CITY OF CHINO
STATEMENT OF INVESTMENT POLICY
ADOPTED FEBRUARY 3, 2026
1.0 POLICY
This statement is intended to provide guidelines for the prudent investment of the temporary idle cash of the City of Chino (City) and outline policies for maximizing the efficiency of the City's cash management system. The goal is to enhance the economic status of the City, while protecting the investment corpus of pooled cash in accordance with applicable local, state, and federal laws.
2.0 SCOPE
This investment policy applies to all financial assets and investment activities of the City, except for proceeds of debt issuance. Debt proceeds shall be invested in accordance with the "Permitted Investments" and/or investment provisions for each specific bond indenture and/or bond document.
The Policy applies to the following funds and is accounted for in the City's annual audited financial statements.
General Fund
Special Revenue Funds
Debt Service Funds
Capital Improvement Funds
Enterprise Funds
Internal Service Funds
Successor Agency Funds
Any joint powers authority funds.
STANDARDS OF PRUDENCE
The City Treasurer, Deputy City Treasurer, or Designee authorized to make investment decisions on behalf of the City of Chino investing public funds pursuant to this policy are trustees and therefore fiduciaries subject to the prudent investor standard. When investing, reinvesting, purchasing, acquiring, exchanging, selling, and managing public funds, the City Treasurer or Deputy City Treasurer 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, the City Treasurer or a Deputy City Treasurer is authorized to acquire investments as authorized by law.
INVESTMENT OBJECTIVES
When investing, reinvesting, purchasing, acquiring, exchanging, selling, and managing public funds, the primary objective of the City Treasurer or Deputy City Treasurer shall be to safeguard the principal of the funds under its control. The secondary objective shall be to meet the liquidity needs of the City. The third objective shall be to achieve a market average rate of return consistent with the primary objectives of safety and liquidity, throughout budgetary and economic cycles. At no time should safety or liquidity be compromised in exchange for higher yields.
Safety - The preservation of invested capital (principal) is of primary importance. The City Treasurer or a Deputy City Treasurer shall only invest in investments that are considered safe. The safety and risk associated with an investment refers to the potential loss of principal, accrued interest, or a combination of these amounts. Each investment decision shall seek to ensure that capital losses are avoided.
Liquidity - The City's investment portfolio shall contain investments with a diversified mix of maturities to provide sufficient liquidity to meet projected operating cash requirements of the City.
Return on Investments -The City's investment portfolio shall be designed with the objective of obtaining a reasonable and competitive market rate of return throughout budgetary and economic cycles, taking into consideration risk constraints, prudent investment principles, and the cash flow characteristics of the portfolio.
DELEGATION OF AUTHORITY
The authority to invest City funds is vested in the City Treasurer as adopted by resolution of the City Council or Agency of the City of Chino. All investment decisions and investment of funds shall be made in full compliance with this policy, the California Government Code Sections 53600 et. seq. and all other relevant state and federal requirements as well as any amendments or additions to such requirements.
Management responsibility for the investment of City funds is vested in the City Treasurer who shall prepare written procedures for the operation of the investment program and safekeeping of investment instruments consistent with this investment policy. The written procedures may provide for the delegation of authority to a designee or Deputy City Treasurer who, upon assuming such office, shall become responsible for investment transactions. No person may engage in an investment decision except as permitted by this policy and by the procedures promulgated by the City Treasurer. Prior to implementing such procedures, the City Treasurer shall submit them to the City Council for approval.
The Investment Advisory Committee is hereby established, and it is vested with the authority to oversee the implementation of this policy and to recommend amendments of this policy to the City Council. The Committee is composed of two City Council Members, the City Manager, the City Treasurer, the Deputy City Treasurer, and one alternate City Council Member who shall serve only in the absence of the regular City Council Members. The Committee shall meet once every quarter and at such other times as may be called by the City Treasurer or City Council Members. The City Treasurer shall be the chair of the Committee. The Committee may recommend the employment of a qualified investment advisor whose employment shall be determined by the City Council. The investment advisor shall advise the City Treasurer, the Committee and the City Council.
ETHICS AND CONFLICTS OF INTEREST
Elected officials and employees of the City 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 decisions under the Political Reform Act and Government Code Section 1090 et seq. Elected officials and employees shall disclose to the City Manager any material interests in financial institutions that conduct business with the City, and they shall further disclose any personal investment position or financial asset that could be related to the performance of the City's investment program. Elected officials and employees shall subordinate their personal investment transactions to those of the City particularly with regard to the time of purchases and sales. Any firm proposing to provide any type of investment service to the City shall acknowledge their familiarity with the provisions of the Political Reform Act, Government Code Section 81000 et seq. and CA Code of Regulations 18110 et seq. and the provisions limiting contractual conflicts of interest under Government Code Section 1090 et seq.
Any firm proposing to provide any type of investment service to the City shall also acknowledge their familiarity with and agree to abide by any Federal or State law, regulation, rule or policy pertaining to or limiting campaign contributions by such firms, their employees, spouses or agents.
All persons, firms, broker/dealers, financial institutions and advisors providing investment services or bond issue assistance shall disclose to the City Manager and the Treasurer all fee sharing, fee-splitting and commission arrangements with other entities or persons prior to the City agreeing to buy an investment or issue bonds.
AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS
The City Treasurer shall select all security dealers and depositories subject to City Council approval. The City shall conduct its investment transactions with several competing, reputable security broker/dealers. These may include “primary” dealers or regional dealers that qualify under Securities & Exchange Commission Rule 15C3-1 (uniform net capital rule). The selection process shall focus on financial viability, knowledge, experience, and ethics in the fixed-income securities industry. The City Treasurer will maintain a list and a written agreement with financial institutions authorized to provide investment services subject to City Council approval.
All financial institutions and broker/dealers who desire to become qualified bidders for investment transactions must supply the City Treasurer with the following: audited financial statements, proof of Financial Industry Regulatory Authority (FINRA) or National Association of Securities Dealers (NASD) certification, proof of state registration, completed broker/dealer questionnaire, and certification of having read the City's investment policy and depository contracts. The City Treasurer will conduct periodic reviews of the financial condition and registrations of qualified bidders.
AUTHORIZED AND SUITABLE INVESTMENTS
Authorized and suitable investments shall mean and include only those securities listed in Figure 1, to the extent they are permitted by applicable federal and state law under Government Code Sections 53601 and 53601.6. While the state code authorizes a broader range of investment instruments, the City has further restricted the eligible types of securities and transactions. Accordingly, Figure 1 represents the City’s restricted list of allowable investments, which may be more conservative than those permitted under State statute.
The Table of Notes for Figure 1 provides additional footnotes related to this figure. (See Figure 1 on following pages)
FIGURE 1
ALLOWABLE INVESTMENT INSTRUMENTS PER STATE GOVERNMENT CODE (AS OF JANUARY 1, 2026)A APPLICABLE TO CITY OF CHINOB See “Table of Notes for Figure 1” for footnotes related to this figure.
TYPE
MAXIMUM
MATURITYC
MAXIMUM
SPECIFIED
% OF
PORTFOLIOD
MINIMUM
QUALITY
REQUIREMENTS
GOV'T
CODE
SECTIONS
Local Agency Bonds
5 years
None
None
53601(a)
U.S. Treasury Obligations
5 years
None
None
53601(b)
State Obligations— CA And Others
5 years
None
None
53601(c)
53601(d)
CA Local Agency Obligations
5 years
None
None
53601(e)
U.S Agency Obligations
5 years
None
None
53601(f)
Negotiable Certificates of Deposit
5 years
30%K
None
53601(i)
Non-negotiable Certificates of Deposit
5 years
None
None
53630 et seq.
Placement Service Deposits
5 years
50%L
None
53601.8 and 53635.8
Placement Service
Certificates of Deposit
5 years
50%L
None
53601.8 and 53635.8
Medium-Term NotesO
5 years or less
5%
“AA” rating category or its equivalent or better
53601(k)
Mutual Funds And Money Market Mutual Funds
N/A
20%P
MultipleQ, R
53601(l) and 53601.6(b)
Collateralized Bank DepositsS
5 years
None
None
53630 et seq. and 53601(n)
County Pooled Investment Funds
N/A
None
None
27133
Joint Powers Authority Pool
N/A
None
MultipleU
53601(p)
9.0 REVIEW OF INVESTMENT PORTFOLIO
The securities held by the City must be in compliance with Section 8.0 Authorized and Suitable Investments at the time of purchase. Because some securities may not comply with Section 8.0 Authorized and Suitable Investments after the date of purchase, the city should at least quarterly review the portfolio to identify those securities that do not comply. The city will report to the council and its committee any major and critical incidences of noncompliance identified as soon as possible for possible action.
10.0 INVESTMENT POOLS/MUTUAL FUNDS
A thorough investigation of the pool/fund is required prior to investing, and on a continual basis. Best efforts will be made to acquire the following information:
A description of eligible investment securities, and a written statement of investment policy and objectives.
A description of interest calculations and how it is distributed, and how gains and losses are treated.
A description of how the securities are safeguarded (including the settlement processes), and how often the securities are priced and the program audited.
A description of who may invest in the program, how often, and what size deposit and withdrawal are allowed.
A schedule for receiving statements and portfolio listings.
Are reserves, retained earnings, etc. utilized by the pool/funds? A fee schedule, and when and how is it assessed.
Is the pool/fund eligible for bond proceeds and/or will it accept such proceeds?
11.0 COLLATERALIZATION
All demand deposits and time deposits are to be fully collateralized with securities authorized by the California Government Code and the City. The eligible collateral for repurchase agreements must be those investments authorized by Section 53651 of the California Government Code. The Treasurer may specify the type of eligible collateral for use in repurchase agreements. Eligible collateral must be in book entry form. Collateral is valued at current market plus accrued interest through the date of valuation to anticipate market changes and provide a level of security for all funds.
The cost value (book value) of collateral pledged for demand deposits must always be equal to or greater than the amount on deposit, plus accrued interest, in accordance with the following ratio:
U.S. Treasury Securities 110%
It is the policy of the City to require reports at least on a quarterly basis from institutions with which the Treasurer has pledged security interest. The Treasurer shall monitor the adequacy of collateralization to ensure that balances are collateralized in accordance with the ratios approved herein.
Collateralized investments and deposits often require substitution of collateral. Any broker or financial institution requesting substitution must contact the City through the City Treasurer, for approval in the event the counterparty to the transaction is not authorized under agreement with the City to make substitutions.
12.0 SAFEKEEPING AND CUSTODY
All security transactions entered into by the City of Chino should be conducted on a delivery-versus-payment (DVP) basis. Securities will be held by a third-party custodian designated by the Treasurer and evidenced by safekeeping receipts.
DIVERSIFICATION OF INVESTMENTS:
The City shall diversify the investments within the portfolio to avoid incurring unreasonable risks inherent in over-investing in specific instruments, individual financial institutions, or maturities. To promote diversification, no more than 5% of the portfolio may be invested in the securities of any one issuer, regardless of security type, excluding U.S. Treasuries, federal agencies, and pooled investments such as LAIF, the money market funds, or any other local government investment pool authorized under California Government Code.
14.0 MAXIMUM MATURITIES
To the extent possible, the City will attempt to provide sufficient liquidity to meet cash flow needs for the City's expenditure requirements for a minimum of the next six months. The City will not directly invest in securities maturing more than 5 years from the date of settlement. Forward settlement on new issues is 45 days from the time of investment.
15.0 INTERNAL CONTROLS
The Treasurer is responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the City of Chino are protected from loss, theft, fraud or misuse. Accordingly, the Treasurer shall establish an annual process of independent review by an external auditor. This review will provide internal control by assuring compliance with policies and procedures.
16.0 PERFORMANCE STANDARDS
The investment portfolio shall be designed with the objective of obtaining a reasonable rate of return throughout budgetary and economic cycles, commensurate with the risk constraints and cash flow needs. The City's investment strategy is a laddered, buy-and-hold strategy approach designed to provide consistent passive income while maintaining safety and liquidity.
The City shall regularly review and monitor liquid funds, and when appropriate, reallocate them among authorized investment pool options to ensure continued alignment with the City’s investment objectives.
The performance of the portfolio will be measured against the twelve-month moving average of the 2-year U.S. Treasury rate. This benchmark is intended solely as a performance reference and shall not be used in a manner that encourages or results in the City assuming additional risk or compromising the primary objective of safety. The City recognizes that appropriate benchmarks may change over time based on market conditions or portfolio characteristics.
17.0 REPORTING
The City Treasurer shall provide the City Council with monthly reports about the City's investments and shall deliver via email to the Mayor and each City Council Member within 45 days after the end of the month.
The City Treasurer’s report shall include at a minimum the following information:
Investment type (e.g. U.S. Treasury Note, U.S. Government Agency Bond) Name of the issuer (e.g. Federal Farm Credit Bank, Federal Home Loan Bank) Maturity date
Yield to maturity
Current market value and source of market value
Par and dollar amount for each security the City has invested in Par and dollar amount on any money held by the City (e.g. LAIF balance, Cash Balance).
The report shall also include a description of any of the City’s funds, investments, or programs, that are under the management of contracted parties, including lending programs, if applicable.
The report shall state compliance of the portfolio to the investment policy, or manner in which the portfolio is not in compliance.
The report shall include a statement denoting the ability of the City to meet its expenditure requirements for the next six months or provide an explanation as to why sufficient money shall (or may not) be available.
INVESTMENT POLICY ADOPTION
The City's investment policy shall be adopted annually by resolution by the City Council. The policy shall be reviewed annually by the City Treasurer and the City Council and any modifications made thereto shall be approved by the City Council.
19.0 GLOSSARY
AGENCIES -Agencies of the Federal government set up to supply credit to various classes of institutions (e.g., S&L's, small business firms, students, farmers, housing agencies, etc.) Examples include Federal Home Loan Mortgage Corporation (FHLMC), Federal National Mortgage Association (FNMA), Federal Home Loan Bank (FHLB) and Federal Farm Credit Bank (FFCB).
BANKERS' ACCEPTANCE (BA)-A draft or bill of exchange accepted by a bank or trust company. The accepting institution guarantees payment of the bill as well as the issuer.
BENCHMARK - A comparative base for measuring the performance or risk tolerance of the investment portfolio. A benchmark should represent a close correlation to the level of risk and the average duration of the portfolio’s investments.
BOOK VALUE (COST VALUE) - The purchase price of the security as recorded in the City's books.
BROKER/DEALER - An individual or firm acting as principal in a securities transaction.
CALIFORNIA ASSET MANAGEMENT PROGRAM (CAMP) - a California Joint Powers Authority (JPA) established in 1989 to provide California public agencies with professional investment services.
CALLABLES - Securities that the issuer has the right to redeem prior to maturity.
CERTIFICATE OF DEPOSIT (CD) - A time deposit with a specific maturity evidenced by a certificate. Large denomination CD's are typically negotiable.
COLLATERAL - Securities, evidence of deposit or other property which a borrower pledges to secure repayment of a loan. Also refers to securities pledged by a bank to secure deposits of public monies.
CORPORATE MEDIUM TERM NOTE - A security issued by a corporation doing business in the U.S. with a maturity not to exceed five years.
COST VALUE (BOOK VALUE) - The purchase price of the security as recorded in the City's books.
DELIVERY VS. PAYMENT - Delivery of securities with a simultaneous exchange of money.
DIVERSIFICATION - Dividing investment funds among a variety of securities offering independent returns.
FINANCIAL ADVISOR - A firm or bank that acts in a financial advisory capacity with respect to a new issue of municipal securities pursuant to a written contract.
INTERNAL RATE OF RETURN - Rate of return over the life of a security on variables.
LOCAL AGENCY INVESTMENT FUND (LAIF) - The aggregate of all funds from political subdivisions that are placed in the custody of the State Treasurer for investment and reinvestment.
MARKET VALUE-The price at which a security is trading, usually the liquidation value.
MONEY MARKET MUTUAL FUNDS - Open-ended mutual fund that invests in commercial paper, banker's acceptances, repurchase agreements, government securities, certificates of deposit and other highly liquid and safe securities, and pays money market rates of interest. The fund's net asset value remains a constant $1 share, with the interest rate increasing or decreasing.
NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATION
(NRSRO) - A rating organization designated by the SEC as being nationally recognized. Credit ratings shall be based on the highest rating issued by a Nationally Recognized Statistical Rating Organization (NRSRO).
OFFER PRICE - The price at which a broker/dealer will offer securities to an investor.
OPEN MARKET OPERATIONS - Federal Reserve activity. Under the Federal Reserve Act, the Fed uses purchases and sales of Government and Federal Agency securities to add to or subtract from commercial bank reserves. Goals are to sustain economic growth, high employment and reasonable price stability.
PAPER GAIN OR LOSS Term used for unrealized gain or loss on securities being held in a portfolio based on comparison of current market quotes and their original cost. This situation exists as long as the security is held while there is a difference between cost value (book value) and the market value.
PORTFOLIO - Collection of securities held by an investor.
PRIMARY DEALER - A group of government securities dealers that serve as trading counterparties of the New York Fed in its implementation of monetary policy. This role includes the obligations to: (i) participate consistently in open market operations to carry out U.S. monetary policy pursuant to the direction of the Federal Open Market Committee (FOMC); and, (ii) provide the New York Fed's trading desk with market information and analysis helpful in the formulation and implementation of monetary policy. Primary dealers are also required to participate in all auctions of U.S. government debt and to make reasonable markets for the New York Fed when it transacts on behalf of its foreign official account holders.
RATE OF RETURN - The yield obtainable on a security based, on its purchase price or its current market price. This may be the amortized yield to maturity; on a bond, the current income return.
SAFEKEEPING - The service provided by banks and trust companies for clients when the bank or trust company stores the securities, takes in coupon payments, and redeems issues at maturity.
SECURITIES & EXCHANGE COMMISSION (SEC) - Agency created by Congress to protect investors in securities transactions by administering securities legislation.
SEC RULE 15(C)3 -1- See Uniform Net Capital Rule.
Exhibit A – City of Chino Investment Policy