balances placed in the pool by all pool participants,
excluding any amounts obtained through selling securities by way of
reverse repurchase agreements or other similar borrowing methods.
6.9.5.6 Spread
Spread means the difference between the cost of funds obtained using the
reverse repurchase agreement and the earnings obtained on the reinvestment
of the funds.
6.10 Medium-Term Notes
Medium-term notes, defined as all corporate and depository institution debt securities with a
maximum remaining maturity of five years or less, 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. Notes eligible for investment under this Section 6.10 shall be
rated "A" or better by a nationally recognized rating service. Purchases of medium-term notes
shall not include other instruments authorized by Section 6 and may not exceed 30 percent of the
City's surplus money which may be invested.
Resolution No. 2024-11
12 of 20
____________________
Page 11 of 18
Investment Policy 2024/2025
6.11 Diversified Management Company Shares
6.11.1 Shares of beneficial interest issued by diversified management companies that
invest in the securities and obligations as authorized by Sections 6.1 to 6.10,
inclusive, or Sections 6.13 or 6.14 and that comply with the investment restrictions
of Article 1 (commencing with Section 53600 of the California Government Code)
and Article 2 (commencing with Section 53630 of the California Government
Code). However, notwithstanding these restrictions, a counterparty to a reverse
repurchase agreement is not required to be a primary dealer of the Federal Reserve
Bank of New York if the company's board of directors finds that the counterparty
presents a minimal risk of default, and the value of the securities underlying a
repurchase agreement may be 100 percent of the sales price if the securities are
marked to market daily.
6.11.2 Shares of beneficial interest issued by diversified management companies that are
money market funds registered with the Securities and Exchange Commission
under the Investment Company Act of 1940 (15 U.S.C. Sec. 80a-l, et seq.).
6.11.3 If investment is in shares issued pursuant to Section 6.11.1, the company shall have
met either of the following criteria:
6.11.3.1 Attained the highest ranking or the highest letter and numerical
rating provided by not less than two nationally recognized statistical
rating organizations; or
6.11.3.2 Retained an investment adviser registered or exempt from
registration with the Securities and Exchange Commission with not
less than five years' experience investing in the securities and
obligations authorized by Sections 6.1 to 6.10, inclusive, or Sections
6.13 or 6.14 and with assets under management in excess of five
hundred million dollars ($500,000,000).
6.11.4 If investment is in shares issued pursuant to Section 6.11.2, the company shall
have met either of the following criteria:
6.11.4.1 Attained the highest ranking or the highest letter and numerical
rating provided by not less than two nationally recognized statistical
rating organizations; or
6.11.4.2 Retained an investment adviser registered or exempt from
registration with the Securities and Exchange Commission with not
less than five years' experience managing money market mutual
funds with assets under management in excess of five hundred
million dollars ($500,000,000).
Resolution No. 2024-11
13 of 20
____________________
Page 12 of 18
Investment Policy 2024/2025
6.11.5 The purchase price of shares of beneficial interest purchased pursuant to this
Section 6.11 shall not include any commission that the companies may charge and
shall not exceed 20 percent of the City's surplus money that may be invested
pursuant to this Section 6. However, no more than 10 percent of the City's surplus
funds may be invested in shares of beneficial interest of any one mutual fund
pursuant to Section 6.11.1.
6.12 Moneys Pledged to Payment or Security of Bonds of the City
Moneys held by a trustee or fiscal agent and pledged to the payment or security of bonds or other
indebtedness, or obligations under a lease, installment sale, or other agreement of the City, or
certificates of participation in those bonds, indebtedness, or lease installment sale, or other
agreements, may be invested in accordance with the statutory provisions governing the issuance
of those bonds, indebtedness, or lease installment sale, or other agreement, or to the extent not
inconsistent therewith or if there are no specific statutory provisions, in accordance with the
ordinance, resolution, indenture, or agreement of the City providing for the issuance.
6.13 Bonds Secured by Government Code Section 53651 Eligible Securities
Notes, bonds, or other obligations that are at all times secured by a valid first priority security
interest in securities of the types listed by Section 53651 of the California Government Code as
eligible securities for the purpose of securing local agency deposits having a market value at least
equal to that required by Section 53652 of the California Government Code for the purpose of
securing local agency deposits. The securities serving as collateral shall be placed by delivery or
book entry into the custody of a trust company or the trust department of a bank which is not
affiliated with the issuer of the secured obligation, and the security interest shall be perfected in
accordance with the requirements of the Uniform Commercial Code or federal regulations
applicable to the types of securities in which the security interest is granted.
6.14 Mortgage Pass-Through Security
Any Mortgage pass-through security, collateralized mortgage obligation, mortgage-backed or
other pay-through bond, equipment lease-backed certificate, consumer receivable pass-through
certificate, or consumer receivable-backed bond, in each case, of a maximum of five years
maturity. Securities eligible for investment under this Section 6.14 shall be issued by an issuer
having an "A" or higher rating for the issuer's debt as provided by a nationally recognized rating
service and rated in a rating category of "AA" or its equivalent or better by a nationally recognized
rating service. Purchase of securities authorized by this Section 6.14 may not exceed 20 percent
of the City's surplus money that may be invested pursuant to Section 6.
6.15 Pooled Investment Funds
6.15.1 County Pooled Investment Funds in accordance with the laws and regulations
governing those Funds and Section 53684 of the California Government Code.
Resolution No. 2024-11
14 of 20
____________________
Page 13 of 18
Investment Policy 2024/2025
6.15.2 State of California pooled “Local Agency Investment Fund” in accordance with the
laws and regulations governing those Funds and Section 16429.1 et seq. of the
California Government Code.
7.0 DESIGNATED ENTITIES FROM WHOM THE CITY MAY
PURCHASE AUTHORIZED INVESTMENTS
The purchase by the City of any investment authorized pursuant to California Government Code
Sections 53601 or 53601.1, not purchased directly from the issuer, shall be purchased either from
an institution licensed by the State as a broker-dealer, as defined in Section 25004 of the California
Corporations Code, or from a member of a federally regulated securities exchange, from a national
or state-chartered bank, from a savings association or federal association (as defined by Section
5102 of the California Financial Code) or from a brokerage firm designated as a primary
government dealer by the Federal Reserve Bank.
8.0 PROHIBITED INVESTMENTS
8.1 The City shall not invest any funds pursuant to this Investment Policy or pursuant to
California Government Code, Article 2, Deposit of Funds (commencing with Section 53630) in
inverse floats, range notes, or mortgage-derived, interest-only strips.
8.2 The City shall not invest any funds pursuant to this Investment Policy or pursuant to
California Government Code, Article 2, Deposit of Funds (commencing with Section 53630) in
any security that could result in zero interest accrual if held to maturity. However, the City may
hold prohibited instruments currently owned by the City until their maturity dates. The limitation
in this Section 8.2 shall not apply to City investments in shares of beneficial interest issued by
diversified management companies registered under the Investment Company Act of 1940 (15
U.S.C. Sec. 80a-1, and following) that are authorized for investment pursuant to Section 6.11.
8.3 The City is prohibited under this policy from engaging in speculative activities typical to
many organizations orientated toward profit maximization. Taking risks in order to arbitrage
market opportunities, or risks unrelated to the City’s normal business activities is prohibited.
These include investments in derivatives such as contracts-options, swaps, and futures/forward
contracts without a clear, identifiable, justifiable, and effective hedgeable item.
8.4 Prior to entering into an allowable hedgeable transaction, such as a swap agreement, the
City shall review legal documentation subject to the transaction to understand the terms of the
transaction, the risks taken on by the parties, and the remedies available to them. These
documents may include, among others, the ISDA Master Agreement, Schedule, Confirmation
and Credit Support Annex. Such documentation will be retained to support the basis of the
decision.
Resolution No. 2024-11
15 of 20
____________________
Page 14 of 18
Investment Policy 2024/2025
9.0 ALLOWABLE HEDGABLE TRANSACTIONS
9.1 Interest rate swap contract in conjunction with debt issuances shall be reviewed as part of
the City‘s overall financial position considering both the potential benefits and potential risks.
Prior to submitting a swap agreement for City Council’s approval, the potential benefits and
potential benefits are to be analyzed. The results of the analysis shall be provided to City Council
at the time of approval.
9.2 Potential benefits: Accessing the swap market increases the array of options available to
the City for hedging risk. Using swaps, can in some circumstances, reduce costs or improve cash
flows, thereby increasing resources available for debt service, other public purposes, and
contributing to the City’s overall mission. The City shall consider the following benefit factors
when determining the applicability as part of different strategies:
9.2.1 Reducing borrowing costs, by using floating-to-fixed rate swaps combined with
variable rate bonds to achieve costs lower than those available with fixed-rate bonds,
or by using fixed-to-floating rate swaps to create synthetic floating rate debt and
achieve lower costs without external liquidity or remarketing support.
9.2.2 Improving cash flows, by using basis swaps where the City expects the payments
received from the counterparty to be greater, over time, than the payments made to
the counterparty.
9.2.3 Locking in current rates for future transactions, through forward-starting swaps or
swaptions.
9.2.4 Matching assets and liabilities, by using a swap contract so that fixed-rate debt
is matched with fixed-rate assets and floating-rate debt is matched with floating-
rate assets.
9.2.5 The City shall take into account the potential benefits of swap transactions in
conjunction with debt issuances by recognizing that in the proper circumstances they
can have a positive effect on the City’s financial position.
9.3 Potential Risks: Interest rate swaps involve certain risks that shall be considered when
doing an analysis. Prior to submitting a swap agreement to City Council for approval, the potential
risk factors will be examined and analyzed. They will be presented as part of the overall staff report
in order to provide a full perspective of both the risks and benefits. There are five potential risk
factors that encompass ten different separate elements:
9.3.1 Risk Factor No. 1: Cash flows and/or net revenues
9.3.1.1 Basis Risk: The risk that variable rate payments received will be less than
variable rate payments they were designed to offset, because the variable
rate payments received and the variable rate payments owed are based on
different indexes, and the ratio between those indexes changes over time.
Resolution No. 2024-11
16 of 20
____________________
Page 15 of 18
Investment Policy 2024/2025
9.3.1.2 Tax Risk: The risk that the City’s costs will raise because federal income
tax rates fall, or because the tax exemption for municipal debt is eliminated
or is modified in a way that reduces its value.
9.3.1.3 Yield Curve Risk: The risk is that the City’s cash flow will be adversely
affected because the slope of the yield curve is not as the City anticipated
when entering into the swap. This is an aspect of basis risk that may affect
the termination value for swaps contacts.
9.3.1.4 Amortization Mismatch: The risk that the notional amount of the swap and
the outstanding principal amount of the debt intended to be hedged will no
longer be equal. Such mismatch may be a feature of the transaction at its
inception or may be caused by subsequent events, such as redemption of
bonds before maturity or termination of the swap before bond maturity.
9.3.2 Risk Factor No. 2: Balance Sheet
9.3.2.1 Termination Risk: The risk that the City will be required to make a payment
based on the market value of the swap in connection with an unforeseen
termination of the swap, at a time when the market value is negative to the
issuer.
9.3.2.2 Collateral Posting Risk: The risk that the City will be required to post
collateral, upon a downgrade of its credit rating or other trigger event a time
when the market value is negative.
9.3.3 Risk Factor No. 3: Counterparty Risk
9.3.3.1 The risk that the counterparty will no longer perform its obligations under
the contract, or that the counterparty’s credit quality will decline to the point
where there is uncertainty about its ability to perform.
9.3.4 Risk Factor No. 4: Future Financial Management
9.3.4.1 Market Access Risk: The risk that the City will be unable to obtain
derivatives contracts when needed in the future on reasonably favorable
terms, including new derivatives upon early or scheduled termination of
existing hedges (“Rollover Risk”).
9.3.4.2 Loss of Flexibility: The risk that a swap contract will limit the issuer’s debt
management options in the future due to an inability to modify or terminate
the swap without cost.
9.3.5 Risk Factor No. 5: Management Complexity
9.3.5.1 The risk that certain swap contracts may add a level of complexity to
financial management that will require ongoing commitment of additional
resources. The utilization of a financial advisory firm to assist or review
transactions prior to entering into an arrangement may be required.
Resolution No. 2024-11
17 of 20
____________________
Page 16 of 18
Investment Policy 2024/2025
10.0 STATEMENTS OF INVESTMENT ACTIVITIES
10.1 Annual Statement of Investment Policy
The City Treasurer shall annually render to the City Council a statement of investment policy,
which the City shall consider at a public meeting. Any changes in the investment policy shall also
be considered by the City Council of the City at a public meeting.
10.2 Quarterly Report of Investments
The City Treasurer shall render a quarterly report to City Council. The quarterly report shall be
so submitted within 45 days following the end of the quarter covered by the report. This report
shall include the type of investment, issuer, date of maturity par and dollar amount invested on all
securities, investments and moneys held by the City and shall additionally include a description of
any of the City's funds, investments, or programs that are under the management of contracted
parties, including lending programs. With respect to all securities held by the City and under
management of any outside party that is not also a local agency or the State of California Local
Agency Investment Fund (LAIF), the report shall also include a current market value as of the date
of the report, and shall include the source of this same valuation.
For local agency investments that have been placed in the State of California Local Agency
Investment Fund (LAIF), in National Credit Union Share Insurance Fund-insured accounts in a
credit union, in accounts insured or guaranteed pursuant to Section 14858 of the California
Financial Code, or in Federal Deposit Insurance Corporation-insured accounts in a bank or savings
and loan association, in a California County investment pool, or any combination of these, the City
Treasurer and the Treasurer's Department may supply to the City Council the most recent
statements received by the City from these institutions.
The quarterly report shall state compliance of the portfolio to this Investment Policy, or the manner
in which the portfolio is not in compliance. The quarterly report shall include a statement denoting
the ability of the City to meet its budgeted expenditure requirements for the next six months, or
provide an explanation as to why sufficient money shall, or may, not be available. In the quarterly
report, a subsidiary ledger of investments may be used in accordance with accepted accounting
practices.
10.3 Monthly Investment Transaction Report
The authority of the City Council to invest or to reinvest funds of the City, or to sell or exchange
securities so purchased has been delegated for a one-year period by the City Council to the City
Treasurer, who shall thereafter assume full responsibility for those transactions and shall make a
timely monthly report of those transactions to the City Council.
11.0 CONFLICT OF INTEREST
No City employee shall, outside of regular working hours, engage in any professions, trade,
business, or occupation which is incompatible or involves a conflict of interest with his/her duties
as a City Officer or employee.
Resolution No. 2024-11
18 of 20
____________________
Page 17 of 18
Investment Policy 2024/2025
12.0 PUBLIC INQUIRY
The City Treasurer's portfolio and related transactions are a matter of public record. Any member
of the public may receive a copy of the portfolio or this Investment Policy by requesting a copy at
the Treasurer's Office. The Treasurer may charge a fee for the copy, as allowed by law.
13.0 ANALYSIS OF PROSPECTIVE INVESTMENTS
Due to the complexity of the various investment instruments available and uncertainty of market
conditions the Treasurer may seek professional advice in making investment decisions in order to
optimize investment selections.
14.0 SAFEKEEPING
As required by California Government Code Section 53601 all investment instruments in a
negotiable, bearer, registered, or nonregistered format, shall be delivered to the City's custodial
bank by using book entry or physical delivery. The "delivery vs. payment" purchase procedure
shall be used.
The City’s custodial bank for safekeeping of the bonds, notes, bills, debentures, obligations,
certificates of indebtedness, warrants, or other evidences of indebtedness in which the money of
the City is invested pursuant to this policy shall be one of the following: (a) a federal or state
association (as defined by Section 5102 of the Financial Code), (b) a trust company or a state or
national bank located within California, (c) the Federal Reserve Bank of San Francisco or any
branch thereof within California, (d) any Federal Reserve Bank, or (e) with any state or national
bank located in any city designated as a reserve city by the Board of Governors of the Federal
Reserve System.
15.0 BROKER/DEALER AND DEPOSITORY INSTITUTION
RELATIONSHIPS
15.1 Approved List of Broker/Dealer Institutions
Subject to Section 7.0, the City Treasurer shall approve and maintain a list of broker/dealers and
depository institutions authorized to provide investment and other services to the City. All
investments must be made with institutions that have been approved by the City Treasurer prior to
investing.
15.2 Broker/Dealer Commissions and Fees Chargeable to the City
All broker/dealers who transact with the City and buy and sell securities on the City's behalf
shall earn a commission or charge a fee not to exceed an amount deemed prudent and reasonable
by the Financial Industry Regulatory Authority (“FINRA”) and what is customary in the industry
for the types of securities being purchased by the City.
Resolution No. 2024-11
19 of 20
____________________
Page 18 of 18
Investment Policy 2024/2025
15.3 Deposit and Investment of Funds of the City
All depository institutions that do business with the City shall be in compliance with the
requirements of Article 2, commencing with Section 53630, of the Government Code of the State
of California, concerning the deposit of funds, including the overall creditworthiness and credit
ratings requirements of the sections of that Article.
Resolution No. 2024-11
20 of 20
____________________
City Council Agenda Report
Meeting Date:June 18, 2024
From:Jessica Alcaraz, Financial Services Administrator
Department:Finance
Submitted by:Joaquin Leon, Deputy City Treasurer
Subject
Annual Statement of Investment Policy for Fiscal Year 2024-2025
Recommendation
Adopt Resolution No. 2024-11 approving an Annual Statement of Investment Policy for Fiscal
Year 2024-25 and delegating investment authority to the Director of Finance/City Treasurer.
Background
The Annual Statement of Investment Policy (Investment Policy) sets forth the course of action
necessary to guide the decision- making of the City Council, Director of Finance/City Treasurer,
and those authorized to make investment decisions in the administration of the City’s investment
portfolio. The existing Investment Policy is in compliance with the California Government Code
and is a restatement of relevant sections applying to investment activities. The Investment Policy
is designed to ensure that the administration of surplus funds is performed in accordance with
the “prudent investor standard” pursuant to California Government Code Section 53600.3. As
such, capital preservation is of paramount importance; therefore, the City does not engage in
speculative activities.
Pursuant to California Government Code Section 53646(a)(2), the City Treasurer may annually
render to the City Council an Annual Statement of Investment Policy which the City Council shall
consider at a public meeting.
Section 4.0 – Delegation of Authority has been amended to grant the Deputy City Treasurer the
authority to assume the responsibilities of the City Treasurer in their absence. This includes
overseeing investment transactions and any other transactions permitted under California state
laws, the Government Code of the State of California, and other powers and duties as outlined
by resolutions or ordinances passed by the City Council.
The proposed Investment Policy conforms with California Law and is to be adhered to and
attested by the Independent Certified Public Accounting firm that performs the certified annual
audit of the City's financial statements.
Fiscal Impact
There is no fiscal impact associated with this report.
Attachments
1. Resolution No. 2024-11
2. FY 2024-25 Investment Policy (redline)
1
0
0
8
CITY OF VERNON
ANNUAL
STATEMENT OF
INVESTMENT POLICY
FISCAL YEAR 2024/20252023/2024
Joaquin LeonScott A. Williams
Deputy City TreasurerDirector of Finance/City Treasurer
July 1, 20242023
Table of Contents
0.0 PREFACE............................................................................................................................- 3 -
1.0 SCOPE .................................................................................................................................- 3 -
2.0 PURPOSE............................................................................................................................- 3 -
3.0 OBJECTIVE.........................................................................................................................- 4 -
4.0 DELEGATION OF AUTHORITY......................................................................................- 5 -
5.0 INVESTMENT PROGRAM................................................................................................- 6 -
6.0 INSTRUMENTS AUTHORIZED FOR INVESTMENT....................................................- 6 -
7.0 DESIGNATED ENTITIES FROM WHOM THE CITY MAY PURCHASE
AUTHORIZED INVESTMENTS................................................................................- 13 -
8.0 PROHIBITED INVESTMENTS........................................................................................- 13 -
9.0 ALLOWABLE HEDGABLE TRANSACTIONS.............................................................- 14 -
10.0 STATEMENTS OF INVESTMENT ACTIVITIES........................................................- 16 -
11.0 CONFLICT OF INTEREST............................................................................................- 16 -
12.0 PUBLIC INQUIRY..........................................................................................................- 17 -
13.0 ANALYSIS OF PROSPECTIVE INVESTMENTS........................................................- 17 -
14.0 SAFEKEEPING...............................................................................................................- 17 -
15.0 BROKER/DEALER AND DEPOSITORY INSTITUTION RELATIONSHIPS...........- 17 -
Page 3 of 18
Investment Policy 2024/2025
0.0 PREFACE
This Annual Statement of Investment Policy (the "Investment Policy") sets forth the course of
action necessary to guide the decision-making of the City Council, and to the extent authorized
under Section 4.0 hereof, City Treasurer and all persons authorized to make investment decisions
on behalf of the City of Vernon (the “City”) in the administration of the City's investment portfolio.
While some portions of this Investment Policy are a restatement of the laws of the State of
California (the “State”), it is viewed that these restatements are integral to the purpose and flow of
this Investment Policy. In most instances the use of future tense throughout this Investment Policy
is intended to mean a continued practice or a practice which shall be continued.
The following statements are intended to ensure the achievement of the purpose, the goals and
objectives in an orderly and accurate manner. However, there is no guarantee that problems, errors
or losses will not arise in the course of administering the investment of idle or surplus funds.
Among the obstacles and deterrents in achieving the goals and objectives of the portfolio are:
unforeseen national or international events or crises, deviation of actual cash flow from forecasted
cash flow, unforeseen demands on cash flow, policies made with regard to investment in local
depositories, errors in data or advice used to make decisions, as well as any other unanticipated
event that may have an effect on local, national or international financial markets, economies or
politics which in turn has a decided effect upon the portfolio.
This Investment Policy is designed to achieve, keeping in mind the obstacles and deterrents in
pursuing portfolio goals and objective, the safety of the principal of all City funds, consistent with
limited risk and prudent investment practices.
1.0 SCOPE
This Investment Policy governs the deposit, safekeeping and investment of the funds of the
Treasury, as well as all related transactions and investment activities. The investment of bond
proceeds and amounts held under indentures and other security agreements with respect to bonds
as provided in Section 6.12 will be governed by the provisions of the relevant bond documents.
2.0 PURPOSE
The purpose of the Investment Policy is to facilitate accomplishment of the goals and objectives
of the Treasurer with regard to the investment of surplus funds (funds not required for the
immediate needs of the City), to provide a framework within which to carry out the business of
administering and investing the surplus funds of the Treasury, and to improve communications at
all levels between those involved and those interested in the process of investing and administering
the surplus funds of the Treasury.
Page 4 of 18
Investment Policy 2024/2025
3.0 OBJECTIVE
3.1 Legal Compliance
All investments shall be made in accordance with this Investment Policy, California Government
Code Section 53600 et seq., and any forthcoming amendments or additions to the California
Government Code in relation to the investment of local agency surplus funds.
3.2 Prudence
The administration of surplus funds of the City Treasurer, as a fiduciary trustee, shall be performed
in accordance with the prudent investor standard pursuant to California Government Code Section
53600.3.
The City Treasurer and the City Council of the City and all persons authorized to make investment
decisions on behalf of the City are "trustees" and therefore fiduciaries subject to the prudent
investor standard. When investing, reinvesting, purchasing, acquiring, exchanging, selling, or
managing public funds, a trustee of the City shall act with care, skill, prudence, and diligence under
the circumstances then prevailing, 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 satisfy the liquidity needs of the City. Within the limitations of this
Investment Policy and Section 53600.3 of the California Government Code and considering
individual investments as part to an overall strategy, the City Treasurer and all persons authorized
to make investment decisions on behalf of the City are authorized to acquire investments as
authorized by law.
As prudence shall be applied in the context of portfolio management, investment officers and their
advisors, acting in accordance with written procedures and exercising due diligence, shall report
deviations from expectation in an individual security’s performance to the Treasurer in a timely
fashion evaluate and appropriate action to be taken to control adverse developments.
3.3 Investment Criteria Goals
The Treasurer's primary goals for the investment of surplus funds (in the City's Treasury or monies
in a sinking fund) are, in order of priority pursuant to California Government Code Section
53600.5:
3.3.1 Safety -- Safety of capital shall mean the safeguarding of capital through the
selection of investments and investing procedures to best protect against loss,
whether arising from various investment risks (such as interest rate risk, market
risk, counterparty risk, etc.) or from default, fraud, or error.
3.3.2 Liquidity -- The City's portfolio shall be invested so as to always have the ability
to convert sufficient securities in the portfolio to cash, with little or no loss in value,
to cover cash flow needs of the City to meet contingency needs.
Page 5 of 18
Investment Policy 2024/2025
3.3.3 Yield -- Yield refers to earning a reasonable rate of return and shall take into
consideration current market conditions, the present phase of the market cycle, both
present and future cash flow needs, and the other primary goals of Safety and
Liquidity.
3.4 Performance Measurement
The investment portfolio will be managed in accordance with the parameters specified within this
Investment Policy. The methods of measuring investment performance and performance
benchmarks shall be articulated in the internal policies of the City Treasurer's Department.
3.5 Maintenance of Public Trust
As the Treasurer has been entrusted with the safekeeping of public monies received from all
sources, the Treasurer, in managing the investment portfolio, shall exercise a high degree of
professionalism to ensure and sustain public confidence, remembering that both the investment
instruments and the methods of transacting investment business are subject to public review and
scrutiny.
4.0 DELEGATION OF AUTHORITY
The management responsibility for the City's investment program is hereby delegated to the City
Treasurer in accordance with California Government Code Section 53607. Pursuant to California
Government Code Sections 53601, the City Treasurer shall be responsible for the investment of
the City's funds (including the purchase, sale, or exchange of securities), the monitoring and
reviewing of all investments for consistency under this Investment Policy, and the establishment
of a system of controls to regulate the activities of subordinate officials.
The Treasurer shall have the responsibility to execute investment transactions on a day to day
basis. When circumstances warrant, the responsibility to execute investment transactions may be
delegated to the Deputy City Treasurer or to the City Treasurer's authorized designee. However,
Eeach and every transaction must be approved by the City Treasurer. However, the City Council
hereby authorizes the Deputy City Treasurer, in the absence of the City Treasurer, to report directly
to the City Council, subject to the provisions of the Charter of the City of Vernon, or the Code of
the City of Vernon, or as prescribed by the City Council and to assume such other powers, duties
and responsibilities of the City Treasurer as necessary concerning investment transactions or any
other transaction provided for under the laws of the State of California, the Government Code of
the State of California and such other powers and duties as prescribed by resolutions or ordinances
adopted by the City Council.
Any persons authorized to make investment decisions on behalf of the City, shall be subject to
daily oversight and monitoring by the City Treasurer or the Treasurer's Office in order to insure
full and complete compliance with this Investment Policy and the Government Code of the State
of California, relating to the deposit and investment of funds and local agency finances.
NO PERSON MAY ENGAGE IN AN INVESTMENT TRANSACTION EXCEPT AS
PROVIDED UNDER THE LIMITS OF THIS POLICY.
Page 6 of 18
Investment Policy 2024/2025
5.0 INVESTMENT PROGRAM
5.1 Investment in Long Term Securities
The City Treasurer and the authorized designees of the City Treasurer shall actively manage the
City's portfolio of investments in order to take advantage of changing economic conditions and to
insure that the liquidity needs of the City are satisfied. As part of the City's investment program,
the City Treasurer has the express authority to make investments in securities that have a term, or
a term remaining to maturity, at the time of investment, in excess of five years, as long as such
investments, taken in the aggregate in relation to the City's entire investment portfolio, do not
adversely impact the ability to satisfy the liquidity needs of the City and its funds and enterprises.
Notwithstanding anything contained in this Investment Policy to the contrary, it is the policy of
the City to limit the investment of money in the Electric Fund, including operating, reserve and
surplus funds, in an amount up to one hundred million dollars ($100,000,000), to investments
otherwise permitted for such Fund under this Investment Policy which mature no later than five
years from the time of such investment.
5.2 Active Portfolio Management
The City Treasurer has the express authority to sell, as he deems prudent, any securities in the
City's portfolio of investments prior to the maturity date of the particular security. The City
Treasurer has the express authority to invest in, as he deems prudent, any security authorized by
this Investment Policy with the objective of selling that same security prior to its maturity date.
The City Treasurer's authority to buy and sell securities for investment on behalf of the City
includes the authorization to buy and sell the same security on the same trading day.
6.0 INSTRUMENTS AUTHORIZED FOR INVESTMENT
The City, having money in a sinking fund of, or surplus money in, its treasury not required for the
immediate needs of the City may invest any portion of the money that it deems wise or expedient
in those investments set forth below. If the City purchases or obtains any securities prescribed in
this Section 6.0, in a negotiable, bearer, registered, or nonregistered format, the City shall require
delivery of the securities to the City, including those purchased for the City by financial advisors,
consultants, or managers using the City's funds, by book entry, physical delivery, or by third party
custodial agreement. The transfer of securities to the Counterparty bank's customer book entry
account may be used for book entry delivery. For purposes of this Section 6.0, "Counterparty"
means the other party to the transaction. A Counterparty bank's trust department or separate
safekeeping department may be used for the physical delivery of the security if the security is held
in the name of the City.
Investments may be made in any security authorized by this Section 6, and by Section 53601 of
the California Government Code, that has at the time of investment, a term, or a term remaining
to maturity, in excess of five years, as long as such investment comports with the policies and
objectives of this Investment Policy and the provisions of the California Government Code.
Page 7 of 18
Investment Policy 2024/2025
6.1 Bonds Issued by the City
Bonds issued by the City, including bonds payable solely out of the revenues from a
revenue-producing property owned, controlled, or operated by the City or by a department, board,
agency, or authority of the City.
6.2 United States Treasury Bonds
United States Treasury notes, bonds, bills, or certificates of indebtedness, or those for which the
faith and credit of the United States are pledged for the payment of principal and interest.
6.3 Bonds of the State of California
Registered State warrants or treasury notes or bonds of the State, including bonds payable solely
out of the revenues from a revenue-producing property owned, controlled, or operated by the State
or by a department, board, agency, or authority of the State.
6.4 Bonds of State of California Local Agencies
Bonds, notes, warrants, or other evidences of indebtedness of any local agency within this 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.
6.5 Obligations Issued by Federal Agency or United States Government - Sponsored
Enterprises
Federal agency or United States government-sponsored enterprise obligations, participations, or
other instruments, issued by, or fully guaranteed as to principal and interest by federal agencies or
United States government-sponsored enterprises.
6.6 Bills of Exchange
Bankers’ acceptances otherwise known as bills of exchange or time drafts that are drawn on and
accepted by a commercial bank. Purchases of bankers’ acceptances may not exceed 180 days
maturity or 40 percent of the City's surplus money that may be invested pursuant to this Section 6.
However, no more than 30 percent of the City's money may be invested in the bankers’ acceptances
of any one commercial bank pursuant to this Investment Policy.
6.7 Commercial Paper
Commercial paper of "prime" quality of the highest ranking or of the highest letter and numerical
rating as provided for by Moody's Investors Service, Inc. ("Moody's"), or the Standard & Poor's
Corporation ("S&P") or Fitch Financial Services, Inc. ("Fitch"). The corporation that issues the
commercial paper shall be organized and operating within the United States, shall have total assets
in excess of five hundred million dollars ($500,000,000) and shall issue debt, other than
Page 8 of 18
Investment Policy 2024/2025
commercial paper, if any, that is rated "A" or higher by Moody's, S&P or Fitch. Eligible
commercial paper shall have a maximum maturity of 270 days or less. The City may invest no
more than 25% of its money in eligible commercial paper. The City may purchase no more than
10 percent of the outstanding commercial paper of any single corporate issue.
6.8 Negotiable Certificates of Deposit
Negotiable 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),
a state or federal credit union, or by a state-licensed branch of a foreign bank. Purchases of
negotiable certificates of deposit may not exceed 30 percent of the City's money which may be
invested pursuant to this Investment Policy. For purposes of this Section 6.8, negotiable
certificates of deposit do not come within Article 2 of the California Government Code
(commencing with Section 53630), except that the amount so invested shall be subject to the
limitations of California Government Code Section 53638 concerning maximum deposits. The
City Council of the City and the City Treasurer or other official of the City having legal custody
of the money are prohibited from investing City funds, or funds in the custody of the City, in
negotiable certificates of deposit issued by a state or federal credit union if a member of the City
Council of the City, or any person with investment decision making authority in the City
Administrator's Office, Budget-Auditor's Office, Treasurer's Office or Finance Department of the
City, also serves on the board of directors, or any committee appointed by the board of directors,
or the credit committee or the supervisory committee of the state or federal credit union issuing
the negotiable certificates of deposit.
6.9 Repurchase, Reverse Repurchase and Securities Lending Agreements
6.9.1 Investments in repurchase agreements or reverse repurchase agreements or
securities lending agreements of any securities authorized by this Section 6, as long
as the agreements are subject to this Section 6.9, including, the delivery
requirements specified in this Section 6.9.
6.9.2 Investments in repurchase agreements may be made, on any investment authorized
in Section 6, when the term of the agreement does not exceed one year. The market
value of securities that underlay a repurchase agreement shall be valued at 102
percent or greater of the funds borrowed against those securities and the value shall
be adjusted no less than quarterly. Since the market value of the underlying
securities is subject to daily market fluctuations, the investments in repurchase
agreements shall be in compliance if the value of the underlying securities is
brought back up to 102 percent no later than the next business day.
6.9.3 Reverse repurchase agreements or securities lending agreements may be utilized
only when all of the following conditions are met:
6.9.3.1 The security to be sold on reverse repurchase agreement or securities
lending agreement has been owned and fully paid for by the City for a
minimum of 30 days prior to sale.
Page 9 of 18
Investment Policy 2024/2025
6.9.3.2 The total of all reverse repurchase agreements and securities lending
agreements on investments owned by the City does not exceed 20 percent
of the base value of the portfolio.
6.9.3.3 The agreement does not exceed a term of 92 days, unless the agreement
includes a written codicil guaranteeing a minimum earning or spread for the
entire period between the sale of a security using a reverse repurchase
agreement or securities lending agreement and the final maturity date of the
same security.
6.9.3.4 Funds obtained or funds within the pool of an equivalent amount to that
obtained from selling a security to a counterparty by way of a reverse
repurchase agreement or securities lending agreement, shall not be used to
purchase another security with a maturity longer than the maturity of the
reverse repurchase agreement or securities lending agreement.
6.9.4 Investments in reverse repurchase agreements, securities lending agreements or
similar investments in which the City sells securities prior to purchase with a
simultaneous agreement to repurchase the security, may only be made upon prior
approval of the City Council of the City and shall only be made with primary
dealers of the Federal Reserve Bank of New York or with a nationally or state-
chartered bank that has or has had a significant banking relationship with the City.
6.9.4.1 For purposes of this Section 6.9, "significant banking relationship" means
any of the following activities of a bank:
6.9.4.1.1 Involvement in the creation, sale, purchase, or retirement of
the City's bonds, warrants, notes, or other evidence of
indebtedness.
6.9.4.1.2 Financing of the City's activities.
6.9.4.1.3 Acceptance of the City's securities or funds as deposits.
6.9.5 Definitions
6.9.5.1 Repurchase Agreement
Repurchase Agreement means a purchase of securities by the City pursuant
to an agreement by which the counterparty seller will repurchase the
securities on or before a specified date and for a specified amount and the
counterparty will deliver the underlying securities to the City by book entry,
physical delivery, or by third party custodial agreement. The transfer of
underlying securities to the counterparty bank's customer book-entry
account may be used for book-entry delivery.
Page 10 of 18
Investment Policy 2024/2025
6.9.5.2 Securities
Securities mean securities of the same issuer, description, issue date, and
maturity.
6.9.5.3 Reverse Repurchase Agreement
Reverse Repurchase Agreement means a sale of securities by the City
pursuant to an agreement by which the City will repurchase the securities
on or before a specified date and includes other comparable agreements.
6.9.5.4 Securities Lending Agreement
Securities Lending Agreement means an agreement under which the City
agrees to transfer securities to a borrower who, in turn, agrees to provide
collateral to the City. During the term of the agreement, both the securities
and the collateral are held by a third party. At the conclusion of the
agreement, the securities are transferred back to the City in return for the
collateral.
6.9.5.5 Base Value
Base Value of the City's pool portfolio shall be that dollar amount obtained
by totaling all cash balances placed in the pool by all pool participants,
excluding any amounts obtained through selling securities by way of
reverse repurchase agreements or other similar borrowing methods.
6.9.5.6 Spread
Spread means the difference between the cost of funds obtained using the
reverse repurchase agreement and the earnings obtained on the reinvestment
of the funds.
6.10 Medium-Term Notes
Medium-term notes, defined as all corporate and depository institution debt securities with a
maximum remaining maturity of five years or less, 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. Notes eligible for investment under this Section 6.10 shall be
rated "A" or better by a nationally recognized rating service. Purchases of medium-term notes
shall not include other instruments authorized by Section 6 and may not exceed 30 percent of the
City's surplus money which may be invested.
Page 11 of 18
Investment Policy 2024/2025
6.11 Diversified Management Company Shares
6.11.1 Shares of beneficial interest issued by diversified management companies that
invest in the securities and obligations as authorized by Sections 6.1 to 6.10,
inclusive, or Sections 6.13 or 6.14 and that comply with the investment restrictions
of Article 1 (commencing with Section 53600 of the California Government Code)
and Article 2 (commencing with Section 53630 of the California Government
Code). However, notwithstanding these restrictions, a counterparty to a reverse
repurchase agreement is not required to be a primary dealer of the Federal Reserve
Bank of New York if the company's board of directors finds that the counterparty
presents a minimal risk of default, and the value of the securities underlying a
repurchase agreement may be 100 percent of the sales price if the securities are
marked to market daily.
6.11.2 Shares of beneficial interest issued by diversified management companies that are
money market funds registered with the Securities and Exchange Commission
under the Investment Company Act of 1940 (15 U.S.C. Sec. 80a-l, et seq.).
6.11.3 If investment is in shares issued pursuant to Section 6.11.1, the company shall have
met either of the following criteria:
6.11.3.1 Attained the highest ranking or the highest letter and numerical
rating provided by not less than two nationally recognized statistical
rating organizations; or
6.11.3.2 Retained an investment adviser registered or exempt from
registration with the Securities and Exchange Commission with not
less than five years' experience investing in the securities and
obligations authorized by Sections 6.1 to 6.10, inclusive, or Sections
6.13 or 6.14 and with assets under management in excess of five
hundred million dollars ($500,000,000).
6.11.4 If investment is in shares issued pursuant to Section 6.11.2, the company shall
have met either of the following criteria:
6.11.4.1 Attained the highest ranking or the highest letter and numerical
rating provided by not less than two nationally recognized statistical
rating organizations; or
6.11.4.2 Retained an investment adviser registered or exempt from
registration with the Securities and Exchange Commission with not
less than five years' experience managing money market mutual
funds with assets under management in excess of five hundred
million dollars ($500,000,000).
Page 12 of 18
Investment Policy 2024/2025
6.11.5 The purchase price of shares of beneficial interest purchased pursuant to this
Section 6.11 shall not include any commission that the companies may charge and
shall not exceed 20 percent of the City's surplus money that may be invested
pursuant to this Section 6. However, no more than 10 percent of the City's surplus
funds may be invested in shares of beneficial interest of any one mutual fund
pursuant to Section 6.11.1.
6.12 Moneys Pledged to Payment or Security of Bonds of the City
Moneys held by a trustee or fiscal agent and pledged to the payment or security of bonds or other
indebtedness, or obligations under a lease, installment sale, or other agreement of the City, or
certificates of participation in those bonds, indebtedness, or lease installment sale, or other
agreements, may be invested in accordance with the statutory provisions governing the issuance
of those bonds, indebtedness, or lease installment sale, or other agreement, or to the extent not
inconsistent therewith or if there are no specific statutory provisions, in accordance with the
ordinance, resolution, indenture, or agreement of the City providing for the issuance.
6.13 Bonds Secured by Government Code Section 53651 Eligible Securities
Notes, bonds, or other obligations that are at all times secured by a valid first priority security
interest in securities of the types listed by Section 53651 of the California Government Code as
eligible securities for the purpose of securing local agency deposits having a market value at least
equal to that required by Section 53652 of the California Government Code for the purpose of
securing local agency deposits. The securities serving as collateral shall be placed by delivery or
book entry into the custody of a trust company or the trust department of a bank which is not
affiliated with the issuer of the secured obligation, and the security interest shall be perfected in
accordance with the requirements of the Uniform Commercial Code or federal regulations
applicable to the types of securities in which the security interest is granted.
6.14 Mortgage Pass-Through Security
Any Mortgage pass-through security, collateralized mortgage obligation, mortgage-backed or
other pay-through bond, equipment lease-backed certificate, consumer receivable pass-through
certificate, or consumer receivable-backed bond, in each case, of a maximum of five years
maturity. Securities eligible for investment under this Section 6.14 shall be issued by an issuer
having an "A" or higher rating for the issuer's debt as provided by a nationally recognized rating
service and rated in a rating category of "AA" or its equivalent or better by a nationally recognized
rating service. Purchase of securities authorized by this Section 6.14 may not exceed 20 percent
of the City's surplus money that may be invested pursuant to Section 6.
6.15 Pooled Investment Funds
6.15.1 County Pooled Investment Funds in accordance with the laws and regulations
governing those Funds and Section 53684 of the California Government Code.
Page 13 of 18
Investment Policy 2024/2025
6.15.2 State of California pooled “Local Agency Investment Fund” in accordance with the
laws and regulations governing those Funds and Section 16429.1 et seq. of the
California Government Code.
7.0 DESIGNATED ENTITIES FROM WHOM THE CITY MAY
PURCHASE AUTHORIZED INVESTMENTS
The purchase by the City of any investment authorized pursuant to California Government Code
Sections 53601 or 53601.1, not purchased directly from the issuer, shall be purchased either from
an institution licensed by the State as a broker-dealer, as defined in Section 25004 of the California
Corporations Code, or from a member of a federally regulated securities exchange, from a national
or state-chartered bank, from a savings association or federal association (as defined by Section
5102 of the California Financial Code) or from a brokerage firm designated as a primary
government dealer by the Federal Reserve Bank.
8.0 PROHIBITED INVESTMENTS
8.1 The City shall not invest any funds pursuant to this Investment Policy or pursuant to
California Government Code, Article 2, Deposit of Funds (commencing with Section 53630) in
inverse floats, range notes, or mortgage-derived, interest-only strips.
8.2 The City shall not invest any funds pursuant to this Investment Policy or pursuant to
California Government Code, Article 2, Deposit of Funds (commencing with Section 53630) in
any security that could result in zero interest accrual if held to maturity. However, the City may
hold prohibited instruments currently owned by the City until their maturity dates. The limitation
in this Section 8.2 shall not apply to City investments in shares of beneficial interest issued by
diversified management companies registered under the Investment Company Act of 1940 (15
U.S.C. Sec. 80a-1, and following) that are authorized for investment pursuant to Section 6.11.
8.3 The City is prohibited under this policy from engaging in speculative activities typical to
many organizations orientated toward profit maximization. Taking risks in order to arbitrage
market opportunities, or risks unrelated to the City’s normal business activities is prohibited.
These include investments in derivatives such as contracts-options, swaps, and futures/forward
contracts without a clear, identifiable, justifiable, and effective hedgeable item.
8.4 Prior to entering into an allowable hedgeable transaction, such as a swap agreement, the
City shall review legal documentation subject to the transaction to understand the terms of the
transaction, the risks taken on by the parties, and the remedies available to them. These
documents may include, among others, the ISDA Master Agreement, Schedule, Confirmation
and Credit Support Annex. Such documentation will be retained to support the basis of the
decision.
Page 14 of 18
Investment Policy 2024/2025
9.0 ALLOWABLE HEDGABLE TRANSACTIONS
9.1 Interest rate swap contract in conjunction with debt issuances shall be reviewed as part of
the City‘s overall financial position considering both the potential benefits and potential risks.
Prior to submitting a swap agreement for City Council’s approval, the potential benefits and
potential benefits are to be analyzed. The results of the analysis shall be provided to City Council
at the time of approval.
9.2 Potential benefits: Accessing the swap market increases the array of options available to
the City for hedging risk. Using swaps, can in some circumstances, reduce costs or improve cash
flows, thereby increasing resources available for debt service, other public purposes, and
contributing to the City’s overall mission. The City shall consider the following benefit factors
when determining the applicability as part of different strategies:
9.2.1 Reducing borrowing costs, by using floating-to-fixed rate swaps combined with
variable rate bonds to achieve costs lower than those available with fixed-rate bonds,
or by using fixed-to-floating rate swaps to create synthetic floating rate debt and
achieve lower costs without external liquidity or remarketing support.
9.2.2 Improving cash flows, by using basis swaps where the City expects the payments
received from the counterparty to be greater, over time, than the payments made to
the counterparty.
9.2.3 Locking in current rates for future transactions, through forward-starting swaps or
swaptions.
9.2.4 Matching assets and liabilities, by using a swap contract so that fixed-rate debt
is matched with fixed-rate assets and floating-rate debt is matched with floating-
rate assets.
9.2.5 The City shall take into account the potential benefits of swap transactions in
conjunction with debt issuances by recognizing that in the proper circumstances they
can have a positive effect on the City’s financial position.
9.3 Potential Risks: Interest rate swaps involve certain risks that shall be considered when
doing an analysis. Prior to submitting a swap agreement to City Council for approval, the potential
risk factors will be examined and analyzed. They will be presented as part of the overall staff report
in order to provide a full perspective of both the risks and benefits. There are five potential risk
factors that encompass ten different separate elements:
9.3.1 Risk Factor No. 1: Cash flows and/or net revenues
9.3.1.1 Basis Risk: The risk that variable rate payments received will be less than
variable rate payments they were designed to offset, because the variable
rate payments received and the variable rate payments owed are based on
different indexes, and the ratio between those indexes changes over time.
Page 15 of 18
Investment Policy 2024/2025
9.3.1.2 Tax Risk: The risk that the City’s costs will raise because federal income
tax rates fall, or because the tax exemption for municipal debt is eliminated
or is modified in a way that reduces its value.
9.3.1.3 Yield Curve Risk: The risk is that the City’s cash flow will be adversely
affected because the slope of the yield curve is not as the City anticipated
when entering into the swap. This is an aspect of basis risk that may affect
the termination value for swaps contacts.
9.3.1.4 Amortization Mismatch: The risk that the notional amount of the swap and
the outstanding principal amount of the debt intended to be hedged will no
longer be equal. Such mismatch may be a feature of the transaction at its
inception or may be caused by subsequent events, such as redemption of
bonds before maturity or termination of the swap before bond maturity.
9.3.2 Risk Factor No. 2: Balance Sheet
9.3.2.1 Termination Risk: The risk that the City will be required to make a payment
based on the market value of the swap in connection with an unforeseen
termination of the swap, at a time when the market value is negative to the
issuer.
9.3.2.2 Collateral Posting Risk: The risk that the City will be required to post
collateral, upon a downgrade of its credit rating or other trigger event a time
when the market value is negative.
9.3.3 Risk Factor No. 3: Counterparty Risk
9.3.3.1 The risk that the counterparty will no longer perform its obligations under
the contract, or that the counterparty’s credit quality will decline to the point
where there is uncertainty about its ability to perform.
9.3.4 Risk Factor No. 4: Future Financial Management
9.3.4.1 Market Access Risk: The risk that the City will be unable to obtain
derivatives contracts when needed in the future on reasonably favorable
terms, including new derivatives upon early or scheduled termination of
existing hedges (“Rollover Risk”).
9.3.4.2 Loss of Flexibility: The risk that a swap contract will limit the issuer’s debt
management options in the future due to an inability to modify or terminate
the swap without cost.
9.3.5 Risk Factor No. 5: Management Complexity
9.3.5.1 The risk that certain swap contracts may add a level of complexity to
financial management that will require ongoing commitment of additional
resources. The utilization of a financial advisory firm to assist or review
transactions prior to entering into an arrangement may be required.
Page 16 of 18
Investment Policy 2024/2025
10.0 STATEMENTS OF INVESTMENT ACTIVITIES
10.1 Annual Statement of Investment Policy
The City Treasurer shall annually render to the City Council a statement of investment policy,
which the City shall consider at a public meeting. Any changes in the investment policy shall also
be considered by the City Council of the City at a public meeting.
10.2 Quarterly Report of Investments
The City Treasurer shall render a quarterly report to City Council. The quarterly report shall be
so submitted within 45 days following the end of the quarter covered by the report. This report
shall include the type of investment, issuer, date of maturity par and dollar amount invested on all
securities, investments and moneys held by the City and shall additionally include a description of
any of the City's funds, investments, or programs that are under the management of contracted
parties, including lending programs. With respect to all securities held by the City and under
management of any outside party that is not also a local agency or the State of California Local
Agency Investment Fund (LAIF), the report shall also include a current market value as of the date
of the report, and shall include the source of this same valuation.
For local agency investments that have been placed in the State of California Local Agency
Investment Fund (LAIF), in National Credit Union Share Insurance Fund-insured accounts in a
credit union, in accounts insured or guaranteed pursuant to Section 14858 of the California
Financial Code, or in Federal Deposit Insurance Corporation-insured accounts in a bank or savings
and loan association, in a California County investment pool, or any combination of these, the City
Treasurer and the Treasurer's Department may supply to the City Council the most recent
statements received by the City from these institutions.
The quarterly report shall state compliance of the portfolio to this Investment Policy, or the manner
in which the portfolio is not in compliance. The quarterly report shall include a statement denoting
the ability of the City to meet its budgeted expenditure requirements for the next six months, or
provide an explanation as to why sufficient money shall, or may, not be available. In the quarterly
report, a subsidiary ledger of investments may be used in accordance with accepted accounting
practices.
10.3 Monthly Investment Transaction Report
The authority of the City Council to invest or to reinvest funds of the City, or to sell or exchange
securities so purchased has been delegated for a one-year period by the City Council to the City
Treasurer, who shall thereafter assume full responsibility for those transactions and shall make a
timely monthly report of those transactions to the City Council.
11.0 CONFLICT OF INTEREST
No City employee shall, outside of regular working hours, engage in any professions, trade,
business, or occupation which is incompatible or involves a conflict of interest with his/her duties
as a City Officer or employee.
Page 17 of 18
Investment Policy 2024/2025
12.0 PUBLIC INQUIRY
The City Treasurer's portfolio and related transactions are a matter of public record. Any member
of the public may receive a copy of the portfolio or this Investment Policy by requesting a copy at
the Treasurer's Office. The Treasurer may charge a fee for the copy, as allowed by law.
13.0 ANALYSIS OF PROSPECTIVE INVESTMENTS
Due to the complexity of the various investment instruments available and uncertainty of market
conditions the Treasurer may seek professional advice in making investment decisions in order to
optimize investment selections.
14.0 SAFEKEEPING
As required by California Government Code Section 53601 all investment instruments in a
negotiable, bearer, registered, or nonregistered format, shall be delivered to the City's custodial
bank by using book entry or physical delivery. The "delivery vs. payment" purchase procedure
shall be used.
The City’s custodial bank for safekeeping of the bonds, notes, bills, debentures, obligations,
certificates of indebtedness, warrants, or other evidences of indebtedness in which the money of
the City is invested pursuant to this policy shall be one of the following: (a) a federal or state
association (as defined by Section 5102 of the Financial Code), (b) a trust company or a state or
national bank located within California, (c) the Federal Reserve Bank of San Francisco or any
branch thereof within California, (d) any Federal Reserve Bank, or (e) with any state or national
bank located in any city designated as a reserve city by the Board of Governors of the Federal
Reserve System.
15.0 BROKER/DEALER AND DEPOSITORY INSTITUTION
RELATIONSHIPS
15.1 Approved List of Broker/Dealer Institutions
Subject to Section 7.0, the City Treasurer shall approve and maintain a list of broker/dealers and
depository institutions authorized to provide investment and other services to the City. All
investments must be made with institutions that have been approved by the City Treasurer prior to
investing.
15.2 Broker/Dealer Commissions and Fees Chargeable to the City
All broker/dealers who transact with the City and buy and sell securities on the City's behalf
shall earn a commission or charge a fee not to exceed an amount deemed prudent and reasonable
by the Financial Industry Regulatory Authority (“FINRA”) and what is customary in the industry
for the types of securities being purchased by the City.
Page 18 of 18
Investment Policy 2024/2025
15.3 Deposit and Investment of Funds of the City
All depository institutions that do business with the City shall be in compliance with the
requirements of Article 2, commencing with Section 53630, of the Government Code of the State
of California, concerning the deposit of funds, including the overall creditworthiness and credit
ratings requirements of the sections of that Article.