Agenda packet, first session — Arcata City Council, January 21, 2026 (part 2 of 2)

21 allows local agencies to purchase more than $250,000 in CDs from a single financial institution (must be a participating institution of CDARS) while still maintaining FDIC insurance coverage.

Intrafi is an entity providing this service. CDARS facilitates the trading of deposits between the California institution and other participating institutions in amounts that are less than $250,000 each, so that FDIC coverage is maintained.

Collateralization - A process by which a borrower pledges securities, property, or other deposits for the purpose of securing the repayment of a loan and/or security.

Collateralized Bank Deposit - A bank deposit that is collateralized at least 100% (principal plus interest to maturity). The deposit is collateralized using assets set aside by the issuer such as Treasury securities or other qualified collateral to secure the deposit in excess of the limit covered by the Federal Deposit Insurance Corporation.

Collateralized Mortgage Obligations (CMO) - Classes of bonds that redistribute the cash flows of mortgage securities (and whole loans) to create securities that have different levels of prepayment risk, as compared to the underlying mortgage securities.

Collateralized Time Deposit - Time deposits that are collateralized at least 100% (principal plus interest to maturity). These instruments are collateralized using assets set aside by the issuer such as Treasury securities or other qualified collateral to secure the deposit in excess of the limit covered by the Federal Deposit Insurance Corporation.

Commercial Paper - An unsecured short-term promissory note issued by corporations, with maturities ranging from 2 to 270 days.

Coupon - The annual rate of interest that a bond's issuer promises to pay the bondholder on the bond's face value; a certificate attached to a bond evidencing interest due on a payment date.

Credit Risk - The risk that principal and/or interest on an investment will not be paid in a timely manner due to changes in the condition of the issuer.

Custodian - A bank or other financial institution that keeps custody of stock certificates and other assets.

Dealer - Someone who acts as a principal in all transactions, including buying and selling from his/her own account/
Delivery vs. Payment (DVP) - A securities industry procedure whereby payment for a security must be made at the time the security is delivered to the purchaser’s agent.

Discount - The amount by which the par value of a security exceeds the price paid for the security.

Diversification - A process if investing assets among a range of security types by sector, maturity and quality rating.

Duration - The weighted average time to maturity of a bond where the weights are the present values of the future cash flows. Duration measures the price sensitivity of a security to changes

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22 interest rates.

Fair Value - The amount at which an investment could be exchanged in a current transaction between willing parties.

Federal Deposit Insurance Corporation (FDIC) - The Federal Deposit Insurance Corporation (FDIC) is an independent federal agency insuring deposits in U.S. banks and thrifts in the event of bank failures. The FDIC was created in 1933 to maintain public confidence and encourage stability in the financial system through the promotion of sound banking practices.

Federally Insured Time Deposit - A time deposit is an interest-bearing bank deposit account that has a specified date of maturity, such as a certificate of deposit (CD). These deposits are limited to funds insured in accordance with FDIC insurance deposit limits.

Fiduciary - A person or organization that acts on behalf of another person(s) or organization that puts their clients’ interest ahead of their own as they are bound both legally and ethically to act in the other’s best interests.

Interest Rate - The annual rate of income received by an investor from the issuer of certain types of fixed income securities.

Investment Policy - A concise and clear statement of the objectives and parameters formulated by an investor or investment manager for a portfolio of investment securities.

Joint Powers Authority (JPA) - An entity created by two or more public agencies that share a common goal in order to jointly exercise powers common to all members through a joint powers agreement or contract.

Leverage - Borrowing funds in order to invest in securities that have the potential to pay earnings at a rate higher than the cost of borrowing.

Liquidity - An asset that can be converted easily and quickly to cash without significant loss of value.

Local Agency Investment Fund (LAIF) - A voluntary investment fund open to government entities in California that is managed by the State Treasurer's Office.

Local Government Investment Pool (LGIP) - Investment pools that range from the State Treasurer’s Office Local Agency Investment Fund (LAIF) to county pools, to Joint Powers Authorities (JPAs). These funds are not subject to the same SEC rules applicable to money market mutual funds.

Make Whole Call - A type of call provision on a bond that allows the issuer to pay off the remaining debt early. Unlike a call option, with a make whole call provision, the issuer makes a lump sum payment that equals the net present value (NPV) of future coupon payments that will not be paid because of the call. With this type of call, an investor is compensated, or "made whole." Margin - The difference between the market value of a security and the loan a broker makes using

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23 that security as collateral.

Market Risk - The risk that the value of securities will fluctuate with changes in overall market conditions or interest rates.

Market Value - The price at which a security is trading and presumably could be purchased or sold at a particular point in time.

Maturity - The date on which the principal or stated value of an investment becomes due and payable. The investment’s term or remaining maturity is measured from the settlement date to final maturity.

Medium Term Notes - Unsecured, investment-grade senior debt securities of major corporations which are sold in relatively small amounts on either a continuous or an intermittent basis. MTNs are highly flexible debt instruments that can be structured to respond to market opportunities or to investor preferences.

Modified Duration - The percent change in price for a 100-basis point change in yields. Modified duration is the best single measure of a portfolio’s or security’s exposure to market risk.

Money Market - The market in which short-term debt instruments (T-bills, discount notes, commercial paper, and banker’s acceptances) are issued and traded.

Money Market Mutual Fund - Mutual funds that invest solely in money market instruments (short-term debt instruments, such as Treasury bills, commercial paper, banker's acceptance, repos and federal funds)
Mortgage Pass-Through Securities- A securitized participation in the interest and principal cash flows from a specified pool of mortgages. Principal and interest payments made on the mortgages are passed through to the holder of the security.

Municipal Securities - Securities issued by state and local agencies to finance capital and operating expenses.

Mutual Funds - An investment company that pools money and can invest in a variety of securities, including fixed-income securities and money market instruments.

Nationally Recognized Statistical Rating Organization (NRSRO) - A credit rating agency that the Securities and Exchange Commission in the United States uses for regulatory purposes. Credit rating agencies provide assessments of an investment's risk. The issuers of investments, especially debt securities, pay credit rating agencies to provide them with ratings. The three most prominent NRSROs are Fitch, S&P, and Moody's.

Negotiable Certificate of Deposit (CD) - A short-term debt instrument that pays interest and is issued by a bank, savings or federal association, state or federal credit union, or state-licensed branch of a foreign bank. Negotiable CDs are traded in a secondary market.

Offer (Ask) - An indicated price at which market participants are willing to sell a security. Also

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24 referred to as the “ask price”.

Par Value - The amount of principal which must be paid at maturity. Also referred to as the face amount of a bond, typically $1,000 per bond.

Paydown - A reduction in the principal amount owed on a bond, loan, or other debt.

Placement Service Deposits - A private service that allows local agencies to invest in FDICinsured deposits with one or more banks, savings and loans, and credit unions located in the United States. IntraFi (formerly known as CDARS) is an example of an entity that provides this service.

Portfolio - Combined holding of more than one stock, bond, commodity, real estate investment, cash equivalent, or other asset. The purpose of a portfolio is to reduce risk by diversification.

Premium - The amount by which the price paid for a security exceeds the securities par value.

Primary Dealer - A financial institution (1) that is a trading counterparty with the Federal Reserve in its execution of market operations to carry out U.S. monetary policy, and (2) that participates for statistical reporting purposes in compiling data on activity in the U.S. Government securities market.

Principal - The face value or par value of a debt instrument, or the amount of capital invested in a given security.

Prospectus - A legal document that must be provided to any prospective of a new securities offering registered with the SEC that typically includes information on the issuer, the issuer's business, the proposed use of proceeds, the experience of the issuer's management, and certain certified financial information (also known as an "official statement").

Prudent Investor Standard - A standard of conduct where a person acts with care, skill, prudence, and diligence when investing, purchasing, acquiring, exchanging, selling, and managing funds.

The test of whether the standard is being met is if a prudent person acting in a similar situation would engage in similar conduct to ensure that investments safeguard principal and maintain liquidity.

Regional Dealer. A financial intermediary that buys and sells securities for the benefit of its customers without maintaining substantial inventories of securities and that is not a primary dealer.

Repurchase Agreements - An agreement of one party to sell securities to a second party and simultaneous agreement by the first party to repurchase the securities at a specified price from the second party on demand or at a specified date.

Safekeeping Service - Offers storage and protection of assets provided by an institution serving as an agent.

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25 was created by Congress in 1934 as the first federal regulator of securities markets. The SEC promotes full public disclosure, protects investors against fraudulent and manipulative practices in the market, and monitors corporate takeover actions in the United States.

Securities and Exchange Commission (SEC) Rule 15c3-1 - An SEC rule setting capital requirements for brokers and dealers. Under Rule 15c3-1, a broker or dealer must have sufficient liquidity in order to cover the most pressing obligations. This is defined as having a certain amount of liquidity as a percentage of the broker/dealer's total obligations. If the percentage falls below a certain point, the broker or dealer may not be allowed to take on new clients and may have restrictions placed on dealings with current client.

Structured Note - A complex, fixed income instrument, which pays interest, based on a formula tied to other interest rates, commodities or indices. Examples include inverse floating rate notes which have coupons that increase when other interest rates are falling, and which fall when other interest rates are rising, and "dual index floaters," which pay interest based on the relationship between two other interest rates - for example, the yield on the ten-year Treasury note minus the Libor rate. Issuers of such notes lock in a reduced cost of borrowing by purchasing interest rate swap agreements.

Supranational - A Supranational is a multi-national organization whereby member states transcend national boundaries or interests to share in the decision making to promote economic development in the member countries.

Third Party Custodian - An independent, third-party custodial safekeeping provider that has a fiduciary responsibility for safekeeping their client’s assets to minimize the risk of a fraudulent transaction.

Total Rate of Return - A measure of a portfolio’s performance over time. It is the internal rate of return, which equates the beginning value of the portfolio with the ending value; it includes interest earnings, realized and unrealized gains, and losses in the portfolio.

US Treasury Obligation - Debt obligations of the Unites States Government sold by the Treasury Department in the forms of Bills, Notes, and Bonds. Bills are short-term obligations that mature in 1 year or less and are sold on the basis of a rate of discount. Notes are obligations which mature between 1 to 10 years. Bonds are long-term obligations which generally mature in 10 years or more.

Treasury Bills - All securities issued with initial maturities of one year or less are issued as discounted instruments and are called Treasury bills. The Treasury currently issues three- and sixmonth T-bills at regular weekly auctions. It also issues “cash management” bills as needed to smooth out cash flows.

Treasury Notes- All securities issued with initial maturities of two to ten years are called Treasury notes and pay interest semi-annually.

Treasury Bonds - All securities issued with initial maturities greater than ten years are called

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26 Treasury bonds. Like Treasury notes, they pay interest semi-annually.

Weighted Average Maturity (WAM) - The average maturity of all the securities that comprise a portfolio that is typically expressed in days or years.

Volatility - The rate at which security prices change with changes in general economic conditions or the general level of interest rates.

Yield - The current rate of return on an investment security generally expressed as a percentage of the security's current price.

Yield Curve - A graphic representation that shows the relationship at a given point in time between yields and maturity for bonds that are identical in every way except maturity.

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Investment Policy
(Revised 1/21/2026)

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2 INVESTMENT POLICY
City of Arcata
Table of Contents
I. Investment Philosophy
A. Policy 3
B. Investment Objectives 3
C. Prudence 4
D. Ethics and Conflicts of Interest 4
II. Operational and Procedural Matters
A. Scope 5
B. Delegation of Authority 5
C. Authorized Financial Institutions, Depositories, and Broker/Dealers 5 D. Delivery vs. Payment 7
E. Safekeeping of Securities 7
III. Permitted Investments and Risk Management
A. Authorized Investments 7
B. Prohibited Investment Vehicles and Practices 13
C. Investment Pools/Mutual Funds 13
D. Collateralization 14
E. Socially Responsible Investing 14
F. Mitigating Credit Risk in the Portfolio 15
G. Mitigating Market Risk in the Portfolio 15
H. Maximum Maturity 16
IV. Specific Objectives and Expectations
A. Overall Objective 16
B. Specific Objective 16
V. Reporting, Disclosure and Program Evaluation
A. Quarterly Reports 16
B. Annual Reports 17
C. Review of the Investment Portfolio 17
D. Performance Evaluation 18
E. Internal Controls 18
F. Annual Audit 18
G. Special Audits 18
Glossary of Terms 19

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3 INVESTMENT POLICY
The City of Arcata
The Arcata Community Development Agency
Originally Adopted April 15, 1998, Revised 09/18/2024
I. INVESTMENT PHILOSOPHY
A. Policy

1. This Investment Policy is set forth by the City of Arcata (the City) and the Arcata Community Development Agency (ACDA), collectively referred to as the City, for the following purposes:
a) To establish a clear understanding for the City Council, City management, responsible employees, citizens and third parties of the objectives, policies and guidelines for the investment of City and ACDA idle and surplus funds; b) To offer guidance to investment staff and any external investment advisors on the investment of City and ACDA funds; and
c) To establish a basis for evaluating investment results

2. The City establishes investment policies which meet its current investment goals.

The City shall review this policy annually, and may change its policies as its investment objectives change.

3. This policy is written to incorporate industry best practices and recommendations from sources such as the Government Finance Officers Association (GFOA), California Municipal Treasurers Association (CMTA), California Debt and Investment Advisory Commission (CDIAC) and the Association of Public Treasurers (APT).

B. Investment Objectives

1. The objectives of this investment policy are, in order of priority:
a) To ensure safety of invested funds;
b) To maintain sufficient liquidity to meet cash flow needs; c) To attain a "market average rate of return" consistent with the primary objectives of safety and liquidity. The expected rate of return on the City's portfolio is more specifically defined in Section IV; and d) To assure ongoing compliance with all Federal, State and local laws governing the investment of moneys under the control of the City Treasurer.

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4 e) To invest public funds in a manner that contributes to the well-being and enrichment of the community.

C. Prudence

1. The Prudent Person Standard shall be used by investment officials, and shall be applied in the context of managing an overall portfolio. Investment staff acting in accordance with written procedures and the investment policy and exercising due diligence shall be relieved of personal responsibility for an individual security's credit risk or market price changes, provided deviations from expectations are reported within 30 days and appropriate action is taken to control adverse developments.

2. Pursuant to California Government Code, Section 53600.3, all persons authorized to make investment decisions on behalf of the Agency are trustees and therefore fiduciaries subject to the Prudent Investor Standard: “…all governing bodies of local agencies or persons authorized to make investment decisions on behalf of those local agencies investing public funds pursuant to this chapter are trustees and therefore fiduciaries subject to the prudent investor standard. When investing, reinvesting, purchasing, acquiring, exchanging, selling, and managing public funds, a trustee shall act with care, skill, prudence and diligence under the circumstances then prevailing, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the agency. Within the limitations of this section and considering individual investments as part of an overall strategy, a trustee is authorized to acquire investments as authorized by law.”
D. Ethics and Conflicts of Interest

1. All participants in the investment process shall act as custodians of the public trust. Investment officials shall recognize that the investment portfolio is subject to public review and evaluation. Officers and employees involved in the investment process shall refrain from personal business activity that could conflict with proper execution of the investment program, or which could impair their ability to make impartial investment decisions.

2. Employees and investment officials shall disclose to the Finance Director any material interests in financial institutions with which they conduct business, and they shall further disclose any large personal financial/investment positions that could be related to the performance of the investment portfolio. Employees and officers shall refrain from undertaking any personal investment transactions with the same individual with whom business is conducted on behalf of the City.

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5 II. OPERATIONAL AND PROCEDURAL MATTERS
A. Scope

1. The City's investment policy applies to all financial assets and investment activities of the City and ACDA with the following exceptions:
a) The City's Deferred Compensation Plan is excluded because it is managed by a third party administrator and invested by individual plan participants; and b) Proceeds of debt issuance shall be invested in accordance with the general investment philosophy of the City as set forth in this policy; however, such proceeds are invested in accordance with permitted investment provisions of their specific bond indentures.

2. Except for cash in certain restricted and special funds, the City will consolidate cash and reserve balances from all funds to maximize investment earnings and to increase efficiencies with regard to investment pricing, safekeeping and administration. Investment income will be allocated to the various funds based on their respective participation and in accordance with generally accepted accounting principles.

B. Delegation of Authority

1. Authority to manage the City's investment program is derived from the California Government Code Sections 41006 and 53600 et seq., and Section 1100 of the Arcata Municipal Code.

2. The City may engage the services of one or more external investment managers to assist in the management of the City's investment portfolio in a manner consistent with the City's objectives. Such external managers may be granted discretion to purchase and sell investment securities in accordance with this Investment Policy.

Such managers must be registered under the Investment Advisors Act of 1940.

3. The City's overall investment program shall be designed and managed with a degree of professionalism that is worthy of the public trust. The City recognizes that in a diversified portfolio, occasional measured losses may be inevitable and must be considered within the context of the overall portfolio’s return and the cash flow requirements of the City.

C. Authorized Financial Institutions, Depositories, and Broker/Dealers

1. To the extent practicable, the Treasurer shall endeavor to complete investment transactions using a competitive bid process whenever possible. The City’s Treasurer will determine which financial institutions are authorized to provide investment services to the City. It shall be the City’s policy to purchase securities only from authorized institutions and firms.

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6 2. The Treasurer shall maintain procedures for establishing a list of authorized broker/dealers and financial institutions which are approved for investment purposes that are selected through a process of due diligence as determined by the City. Due inquiry shall determine whether such authorized broker/dealers, and the individuals covering the City are reputable and trustworthy, knowledgeable and experienced in Public Agency investing and able to meet all of their financial obligations. These institutions may include "primary" dealers or regional dealers that qualify under Securities and Exchange Commission (SEC) Rule 15c3-1 (uniform net capital rule).

3. In accordance with Section 53601.5, institutions eligible to transact investment business with the City and ACDA include:
a) Institutions licensed by the state and proof of FINRA certification as a brokerdealer, as defined in Section 25004 of Corporations Code. b) Institutions that are members of a federally regulated securities exchange. c) Primary government dealers as designated by the Federal Reserve Bank and non-primary government dealers;
d) Nationally or state-chartered banks;
e) Savings association or federal association (as defined in Section 5102 of the Financial Code);
f) The Federal Reserve Bank; and
g) Direct issuers of securities eligible for purchase by the City;

4. Selection of financial institutions and broker/dealers authorized to engage in transactions with the City shall be at the sole discretion of the City, except where the City utilizes an external investment adviser in which case the City may rely on the adviser for selection.

5. All financial institutions which desire to become qualified bidders for investment transactions (and which are not dealing only with the investment adviser) must supply the City Treasurer with a statement certifying that the institution has reviewed the California Government Code Section 53600 et seq. and the City's Investment Policy and that all securities offered to the City shall comply fully and in every instance with all provisions of the Code and with this Investment Policy.

6. Public deposits shall be made only in qualified public depositories within the State of California as established by state law. Deposits shall be insured by the Federal Deposit Insurance Corporation, or, to the extent the amount exceeds the insured maximum, shall be collateralized with securities in accordance with State law.

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7 7. Selection of broker/dealers used by an external investment adviser retained by the City will be at the sole discretion of the adviser. Where possible, transactions with broker/dealers shall be selected on a competitive basis and their bid or offering prices shall be recorded. If there is no other readily available competitive offering, best efforts will be made to document quotations for comparable or alternative securities. When purchasing original issue instrumentality securities, no competitive offerings will be required as all dealers in the selling group offer those securities at the same original issue price.

D. Delivery vs. Payment
All investment transactions of the City shall be conducted using standard delivery vs payment procedures where the security must be delivered before funds are released.

E. Safekeeping of Securities
To protect against potential loss by collapse of individual securities dealers, and to enhance access to securities, interest payments and maturity proceeds, all securities owned by the City shall be held in safekeeping by a third party bank trust department, acting as agent for the City under the terms of a custody agreement executed by the bank and by the City. All investment transactions will require a safekeeping receipt or acknowledgment generated from the trade. A monthly report will be received by the City from the custodian listing all securities held in safekeeping with current market data and other information. The only exceptions to the foregoing shall be depository accounts and securities purchases made with: (i) local government investment pools; (ii) time certificates of deposit, and, (iii) mutual funds and money market mutual funds, since these securities are not deliverable.

III. PERMITTED INVESTMENTS AND PORTFOLIO RISK MANAGEMENT A. Authorized Investments: All investments shall be made in accordance with Sections 53600 et seq. of the Government Code of California and as described within this Investment Policy. In the event a discrepancy is found between this policy and the Code, the more restrictive parameters will take precedence. Percentage holding limits listed in this section apply at the time the security is purchased.

Any investment currently held at the time the policy is adopted which does not meet the new policy guidelines can be held until maturity and shall be exempt from the current policy. At the time of the investment’s maturity or liquidation, such funds shall be reinvested only as provided in the current policy.

An appropriate risk level shall be maintained by primarily purchasing securities that are of high quality, liquid, and marketable. The portfolio shall be diversified by security type and institution to avoid incurring unreasonable and avoidable risks

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8 regarding specific security types or individual issuers.

Permitted investments under this policy shall include:

1. U.S. Treasuries and other government obligations for which the full faith and credit of the United States are pledged for the payment of principal and interest.

There are no limits on the dollar amount or percentage that the City may invest in U.S. Treasuries, provided that:
a) The maximum maturity is five (5) years.

2. Federal Agencies or United States Government-Sponsored Enterprise obligations, participations, or other instruments, including those issued by or fully guaranteed as to principal and interest by federal agencies or United States government-sponsored enterprises. There are no limits on the dollar amount or %age that the Agency may invest in Federal Agency or Government-Sponsored Enterprises (GSEs), provided that:
a) No more than 30% of the total portfolio may be invested in any single Agency/GSE issuer.
b) The maximum maturity does not exceed five (5) years. c) The maximum percent of agency callable securities in the total portfolio will be 20%.

3. Banker's Acceptances provided that:
a) They are issued by institutions which have short-term debt obligations rated “A-1” or its equivalent or better by at least one NRSRO; or long-term debt obligations which are rated in a rating category of “A” or its equivalent or better by at least one NRSRO.
b) The maturity does not exceed 180 days.
c) No more than 40 % of the total portfolio may be invested in banker's acceptances.
d) No more than 5% of the total portfolio may be invested in any single issuer.

4. Federally Insured Time Deposits (Non-negotiable certificates of deposit) in state or federally chartered banks, savings and loans, or credit unions, provided that:
a) The amount per institution is limited to the maximum covered under federal insurance.
b) No more than 20% of the total portfolio will be invested in a combination of federally insured and collateralized time deposits.

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9 c) The maximum maturity does not exceed five (5) years.

5. Collateralized Time Deposits (Non-negotiable certificates of deposit) in state or federally chartered banks, savings and loans, or credit unions in excess of insured amounts which are fully collateralized with securities in accordance with California law, provided that:
a) No more than 20 % of the total portfolio shall be invested in a combination of federally insured and collateralized time deposits.
b) The maximum maturity does not exceed five (5) years.

6. Negotiable Certificates of Deposit (NCDs), issued by a nationally or statechartered bank, a savings association or a federal association, a state or federal credit union, or by a federally licensed or state-licensed branch of a foreign bank, provided that:
a) The amount of the NCD insured up to the FDIC limit does not require any credit ratings.
b) Any amount above the FDIC insured limit must be issued by institutions which have short-term debt obligations rated “A-1” or its equivalent or better by at least one Nationally Recognized Statistical Ratings Organization (NRSRO); or long-term obligations rated in a rating category of “A” or it’s equivalent or better by at least one NRSRO.
c) No more than 30 % of the total portfolio may be invested in NCDs. d) No more than 5% of the total portfolio may be invested in any single issuer. e) The maximum maturity does not exceed five (5) years.

7. Repurchase Agreements collateralized with securities authorized under California Government Code, maintained at a level of at least 102% of the market value of the repurchase agreements. There are no limits on the dollar amount or percentage that the City may invest, provided that:
a) The maximum maturity does not exceed one (1) year.
b) Securities used as collateral for repurchase agreements will be delivered to an acceptable third party custodian bank.
c) The repurchase agreements are the subject of a master repurchase agreement between the City and the provider of the repurchase agreement. The master repurchase agreement shall be substantially in the form developed by the Securities Industry and Financial Markets Association (SIFMA).

8. Commercial Paper provided that the securities are issued by an entity that meets all of the following conditions in either paragraph (a) or (b) and other

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10 requirements specified below:
a) Securities issued by corporations:
i. A corporation organized and operating in the United States with assets more than $500 million.
ii. The securities are rated “A-1” or its equivalent or better by at least one NRSRO.
iii. If the issuer has other debt obligations, they must be rated in a rating category of “A” or its equivalent or better by at least one NRSRO. b) Securities issued by other entities:
i. The issuer is organized within the United States as a special purpose corporation, trust, or limited liability company.
ii. The securities must have program-wide credit enhancements including, but not limited to, overcollateralization, letters of credit, or a surety bond. iii. The securities are rated “A-1” or its equivalent or better by at least one NRSRO.
c) No more than 10% of the outstanding commercial paper for any single issuer. d) No more than 25% of the total portfolio may be invested in commercial paper. e) The maturity does not exceed 397 days.
f) No more than 5% of the total portfolio may be invested in any single issuer.

9. Corporate Medium Term Notes, provided that:
a) Such notes have a maximum maturity of five years.
b) Are 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.
c) Are rated in a rating category of "A" or its equivalent or better by at least one NRSRO.
d) No more than 5% of the total portfolio may be invested in any single issuer. e) Holdings of medium-term notes may not exceed 30% of the total portfolio.

10. Asset-Backed, Mortgage-Backed, Mortgage Pass-Through securities and Collateralized Mortgage Obligations from issuers not defined in sections 1 and 2 of the Authorized Investments section of this policy, provided that:
a) Such securities shall have a maximum stated final maturity of five years.

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11 b) Shall be rated “AA” or its equivalent or better by a NRSRO. c) No more than 5% of the total portfolio may be invested in any single AssetBacked or Commercial Mortgage security issuers. d) Purchase of securities authorized by this subdivision may not exceed 20% of the total portfolio.

11. Mutual Funds and Money Market Mutual Funds that are registered with the Securities and Exchange Commission under the Investment Company Act of 1940, provided that:
a) Mutual Funds that invest in the securities and obligations as authorized under California Government Code, Section 53601 (a) to (k) and (m) to (q) inclusive and that meet either i or ii of the following criteria:
i. Attained the highest ranking or the highest letter and numerical rating provided by not less than two (2) NRSROs; or
ii. Have 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 California Government Code, Section 53601 and with assets under management in excess of $500 million.
iii. No more than 10% of the total portfolio may be invested in shares of any one mutual fund.
b) Money Market Mutual Funds registered with the Securities and Exchange Commission under the Investment Company Act of 1940 and issued by diversified management companies and meet either i or ii of the following criteria:
i. Have attained the highest ranking or the highest letter and numerical rating provided by not less than two (2) NRSROs; or
ii. Have 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 $500 million.
iii. No more than 20% of the total portfolio may be invested in the shares of any one Money Market Mutual Fund.
c) No more than 20% of the total portfolio may be invested in these securities.

12. Local Government Investment Pools (LGIP)
a) State of California Local Agency Investment Fund (LAIF), provided

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12 that
i. The City and ACDA may invest up to the maximum permitted amount in LAIF; and
ii. LAIF's investments in instruments prohibited by or not specified in the City's policy do not exclude it from the City's list of allowable investments, provided that the fund's reports allow the City Treasurer to adequately judge the risk inherent in LAIF's portfolio. b) Shares of Beneficial Interest Issued by a Joint Powers Authority (JPA), provided that:
i. The JPA is organized pursuant to California Government Code Section 6509.7 and invests in the securities and obligations authorized in subdivisions (a) to (r), inclusive.
ii. Each share shall represent an equal proportional interest in the underlying pool of securities owned by the JPA.
iii. The JPA has retained an investment advisor who is registered with the SEC (or exempt from registration), has assets under management in excess of $500 million, and has at least five years’ experience investing in instruments authorized by Section 53601, subdivisions (a) to (q). c) Other Local Government Investment Pools (LGIP)
i. Other LGIPs permitted by the City (such as a County Pool defined by Section 27000.3).
ii. No more than 20% of the total portfolio may be invested in LGIPs other than LAIF and JPAs.

13. Municipal Securities include obligations of the City, the State of California and any local agency within the State of California, provided that:
a) The securities are rated in a rating category of “A” or its equivalent or better by at least one NRSRO.
b) No more than 5% of the total portfolio may be invested in any single issuer. c) No more than 30% of the total portfolio may be in Municipal Securities. d) The maximum maturity does not exceed five (5) years.

14. Municipal Securities (Registered treasury notes or bonds) of any of the other 49 states in addition to California, including bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by a state or by a department, board, agency, or authority of any of the other 49 states, in addition to California.

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13 a) The securities are rated in a rating category of “A” or its equivalent or better by at least one NRSRO.
b) No more than 5% of the total portfolio may be invested in any single issuer. c) No more than 30% of the total portfolio may be in Municipal Securities. d) The maximum maturity does not exceed five (5) years.

15. Placement Service Deposits, provided that:
a) No more than 30% of the total portfolio may be invested in a combination of Certificates of Deposit, including CDARS.
b) The maximum maturity does not exceed five (5) years.

16. Collateralized Bank Deposits. City’s deposits with financial institutions will be collateralized with pledged securities per California Government Code, Section 53651. There are no limits on the dollar amount or percentage that the City may invest in collateralized bank deposits.

17. Supranationals, provided that:
a) Issues are US dollar denominated senior unsecured unsubordinated obligations issued or unconditionally guaranteed by the International Bank for Reconstruction and Development, International Finance Corporation, or InterAmerican Development Bank. b) The securities are rated in a rating category of “AA” or its equivalent or better by a NRSRO.
c) No more than 30% of the total portfolio may be invested in these securities. d) No more than 10% of the total portfolio may be invested in any single issuer. e) The maximum maturity does not exceed five (5) years.

B. Prohibited Investment Vehicles and Practices

1. State law notwithstanding, any investments not specifically described herein are prohibited, including, but not limited to, unregulated and/or unrated investment pools or trusts and futures and options.

2. In accordance with Government Code Section 53601.6, investment in inverse floaters, range notes, or mortgage derived interest-only strips is prohibited

3. Investment in any security that could result in a zero interest accrual if held to maturity is prohibited. Under a provision sunsetting on January 1, 2031, securities backed by the U.S. Government that could result in a zero- or negative-interest accrual if held to maturity are permitted.

4. Trading securities for the sole purpose of speculating on the future direction of

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14 interest rates is prohibited.

5. Purchasing or selling securities on margin in prohibited.

6. The use of reverse repurchase agreements, securities lending or any other form of borrowing or leverage is prohibited.

7. The purchase of foreign currency denominated securities is prohibited.

8. Prohibited investments held in the portfolio at the time of adoption of this policy may be held until maturity at the discretion of the Treasurer.

9. The purchase of a security with a forward settlement date exceeding 45 days from the time of the investment is prohibited.

C. Investment Pools/Mutual Funds
The City shall conduct a thorough investigation of any pool or mutual fund prior to making an investment, and on a continual basis thereafter. Annually, the Treasurer shall seek responses to the following questions from any investment pool or mutual fund in which the Agency invests:

1. A description of eligible investment securities, and a written statement of investment policy and objectives.

2. A description of interest calculations and how it is distributed, and how gains and losses are treated.

3. A description of how the securities are safeguarded (including the settlement processes), and how often the securities are priced and the program audited.

4. A description of who may invest in the program, how often, what size deposit and withdrawal are allowed.

5. A schedule for receiving statements and portfolio listings.

6. Are reserves, retained earnings, etc. utilized by the pool/fund?

7. A fee schedule, and when and how is it assessed.

8. Is the pool/fund eligible for bond proceeds and/or will it accept such proceeds? D. Collateralization

1. Certificates of Deposit (CDS). The City shall require any commercial bank or savings and loan association to deposit eligible securities with an agency of a depository approved by the State Banking Department to secure any uninsured portion of a Non-Negotiable Certificate of Deposit. The value of eligible securities as defined pursuant to California Government Code, Section 53651, pledged against a Certificate of Deposit shall be equal to 150% of the face value of the CD if the securities are classified as mortgages and 110% of the face value

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15 of the CD for all other classes of security.

2. Collateralization of Bank Deposits. This is the process by which a bank or financial institution pledges securities, or other deposits for the purpose of securing repayment of deposited funds. The City shall require any bank or financial institution to comply with the collateralization criteria defined in California Government Code, Section 53651.

3. Repurchase Agreements. The City requires that Repurchase Agreements be collateralized only by securities authorized in accordance with California Government Code:
a) The securities which collateralize the repurchase agreement shall be priced at Market Value, including any Accrued Interest plus a margin. The Market Value of the securities that underlie a repurchase agreement shall be valued at 102% or greater of the funds borrowed against those securities. b) Securities used as collateral for Repurchase Agreements will be delivered to an acceptable third party custodian.
c) Financial institutions shall mark the value of the collateral to market at least monthly and increase or decrease the collateral to satisfy the ratio requirement described above.
d) The City shall receive monthly statements of collateral.

E. Socially Responsible Investing

1. In accordance with City of Arcata policy, prohibited investments also include investments in commercial paper or medium term notes of corporations that:
a) receive any of its revenue from the sale of tobacco or tobacco products; b) receive any of its revenue from the manufacture of nuclear weapons or nuclear weapon components;
c) receive any of its revenue from the production of nuclear energy;

2. In addition to the prohibitions outlined above, the long-term goal of this investment policy shall be to prohibit investment in corporations with a record of gross ecological and environmental degradation; gross violations of the rights of workers; or corporations that invest in countries that have gross violations of human rights.

F. Mitigating Credit Risk in the Portfolio
Credit risk is the risk that a security or a portfolio will lose some or all of its value due to a real or perceived change in the ability of the issuer to repay its debt. The City shall mitigate credit risk by adopting the following strategies:

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16 1. The diversification requirements included in Section III (A) are designed to mitigate credit risk in the portfolio;

2. No more than 5 % of the total portfolio may be invested in securities of any single issuer unless otherwise specific in this policy;

3. The City may elect to sell a security prior to its maturity and record a capital gain or loss in order to improve the quality, liquidity or yield of the portfolio in response to market conditions or the City's risk preferences; and

4. If securities owned by the City are downgraded by either Moody's or S&P to a level below the quality required by this Investment Policy, it shall be the City's policy to review the credit situation and make a determination as to whether to sell or retain such securities in the portfolio.
a) If a security is downgraded two grades below the level required by the City, the security shall be sold immediately.
b) If a security is downgraded one grade below the level required by this policy, the City Treasurer will use discretion in determining whether to sell or hold the security based on its current maturity, the loss in value, the economic outlook for the issuer, and other relevant factors.
c) If a decision is made to retain a downgraded security in the portfolio, its presence in the portfolio will be monitored and reported monthly to the City Council.

G. Mitigating Market Risk in the Portfolio
Market risk is the risk that the portfolio will decline in value (or will not optimize its value) due to changes in the general level of interest rates. The City recognizes that, over time, longer portfolios achieve higher returns. On the other hand, longer term portfolios have higher volatility of return. The City shall mitigate market risk by providing adequate liquidity for short term cash needs, and by making some longer term investments only with funds with are not needed for current cash flow purposes.

The City further recognizes that certain types of securities, including variable rate securities, securities with principal paydowns prior to maturity, and securities with embedded options, will affect the market risk profile of the portfolio differently in different interest rate environments. The City, therefore, adopts the following strategies to control and mitigate its exposure to market risk:

1. The maximum stated final maturity of individual securities in the portfolio shall be five years, except as otherwise stated in this policy;

2. The City shall maintain a minimum of three months of budgeted operating expenditures in short term investments to provide sufficient liquidity for expected

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17 disbursements; and

3. The duration of the portfolio will generally be approximately equal to the duration (typically, plus or minus 20%) of a market benchmark , an index selected by the City based on the City’s investment objectives, constraints and risk tolerances.

H. Maximum Maturity
To the extent possible, investments shall be matched with anticipated cash flow requirements and known future liabilities.

The City will not invest in securities maturing more than five (5) years from the date of trade settlement, unless the City Council has by resolution granted authority to make such an investment.

IV. SPECIFIC OBJECTIVES AND EXPECTATIONS
A. Overall Objective: The investment portfolio shall be designed with the overall objective of obtaining a total rate of return throughout economic cycles, commensurate with investment risk constraints and cash flow needs.

B. Specific Objective: The investment performance objective for the portfolio shall be to earn a total rate of return over a market cycle which is approximately equal to the return on the Benchmark Index.

V. REPORTING, DISCLOSURE AND PROGRAM EVALUATION
A. Monthly Reports
Monthly transaction reports will be submitted by the City Treasurer to the City Council in accordance with California Government Code Section 53607.

B. Quarterly Reports
Quarterly reports shall be submitted by the City Treasurer to the City Council within 45 days after the end of the quarter. These reports shall disclose at a minimum, the following information about the risk characteristics of the City's portfolio:

1. An asset listing showing par value, cost and accurate and complete market value of each security, type of instrument, issuer, and interest rate;

2. One page summary report which shows:
a) Average maturity of the portfolio and modified duration of the portfolio; b) Maturity distribution of the portfolio;
c) Average portfolio credit quality; and

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18 d) Time-weighted total rate of return for the portfolio for the prior three months, twelve months, year-to-date, and since inception compared to the Benchmark Index returns for the same periods;

3. A statement of compliance with investment policy, including a schedule of any transactions or holdings which do not comply with this policy or with the California Government Code, including a justification for their presence in the portfolio and a timetable for resolution; and

4. A statement that the City has adequate funds to meet its cash flow requirements for the next six months.

C. Annual Reports

1. The investment policy shall be reviewed and adopted at least annually within 120 days of the end of the fiscal year to ensure its consistency with the overall objectives of preservation of principal, liquidity and return, and its relevance to current law and financial and economic trends.

2. A comprehensive annual report shall be presented in conjunction with the investment policy review. This report shall include comparisons of the City's return to the Benchmark Index return, shall suggest policies and improvements that might enhance the investment program, and shall include an investment plan for the coming year.

Any recommended modifications or amendments shall be presented by Staff to the City Council for their consideration and adoption.

D. Review of Investment Portfolio
The Treasurer shall periodically, but no less than quarterly, review the portfolio to identify investments that do not comply with this investment policy and establish protocols for reporting major and critical incidences of noncompliance to the City Council.

E. Performance Evaluation
The investment portfolio shall be designed to attain a market-average rate of return throughout budgetary and economic cycles, taking into account the City’s risk constraints, the cash flow characteristics of the portfolio, and state and local laws, ordinances or resolutions that restrict investments.

The Treasurer shall monitor and evaluate the portfolio’s performance relative to the chosen market benchmark(s), which will be included in the Treasurer’s quarterly report. The Treasurer shall select an appropriate, readily available index to use as a market benchmark. Benchmarks may change over time based on changes in market conditions or cash flow requirements.

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19 F. Internal Controls
The City Treasurer is responsible for establishing and maintaining an internal control structure designed to ensure that assets are protected from loss, theft or misuse. The internal control structure shall be designed to provide reasonable assurance that these objectives are met. Internal controls shall be in writing and shall address the following points: control of collusion, separation of transaction authority from accounting and record keeping, safekeeping of assets and written confirmation of telephone transactions for investments and wire transfers.

G. Annual Audit
The City Treasurer shall establish an annual process of independent review by the City's external auditor to assure compliance with internal controls. Such audit will include tests deemed appropriate by the auditor.

H. Special Audits
The City Council may at any time order an audit of the investment portfolio and/or the City Treasurer's investment practices.

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20 Glossary of Terms
The following is a glossary of key investing terms, many of which appear in the City's Investment Policy.

Accrued Interest - The accumulated interest due on a bond as of the last interest payment made by the issuer.

Agency - A debt security issued by a federal or federally-sponsored agency. Federal agencies are backed by the full faith and credit of the U.S. Government. Federally-sponsored agencies (FSA's) are backed by each particular agency with a market perception that there is an implicit government guarantee. An example of a Federal Agency is the Government National Mortgage Association (GNMA, Ginnie Mae). An example of a FSA is the Federal National Mortgage Association (FNMA, Fannie Mae).

Amortization - The systematic reduction of the amount owed on a debt issue through periodic payments of principal.

Asset Backed Securities - Securities supported by pools of installment loans or leases or by pools of revolving lines of credit.

Bankers Acceptance - A draft or bill or exchange accepted by a bank or trust company. The accepting institution, as well as the issuer, guarantees payment of the bill.

Basis Point - A unit of measurement used in the valuation of fixed-income securities equal to 1/100 of 1% of yield, e.g, "1/4" of one percent is equal to 25 basis points.

Benchmark - A comparison security or portfolio. A performance benchmark is a partial market index, which reflects the mix of securities allowed under a specific investment policy.

Bid - The indicated price at which a buyer is willing to purchase a security or commodity.

Book Value - The value at which a security is carried on the inventory lists or other financial records of an investor. The book value may differ significantly from the securities current value on the market.

Broker - A broker brings buyers and sellers together for a transaction for which the broker receives a commission. A broker does not sell securities from their own position.

Callable Bond - A bond issue in which all or part of its outstanding principal amount may be redeemed before maturity by the issuer under specified conditions.

Certificate of Deposit (CD) - A time deposit with a specific maturity evidenced by a certificate.

Collateralization - A process by which a borrower pledges securities, property, or other deposits for the purpose of securing the repayment of a loan and/or security.

Collateralized Bank Deposit - A bank deposit that is collateralized at least 100% (principal plus

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21 interest to maturity). The deposit is collateralized using assets set aside by the issuer such as Treasury securities or other qualified collateral to secure the deposit in excess of the limit covered by the Federal Deposit Insurance Corporation.

Commercial Paper - An unsecured short-term promissory note issued by corporations, with maturities ranging from 2 to 270 days.

Coupon - The annual rate of interest that a bond's issuer promises to pay the bondholder on the bond's face value; a certificate attached to a bond evidencing interest due on a payment date.

Credit Risk - The risk that principal and/or interest on an investment will not be paid in a timely manner due to changes in the condition of the issuer.

Discount - The amount by which the par value of a security exceeds the price paid for the security.

Diversification - A process if investing assets among a range of security types by sector, maturity and quality rating.

Duration - The weighted average time to maturity of a bond where the weights are the present values of the future cash flows. Duration measures the price sensitivity of a security to changes interest rates.

Fair Value - The amount at which an investment could be exchanged in a current transaction between willing parties.

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22 Fiduciary - A person or organization that acts on behalf of another person(s) or organization that puts their clients’ interest ahead of their own as they are bound both legally and ethically to act in the other’s best interests.

Interest Rate - The annual rate of income received by an investor from the issuer of certain types of fixed income securities.

Investment Policy - A concise and clear statement of the objectives and parameters formulated by an investor or investment manager for a portfolio of investment securities.

Leverage - Borrowing funds in order to invest in securities that have the potential to pay earnings at a rate higher than the cost of borrowing.

Liquidity - An asset that can be converted easily and quickly to cash without significant loss of value.

Local Agency Investment Fund (LAIF) - A voluntary investment fund open to government entities in California that is managed by the State Treasurer's Office.

Market Risk - The risk that the value of securities will fluctuate with changes in overall market conditions or interest rates.

Market Value - The price at which a security is trading and presumably could be purchased or sold at a particular point in time.

Medium Term Notes - Unsecured, investment-grade senior debt securities of major corporations which are sold in relatively small amounts on either a continuous or an intermittent basis. MTNs

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23 are highly flexible debt instruments that can be structured to respond to market opportunities or to investor preferences.

Modified Duration - The percent change in price for a 100-basis point change in yields. Modified duration is the best single measure of a portfolio’s or security’s exposure to market risk.

Money Market - The market in which short-term debt instruments (T-bills, discount notes, commercial paper, and banker’s acceptances) are issued and traded.

Municipal Securities - Securities issued by state and local agencies to finance capital and operating expenses.

Mutual Funds- An investment company that pools money and can invest in a variety of securities, including fixed-income securities and money market instruments.

Offer (Ask) - An indicated price at which market participants are willing to sell a security. Also referred to as the “ask price”.

Par Value - The amount of principal which must be paid at maturity. Also referred to as the face amount of a bond, typically $1,000 per bond.

Paydown - A reduction in the principal amount owed on a bond, loan, or other debt.

Portfolio - Combined holding of more than one stock, bond, commodity, real estate investment, cash equivalent, or other asset. The purpose of a portfolio is to reduce risk by diversification.

Premium - The amount by which the price paid for a security exceeds the securities par value.

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24 Primary Dealer - A financial institution (1) that is a trading counterparty with the Federal Reserve in its execution of market operations to carry out U.S. monetary policy, and (2) that participates for statistical reporting purposes in compiling data on activity in the U.S. Government securities market.

Principal - The face value or par value of a debt instrument, or the amount of capital invested in a given security.

Prudent Investor Standard - A standard of conduct where a person acts with care, skill, prudence, and diligence when investing, purchasing, acquiring, exchanging, selling, and managing funds.

Regional Dealer. A financial intermediary that buys and sells securities for the benefit of its customers without maintaining substantial inventories of securities and that is not a primary dealer.

Safekeeping Service - Offers storage and protection of assets provided by an institution serving as an agent.

Securities and Exchange Commission (SEC) - The U.S. Securities and Exchange Commission (SEC) is an independent federal government agency responsible for protecting investors, maintaining fair and orderly functioning of securities markets and facilitating capital formation. It was created by Congress in 1934 as the first federal regulator of securities markets. The SEC promotes full public disclosure, protects investors against fraudulent and manipulative practices in the market, and monitors corporate takeover actions in the United States.

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25 interest rates are rising, and "dual index floaters," which pay interest based on the relationship between two other interest rates - for example, the yield on the ten-year Treasury note minus the Libor rate. Issuers of such notes lock in a reduced cost of borrowing by purchasing interest rate swap agreements.

Treasury Notes- All securities issued with initial maturities of two to ten years are called Treasury notes and pay interest semi-annually.

Treasury Bonds - All securities issued with initial maturities greater than ten years are called Treasury bonds. Like Treasury notes, they pay interest semi-annually.

Weighted Average Maturity (WAM) - The average maturity of all the securities that comprise a portfolio that is typically expressed in days or years.

Volatility - The rate at which security prices change with changes in general economic conditions or the general level of interest rates.

Yield - The current rate of return on an investment security generally expressed as a percentage of the security's current price.

Yield Curve - A graphic representation that shows the relationship at a given point in time between yields and maturity for bonds that are identical in every way except maturity.

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RESOLUTION NO. 256-33

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ARCATA, ADOPTING THE 2026 CITY OF ARCATA INVESTMENT POLICY
WHEREAS, the California Government Code Section 53646 encourages local governmental entities to develop and implement an investment policy to govern the investing and treasury management practices of that entity; and
WHEREAS, the City of Arcata last updated the City of Arcata Investment Policy in September of 2024, which sets forth the investment and operational policies for the management of public funds of the City; and
WHEREAS, staff and the City’s Investment Advisor, Chandler Asset Management, have reviewed the revised policy and confirmed it complies with current California Government Code; and NOW, THEREFORE, BE IT RESOLVED, that the City Council does resolve, find and order as follows:

1. The above recitals are true and correct.

2. The January 21, 2026, City of Arcata Investment Policy is adopted.

3. The City Clerk is directed to forward a certified copy of the resolution to the Assistant City Manager/Finance Director, who is authorized to take such action as necessary to implement the terms of this resolution.

4. The resolution is effective upon adoption.

DATED:

ATTEST: APPROVED:
___________________________ __________________________
City Clerk, City of Arcata Mayor, City of Arcata

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CLERK'S CERTIFICATE
I hereby certify that the foregoing is a true and correct copy of Resolution No. 256-33, passed and adopted at a regular meeting of the City Council of the City of Arcata, Humboldt County, California, held on the 21st day of January, 2026, by the following vote:

AYES:

NOES:

ABSENT:

ABSTENTIONS:
___________________________
City Clerk, City of Arcata

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Cit!- Mahager
70't -822-5953
Environmental Services
'70'7-822-8t84 't07 -822-2428
Recreatioh
'707-822-7Wt
Community Deeelopmenl
107 -822-5955 707 -822-5951
Engineering
707 -425-2128
Transportation
7 01 -822-377 5
736 F Strcet
Arcata CA 95521
July 1,2024
Kara Hooks
Portfolio Strategist
Chandler Asset Management
9255 Towne Centre Dr., Suite 600
San Diego, C492121
RE: City of Arcata's Management Directive
Dear Ms. Hooks
The City of Arcata entered into a discretionary investment advisory agreement with Chandler Asset Management, a SEC-registered investment advisor, to manage a portion of the City's investment assets in a disciplined, active manner that complies with the City's primary objectives of safety, liquidity and return on investment, as stated in the City's investment policy.

After a recent consultation with Chandler's investment team, the City agreed to implement a strategy for its funds that invests in a diversified portfolio of US dollar-denominated fixed income securities managed in compliance with the City's investment policy. Chandler will make best efforts to maintain the City's market risk, as measured by modified duration within +^ 10% of the duration of the ICE BofA 1-5 year US Treasury and Agency lndex. ln addition, Chandler will collaborate with staff to integrate Socially Responsible lnvesting (SRl) preferences into the management of the City's portfolio to exclude from its "Authorized and Suitable lnvestments" section companies whose primary activity involves the extraction and production of fossil fuels.

Respectfully,
Tabatha Miller
Director of Finance
City of Arcata
Chandler will transition to the strategy incrementally, as market changes provide opportunities to position the target duration. This directive supersedes any previous directives on file and will remain in effect until it is replaced by a revised directive. cvh,ffi.-vuPage 154 of 176
STAFF REPORT – CITY COUNCIL MEETING
TO: Honorable Mayor and City Council Members
FROM: David Loya, Director of Community Development
PREPARER: Mads Odom, Administrative Specialist
DATE: January 21, 2026
TITLE: Reappoint Amanda Hickey to the Planning Commission for a Term Expiring March 31, 2027.

RECOMMENDATION:

It is recommended that the Council declare Commissioner Hickey’s position vacant, then reappoint her to the Planning Commission for term expiring March 31, 2027.

INTRODUCTION:

Pursuant to Arcata Municipal Code Sec. 2204.B, the Planning Commission liaison shall certify the fact to the Council and the Council shall declare the positions vacant. Commissioner Hickey has been absent for the following four regularly scheduled Planning Commission meetings in 2025:

March 11th, May 13th, October 14th, and December 9th. She wishes to continue her service to the City. This action would reappoint Commissioner Hickey to complete her term.

BACKGROUND:

Amanda Hickey was appointed to the Planning Commission on July 1, 2025, with a term expiring on March 31, 2027.

DISCUSSION:

Amanda Hickey is a valuable member of the Planning Commission whose service is valued. Her travel plans unfortunately conflicted with meeting dates, but Amanda is committed to the important work the Planning Commission does. Amanda is interested in completing her term. Staff recommend that the Council reappoint Amanda Hickey without conducting further recruitment.

ENVIRONMENTAL REVIEW (CEQA):

The action is not a project as defined by the California Environmental Quality Act (CEQA). As such, the decision to reappoint is not subject to CEQA.

RECOMMENDED COUNCIL ACTION:

Motion to declare Commissioner Hickey’s position vacant and reappoint Amanda Hickey to the Planning Commission for a term expiring March 31, 2027. Consent Calendar vote.

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STAFF REPORT – CITY COUNCIL MEETING
TO: Honorable Mayor and City Council Members
FROM: Netra Khatri, City Engineer
PREPARER: Mara Grow, Administrative Specialist
DATE: January 21, 2026
TITLE: Approve the Memorandum of Understanding (MOU) with Cal Poly Humboldt for the US 101 and Sunset Avenue Interchange Improvements Project; and Authorize the City Manager to Execute All Necessary Documents Pertaining to the MOU.

RECOMMENDATION:

It is recommended that the Council:
1) Approve the Memorandum of Understanding (MOU) with the Trustees of the California State University, on behalf of California State Polytechnic University, Humboldt and the City of Arcata for the US 101 and Sunset Avenue Interchange Improvements Project; and 2) Authorize the City Manager to Execute All Necessary Documents Pertaining to the MOU.

INTRODUCTION:

The US 101 and Sunset Avenue Interchange Improvements Project (also known as the Sunset Avenue and L.K. Wood Boulevard Improvements Project) will replace three existing stop-controlled intersections with two modern roundabouts, simplifying vehicle movements and significantly improving safety for pedestrians, cyclists, and motorists throughout the interchange. Identified in long-range plans for more than a decade, this project is a high priority for the Arcata community because it enhances safety for all travel modes, improves traffic operations at a critical local and regional bottleneck, and expands affordable transportation options for students and residents traveling to and from the Cal Poly Humboldt campus.

BACKGROUND:

Improvements to the US 101 and Sunset Avenue interchange have been a long-standing City priority, as existing intersection controls, roadway geometry, and heavy local and regional traffic contribute to poor traffic operations at and near the interchange. In 2017, the City completed the Central Arcata Areawide Traffic Study, which included these intersections. The study identified roundabouts as a preferred solution for the issues at the Sunset Avenue and L.K. Wood Boulevard intersections because they improve safety for all users, both motorized and non-motorized, support complete streets principles, and create a welcoming gateway between Arcata and Cal Poly Humboldt.

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The overarching goal of the project is to transform the interchange into a multimodal facility that safely and efficiently accommodates pedestrians, cyclists, and vehicles, while minimizing impacts to adjacent properties, existing structures, and sensitive environmental areas.

DISCUSSION:

The Cal Poly Humboldt (CPH) team has been a project partner since the early stages of the project and remains committed to seeing the project through to completion. During the grant application process, City staff worked closely with CPH to secure both support and matching funds. The total construction cost of the project is anticipated to be approximately $19.8 million, with $14.9 million in funds from the RAISE grant, $2.5 million from CPH, $1.25 million from Caltrans, and the remaining balance funded by the City’s Street Fund.

ENVIRONMENTAL REVIEW (CEQA):

The Project qualifies for a combination of Class 1, Class 2, and Class 3 Categorical Exemptions from CEQA under Sections 15301(c), 15302(c), and 15303(d) of the CEQA Guidelines. The environmental review and documentation reports prepared for the Project did not identify any significant effects that will result from the Project, and the exceptions listed in Section 15300.2 of the CEQA Guidelines were found not to apply to the Project.

A CEQA Notice of Exemption (NOE) was filed with the Humboldt County Recorder’s Office on February 22, 2024.

BUDGET/FISCAL IMPACT:

The funds associated with the MOU are budgeted for this year’s budget.

RECOMMENDED COUNCIL ACTION:

Motion to Approve the Memorandum of Understanding (MOU) with the Trustees of the California State University, on behalf of California State Polytechnic University, Humboldt and the City of Arcata for the US 101 and Sunset Avenue Interchange Improvements Project; and Authorize the City Manager to Execute All Necessary Documents Pertaining to the MOU. Consent Calendar vote.

ATTACHMENTS:

A. MOU between Arcata and Cal Poly Humboldt

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MEMORANDUM OF UNDERSTANDING

BETWEEN

THE TRUSTEES OF THE CALIFORNIA STATE UNIVERSITY, ON BEHALF OF

CALIFORNIA STATE POLYTECHNIC UNIVERSITY, HUMBOLDT
and

THE CITY OF ARCATA
I. PARTIES
This Memorandum of Understanding ("MOU") is entered into by and between the Trustees of the California State University, on behalf of California State Polytechnic University, Humboldt ("University"), and the City of Arcata, a municipal corporation ("City"). The University and the City may be referred to individually as a "Party" and collectively as the "Parties." II. PURPOSE
The purpose of this MOU is to document the understanding between the Parties regarding the University’s financial contribution to the US 101 and Sunset Avenue Interchange Improvements Project ("Project"), including planning, design, and related professional services, as well as construction related contracts administered by the City. This MOU is intended to provide the contractual basis necessary for the University to reimburse the City for eligible Project costs incurred on the University’s behalf.

III. BACKGROUND

1. The City is the lead agency responsible for planning, design, permitting, and delivery of the Project, which will improve traffic operations, safety, and multimodal access at the US 101 and Sunset Avenue interchange.

2. The University has previously committed to supporting the Project financially, recognizing the Project’s importance to campus access, safety, and the surrounding community.

3. Certain Project services were procured and administered by the City. The University did not independently bid or contract for these services and therefore requires this MOU to authorize reimbursement to the City.

IV. SCOPE OF UNDERSTANDING

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1. City Responsibilities
The City shall serve as the lead agency for the Project elements covered by this MOU and shall be responsible for the overall coordination, management, and administration of Project activities, including but not limited to:
• Procurement and administration of professional services and consultants in accordance with applicable federal, state, and local laws; • Coordination with Caltrans, federal funding partners, consultants, and other stakeholders;
• Oversight of planning, design, right-of-way engineering, landscape design, and related Project components;
• Maintenance of Project records, schedules, and cost documentation; • Providing reasonable opportunities for University coordination and input on Project elements affecting campus access, operations, or aesthetics.

2. University Responsibilities
The University shall:
• Provide funding to reimburse the City for eligible Project costs as described in this MOU;
• Designate University staff to participate in coordination meetings as reasonably requested by the City;
• Review Project information provided by the City in a timely manner; • Process payment in accordance with CSU policies upon receipt of a complete and acceptable invoice.

V. PROJECT COORDINATION AND MITIGATION

1. Coordination
The Parties shall cooperate in good faith to coordinate Project activities that may affect University property, access, operations, or public safety. Coordination may include meetings, site visits, schedule updates, and review of design elements relevant to University interests.

2. Construction-Related Impacts
Although this MOU primarily addresses planning and design activities, the City shall use reasonable efforts to minimize potential impacts to University operations associated with Project-related activities, including traffic circulation, pedestrian and bicycle access, and temporary disruptions near campus boundaries.

3. Mitigation Measures
Where Project activities may result in temporary impacts, the City shall implement mitigation measures consistent with approved Project plans, environmental documentation, and applicable regulations. Such measures may include traffic control plans, signage, coordination of work hours, and communication with affected stakeholders.

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VI. FINANCIAL TERMS

1. Not-to-Exceed Amount
The University’s financial obligation under this MOU shall not exceed Two Million, Five Hundred Thousand Dollars ($2,500,000.00) with the first $500,000 to be applied to planning and design followed by $2,000,000 for construction funding, unless amended in writing by the Parties.

2. Eligible Costs
Eligible costs include planning, design, landscape design, right-of-way engineering, environmental coordination, related professional services and construction-related costs associated with the Project, as documented in City invoices and supporting materials.

3. Invoicing and Payment
The City shall submit invoices to the University with sufficient detail to substantiate costs. Upon approval, the University shall remit payment in accordance with CSU payment procedures.

VII. TERM
This MOU shall become effective upon execution by both Parties and shall remain in effect until the earlier of (a) completion of payments described herein, or (b) termination by mutual written agreement.

VIII. INDEPENDENT ENTITIES
The Parties are independent entities, and nothing in this MOU shall be construed to create a partnership, joint venture, or agency relationship.

IX. INDEMNIFICATION
Each Party shall be responsible for its own acts and omissions and those of its officers, employees, and agents, in accordance with applicable law.

X. JURISDICTION AND VENUE

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This MOU shall be construed in accordance with the laws of the State of California. Any dispute arising hereunder, or relating hereto, shall be litigated in the State of California and venue shall lie in the County of Humboldt unless transferred by court order pursuant to California Code of Civil Procedure Sections 394 or 395.

XI. AMENDMENTS
This MOU may be amended only by a written instrument signed by authorized representatives of both Parties.

XII. SIGNATURES
IN WITNESS WHEREOF, the Parties have executed this MOU by their duly authorized representatives.

CAL POLY HUMBOLDT
By: ______________________________
Name: Tawny Fleming
Title: Executive Director, Strategic Business Services
Email: [email protected]
Date:

CITY OF ARCATA
By: ______________________________
Name: Merritt Perry
Title: City Manager
Email: [email protected]
Date:

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STAFF REPORT – CITY COUNCIL MEETING
TO: Honorable Mayor and City Council Members
FROM: Merritt Perry, City Manager
PREPARER: Beth Redfern, Executive Assistant/Deputy City Clerk DATE: January 21, 2026
TITLE: Approve a Sponsorship for the Kinetic Universe’s Kinetic Grand Championship Race in an Amount Equivalent to the Plaza Event Fees of $1,300 for the Sculpture Race Planned on the Arcata Plaza on May 23, 2026.

RECOMMENDATION:

It is recommended that the Council approve a sponsorship for the Kinetic Universe’s Kinetic Grand Championship Race in an amount equivalent to the Plaza event fees of $1,300 for the sculpture race to be held on the Arcata Plaza on May 23, 2026.

INTRODUCTION:

Since 1969, the Kinetic Race has been a longstanding North Coast tradition. The event consists of a three-day marathon spanning more than 40 miles through the towns, beaches, trails, and rivers of Humboldt County, California, and takes place annually over Memorial Day weekend. The Kinetic Grand Championship is Humboldt County’s largest and oldest free-to-attend arts event, attracting thousands of spectators from the local community and around the world, as well as coverage from local and national media.

This event is one of the signature cultural attractions that helps place the City of Arcata on the national and international map. It draws visitors from across the globe while also providing a free, accessible festival for residents. The race has a significant positive impact on the local economy and contributes meaningfully to the region’s cultural identity.

The City of Arcata hosts one of the most prestigious and highly attended segments of the race. This portion includes formal judging and ceremonial pageantry, offering the public a unique and accessible opportunity to view the kinetic sculptures up close as they circle the Arcata Plaza in advance of the race. During the event, the Plaza takes on a festive, carnival-like atmosphere and provides economic opportunities for food vendors and nearby local restaurants. Attendance at this event is free and open to the public.

BACKGROUND/DISCUSSION:

The rates charged for the use of the Plaza for a special event are intended to cover staff costs as well as maintenance, barricade fees, utilities, traffic control plan, equipment servicing and equipment and permanent restrooms. In the prior fiscal year, the City Council approved reimbursement of Plaza usage fees for the event. This support advanced the organizers’ goal of strengthening partnerships with municipalities along the race route and contributed to increased media coverage and spectator

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attendance. Waiving Plaza usage and event setup fees is recommended as a continuation of a partnership that has demonstrated clear benefits to the City, local businesses, and the community, while supporting the long-term viability of this Humboldt County–originated event.

The cost to use the Plaza for the Kinetic Grand Championship event is approximately $1,300 for use of the area from 7 a.m. through 2 p.m. on May 23, 2026.

A $500 deposit will be required from the Kinetic Universe to ensure clarity and responsibility for clean-up.

Staff are recommending that the Council provide support for the race in an amount equivalent to the anticipated use fees for the event, in the amount of approximately $1,300.

POLICY IMPLICATIONS:

N/A
ENVIRONMENTAL REVIEW (CEQA):

N/A
BUDGET/FISCAL IMPACT:

Although the City Council has not identified specific events to receive support from the City, the City Council did express its desire to support events in the City and set aside $25,000 for that purpose. Although no specific events were identified in the budget at that time, free, publicly accessible festivals and events with a long history of success that attract visitors from both near and far, such as the Kinetic Grand Championship race, appear to be the types of events the Council should consider supporting with the funds set aside for that purpose.

If approved, the funds for the event would come from 101-10-01-52104. Approximately $9,900 would remain for the support of other events or community projects over the remainder of the fiscal year.

RECOMMENDED COUNCIL ACTION:

ATTACHMENTS:

A. Kinetic Grand Championship Letter to Council 2026

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Kinetic Universe
PO Box 425
Eureka, CA 95501
Thursday, January 22nd, 2026
Arcata City Council
736 F Street
Arcata, CA 95521
Dear Mayor and Members of the Arcata City Council,
On behalf of Kinetic Universe, I am respectfully requesting reimbursement of the City of Arcata’s major event fees for use of the Arcata Plaza and the City’s traffic control services for Saturday, May 23, 2026.

Each Memorial Day weekend, the Kinetic Grand Championship carries on the tradition of Hobart Brown’s original Kinetic Sculpture Race with a 50-mile human-powered adventure over land, sand, and water.

This free, family-friendly event promotes creativity and STEAM learning while generating significant economic activity for local businesses, hotels, restaurants, and shops.

In 2025, the race included 596 racers and support crew, about half from outside Humboldt County, and was supported by 375 volunteers, including 57 from outside the region, reflecting its importance as both a local tradition and a benefit to tourism.

Kinetic Universe is a volunteer-run organization that works year-round to raise over $60,000 and manage the permits, logistics, volunteer coordination, site planning across 18 locations, and media outreach.

Last year, we asked the City of Arcata to reimburse the Plaza usage fees, and the City generously approved that request, thank you. Not only did it mean progress toward our long-term goal of building partnerships with the municipalities the race passes through, but the resulting media coverage resulted in a wave of spectator support.

For years, the cost of producing the race has fallen largely on the racers themselves. While the race is free to watch, we invite spectators to support it through our “Invisible Ticket” program, and thanks in part to the City’s partnership, that support grew significantly last year. As a result, for the first time, we ended our fiscal year in a genuinely stable financial position, made possible by spectator donations and new partnerships, including the Arcata and Eureka Lodging Alliances and the City of Arcata.

At the same time, while we are no longer in crisis mode, we are not “in the clear.” The race remains expensive and complex to produce, and its long-term sustainability depends on continued collaboration between Kinetic Universe, our racers, our spectators, and the communities that benefit from the race.

We see waiving the plaza usage and event setup fees as a continuation of a partnership that is clearly working, for the City, for local businesses, for spectators, and for the long-term health of this Humboldtborn tradition.

Thank you for your time, your consideration, and your ongoing support of the Kinetic Grand Championship.

For the glory!
Jennifer Thelander
Development Director, Kinetic Universe
(971)990-6991
[email protected]

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STAFF REPORT – CITY COUNCIL MEETING
TO: Honorable Mayor and City Council Members
FROM: Netra Khatri, City Engineer
PREPARER: Netra Khatri, City Engineer
DATE: January 21, 2026
TITLE: Approve an Amendment to the Bike Share Program Contract with Tandem Mobility, LLC to Add Two New E-bike Stations and Extend the Term for Three Years, for up to $137,500 per Program Year; and Authorize the City Manager to Execute all Related Documents.

RECOMMENDATION:

It is recommended that the Council:

1. Approve an amendment to the existing Bike Share Program contract with Tandem Mobility LLC to add two new stations with e-bikes and extend the term for three years, for up to $137,500 per program year, and

2. Authorize the City Manager to Execute All Applicable Documents.

INTRODUCTION:

The City of Arcata has an existing contract with Tandem Mobility to operate a bike share program within City limits. The contract was awarded in 2021 following a formal Request for Proposals (RFP) process. The program currently includes ten bike share stations with 50 classic bicycles located throughout the City. The program currently includes 1,921 active users, and averages rentals have increased to 6,722. The proposed amendment would add two additional stations and ten e-bikes to the program.

The bike share program is funded through a combination of sources, including an Affordable Housing and Sustainable Communities (AHSC) Grant, contributions from Cal Poly Humboldt (CPH), and 2% Bike and Pedestrian Local Transportation funds administered by the Humboldt County Association of Governments (HCAOG). Most of this funding will expire by the end of Fiscal Year (FY) 25-26 except for the CPH contribution.

BACKGROUND:

The City of Arcata’s original bike share program was launched in 2017 in partnership with Zagster.

From 2017 through 2019, ridership increased annually, with particularly strong usage from late summer through the end of each year. A substantial share of users were Cal Poly Humboldt students.

In 2020, at the onset of the COVID-19 pandemic, the program was discontinued following Zagster’s bankruptcy. In 2021, the City of Arcata and Cal Poly Humboldt reestablished the bike share program with a new service provider, Tandem Mobility, to continue delivering bike share services throughout Arcata and the Cal Poly Humboldt campus.

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Bike share stations are strategically located in high-traffic and activity-rich areas. Two stations are located in downtown Arcata—one of the City’s primary transportation hubs—which includes the Arcata Library, City Hall, the Arcata Transit Center, and numerous businesses surrounding the Arcata Plaza. An additional downtown-area station is located at the intersection of 7th Street and I Street at the Sorrel Building, a new high-density residential development.

Additional stations include one along the Humboldt Bay Trail North adjacent to Shay Park, serving nearby high-density residential developments; one at the end of 30th Street serving newly constructed housing and the surrounding neighborhood; and another along Valley West Boulevard, adjacent to bus stops.

Most recently, two new stations were added at the Hinarr Hu Moulik student housing project, with funding provided by Cal Poly Humboldt. There are also two existing stations on the campus.

DISCUSSION:

Under this new contract, the City will add two new locations with a total of ten new e-bikes (five per station) to the bike share program, further expanding system capacity and improving mobility and access for users throughout the community.

Late last year, the City was awarded $216,000 in funding through the Federal Statewide Transportation Improvement Program (FSTIP) to support this program. In addition, Cal Poly Humboldt has committed to supporting the program for the next three years. The funding sources and distribution for the program are outlined below.

Source of Funding
Year FSTIP (Federal grant) CPH
City Match
(Measure H) Total
FY 26-27 $ 72,000 $ 43,000 $ 22,500 $ 137,500
FY 27-28 $ 72,000 $ 43,000 $ 22,500 $ 137,500
FY 28-29 $ 72,000 $ 43,000 $ 22,500 $ 137,500
$ 216,000 $ 129,000 $ 67,500 $ 412,500
ENVIRONMENTAL REVIEW (CEQA):

This bikeshare program is exempt from CEQA, per 15301(c) bicycle-share facilities.

BUDGET/FISCAL IMPACT:

A large portion of the program will be funded by FSTIP, with a portion funded by a financial contribution from Cal Poly Humboldt, and the remainder funded by the City’s Measure H funds. The necessary funds will be allocated in each fiscal year’s budget.

RECOMMENDED COUNCIL ACTION:

1. Receive a staff report and review questions with staff.

2. Open public comment.

3. Motion to Approve an Amendment to the Bike Share Program Contract with Tandem Mobility, LLC to Add Two New E-bike Stations and Extend the Term for Three Years, for up to $137,500 per Program Year; and Authorize the City Manager to Execute all Related Documents.

ATTACHMENTS:

A. Tandem Mobility Quote

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DRAFT QUOTE
City of Arcata, CA
City of Arcata
736 F Street
ARCATA CA 95521
USA
Date
3 Sep 2025
Expiry
1 Feb 2026
Quote Number
QU-0212a
Reference
2026-2031 Bikeshare
Tandem Mobility
120 W. Main St, Suite 300
Northville, MI 48167

UNITED STATES
Description Quantity Unit Price Discount Tax Amount USD Bike Share
Annual Location Fee: Classic bikes
May/June 2026 Re-fleet with new Tempo +
AXA locks

10.00 10,750.00 Tax on
Sales
107,500.00
Bike Share
Annual Location Fee: E bikes

2.00 15,000.00 Tax on
Sales
30,000.00
Guaranteed minimums
- Classic bikes: 50
- E bikes: 10

0.00 0.00 0.00
Invoice to be prorated based on actual
contract effective date and any prepayments
already applied.
20 Annual Movatic GO Memberships
per location x 12 locations
240.00 100.00 100.00% 0.00
100 Additional GO Memberships for up front
3-year payment
100.00 100.00 100.00% 0.00
Subtotal (includes a discount of
34,000.00)
137,500.00
TOTAL TAX 0.00
TOTAL USD 137,500.00

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STAFF REPORT – CITY COUNCIL MEETING
TO: Honorable Mayor and City Council Members
FROM: Merritt Perry, City Manager
PREPARER: Rhea Varley, City Clerk
DATE: January 21, 2026
TITLE: Introduce Ordinance No. 1585, An Ordinance of the City Council of the City of Arcata Amending the Arcata Municipal Code Title II, Chapter 10, to Make Biennial Consumer Price Index Adjustments to Campaign Contribution Limitations.

RECOMMENDATION:

It is recommended that the Council:
1) Open the Public Hearing;
2) Receive Public Comment;
3) Close the Public Hearing; and
4) Introduce Ordinance No. 1585, An Ordinance of the City Council of the City of Arcata Amending the Arcata Municipal Code Title II, Chapter 10, to Make Biennial Consumer Price Index Adjustments to Campaign Contribution Limitations; waive reading of the text, and consent to read by title only.

INTRODUCTION:

In 1992, the Arcata voters adopted a ballot measure that established campaign contribution limitations (codified in the Arcata Municipal Code at §§ 3011–3018, Title II, Chapter 10). This ballot measure set local office candidate campaign contribution limitations and requirements for disclosure of independent expenditures at $100 per election cycle, to be adjusted every evennumbered year by the consumer price index (CPI). Ordinance No. 1585 makes this adjustment for 2026.

DISCUSSION:

Consumer Price Index adjustments to the contribution limitation and independent expenditure disclosure requirement made since adoption of the campaign finance ballot measure raised the $100 threshold to $240 in 2024. Ordinance No. 1585 presented for introduction would raise the campaign contribution limits and disclosure thresholds for the 2026 election cycle to $250 based on a CPI adjustment calculation made by the Assistant City Manager/Finance Director.

General Legal Issues. The law surrounding campaign finance, including campaign contribution limitations and independent expenditure disclosure, is complex and subject to change by federal and state court interpretation. State laws are found in the California Political Reform Act (PRA,

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Government Code §§ 84100-91014) and are regulated by the Fair Political Practices Commission (FPPC). The following legal analysis was completed by former City Attorney Nancy Diamond and sets out an analysis of the legal framework for campaign contribution limitations, independent campaign expenditure disclosure requirements, and expenditure limitations on ballot measures, initiatives and referenda.

Campaign Contribution Limitations. Campaign contribution limitations infringe on First Amendment freedoms by restricting the contributor’s ability to engage in free communication and association. (Citizens United v. Federal Election Commission (2010) 130 S.Ct. 876; Buckley v. Valeo (1976) 424 U.S. 1; SpeechNow.org v. Federal Election Commission (2010) 599 F.3d 686.) As a result, restrictions on contributions are permissible only if necessary to advance a legitimate state interest and are “closely drawn” to avoid unnecessary abridgment of associational (First Amendment) freedoms.

To date, courts have identified the elimination of corruption or its appearance as the only governmental interest that will support limitations on direct campaign contributions. (E.g., Federal Election Comm’n v. Nat’l Conservation Political Action Committee (1985) 470 U.S. 480, 496-497.) Importantly, the goal of equalizing political opportunities between candidates and parties has been expressly rejected as a legitimate justification for the adoption of campaign contribution limitations. (Buckley, 424 U.S. at 48).

Additionally, courts have determined that, as a matter of law, anti-corruption is not a legitimate interest in regard to independent groups, and no justification for limiting campaign contributions to independent organizations simply because it is a corporation therefore exists. (Citizens United, supra, SpeechNow, supra.) A number of statewide initiative measures establishing contribution limitations have been adopted over the last 30 years and have been largely declared as unconstitutional by reviewing courts. For example, limitations established by initiative measure adopted in 1994 imposing inter alia a $100 campaign contribution limitation on local elections in small jurisdictions were found largely unconstitutional in 1996. (California Profile Council PAC v. Scully (ED Cal 1998) 989 F. Supp. 1282, Aff’d (9th Cir. 1999) 164 F.3d. 1189.) However, that Court also indicated that local campaign contribution limitation ordinances could potentially pass constitutional muster if challenged through a case-bycase analysis of facts pertinent to the local jurisdiction such as size, available news media coverage, and cost of media, printing and support staff. (Id. 989 F. Supp. 1189 at 1299.) At present, local campaign limitations made directly to candidates are authorized by the California Elections Code § 10202 (“A city may, by ordinance or resolution, limit campaign contributions in municipal elections”), provided such limitations are in compliance with the Political Reform Act (Government Code § 81013, et seq.). If challenged in court as violating First Amendment rights, local limits would be evaluated case-by-case to determine whether they are locally justified. The specific dollar amount imposed as a contribution limit must not “burden substantially more speech than is necessary to further the government’s legitimate interest.” (Ward v. Rock Against Racism (1989) 491 US 781, 799.)
Arcata’s campaign contribution limitation ordinance has never been challenged as violating First Amendment Laws, and its need in protecting against political corruption has never been tested. Additionally, staff is not aware that formal analysis has been made

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as to whether the amount of the limitation permits adequate campaigning within the City.

As a result, it is impossible to state with certainty whether the proposed $250 limitation under the Arcata Municipal Code § 3012(A)(1) is locally justified.

Expenditure Disclosure Limitations. In contrast to the narrow purposes for which a local government may impose direct campaign contribution limitations, courts have found that a legitimate governmental interest exists in the public’s knowledge of the sources of political contributions because they educate the voters about interests a candidate is likely to respond and become beholden to. (Buckly v.Valeo (1976) 424. U.S. 1, 68). Under Government Code § 82031, independent expenditures of $1,000 or more made in support or opposition to a candidate or measure must be reported to the FPPC. There appears to be no prohibition against requiring disclosure of smaller contributions such as the proposed $240 disclosure threshold under AMC § 3012(D).

Limitations on Ballot Measures, Initiatives and Referenda Contributions. Although Arcata’s campaign contribution limitations ordinance does not limit contributions made to support or defeat ballot measures, initiatives and referenda; the following discussion is included to provide a broader understanding for campaign finance regulation. Courts have determined that the elimination of corruption and associated “political debt” is not a valid justification for limiting contributions made to support or defeat ballot measures, initiatives and referenda. One court has stated:
“Whatever the justification for prohibiting contributions that are prone to create political debts, it largely evaporates when the object of prohibition is not contributions to a candidate or party, but contributions to a public referendum. The specter of a political debt created by a contribution to a referendum campaign is too distant to warrant this further encroachment on First Amendment rights.” (PG&E v. City of Berkeley (1976) 60 Cal.App3d 123, 128-129, quoting Schwartz v. Romnes (2d. Cir. 1974) 495 F. 2d 844, 852-853.)
This decision arose from a ban prohibiting corporate contributions to support or defeat local measures, as opposed to an across-the-board limitation equally applicable to individuals and corporations. Nonetheless, the principal stated is important: valid justifications for burdening First Amendment speech in the context of candidate contribution limitations may not be valid in the context of ballot measures.

COMMITTEE/COMMISSION REVIEW:

None.

ENVIRONMENTAL REVIEW (CEQA):

This ordinance is exempt from the California Environmental Quality Act (CEQA) Guidelines pursuant to Section 15061(b)(3) of the CEQA Guidelines.

BUDGET/FISCAL IMPACT:

Not applicable.

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RECOMMENDED COUNCIL ACTION:

1. Open the Public Hearing.

2. Receive a staff report and review questions with staff.

3. Open public comment.

4. Close public comment/the public hearing.

5. Motion to Introduce Ordinance No. 1585, An Ordinance of the City Council of the City of Arcata Amending the Arcata Municipal Code Title II, Chapter 10, to Make Biennial Consumer Price Index Adjustments to Campaign Contribution Limitations; waive reading of the text, and consent to read by title only.

ATTACHMENTS:

A. Ordinance No. 1585 Campaign Contribution Limitations.

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Page 1 of 4 ends

ORDINANCE NO. 1585

AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF ARCATA
AMENDING THE ARCATA MUNICIPAL CODE TITLE II, CHAPTER 10, TO MAKE

BIENNIAL CONSUMER PRICE INDEX ADJUSTMENTS TO

CAMPAIGN CONTRIBUTION LIMITATIONS
The City Council of the City of Arcata does ordain as follows:

Section 1: Title II—Administration, Chapter 10—Contribution Limitations, Sections 3012(A)(1) and 3012(D) of the Arcata Municipal Code, are hereby amended as shown by the following strikethrough for deleted text and bold double underscore for added text (unchanged text is omitted and is shown by three asterisks: “* * *”):
* * *
SEC. 3012. Contribution limitations.

A. Limitations on Contributions from Persons:

1. No person other than a candidate shall make, and no campaign treasurer shall solicit or accept, any contribution which will cause the total amount contributed by such person during an election cycle in support or opposition to such candidate for city office, including contributions to all committees supporting or opposing such candidate, to become an amount exceeding the base amount of one hundred dollars ($100.00) for the election cycle, adjusted every two (2) years pursuant to Section 3015, to two hundred forty two hundred fifty dollars ($240.00250.00) in 20242026.

2. The terms in this subsection are applicable to any contributions made to a candidate or committee hereunder, whether used by such candidate or committee to finance a current campaign, to pay deficits incurred in other campaigns or for any other use.

B. Family Contributions:

1. Contributions by a husband and a wife shall be treated as separate contributions and shall not be aggregated.

2. Contributions by children under the age of eighteen (18) years of age shall be treated as contributions by their parents and attributed proportionately to each parent [one-half (1/2) to each parent or the total amount to a single custodial parent].

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Page 2 of 4 ends

C. Loans:

1. Every loan to a candidate or the candidate's controlled committee shall be by written agreement, a copy of which shall be filed with the candidate's or committee's campaign statement on which the loan is first reported.

2. The proceeds of a loan made to a candidate by a commercial lending institution in the regular course of business on the same terms available to members of the public and which is secured or guaranteed shall not be subject to the contribution limitations of this Chapter.

3. Extensions of credit [other than loans pursuant to subsection (C)(2)] for a period of more than thirty (30) days are subject to the contribution limitations of this Chapter.

D. Notice of Independent Expenditures
Any person who makes independent expenditures of more than two hundred forty two hundred fifty dollars ($240.00250.00), in support of or in opposition to any candidate shall notify the local filing officer and all candidates running for the same seat by electronic mail within five (5) days each time the two-hundred-forty two hundred fifty dollar ($240.00250.00) threshold is exceeded.

E. Organizational Contributions

1. No officer, employee, agent or attorney or other representative of a person covered by this Chapter shall aid, abet, advise or participate in a violation of this subsection.

2. No person shall knowingly accept a payment or contribution made in violation of this subsection.

3. This Chapter shall not prohibit a controlled committee of a candidate from conveying to that candidate any monies received by said committee as contributions within the limitations of this Chapter.

F. Duties of Campaign Treasurer
If a campaign treasurer is offered a contribution which would be in excess of the contribution limitations of this Chapter, the treasurer must refuse the contribution. If, however, a contribution is deposited in the campaign committee's account, which is in violation of this section, he or she shall report in writing within five (5) days to the City Clerk the facts surrounding such payment or contribution. Any such contribution so deposited shall be paid promptly, from available campaign funds, if any, to the City Treasurer for deposit in the General Fund of the City.
* * *

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Section 2. SEVERABILITY. If any section, subsection, sentence, clause or phrase of this ordinance is for any reason held to be invalid, such decision shall not affect the validity of the remaining portions of the ordinance. The City Council hereby declares that it would have adopted the ordinance, and each section, subsection, sentence, clause, or phrase thereof, irrespective of the fact that one or more sections, subsections, sentences, clauses or phrases be declared invalid.

Section 3. LIMITATION OF ACTIONS. Any action to challenge the validity or legality of any provision of this ordinance on any grounds shall be brought by court action commenced within thirty (30) days of the date of adoption of this ordinance.

Section 4. CEQA. This ordinance is exempt from the California Environmental Quality Act (CEQA) pursuant to Section 15061(b)(3) of the CEQA Guidelines because there is no possibility that the ordinance may have a significant effect on the environment.

Section 5. EFFECTIVE DATE. This ordinance shall become effective thirty (30) days from and after its final passage, provided it is published pursuant to Government Code section 36933 in a newspaper of general circulation within fifteen (15) days after its adoption.

DATED:

ATTEST: APPROVED:

City Clerk, City of Arcata Mayor, City of Arcata

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Page 4 of 4 ends

CLERK'S CERTIFICATE
I hereby certify that the foregoing is a true and correct copy of Ordinance No. 1585, passed and adopted at a regular meeting of the City Council of the City of Arcata, Humboldt County, California, on the __ day of ______, 2026, by the following vote:

AYES:

NOES:

ABSENT:

ABSTENTIONS:

City Clerk, City of Arcata

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Arcata City CouncilJanuary 21, 2026

Arcata City Council
January 21, 2026