Citrus Heights City Council Meetings
April 8, 2026

Printed on Recycled Paper
Summary of Key Changes in the 2026 Investment Policy
• Authorized Financial Dealers and Institutions – Added to the list of institutions the City can conduct business with as defined in Section 5102 of the Financial Code. (LEGAL) • Joint Powers Authority (JPA) Investment Pools Clarified – Splits Other Local Government Investment Pools keeping the focus on JPA Investment Pools. Provides stronger oversight of pooled investment vehicles, ensuring transparency, creditworthiness, and operational stability. (BEST PRACTICE) • New Section on Other Local Government Investment Pools (LGIPs) Establishes ability to invest in county or other LGIPs. Caps non-LAIF/JPA LGIPs at 20% of the portfolio.

Expands diversification options while adding a limit to prevent overreliance on any one type of external pool. (BEST PRACTICE)
• Glossary Expanded and Updated - Adds/updates definitions across a wide range of investment terms (e.g., supranational, structured notes, make whole calls, collateralized deposits). Provides clarity, improves transparency, and supports public understanding and staff training.

Attachments

1. Resolution Approving the Investment Policy

2. Proposed Investment Policy (final version)

3. Proposed Investment Policy (redline version)
ITEM 16 Agenda Packet Page #265
RESOLUTION NO. 2026 - ____

RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CITRUS

HEIGHTS, CALIFORNIA APPROVING THE INVESTMENT POLICY

AND DELEGATING AUTHORITY TO THE ADMINISTRATIVE

SERVICES DIRECTOR TO INVEST FUNDS IN ACCORDANCE WITH

THE INVESTMENT POLICY
WHEREAS, consistent with legal compliance to the California Government Code; and WHEREAS, the policy has been updated to reflect industry best practices and.

NOW, THEREFORE, BE IT RESOLVED, the City Council finds that the City’s Investment Policy complies with California Government Code Sections 53600 et seq., which governs investment practices of local governments; and
BE IT FURTHER RESOLVED the City Council of the City of Citrus Heights adopts the attached City of Citrus Heights Investment Policy.

PASSED AND ADOPTED by the City Council of the City of Citrus Heights, California, this 8th day of April, 2026, by the following vote, to wit:

AYES: Council Members:

NOES: Council Members:

ABSTAIN: Council Members:

ABSENT: Council Members:

MariJane Lopez-Taff, Mayor
ATTEST:

Amy Van, City Clerk
ITEM 16 Agenda Packet Page #266
City of CitrusHeights
Investment Policy
April 08, 2026
ITEM 16 Agenda Packet Page #267
City of Citrus Heights Investment Policy
Table of Contents
I. PURPOSE ..................................................................................................................................................... 3 II. POLICY ...................................................................................................................................................... 3 III. SCOPE ....................................................................................................................................................... 3 IV. GENERAL OBJECTIVES ...................................................................................................................... 4 A. Safety ............................................................................................................................................. 4 B. Liquidity ........................................................................................................................................ 4 C. Yield (Return on Investment) ...................................................................................................... 4 V. STANDARDS OF CARE ........................................................................................................................... 4 A. Prudence ........................................................................................................................................ 4 B. Ethics and Conflicts ofInterest ................................................................................................... 4 C. Delegation of Authority ................................................................................................................ 5 D. Internal Controls .......................................................................................................................... 5 E. Review of Investment Portfolio ................................................................................................... 6 VI. AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS ...................................................... 6 VII. SAFEKEEPING AND CUSTODY ........................................................................................................ 7 VIII. SUITABLE AND AUTHORIZED INVESTMENTS ......................................................................... 7 A. Investment Types .......................................................................................................................... 8 B. Collateralization .......................................................................................................................... 13 C. Investments Not Approved ........................................................................................................ 13 D. Risk Management and Diversification ..................................................................................... 13 IX. INVESTING PARAMETERS ............................................................................................................... 14 X. REPORTING ............................................................................................................................................ 15 XI. PERFORMANCE EVALUATION ....................................................................................................... 15 XII. PERFORMANCE STANDARDS ........................................................................................................ 15 XIII. INVESTMENT POLICY COMPLIANCE AND ADOPTION ....................................................... 16 A. Policy Compliance and Changes ............................................................................................... 16 B. Annual Statement of InvestmentPolicy .................................................................................... 16 APPENDIX .................................................................................................................................................... 17 GLOSSARY OF INVESTMENT TERMS .................................................................................... 17 ITEM 16 Agenda Packet Page #268
City of Citrus Heights Investment Policy 3
I. PURPOSE
The purpose of this Investment Policy is to provide guidance and direction for the prudent investment of the City of Citrus Heights (“City”) funds and to foster the creation of a systematic and controlled investment process. The ultimate goal of this Investment Policy is to maximize the efficiency of the City's cash managementsystem and to enhance the economic status of the City while protecting its invested funds.

II. POLICY
A. Goal
It is the City’s policy to invest public funds in a prudent manner that will provide maximum security, adequate liquidity, and sufficient yield while meeting the daily cash flow demands of the City and conforming to all statutes and regulations governing the investment of public funds. This policy incorporates 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. Interpretation of Policy
If any portion of these policies is or becomes contrary to Government Code 53600 et seq., or any other applicable law(s), the requirements of this investment policy shall be interpreted consistent with such applicable law(s).

III. SCOPE
This investment policy appliesto all funds and investment activities under the direct authority of the City, as set forth in the State Government Code, Section 53600 et seq. These funds are accounted for in the City's Annual Comprehensive Financial Report and include: the General Fund, Special Revenue Funds, Capital Project Funds, Enterprise Fund, Internal Service Funds and Fiduciary Funds.

The following are not governed by this policy:
• The City's Retiree Healthcare Plan. It is administered and managed separately by the California Employers' Retiree Benefit Trust (CERBT) Fund under California Government Code Section 53620-53622.
• Bond proceeds. They are subject to the conditions and restrictions of bond documents; • Any other funds specifically exempted by the City Council.

Pooling of Funds
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.

ITEM 16 Agenda Packet Page #269
City of Citrus Heights Investment Policy 4
IV. GENERAL OBJECTIVES
The primary objectives, in priority order, of the City's investment activities are safety, liquidity, and yield.

A. Safety
Preservation of principal is the foremost objective of the investment program. Investments of the City shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. The objective shall be to mitigate credit risk and market risk. To attain this objective, the City shall diversify its investments by investing funds among several financial institutions and a variety of securities offering independent returns.

B. Liquidity
The City's investment portfolio shall remain sufficiently liquid to enable the City to meet all operating requirements that might be reasonably anticipated without requiring a sale of securities. Since all possible cash demands cannot be anticipated, the portfolio shall consist largely of securities with active secondary or resale markets. A portion of the portfolio also may be placed in money market mutual funds or LAIF, which offer sameday liquidity for short-term funds.

C. Yield (Return on Investment)
The City's investment portfolio shall be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, commensurate with the City's investment risk constraints and the liquidity characteristics of the portfolio. The core of investments is limited to relatively low-risk securities in anticipation of earning a fair return relative to the risk being assumed.

V. STANDARDS OF CARE
A. Prudence
The standard of prudence to be used by City investment officials in the management of City moneys shall be the Prudent Investor Standard as authorized under Section 53600.3 of the California Government Code, which shall be applied in the context of managing all aspects of the overall portfolio. Investments shall be made with the care, skill, prudence, and diligence, under circumstancesthen prevailing, including but not limited to, the general economic conditions and the anticipated needs of the City, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims to safeguard the principal and maintain the liquidity needs of the City. This standard shall be applied in the context of managing the overall portfolio.

City investment officers 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 in a timely fashion and appropriate action is taken to control adverse developments.

B. Ethics and Conflicts ofInterest
All participants in the investment process shall act as custodians of the public trust.

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City of Citrus Heights Investment Policy 5
Investment officialsshall recognize that the investment portfolio is subject to public review and evaluation. Officers and employees involved in the City investment process shall refrain from personal business or other activity that could conflict with the proper execution of the investment program, or that could impair their ability to make impartial investment decisions. All participants shall comply with the Political Reform Act and the City’s Conflict of Interest Code, as it is updated from time to time, including the requirements to disclose any material financial interests in financial institutions that conduct business within their jurisdiction, and any personal financial/investment positions. Additionally, all participants shall immediately inform the Citrus Heights City Managerof any potential conflict of interest. City employees and officers shall refrain from undertaking personal investment transactions with the same individual with whom business is conducted on behalf of the City.

C. Delegation of Authority
Authority to manage the City’s investment program is derived from California Government Code, Sections 41006 for City Treasurers and 53600 et seq. The City Council is responsible for the management of the City’s funds, including the administration of this investment policy, and delegates to the Administrative Services Director the authority to invest or to reinvest funds, or to sell or exchange securities. The Administrative Services Director shall thereafter assume full responsibility for those transactions until the delegation of authority is revoked or expires. The Finance Manager and Accounting Manager are authorized to conduct investment-related activities, under the supervision of the Administrative Services Director, on behalf of the City.

The City may engage the services of one or more external investment advisers, who are registered under the Investment Advisers Act of 1940, to assist in the management of the City’s investment portfolio in a manner consistent with the City’s objectives. External investment advisers may be granted discretion to purchase and sell investment securities in accordance with this investment policy. 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.

D. Internal Controls
The Administrative Services Director is responsible for establishing and maintaining a system of written internal controls. The internal controls shall be designed to prevent losses of public funds arising from fraud, employee error, misrepresentation by third parties, unanticipated changes in financial markets, or imprudent action by City employees and officers. The internalstructure shall be designed to provide reasonable assurance that these objectives are met. The concept of reasonable assurance recognizes that (1) the cost of a control should not exceed the benefits likely to be derived, and (2) the valuation of costs and benefits requires estimates and judgments by management.

The internal controls shall address the following points:
■ Segregation of duties
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City of Citrus Heights Investment Policy 6
■ Custodial safekeeping ■ Delivery versus payment (DVP) ■ Delegation of authority ■ Documentation of transactions Periodically, as deemed appropriate by the Administrative Services Director and/or the City Council, an independent analysis by an external auditor shall be conducted to review internal controls, account activity, and compliance with policies and procedures.

E. Review of Investment Portfolio
The securities held by the City must be in compliance with Section VIII (Suitable and Authorized Investments) at the time of purchase. Because some securities may not comply with Section VIII subsequent to the date of purchase, the Administrative Services Director shall at least quarterly review the portfolio to identify those securities that do not comply. The Administrative Services Director shall establish procedures to report to the City Council, major and critical incidences of noncompliance identified through the review of the portfolio.

VI. AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS
The Administrative Services Director shall endeavor to complete investment transactions using a competitive bid process whenever possible. The City’s Administrative Services Director will determine which financial institutions are authorized to provide investment services to the City. Securities shall only be purchased from authorized institutions and firms.

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

In accordance with Section 53601.5, institutions eligible to transact investment business with the City include:
 Institutions licensed by the state and proof of FINRA certification as a broker-dealer as defined in Section 25004 of the Corporations Code.
 Institutions that are members of a federally regulated securities exchange.  Primary government dealers as designated by the Federal Reserve Bank.  Nationally or state-chartered banks.
 Savings association or federal association as defined in Section 5102 of the Financial Code.  The Federal Reserve Bank.
 Direct issuers of securities eligible for purchase.

Selection of financial institutions and broker/dealers authorized to engage in transactions will be at the sole discretion of the City, except where the City utilizes an external investment ITEM 16 Agenda Packet Page #272
City of Citrus Heights Investment Policy 7
adviser in which case the City may rely on the adviser for selection.

All financial institutions that desire to become qualified bidders for investment transactions (and which are not dealing only with the investment adviser) must supply the Administrative Services Director with audited financials and a statement certifying that the institution has reviewed the California Government Code, Section 53600 et seq. and the City’s investment policy. The Administrative Services Director will conduct an annual review of the financial condition and registrations of such qualified bidders.

Public deposits will be made only in qualified public depositories as established by State law.

Deposits will be insured by the Federal Deposit Insurance Corporation, or, to the extent the amount exceeds the insured maximum, will be collateralized in accordance with State law.

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 brokers/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.

VII. SAFEKEEPING AND CUSTODY
All security transactions, including collateral for repurchase agreements, entered into by the City shall be conducted on a delivery-versus-payment (DVP) basis, which will ensure that securities are deposited in an eligible financial institution prior to the release of funds. To protect against potential losses due to the failure of individual securities dealers, and to enhance access to securities, interest payments, and maturity proceeds, all cash and securities shall be held in safekeeping in the City’s name by a third-party custodian designated by the Administrative Services Director, acting for the City under the terms of a custody agreement executed by the bank and 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 exception to the foregoing shall be depository accounts and securities purchases made with: State of California Local Agency Investment Fund (LAIF), time certificates of deposit, and mutual funds and money market mutual funds since the purchased securities are not deliverable. The Administrative Services Directorshall be bonded to protect the public against possible embezzlement and malfeasance.

VIII. SUITABLE AND AUTHORIZED INVESTMENTS
The City’s investments are governed by California Government Code, Sections 53600 et seq. (“Code”). Within the investments permitted by the Code, the City seeks to further restrict eligible investmentsto the guidelines listed below. In the event a discrepancy is found between this policy and the Code, the more restrictive parameters will take precedence, unless it would be contrary to applicable law, in which case applicable law shall control.

Any investment currently held at the time the policy is adopted which does not meet the new ITEM 16 Agenda Packet Page #273
City of Citrus Heights Investment Policy 8
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. Percentage limitations of surplus funds invested are noted for the various investment instruments. Where there is a specified percentage limitation or minimum credit quality requirement for a particular category of investments, these requirements are applicable only at the date of purchase. A later increase or decrease in a percentage resulting from a change in values or assets shall not constitute a violation of that restriction. The City's funds may not be invested in those prohibited funds described in California Government Code section 53601.6, but must only be invested in any of the following instruments as permitted by law (California Government Code Section 53601). 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 issuer to avoid incurring unreasonable and avoidable risks regarding specific security types or individual issuers.

The City is empowered by statute to invest in the following types of securities:

A. Investment Types

1. U.S. TREASURY BILLS, NOTES & BONDS. Allowable along with 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 the maximum maturity is five (5) years.

2. U.S. GOVERNMENT AGENCY ISSUES AND GOVERNMENTSPONSORED ENTERPRISES. This includes obligations, participations, or other instruments of, or issued by, a federal government agency or a United States government-sponsored enterprise. No more than 30% of the portfolio may be invested in any single Agency/Government Sponsored Enterprise and there shall be no more than 20% of callable agency securities in the portfolio. The maximum maturity shall not exceed five (5) years.

3. LOCAL AGENCY INVESTMENT FUND (LAIF). As authorized in Government Code Section 16429.1, local agencies may invest in the Local Agency Investment Fund (LAIF), a pooled investment money market fund established by the State of California, and overseen by the State Treasurer, which allows local agencies to pool their investment resources. Principal may be withdrawn on a one-day notice. Interest earned is paid quarterly. The fees charged are limited to one-quarter of one percent of the earnings of the fund. Current policies of LAIF set minimum and maximum amounts of monies that may be invested as well as maximum numbers of transactions that are allowed per month. The City may invest up to the maximum amount permitted by LAIF. LAIF is in trust in the custody of the State Treasurer. The City's right to withdraw its deposited monies from LAIF is not contingent upon the State's ability to adopt a State Budget by July 1st of each new fiscal year.

4. BANKER'S ACCEPTANCE. Otherwise known as bills of exchange or time drafts, ITEM 16 Agenda Packet Page #274
City of Citrus Heights Investment Policy 9
are negotiable instruments with a maturity of 180 days or less drawn on and accepted by a commercial bank. These instruments must be rated "A-1" or its equivalent or better by at least one Nationally Recognized Statistical Rating Organization (NRSRO) for short-term debt obligations; or long-term debt obligations that are rated in a category of "A" or its equivalent or better by at least one NRSRO. Banker's Acceptances are usually created to finance the import or export of goods, or the shipment of goods within the United States. No more than 40% of the portfolio may be invested in Banker's Acceptances. No more than 5% of the portfolio may be invested in any single issuer. The maximum maturity may not exceed 180 days.

5. NON-NEGOTIABLE CERTIFICATE OF DEPOSIT (CD). As authorized in Government Code Section 53601.8, local agencies may invest in Certificates of Deposit.

These instruments must comply with Government Code Sections 16500 or 16600. This is a receipt for funds deposited in a Bank or Savings and Loan Association for a specified period at a specified rate of interest. No more than 20% of the portfolio may be invested in certificates of deposit. Maturities may not exceed five (5) years.

6. NEGOTIABLE CERTIFICATE OF DEPOSIT (NCD). Allowable certificates of deposits must be issued by a nationally or state-chartered bank or a state or federal association, a state or federal credit union, or by a federally licensed or state-licensed branch of a foreign bank. The amount of the NCD insured up to the FDIC limit does not require any credit ratings. Any amount above the FDIC-insured limit must be issued by institutions which has short-term debt obligations rated "A-1" or its equivalent or better by at least one NRSRO; or long-term obligations rated in a rating category of "A" or its equivalent or better by at least one NRSRO. The maturity period for this investment vehicle may not exceed five (5) years unless approved by the Council. No more than 30% of the total portfolio may be invested in these securities. No morethan 5% of the portfolio may be invested in any single issuer.

7. COMMERCIAL PAPER. As authorized in Government Code Section 53601(h), provided that the securities are issued by an entity that meets all of the following conditions in either paragraph (a) or (b) and other requirements specified below:
 Securities issued by corporations:
 A corporation organized and operating in the United States with assets of more than $500 million.
 The securities are rated “A-1” or its equivalent or better by at least one NRSRO.  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.  Securities issued by other entities:
 The issuer is organized within the United States as a special purpose corporation, trust, or limited liability company.
 The securities must have program-wide credit enhancements including, but not limited to, over-collateralization, letters of credit, or a surety bond.  The securities are rated “A-1” or its equivalent or better by at least one NRSRO.

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 No more than 10% of the outstanding commercial paper of any single issuer.  No more than 25% of the City’s investment assets under management may be invested in Commercial Paper.
 No more than 5% of the portfolio may be invested in any single issuer.  The maximum maturity does not exceed 397 days.

8. REPURCHASE AGREEMENTS. As authorized in Government Code Section 53601(j), repurchase agreements are agreements between the local agency and seller for the purchase of government securities to be resold at a specific date and for a specific amount. Repurchase agreements are generally used for short-term investments for the City's daily automatic sweep account and will generally not exceed 30 days.

Repurchase Agreements are subject to a Master Repurchase Agreement between the City and the provider of the repurchase agreement. The Master Repurchase Agreement will be substantially in the form developed by the Securities Industry and Financial Markets Association (SIFMA). The legal limitation on the maturity period for a repurchase agreement is for one (1) year with the required market value underlying the agreement at 102% of the funds borrowed with the value adjusted quarterly.

9. MUNICIPAL SECURITIES OF THE CITY, STATE OF CALIFORNIA, OR LOCAL AGENCIES. As authorized in Government Code Section 53601(e), local agencies may invest in Bonds of the State of California and any local government in the State of California, which are rated in the "A" category or better by oneNRSRO at the time of investment. In no event shall this classification of investment exceed 30% of the value of the portfolio. No more than 5% of the portfolio may be invested in any single issuer and the maximum maturity does not exceed five (5) years.

10. MUNICIPAL SECURITIES (REGISTERED TREASURY NOTES OR
BONDS). 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, which are rated in the "A" category or better by one NRSRO at the time of investment. In no event shall this classification of investment exceed 30% of the value of the portfolio. No more than 5% of the portfolio may be invested in any single issuer and the maximum maturity does not exceed five (5) years.

11. COLLATERALIZED BANK DEPOSITS. The 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.

12. MUTUAL FUNDS AND MONEY MARKET MUTUAL FUNDS. Mutual Funds are referred to in California Government Code Section 53601(l)(1), as "shares of beneficial interest issued by diversified management companies." Mutual Funds and Money Market Mutual Funds that are registered with the Securities and Exchange Commission under the Investment Company Act of 1940 are authorized investments ITEM 16 Agenda Packet Page #276
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for funds subject to the following provisions:
 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 of the following criteria: ■ Attained the highest ranking or the highest letter and numerical rating provided by not less than two (2) NRSROs; or ■ Have retained an investment advisor 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. ■ No more than 10% of the total portfolio may be invested in Mutual Funds. ■ 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 of the following criteria: ■ Have attained the highest ranking or the highest letter and numerical rating provided by not less than two (2) NRSROs; or ■ Have retained an investment advisor 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. ■ No more than 20% of the total portfolio may be invested in Money Market Mutual Funds. ■ No more than 20% of the total portfolio may be invested in mutual funds and money market mutual funds combined.

13. CORPORATE MEDIUM TERM NOTES. As authorized in Government Code Section 53601(k), local agencies may invest in corporate medium-term notes issued by corporations organized and operating in the United States or by depository institutions licensed by the United States or any state and operating within the United States that are rated in the rating category of "A" or its equivalent or higher rating for the issuer's debt as provided by one NRSRO and having a maximum remaining maturity period of five (5) years or less in an amount not to exceed 30% of the City's portfolio. Furthermore, the maximum principal amount in any one issuer will not exceed 5% of the City's portfolio.

14. ASSET-BACKED, MORTGAGE-BACKED, MORTGAGE PASS-THROUGH

SECURITIES, AND COLLATERALIZED MORTGAGE OBLIGATION
FROM ISSUERS NOT DEFINED IN SECTIONS 1 AND 2 OFTHE SUITABLE AND AUTHORIZED INVESTMENTS SECTION OF THIS POLICY. The
securities must be rated in a rating category of “AA” or its equivalent or better by a NRSRO. No more than 20% of the total portfolio may be invested in these securities with no more than 5% of the portfolio may be invested in any single Asset-Backed or commercial Mortgage security issuer. The maximum legal final maturity does not exceed five (5) years.

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15. SUPRANATIONALS. Allowable, provided that 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 Inter-American Development Bank. The securities are rated in a rating category of “AA” or its equivalent or better by a NRSRO. No more than 30% of the total portfolio may be invested in these securities and no more than 10% of the portfolio may be invested in any single issuer. The maximum maturity does not exceed five (5) years.

16. SHARES OF BENEFICIAL INTEREST ISSUED BY A JOINT POWERS AUTHORITY (JPA). Organized pursuant to Section 6509.7 that invests in securities and obligations authorized in subdivisions (a) to (q), inclusive. Each share shall represent an equal proportional interest in the underlying pool of securities owned by the joint powers authority. To be eligible under this section, the joint powers authority issuing the shares shall have retained an investment advisor that meets all of the following criteria:
 The advisor is registered or exempt from registration with the Securities and Exchange Commission.
 The advisor has not less than five years of experience investing each of the types of securities and obligations authorized by Government 53601.  The advisor has assets under management in excess of five hundred million dollars ($500,000,000).

While local government investment pools generally provide significant safety and liquidity, the Administrative Services Director shall complete a thorough investigation prior to making any such investment. Due diligence in investigations shall generally include a review of written statements of investment policies, objectives, fees schedules, and reporting schedules, as well as issues related to (1) eligible investors and securities, (2) the permitted frequencies and sizes of deposits and withdrawals, (3) security safeguards, including settlement processes, (4) the frequency with which securities are priced and the program audited, (5) the treatment of gains and losses, including interest calculations and distribution, (6) whether and, if so, how reserves, retained earnings, and similar funds are utilized by the investment pool, and (7) whether the investment pool is eligible for and, if so, accepts bond proceeds. In addition, only local government investment pools with at least five years' experience providing similar services to other California municipalities may be utilized.

17. OTHER LOCAL GOVERNMENT INVESTMENT POOLS (LGIP). Other LGIPs permitted by the City (such as a County Pool as defined by California Government Code Section 27000.3).
 No more than 20% of the total portfolio may be invested in LGIPs other than LAIF and JPAs.

The investment in the LGIP shall not cause the City’s investment policy to violate any other investment requirement, including the requirements to not invest more than 25% of the total portfolio in eligible commercial paper, or more than 5% of the total portfolio in any one issuer’s ITEM 16 Agenda Packet Page #278
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commercial paper.

B. Collateralization
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.

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 of the CD for all other classes of security.

Collateralization of Bank Deposits. The City shall require any bank or financial institution to comply with the collateralization criteria defined in California Government Code, Section 53651.

Repurchase Agreements. The City requires that Repurchase Agreements be collateralized only by securities authorized in accordance with California Government Code:
 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.
 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.  The City shall receive monthly statements of collateral.

C. Investments Not Approved
Any security type or structure not specifically approved by this policy is hereby prohibited, including, but not limited to futures and options. In accordance with Government Code, Section 53601.6, investment in inverse floaters, range notes, or mortgage-derived interest-only strips is prohibited. Investment in any security that could result in a zerointerest 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 negativeinterest accrual if held to maturity are permitted. Trading securities for the sole purpose of speculating on the future direction of interest rates are prohibited. Purchasing or selling securities on margin is prohibited. The use of reverse repurchase agreements, securities lending or any other form of borrowing or leverage is prohibited. The purchase of foreign currency-denominated securities is prohibited. The purchase of a security with a forward settlement date exceeding 45 days from the time of the investment isprohibited.

D. Risk Management and Diversification
Mitigating Credit Risk in the Portfolio
Credit risk is the risk that a security or a portfolio will lose some or all its value due to a real or perceived change in the ability of the issuer to repay its debt. The City will mitigate ITEM 16 Agenda Packet Page #279
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credit risk by adopting the following strategies:
 The diversification requirements included in the “Authorized Investments” section of this policy are designed to mitigate credit risk in the portfolio.  No more than 5% of the total portfolio may be deposited with or invested in securities issued by any single issuer unless otherwise specified in this policy.  The City may elect to sell a security prior to its maturity and record a capital gain or loss in order to manage the quality, liquidity or yield of the portfolio in response to market conditions or City’s risk preferences.
 If a security owned by the City is downgraded to a level below the requirements of this policy, making the security ineligible for additional purchases, the following steps will be taken:
 Any actions taken related to the downgrade by the investment manager will be communicated to the Administrative Services Director in a timely manner.  If a decision is made to retain the security, the credit situation will be monitored and reported to the City Council.

Mitigating Market Risk in the Portfolio
Market risk is the risk that the portfolio value will fluctuate due to changes in the general level of interest rates. The City recognizes that, over time, longer-term portfolios have the potential to achieve higher returns. On the other hand, longer-term portfolios have higher volatility of return. The City will mitigate market risk by providing adequate liquidity for short-term cash needs, and by making longer-term investments only with funds that 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:
 The City will maintain a minimum of six months of budgeted operating expenditures in short-term investments to provide sufficient liquidity for expected disbursements.
 The maximum stated final maturity of individual securities in the portfolio will be five (5) years, except as otherwise stated in this policy.  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.

IX. INVESTING PARAMETERS
Maximum Maturities
To the extent possible, the City will attempt to match its investments with anticipated cash flow requirements and known future liabilities. Where there is no specified maturity limitation on an investment, no investment shall be made in any security, which, at the time of the investment, has a term remaining to maturity in excess of five (5) years from the date of trade settlement, unless the City Council has granted express authority to make that investment no less than three months prior to the investment.

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X. REPORTING
The Administrative Services Director shall submit investment reports to the City Council that provide a clear picture of the status of the current investment portfolio and shall contain sufficient information to permit an independent organization to evaluate the performance of the investment program.

Reporting to City Council
In accordance with California Government Code Sections 53607 and 53646, the Administrative Services Director shall submit to the City Council a monthly report of portfolio transactions and a quarterly investment report, which summarizes all securities in the portfolio. The quarterly report shall be provided to City Council within 45 days after the end of the quarter and include:
 Investment type
 Issuer
 Purchase date
 Maturity date
 Credit quality
 Coupon and yield
 Book value
 Market value
 Interest Earnings
 Average days to maturity
 Discussion of the current economic climate
 Statement that the portfolio complies with this Investment Policy or the manner in which the portfolio is not in compliance.
 Statement of the City's ability to meet anticipated expenditure requirements for the next six months, or an explanation as to why sufficient money may not be available.

XI. 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.

XII. PERFORMANCE STANDARDS
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, ITEM 16 Agenda Packet Page #281
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the cash flow characteristics of the portfolio, and state and local laws, ordinances or resolutions that restrict investments.

The Administrative Services Director shall monitor and evaluate the portfolio’s performance relative to the chosen market benchmark(s), which will be included in the Administrative Services Director’s quarterly report. The Administrative Services Director 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.

XIII. INVESTMENT POLICY COMPLIANCE AND ADOPTION
A. Policy Compliance and Changes
Any deviation from the policy shall be reported to City Council at the next scheduled meeting. The Administrative Services Director shall promptly notify the City Council of any material change in the policy, and any modifications to the policy must be approved by the City Council.

B. Annual Statement of InvestmentPolicy
The Administrative Services Director shall render a written Investment Policy that shall be reviewed at least annually by the City Council 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. The City Council shall consider the annual Investment Policy and any changes therein at a public meeting. The Investment Policy shall be adopted by resolution of the City Council.

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APPENDIX

GLOSSARY OF INVESTMENT TERMS
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 (i.e., Government National Mortgage Association). Federally sponsored agencies (FSA's) are backed by each particular agency with a market perception that there is an implicit government guarantee (i.e., Federal National Mortgage Association).
• FEDERAL FARM CREDIT BANK (FFCB): Provides credit and liquidity in the agricultural industry. FFCB issues discount notes and bonds. • FEDERAL HOME LOAN BANKS (FHLB): Government sponsored wholesale banks (currently 12 regional banks) that lend funds and provide correspondent banks services to member commercial banks, thrift institutions, credit unions and insurance companies.
• FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC): Like
FHLB, provides credit and liquidity in the housing market. FHLMC, also called “Freddie Mac” issues discount notes, bonds and mortgage pass-through securities. • FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA): FNMA is a federal corporation working under the auspices of the Department of Housing and Urban Development (HUD). It is the largest single provider of residential mortgage funds in the United States. Fannie Mae, as the corporation is called, is a private stockholder-owned corporation. The corporation's purchases include a variety of adjustable mortgages and second loans, in addition to fixed-rate mortgages. • GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA or Ginnie Mae): Securities influencing the volume of bank credit guaranteed by GNMA and issued by mortgage bankers, commercial banks, savings and loan associations, and other institutions. Security holder is protected by full faith and credit of the U.S.

Government. Ginnie Mae securities are backed by the FHA, VA, or FMHA mortgages.

The term "pass-throughs" is often used to describe Ginnie Maes. • PRIVATE EXPORT FUNING CORPORATION (PEFCO): Assists exporters; obligations of PEFCO are not guaranteed by the full faith and credit of the US government.
• TENNESSEE VALLEY AUTHORITY (TVA): Provides flood control and power and promotes development in portions of the Tennessee, Ohio, Mississippi River valleys. TVA currently issues discount notes and bonds.

ASSET-BACKED SECURITIES: Securities supported by pools of installment loans or leases or by pools of revolving lines of credit.

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BANKER’S ACCEPTANCE: A money market instrument created to facilitate international trade transactions. It is highly liquid and safe because the risk of the trade transaction is transferred to the bank which “accepts” the obligation to pay the investor.

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 debt security is shown on the holder's balance sheet. Book value is often acquisition cost plus/minus amortization and accretion, which may differ significantly from the security's current value in the market.

BROKER: Someone who brings buyers and sellers together and is compensated for his/her service.

CALLABLE: A callable security gives the issuer the option to call it from the investor prior to its maturity. The main cause of a call is a decline in interest rates. If interest rates decline, the issuer will likely call its current securities and reissue them at a lower rate of interest.

CERTIFICATE OF DEPOSIT (CD): A time deposit with a specific maturity evidenced by a certificate. Large-denomination CDs 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.

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: The short-term unsecured debt of corporations.

COUPON: The rate of return at which interest is paid on a bond.

CREDIT QUALITY: The measurement of the financial strength of a bond issuer. This measurement helps an investor to understand an issuer's ability to make timely interest payments and repay the loan principal upon maturity. Generally, the higher the credit quality of a bond issuer, ITEM 16 Agenda Packet Page #284
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the lower the interest rate paid by the issuer because the risk of default is lower. Credit quality ratings are provided by a Nationally Recognized Statistical-Rating Organization.

CREDIT RISK: The risk to an investor that an issuer will default in the payment of interest and/or principal on a security.

CUSTODIAN: A bank or other financial institution that keeps custody of stock certificates and other assets.

DEALER: A dealer, as opposed to a broker, acts as a principal in all transactions, by buying and selling for his/her own account.

DELIVERY VERSUS PAYMENT: There are two methods of delivery of securities: delivery versus payment and delivery versus receipt. Delivery versus payment is delivery of securities with an exchange of money for the securities. Delivery versus receipt is delivery of securities with an exchange of a signed receipt for the securities.

DISCOUNT: The difference between the par value of a bond and the cost of the bond, when the cost is below par. Some short-term securities, such as T-bills and banker’s acceptances, are known as discount securities. They sell at a discount from par and return the par value to the investor at maturity without additional interest. Othersecurities, which have fixed coupons, trade at a discount when the coupon rate is lower than the current market rate for securities of that maturity and/or quality.

DIVERSIFICATION: Dividing investment funds among a variety of investments to avoid excessive exposure to any one source of risk.

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, other than in a forced or liquidation sale.

FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC): A federal agency that insures bank deposits currently up to $250,000 per deposit.

FEDERAL RESERVE SYSTEM: The central bank of the United States created by Congress and consisting of a seven-member Board of Governors in Washington, D.C., twelve Regional Banks and about 5,700 commercial banks that are members of the system.

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.

GOVERNMENT ACCOUNTING STANDARDS BOARD (GASB): A standard-setting body, associated with the Financial Accounting Foundation, which prescribes standard accounting practices for governmental units.

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GOVERNMENT SECURITIES: An obligation of the U.S. government, backed by the full faith and credit of the government. These securities are regarded as the highest quality of investment securities available in the U.S. securities market. See "Treasury Bills, Notes, and Bonds." INTERNAL CONTROLS: An internal control structure designed to ensure that the assets of the entity are protected from loss, theft, or misuse. The internal control structure is designed to provide reasonable assurance that these objectives are met. The concept of reasonable assurance recognizes that 1) the cost of a control should not exceed the benefits likely to be derived and 2) the valuation of costs and benefits requires estimates and judgments by management. Internal controls should address the following points:
• Control of collusion - Collusion is a situation where two or more employees are working in conjunction to defraud their employer.
• Separation of transaction authority from accounting and record keeping - By separating the person who authorizes or performs the transaction from the people who record or otherwise account for the transaction, a separation of duties is achieved. • Custodial safekeeping - Securities purchased from any bank or dealer including appropriate collateral (as defined by state law)shall be placed with an independent third party for custodial safekeeping.
• Avoidance of physical delivery securities - Book-entry securities are much easier to transfer and account for since actual delivery of a document never takes place.

Delivered securities must be properly safeguarded against loss or destruction. The potential for fraud and loss increases with physically delivered securities. • Clear delegation of authority to subordinate staff members - Subordinate staff members must have a clear understanding of their authority and responsibilities to avoid improper actions. Clear delegation of authority also preserves the internal control structure that is contingent on the various staff positions and their respective responsibilities.
• Written confirmation of transactions for investments and wire transfers - Due to the potential for error and improprieties arising from telephone and electronic transactions, all transactions should be supported by written communications and approved by the appropriate person. Written communications may be via fax if on letterhead and if the safekeeping institution has a list of authorized signatures. • Development of a wire transfer agreement with the lead bank and third-party custodian - The designated official should ensure that an agreement will be entered into and will address the following points: controls, security provisions, and responsibilities of each party making and receiving wire transfers.

JOINT POWERS AUTHORITY (JPA): An entity created by two or more public agencies that share a common goal to jointly exercise powers common to all members through a joint powers agreement or contract.

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

LIQUIDITY: A liquid asset is one that can be converted easily and rapidly into cash without a substantial loss of value. In the money market, a security is said to be liquid if the spread between bid and asked prices is narrow and reasonable size can be done at those quotes.

LOCAL AGENCY INVESTMENT FUND (LAIF): Chapter 730, Statutes of 1976 of the State of California, established the Local Agency Investment Fund. This fund enables local governmental agencies to remit money not required for immediate needs to the State Treasurer for the purpose of investment. In order to derive the maximum rate of return possible, the State Treasurer has elected to invest these monies with State monies as a part of the Pooled Money Investment Account (PMIA). Each local governmental unit has the exclusive determination of the length of time its money will be on deposit with the State Treasurer. At the end of each calendar quarter, all earnings derived from investments are distributed by the State Controller to the participating government agencies in proportion to each agency's respective amounts deposited in the Fund and the length of time such amounts remained therein. Prior to the distribution, the State's costs of administering the program are deducted from the earnings.

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 that security as collateral.

MARKET RISK: The risk that the value of securities will fluctuate with changes in overall market conditions or interest rates.

MARK-TO-MARKET: The process whereby the book value or collateral value of a security is adjusted to reflect its current market value.

MARKET VALUE: The current price at which a security is trading and could presumably be purchased or sold at that particular point in time.

MASTER REPURCHASE AGREEMENT: A written contract covering all future transactions between the parties to repurchase-reverse repurchase agreements that establish each party's rights in the transactions. A master agreement will often specify, among other things, the right of the buyer-lender to liquidate the underlying securities in the event of default by the seller- borrower.

MATURITY: The date upon which the principal or stated value of a financial obligation is due and payable. The investment’s term or remaining maturity is measured from the settlement date to ITEM 16 Agenda Packet Page #287
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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, bankers' acceptances, 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 FUND: An investment company that pools money and can invest in a variety of securities, including fixed-income securities and money market instruments. Mutual funds are regulated by the Investment Company Act of 1940 and must abide by Securities and Exchange Commission (SEC) disclosure guidelines.

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. Standard and Poor's, Moody's, and Fitch Financial Services are examples of such organizations.

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 referred to as the “ask price.”
PAR VALUE: The amount of principal that must be paid at maturity. Also referred to as the face amount of a bond, normally quoted in $1,000 increments per bond.

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

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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 difference between the par value of a bond and the cost of the bond, when the cost is above par.

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

PRIMARY DEALER: A group of government securities dealers who submit daily reports of market activity and monthly financial statements to the Federal Reserve Bank of New York and are subject to its informal oversight. Primary dealers include Securities and Exchange Commission (SEC) registered securities broker/dealers, banks and a few unregulated firms.

PRINCIPAL: (1) The face amount or par value of a debt instrument. (2) One who acts as a dealer buying and selling for his own account.

PRUDENT INVESTOR (PRUDENT PERSON) RULE: A standard of responsibility which applies to fiduciaries. In California, the rule is stated as “Investments shall be managed with the care, skill, prudence and diligence, under the circumstances then prevailing, that a prudent person, acting in a like capacity and familiar with such matters, would use in the conduct of an enterprise of like character and with like aims to accomplish similar purposes.” 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 or the current income return.

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 AGREEMENT (RP OR REPO): A holder of securities sells these securities to an investor with an agreement to repurchase them at a fixed price on a fixed date. The security "buyer" in effect lends the "seller" money for the period of the agreement, and the terms of the agreement are structured to compensate the buyer for this. Dealers use RP extensively to finance their positions. Exception: When the Fed is said to be doing RP, it is lending money that is increasing bank reserves.

RISK: Degree of uncertainty of return on an asset.

RULE 2A-7 OF THE INVESTMENT COMPANY ACT: Applies to all money market mutual funds and mandates such funds to maintain certain standards, including a 13-month maturity limit and a 90-day average maturity on investments, to help maintain a constant net asset value of one dollar ($1.00).

SAFEKEEPING: A service to bank customers whereby securities are held by the bank in the customer’s name.

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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.

STRUCTURED NOTE: Notes issued by Government Sponsored Enterprises (FHLB, FNMA, etc.) and Corporations, which have imbedded options (e.g., call features, step-up coupons, floating rate coupons, derivative-based returns) into their debt structure. Their market performance is impacted by the fluctuation of interest rates, the volatility of the imbedded options and shifts in the shape of the yield curve.

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.

U.S. TREASURY OBLIGATIONS: Securities issued by the U.S. Treasury and backed by the full faith and credit of the United States. Treasuries are considered to have no credit risk and are the benchmark for interest rates on all other securities in the US and overseas. The Treasury issues both discounted securities and fixed coupon notes and bonds. • TREASURY BILLS: Short-term U.S. government non-interest bearing discounted debt securities with maturities of no longer than one year and issued in minimum denominations of $10,000. Auctions of three- and six-month bills are weekly, while auctions of one-year bills are monthly. The yields on these bills are monitored closely in the money markets for signs of interest rate trends.
• TREASURY NOTE: A medium-term coupon-bearing U.S. Treasury security issued as a direct obligation of the U.S.Government and having an initialmaturity of from one to ten years and issued in denominations ranging from $1,000 to $1 million or more. • TREASURY BOND: A long-term coupon-bearing U.S. Treasury security issued as a direct obligation of the U.S. Government and having an initial maturity of more than 10 years and issued in minimum denominations of $1,000.

UNIFORM NET CAPITAL RULE: Securities and Exchange Commission (SEC) Rule 15C3- 1 outlining requirements that member firms as well as nonmember broker-dealers in securities maintain a maximum ratio of indebtedness to liquid capital of 15 to 1; also called net capital rule ITEM 16 Agenda Packet Page #290
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and net capital ratio. Indebtedness covers all money owed to a firm, including margin and commitments to purchase securities, one reason new public issues are spread among members of underwriting syndicates. Liquid capital includes cash and assets easily converted into cash.

VOLATILITY: A degree of fluctuation in the price and valuation of securities.

YIELD: The current rate of return on investment security generally expressed as a percentage of the security's current price. (a) INCOME YIELD is obtained by dividing the current dollar income by the current market price for the security. (b) NET YIELD or YIELD TO MATURITY is the current income yield minus any premium above par or plus any discount from par in purchase price, with the adjustment spread over the period from the date of purchase to the date of maturity of the bond.

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City of CitrusHeights
Investment Policy
April 08, 2026
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City of Citrus Heights Investment Policy
Table of Contents
I. PURPOSE ..................................................................................................................................................... 3 II. POLICY ...................................................................................................................................................... 3 III. SCOPE ....................................................................................................................................................... 3 IV. GENERAL OBJECTIVES ...................................................................................................................... 4 A. Safety ............................................................................................................................................. 4 B. Liquidity ........................................................................................................................................ 4 C. Yield (Return on Investment) ...................................................................................................... 4 V. STANDARDS OF CARE ........................................................................................................................... 4 A. Prudence ........................................................................................................................................ 4 B. Ethics and Conflicts ofInterest ................................................................................................... 4 C. Delegation of Authority ................................................................................................................ 5 D. Internal Controls .......................................................................................................................... 5 E. Review of Investment Portfolio ................................................................................................... 6 VI. AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS ...................................................... 6 VII. SAFEKEEPING AND CUSTODY ........................................................................................................ 7 VIII. SUITABLE AND AUTHORIZED INVESTMENTS ......................................................................... 7 A. Investment Types .......................................................................................................................... 8 B. Collateralization .......................................................................................................................... 13 C. Investments Not Approved ........................................................................................................ 13 D. Risk Management and Diversification ..................................................................................... 13 IX. INVESTING PARAMETERS ............................................................................................................... 14 X. REPORTING ............................................................................................................................................ 15 XI. PERFORMANCE EVALUATION ....................................................................................................... 15 XII. PERFORMANCE STANDARDS ........................................................................................................ 15 XIII. INVESTMENT POLICY COMPLIANCE AND ADOPTION ....................................................... 16 A. Policy Compliance and Changes ............................................................................................... 16 B. Annual Statement of InvestmentPolicy .................................................................................... 16 APPENDIX .................................................................................................................................................... 17 GLOSSARY OF INVESTMENT TERMS .................................................................................... 17 ITEM 16 Agenda Packet Page #293
City of Citrus Heights Investment Policy 3
I. PURPOSE
The purpose of this Investment Policy is to provide guidance and direction for the prudent investment of the City of Citrus Heights (“City”) funds and to foster the creation of a systematic and controlled investment process. The ultimate goal of this Investment Policy is to maximize the efficiency of the City's cash managementsystem and to enhance the economic status of the City while protecting its invested funds.

II. POLICY
A. Goal
It is the City’s policy to invest public funds in a prudent manner that will provide maximum security, adequate liquidity, and sufficient yield while meeting the daily cash flow demands of the City and conforming to all statutes and regulations governing the investment of public funds. This policy incorporates 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. Interpretation of Policy
If any portion of these policies is or becomes contrary to Government Code 53600 et seq., or any other applicable law(s), the requirements of this investment policy shall be interpreted consistent with such applicable law(s).

III. SCOPE
This investment policy appliesto all funds and investment activities under the direct authority of the City, as set forth in the State Government Code, Section 53600 et seq. These funds are accounted for in the City's Annual Comprehensive Financial Report and include: the General Fund, Special Revenue Funds, Capital Project Funds, Enterprise Fund, Internal Service Funds and Fiduciary Funds.

The following are not governed by this policy:
• The City's Retiree Healthcare Plan. It is administered and managed separately by the California Employers' Retiree Benefit Trust (CERBT) Fund under California Government Code Section 53620-53622.
• Bond proceeds. They are subject to the conditions and restrictions of bond documents; • Any other funds specifically exempted by the City Council.

Pooling of Funds
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.

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IV. GENERAL OBJECTIVES
The primary objectives, in priority order, of the City's investment activities are safety, liquidity, and yield.

A. Safety
Preservation of principal is the foremost objective of the investment program. Investments of the City shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. The objective shall be to mitigate credit risk and market risk. To attain this objective, the City shall diversify its investments by investing funds among several financial institutions and a variety of securities offering independent returns.

B. Liquidity
The City's investment portfolio shall remain sufficiently liquid to enable the City to meet all operating requirements that might be reasonably anticipated without requiring a sale of securities. Since all possible cash demands cannot be anticipated, the portfolio shall consist largely of securities with active secondary or resale markets. A portion of the portfolio also may be placed in money market mutual funds or LAIF, which offer sameday liquidity for short-term funds.

C. Yield (Return on Investment)
The City's investment portfolio shall be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, commensurate with the City's investment risk constraints and the liquidity characteristics of the portfolio. The core of investments is limited to relatively low-risk securities in anticipation of earning a fair return relative to the risk being assumed.

V. STANDARDS OF CARE
A. Prudence
The standard of prudence to be used by City investment officials in the management of City moneys shall be the Prudent Investor Standard as authorized under Section 53600.3 of the California Government Code, which shall be applied in the context of managing all aspects of the overall portfolio. Investments shall be made with the care, skill, prudence, and diligence, under circumstancesthen prevailing, including but not limited to, the general economic conditions and the anticipated needs of the City, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims to safeguard the principal and maintain the liquidity needs of the City. This standard shall be applied in the context of managing the overall portfolio.

City investment officers 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 in a timely fashion and appropriate action is taken to control adverse developments.

B. Ethics and Conflicts ofInterest
All participants in the investment process shall act as custodians of the public trust.

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Investment officialsshall recognize that the investment portfolio is subject to public review and evaluation. Officers and employees involved in the City investment process shall refrain from personal business or other activity that could conflict with the proper execution of the investment program, or that could impair their ability to make impartial investment decisions. All participants shall comply with the Political Reform Act and the City’s Conflict of Interest Code, as it is updated from time to time, including the requirements to disclose any material financial interests in financial institutions that conduct business within their jurisdiction, and any personal financial/investment positions. Additionally, all participants shall immediately inform the Citrus Heights City Managerof any potential conflict of interest. City employees and officers shall refrain from undertaking personal investment transactions with the same individual with whom business is conducted on behalf of the City.

C. Delegation of Authority
Authority to manage the City’s investment program is derived from California Government Code, Sections 41006 for City Treasurers and 53600 et seq. The City Council is responsible for the management of the City’s funds, including the administration of this investment policy, and delegates to the Administrative Services Director the authority to invest or to reinvest funds, or to sell or exchange securities. The Administrative Services Director shall thereafter assume full responsibility for those transactions until the delegation of authority is revoked or expires. The Finance Manager and Accounting Manager are authorized to conduct investment-related activities, under the supervision of the Administrative Services Director, on behalf of the City.

The City may engage the services of one or more external investment advisers, who are registered under the Investment Advisers Act of 1940, to assist in the management of the City’s investment portfolio in a manner consistent with the City’s objectives. External investment advisers may be granted discretion to purchase and sell investment securities in accordance with this investment policy. 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.

D. Internal Controls
The Administrative Services Director is responsible for establishing and maintaining a system of written internal controls. The internal controls shall be designed to prevent losses of public funds arising from fraud, employee error, misrepresentation by third parties, unanticipated changes in financial markets, or imprudent action by City employees and officers. The internalstructure shall be designed to provide reasonable assurance that these objectives are met. The concept of reasonable assurance recognizes that (1) the cost of a control should not exceed the benefits likely to be derived, and (2) the valuation of costs and benefits requires estimates and judgments by management.

The internal controls shall address the following points:
■ Segregation of duties
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■ Custodial safekeeping ■ Delivery versus payment (DVP) ■ Delegation of authority ■ Documentation of transactions Periodically, as deemed appropriate by the Administrative Services Director and/or the City Council, an independent analysis by an external auditor shall be conducted to review internal controls, account activity, and compliance with policies and procedures.

E. Review of Investment Portfolio
The securities held by the City must be in compliance with Section VIII (Suitable and Authorized Investments) at the time of purchase. Because some securities may not comply with Section VIII subsequent to the date of purchase, the Administrative Services Director shall at least quarterly review the portfolio to identify those securities that do not comply. The Administrative Services Director shall establish procedures to report to the City Council, major and critical incidences of noncompliance identified through the review of the portfolio.

VI. AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS
The Administrative Services Director shall endeavor to complete investment transactions using a competitive bid process whenever possible. The City’s Administrative Services Director will determine which financial institutions are authorized to provide investment services to the City. Securities shall only be purchased from authorized institutions and firms.

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

In accordance with Section 53601.5, institutions eligible to transact investment business with the City include:
 Institutions licensed by the state and proof of FINRA certification as a broker-dealer as defined in Section 25004 of the Corporations Code.
 Institutions that are members of a federally regulated securities exchange.  Primary government dealers as designated by the Federal Reserve Bank.  Nationally or state-chartered banks.
 Savings association or federal association as defined in Section 5102 of the Financial Code.  The Federal Reserve Bank.
 Direct issuers of securities eligible for purchase.

Selection of financial institutions and broker/dealers authorized to engage in transactions will be at the sole discretion of the City, except where the City utilizes an external investment ITEM 16 Agenda Packet Page #297
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adviser in which case the City may rely on the adviser for selection.

All financial institutions that desire to become qualified bidders for investment transactions (and which are not dealing only with the investment adviser) must supply the Administrative Services Director with audited financials and a statement certifying that the institution has reviewed the California Government Code, Section 53600 et seq. and the City’s investment policy. The Administrative Services Director will conduct an annual review of the financial condition and registrations of such qualified bidders.

Public deposits will be made only in qualified public depositories as established by State law.

Deposits will be insured by the Federal Deposit Insurance Corporation, or, to the extent the amount exceeds the insured maximum, will be collateralized in accordance with State law.

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 brokers/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.

VII. SAFEKEEPING AND CUSTODY
All security transactions, including collateral for repurchase agreements, entered into by the City shall be conducted on a delivery-versus-payment (DVP) basis, which will ensure that securities are deposited in an eligible financial institution prior to the release of funds. To protect against potential losses due to the failure of individual securities dealers, and to enhance access to securities, interest payments, and maturity proceeds, all cash and securities shall be held in safekeeping in the City’s name by a third-party custodian designated by the Administrative Services Director, acting for the City under the terms of a custody agreement executed by the bank and 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 exception to the foregoing shall be depository accounts and securities purchases made with: State of California Local Agency Investment Fund (LAIF), time certificates of deposit, and mutual funds and money market mutual funds since the purchased securities are not deliverable. The Administrative Services Directorshall be bonded to protect the public against possible embezzlement and malfeasance.

VIII. SUITABLE AND AUTHORIZED INVESTMENTS
The City’s investments are governed by California Government Code, Sections 53600 et seq. (“Code”). Within the investments permitted by the Code, the City seeks to further restrict eligible investmentsto the guidelines listed below. In the event a discrepancy is found between this policy and the Code, the more restrictive parameters will take precedence, unless it would be contrary to applicable law, in which case applicable law shall control.

Any investment currently held at the time the policy is adopted which does not meet the new ITEM 16 Agenda Packet Page #298
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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. Percentage limitations of surplus funds invested are noted for the various investment instruments. Where there is a specified percentage limitation or minimum credit quality requirement for a particular category of investments, these requirements are applicable only at the date of purchase. A later increase or decrease in a percentage resulting from a change in values or assets shall not constitute a violation of that restriction. The City's funds may not be invested in those prohibited funds described in California Government Code section 53601.6, but must only be invested in any of the following instruments as permitted by law (California Government Code Section 53601). 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 issuer to avoid incurring unreasonable and avoidable risks regarding specific security types or individual issuers.

The City is empowered by statute to invest in the following types of securities:

A. Investment Types

1. U.S. TREASURY BILLS, NOTES & BONDS. Allowable along with 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 the maximum maturity is five (5) years.

2. U.S. GOVERNMENT AGENCY ISSUES AND GOVERNMENTSPONSORED ENTERPRISES. This includes obligations, participations, or other instruments of, or issued by, a federal government agency or a United States government-sponsored enterprise. No more than 30% of the portfolio may be invested in any single Agency/Government Sponsored Enterprise and there shall be no more than 20% of callable agency securities in the portfolio. The maximum maturity shall not exceed five (5) years.

3. LOCAL AGENCY INVESTMENT FUND (LAIF). As authorized in Government Code Section 16429.1, local agencies may invest in the Local Agency Investment Fund (LAIF), a pooled investment money market fund established by the State of California, and overseen by the State Treasurer, which allows local agencies to pool their investment resources. Principal may be withdrawn on a one-day notice. Interest earned is paid quarterly. The fees charged are limited to one-quarter of one percent of the earnings of the fund. Current policies of LAIF set minimum and maximum amounts of monies that may be invested as well as maximum numbers of transactions that are allowed per month. The City may invest up to the maximum amount permitted by LAIF. LAIF is in trust in the custody of the State Treasurer. The City's right to withdraw its deposited monies from LAIF is not contingent upon the State's ability to adopt a State Budget by July 1st of each new fiscal year.

4. BANKER'S ACCEPTANCE. Otherwise known as bills of exchange or time drafts, ITEM 16 Agenda Packet Page #299
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are negotiable instruments with a maturity of 180 days or less drawn on and accepted by a commercial bank. These instruments must be rated "A-1" or its equivalent or better by at least one Nationally Recognized Statistical Rating Organization (NRSRO) for short-term debt obligations; or long-term debt obligations that are rated in a category of "A" or its equivalent or better by at least one NRSRO. Banker's Acceptances are usually created to finance the import or export of goods, or the shipment of goods within the United States. No more than 40% of the portfolio may be invested in Banker's Acceptances. No more than 5% of the portfolio may be invested in any single issuer. The maximum maturity may not exceed 180 days.

5. NON-NEGOTIABLE CERTIFICATE OF DEPOSIT (CD). As authorized in Government Code Section 53601.8, local agencies may invest in Certificates of Deposit.

These instruments must comply with Government Code Sections 16500 or 16600. This is a receipt for funds deposited in a Bank or Savings and Loan Association for a specified period at a specified rate of interest. No more than 20% of the portfolio may be invested in certificates of deposit. Maturities may not exceed five (5) years.

6. NEGOTIABLE CERTIFICATE OF DEPOSIT (NCD). Allowable certificates of deposits must be issued by a nationally or state-chartered bank or a state or federal association, a state or federal credit union, or by a federally licensed or state-licensed branch of a foreign bank. The amount of the NCD insured up to the FDIC limit does not require any credit ratings. Any amount above the FDIC-insured limit must be issued by institutions which has short-term debt obligations rated "A-1" or its equivalent or better by at least one NRSRO; or long-term obligations rated in a rating category of "A" or its equivalent or better by at least one NRSRO. The maturity period for this investment vehicle may not exceed five (5) years unless approved by the Council. No more than 30% of the total portfolio may be invested in these securities. No morethan 5% of the portfolio may be invested in any single issuer.

7. COMMERCIAL PAPER. As authorized in Government Code Section 53601(h), provided that the securities are issued by an entity that meets all of the following conditions in either paragraph (a) or (b) and other requirements specified below:
 Securities issued by corporations:
 A corporation organized and operating in the United States with assets of more than $500 million.
 The securities are rated “A-1” or its equivalent or better by at least one NRSRO.  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.  Securities issued by other entities:
 The issuer is organized within the United States as a special purpose corporation, trust, or limited liability company.
 The securities must have program-wide credit enhancements including, but not limited to, over-collateralization, letters of credit, or a surety bond.  The securities are rated “A-1” or its equivalent or better by at least one NRSRO.

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 No more than 10% of the outstanding commercial paper of any single issuer.  No more than 25% of the City’s investment assets under management may be invested in Commercial Paper.
 No more than 5% of the portfolio may be invested in any single issuer.  The maximum maturity does not exceed 397 days.

8. REPURCHASE AGREEMENTS. As authorized in Government Code Section 53601(j), repurchase agreements are agreements between the local agency and seller for the purchase of government securities to be resold at a specific date and for a specific amount. Repurchase agreements are generally used for short-term investments for the City's daily automatic sweep account and will generally not exceed 30 days.

Repurchase Agreements are subject to a Master Repurchase Agreement between the City and the provider of the repurchase agreement. The Master Repurchase Agreement will be substantially in the form developed by the Securities Industry and Financial Markets Association (SIFMA). The legal limitation on the maturity period for a repurchase agreement is for one (1) year with the required market value underlying the agreement at 102% of the funds borrowed with the value adjusted quarterly.

9. MUNICIPAL SECURITIES OF THE CITY, STATE OF CALIFORNIA, OR LOCAL AGENCIES. As authorized in Government Code Section 53601(e), local agencies may invest in Bonds of the State of California and any local government in the State of California, which are rated in the "A" category or better by oneNRSRO at the time of investment. In no event shall this classification of investment exceed 30% of the value of the portfolio. No more than 5% of the portfolio may be invested in any single issuer and the maximum maturity does not exceed five (5) years.

10. MUNICIPAL SECURITIES (REGISTERED TREASURY NOTES OR
BONDS). 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, which are rated in the "A" category or better by one NRSRO at the time of investment. In no event shall this classification of investment exceed 30% of the value of the portfolio. No more than 5% of the portfolio may be invested in any single issuer and the maximum maturity does not exceed five (5) years.

11. COLLATERALIZED BANK DEPOSITS. The 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.

12. MUTUAL FUNDS AND MONEY MARKET MUTUAL FUNDS. Mutual Funds are referred to in California Government Code Section 53601(l)(1), as "shares of beneficial interest issued by diversified management companies." Mutual Funds and Money Market Mutual Funds that are registered with the Securities and Exchange Commission under the Investment Company Act of 1940 are authorized investments ITEM 16 Agenda Packet Page #301
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for funds subject to the following provisions:
 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 of the following criteria: ■ Attained the highest ranking or the highest letter and numerical rating provided by not less than two (2) NRSROs; or ■ Have retained an investment advisor 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. ■ No more than 10% of the total portfolio may be invested in Mutual Funds. ■ 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 of the following criteria: ■ Have attained the highest ranking or the highest letter and numerical rating provided by not less than two (2) NRSROs; or ■ Have retained an investment advisor 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. ■ No more than 20% of the total portfolio may be invested in Money Market Mutual Funds. ■ No more than 20% of the total portfolio may be invested in mutual funds and money market mutual funds combined.

13. CORPORATE MEDIUM TERM NOTES. As authorized in Government Code Section 53601(k), local agencies may invest in corporate medium-term notes issued by corporations organized and operating in the United States or by depository institutions licensed by the United States or any state and operating within the United States that are rated in the rating category of "A" or its equivalent or higher rating for the issuer's debt as provided by one NRSRO and having a maximum remaining maturity period of five (5) years or less in an amount not to exceed 30% of the City's portfolio. Furthermore, the maximum principal amount in any one issuer will not exceed 5% of the City's portfolio.

14. ASSET-BACKED, MORTGAGE-BACKED, MORTGAGE PASS-THROUGH

SECURITIES, AND COLLATERALIZED MORTGAGE OBLIGATION
FROM ISSUERS NOT DEFINED IN SECTIONS 1 AND 2 OFTHE SUITABLE AND AUTHORIZED INVESTMENTS SECTION OF THIS POLICY. The
securities must be rated in a rating category of “AA” or its equivalent or better by a NRSRO. No more than 20% of the total portfolio may be invested in these securities with no more than 5% of the portfolio may be invested in any single Asset-Backed or commercial Mortgage security issuer. The maximum legal final maturity does not exceed five (5) years.

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15. SUPRANATIONALS. Allowable, provided that 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 Inter-American Development Bank. The securities are rated in a rating category of “AA” or its equivalent or better by a NRSRO. No more than 30% of the total portfolio may be invested in these securities and no more than 10% of the portfolio may be invested in any single issuer. The maximum maturity does not exceed five (5) years.

16. SHARES OF BENEFICIAL INTEREST ISSUED BY A JOINT POWERS AUTHORITY (JPA). Organized pursuant to Section 6509.7 that invests in securities and obligations authorized in subdivisions (a) to (q), inclusive. Each share shall represent an equal proportional interest in the underlying pool of securities owned by the joint powers authority. To be eligible under this section, the joint powers authority issuing the shares shall have retained an investment advisor that meets all of the following criteria:
 The advisor is registered or exempt from registration with the Securities and Exchange Commission.
 The advisor has not less than five years of experience investing each of the types of securities and obligations authorized by Government 53601.  The advisor has assets under management in excess of five hundred million dollars ($500,000,000).

While local government investment pools generally provide significant safety and liquidity, the Administrative Services Director shall complete a thorough investigation prior to making any such investment. Due diligence in investigations shall generally include a review of written statements of investment policies, objectives, fees schedules, and reporting schedules, as well as issues related to (1) eligible investors and securities, (2) the permitted frequencies and sizes of deposits and withdrawals, (3) security safeguards, including settlement processes, (4) the frequency with which securities are priced and the program audited, (5) the treatment of gains and losses, including interest calculations and distribution, (6) whether and, if so, how reserves, retained earnings, and similar funds are utilized by the investment pool, and (7) whether the investment pool is eligible for and, if so, accepts bond proceeds. In addition, only local government investment pools with at least five years' experience providing similar services to other California municipalities may be utilized.

17. OTHER LOCAL GOVERNMENT INVESTMENT POOLS (LGIP). Other LGIPs permitted by the City (such as a County Pool as defined by California Government Code Section 27000.3).
 No more than 20% of the total portfolio may be invested in LGIPs other than LAIF and JPAs.

The investment in the LGIP shall not cause the City’s investment policy to violate any other investment requirement, including the requirements to not invest more than 25% of the total portfolio in eligible commercial paper, or more than 5% of the total portfolio in any one issuer’s ITEM 16 Agenda Packet Page #303
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commercial paper.

B. Collateralization
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.

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 of the CD for all other classes of security.

Collateralization of Bank Deposits. The City shall require any bank or financial institution to comply with the collateralization criteria defined in California Government Code, Section 53651.

Repurchase Agreements. The City requires that Repurchase Agreements be collateralized only by securities authorized in accordance with California Government Code:
 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.
 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.  The City shall receive monthly statements of collateral.

C. Investments Not Approved
Any security type or structure not specifically approved by this policy is hereby prohibited, including, but not limited to futures and options. In accordance with Government Code, Section 53601.6, investment in inverse floaters, range notes, or mortgage-derived interest-only strips is prohibited. Investment in any security that could result in a zerointerest 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 negativeinterest accrual if held to maturity are permitted. Trading securities for the sole purpose of speculating on the future direction of interest rates are prohibited. Purchasing or selling securities on margin is prohibited. The use of reverse repurchase agreements, securities lending or any other form of borrowing or leverage is prohibited. The purchase of foreign currency-denominated securities is prohibited. The purchase of a security with a forward settlement date exceeding 45 days from the time of the investment isprohibited.

D. Risk Management and Diversification
Mitigating Credit Risk in the Portfolio
Credit risk is the risk that a security or a portfolio will lose some or all its value due to a real or perceived change in the ability of the issuer to repay its debt. The City will mitigate ITEM 16 Agenda Packet Page #304
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credit risk by adopting the following strategies:
 The diversification requirements included in the “Authorized Investments” section of this policy are designed to mitigate credit risk in the portfolio.  No more than 5% of the total portfolio may be deposited with or invested in securities issued by any single issuer unless otherwise specified in this policy.  The City may elect to sell a security prior to its maturity and record a capital gain or loss in order to manage the quality, liquidity or yield of the portfolio in response to market conditions or City’s risk preferences.
 If a security owned by the City is downgraded to a level below the requirements of this policy, making the security ineligible for additional purchases, the following steps will be taken:
 Any actions taken related to the downgrade by the investment manager will be communicated to the Administrative Services Director in a timely manner.  If a decision is made to retain the security, the credit situation will be monitored and reported to the City Council.

Mitigating Market Risk in the Portfolio
Market risk is the risk that the portfolio value will fluctuate due to changes in the general level of interest rates. The City recognizes that, over time, longer-term portfolios have the potential to achieve higher returns. On the other hand, longer-term portfolios have higher volatility of return. The City will mitigate market risk by providing adequate liquidity for short-term cash needs, and by making longer-term investments only with funds that 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:
 The City will maintain a minimum of six months of budgeted operating expenditures in short-term investments to provide sufficient liquidity for expected disbursements.
 The maximum stated final maturity of individual securities in the portfolio will be five (5) years, except as otherwise stated in this policy.  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.

IX. INVESTING PARAMETERS
Maximum Maturities
To the extent possible, the City will attempt to match its investments with anticipated cash flow requirements and known future liabilities. Where there is no specified maturity limitation on an investment, no investment shall be made in any security, which, at the time of the investment, has a term remaining to maturity in excess of five (5) years from the date of trade settlement, unless the City Council has granted express authority to make that investment no less than three months prior to the investment.

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X. REPORTING
The Administrative Services Director shall submit investment reports to the City Council that provide a clear picture of the status of the current investment portfolio and shall contain sufficient information to permit an independent organization to evaluate the performance of the investment program.

Reporting to City Council
In accordance with California Government Code Sections 53607 and 53646, the Administrative Services Director shall submit to the City Council a monthly report of portfolio transactions and a quarterly investment report, which summarizes all securities in the portfolio. The quarterly report shall be provided to City Council within 45 days after the end of the quarter and include:
 Investment type
 Issuer
 Purchase date
 Maturity date
 Credit quality
 Coupon and yield
 Book value
 Market value
 Interest Earnings
 Average days to maturity
 Discussion of the current economic climate
 Statement that the portfolio complies with this Investment Policy or the manner in which the portfolio is not in compliance.
 Statement of the City's ability to meet anticipated expenditure requirements for the next six months, or an explanation as to why sufficient money may not be available.

XI. 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.

XII. PERFORMANCE STANDARDS
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, ITEM 16 Agenda Packet Page #306
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the cash flow characteristics of the portfolio, and state and local laws, ordinances or resolutions that restrict investments.

The Administrative Services Director shall monitor and evaluate the portfolio’s performance relative to the chosen market benchmark(s), which will be included in the Administrative Services Director’s quarterly report. The Administrative Services Director 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.

XIII. INVESTMENT POLICY COMPLIANCE AND ADOPTION
A. Policy Compliance and Changes
Any deviation from the policy shall be reported to City Council at the next scheduled meeting. The Administrative Services Director shall promptly notify the City Council of any material change in the policy, and any modifications to the policy must be approved by the City Council.

B. Annual Statement of InvestmentPolicy
The Administrative Services Director shall render a written Investment Policy that shall be reviewed at least annually by the City Council 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. The City Council shall consider the annual Investment Policy and any changes therein at a public meeting. The Investment Policy shall be adopted by resolution of the City Council.

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APPENDIX

GLOSSARY OF INVESTMENT TERMS
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 (i.e., Government National Mortgage Association). Federally sponsored agencies (FSA's) are backed by each particular agency with a market perception that there is an implicit government guarantee (i.e., Federal National Mortgage Association).
• FEDERAL FARM CREDIT BANK (FFCB): Provides credit and liquidity in the agricultural industry. FFCB issues discount notes and bonds. • FEDERAL HOME LOAN BANKS (FHLB): Government sponsored wholesale banks (currently 12 regional banks) that lend funds and provide correspondent banks services to member commercial banks, thrift institutions, credit unions and insurance companies.
• FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC): Like
FHLB, provides credit and liquidity in the housing market. FHLMC, also called “Freddie Mac” issues discount notes, bonds and mortgage pass-through securities. • FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA): FNMA is a federal corporation working under the auspices of the Department of Housing and Urban Development (HUD). It is the largest single provider of residential mortgage funds in the United States. Fannie Mae, as the corporation is called, is a private stockholder-owned corporation. The corporation's purchases include a variety of adjustable mortgages and second loans, in addition to fixed-rate mortgages. • GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA or Ginnie Mae): Securities influencing the volume of bank credit guaranteed by GNMA and issued by mortgage bankers, commercial banks, savings and loan associations, and other institutions. Security holder is protected by full faith and credit of the U.S.

Government. Ginnie Mae securities are backed by the FHA, VA, or FMHA mortgages.

The term "pass-throughs" is often used to describe Ginnie Maes. • PRIVATE EXPORT FUNING CORPORATION (PEFCO): Assists exporters; obligations of PEFCO are not guaranteed by the full faith and credit of the US government.
• TENNESSEE VALLEY AUTHORITY (TVA): Provides flood control and power and promotes development in portions of the Tennessee, Ohio, Mississippi River valleys. TVA currently issues discount notes and bonds.

ASSET-BACKED SECURITIES: Securities supported by pools of installment loans or leases or by pools of revolving lines of credit.

ITEM 16 Agenda Packet Page #308
City of Citrus Heights Investment Policy 18
BANKER’S ACCEPTANCE: A money market instrument created to facilitate international trade transactions. It is highly liquid and safe because the risk of the trade transaction is transferred to the bank which “accepts” the obligation to pay the investor.

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 debt security is shown on the holder's balance sheet. Book value is often acquisition cost plus/minus amortization and accretion, which may differ significantly from the security's current value in the market.

BROKER: Someone who brings buyers and sellers together and is compensated for his/her service.

CALLABLE: A callable security gives the issuer the option to call it from the investor prior to its maturity. The main cause of a call is a decline in interest rates. If interest rates decline, the issuer will likely call its current securities and reissue them at a lower rate of interest.

CERTIFICATE OF DEPOSIT (CD): A time deposit with a specific maturity evidenced by a certificate. Large-denomination CDs 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.

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: The short-term unsecured debt of corporations.

COUPON: The rate of return at which interest is paid on a bond.

CREDIT QUALITY: The measurement of the financial strength of a bond issuer. This measurement helps an investor to understand an issuer's ability to make timely interest payments and repay the loan principal upon maturity. Generally, the higher the credit quality of a bond issuer, ITEM 16 Agenda Packet Page #309
City of Citrus Heights Investment Policy 19
the lower the interest rate paid by the issuer because the risk of default is lower. Credit quality ratings are provided by a Nationally Recognized Statistical-Rating Organization.

CREDIT RISK: The risk to an investor that an issuer will default in the payment of interest and/or principal on a security.

CUSTODIAN: A bank or other financial institution that keeps custody of stock certificates and other assets.

DEALER: A dealer, as opposed to a broker, acts as a principal in all transactions, by buying and selling for his/her own account.

DELIVERY VERSUS PAYMENT: There are two methods of delivery of securities: delivery versus payment and delivery versus receipt. Delivery versus payment is delivery of securities with an exchange of money for the securities. Delivery versus receipt is delivery of securities with an exchange of a signed receipt for the securities.

DISCOUNT: The difference between the par value of a bond and the cost of the bond, when the cost is below par. Some short-term securities, such as T-bills and banker’s acceptances, are known as discount securities. They sell at a discount from par and return the par value to the investor at maturity without additional interest. Othersecurities, which have fixed coupons, trade at a discount when the coupon rate is lower than the current market rate for securities of that maturity and/or quality.

DIVERSIFICATION: Dividing investment funds among a variety of investments to avoid excessive exposure to any one source of risk.

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, other than in a forced or liquidation sale.

FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC): A federal agency that insures bank deposits currently up to $250,000 per deposit.

FEDERAL RESERVE SYSTEM: The central bank of the United States created by Congress and consisting of a seven-member Board of Governors in Washington, D.C., twelve Regional Banks and about 5,700 commercial banks that are members of the system.

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.

GOVERNMENT ACCOUNTING STANDARDS BOARD (GASB): A standard-setting body, associated with the Financial Accounting Foundation, which prescribes standard accounting practices for governmental units.

ITEM 16 Agenda Packet Page #310
City of Citrus Heights Investment Policy 20
GOVERNMENT SECURITIES: An obligation of the U.S. government, backed by the full faith and credit of the government. These securities are regarded as the highest quality of investment securities available in the U.S. securities market. See "Treasury Bills, Notes, and Bonds." INTERNAL CONTROLS: An internal control structure designed to ensure that the assets of the entity are protected from loss, theft, or misuse. The internal control structure is designed to provide reasonable assurance that these objectives are met. The concept of reasonable assurance recognizes that 1) the cost of a control should not exceed the benefits likely to be derived and 2) the valuation of costs and benefits requires estimates and judgments by management. Internal controls should address the following points:
• Control of collusion - Collusion is a situation where two or more employees are working in conjunction to defraud their employer.
• Separation of transaction authority from accounting and record keeping - By separating the person who authorizes or performs the transaction from the people who record or otherwise account for the transaction, a separation of duties is achieved. • Custodial safekeeping - Securities purchased from any bank or dealer including appropriate collateral (as defined by state law)shall be placed with an independent third party for custodial safekeeping.
• Avoidance of physical delivery securities - Book-entry securities are much easier to transfer and account for since actual delivery of a document never takes place.

Delivered securities must be properly safeguarded against loss or destruction. The potential for fraud and loss increases with physically delivered securities. • Clear delegation of authority to subordinate staff members - Subordinate staff members must have a clear understanding of their authority and responsibilities to avoid improper actions. Clear delegation of authority also preserves the internal control structure that is contingent on the various staff positions and their respective responsibilities.
• Written confirmation of transactions for investments and wire transfers - Due to the potential for error and improprieties arising from telephone and electronic transactions, all transactions should be supported by written communications and approved by the appropriate person. Written communications may be via fax if on letterhead and if the safekeeping institution has a list of authorized signatures. • Development of a wire transfer agreement with the lead bank and third-party custodian - The designated official should ensure that an agreement will be entered into and will address the following points: controls, security provisions, and responsibilities of each party making and receiving wire transfers.

JOINT POWERS AUTHORITY (JPA): An entity created by two or more public agencies that share a common goal to jointly exercise powers common to all members through a joint powers agreement or contract.

ITEM 16 Agenda Packet Page #311
City of Citrus Heights Investment Policy 21
LEVERAGE: Borrowing funds to invest in securities that have the potential to pay earnings at a rate higher than the cost of borrowing.

LIQUIDITY: A liquid asset is one that can be converted easily and rapidly into cash without a substantial loss of value. In the money market, a security is said to be liquid if the spread between bid and asked prices is narrow and reasonable size can be done at those quotes.

LOCAL AGENCY INVESTMENT FUND (LAIF): Chapter 730, Statutes of 1976 of the State of California, established the Local Agency Investment Fund. This fund enables local governmental agencies to remit money not required for immediate needs to the State Treasurer for the purpose of investment. In order to derive the maximum rate of return possible, the State Treasurer has elected to invest these monies with State monies as a part of the Pooled Money Investment Account (PMIA). Each local governmental unit has the exclusive determination of the length of time its money will be on deposit with the State Treasurer. At the end of each calendar quarter, all earnings derived from investments are distributed by the State Controller to the participating government agencies in proportion to each agency's respective amounts deposited in the Fund and the length of time such amounts remained therein. Prior to the distribution, the State's costs of administering the program are deducted from the earnings.

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 that security as collateral.

MARKET RISK: The risk that the value of securities will fluctuate with changes in overall market conditions or interest rates.

MARK-TO-MARKET: The process whereby the book value or collateral value of a security is adjusted to reflect its current market value.

MARKET VALUE: The current price at which a security is trading and could presumably be purchased or sold at that particular point in time.

MASTER REPURCHASE AGREEMENT: A written contract covering all future transactions between the parties to repurchase-reverse repurchase agreements that establish each party's rights in the transactions. A master agreement will often specify, among other things, the right of the buyer-lender to liquidate the underlying securities in the event of default by the seller- borrower.

MATURITY: The date upon which the principal or stated value of a financial obligation is due and payable. The investment’s term or remaining maturity is measured from the settlement date to ITEM 16 Agenda Packet Page #312
City of Citrus Heights Investment Policy 22
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, bankers' acceptances, 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 FUND: An investment company that pools money and can invest in a variety of securities, including fixed-income securities and money market instruments. Mutual funds are regulated by the Investment Company Act of 1940 and must abide by Securities and Exchange Commission (SEC) disclosure guidelines.

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. Standard and Poor's, Moody's, and Fitch Financial Services are examples of such organizations.

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 referred to as the “ask price.”
PAR VALUE: The amount of principal that must be paid at maturity. Also referred to as the face amount of a bond, normally quoted in $1,000 increments per bond.

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

ITEM 16 Agenda Packet Page #313
City of Citrus Heights Investment Policy 23
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 difference between the par value of a bond and the cost of the bond, when the cost is above par.

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

PRIMARY DEALER: A group of government securities dealers who submit daily reports of market activity and monthly financial statements to the Federal Reserve Bank of New York and are subject to its informal oversight. Primary dealers include Securities and Exchange Commission (SEC) registered securities broker/dealers, banks and a few unregulated firms.

PRINCIPAL: (1) The face amount or par value of a debt instrument. (2) One who acts as a dealer buying and selling for his own account.

PRUDENT INVESTOR (PRUDENT PERSON) RULE: A standard of responsibility which applies to fiduciaries. In California, the rule is stated as “Investments shall be managed with the care, skill, prudence and diligence, under the circumstances then prevailing, that a prudent person, acting in a like capacity and familiar with such matters, would use in the conduct of an enterprise of like character and with like aims to accomplish similar purposes.” 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 or the current income return.

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 AGREEMENT (RP OR REPO): A holder of securities sells these securities to an investor with an agreement to repurchase them at a fixed price on a fixed date. The security "buyer" in effect lends the "seller" money for the period of the agreement, and the terms of the agreement are structured to compensate the buyer for this. Dealers use RP extensively to finance their positions. Exception: When the Fed is said to be doing RP, it is lending money that is increasing bank reserves.

RISK: Degree of uncertainty of return on an asset.

RULE 2A-7 OF THE INVESTMENT COMPANY ACT: Applies to all money market mutual funds and mandates such funds to maintain certain standards, including a 13-month maturity limit and a 90-day average maturity on investments, to help maintain a constant net asset value of one dollar ($1.00).

SAFEKEEPING: A service to bank customers whereby securities are held by the bank in the customer’s name.

ITEM 16 Agenda Packet Page #314
City of Citrus Heights Investment Policy 24
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.

STRUCTURED NOTE: Notes issued by Government Sponsored Enterprises (FHLB, FNMA, etc.) and Corporations, which have imbedded options (e.g., call features, step-up coupons, floating rate coupons, derivative-based returns) into their debt structure. Their market performance is impacted by the fluctuation of interest rates, the volatility of the imbedded options and shifts in the shape of the yield curve.

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.

U.S. TREASURY OBLIGATIONS: Securities issued by the U.S. Treasury and backed by the full faith and credit of the United States. Treasuries are considered to have no credit risk and are the benchmark for interest rates on all other securities in the US and overseas. The Treasury issues both discounted securities and fixed coupon notes and bonds. • TREASURY BILLS: Short-term U.S. government non-interest bearing discounted debt securities with maturities of no longer than one year and issued in minimum denominations of $10,000. Auctions of three- and six-month bills are weekly, while auctions of one-year bills are monthly. The yields on these bills are monitored closely in the money markets for signs of interest rate trends.
• TREASURY NOTE: A medium-term coupon-bearing U.S. Treasury security issued as a direct obligation of the U.S.Government and having an initialmaturity of from one to ten years and issued in denominations ranging from $1,000 to $1 million or more. • TREASURY BOND: A long-term coupon-bearing U.S. Treasury security issued as a direct obligation of the U.S. Government and having an initial maturity of more than 10 years and issued in minimum denominations of $1,000.

UNIFORM NET CAPITAL RULE: Securities and Exchange Commission (SEC) Rule 15C3- 1 outlining requirements that member firms as well as nonmember broker-dealers in securities maintain a maximum ratio of indebtedness to liquid capital of 15 to 1; also called net capital rule ITEM 16 Agenda Packet Page #315
City of Citrus Heights Investment Policy 25
and net capital ratio. Indebtedness covers all money owed to a firm, including margin and commitments to purchase securities, one reason new public issues are spread among members of underwriting syndicates. Liquid capital includes cash and assets easily converted into cash.

VOLATILITY: A degree of fluctuation in the price and valuation of securities.

YIELD: The current rate of return on investment security generally expressed as a percentage of the security's current price. (a) INCOME YIELD is obtained by dividing the current dollar income by the current market price for the security. (b) NET YIELD or YIELD TO MATURITY is the current income yield minus any premium above par or plus any discount from par in purchase price, with the adjustment spread over the period from the date of purchase to the date of maturity of the bond.

ITEM 16 Agenda Packet Page #316

CITY OF CITRUS HEIGHTS

CITY COUNCIL STAFF REPORT

MEMORANDUM
DATE: April 8, 2026
TO: Mayor and City Council Members
Ashley J. Feeney, City Manager
FROM: Meghan Huber, Economic Development &
Community Engagement Director
SUBJECT: Approval of Sunrise MarketPlace Property-Based Improvement District 2025 Annual Report
Recommendation
The Sunrise MarketPlace Property-Based Improvement District (PBID) is required by law to provide an annual report to the City Council. The PBID Board of Directors approved the 2025 Sunrise MarketPlace Annual Report on March 12, 2026 and are ready to present this report to the City Council.

Staff recommend the City Council adopt Resolution No. 2026-____ a Resolution of the City Council of the City of Citrus Heights, California, Approving the Sunrise MarketPlace 2025 Annual Report.

Strategic Plan Alignment
This item is in alignment with the following City Council priority:

Goal: Diversify for a Vibrant Economy
Fiscal Impact
There is no fiscal impact associated with this action.

Background and Analysis
The City Council approved the formation of the Sunrise MarketPlace PBID in 1999 and the most recent renewal in June 2024. Sunrise MarketPlace is an important partner of the City to achieve shared economic development goals.

ITEM 17 Agenda Packet Page #317
Subject: Approval of Sunrise MarketPlace Property and Business Improvement District 2025 Annual Report Date: April 8, 2026

The PBID is governed by the Management District Plan (MDP), which serves as the foundational document outlining the district’s purpose, boundaries, governance structure, assessment methodology, and program of services. In accordance with the MDP and the Property and Business Improvement District Law of 1994, the Owners’ Association is required to prepare an annual report and present it to the City Council for review and approval.

The annual report provides transparency and accountability for the use of assessment funds and must include, at a minimum, a description of proposed improvements and activities, associated budgets, assessment methodology, and any anticipated changes to the district. City Council approval is required each year to authorize the continued levy and expenditure of assessments in alignment with the MDP.

The Sunrise MarketPlace Board of Directors approved the 2025 Annual Report at its meeting on March 12, 2026. The meeting was properly noticed and conducted in compliance with the Brown Act.

Attachments

1. Resolution 2026-___, a Resolution of the City Council of the City of Citrus Heights, California, Approving the Sunrise MarketPlace 2025 Annual Report a. Sunrise MarketPlace 2025 Annual Report
ITEM 17 Agenda Packet Page #318
RESOLUTION NO. 2026- ___

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CITRUS HEIGHTS, CALIFORNIA, APPROVING THE SUNRISE MARKETPLACE 2025 ANNUAL REPORT

WHEREAS, The City Council approved the formation of the Sunrise MarketPlace PBID in 1999 and the most recent renewal in June 2024; and
WHEREAS, the Sunrise MarketPlace Board of Directors approved the Sunrise MarketPlace 2025 Annual Report on March 12, 2026; and
WHEREAS, the Sunrise MarketPlace 2025 Annual Report is incorporated as part of this Resolution and is on file with the City Clerk.

NOW THEREFORE BE IT RESOLVED AND ORDERED The City Council of the City of Citrus Heights does approve the Sunrise MarketPlace 2025 Annual Report.

The City Clerk shall certify the passage and adoption of this Resolution and enter it into the book of original resolutions.

PASSED AND ADOPTED by the City Council of the City of Citrus Heights, California, this 8th day of April, 2026 by the following vote, to wit:

AYES: Council Members:

NOES: Council Members:

ABSTAIN: Council Members:

ABSENT: Council Members:

MariJane Lopez-Taff, Mayor
ATTEST:

Amy Van, City Clerk
Attachment
Sunrise MarketPlace 2025 Annual Report
ITEM 17 Agenda Packet Page #319
8095 Greenback Lane Suite D
Citrus Heights, CA 95610

PRSRT STD
U.S. POSTAGE
PAID

SACRAMENTO, CA
PERMIT NO. 586
OPENED
IN 2025
Aisha Hair Salon
Fair Oaks Plaza
Bargain Supermarket
Citrus Heights Chamber
Greenfaire Village
D & D European Nails
Greenback Square
Fire and Ice
Sunrise Hills
Mancinis Sleepworld
Citrus Town Center
Must Be Cow
Nothing Bundt Cakes
Sunrise Village
Pinkberry
Sunrise Village
Sunrise Montessori
Former Sears Service building
Teriyaki Madness
Marketplace at Birdcage
The Bizzy Bee Hair Salon
Greenfaire Village
STAFF
Kathilynn Carpenter
Executive Director
[email protected]
Lisa Cordell
Marketing & Special Projects Manager
[email protected]
Mikhaila Freas
Marketing Assistant
[email protected]

CITY COUNCIL LIAISONS
MariJane Lopez-Taft
2025 Vice Mayor
Tim Schaefer
Council Member
2025 BOARD OF DIRECTORS

OFFICERS
Ross Tolbert
Chair
Ethan Conrad Properties
Tiffany Clement
Chair (2024 - 10/25)
Merlone Geier
Vickie Adams
Secretary (9/25 - present)
Citrus Heights Pet Hospital
Eric Brickson
Secretary (through 8/25)
Citrus Heights Pet Hospital
Christina DeCelle
Treasurer (10/25 - present)
Ben’s Barketplace
Don Tollefson
Treasurer (through 10/25)
Batteries Plus
Brooke Bolden-Mallory
(through 2/25)
Sunrise Mall
Kareem Daniels
(through 9/25)
Intercal Real Estate
Citrus Town Center,
Greenback Square,
Greenfaire Village
Grant Bollinger
(9/25 - present)
Intercal Real Estate
Citrus Town Center,
Greenback Square,
Greenfaire Village
Phil Jarrett
Property Owner
Ted Mitchell
Mitchell Properties
Ryan Eichorst
Gerrity Group
Marketplace at Birdcage
Andrea Velasquez
Merlone Geier, Sunrise Village
ITEM 17 Agenda Packet Page #320

CLEAN & SAFE COMMITTEE

MESSAGE FROM THE CHAIR
As a representative of a company
that owns/manages more than 12
million square feet of real estate
in the region, I participate in 10
business improvement districts
(PBID). One of the first things
we did after purchasing property
in Sunrise MarketPlace was to
actively participate in the PBID.

Last year I became chair of the
board. These districts are of
vital importance to the economic
vitality, physical vibrancy and
safety of its business and
property owners.

Sunrise MarketPlace acts as the area’s communications center.

The PBID alerts business and property owners of relevant information coming from the City and police department, Sacramento County and other organizations. The PBID facilitates relationships between property owners and between owners and the City.

BY ROSS TOLBERT
Chair - Sunrise MarketPlace board of directors
Executive Vice President - Property Management Ethan Conrad Properties 2025 ANNUAL REPORT
The Clean & Safe Committee meeting is a valuable
opportunity to connect with PBID, City, and Police
representatives to discuss issues impacting your
business. Your input helps ensure resources are
allocated effectively. All are welcome to attend, but
security and loss prevention personnel are especially
encouraged. The committee’s goal is to promote
information sharing and collaboration to maintain a
safe and welcoming District.

HERE IS HOW TO GET THE MOST

OUT OF BEING IN
THE PBID:
• Be sure you are subscribed to our newsletter by going to our website at sunrisemarketplace.com.
• Reach out to staff if you need help navigating issues with the City or police.
• Send staff information on deals or unique events that can be posted to social media channels.
• Attend the Clean and Safe Committee.
see more information in the report
• Distribute our crime prevention flier to front-line employees.

Be proactive and call in issues that require either security or the porter service -download the flier which has contact numbers and other useful information on our website.
• Submit a Letter of Agency to the PBID - allows security to trespass individuals on your behalf.

If you have questions or need more information on anything contained in the report, please contact Executive Director Kathilynn Carpenter at: [email protected]
SHOP
DINE
DO
PLAY
2025 ANNUAL REPORT
ITEM 17 Agenda Packet Page #321

CLEAN & SAFE PROGRAMS

PROGRAMS & SERVICES
INCIDENT TYPE TOTAL 2025 TOTAL 2024 VARIANCE
> Assistance 1,416 511 +950
Business Clearing, Foot Patrol, Vehicle
Patrol, Medical
> Disturbance 142 190 -48
Behavior that interferes with business or
center operation bothering customers
> Loitering / Trespassing 1,667 2,006 -309
Camps & Panhandling, Street/parking
lot sales
>Theft 79 243 -164
Prevention, Recovery & Assistance
> Vandalism / Large Illegal Dumps 60 101 -41
> Vehicle / RV Incidents 166 92 +74
> # of Transient Interations 2,215 3,001 -876
> # of Non-Transient Interactions 585 717 -132
> Total Individual Interactions 2,710 3,718 -1,008
> 602’s Issued 88 14 +74
SMP Clean & Safe Programs Show Positive Impact For
Businesses & Consumers
2025 statistics communicate
an undeniable fact- security is
necessary and it is effective.

The data reflects a measurable
reduction in disruptive and
criminal activity. At the same time,
there was a significant increase
in proactive assistance and
enforcement efforts, allowing for
a strategic shift toward prevention,
visibility, and early intervention.

ITEM 17 Agenda Packet Page #322

PORTER SERVICE
SMP contracted with City Wide Property Services to provide porter service in the District. The Porter removes illegally dumped items, homeless camps, abandoned shopping carts, cleans graffiti, and picks up trash. An assigned porter patrols the District Monday through Friday, four hours per day.

To report dumping graffiti, or trash cleanup, call, text or email Kathilynn Carpenter (916) 769-5615 - [email protected] SERVICE TYPE TOTAL 2025 TOTAL 2024 VARIANCE
> Bags of Trash 1,412 848 +564
63,540 lbs 38,160 lbs +25,380 lbs
> Shopping Carts 529 631 -102
> Graffiti Tags 436 407 +29
> Illegal Dumping-Large Dumps 34 30 +4
> Items Removed 391 218 +173
furniture, tires, pallets, appliances,
mattresses, etc.
> Hazardous Items 41 101 -60
needles, paint, chemicals
Fun Fact:
64,000 lbs of trash is equal to one Megladon!
Or 32 tons of trash! Our porter picked up 25,000
more pounds than last year equal to one
whale shark.

While we saw less homeless camp debris in 2025,
trash and dumping increased substantially. Our
porter did an excellent job staying on top of these
unsightly and unsafe issues. With consistent security
we also see fewer rogue shopping carts. Many graffiti
taggers are not homeless.

ITEM 17 Agenda Packet Page #323

SOCIAL MEDIA CONTEST
Sunrise MarketPlace strategically uses Facebook and Instagram to promote District businesses, highlight community events, and drive both online engagement and in-person visits. Through consistent content creation, targeted promotions, seasonal campaigns, business spotlights, and grand opening features, SMP strengthens brand awareness, increases tenant visibility, and fosters community pride while delivering measurable growth in reach, impressions, and engagement. These coordinated efforts position Sunrise MarketPlace as a dynamic, connected destination that supports local businesses and encourages shoppers to keep their spending within the District.

MARKETING & EVENTS
• Flash Friday
Giveaways
Weekly $25 gift
card promotions
encouraging repeat
engagement and
storefront visits.
• Lucky the
Leprechaun
District Hunt
Multi-day spring
scavenger hunt
awarding $75
business gift cards
and a $300 “Pot of
Gold” grand prize.
• Spooky Season
Photo Contest
Halloween photo
submissions with
three $250 gift card
prizes celebrating
community creativity.
• Gobbles the
Turkey Hunt
November holiday
scavenger
hunt with weekly $75
prizes and a $300
Thanksgiving grocery
grand prize.
• 25 Days of
Giving
December daily
giveaways awarding
25 $50 gift cards to
District businesses.
• Holiday
Shopping Spree
SMP’s largest
promotion awarding
three winners a
combined $2,250
in District gift cards
during peak holiday
shopping season.

FACEBOOK
13,835 Followers
+ 387 from 2024
8,051 Engagements
+4,608 from 2024

INSTAGRAM
2,513 Followers
+ 186 from 2024
9,192 Engagements
+469 from 2024

NEWSLETTER
9,619 Consumer Subscribers
348 Business Subscribers
24 Business Newsletters
Distributed
27 Consumer Newsletters
Distributed

25.66% Open Rate

2.41% Click Rate
113,121 Total Open
Visit shopsmp.com
to sign up for newsletters

CITRUS HEIGHTS SENTINEL HOMEPAGE

ADVERTISING
In 2025, SMP placed targeted advertisements on the
homepage of the Citrus Heights Sentinel to promote
District events, seasonal campaigns, and local
businesses. These placements increased visibility among the community, supported marketing initiatives, and
encouraged both online and in-person engagement
with the District.
3,792,218 Impressions
50,000+ Hovers
5,899 Clicks
SMP FOLLOWERS WON $15,375IN GIFT CARDS SUPPORTING LOCAL SMP BUSINESSES ITEM 17 Agenda Packet Page #324

SPECIAL EVENTS IN THE DISTRICT

HOLIDAY EVENTS
Our largest events take place during the holiday season, drawing over 1,200+ attendees to the District during key retail periods while creating family-friendly experiences that strengthen emotional connections with our community and businesses.

HARVEST FESTIVAL
& MOVIE NIGHT
OCTOBER 17TH
200+ Attendees
Free Halloween-themed event
featuring pumpkin decorating, face
painting, train rides, live magic, food
trucks, and an outdoor screening of
Beetlejuice, bringing families to Sunrise
Mall for an evening of seasonal fun.

STRANGER THINGS FINALE

SKATE PARTY
DECEMBER 12TH
100+ Attendees
1980s-themed roller skating event
inspired by Stranger Things, featuring
costume contests, themed prizes, and
nostalgic décor that engaged local
youth and families.

LASER LIGHT SHOW
DECEMBER 5TH
1,000+ Attendees
Signature holiday kickoff event
featuring a Christmas Beam Lighting,
free Santa photos, a 45-minute laser
spectacular, car show, night market,
carnival games, and live entertainment
— creating a high-energy holiday
destination in the District.

WEBSITE
Our website is consumer-facing, and includes a directory of our businesses, special event and contest information, clean and safe information, Art in SMP page and details about Sunrise MarketPlace.
40,595 Users Visited Shopsmp.com
67,458 Page Views
PROPERTY OWNERS will find information here as well, such as previous Annual Reports and board meeting agendas and minutes.

ITEM 17 Agenda Packet Page #325

FALL FOOD DRIVE
In partnership with Sunrise Christian Food
Ministry we collected 1,000+ food items (two
full pallets) to support local families during the
Thanksgiving season.

COMMUNITY EVENTS SMP SUPPORTED

BIG DAY OF SERVICE
In support of the Citrus Heights Police Department
we hosted volunteers to create supportive signage for
local law enforcement, reinforcing strong community
partnerships.

COMMUNITY SUPPORT

ECONOMIC DEVELOPMENT
SMP assists owners and new tenants in navigating the City’s entitlement and permitting processes, helping them to get open quickly and efficiently.

All of our programs and services are aligned to keep the District a safe, clean, attractive place for existing businesses to be successful and for new businesses taking a look at the area. Download our “Locate in SMP” brochure on our website sunrisemarketplace.com/locate/.

In 2025:
• We worked to facilitate the sale of the former Marie Callenders building. • We worked with the owners of Marketplace at Birdcage to open a pop-up coffee shop- Black Sails coffee- together we overcame many challenges from the County.
• We supported several brokers with letters of support and marketing information. • American Legion - We Support
Vets event
• Big Day of Giving
• Cappuccino Cruisers Cruising
for Kids
• Chamber Best Of Citrus
Heights
• Citrus Heights HART Student
Store Reopening Event
• Citrus Heights HART
Spaghetti Fest
• Citrus Town Center Funtopia
Events/Halloween event &
Christmas Promotion
• City of Citrus Heights
- Arcade Creek Trail Ribbon
Cutting
- City of Citrus Heights 4th of
July event
- City of Citrus Heights Citrus
Nights Concert
- City of Citrus Heights Tree
Lighting
• Citrus Heights Police Dept.
- Operation Cheer
• CHPD PALS
- Golf Tournament
- Trunk or Treat
• Marketplace at Birdcage
Bubble Bash
• Marketplace at Birdcage
Citrus Heights Market Event
(Spring & Fall)
• Marketplace at Birdcage Low
Riders Trunk or Treat
• Single Mom Strong Valentines
Fundraiser
• Sunrise Parks & Recreation
District – 75th Anniversary
Concert
“Thank you to the Sunrise MarketPlace Team for their continued support of our activation efforts at Marketplace at Birdcage in Citrus Heights. We are truly grateful for their partnership in helping spread the word about new retailers, supporting our events and activations, assisting with grant opportunities, and championing initiatives that celebrate local artists and the community as a whole.” - Monika Foley, Vice President, Placemaking Gerrity Group Marketplace “Kathilynn Carpenter’s extensive knowledge of the Sunrise Marketplace business district and the City of Citrus Heights staff and residents’ wishes and concerns regarding the Marie Callenders building was valuable in getting the “causual dining use” use approved and understanding how to present the redevelopment of the Marie Callender’s site on Sunrise. Blvd.” - Stephen Patterson- Patterson Properties
Big Day of Service
Citrus Nights Concerts
Bubble Bash
Best of Citrus Heights
Spaghetti Fest
ITEM 17 Agenda Packet Page #326

FINANCIALS
2025 2026
2025 ACTUAL INCOME
Surplus/Deficit $87,000
Assessment Income $874,348
late pays to be sent in 2026
Total Assessment Income $961,348
Grants/Sponsorships/Event/misc. $87,797
TOTAL $1,045,145
2025 ACTUAL EXPENSES
Admin/Advocacy/Operations $128,901 14.93%
Economic Development* $46,265 5.36%
Marketing & Events $318,530 36.89%
Clean & Safe $369,777 42.82%
TOTAL $863,473 100%
Carry Over/January/February Expense $181,672
2026 BUDGET - INCOME
Surplus/Deficit $181,672
Assessment Income $931,769
Total Assessment Income $1,113,441
Grants/Sponsorships $42,300
TOTAL $1,155,741
2026 BUDGET - EXPENSES
Admin/Advocacy/Maintenance $140,045 15%
increase due to higher operational costs from
increase in premiums, rent, etc.

Economic Development/PBID Renewal $47,426 5.08%
Marketing & Events $379,623 40.67%
Clean & Safe $349,247 37.42%
Contingency $17,000 2%
TOTAL $933,341 100%
Carry Over/January/February Expense $224,400
Assessment funds are received in March and June

FINANCIAL REPORT
15% Administration/
Advocacy/Operationsa
5% Economic Development
37% Marketin & Events
SUMMARY: TERM - 2025 - 2034
Term: The board approved a small 5% CPI increase to the 2026 assessment to keep up with rising prices.

Assessment: Assessment Rates: Retail zoned parcels will now be assessed at 0.735 (up from $0.07 cents) per square foot of land, per year. Office/Professional zoned parcels will be assessed at $0.047 (up from $0.045 cents) per square foot of land per year Boundaries: The District includes parcels along Greenback Lane between Birdcage Street and Fair Oaks Blvd. and along Sunrise Blvd. between Madison Avenue and just north of Arcadia.Management:

Sunrise MarketPlace, Inc. will continue to serve as the Owners’ Association for the District.

All information regarding the District is included in the Management District Plan, which can be downloaded from the website at https://sunrisemarketplace.com/about/owners/ 10% Administration/
Advocacy/Operations
5% Economic Development/ PBID Renewal
37% Clean & Safe
48%
Marketing
& Events
43%
Clean
& Safe
ITEM 17 Agenda Packet Page #327

CITY OF CITRUS HEIGHTS

CITY COUNCIL STAFF REPORT

MEMORANDUM
DATE: April 8, 2026
TO: Mayor and City Council Members
Ashley J. Feeney, City Manager
FROM: Amy Van, City Clerk
SUBJECT: Consider Policy Adoption for Public Meeting Disruption Procedures under Brown Act Amendments (SB 707)
Recommendation
Staff recommends the City Council adopt Resolution No. 2026-___, A Resolution of the City Council of the City of Citrus Heights, California, adopting a City Council policy on disruption of telephonic or internet service during public meetings.

Strategic Plan Alignment
This item is in alignment with the following City Council priority:

Goal: Enhance Community Vibrancy and Engagement
Fiscal Impact
SB 707 is a legislative unfunded mandate of cities which must bear the additional costs associated with compliance. An estimate of costs to implement SB 707 requirements is unknown at this time. Anticipated costs include alteration and expansion of Council Chambers audio visual equipment, outreach and website materials, and additional staff time necessary to ensure meetings comply with SB 707.

Background and Analysis
On October 3, 2025, Senate Bill 707 (SB 707) was signed by Governor Newsom that made significant changes to the Ralph M. Brown Act intended to diversify and increase public engagement in local government. One provision of SB 707 requires eligible legislative bodies to adopt, on or before July 1, 2026, a policy addressing how the agency will respond to disruptions in telephonic or internet service that prevent members of the public from attending or observing a meeting remotely. This item is being presented to the City Council to comply with that requirement as well as provide an overview of the new Brown Act requirements under SB 707.

ITEM 18 Agenda Packet Page #328
Subject: Consider Policy Adoption for Public Meeting Disruption Procedures under Brown Act Amendments (SB 707)
Date: April 8, 2026

Summary of SB 707 Brown Act Changes
The Ralph M. Brown Act requires that, with limited exceptions, all meetings of a legislative body of a local agency be open and public and that all persons be permitted to attend and participate. Beginning July 1, 2026, the Citrus Heights City Council will be required to comply with the following:

Mandatory Hybrid Public Meetings: Eligible legislative bodies such as Citrus Heights City Council must provide hybrid meetings, which means an in-person meeting plus a teleconference option for all its meetings. The teleconference option must be either a two-way telephonic or audiovisual platform. The City will utilize Zoom Webinar to provide public access to meetings.

For both non-agenda public comment and comments on specific agenda items, in-person speakers will be called first, followed by remote participants. Remote participants will be audioonly and will not have the ability to enable video or share their screens.

Policy Regarding Broadcast Disruption: Prior to July 1, 2026, the City Council must adopt an open session policy regarding hybrid meetings that includes procedures for restoring service in the event of a broadcast disruption. The policy should include the steps to be taken if audio, video, or the entire platform fails, and the procedure to notify the public and resume the meeting upon restoration of service. If a disruption prevents the public from attending the meeting remotely, the City Council must take a recess and try to restore service. If service cannot be restored within one (1) hour, the City Council must conduct a roll call vote confirming that good faith efforts were made and make a finding that the public interest in continuing the meeting outweighs remote access.

SB 707 also authorizes the removal of virtual attendees causing disruption under the Brown Act.

The City must still provide warning before removal, unless behavior constitutes use of force or true threat of force.

Staff prepared the attached City Council Policy on the Disruption of Telephonic or Internet Service during Public Meetings to satisfy this new State requirement. The Policy mirrors the meeting disruption guidelines that are already outlined in SB 707. Please note that the public would still be able to view the City Council meeting using any of the following resources:

1. The City’s website https://www.citrusheights.net/152/Council-Meetings

2. Metro Cable Channel 14

3. City’s YouTube Channel https://www.youtube.com/@COCitrusHeights

4. In person at the meeting location
Attachments

1. Resolution No. 2026-____ Adopting a City Council policy on disruption of telephonic or internet service during public meetings
a. City Council Policy on the Disruption of Telephonic or Internet Service during Public Meetings
ITEM 18 Agenda Packet Page #329
RESOLUTION NO. 2026- ___

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CITRUS HEIGHTS,

CALIFORNIA, ADOPTING A CITY COUNCIL POLICY ON DISRUPTION OF

TELEPHONIC OR INTERNET SERVICES DURING PUBLIC MEETINGS

WHEREAS, on October 3, 2025, Senate Bill 707 (SB 707) was signed by Governor Newsom that made significant changes to the Ralph M. Brown Act intended to diversify and increase public engagement in local government; and
WHEREAS, among the various new requirements under SB 707, all eligible legislative bodies must now offer hybrid meetings (through a two-way telephonic or audiovisual platform); and WHEREAS, SB 707 requires the City Council to adopt, on or before July 1, 2026, a policy addressing how the agency will respond to disruptions in telephonic or internet service that prevent members of the public from attending or observing a meeting remotely.

NOW THEREFORE BE IT RESOLVED AND ORDERED that the City Council of the City of Citrus Heights does hereby adopts the City Council policy on disruption of telephonic or internet service during public meetings (Exhibit A).

The City Clerk shall certify the passage and adoption of this Resolution and enter it into the book of original resolutions.

PASSED AND ADOPTED by the City Council of the City of Citrus Heights, California, this 8th day of April 2026 by the following vote, to wit:

AYES: Council Members:

NOES: Council Members:

ABSTAIN: Council Members:

ABSENT: Council Members:

MariJane Lopez-Taff, Mayor
ATTEST:

Amy Van, City Clerk
Exhibit
A. City Council Policy on Disruption of Telephonic or Internet Service During Public Meetings ITEM 18 Agenda Packet Page #330

City of Citrus Heights
City Council Policy on Disruption of Telephonic
or Internet Service During Public Meetings

1. Background
Senate Bill 707 (2025) amended the Brown Act to require eligible legislative bodies to adopt, on or before July 1, 2026, a policy addressing how the agency will respond to disruptions in telephonic or internet service that prevent members of the public from attending or observing a meeting remotely. This policy is adopted to comply with that requirement and to ensure continuity of public participation during technical disruptions.

2. Purpose
This policy establishes procedures for responding to a disruption in the telephonic or internet services that provide two-way remote public access to meetings of the Citrus Heights City Council, as required by the Brown Act (Gov. Code § 54953.4). The policy ensures transparency, public participation, and continuity of government during technology disruptions.

3. Definitions
For purposes of this policy:
• “Disruption” means any failure, outage, or other interruption that prevents members of the public from attending or observing the meeting via these remote access services. • “Remote access services” means the two-way telephonic service and/or two-way audiovisual platform used to provide real-time remote public attendance and observation of meetings.

4. Applicability
This policy applies to all open and public meetings of the Citrus Heights City Council at which remote public participation is offered or required under the Brown Act.

5. Procedures in the Event of a Service Disruption

5.1. Response to Service Disruption
If the Presiding Officer or Clerk becomes aware of a disruption to the agency’s remote access services that prevents members of the public from attending or observing the meeting remotely:

1. The Presiding Officer or Clerk shall immediately announce the disruption to the public.

2. The Presiding Officer may then call for a recess of the open session or convene the legislative body in closed session, consistent with the Brown Act.

3. Staff shall begin efforts to diagnose and restore the disrupted service.

4. The meeting shall remain in recess for at least one hour or until service is restored, whichever is sooner. The recess period may be extended if restoration efforts are ongoing.

ITEM 18 Agenda Packet Page #331

6. Reconvening the Open Session

6.1. Timing
The open session may be reconvened after at least one hour has elapsed from the time of disruption or as soon as service is restored, whichever occurs earlier.

6.2. If Service Is Restored
If the remote access service is restored before or at the time the meeting reconvenes, the meeting shall continue as normal.

6.3. If Service Is Not Restored
If service has not been restored after one hour, the Citrus Heights City Council may reconvene and:

1. Adjourn the meeting; or

2. Continue the meeting in open session by adopting, by roll call vote, the following, or a substantially similar, finding:
“The City of Citrus Heights has made good faith efforts to restore telephonic or internet service in accordance with its adopted policy, and the public interest in continuing the meeting outweighs the public interest in remote public access.”
Upon adoption of the finding, the legislative body may continue the open session despite the fact that remote access services have not been restored.

7. Recordkeeping
The Clerk shall enter a brief statement into the meeting minutes, including the following:
• The nature and time of the disruption
• The restoration efforts undertaken
• The time the meeting was reconvened (if applicable)
• Any finding adopted pursuant to Section 6.3

8. Review and Updates
This policy may be amended by the Citrus Heights City Council at a noticed public meeting in open session, not on the consent calendar.

ITEM 18 Agenda Packet Page #332

CITY OF CITRUS HEIGHTS

CITY COUNCIL STAFF REPORT

MEMORANDUM
DATE: April 8, 2026
TO: Mayor and City Council Members
Ashley J. Feeney, City Manager
FROM: Amy Van, City Clerk
SUBJECT: Discussion of City’s Regulations for Temporary Signs Placed in the Public Right-of-Way
Recommendation
At the October 23, 2024 City Council Meeting, two members of Council requested to agendize an item to discuss temporary sign regulations. Staff recommends the City Council review the information provided in this report and presentation and provide direction to staff regarding whether to consider modifications to the City’s temporary sign regulations within the public right-of-way.

Fiscal Impact
There is no immediate fiscal impact associated with this item.

Background and Analysis
This report provides an overview of the City’s regulatory framework governing temporary signs placed within the public right-of-way. It summarizes current standards, enforcement practices, and common issues associated with temporary and permanent signage in these areas.

The public right-of-way includes streets, sidewalks, medians, planting strips, utility poles, traffic control devices, and any other publicly owned corridor used for transportation or public access.

Because these areas must remain safe, accessible, and free of obstructions, the City maintains strict limitations on private signage within them.

Citrus Heights Municipal Code Regulations – Signs within a public right-of-way Zoning Code Section 106.38.050(E) of the City’s Municipal Code governs signs within a public right-of-way as follows:

1. No sign shall be allowed in the public right-of-way except for the following:

ITEM 19 Agenda Packet Page #333
Subject: Discussion of City’s Temporary Sign Regulations Date: April 8, 2026

a. A projecting sign in compliance with Section 106.38.070.G (Projecting and suspended signs);
b. Public signs erected by or on behalf of a governmental agency to convey public information, identify public property, post legal notices, or direct or regulate pedestrian or vehicular traffic;
c. Transit stop signs installed on behalf of a public or contracted private transit company;
d. Informational signs of a public utility regarding its lines, pipes, poles, or other facilities; or
e. Emergency warning signs erected by a governmental agency, a public utility company, or a contractor doing authorized work within the public right-of-way.

2. Any sign installed or placed within the public right-of-way other than in compliance with this Section shall be forfeited to the public and be subject to confiscation [emphasis added].

3. In addition to other remedies identified in Municipal Code Chapter 50 (Neighborhood Enhancement Code), the City shall have the right to recover from the owner, or person placing the sign, the full costs related to the removal and disposal of the sign [emphasis added].

4. A sign permit shall not be required for City signs placed within the public right-of-way.

The City’s regulations have been in place since December 2008 and are consistent with other jurisdictions in the region.

Enforcement Practices
Enforcement is typically carried out by Code Enforcement staff, General Services staff, or both.

Common practices include:
• Routine Removal — Unauthorized signs may be removed without notice when placed in prohibited areas.
• Complaint Driven Response — Staff respond to reports of sign violations from residents or businesses.
• Administrative Citations — Repeat or egregious violations may result in fines or cost recovery for removal.
• Education and Outreach — Staff often provide guidance to community groups, campaigns, and businesses regarding compliant sign placement.

Current Administrative Code Enforcement Penalties are $100 for the first violation, $200 for the second violation within one year from the first violation. Three or more violations within a year is $500.

Issues and Challenges
One ongoing issue in regulating signs within the right-of-way is that political sign activity surges during election periods, leading to a need for increased oversight. Political signs may be placed no sooner than 90 days before Election Day and must be removed within 10 days after the election. Zoning Code Section 106.38.035 (D)(3) provides that temporary political signs are allowed without a sign permit, provided that they comply with Zoning Code Section 106.38.050, and the signs:

ITEM 19 Agenda Packet Page #334
Subject: Discussion of City’s Temporary Sign Regulations Date: April 8, 2026

1. Are installed with the property owner’s consent;

2. Do not exceed a maximum cumulative area of 50 square feet on any lot, do not exceed a maximum height of six feet, and are not illuminated;

3. If freestanding are set back a minimum of five feet from any property line, and are not placed within 15 feet of a fire hydrant, street sign, or traffic signal, and do not interfere with, confuse, obstruct, or mislead traffic;

4. Are not placed unlawfully. The placement of a sign in the public right-of-way in violation of the City’s Municipal Code is a nuisance, and any sign so placed may be removed summarily and disposed of by the City [emphasis added]; and

5. Each sign shall be removed within 10 days after the conclusion of the political campaign or event to which they relate. A sign that is not removed may be removed by the City at the expense of the political candidate or organization involved.

Candidates for Citrus Heights City Council are provided with a document explaining the City’s guidelines for placement of campaign signs. Details are also provided on a dedicated Elections page on the City’s website. Should any political signs be placed unlawfully within the public right-of-way or on City property, City staff will remove these signs. Staff will inform the candidate or campaign committee to collect the removed signs.

Additionally, the City works closely with the Sacramento County Voter Registration and Elections Division to educate other candidates and committees of the City’s regulations.

Items for City Council Consideration
The City Council may wish to review current enforcement measures and if desired, consider adjustments to penalty structures or oversight protocols in response to recurring challenges with all temporary signs placed in the public right-of-way. However, revisiting enforcement protocols and penalty structures could require additional staff time, resources, and administrative effort.

In considering enforcement protocols for temporary signs placed within the public right-of-way, one of the Council members that requested this item presented regulations from the City of Mountain House, CA. Under these regulations, a fine of $350.00 is imposed for each day that a structure or object within the public right-of-way remains after the individual responsible— whether causing, owning, or controlling the structure or object—has received a 10-day notice to remove it. The City of Mountain House is located near Tracy with a population of 28,795 and a geographic size of 7.5 square miles.

While this approach establishes clear penalties for non-compliance and reinforces accountability for maintaining public spaces, it also places a significant enforcement burden on City staff. Staff are responsible for monitoring sign placement, removing violations, and coordinating with individuals responsible to remove the signs, all of which require substantial time and resources.

Additional signage notifying the public of any penalty or fine would need to be installed at various locations across the City, with particular attention to areas that frequently experience a higher incidence of unlawfully placed signs. Furthermore, installing these signs could contribute to visual blight and increase ongoing maintenance responsibilities for City staff.

ITEM 19 Agenda Packet Page #335

CITY OF CITRUS HEIGHTS

CITY COUNCIL STAFF REPORT

REVISED MEMORANDUM
DATE: April 8, 2026
TO: Mayor and City Council Members
Ashley J. Feeney, City Manager
FROM: Susan K. Talwar, Administrative Services Director Dena Jenkins, Finance Manager
SUBJECT: Annual Comprehensive Financial Report, Single Audit Report, and Audited Financial Statements and Compliance Report for Transportation Development Act Funds
Recommendation
Staff recommends the City Council receive and file the City of Citrus Heights Annual Comprehensive Financial Report for the Fiscal Year Ended June 30, 2025, the City of Citrus Heights Popular Annual Financial Report for the Fiscal Year Ended June 30, 2025, the Audit Communication Letter, the Independent Auditors’ Report on Internal Control over Financial Reporting and on Compliance and Other Matters, the Single Audit Report for the fiscal year ended June 30, 2025, and the City of Citrus Heights Transportation Development Act (TDA) Funds Audited Financial Statements and Compliance Report for the fiscal year ended June 30, 2025.

Strategic Plan Alignment
This item is in alignment with the following City Council priority:

Goal: Maintain and Enhance Fiscal Stability while supporting operational excellence.

Fiscal Impact
There is no fiscal impact associated with this action.

Background and Analysis
Annual Comprehensive Financial Report (ACFR)
Financial Report
Subject: Annual Comprehensive Financial Report, Single Audit Report, and Audited Financial Statements and Compliance Report for Transportation Development Act Funds Date: April 8, 2026

In accordance with the provisions of California Government Code Sections 37208, 53891, and Section 2-355 of the Citrus Heights Municipal Code, the City prepares and publishes annual audited financial statements. The accounting firm Lance, Soll & Lunghard, LLP (LSL) performed the annual audit of the City’s general purpose financial statements for the fiscal year ended June 30, 2025. The auditor has opined that the City’s financial statements present fairly, in all material respects, the respective financial position of the City of Citrus Heights. The statements are in conformity with Generally Accepted Accounting Principles.

Some highlights from this year’s ACFR include:
• An increase in Property Tax of $267,000;
• A decrease in Sales Tax Revenue of $71,000;
• An increase in State Vehicle In-Lieu tax of $831,000; • Higher than expected revenues in investment revenue and vehicle fines; • Savings in the General Fund of approximately $1.5 million due primarily to salary savings and lower than anticipated operating expenses;
• An increase in the General Fund balance of approximately $5.8 million.

Popular Annual Financial Report
The City has also completed its fourth Popular Annual Financial Report (PAFR), a report intended to provide the City’s citizens with an easy-to-read explanation of its finances. The information in the PAFR is derived from the City’s ACFR.

The Annual Comprehensive Financial Report and the Popular Annual Financial Report for the fiscal year ended June 30, 2025 are posted on the City’s website at:
http://citrusheights.net/213/Financial-Reporting-Budget-CIP.

The City received awards from the Governmental Finance Officers Association (GFOA) for both its 2024 ACFR and its 2024 PAFR, and the 2025 reports have been submitted for consideration of the awards.

Communications from LSL
The City’s audit firm, LSL is required by auditing standards to provide communication to the Council in the form of an Auditor Communication Letter and an Independent Auditors’ Report on Internal Control over Financial Reporting and on Compliance and Other Matters.

The purpose of the Auditor Communication Letter is to communicate significant audit matters (if any) to the City Council. No significant audit matters were identified as a result of the audit procedures.

The purpose of the Independent Auditors’ Report on Internal Control over Financial Reporting and on Compliance and Other Matters is to communicate any deficiencies in internal control or Subject: Annual Comprehensive Financial Report, Single Audit Report, and Audited Financial Statements and Compliance Report for Transportation Development Act Funds Date: April 8, 2026

instances of noncompliance with certain provisions of laws, regulations, contracts, and grant agreements. LSL reports that they did not identify any deficiencies in internal control or instances of noncompliance.

Single Audit Report
A single audit is required by Title 2 of the U.S. Code of Federal regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) when federal expenditures during a fiscal year exceed $750,000. For the fiscal year ended June 30, 2025, the City made federal expenditures of $17.7 million. The City’s audit firm, LSL, performed the single audit. The single audit report also includes the report on Internal Control over Financial Reporting and Compliance and Other Matters. LSL issued a clean audit opinion regarding compliance and internal control over compliance for the City’s major federal programs and Schedule of Expenditures of Federal Awards (SEFA).

The Single Audit Report for the fiscal year ended June 30, 2025 is posted on the City’s website at: http://citrusheights.net/213/Financial-Reporting-Budget-CIP.

Transportation Development Act Audit
The accounting firm of Richardson & Company, LLP was hired by the Sacramento Area Council of Governments to audit the transportation funds received by member agencies for the fiscal year ended June 30, 2025. They have determined that the City of Citrus Heights Transportation Fund financial statements present fairly, in all material respects, the financial position of the Transportation Development Act Funds of the City of Citrus Heights as of June 30, 2025. The statements are in conformity with Generally Accepted Accounting Principles.

Attachments

1. City of Citrus Heights Annual Comprehensive Financial Report for the Fiscal Year Ended June 30, 2025.

2. City of Citrus Heights Popular Annual Financial Report for the Fiscal Year Ended June 30, 2025.

3. Auditor Communication Letter.

4. Independent Auditors’ Report on Internal Control over Financial Reporting and on Compliance and Other Matters.

5. City of Citrus Heights Single Audit Report for the year ended June 30, 2025.

6. City of Citrus Heights Transportation Development Act Funds – Audited Financial Statements and Compliance Report as of June 30, 2025.