COMMERCE CITY COUNCIL
RESOLUTION NO. _______
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF COMMERCE, CALIFORNIA, ADOPTING THE CITY’S ANNUAL INVESTMENT POLICY PURSUANT TO CALIFORNIA GOVERNMENT CODE SECTION 53646
WHEREAS, the City of Commerce is required by California Government Code Section 53646 to prepare and adopt an annual investment policy; and WHEREAS, the Investment Policy governs the prudent investment of City funds and outlines the objectives of safety, liquidity, and return, in accordance with Government Code Sections 53600 through 53686; and
WHEREAS, the Director of Finance & City Treasurer has reviewed and recommended the attached policy to ensure compliance with applicable law and best practices for public fund investment; and
WHEREAS, the City Council has reviewed the proposed Investment Policy and desires to formally adopt it for Fiscal Year 2025–26;
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF COMMERCE DOES HEREBY RESOLVE AS FOLLOWS:
1. The City’s Investment Policy for Fiscal Year 2025–26, attached hereto as Exhibit A, is hereby adopted.
2. The Director of Finance & City Treasurer or designee is authorized to invest City funds in accordance with the provisions of this policy and applicable state law.
3. The City Council shall review and readopt the Investment Policy annually.
PASSED, APPROVED and ADOPTED this 24th day of June, 2025. _______________________________
Ivan Altamirano, Mayor
ATTEST:
___________________________
Lena Shumway, City Clerk
INVESTMENT POLICY STATEMENT
2535 Commerce Way Commerce, CA 90040 www.commerceca.gov (323) 722-4805
EXHIBIT A
City of Commerce
Investment Policy Statement
INVESTMENT POLICY STATEMENT
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The City Council, as the legislative body of the City, is committed to investing public funds in a manner that will provide, in priority order, maximum security, adequate liquidity, and sufficient yield, while meeting the daily cash flow demands of the City and conforming to California Government Code Section 53600, et seq., and related statutes and regulations governing the investment of public funds.
I. Purpose
The purpose of this Investment Policy is to establish the guidelines for the prudent investment of public funds of the City of Commerce and to provide the framework for ensuring the safety, liquidity, and yield of the City's invested funds. This policy is intended to comply with the California Government Code Sections 53600–53686 and shall be reviewed annually and adopted by the City Council.
II. Scope
This policy shall direct the investment of the City’s idle cash for all funds in the investment portfolio and applies to all financial assets and investment activities of the City of Commerce, including:
• General Fund
• Special Revenue Funds
• Capital Projects Funds
• Enterprise Funds
• Internal Service Funds
• Any other funds not specifically excluded
This policy does not apply to:
• Bond proceeds governed by bond indentures or covenants • Deferred compensation funds
• Pension or trust funds
III. Objectives
The City’s funds shall be invested in accordance with all applicable City policies and codes, State statutes, and Federal regulations, and in a manner designed to accomplish the following objectives. The primary objectives, in order of priority, are:
1. Safety:
Preservation of principal is the foremost objective. Investments shall be undertaken in a manner that minimizes the risk of loss. City investments shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. The City shall select only those investments that are considered very safe. The City shall not engage in speculation. The City shall diversify its investments by investing funds among a variety of securities and
INVESTMENT POLICY STATEMENT
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financial institutions offering independent returns.
2. Liquidity:
Liquidity is the ability to change an investment into its cash equivalent on short notice at its prevailing market value. The investment portfolio shall remain sufficiently liquid to meet all operating requirements. This is accomplished by structuring the portfolio so that securities mature concurrently with cash needs to meet anticipated demands. Furthermore, since all possible cash demands cannot be anticipated, the portfolio will maintain a liquidity buffer and invest primarily in securities with active secondary and resale markets.
3. Return on Investment (Yield):
Yield is the potential dollar earnings that an investment can provide; it is also referred to as the rate of return. The City shall seek to optimize returns consistent with the first two objectives.
The City’s portfolio shall be designed to attain a return on investments through economic cycles, considering investment risk constraints and liquidity needs. Return on investment is of the least importance in comparison to the safety and liquidity objectives.
IV. Prudence
The standard of prudence to be used shall be the "Prudent Investor Standard" as defined in Government Code §53600.3.
The City’s Director of Finance & City Treasurer shall be responsible for maintaining and updating investment policies and procedures. The intent of the procedures will be to ensure that the investment objectives and safeguards stated in this Policy are effectively communicated to all officials involved in the investment of public funds and that they properly reflect the intent of the “Prudent Investor” rule. The procedures will be maintained on file with the Director of Finance & City Treasurer.
V. Delegation of Authority
The authority to invest public funds is delegated to the Director of Finance & City Treasurer (or designee), who shall act in accordance with this policy and all applicable laws. No person may engage in investment transactions except as authorized under the terms of this policy. Within the constraints set forth in the Policy, the Director of Finance & City Treasurer has the authority to direct investment strategy and approve investment transactions for the City's investment portfolio. The Director of Finance & City Treasurer is responsible for the following:
• Approving daily investment transactions.
• Developing projections of the City's cash requirements for operating needs. • Reviewing the liquidity position of the investment portfolio. • Ensuring that the City's cash position is consistent with operating requirements. • Preparing appropriate investment reports.
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• Developing, implementing and monitoring controls over investments. • Record keeping for investment transactions.
The city may engage the services of external investment management advisors to assist in the management of the City’s investment portfolio in a manner consistent with the City’s objectives.
Such advisors may be granted discretion to purchase and sell investment securities in accordance with the Policy. Such advisors must be registered with the Security and Exchange Commission and possess experience in public funds investment management. All broker/dealers selected by an external advisor must comply with the requirements of California Government Code Section 53601.5.
All financial institutions and broker/dealers who desire to become qualified bidders for investment transactions must supply the investment management advisor with the following: audited financial statements, proof of Financial Industry Regulatory Authority (FINRA) registration, proof of State of California registration, and certification of having read the City’s investment policy.
VI. Ethics and Conflicts of Interest
Employees and officials involved in the investment process shall refrain from personal business activity that could conflict with proper execution of the investment program, or which could impair their ability to make impartial investment decisions. Employees and investment officials shall comply with the disclosure and disqualification requirements mandated by state law and any applicable regulations, including those adopted by the Fair Political Practices Commission, or FPPC. In addition, the FPPC’s Statement of Economic Interests (Form 700) shall be completed annually and submitted to the City Clerk for all individuals involved in the investment of public funds.
VII. Authorized Financial Institutions and Dealers
Investments shall only be made with:
• Nationally or state-chartered banks and credit unions • Primary government securities dealers
VIII. Authorized Investments
Permitted investments include, but are not limited to, the following as outlined in Government Code §§53601 and 53635:
• U.S. Treasury obligations
• Federal agency and instrumentality securities
• Local Agency Investment Fund (LAIF)
• California Asset Management Program (CAMP)
• Certificates of deposit (insured or collateralized)
• Bankers’ acceptances (maximum 180 days; up to 40% of portfolio)
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• Commercial paper (rated A-1/P-1; up to 25% of portfolio) • Medium-term corporate notes (rated A or better; up to 30%) • Money market mutual funds (AAA-rated; no-load; up to 20%) • Municipal bonds issued by California or other U.S. entities All investments shall comply with maturity and percentage limitations established in the California Government Code.
IX. Prohibited Investments
Pursuant to Government Code §53601.6, the City shall not invest in:
• Inverse floaters
• Range notes
• Interest-only strips from collateralized mortgage obligations • Any security not specifically authorized by state law or this policy X. Diversification and Maturity
The City shall diversify its investments by security type, institution, and maturity date to mitigate 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 shall mitigate credit risk by adopting the following strategies:
• The diversification requirements included in this section are designed to mitigate credit risk in the portfolio.
• No more than 5% of the total portfolio may be invested in securities of any single issuer, other than the US government, its agencies and instrumentalities. • The city may elect to sell a security prior to its maturity and record a capital gain or loss to improve the quality, liquidity or yield of the portfolio in response to market conditions or the city’s risk preferences.
• If securities owned by the city are downgraded by a Nationally Recognized Statistical Rating Organization (NRSRO) to a level below the quality required by the Policy, it shall be the city’s policy to review the credit situation and decide as to whether to sell or retain such securities in the portfolio. Moody’s, Standard and Poor’s, and Fitch are currently used as NRSRO. o a. If a security is downgraded below the level required by the Policy, the Director of Finance & City Treasurer will use discretion in determining whether to sell or hold the security based on its current maturity, the loss in value, the economic outlook for the issuer, and other relevant factors.
o b. If a decision is made to retain a downgraded security in the portfolio, it will be monitored and reported monthly to the City Council.
Additionally, the city shall not make any investments in instruments with a stated remaining maturity
INVESTMENT POLICY STATEMENT
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that exceeds five years at the time of purchase. The maturity of investment instruments in the portfolio shall be consistent with projected cash requirements.
XI. Internal Controls
The Director of Finance & City Treasurer shall establish and maintain internal controls to protect public funds. Controls shall be designed to prevent losses arising from fraud, error, misrepresentation, or imprudent actions. Controls deemed most important include: separation of duties, separation of transaction authority from accounting and record keeping, custodial safekeeping, clear delegation of authority, specific limitations regarding securities losses and remedial action, control over wire transfers, minimizing the number of authorized investment officials and documentation of transactions and strategies.
The Director of Finance & City Treasures shall establish an annual process of independent review by an external auditor. This review will provide internal control by assuring compliance with this Policy.
XII. Performance and Reporting
The Director of Finance & City Treasurer shall submit a quarterly investment report to the City Council, in accordance with Government Code §53646. The report shall include:
• Type of investments
• Institution or issuer
• Purchase and maturity dates
• Par and market value
• Yield
• Compliance with this policy
• Statement of ability to meet liquidity needs
XIII. Safekeeping and Custody
All securities shall be held in safekeeping by a third-party custodian in the City’s name. Securities held in custody for the City shall be independently audited on an annual basis to verify investment holdings.
Except for federally insured Certificates of Deposit, money market funds or the Local Agency Investment Fund (LAIF), all investments evidenced by physical or book-entry securities shall be secured through third-party custody and the following safekeeping procedures:
• All transactions described above shall be executed on a delivery-versus-payment (DVP) basis. • The custodian shall hold assets until the investments mature, or the custodial bank receives a request from the City to sell or transfer the securities. • Bearer instruments shall be held only through third party institutions.
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XIV. Policy Review
The City of Commerce’s investment policy shall be adopted by resolution of the City Council. The policy shall be reviewed annually by the City Council and any modifications made thereto must be approved by the City Council.