Agenda packet — Costa Mesa City Council, March 17, 2026 (part 2 of 7)

RESOLUTION NO. 2024-XXX

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF

SANTA ANA APPROVING TH E SUBMITTAL OF

IMPROVEMENT PROJECTS TO THE ORANGE COUNTY

TRANSPORTATION AUTHORITY FOR FUNDING UNDER

THE REGIONAL TRAFFIC SIGNAL SYNCHRONIZATION

PROGRAM

BE IT RESOLVED BY THE CITY COUN CIL OF THE CITY OF SANTA ANA AS FOLLOWS:

Section 1. The City Council of the City of Santa Ana hereby finds, determines and declares as follows:

A. The Measure M2 Regional Traffic Signal Synchronization Program targets over 2,000 signalized intersections across Orange County to maintain traffic signal synchronization, improve traffic flow, and reduce congestion across jurisdictions.

B. The City of Santa Ana has been declared by the Orange County Transportation Authority to meet the eligibility requirements to receive revenues as part of Measure M2.

C. The City of Santa Ana must include all projects funded by Net Revenues in the seven-year Capital Improvement Program as part of the Renewed Measure M Ordinance eligibility requirement.

D. The City of Santa Ana authorizes a formal amendment to the seven-year Capital Improvement Program to add projects app roved for funding upon approval from the Orange County Transportation Authority Board of Directors, if necessary.

E. The City of Santa Ana has currently adopted a Local Signal Synchronization Plan consistent with the Regional Traffic Signal Synchronization Master Plan as a key component of local agencies’ efforts to synchronizing traffic signals across local agencies’ boundaries.

F. The City of Santa Ana will provide matching funds for each project as required by the Comprehensive Tr ansportation Fu nding Programs Procedures Manual.

G. The City of Santa Ana will not use Renewed Measure M funds to supplant Developer Fees or other commitments.
45 183
Resolution No. 2024-XXX

Page 2 of 3 ends

G. The City of Santa Ana desires to implement mult i-jurisdictional signal synchronization listed below.

Section 2. The City Council of the City of Sa nta Ana hereby approves the formal submissions of the projects described below to the Orange County Transportation Authority for funding under the OCTA’s Regional Traffic Signal Synchronization Program and requests that the OCTA a llocate funds in the amount s specified in the City’s submissions. Said funds shall be matched by funds from Santa Ana as required and shall be used as supplemental funding to aid the City in signal synchronization along the following street(s):

PROJECT PROGRAM
FY

Section 3. The City Council of the City of Santa Ana appoints the City Manager, or his or her designee, as agent for the City of Santa Ana to conduct all negotiations, and execute and submit all documents, including but not limited to applications, agreements, amendments, payment requests and so on, which may be necessary for allocation of the requested funds to Santa Ana.

Section 4. This Resolution shall take effe ct immediately upon its adoption by the City Council, and the Clerk of the Council shall attest to and certify the vote adopting this Resolution.

ADOPTED this ____ day of ___________________, 2024.

V a l e r i e A m e z c u a
M a y o r

APPROVED AS TO FORM:

Sonia R. Carvalho, City Attorney

B y :

Jonathan T. Martinez
Assistant City Attorney

Bristol Street Traffic Signal Synchronization
RTSSP 25/26
46 184
Resolution No. 2024-XXX

Page 3 of 3 ends

AYES: Councilmembers

N O E S : C o u n c i l m e m b e r s

A B S T A I N : C o u n c i l m e m b e r s

NOT PRESENT: Councilmembers _

CERTIFICATE OF ATTESTATION AND ORIGINALITY

I, Jennifer L. Hall, City Clerk, do hereby certify the attached Resolution No. 2024- ____ to be the original resolution adopted by the Ci ty Council of the City of Santa Ana on _____________________, 2024.

Date:

City Clerk
City of Santa Ana

47 185
48 186
ATTACHMENT 1

Resolution No. 2024-xx Page 1 of 3

RESOLUTION NO. 2024-xx

A RESOLUTION OF THE CITY COUNCI L OF THE CITY OF COSTA MESA,

CALIFORNIA, APPROVING THE SUBMITTA L OF A FUNDING APPLICATION TO

THE ORANGE COUNTY TRANSPORTATION AUTHORITY FOR FUNDING UNDER THE COMPETITIVE MEASURE M2 RE GIONAL TRAFFIC SYNCHRONIZATION

PROGRAM (RTSSP)

THE CITY COUNCIL OF THE CITY OF CO STA MESA, CALIFORNIA DOES HEREBY FIND AND DECLARE AS FOLLOWS:
a) WHEREAS, the Measure M2 Regional Traffic Signal Synchronization Program targets over 2,000 signalized intersections across Orange County to maintain traffic signal synchronization, improve traffic flow, and reduce congestion across jurisdictions; and b) WHEREAS, the City of Costa Mesa has been declared by the Orange County Transportation Authority to meet the eligibility requirements to receive revenues as part of Measure M2; and
c) WHEREAS, the CITY must include all projects funded by Net Revenues in the seven- year Capital Improvement Program as part of the Renewed Measure M Ordinance eligibility requirement; and
d) WHEREAS, the CITY authorizes a formal amendment to the seven-year Capital Improvement Program to add projects approved for fundi ng upon approval from the Orange County Transportation Authority Board of Directors, if necessary; and e) WHEREAS, the City of Costa Mesa has currently adopted a Local Signal Synchronization Plan consistent with the Regional Traffic Signal Synchronization Master Plan as a key component of local agencies’ efforts to synchronizing traffic signals across local agencies’ boundaries; and
f) WHEREAS, the City of Co sta Mesa will provide matching funds for each project as required by the Comprehensive Transporta tion Funding Programs Procedures Manual; and
g) WHEREAS, the City of Costa Mesa will not use Renewed Measure M funds to supplant Developer Fees or other commitments; and
h) WHEREAS, the City of Cost a Mesa desires to implement multi-jurisdictional signal synchronization listed below.

NOW, THEREFORE, BE IT RESOLVED THAT:

The City Council of the City of Costa Me sa hereby requests the Orange County Transportation Authority allocate funds in t he amounts specified in the City’s application to said City from the Regional Traffic Si gnal Synchronization Program. Said funds, if approved, shall be
matched by funds from said City as required and shall be used as 49 187
ATTACHMENT 1
Resolution No. 2024-xx Page 2 of 3
supplemental funding to aid the City in signal synchronization along the following street(s):

PROJECT PROGRAM FY
Bristol Street Traffic Signal Synchronization RTSSP 25/26 PASSED AND ADOPTED this 19th day of November, 2024.
_______________________________
John Stephens, Mayor
50 188
ATTACHMENT 1

Resolution No. 2024-xx Page 3 of 3

ATTEST: APP ROVED AS TO FORM:

_______________________________ _______________ ________________ Brenda Green, City Clerk Kimberly Hall Barlow, City Attorney

STATE OF CALIFORNIA )
COUNTY OF ORANGE ) ss

CITY OF COSTA MESA )

I, BRENDA GREEN, City Clerk of the City of Costa Mesa, DO HEREBY CERTIFY that the above and foregoing is the original of Resolution No. 2024-xx and was duly passed and adopted by the City Council of the City of Costa Mesa at a regular meeting held on the 19
th day of November, 2024, by the following roll call vote, to wit:

AYES: COUNCIL MEMBERS:

NOES: COUNCIL MEMBERS:

ABSENT: COUNCIL MEMBERS:

IN WITNESS WHEREOF, I have hereby set my hand and affixed the seal of the City of Costa Mesa this 19
th day of November 2024.

_______________________________

BRENDA GREEN, CITY CLERK (SEAL)

51 189
52 190

RESOLUTION NO. 2024 - ______

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF

NEWPORT BEACH, CALIFORNIA SUPPORTING AN

APPLICATION BY THE CITY OF SANTA ANA FOR THE
ORANGE COUNTY TRANSPO RTATION AUTHORITY’S
MEASURE M2 TRAFFIC SI GNAL SYNCHRONIZATION

PROGRAM FUNDING FOR THE BRISTOL STREET

PROJECT

WHEREAS, the Orange County Transportation Authority’s (“OCTA”) Measure M2 Regional Traffic Signal Synchronization Program (“Program”) targets over two thousand (2000) signalized intersections across Orange County to maintain traffic signal synchronization, improve traffic flow, and reduce congestion across jurisdictions;

WHEREAS, the City of Newport Beach (“City ”) has been declared by OCTA to meet the eligibility requirements to receive revenues as part of the Program;

WHEREAS, City must include all projects funded by the net revenues in the City’s seven-year Capital Improvement Program as part of OCTA’s Renewed Measure M Local Transportation Authority Ordinance eligibility requirements;

WHEREAS, City has a currently adopted a Local Signal Synchronization Plan consistent with the countywide Regional Traffic Signal Synchronization Master Plan as a key component of the City’s efforts to synchronize traffic signals across its boundaries;

WHEREAS, City desires to support the funding application of the City of Santa Ana to implement a multi-jurisdictional traffic signal synchronization project for the Bristol Street.

WHEREAS, by this resolution, the City Counc il for the City intends to authorize a formal amendment to its seven-year Capital Improvement Program to add the Project for funding upon approval from OCTA’s Board of Directors to fund the Project as part of the Program;

WHEREAS, by this resolution, the City Council for the City intends to agree to provide matching funds for the primary implementation and ongoing maintenance and monitoring of Project, as required by the Guidelines M anual for OCTA’s Comprehensive Transportation Funding Programs; and

WHEREAS, City will not use renewed Program f unds to supplant developer fees or other commitments.

NOW, THEREFORE, the City Council of the City of Newport Beach resolves as follows:

Section 1: The City Council does hereby support the funding applic ation of the City of Santa Ana to implement the Project.

53 191
Resolution No. 2024-___

Page 2 of 2 ends

Section 2: The City Council does her eby authorize a formal amendment to its seven-year Capital Improvement Program to add the Project for funding upon approval from OCTA’s Board of Directors to fund the Project as part of the Program.

Section 3: The City Council does hereby agree to provide matching funds for the primary implementation and on going maintenance and monitoring of the Project, as required by the Guidelines Manual for OC TA’s Comprehensive Transportation Funding Programs.

Section 4: The recitals provided in this resolution are true and correct and are incorporated into the operative part of this resolution.

Section 5: If any section, subsection, sentence, clause or phrase of this resolution is, for any reason, held to be invalid or unconstitutional, such decision shall not affect the validity or constitutionality of the remaining portions of this resolution. The City Council hereby declares that it would have passed this resolution, and each section, subsection, sentence, clause or phrase hereof, irrespective of the fact that any one or more sections, subsections, sentences, clauses or phrases be declared invalid or unconstitutional.

Section 6: The City Council finds the adoption of this resolution is not subject to the California Environmental Quality Act (“CEQA”) pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly.

Section 7: This resolution shall take effect immediately upon its adoption by the City Council, and the City Clerk shall certify the vote adopting the resolution.

ADOPTED this 19th day of November, 2024.

______________________
Will O’Neill
M a y o r
ATTEST:

__________________________
Leilani I. Brown
City Clerk

APPROVED AS TO FORM:

CITY ATTORNEY’S OFFICE

___________________________
Aaron C. Harp
City Attorney
54 192

“Provide a safe and reliable transportation network that serves all people and respects the environment” DISTRICT 12
1750 East 4 th Street, Suite 100 | SANTA ANA, CA 92705 (657) 328-6000 | FAX (657) 328-6522 TTY 711
https://dot.ca.gov/caltrans-near-me/district-12

October 7, 2024

Zdenek Kekula
Principal Civil Engineer
City of Santa Ana
PWA – Traffic Engineering
20 Civic Center Plaza, M-43
Santa Ana, CA 92702

Subject: Letter of Support for Regional Traffic Signal Synchronization Program Application – Bristol Street Corridor

Dear Mr. Kekula:

The Orange County Transportation Authority recently issued the 2024 Comprehensive Transportation Funding Program Call for Projects for the Regional Traffic Signal Synchronization Program to coordinate traffic signals across jurisdictional boundaries in the County.

The State of California Department of Transportation (Caltrans) is in support of the City of Santa Ana’s submittal of the Call for the Projects application for signal synchronization on the Bristol Street corridor from SR-22 Ramps in the City of Santa Ana to Jamboree Road in the City of Newport Beach.

Caltrans Signal on Bristol St. Corridor:

1. SR-22 EB Ramps

2. I-405 NB Ramps

3. I-405 SB Ramps

If you have any questions or require additional information, please contact Mr. Mansour Feiz at (949) 279-9169 or by email at [email protected].

Sincerely,

Peter Ngo, P.E.

Branch Chief, Traffic Signals/Ramp Metering/Census
Caltrans District 12
6681 Marine Way
Irvine, CA 92618
Mobile: (949) 285-4262
55 193
Bristol Street RTSSP
Appendix E

ADDITIONAL INFORMATION
(Fiber Optic Underground and TMC Improvement Details, Cabinet Pictures, and As- Built Plans)
56 194
Bristol RTSSP
Additional Improvement Details
Agency: City of Santa Ana
Fiber Optic Underground
System Improvement Unit Quantity Unit Cost Amount Total Etherwan Fiber Optic Ethernet Switch (w/
SFP's and Power Supply) EA 18 $5,000 $90,000
Total $90,000
Intersections 18
Total Per Intersection $5,000
USE $5,000
Central System (server, licenses, workstations)
System Improvement Unit Quantity Unit Cost Amount Total Dell Workstation with Dual Monitors EA 3 $15,000 $45,000 Central System Licenses LS 1 $90,000 $90,000
Relocate Servers to New TMC LS 1 $15,000 $15,000
Remove and Discard old TMC Equipment LS 1 $10,000 $10,000 Server Racks (bolt down) LS 1 $15,000 $15,000
Install New Fiber to New TMC (including
Splicing, FDU, and Terminations) LS 1 $50,000 $50,000
Console/ Furniture LS 1 $100,000 $100,000
Total $325,000
USE $325,000
Display (Video Wall, VMS, etc..)
System Improvement Unit Quantity Unit Cost Amount Total Video Wall LS 1 $175,000 $175,000
Video Wall Software EA 1 $50,000 $50,000
Video Wall Server EA 1 $25,000 $25,000
$0 $0
Total $250,000
USE $250,000
$90,000
$325,000
$250,000
57 195
Bristol RTSSP
Additional Improvement Details
Agency: City of Costa Mesa
Fiber Optic Underground
System Improvement Unit Quantity Unit Cost Amount Total Etherwan Switch with SFP Modules EA 16 $5,000 $80,000
New Hub Switch with SFP Modules at Hub
Location (Bristol/Sunflower Hub) EA 1 $15,000 $15,000
Furnish and Install 12 SMFO Drop Cable * EA 3 $1,000 $3,000 Furnish and Install New #6E Pull Box * EA 3 $3,000 $9,000 Furnish and Install New Fiber Patch Panel with
Fiber Optic Pigtails/cabling * EA 3 $1,500 $4,500
Furnish and Install Splice Enclosure * EA 3 $2,500 $7,500 Fusion Splice Strands of SMFO Cable & Testing * EA 3 $2,500 $7,500 Total $126,500
Intersections 16
Total Per Intersection $7,906
USE $8,000
Central System (server, licenses, workstations)
System Improvement Unit Quantity Unit Cost Amount Total New Workstations for TMC EA 2 $10,000 $20,000
New Centracs Server and Maintenance
Agreement Renewal LS 1 $47,000 $47,000
Core TMC Switch EA 1 $15,000 $15,000
Hub Switch for Newport/Fair for Connection
back to TMC EA 1 $15,000 $15,000
Field Rugged Laptop with Econolite Local
Edition Software LS 1 $5,000 $5,000
TMC Furniture LS 1 $4,000 $4,000
NTP Server LS 1 $4,000 $4,000
Total $110,000
USE $110,000
$126,500
$110,000
* Anton/Park Center Dr, Anton/Ave of the Arts, and Anton/Sakioka 58 196
Bristol RTSSP
Additional Improvement Details
Agency: Newport Beach
Fiber Optic Underground
System Improvement Unit Quantity Unit Cost Amount Total Cisco Fiber Optic Ethernet Switch (w/ SFP's
and Power Supply) EA 7 $6,000 $42,000
Total $42,000
Intersections 7
Total Per Intersection $6,000
USE $6,000
$42,000
59 197
ATTACHMENT 2
198
199
200

CITY OF COSTA MESA
Agenda Report
77 Fair Drive
Costa Mesa, CA 92626
File #: 26-165 Meeting Date: 3/17/2026
TITLE:

AMENDMENT TO INCREASE FUNDING TO THE CITY SIDEWALK AND GUTTER FLOW

GRINDING SERVICES AGREEMENT
DEPARTMENT: PUBLIC WORKS DEPARTMENT/MAINTENANCE SERVICES

DIVISION
PRESENTED BY: RAJA SETHURAMAN, PUBLIC WORKS DIRECTOR
CONTACT INFORMATION: ROBERT RYAN, MAINTENANCE SERVICES MANAGER, (714) 754-5123
RECOMMENDATION:

Staff recommends the City Council:

1. Authorize the City Attorney to prepare the Second Amendment to the Maintenance Services Agreement (MSA) for citywide sidewalk grinding and gutter flow grinding with BPR, Incorporated, increasing compensation by $150,000 for an annual not to exceed amount of $300,000.

2. Authorize a ten percent (10%) contingency annually for emergency response, special events and other unforeseen costs; and approval for Consumer Price Index (CPI) escalation and de- escalation.

3. Authorize the City Manager and the City Clerk to execute the agreement and future amendments to this agreement within Council authorized limits.

BACKGROUND:

The City of Costa Mesa has over 1,500,000 linear feet of sidewalk throughout the City. Historically, the Public Works Department has utilized a combination of in-house staff and outside contractors to maintain uneven sidewalk lifts and gutter flow locations throughout the City. The City entered into a two (2) year agreement with BPR, Incorporated for citywide sidewalk grinding and gutter flow grinding services on June 6, 2023, terminating on June 30, 2025, with the option to extend the term for three (3) successive one (1) year periods. The First Amendment (Attachment 1) to the MSA to extend the agreement for the first of the three (3) options for renewal was executed on July 1, 2025.

ANALYSIS:

BPR, Incorporated has provided sidewalk grinding services to the City on an as-needed basis for nearly three (3) years. The work has been performed systematically within geographical areas

Page 1 of 3 ends

201
File #: 26-165 Meeting Date: 3/17/2026
assigned by staff.

Staff is continuously seeking methods to be proactive in ensuring that City sidewalks are safe, accessible and ADA-compliant. On November 1, 2024, the City entered into a separate agreement with Precision Concrete Cutting to perform sidewalk safety assessment services on an as needed basis. Precision provides comprehensive Sidewalk Assessment Surveys using specialized GPS software to identify problem areas and provide an in-depth report and recommendations to resolve those issues. The survey provides the size and severity of the offset, prioritizes the offsets for remediation based on risk factors, and tracks areas that require complete replacement. All data is summarized by street segment and physical address. The goal is to completely assess 20% of the City’s sidewalks per year and to complete assessment of all City sidewalks within five (5) years.

The first assessment began in May 2025 in the southeast side of the City. The initial assessment took several months to complete and covered approximately 45 linear miles of sidewalk and identified approximately 3,000 locations with offset sidewalks. Many of these offset locations could be addressed by grinding, while others require full replacement.

BPR began addressing grinding locations, and to date have addressed over fifty percent (50%) of those offsets, nearly exhausting the $150,000 annual contract amount. As a result, staff recommends the City Council authorize the City Attorney to prepare the Second Amendment to the MSA, increasing compensation by $150,000 annually to ensure sufficient funding to continue addressing offset sidewalks as identified by the assessment.

Staff is currently procuring bids from sidewalk replacement contractors where repairs by grinding is not feasible. This will be presented to City Council for approval when the procurement process is completed.

ALTERNATIVES:

The City Council could reject the proposed amendment and continue with the contract within the current compensation amount. This alternative would leave the City without critical sidewalk and gutter-grinding services until the new fiscal year delaying necessary repairs to the identified offsets.

FISCAL REVIEW:

The funding for the Maintenance Service Agreement increase of $165,000, inclusive of a 10% contingency, in available in the Fiscal Year 2025-26 capital outlay budget in the Gas Tax Fund (Fund 201), which has an available project balance of approximately $200,000, and Measure M2 Fairshare Fund (Fund 416), which has an available project balance of approximately $760,000.

LEGAL REVIEW:

The City Attorney’s Office has reviewed this report and approves it as to form.

CITY COUNCIL GOALS AND OBJECTIVES:

This item works toward achieving the following City Council goal:
· Strengthen the public’s safety and improve the quality of life.

Page 2 of 3 ends

202
File #: 26-165 Meeting Date: 3/17/2026
CONCLUSION:

Staff recommends the City Council:

2. Authorize a ten percent (10%) contingency annually for emergency response, special events and other unforeseen costs; and approval for Consumer Price Index (CPI) escalation and de- escalation.

3. Authorize the City Manager and the City Clerk to execute the agreement and future amendments to this agreement within Council authorized limits.

Page 3 of 3 ends

203

AMENDMENT NUMBER ONE TO

MAINTENANCE SERVICES AGREEMENT
WITH
BPR, INC.

This Amendment Number One ("Amendment") is dated July 3, 2025, ("Effectaive Date"), by and between the CITY OF COSTA MESA, a municipal corporation ("City") and BPR, Inc. a California Corporation ("Contractor").

WHEREAS, City and Contractor entered into an agreement on June 6, 2023, for Contractor to provide maintenance of City Property (the "Agreement"); and WHEREAS, Section 4.1 of the Agreement provides for a term of two (2) years, ending on June 30, 2025, with the option to extend the Agreement for up to a maxaimum of three additional one-year periods upon mutual written agreement of both partaies; and WHEREAS, City and Contractor now desire to extend the Agreement an addaitiona) one (1 ) year through June 30, 2026.

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

4. The foregoing recitals in this Amendment are hereby declared to be true and correct and are incorporated as if fully set forth herein.

2. The term of the Agreement shall be extended through June 30, 2026.

3. All terms not defined herein shall have the same meaning and use as set forth in the Agreement, as amended.

4. All other terms, conditions, and provisions of the Agreement, as amended, shall remain in full force and effect.

5. This Amendment may be executed in one or more counterparts, each of which shall be deemed an original. All counterparts shall be construed together and shall constitute one agreement.
[Signatures appear on following page.)
1 BPR, Inc.

Amendment One
ATTACHMENT 1
204
IN WITNESS WHEREOF, the Parties hereto have caused this Amendment to be executed by and through their respective authoraized officers, as of the date first above written.

CONTRACTOR
Siffiature
Pat Rifley, President
Date:

CITY OF COSTA MESA
APPROVED i
Date:

Date:
g /tz I >,;xr
blubfzoz-s
Kirnberly HalFBarlow
City Attorney
APPROVED AS TO INSURANCE:

Risk Management
Date: (,,IE}>r
Date: G'/3or
APPROVED AS TO CONTENT:

Project Manager
Date: 'Yg02: Z,,az-<
2 BPR, Inc.

Amendment One
205
DEPARTMENTAL APPROVAL:

Public Works Director
ING APPROV AL:

Carol Molina
Finance Director
Date: Qa - ' - "A-
Date:
3 BPR, Inc.

Amendment One
206

CITY OF COSTA MESA
Agenda Report
77 Fair Drive
Costa Mesa, CA 92626
File #: 26-166 Meeting Date: 3/17/2026
TITLE:

RESOLUTION AUTHORIZING STREET CLOSURES FOR THE 2026 ORANGE COUNTY

MARATHON RUNNING FESTIVAL
DEPARTMENT: PUBLIC WORKS DEPARTMENT / TRANSPORTATION

SERVICES DIVISION
PRESENTED BY: RAJA SETHURAMAN, PUBLIC WORKS DIRECTOR
CONTACT INFORMATION: PAUL MARTIN, TRANSPORTATION SERVICES MANAGER, (714) 754-5343
RECOMMENDATION:

Staff recommends the City Council:

Adopt Resolution No. 2026-xx, designating event routes for the 2026 Orange County (OC) Marathon Running Festival and approving the temporary street closures for May 2, 2026, and May 3, 2026, as requested for the 2026 OC Marathon Running Festival.

BACKGROUND:

A Special Event Permit application was submitted to the City on December 27, 2025, requesting permission to close certain streets to conduct the 2026 OC Marathon Running Festival on May 2, 2026 and May 3, 2026. The application is currently under review by the City’s Special Events Committee, which consists of representatives from various City departments. Resolution No. 2026-xx (Attachment 1) includes designated routes and street closures.

This is the seventeenth year the City of Costa Mesa will participate in the OC Marathon, which has been an annual event in the Orange County area since 2004. Similar to the previous marathons, the proposed route for the 2026 OC Marathon Running Festival begins at Newport Center in the City of Newport Beach and finishes at the OC Fair & Event Center in Costa Mesa. This year’sOC Marathon Running Festival consists of four (4) sub-events:

1. Full Marathon (26.2 miles) on Sunday, May 3, 2026;

2. Half Marathon (13.1 miles) on Sunday, May 3, 2026;

3. 5K Fun Run/Walk (3.1 miles) on Saturday, May 2, 2026; and

4. Kids Run the OC (1 mile) on Saturday, May 2, 2026.

The routes within Costa Mesa for the 2026 full and half-marathon events are shown on Attachments

Page 1 of 5 ends

207
File #: 26-166 Meeting Date: 3/17/2026
The routes within Costa Mesa for the 2026 full and half-marathon events are shown on Attachments 2 and 3, respectively. A map depicting the route for the 2026 5K Fun Run/Walk is shown in Attachment 4. The route for the Kids Run is entirely within the OC Fair & Event Center and is shown in Attachment 5. There are no changes to the proposed routes on Costa Mesa’spublic streets for the above events when compared to the 2025 OC Marathon Running Festival.

Within Costa Mesa, the streets affected by the Full Marathon include portions of Santa Ana Avenue, Bristol Street, Red Hill Avenue, Main Street, Sunflower Avenue, Anton Boulevard, Avenue of the Arts, Bear Street, Gisler Avenue, Country Club Drive, Mesa Verde Drive West, Adams Avenue, Placentia Avenue, Oriole Drive, Canary Drive, Tanager Drive, Golf Course Drive, Harbor Boulevard, Merrimac Way, and Fairview Road. The streets affected by the Half Marathon include portions of Santa Ana Avenue, Mesa Drive, and Newport Boulevard Southbound Frontage Road. The affected streets for the 5K Fun Run/Walk are Arlington Drive, Fairview Road, and Merrimac Way.

The Half Marathon event is proposed to start in the City of Newport Beach at 6:30 a.m. on Sunday, May 3. For the Half Marathon event, street closures in Costa Mesa begin at 5:00 a.m. and the last affected road segments reopen no later than 10:00 a.m.

The 5K Fun Run/Walk event will begin and end at the OC Fair & Event Center. For the 5K Fun Run/Walk, street closures will begin at 4:30 p.m. on Saturday, and the last affected road segment will reopen no later than 6:30 p.m.

The 1-mile Kids Run is entirely within the OC Fair & Event Center, and no street closures are required for the Kids Run event on Saturday, May 2.

Since the proposed routes for the Full Marathon, Half-Marathon, and 5K Fun Run/Walk events are not among the pre-designated routes for street closures for Special Event areas as approved in City Council Resolution No. 04-38 (Attachment 6), City Council approval is required for these street closures.

ANALYSIS:

Prior years’marathon events have enjoyed success due to the efforts of organizers, as well as City staff. The organizers will be required to conduct an extensive outreach to churches and businesses that are open during the time of the street closures and detours. In addition, residential areas affected by closures will be notified in advance, similar to prior marathon events.

On the weekend of the 2025 OC Marathon, police management personnel, sworn officers, civilian officers, and explorers (from Costa Mesa and other agencies) provided support for the events. The Fire Department had personnel stationed at the Emergency Medical Services (EMS) tent for the event. As a result of the close coordination between various City departments and event organizers, and the implementation of traffic control, impacts on many residential and commercial areas as well as arterial streets have been minimized in prior years and will be repeated for the 2026 events.

Street Closures:

A number of minor and major arterial streets will require full closure, while some other streets will require either half-closure (one direction) or partial closure (only the closure of one or two lanes in one direction). In order to minimize impacts to the public, the closure of streets will be phased to occur as the fastest runners approach, and will be reopened as the last of the runners and the official

Page 2 of 5 ends

208
File #: 26-166 Meeting Date: 3/17/2026
occur as the fastest runners approach, and will be reopened as the last of the runners and the official sweep vehicle passes by. The fastest marathon runners are expected to finish in approximately two (2) hours and 20 minutes. The overall length of time for the slowest runners in the marathon with traffic control will be limited to a maximum of seven (7) hours. The marathon begins on Sunday, May 3, at 5:30 a.m.; therefore, the last runner permitted on the course with traffic control would finish no later than 12:30 p.m. A sweep vehicle will circulate through the course in time with the slowest paced runner to ensure the course is clear and that streets can be reopened as soon as possible.

Attachment 7 presents a brief summary of the arterials affected by the proposed Full Marathon, Half- Marathon, and 5K Fun Run/Walk routes through Costa Mesa. The Mesa Verde Community, Inc.

Board and the Mesa Verde Country Club will be notified of the event and the street closures.

Additional information to assist the patrons of the Mesa Verde Country Club and navigate the proposed closures will be provided to the Mesa Verde Country Club as the event date approaches.

Impacts to traffic flow will occur at various intersections as marathon participants move along the route, beginning as early as 6:30 a.m. and ending at approximately 1:00 p.m. Attachment 8 identifies the major intersections where traffic detours are necessary to provide for the safety of runners while crossing intersections. As shown in Attachment 8, traffic control on Harbor Boulevard and Fairview Road will be conducted as “soft closures,” whereby vehicles will be allowed through as gaps in runners permit. Adams Avenue will be subject to full closure for approximately two (2) hours, followed by soft closures for up to four (4) hours. Advance warning signs will be positioned to advise drivers of possible delays during this time. Traffic control will be actively managed by Costa Mesa Police Department (CMPD) Officers, allowing traffic to pass through the closed area as much as possible. With the proposed closure of the Adams Avenue at Placentia Avenue/Mesa Verde Drive West intersection, there will be coordination with City of Huntington Beach staff for the placement of advance warning signs within their city limits to minimize congestion and delays.

Staff has also reviewed planned street improvement projects within the City for any conflicts with the 2026 OC Marathon Running Festival Events (Full Marathon, Half Marathon & 5K) and confirms that no street improvement projects are scheduled on streets that would impact the proposed route for this event. Close monitoring of project schedules will continue as the date of the marathon approaches.

Traffic Control:

The OC Marathon Running Festival representatives estimate up to 12,500 combined participants for the Half and Full marathons. Due to the large scale of the event and magnitude of street closures, lane closures, and detours, the Transportation Services Division will require that the applicant be responsible for the preparation and submittal of detailed traffic control plans prepared by a Registered Traffic Engineer. Additionally, the applicant will be responsible for furnishing all traffic control devices, such as cones, signs, and barricades, required for the event. The overall traffic control at intersections and driveways will be directed by CMPD Officers and Explorers.

The Police Department plans to staff this event similarly to prior years’events, making any necessary adjustments based on actual field conditions. Since the OC Marathon is being held on a Sunday, it will not affect weekday peak rush-hour traffic conditions. Therefore, during the hours in which the event occurs in Costa Mesa, it is expected to have a lesser impact on traffic flow. With traffic control monitored and managed by CMPD, emergency access to nearby properties is maintained during the event. Costa Mesa Fire & Rescue staff are members of the Special Event Committee and are

Page 3 of 5 ends

209
File #: 26-166 Meeting Date: 3/17/2026
event. Costa Mesa Fire & Rescue staff are members of the Special Event Committee and are involved in reviewing the Special Event Permit application to identify any needed and appropriate measures to maintain emergency response.

Public Information:

The applicant will be conditioned to provide written notification prior to the event to all property owners and tenants affected by the street closures. Some samples of correspondence are included in the proposed 2026 OC Marathon Operations Plan (Attachment 9). The applicant is engaged in discussion with the OC Fair & Event Center, for approval to utilize the property for the event and anticipates approval.

Similar to prior years, staff will work with the applicant to identify and require properties directly affected by the event to receive adequate notice of the time and period of closure, as well as proper detour information. Additionally, as part of the traffic control requirements, the Public Works Department staff will require the placement of changeable message signs at key locations in advance of the event to give adequate notice of the planned street closures.

Areas of Improvement:

The following are some of the observations and areas for improvement identified for earlier OC Marathon events and continue to apply for the 2026 OC Marathon Running Festival:
· Event start times should be maintained as close to schedule as possible. · Field-review all water stations and band locations, particularly near residential areas. · No music or loud noises near residential areas before 8:00 a.m. · Address traffic issues related to vehicles exiting the fairgrounds parking lot and on Fair Drive. · Improve course signage for all events.

ALTERNATIVES:

The City Council may elect not to approve the requested route as submitted and direct the applicant to revise the route to use other streets. This alternative, however, would not be preferred by the organization as it will have significant impacts on the planned event.

Another alternative would be to not approve the resolution and the requested street closures. This may result in the cancellation of the 2026 OC Marathon Running Festival.

FISCAL REVIEW:

The applicant, OC Marathon LLC, will reimburse the City for the costs associated with Police and Fire & Rescue Department support during the event per the Special Event Permit application. The estimated reimbursement amount of $80,000 will offset City expenditures and will be recorded in the General Fund (Fund 101).

Page 4 of 5 ends

210
File #: 26-166 Meeting Date: 3/17/2026
LEGAL REVIEW:

As part of the Special Event Permit application, the applicant will be required to provide the City with indemnity and insurance per the City’srequirements. The City Attorney’sOffice has reviewed this report and the proposed Resolution (Attachment 1) and approves them both as to form.

CITY COUNCIL GOALS AND PRIORITIES:

This item supports the following City Council Goal:
· Strengthen the public’s safety and improve the quality of life.

CONCLUSION:

A Special Event Permit application was submitted to the City requesting closure of certain streets on May 2, 2026 and May 3, 2026, to conduct the 2026 OC Marathon Running Festival.

Staff recommends the City Council adopt Resolution No. 2026-xx, designating event routes for the 2026 Orange County (OC) Marathon Running Festival and approving the temporary street closures for May 2, 2026 and May 3, 2026, as requested for the 2026 OC Marathon Running Festival.

Page 5 of 5 ends

211
ATTACHMENT 1

Resolution No. 2026-xx Page 1 of 6

RESOLUTION NO. 2026-xx

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF COSTA MESA,

CALIFORNIA, DESIGNATING THE EVENT ROUTES AND STREET CLOSURES FOR THE 2026 ORANGE COUNTY MARATHON RUNNING FESTIVAL

THE CITY COUNCIL OF THE CITY OF COSTA MESA, CALIFORNIA DOES HEREBY FIND AND DECLARE AS FOLLOWS:

WHEREAS, because of the impact that special events have on City streets and traffic when a full or partial street closure is required for such special event s, the City Council of the City of Costa Mesa finds that it is crucial that any such routes be thoroughly reviewed and analyzed to enable careful planning of such special events in order to minimize impacts to the general public where such street closures are permitted; and WHEREAS, in acco rdance with Section 9- 208.9 of the Costa Mesa Municipal Code, Event Routes, after thorough review, analysis, and planning, the City Council does hereby establish the following routes and necessary full and partial street closures for the 2025 Orange County Marathon Running Festival.

NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Costa Mesa as follows:

Section 1. T he 2026 Orange County Marathon event route is hereby established as shown by the map attached hereto as Exhibit “A” and incorporated herein.

Section 2. T he 2026 5K Run/Walk event route is hereby established as shown by the map attached hereto as Exhibit “B” and incorporated herein.

S
ection 3. T he streets listed in Exhibit “C,” attached hereto and incorporated herein, will be subject to full and partial street closures for the 202 6 Orange County Marathon Running Festival. Said closures will be as set forth in Exhibit C.

PASSED AND ADOPTED this 17th day of March, 2026.

_______________________________
John Stephens, Mayor
212
ATTACHMENT 1

Resolution No. 2026-xx Page 2 of 6

ATTEST: APPROVED AS TO FORM:

_______________________________ _______________________________ Brenda Green, City Clerk Kimberly Hall Barlow, City Attorney

STATE OF CALIFORNIA )
COUNTY OF ORANGE ) ss

CITY OF COSTA MESA )

I, BRENDA GREEN, City Clerk of the City of Costa Mesa, DO HEREBY CERTIFY that the above and foregoing is the original of Resolution No. 2026-xx and was duly passed and adopted by the City Council of the City of Costa Mesa at a regular meeting held on the 17
th day of March, 2026, by the following roll call vote, to wit:

AYES: COUNCIL MEMBERS:

NOES: COUNCIL MEMBERS:

ABSENT: COUNCIL MEMBERS:

IN WITNESS WHEREOF, I have hereby set my hand and affixed the seal of the City of Costa Mesa this 17
th day of March 2026.

_______________________________

BRENDA GREEN, CITY CLERK (SEAL)

213
ATTACHMENT 1

Resolution No. 2026-xx Page 3 of 6

214
ATTACHMENT 1

Resolution No. 2026-xx Page 4 of 6

215
ATTACHMENT 1

Resolution No. 2026-xx Page 5 of 6

EXHIBIT C
FULL MARATHON – AFFECTED STREETS ON ROUTE

STREET FROM TO CLOSURE
TYPE

SIDE OF
STREET
Santa Ana Avenue Del Mar Avenue Mesa Drive Half East
Santa Ana Avenue Mesa Drive Bristol Street Half West
Red Hill Avenue Bristol Street Main Street Half West
Main Street Red Hill Avenue Sunflower Avenue Half South/West Sunflower Avenue Main Street Avenue of the Arts Partial South Anton Boulevard Sunflower Avenue Enclave Driveway Full --- Avenue of the Arts Sunflower Avenue Town Center Drive Full --- Bear Street South Coast Drive Sunflower Avenue Partial East Sunflower Avenue Bear Street Raitt Street Partial North Gisler Avenue Santa Ana River Country Club Drive Partial South Country Club Drive Gisler Avenue Mesa Verde Dr. W Partial West Mesa Verde Dr. W Country Club Drive Adams Avenue Half South/East Placentia Avenue Adams Avenue Fairview Park Partial East Oriole Drive Placentia Avenue Canary Drive Partial South Adams Avenue Mesa Verde Drive E Placentia Partial North Canary Drive Oriole Drive Tanager Drive Partial West
Tanager Drive Canary Drive Golf Course Drive Partial South Merrimac Way Harbor Boulevard Fairview Road Half South
Fairview Road Merrimac Way Fair Drive Partial East

HALF MARATHON – AFFECTED STREETS ON ROUTE

STREET FROM TO CLOSURE
TYPE

SIDE OF
STREET
Santa Ana Avenue Del Mar Avenue Mesa Drive Half East
Mesa Drive Santa Ana Avenue Newport Boulevard Half North SB Newport Frontage Mesa Drive Fair Drive Full ---

216
ATTACHMENT 1

Resolution No. 2026-xx Page 6 of 6

5K FUN RUN/WALK – AFFECTED STREETS ON ROUTE

STREET FROM TO CLOSURE
TYPE

SIDE OF
STREET
Fairview Road Fair Drive Arlington Drive Full ---
Fairview Road Arlington Drive Pirate Way /
Mustang Way Half West
Merrimac Way Fairview Road 500’ E/O Harbor Bl. Half North 217

DEL MARMESASANTA ANAAVE OF THE ARTSTOWN CENTERPLAZA
BEAR

FAIRVIEWCHANNEL

TANAGERORIOLECANARY

SANTA ANA RIVERBIKE-TRAIL

BIKE TRAILFINISH

PEDESTRIANBRIDGE

CITY OFSANTA ANACITY OFCOSTA MESA

MERRIMAC

ENTER FROMCITY OF NEWPORT BEACH

TO CITY OFSANTA ANAFROM CITY OFSANTA ANA
2026 OC MARATHONFULL MARATHON ROUTE
GISLERCOUNTRYCLUBMESAVERDE DR.

FUSCHIARAITT
218

DEL MARMESASANTA ANAAVE OF THE ARTSTOWN CENTERPLAZA
BEAR

FAIRVIEWCHANNEL

TANAGERORIOLECANARY

SANTA ANA RIVERBIKE-TRAIL

BIKE TRAILFINISH

CITY OFSANTA ANACITY OFCOSTA MESA

MERRIMAC

ENTER FROMCITY OF NEWPORT BEACH
2026 OC MARATHONHALF MARATHON ROUTE
GISLERCOUNTRYCLUBMESAVERDE DR.
= FINISH @ OC FAIRGROUNDS
219
Permit submission, maps last updated 12/27/25
220
KIDS RUN THE OC - MAY 2, 2026
Permit submission, maps last updated 12/27/25
221

Attachment 6
222

223
224

SPECIAL EVENT AREA 1

HARBOR GATEWAY

FULL STREET CLOSURES

STREET CLOSURES PERMITTED

WITHIN THIS BOUNDARY

STREET CLOSURES PERMITTED

WITHIN THIS BOUNDARY

FREEWAY ACCESS
225

SPECIAL EVENT AREA 2

AIRPORT AREA

FULL STREET CLOSURES

EXCLUDES RED HILL AVENUE, BAKER STREET & PAULARINO AVENUE

SR-73

FREEWAY
AREA
3 B
AREA
3 A
AREA
3 C
SR-55

FREEWAY
I-405

FREEWAY

STREET CLOSURES

PERMITTED WITHIN

THE DASHED

BOUNDARY LINES
226

SPECIAL EVENT - PARADE ROUTE - AREA 3

FAIRGROUNDS AREA
ROLLING PARTIAL 1/2 STREET CLOSURE

ORANGE COUNTY

FAIRGROUNDS

COSTA MESA

HIGH SCHOOL
ORANGE
COAST

COLLEGE TEWINKLE PARK
(STAGING & DISBANDING AREA)

SPECIAL EVENT ROUTE

CITY HALL
227
ATTACHMENT 7
FULL MARATHON – AFFECTED STREETS ON ROUTE

STREET FROM TO CLOSURE
TYPE

HALF MARATHON – AFFECTED STREETS ON ROUTE

STREET FROM TO CLOSURE
TYPE

SIDE OF
STREET
Santa Ana Avenue Del Mar Avenue Mesa Drive Half East
Mesa Drive Santa Ana Avenue Newport Boulevard Half North SB Newport Frontage Mesa Drive Fair Drive Full ---

5K FUN RUN/WALK – AFFECTED STREETS ON ROUTE

STREET FROM TO CLOSURE
TYPE

SIDE OF
STREET
Fairview Road Fair Drive Arlington Drive Full ---
Fairview Road Arlington Drive Pirate Way /
Mustang Way Half West
Merrimac Way Fairview Road 500’ E/O Harbor Bl. Half North

228
Attachment 8

QC MARATHON - MAJOR INTERSECTIONS AFFECTED

STREET CROSSING IMPACT
Newport @ Mesa Drive Closed - Detour North/South Newport Boulevard Boulevard Effective 7:00 - 10:30 A.M.

Bristol Street @Red Hill Closed - Detour East/West Bristol Street Avenue Effective 6:45 - 10:00 AM.

Baker Street @Red Hill Closed - Detour East/West Baker Street Avenue Effective 6:45 - 10:00 AM.

Paularino @Red Hill Closed - Detour East/West Paularino Avenue Avenue Avenue Effective 6:45 - 10:00 A.M.

Sunflower @ Bear Street Closed - Detour East Sunflower Avenue/South Bear Street Avenue Effective 7:00 - 10:30 A.M.

Placentia @Adams Closed - Detour Southbound Placentia Avenue Avenue Avenue Effective 7:30 A.M. - 9:30 AM.

Placentia @Adams "Soft Closure" - Open As Conditions Permit Avenue Avenue Effective 9:30 AM. - 12:30 P.M.

Adams @ Mesa Verde Closed - Detour Mesa Verde Drive East Avenue Drive East Effective 8:00 AM. -10:00 AM.

Harbor @ Merrimac "Soft Closure" - Open As Conditions Permit Detour North/South Traffic As Necessary Boulevard Way Effective 8:00 A.M. - 12:45 P.M.

Fairview @ Merrimac "Soft Closure" - Open As Conditions Permit Detour North/South Traffic As Necessary Road Way Effective 8:00 A.M. - 12:45 P.M. 229
230
231
232
233
234
235
236
237
238
239
240
241
242
243
244
245
246
247
248
249
250
251
252
253
254
255
256
257
258
259
260
261
262
263
264
265
266
267
268
269
270
271
272
273
274
275
276
277
278
279
280
281
282
283
284
285
286
287
288
289
290
291
292
293
294
295
296
297
298
299
300
301
302
303

CITY OF COSTA MESA
Agenda Report
77 Fair Drive
Costa Mesa, CA 92626
File #: 26-195 Meeting Date: 3/17/2026
TITLE:

RESOLUTION 2026-XX APPROVING THE 2025-2026 STATEMENT OF INVESTMENT POLICY

FOR THE CITY, AND DESIGNATING THE CITY TREASURER TO INVEST AND REINVEST IDLE MONIES OF THE CITY OF COSTA MESA IN ACCORDANCE WITH THE 2025-2026 STATEMENT

OF INVESTMENT POLICY
DEPARTMENT: FINANCE
PRESENTED BY: MARK KHOU, BUDGET & PURCHASING MANAGER
CONTACT INFORMATION: MARK KHOU, BUDGET & PURCHASING MANAGER (714) 754- 5241
RECOMMENDATION:

Adopt Resolution 2026-XX (Attachment 1) approving the 2025-26 Costa Mesa Investment Policy (Attachment 2) and delegating the investment activities to the City Treasurer.

BACKGROUND:

Pursuant to California Government Code section 53646(a)(2), the City Treasurer may submit a “Statement of Investment Policy” to the legislative body and any oversight committee. During each fiscal year, City staff presents any recommended changes to the Finance and Pension Advisory Committee (FiPAC) and the City Council. The attached Investment Policy has been developed according to the specific needs of the City of Costa Mesa and complies with the California Government Code, guidelines from the California Municipal Treasurer’sAssociation (CMTA), and the Association of Public Treasurers of the United States and Canada (APTUS&C), as well as recommendations by the City’s Finance Officer-Revenue.

FiPAC committee members review the Investment Policy recommended changes prior to the City Council review. On March 11, 2026, staff presented to the Finance and Pension Advisory Committee, and recommended that changes be made to the FY 2022-2023 Statement of Investment Policy.

FiPAC unanimously approved staff’srecommendation and the proposed revisions. The proposed Resolution provides the annual update and approves proposed revisions of the policy.

In addition to proposed revisions to allowable investment options, the revised policy adds language to ensure that the position of City Treasurer is always filled even if the Finance Director position is vacant.

Page 1 of 3 ends

304
File #: 26-195 Meeting Date: 3/17/2026
ANALYSIS:

The City Treasurer’ssingle most important statutory duty is set forth in California Government Code section 41001, which states the “citytreasurer shall receive and safely keep all money the treasurer receives.”The adopted Investment Policy serves primarily to set parameters for the safe investment of City funds. It also designates who serves as the City Treasurer.

Legal Investment Authority: Temporary idle monies are to be invested in accordance with state and local statutes and in compliance with California Government Code section 53600, et seq. 1 Safety: It is the primary duty and responsibility of the City Treasurer to protect, preserve, and maintain intact cash and investments placed in trust with the City Treasurer. 2 Liquidity: An adequate percentage of the portfolio should be maintained in liquid short-term securities, which can be converted to cash if necessary to meet disbursement requirements. 3 Yield: The City Treasurer shall obtain the highest possible yield within the parameters of the City’s authorized investments, provided the criteria for safety and liquidity have been met.

Investment Policy language was updated to broaden the ability for the City to invest in any permitted Local Government Investment Pool (LGIP), which is permitted under California Government Code, expanding the Policy beyond the currently explicitly named State of California Local Agency Investment Fund (LAIF).

The City’scurrent Investment Policy provides that the Finance Director serves as the City Treasurer.

The existing policy contains no provision regarding who would serve as Treasurer if the Finance Director position were vacant. Principals of good governance require the City to designate who should serve as City Treasurer in the event the Finance Director position is vacant or the designated City Treasurer is absent.

The revised Investment Policy is provided at Attachment 2. For ease of review, a redline showing changes from the current policy is provided in Attachment 3.

ALTERNATIVES:

The City Council could approve amendments to the Resolution or the Investment Policy. Both the Association of Public Treasurers of the United States & Canada and Government Finance Officers Association recommend investment policy be reviewed annually.

FISCAL REVIEW:

The proposed amendments provide additional investment opportunities to allow maximum yield from safe and liquid investment options as per the California Government Code and ensure the role of City Treasurer is always filled. Investment earnings are distributed across all funds.

LEGAL REVIEW:

The City Attorney’sOffice prepared this report and the Resolution and reviewed and approved the revised Investment Policy as to form.

Page 2 of 3 ends

305
File #: 26-195 Meeting Date: 3/17/2026
CITY COUNCIL GOALS AND PRIORITIES:

This item is administrative in nature but supports the City’score values of fiscal sustainability and transparency in government.

CONCLUSION:

The City Council is requested to Adopt Resolution 2026-XX approving the 2025-26 Statement of Investment Policy and delegating investment activities to the City Treasurer.

Page 3 of 3 ends

306
Resolution No. 2026-xx Page 1 of 4
RESOLUTION NO. 2026-xx

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF COSTA MESA, CALIFORNIA, ADOPTING THE 2025-2026 STATEMENT OF INVESTMENT POLICY

FOR THE CITY, AND DESIGNATING THE CITY TREASURER, TO INVEST AND

REINVEST IDLE MONIES OF THE CITY OF COSTA MESA IN ACCORDANCE WITH THE 2025-2026 STATEMENT OF INVESTMENT POLICY

THE CITY COUNCIL OF THE CITY OF COSTA MESA DOES HEREBY
RESOLVE AS FOLLOWS:

WHEREAS, the City Council has established and each year approves a Statement of Investment Policy (“Policy”) pertaining to idle funds under the control of the City Treasurer; and
WHEREAS, the Policy specifies the City’s investment objectives in accordance with California law and provides a framework for managing and investing the City’s funds in accordance with these objectives; and
WHEREAS, the Policy provides that it must be reviewed on an annual basis by the Finance and Pension Advisory Committee and approved by the City Council in an open public meeting; and
WHEREAS, on March 11, 2026, the Finance and Pension Advisory Committee reviewed the Policy; and
WHEREAS, the City Council desires to approve the 2025-2026 Policy and delegate authority to the City Treasurer to invest idle funds.

NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Costa Mesa as follows:

1. In accordance with section 53607 of the California Government Code, the City Council hereby authorizes the City Treasurer, (a) to invest such portion of idle money in the City Treasury, not required for the immediate necessities of the City as is deemed wise or expedient, in securities in which this City Council is authorized to invest such sums by the provisions of Government Code section 53601 and section 53635, in accordance with the provisions of the City’s Statement of Investment Policy; and (b) to sell, or exchange for other eligible securities, and reinvest the proceeds of the securities purchased. The City Treasurer shall make a monthly report of such transactions to the City Council.

This delegation shall be valid for one (1) year pursuant to Government Code section 53607.

2. The City Council hereby adopts the 2025-2026 Statement of Investment Policy as set forth in the attached document.

ATTACHMENT 1
307
Resolution No. 2026-xx Page 2 of 4

3. The City Clerk shall certify to the passage and adoption of this resolution, and it shall be thereupon in full force and effect.

PASSED AND ADOPTED this 17th day of March, 2026.

_____________________________
John Stephens, Mayor

ATTEST: APPROVED AS TO FORM:

________________________ _____________________________ Brenda Green, City Clerk Kimberly Hall Barlow, City Attorney 308
Resolution No. 2026-xx Page 3 of 4

THIS PAGE IS RESERVED FOR THE CITY CLERK’S OFFICE.

STATE OF CALIFORNIA )
COUNTY OF ORANGE ) ss

CITY OF COSTA MESA )

AYES: COUNCIL MEMBERS:

NOES: COUNCIL MEMBERS:

ABSENT: COUNCIL MEMBERS:

IN WITNESS WHEREOF, I have hereby set my hand and affixed the seal of the City of Costa Mesa this 18th day of March, 2026.

___________________________
Brenda Green, City Clerk

309
Resolution No. 2026-xx Page 4 of 4

EXHIBIT A

2025-2026 STATEMENT OF INVESTMENT POLICY

310
ATTACHMENT 2

CITY OF COSTA MESA

STATEMENT OF INVESTMENT POLICY
2025-2026

I. GENERAL INTRODUCTION

Under the laws of the State of California, it is the responsibility of the City Treasurer, at the direction of the City Council, to secure and protect the public funds of the City, and to establish proper safeguards, controls, and procedures to maintain these funds in a lawful, rational and auspicious manner. Said maintenance shall include the prudent and secure investment of idle funds, in a manner anticipated to provide additional benefit to the people of the City of Costa Mesa. The City's Finance Director serves as the City Treasurer. If the position of Finance Director is vacant, the City Manager shall serve as City Treasurer until such time as the Finance Director position is filled.

On an annual basis, this Statement of Investment Policy will be reviewed by the Finance and Pension Advisory Committee and approved by the City Council in an open public meeting. It will be provided to securities dealers, banks, and brokers currently approved for conducting investment transactions with the City Treasurer's office in the ongoing effort to manage the investment portfolio; to other affected persons or entities; and to any members of the public wishing to review this document upon request. The Treasurer reserves the right to provide these documents on a cost basis.

II. SCOPE

This Statement of Investment Policy pertains to those idle funds under the control of the Treasurer, designated for the daily ongoing operations of the City; and concerns the deposit, maintenance, safekeeping, and preservation of all such funds, and the investments made with these funds. This Policy does not apply to pension trust funds, deferred compensation funds, and certain other trust or non-operating funds.

Ill. PURPOSE

The purpose of this Statement of Investment Policy is to provide the City Council, the Finance and Pension Advisory Committee, those involved in servicing the investment requirements of the City, and any other interested party, a clear understanding of the regulations and internal guidelines that will be observed in maintaining and investing City funds. This statement is intended to provide guidelines for the prudent investment of the City's temporary idle cash, and outline the procedures for maximizing the efficiency of the City's cash management system. The ultimate goal of the Investment Policy is to enhance the economic status of the City while safeguarding its assets.

IV. OBJECTIVE

The City's cash management system is designed to accurately monitor and forecast revenues and expenditures, thus enabling the City to invest funds to the fullest extent possible only after the criteria established for safety and liquidity have been met.
311
2 The basic premise underlying the City's investment philosophy is and continues to be, to ensure that surplus funds are always safe and available when needed. The City strives to invest all idle funds as near 100 percent as possible, through daily and projected cash flow determinations. Idle cash management and investment transactions are the responsibility of the City Treasurer or his/her designee.

Criteria for selecting investments and the order of priority are:

1. Safety: The safety and risk associated with an investment refers to the potential loss of principal, interest, or a combination of these amounts. The City only operates in those investments that are considered prudent and allowable under current legislation of the State of California Government Code Section 53600 et seq. and the general laws of the City of Costa Mesa.

2. Liquidity: This refers to the ability to "cash in" at any moment in time with a minimal chance of losing some portion of principal or interest.

3. Yield: Yield is the potential dollar earnings an investment can provide, and sometimes is referred to as the rate of return.

V. DELEGATION OF INVESTMENT AUTHORITY

Authority to manage the City of Costa Mesa's investment program is derived from City of Costa Mesa Council Resolution No. 2026-xx. Management responsibility for the investment program is hereby delegated for Fiscal Year 2025-2026 to the City Treasurer or his/her designee, who shall establish written procedures for the operation of the investment program consistent with this Investment Policy. Procedures should include references to: safekeeping, repurchase agreements, wire transfer agreements, banking service contracts, and collateral/ depository agreements. Such procedures shall include explicit delegation of authority to persons responsible for investment transactions. No person may engage in an investment transaction except as provided under the terms of this policy and the procedures established by the City Treasurer or his/her designee. The City Treasurer or his/her designee shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinate officials.

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

Such a manager must be registered under the Investment Advisers Act of 1940. 312
3 VI. STANDARD OF PRUDENCE

The Treasurer shall perform the investment function in conjunction with the Prudent Investor Standard as set forth in the California Government Code Section 53600.3: "... all governing bodies of local agencies or persons authorized to make investment decisions on behalf of those local agencies investing public funds pursuant to this chapter are trustees and therefore fiduciaries subject to the prudent investor standard. When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a trustee shall act with care, skill, prudence, and diligence under the circumstances then prevailing, including, but not limited to, the general economic conditions and the anticipated needs of the City, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the City. Within the limitations of this section and considering individual investments as part of an overall strategy, investments may be acquired as authorized by law."
VII. AUTHORIZED AND SUITABLE INVESTMENTS

All investments will be made in accordance with Sections 53600 et seq. of the Government Code of California and as described within this Investment Policy. Permitted investments under this policy include:

l. Municipal Securities. These include obligations of the City, the State of California, any other states, and any local agency within the State of California, provided that:

a. Long-term obligations are rated "A" or higher, or the equivalent by at least one nationally recognized statistical rating organization (NRSRO);
b. The maximum maturity is five years; and
c. No more than 5 percent per issuer.

2. U.S. Treasury and other government obligations for which the full faith and credit of the United States are pledged for the payment of principal and interest. There are no limits on the dollar amount or percentage that the City may invest in U.S. Treasuries.

3. Federal Agency or United States government-sponsored enterprise obligations, participations, or other instruments, including those issued by or fully guaranteed as to principal and interest by federal agencies or United States government-sponsored enterprises. There are no limits on the dollar amount or percentage that the City may invest in government-sponsored enterprises. No more than 35 percent of the portfolio may be invested in any one issuer.

4. Banker's acceptances provided that:

a. They are issued by institutions with short term debt obligations rated "A -1" or higher, or the equivalent, by at least one NRSRO; and have long-term debt obligations which are rated "A" or higher, or the equivalent by at least one NRSRO;
b. The maturity does not exceed 180 days; and
c. No more than 40 percent of the total portfolio may be invested in banker's acceptances and no more than 5 percent per issuer.
313
4 5. Federally insured time deposits (Non-negotiable certificates of deposit) in state or federally chartered banks, savings and loans, or credit unions, provided that:

a. The amount per institution is limited to the maximum covered under FDIC; and, b. The maturity of such deposits does not exceed five years.

6. Time deposits (Non- negotiable certificates of deposit) in state or federally chartered banks, savings and loans, or credit unions in excess of FDIC insured amounts which shall be fully secured in accordance with California Government Code Section 53652, provided that:

a. No more than 20 percent of the portfolio will be invested in a combination of federally insured and collateralized time deposits;
b. No more than 5 percent per issuer;
c. They are issued by institutions which have long-term debt obligations which are rated "A" or higher, or the equivalent by at least one NRSRO; and/or have short term obligations rated "A- 1" or higher, or the equivalent, by at least one NRSRO; and d. The maturity of such deposits does not exceed five years.

7. Certificate of Deposit Placement Service (CDARS)

a. No more than 30 percent of the total portfolio may be invested in a combination of certificates of deposit including CDARS; and
b. The maturity of CDARS deposits does not exceed five years.

8. Negotiable certificates of deposit (NCDs) provided that:

a. They are issued by institutions which have long-term obligations which are rated "A" or higher, or the equivalent by at least one NRSRO; and/or have short term debt obligations rated "A-1" or higher, or the equivalent, by at least one NRSRO; b. The maturity does not exceed five years; and
c. No more than 30 percent of the total portfolio may be invested in NCDs and no more than 5 percent per issuer.

9. Repurchase agreements collateralized with securities authorized under the City's Authorized and Suitable Investments (Section VII) of this policy maintained at a level of at least 102 percent of the market value of the repurchase agreements, provided that:

a. The maximum maturity of repurchase agreements will be one year; b. No more than 30 percent of the total portfolio may be invested in repurchase agreements; c. Securities used as collateral for repurchase agreements will be delivered to the City's custodian bank (See Section X); and
d. The repurchase agreements are the subject of a master repurchase agreement between the City and the provider of the repurchase agreement. The master repurchase agreement will be substantially in the form developed by the Securities Industry and Financial Markets Association (SIFMA).
314
5 10. Commercial paper provided that:

a. The maturity does not exceed 270 days from the date of purchase; b. The issuer is a corporation organized and operating in the United States with assets in excess of $500 million;
c. They are issued by institutions whose short term obligations are rated "A-1" or higher, or the equivalent, by at least one NRSRO; and whose long-term obligations are rated "A" or higher, or the equivalent by at least one NRSRO; and
d. No more than 25 percent of the portfolio is invested in commercial paper and no more than 5 percent per issuer.

11. State of California Local Agency Investment Fund (LAIF), provided that:

a. The City may invest up to the maximum permitted amount in LAIF; and, b. LAIF's investments in instruments prohibited by or not specified in the City's policy do not exclude it from the City's list of allowable investments, provided that the fund's reports allow the Finance Director/Treasurer to adequately judge the risk inherent in LAIF's portfolio.

12. Orange County Treasurer's Pool is a special fund in the County Treasury which local agencies may use to deposit funds for investment. The City may not invest more than 35 percent of its surplus money with the Orange County Treasurer's Pool. The County Treasurer charges investment administration fee to all pool participants. Investment earnings are distributed to the pool participants on a monthly basis, net of the administration fee. The earnings are credited to the participant's accounts on either the last day of the month or the first day of the subsequent month.

13. Shares in a California common law trust established pursuant to Title 1, Division 7, Chapter 5 of the Government Code of the State of California which invests exclusively in investments permitted by Section 53601 of Title 5, Division 2, Chapter 4 of the Government Code of California, as it may be amended.

14. All Local Government Investment Pools (LGIPs), provided that:

a. The City may invest up to the maximum permitted amount in any LGIP; and, b. The LGIPs investments in instruments prohibited by or not specified in the City's policy do not exclude it from the City's list of allowable investments, provided that the fund's reports allow the Finance Director/Treasurer to adequately judge the risk inherent in the LGIP's portfolio; and, c. The City only operates in those LGIPs that are considered prudent and allowable under current legislation of the State of California Government Code Section 53600 et seq. and the general laws of the City of Costa Mesa.

15. Corporate medium term notes (MTNs), provided that:

a. Such notes have a maximum maturity of five years;
b. Are issued by corporations organized and operating within the United States or by depository institutions licensed by the United States or any state and operating within the United States; c. Are rated "A" category or better, or the equivalent by at least one NRSRO; and d. Holdings of medium-term notes may not exceed 30 percent of the portfolio and no more than 5 percent per issuer.

16. Mortgage pass -through securities, collateralized mortgage obligations, and asset -backed securities, provided that such securities:
315
6 a. Have a maximum stated final maturity of five years; b. Be issued by an issuer having an "A" or higher rating, or the equivalent for the issuer's debt as provided by an NRSRO;
c. Be rated in a rating category of "AA" or better, or its equivalent by an NRSRO; and d. Purchase of securities authorized by this subdivision may not exceed 20% of the portfolio and no more than 5 percent per issuer.

17. Money market mutual funds that are registered with the Securities and Exchange Commission under the Investment Company Act of 1940:

a. Provided that such funds meet either of the following criteria:

1. Attained the highest ranking or the highest letter and numerical rating provided by not less than two NRSRO; or

2. Have retained an investment adviser registered or exempt from registration with the Securities and Exchange Commission with not less than five years' experience investing in the securities and obligations authorized by California Government Code Section 53601 (a through j) and with assets under management in excess of $500 million. b. Purchase of securities authorized by this subdivision may not exceed 20 percent of the portfolio.

18. Supranational securities of United States 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, with remaining maturity up to five years, and eligible for purchase and sale within the United States.

Investment under this section shall be rated "AA" or higher, or the equivalent by an NRSRO and shall not exceed 15 percent of the portfolio. No more than 5 percent of the portfolio shall be invested in one issuer.
316
7 19.

VIII. INVESTMENT OF BOND PROCEEDS

When investing proceeds from the issuance of bonds, the City of Costa Mesa will follow this Investment Policy when determining allowable investments. Should the trust agreement of a particular bond issue be more restrictive than the City's policy on permitted investments, then the trust agreement will take precedence.

IX. CITY CONSTRAINTS

The City Treasurer or his/her designee will evaluate local banks and savings institutions and may invest idle cash funds with such institutions when the criteria for prudent investment previously stated are met. The City operates its investment pool according to State and self-imposed constraints. Any investment extending beyond a five -year period requires prior City Council approval. Additionally, a minimum of 20 percent of the outstanding investments must mature within a one- year time period.

X. SAFEKEEPING AND COLLATERALIZATION

All security transactions, including collateral for repurchase agreements, entered into by the City shall be conducted on a delivery- versus-payment (DVP) basis. Securities purchased shall be held in third party safekeeping in the Tr ust Department of a financial institution, in the City's name and control. The account established shall be protected from seizure by creditors should the financial institution holding the City's securities file for bankruptcy protection.

Collateralization will be required on two types of investments: certificates of deposit and repurchase agreements. In order to anticipate market changes and provide a level of security for all funds, a minimum collateralization level is required.

Surplus funds must be deposited in State or national banks, State or Federal savings and loan associations, or State or Federal credit unions within the State of California. The deposits cannot exceed the amount of the bank's or savings and loan's paid- up capital and surplus.
317
8 The bank or savings and loan must secure public funds deposits with eligible securities having a market value of 110 percent of the total amount of the deposits. State law also allows as an eligible security, first trust deeds having a value of 150 percent of the total amount of the deposits. A third class of collateral is 105 percent in the form of a letter of credit drawn on the Federal Home Loan Bank.

The City Treasurer or his/her designee may waive security for that portion of a deposit, which is insured pursuant to Federal law. Currently, the first $250,000 of a deposit is federally insured and deposits in excess of $250,000 are collateralized as previously indicated.

XL PORTFOLIO RISK MANAGEMENT

A. Prohibited investment vehicles and 12.ractices

1. State law notwithstanding, any investments not specifically described herein are prohibited, including, but not limited to futures and options, or stocks.

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

3. Investment in any security that could result in a zero interest accrual if held to maturity is prohibited.

4. Trading securities for the sole purpose of speculating on the future direction of interest rates is prohibited.

5. Purchasing or selling securities on margin is prohibited.

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

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

B. Mitigating credit risk in the portfolio

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

1. The divers ification requirements included in Section VII are designed to mitigate credit risk in the portfolio;

2. No more than 5 percent of the total portfolio may be invested in securities of any single issuer, other than the U.S. Government, its agencies and enterprises;

3. The City may elect to sell a security prior to its maturity and record a capital gain or loss in order to improve the quality, liquidity or yield of the portfolio in response to market conditions or City's risk preferences; and
318
9 4. If securities owned by the City are downgraded by an NRSRO to a level below the quality required by this Investment Policy, it will be the City's policy to review the credit situation and make a determination as to whether to sell or retain such securities in the portfolio.

a. If a security is downgraded, the Finance Director/Treasurer will use discretion in determining whether to sell or hold the security based on its current maturity, the economic outlook for the issuer, and other relevant factors.

b. If a decision is made to retain a downgraded security in the portfolio, its presence in the portfolio will be monitored and reported monthly to the City Council.

C. 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 cashflow 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 m itigate its exposure to market risk:

l. The City will maintain a minimum of three months of budgeted operating expenditures in short term investments to provide sufficient liquidity for expected disbursements;

2. The maximum percent of callable securities (does not include "make whole call" securities as defined in the Glossary) in the portfolio will be 20 percent;

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

4. The duration of the portfolio will at all times be approximately equal to the duration (typically plus or minus 20 percent) of a Market Benchmark Index selected by the City based on the City's investment objectives, constraints and risk tolera nces. The City's current Benchmark will be documented in the investment guidelines.

XII. POLICY COMPLIANCE REGULATIONS

Should the portfolio, for any reason, fall out of compliance with this Investment Policy, immediate liquidation of securities in order to bring the portfolio back into compliance is not required. However, the Treasurer must take action to bring the portfolio into compliance within 12 months from the date the portfolio was determined to be in non -compliance with the provisions of this Investment Policy so long as the action is deemed to be prudent under then current market conditions. Additionally, adequate disclosure as to all instances of noncompliance, and the efforts undertaken to bring the portfolio into compliance, must be made on the monthly Treasurer's Report.
319
10 XIII. REPORTING

Under provisions of Section 53646 of the California Government Code, the Treasurer or his/her designee shall render a quarterly investment report to the City Council, the City Manager, and the City Attorney within 30 days following the end of the quarter covered by the report. However, as a matter of practice, a monthly report shall be submitted listing the type of investments, institution, date of maturity, par value, amount of deposit, rate of interest, current market value for all securities, and such other data as may be required by the City Council on a monthly basis. Furthermore, a Finance and Pension Advisory Committee comprised of the following individuals will meet quarterly to review the City's portfolio and investment strategy.

• Mayor, or his/her designee
• City Treasurer
• Assistant Finance Director
• Revenue Supervisor
• Eleven Committee Members appointed by City Council who are either residents or conduct business within the City and have experience in banking, securities trading, or financial planning.

Monthly reports

Monthly investment reports will be submitted by the City Treasurer or his/her designee to the City Council members, the City Manager and the Finance and Pension Advisory Committee. These reports will disclose, at a minimum, the following information about the risk characteristics of the City's portfolio:

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

2. Monthly transactions for the period;

3. A one-page summary report that shows:

a. Average maturity of the portfolio and modified duration of the portfolio; b. Maturity distribution of the portfolio;
c. Average portfolio credit quality; and,
d. Time-weighted total rate of return for the portfolio for the prior one month, three months, twelve months, year to date, and since inception compared to the Benchmark Index returns for the same periods;

4. A statement of compliance with investment policy, including a schedule of any transactions or holdings which do not comply with th is policy or with the California Government Code Section 53600 et seq., including a justification for their presence in the portfolio and a timetable for resolution; and,

5. A statement that the City has adequate funds to meet its cash flow requirements for the next six months.
320
IO
X AUTHORIZED FINANCIAL INSTITUTIONS. DEPOSITORIES. AND BROKER/DEALERS

A list will be maintained of financial institutions and depositories authorized to provide investment services.

In addition, a list will be maintained of approved security broker/dealers selected by conducting a process of due diligence described in the investment procedures manual. These may include "primary" dealers or regional dealers that qualify under Securities and Exchange Commission (SEC) Rule l 5C3- l (uniform net capital rule).

A. The City Finance Director/Treasurer will determine which financial institutions are authorized to provide investment services to the City. Institutions eligible to transact investment business with the City include:

1. Primary government dealers as designated by the Federal Reserve Bank and non- primary government dealers;

2. Nationally or state- chartered banks;

3. The Federal Reserve Bank; and,

4. Direct issuers of securities eligible for purchase.

B. Selection of financial institutions and broker/dealers authorized to engage in transactions with the City will be at the sole discretion of the City.

C. All financial institutions which desire to become qualified bidders for investment transactions (and which are not dealing only with the investment adviser) must supply the Finance Director/Treasurer with a statement certifying that the institution has reviewed the California Government Code Section 53600 et seq. and the City's Investment Policy.

D. Selection of broker/dealers used by an external investment adviser retained by the City will be at the sole discretion of the investment adviser.

E. 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.

XV. POLICY REVIEW

This Statement of Investment Policy shall be reviewed at least annually to ensure its consistency with the overall objectives of preservation of principal, liquidity and return, and its relevance to current law, financial and economic trends.

S
hould conditions change or legislation become effective that behooves subsequent changes or a liberalization of terms within the policy during the next fiscal year, the revised policy will be submitted to both the Finance and Pension Advisory Committee and Council for adoption of the recommended action. 321
11 XVI. INVESTMENT OBJECTIVES (PERFORMANCE STANDARDS AND EVALUATION)

A. Overall objective: The investment portfolio will be designed with the overall objective of obtaining a total rate of return throughout economic cycles, commensurate with investment risk constraints and cash flow needs.

B. Specific objective: The investment performance objective for the portfolio will be to earn a total rate of return over a market cycle which is approximately equal to the return on the Market Benchmark Index as described in the City's investment guidelines. 322
12 CITY OF COSTA MESA

INVESTMENT GUIDELINES AND STRATEGY
I. GUIDELINES - Guidelines are established to direct and control activities in such a manner that previously established goals are achieved.

1. Investment Transactions. Investment transactions will be periodically reviewed by the Treasurer or his/her designee.

2. Pooled Cash. Whenever practical, City cash is consolidated into one bank account and invested on a pooled concept basis. Interest earnings are allocated monthly according to month-end cash and investment balances for each fund.

3. Competitive Bids. Purchase and sales of securities are made on the basis of competitive offers and bids when practical.

4. Cash Forecast. The cash flow for the City is analyzed with the receipt of revenues and maturity of investments scheduled so that adequate cash will be available to meet disbursement requirements.

5. Investment Limitations. Security purchases and holdings are maintained within statutory limits imposed by the California Government Code. Current limits are:

Bankers' Acceptances
Commercial Paper
Negotiable Certificates of Deposit
Medium Term Notes
Money Market Mutual Funds
Asset-Backed/Mortgage-Backed Securities
Federal Agency restriction
Local Agency Investment Fund

Orange County Treasurer's Pool
Supranational Securities
Portfolio Maturing within one year
40% Section 53601(g)
25% Section 5360l(h)
30% Section 5360l(i)
30% Section 5360l(k)
20% Section 53601(1)
20% Section 53601(0)
35% per Agency Section VII of Policy
$65,000,000 maximum allowed per Section
VII of Policy
35% per Section VII of Policy
15% per Section VII of Policy
20% per Section IX of Policy

6. Liquidity. The marketability of a security is considered at the time of purchase, as the security may have to be sold at a later date to meet unanticipated cash demands.

7. Diversification. The portfolio should consist of a mix of various types of securities, issuers, and maturities.
323
13 CITY OF COSTA MESA

INVESTMENT GUIDELINES AND STRATEGY
(Continued)

8. Evaluate Certificates of Deposit
(a) Certificates of Deposit shall be evaluated in terms of FDIC coverage. For deposits in excess of the FDIC insured maximum, approved collateral at full market value shall be required. (California Government Code Section 53652)
(b) Negotiable Certificates of Deposit shall be evaluated in terms of the credit worthiness of the issuer, as these deposits are uninsured and uncollateralized promissory notes.

9. Benchmark Index. The portfolio has a performance index of ICE BofAML 1-5 Year US Treasury & Agency Index. This index includes all securities with a remaining term to final maturity less than five years.

II. STRATEGY - Strategy refers to the ability to manage financial resources in the most advantageous manner.

1. Economic Forecasts. Economic Forecasts are obtained periodically from economists and financial experts through bankers and brokers to assist the Treasurer or his/her designee with the formulation of an investment strategy for the local agency.

2. Implementing Investment Strategy. Investment transactions are executed which conform with anticipated interest rate trends and the current investment strategy plan.

3. Rapport. A close working relationship is maintained with large vendors of the City. The objective is to pinpoint when large disbursements will clear the City's bank account. It is essential for good cash control that such large expenditures be anticipated, estimated as to dollar amount, and communicated to the Treasurer or his/her designee for liquidity planning purposes.

4. Preserve Portfolio Value. Field standards are developed in order to maintain earnings near the market and to preserve the value of the portfolio.
324
14 CITY OF COSTA MESA

INVESTMENT PROCEDURES

INTERNAL CONTROL - GUIDELINES

OBJECTIVES OF INTERNAL CONTROL

Internal control is the plan of organization and all the related systems established by the management's objective of ensuring, as far as practicable:

• The orderly and efficient conduct of its business, including adherence to management policies.

• The safeguarding of assets.

• The prevention or detection of errors and fraud.

• The accuracy and completeness of the accounting records.

• The timely preparation of reliable financial information.

LIMITATIONS OF INTERNAL CONTROL

No internal control system, however elaborate, can by itself guarantee the achievement of management's objectives. Internal control can provide only reasonable assurance that the objectives are met, because o f its inherent limitations, including:

• Management's usual requirement that a control be cost-effective.

• The direction of most controls at recurring, rather than unusual, types of transactions.

• Human error due to misunderstanding, carelessness, fatigue, or distraction.

• Potential for collusion that circumvents controls dependent on the segregation of functions.

• Potential for a person responsible for exercising control abusing that responsibility; a responsible staff member could be in a position to override controls which management has set up. 325
15 CITY OF COSTA MESA

INVESTMENT PROCEDURES

INTERNAL CONTROL - GUIDELINES
(Continued)

ELEMENTS OF INTERNAL CONTROL

Elements of a system of internal control are the means by which an organization can satisfy the objectives of internal control. These elements are:

1. ORGANIZATION
Specific responsibility for the performance of duties should be assigned and lines of authority and reporting clearly identifie d and understood.

2. PERSONNEL
Personnel should have capabilities commensurate with their responsibilities. Personnel selection and training policies together with the quality and quantity of supervision are thus important.

3. SEGREGATION OF FUNCTIONS
Segregation of incompatible functions reduces the risk that a person is in a position both to perpetrate and conceal errors or fraud in the normal course of duty. If two parts of a transaction are handled by different people, collusion is necessary to conceal errors or fraud. In particular, the functions that should be considered when evaluating segregation of functions are authorization, execution, recording, custody of assets, and performing reconciliations.

4. AUTHORIZATION
All transactions should be authorized by an appropriate responsible individual. The responsibilities and limits of authorization should be clearly delineated. The individual or group authorizing a specific transaction or granting general authority for transactions should be in a position commensurate with the nature and significance of the transactions. Delegation of authority to authorize transactions should be handled very carefully.

5. CONTROLS OVER AN ACCOUNTING SYSTEM
Controls over an accounting system include the procedures, both manual and computerized, carried out independently to ascertain that transactions are complete, valid, authorized, and properly recorded. 326
16 CITY OF COSTA MESA

CASH CONTROLS

PROCEDURES PERFORMED BY EXTERNAL AUDITORS WITH RESPECT TO CASH RECEIPTS

A. City procedures and controls are reviewed. Some of the system strengths are:

1. Receipts are controlled upon receipt by proper registration devices.

2. Receipts are reconciled on a daily basis.

3. Amounts are deposited intact.

4. All bank accounts are authorized by City Manager.

5. Cash counts are done by two or more individuals.

6. Bank reconciliations are reviewed.

7. Prompt posting of cash receipt entries in books.

8. Receipt forms are prenumbered, accounted for, and physically secured.

9. Proper approval required for write-offs of customer accounts.

10. Checks are restrictively endorsed upon receipt or when run through cash register.

11. Adequate physical security over cash.

12. Individuals that handle cash do not post to customer account records or process billing statements.

13. Adequate supervision of Finance Department operations.

B. Significant revenues are confirmed directly with payor and compared with City books to make sure amounts are recorded properly.

C. Cash balances are substantiated by confirming all account balances recorded in books. Bank reconciliations are reviewed for propriety and recalculated by the auditor. All significant reconciling items on bank reconciliations are verified as valid reconciling items by proving to subsequent bank statements.
327
17 CITY OF COSTA MESA

SEGREGATION OF RESPONSIBILITIES OF

THE TREASURY FUNCTIONS
Function Responsibility

1. Authorization of investment
transactions:

Formal investment policy should be:

* Prepared by:

* Submitted to:

Investment transactions
should be approved by

2. Execution of investment
transactions

3. Investment transactions approved
for compliance with investment
policy and/or State law

4. Timely recording of investment
transactions:

Recording of investment
transactions in the
Treasurer's records

Recording of investment
transactions in the
accounting records

5. Verification of investment,
i.e., match broker confirma -
tion to Treasurer's records
City Treasurer
City Council
City Treasurer and/or External Investment
Manager

Assistant Finance Director and/or
Finance Officer - Revenue and/or External
Investment
Manager

Assistant Finance Director and/or External
Investment Manager

Finance Officer - Revenue

Accounting Supervisor and/or
Accountant

Assistant Finance Director and/or
Finance Officer - Revenue and/or External
Investment Manager

328
18 6. Safeguarding of assets and records:

Reconciliation of Treasurer's
records to the accounting records

329
19 Reconciliation of Treasurer's records to bank statements and safekeeping records

Accounting Supervisor
and/or Accountant
330
20 CITY OF COSTA MESA

SEGREGATION OF RESPONSIBILITIES OF

THE TREASURY FUNCTIONS
(Continued)

F unction Responsibility

6. Safeguarding of Assets and Records
(continued):

Annual review of (a) financial
institution's financial condition,
(b) safety, liquidity, and potential
yields of investment instruments.

Assistant Finance Director with
Treasurer's approval

7. No less than an annual
review of investment
portfolio as prepared by
Treasurer including:

• Investment types
• Purchase Price
• Par values
• Market values
• Maturity dates
• Investment yields
• Conformance to stated investment policy
• Safekeeping reports

8. Periodic review of investment
portfolio and strategies.

External Independent Auditors

Finance and Pension Advisory Committee
331
21 Glossary of Investment Terms

AGENCIES. Shorthand market terminology for any obligation issued by a government-sponsored entity (GSE), or a federally related institution. Most obligations of GSEs are not guaranteed by the full faith and credit of the US government. Examples are:

FFCB. The Federal Farm Credit Bank System provides credit and liquidity in the agricultural industry.

FFCB issues discount notes and bonds.

FHLB. The Federal Home Loan Bank provides credit and liquidity in the housing market. FHLB issues discount notes and bonds.

FHLMC. Like FHLB, the Federal Home Loan Mortgage Corporation provides credit and liquidity in the housing market. FHLMC, also called "FreddieMac" issues discount notes, bonds and mortgage pass-through securities.

FNMA. Like FHLB and FreddieMac, the Federal National Mortgage Association was established to provide credit and liquidity in the housing market. FNMA, also known as "FannieMae," issues discount notes, bonds and mortgage pass-through securities.

GNMA. The Government National Mortgage Association, known as "GinnieMae," issues mortgage pass-through securities, which are guaranteed by the full faith and credit of the US Government.

PEFCO. The Private Export Funding Corporation assists exporters. Obligations of PEFCO are not guaranteed by the full faith and credit of the US government.

TVA. The Tennessee Valley Authority provides flood control and power and promotes development in portions of the Tennessee, Ohio, and Mississippi River valleys. TVA currently issues discount notes and bonds.

ASKED. The price at which a seller offers to sell a security.

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

AVERAGE LIFE. In mortgage-related investments, including CMOs, the average time to expected receipt of principal payments, weighted by the amount of principal expected.

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 price at which a buyer offers to buy a security.

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

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 since an issuer issues securities, it will likely call its current securities and reissue them at a lower rate of interest. Callable securities have reinvestment risk as the investor may receive its principal back when interest rates are lower than when the investment was initially made.

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

CERTIFICATE OF DEPOSIT ACCOUNT REGISTRY SYSTEM (CDARS). A private placement service that allows local agencies to purchase more than $250,000 in CDs from a single financial institution (must be a participating institution of CDARS) while still maintaining FDIC insurance coverage. CDARS is currently the only entity providing this service. CDARS facilitates the trading of deposits between the California institution and other participating institutions in amounts that are less than $250,000 each, so that FDIC coverage is maintained.
332
22 COLLATERAL. Securities or cash pledged by a borrower to secure repayment of a loan or repurchase agreement.

Also, securities pledged by a financial institution to secure deposits of public monies.

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.

COMMERCIAL PAPER. The short-term unsecured debt of corporations.

COST YIELD. The annual income from an investment divided by the purchase cost. Because it does not give effect to premiums and discounts which may have been included in the purchase cost, it is an incomplete measure of return.

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

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

CURRENT YIELD. The annual income from an investment divided by the current market value. Since the mathematical calculation relies on the current market value rather than the investor's cost, current yield is unrelated to the actual return the investor will earn if the security is held to maturity.

DEALER. A dealer acts as a principal in security transactions, selling securities from and buying securities for his own position.

DEBENTURE. A bond secured only by the general credit of the issuer.

DELIVERY vs. PAYMENT (DVP). A securities industry procedure whereby payment for a security must be made at the time the security is delivered to the purchaser's agent.

DERIVATIVE. Any security that has principal and/or interest payments which are subject to uncertainty (but not for reasons of default or credit risk) as to timing and/or amount, or any security which represents a component of another security which has been separated from other components ("Stripped" coupons and principal). A derivative is also defined as a financial instrument the value of which is totally or partially derived from the value of another instrument, interest rate, or index.

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. Other securities, 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 bond to changes in interest rates. (See modified duration).

FEDERAL FUNDS RATE. The rate of interest charged by banks for short-term loans to other banks. The Federal Reserve Bank through open-market operations establishes it.

FEDERAL OPEN MARKET COMMITTEE. A committee of the Federal Reserve Board that establishes monetary policy and executes it through temporary and permanent changes to the supply of bank reserves.

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

LIQUIDITY. The speed and ease with which an asset can be converted to cash.

LOCAL AGENCY INVESTMENT FUND (LAIF). A voluntary investment fund open to government entities and certain non-profit organizations in California that is managed by the State Treasurer's Office.

LOCAL GOVERNMENT INVESTMENT POOL. 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 333
23 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.

MARKET VALUE. The price at which a security can be traded.

MARKING TO MARKET. The process of posting current market values for securities in a portfolio.

MATURITY. The final date upon which the principal of a security becomes due and payable.

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.

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 entity which pools the funds of investors and invests those funds in a set of securities which is specifically defined in the fund's prospectus. Mutual funds can be invested in various types of domestic and/or international stocks, bonds, and money market instruments, as set forth in the individual fund's prospectus. For most large, institutional investors, the costs associated with investing in mutual funds are higher than the investor can obtain through an individually managed portfolio.

NATIONALLY RECOGNIZED STATISTICAL RATINGS ORGANIZATION (NRSRO).

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

NEGOTIABLE 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 and are payable upon order to the bearer or initial depositor (investor).

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

PREPAYMENT SPEED. A measure of how quickly principal is repaid to investors in mortgage securities.

PREPAYMENT WINDOW. The time period over which principal repayments will be received on mortgage securities at a specified prepayment speed.

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

PRUDENT PERSON (PRUDENT INVESTOR) 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."
334
24 REALIZED YIELD. The change in value of the portfolio due to interest received and interest earned and realized gains and losses. It does not give effect to changes in market value on securities, which have not been sold from the portfolio.

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. Short-term purchases of securities with a simultaneous agreement to sell the securities back at a higher price. From the seller's point of view, the same transaction is a reverse repurchase agreement.

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

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

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

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. All securities issued with initial maturities of one year or less are issued as discounted instruments, and are called Treasury bills. The Treasury currently issues three- and six-month T- bills at regular weekly auctions. It also issues "ca sh management" bills as needed to smooth out cash flows.

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

TREASURY BONDS. All securities issued with initial maturities greater than ten years are called Treasury bonds.

Like Treasury notes, they pay interest semi-annually.

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

YIELD TO MATURITY. The annualized internal rate of return on an investment which equates the expected cash flows from the investment to its cost.
335
ATTACHMENT 3

CITY OF COSTA MESA

STATEMENT OF INVESTMENT POLICY
2025-2026

I. GENERAL INTRODUCTION

II. SCOPE

This Statement of Investment Policy pertains to those idle funds under the control of the Treasurer, designated for th e daily ongoing operations of the City; and concerns the deposit, maintenance, safekeeping, and preservation of all such funds, and the investments made with these funds. This Policy does not apply to pension trust funds, deferred compensation funds, and certain other trust or non-operating funds.

Ill. PURPOSE

The purpose of this Statement of Investment Policy is to provide the City Council, the Finance and Pension Advisory Committee, those involved in servicing the investment requirements of the Cit y, and any other interested party, a clear understanding of the regulations and internal guidelines that will be observed in maintaining and investing City funds. This statement is intended to provide guidelines for the prudent investment of the City's tem porary idle cash, and outline the procedures for maximizing the efficiency of the City's cash management system. The ultimate goal of the Investment Policy is to enhance the economic status of the City while safeguarding its assets.

IV. OBJECTIVE

The City's cash management system is designed to accurately monitor and forecast revenues and expenditures, thus enabling the City to invest funds to the fullest extent possible only after the criteria established for safety and liquidity have been met.
336
2 The basic premise underlying the City's investment philosophy is and continues to be, to ensure that surplus funds are always safe and available when needed. The City strives to invest all idle funds as near 100 percent as possible, through daily and projected cash flow determinations. Idle cash management and investment transactions are the responsibility of the City Treasurer or his/her designee.

Criteria for selecting investments and the order of priority are:

1. Safety: The safety and risk associated with an investment refers to the potential loss of principal, interest, or a combination of these amounts. The City only operates in those investments th at are considered prudent and allowable under current legislation of the State of California Government Code Section 53600 et seq. and the general laws of the City of Costa Mesa.

2. Liquidity: This refers to the ability to "cash in" at any moment in time with a minimal chance of losing some portion of principal or interest.

3. Yield: Yield is the potential dollar earnings an investment can provide, and sometimes is referred to as the rate of return.

V. DELEGATION OF INVESTMENT AUTHORITY

Authority to manage the City of Costa Mesa's investment program is derived from City of Costa Mesa Council Resolution No. 2026-xx. Management responsibility for the investment program is hereby delegated for Fiscal Year 2025-2026 to the City Treasurer or his/her designee, who shall establish written procedures for the operation of the investment program consistent with this Investment Policy. Procedures should include references to: safekeeping, repurchase agreements, wire transfe r agreements, banking service contracts, and collateral/ depository agreements. Such procedures shall include explicit delegation of authority to persons responsible for investment transactions. No person may engage in an investment transaction except as provided under the terms of this policy and the procedures established by the City Treasurer or his/her designee. The City Treasurer or his/her designee shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinate officials.

Such a manager must be registered under the Investment Advisers Act of 1940. 337
3 VI. STANDARD OF PRUDENCE

l. Municipal Securities. These include obligations of the City, the State of California, any other states, and any local agency within the State of California, provided that:

4. Banker's acceptances provided that:

a. They are issued by institutions with short term debt obligations rated "A -1" or higher, or the equivalent, by at least one NRSRO; and have long-term debt obligations which are rated "A" or higher, or the equivalent by at least one NRSRO;
b. The maturity does not exceed 180 days; and
c. No more than 40 percent of the total portfolio may be invested in banker's acceptances and no more than 5 percent per issuer.
338
4 5. Federally insured time deposits (Non-negotiable certificates of deposit) in state or federally chartered banks, savings and loans, or credit unions, provided that:

a. The amount per institution is limited to the maximum covered under FDIC; and, b. The maturity of such deposits does not exceed five years.

6. Time deposits (Non -negotiable certificates of deposit) in state or federally chartered banks, savings and loans, or credit unions in excess of FDIC insured amounts which shall be fully secured in accordance with California Government Code Section 53652, pr ovided that:

7. Certificate of Deposit Placement Service (CDARS)

a. No more than 30 percent of the total portfolio may be invested in a combination of certificates of deposit including CDARS; and
b. The maturity of CDARS deposits does not exceed five years.

8. Negotiable certificates of deposit (NCDs) provided that:

11. State of California Local Agency Investment Fund (LAIF), provided that:

14. All Local Government Investment Pools (LGIPs), provided that:

13.15. Corporate medium term notes (MTNs), provided that:

14.16. Mortgage pass -through securities, collateralized mortgage obligations, and asset -backed securities, provided that such securities:
340
6 a. Have a maximum stated final maturity of five years; b. Be issued by an issuer having an "A" or higher rating, or the equivalent for the issuer's debt as provided by an NRSRO;
c. Be rated in a rating category of "AA" or better, or its equivalent by an NRSRO; and d. Purchase of securities authorized by this subdivision may not exceed 20% of the portfolio and no more than 5 percent per issuer.

15.17. Money market mutual funds that are registered with the Securities and Exchange Commission under the Investment Company Act of 1940:

a. Provided that such funds meet either of the following criteria:

1. Attained the highest ranking or the highest letter and numerical rating provided by not less than two NRSRO; or

16.18. Supranational securities of United States 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, with remaining maturity up to five years, and eligible for purchase and sale within the United States.

VIII. INVESTMENT OF BOND PROCEEDS

IX. CITY CONSTRAINTS

X. SAFEKEEPING AND COLLATERALIZATION

All security transactions, including collateral for repurchase agreements, entered into by the City shall be conducted on a delivery -versus-payment (DVP) basis. Securities purchased shall be held in third party safekeeping in the Trust Department of a financial institution, in the City's name and control. The account established shall be protected from seizure by creditors should the financial institution holding the City's securities file for bankruptcy protecti on.

Surplus funds must be deposited in State or national banks, State or Federal savings and loan associations, or State or Federal credit unions within the State of California. The deposits cannot exceed the amount of the bank's or savings and loan's paid -up capital and surplus.
342
8 The bank or savings and loan must secure public funds deposits with eligible securities having a ma rket value of 110 percent of the total amount of the deposits. State law also allows as an eligible security, first trust deeds having a value of 150 percent of the total amount of the deposits. A third class of collateral is 105 percent in the form of a letter of credit drawn on the Federal Home Loan Bank.

XL PORTFOLIO RISK MANAGEMENT

A. Prohibited investment vehicles and 12.ractices

1. State law notwithstanding, any investments not specifically described herein are prohibited, including, but not limited to futures and options, or stocks.

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

3. Investment in any security that could result in a zero interest accrual if held to maturity is prohibited.

4. Trading securities for the sole purpose of speculating on the future direction of interest rates is prohibited.

5. Purchasing or selling securities on margin is prohibited.

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

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

B. Mitigating credit risk in the portfolio

1. The diversification requirements included in Section VII are designed to mitigate credit risk in the portfolio;

2. No more than 5 percent of the total portfolio may be invested in securities of any single issuer, other than the U.S. Government, its agencies and enterprises;

3. The City may elect to sell a security prior to its maturity and record a capital gain or loss in order to improve the quality, liquidity or yield of the portfolio in response to market conditions or City's risk preferences; and
343
9 4. If securities owned by the City are downgraded by an NRSRO to a level below the quality required by this Investment Policy, it will be the City's policy to review the credit situation and make a determination as to whether to sell or retain such securities in the portfolio.

b. If a decision is made to retain a downgraded security in the portfolio, its presence in the portfolio will be monitored and reported monthly to the City Council.

C. 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 cashflow 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:

l. The City will maintain a minimum of three months of budgeted operating expenditures in short term investments to provide sufficient liquidity for expected disbursements;

2. The maximum percent of callable securities (does not include "make whole call" securities as defined in the Glossary) in the portfolio will be 20 percent;

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

XII. POLICY COMPLIANCE REGULATIONS

Monthly reports

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

2. Monthly transactions for the period;

3. A one-page summary report that shows:

4. A statement of compliance with investment policy, including a schedule of any transactions or holdings which do not comply with this policy or with the California Government Code Section 53600 et seq., including a justification for their presence in the po rtfolio and a timetable for resolution; and,

5. A statement that the City has adequate funds to meet its cash flow requirements for the next six months.
345
IO
X AUTHORIZED FINANCIAL INSTITUTIONS. DEPOSITORIES. AND BROKER/DEALERS

A list will be maintained of financial institutions and depositories authorized to provide investment services.

1. Primary government dealers as designated by the Federal Reserve Bank and non- primary government dealers;

2. Nationally or state-chartered banks;

3. The Federal Reserve Bank; and,

4. Direct issuers of securities eligible for purchase.

B. Selection of financial institutions and broker/dealers authorized to engage in transactions with the City will be at the sole discretion of the City.

C. All financial institutions which desire to become qualified bidders for investment transactions (and which are not dealing only with the investment adviser) must supply the Finance Director/Treasurer with a statement certifying tha t the institution has reviewed the California Government Code Section 53600 et seq. and the City's Investment Policy.

D. Selection of broker/dealers used by an external investment adviser retained by the City will be at the sole discretion of the investment adviser.

XV. POLICY REVIEW

Should conditions change or legislation become effective that behooves subsequent changes or a liberalization of terms within the policy during the next fiscal year, the revised policy will be submitted to both the Finance and Pension Advisory Committee and Council for adoption of the recommended action. 346
11 XVI. INVESTMENT OBJECTIVES (PERFORMANCE STANDARDS AND EVALUATION)

INVESTMENT GUIDELINES AND STRATEGY
I. GUIDELINES - Guidelines are established to direct and control activities in such a manner that previously established goals are achieved.

1. Investment Transactions. Investment transactions will be periodically reviewed by the Treasurer or his/her designee.

3. Competitive Bids. Purchase and sales of securities are made on the basis of competitive offers and bids when practical.

4. Cash Forecast. The cash flow for the City is analyzed with the receipt of revenues and maturity of investments scheduled so that adequate cash will be available to meet disbursement requirements.

5. Investment Limitations. Security purchases and holdings are maintained within statutory limits imposed by the California Government Code. Current limits are:

6. Liquidity. The marketability of a security is considered at the time of purchase, as the security may have to be sold at a later date to meet unanticipated cash demands.

7. Diversification. The portfolio should consist of a mix of various types of securities, issuers, and maturities.
348
13 CITY OF COSTA MESA

INVESTMENT GUIDELINES AND STRATEGY
(Continued)

II. STRATEGY - Strategy refers to the ability to manage financial resources in the most advantageous manner.

2. Implementing Investment Strategy. Investment transactions are executed which conform with anticipated interest rate trends and the current investment strategy plan.

4. Preserve Portfolio Value. Field standards are developed in order to maintain earnings near the market and to preserve the value of the portfolio.
349
14 CITY OF COSTA MESA

INVESTMENT PROCEDURES

INTERNAL CONTROL - GUIDELINES

OBJECTIVES OF INTERNAL CONTROL

Internal control is the plan of organization and all the related systems established by the management's objective of ensuring, as far as practicable:

• The orderly and efficient conduct of its business, including adherence to management policies.

• The safeguarding of assets.

• The prevention or detection of errors and fraud.

• The accuracy and completeness of the accounting records.

• The timely preparation of reliable financial information.

LIMITATIONS OF INTERNAL CONTROL

• Management's usual requirement that a control be cost-effective.

• The direction of most controls at recurring, rather than unusual, types of transactions.

• Human error due to misunderstanding, carelessness, fatigue, or distraction.

• Potential for collusion that circumvents controls dependent on the segregation of functions.

INVESTMENT PROCEDURES

INTERNAL CONTROL - GUIDELINES
(Continued)

ELEMENTS OF INTERNAL CONTROL

Elements of a system of internal control are the means by which an organization can satisfy the objectives of internal control. These elements are:

1. ORGANIZATION
Specific responsibility for the performance of duties should be assigned and lines of authority and reporting clearly identifie d and understood.

CASH CONTROLS

PROCEDURES PERFORMED BY EXTERNAL AUDITORS WITH RESPECT TO CASH RECEIPTS

A. City procedures and controls are reviewed. Some of the system strengths are:

1. Receipts are controlled upon receipt by proper registration devices.

2. Receipts are reconciled on a daily basis.

3. Amounts are deposited intact.

4. All bank accounts are authorized by City Manager.

5. Cash counts are done by two or more individuals.

6. Bank reconciliations are reviewed.

7. Prompt posting of cash receipt entries in books.

8. Receipt forms are prenumbered, accounted for, and physically secured.

9. Proper approval required for write-offs of customer accounts.

10. Checks are restrictively endorsed upon receipt or when run through cash register.

11. Adequate physical security over cash.

12. Individuals that handle cash do not post to customer account records or process billing statements.

13. Adequate supervision of Finance Department operations.

B. Significant revenues are confirmed directly with payor and compared with City books to make sure amounts are recorded properly.

C. Cash balances are substantiated by confirming all account balances recorded in books. Bank reconciliations are reviewed for propriety and recalculated by the auditor. All significant reconciling items on bank reconciliations are verified as valid reconciling items by provin g to subsequent bank statements.
352
17 CITY OF COSTA MESA

SEGREGATION OF RESPONSIBILITIES OF

THE TREASURY FUNCTIONS
Function Responsibility

1. Authorization of investment
transactions:

Formal investment policy should be:

* Prepared by:

* Submitted to:

Investment transactions
should be approved by

2. Execution of investment
transactions

3. Investment transactions approved
for compliance with investment
policy and/or State law

4. Timely recording of investment
transactions:

Recording of investment
transactions in the
Treasurer's records

Recording of investment
transactions in the
accounting records

5. Verification of investment,
i.e., match broker confirma -
tion to Treasurer's records
City Treasurer
City Council
City Treasurer and/or External Investment
Manager

Assistant Finance Director and/or
Finance Officer - Revenue and/or External
Investment Manager

Assistant Finance Director and/or External
Investment Manager

Finance Officer - Revenue

Accounting Supervisor and/or
Accountant

Assistant Finance Director and/or
Finance Officer - Revenue and/or External
Investment Manager

353
18 6. Safeguarding of assets and records:

Reconciliation of Treasurer's
records to the accounting records

354
19 Reconciliation of Treasurer's records to bank statements and safekeeping records

Accounting Supervisor
and/or Accountant
355
20 CITY OF COSTA MESA

SEGREGATION OF RESPONSIBILITIES OF

THE TREASURY FUNCTIONS
(Continued)

Function Responsibility

6. Safeguarding of Assets and Records
(continued):

Annual review of (a) financial
institution's financial condition,
(b) safety, liquidity, and potential
yields of investment instruments.

Assistant Finance Director with
Treasurer's approval

7. No less than an annual
review of investment
portfolio as prepared by
Treasurer including:

• Investment types
• Purchase Price
• Par values
• Market values
• Maturity dates
• Investment yields
• Conformance to stated investment policy
• Safekeeping reports

8. Periodic review of investment
portfolio and strategies.

External Independent Auditors

Finance and Pension Advisory Committee
356
21 Glossary of Investment Terms