Q3 FY25-26 Investment ReviewCity CouncilMay 5, 2026
01 Safety
Principal Preservation
Protect every public dollar first and invest only in high‑grade instruments that safeguard capital under all market conditions 02 Liquidity
Ready Cash Access
Maintain enough liquidity to meet every operating, payroll, and emergency obligation without forced sales 03 Yield
Market-Rate Returns
Pursue competitive, risk‑adjusted returns, but only after safety and liquidity have been fully assured Investment Policy Principles
Our investment policy provides guidelines for prudent investment with an absolute investment priority of safety, liquidity, and yield
Q3 FY2025/26 Investment Performance
Huntington Beach finished the quarter with a $456 million investable fund balance, yielding a 3.91% return and outperforming recent quarters Portfolio Return (%)
FY25‑26 YTD
3.71%
FY24‑25 PTD
3.18%
18‑Month Index
3.74%
Sector Breakdown
$456M
TOTAL
Cash ($10M)
Commercial Paper ($16M)
Agencies ($168M)
Corporates ($118M)
Treasuries ($71M)
Supranationals ($50M)
$
Returns
Portfolio generated $11.7M in 9 months (+$2.5M vs. FY2024/25) ↗
Acceleration
Returns accelerating each quarterly (3.91% for Q3 vs. 3.71% YTD) ✓
Benchmark
Returns in line with benchmark as low‑yield bonds roll-off ↻
Roll‑Offs
$25M in sub‑2% yield bonds maturing in the next 9 months Municipals ($23M)
Long-Term Investment Performance
Our projected net investment income for all fund balances in FY2025/26 is expected to be at least $15 million and our quarterly return increased from 3.7% 3.9% this quarter Consistent Growth
Return grew from 1.22% 3.91% over last 3 years
On Track
FY2025/26 annual income of $15M remains on target
Income Growth
Annual income grew 4× from $3.5M $15M over last 3 years Rate Momentum
Quarterly rate increase reflects roll-offs and active repositioning FY23
FY24
FY25
FY26
1.22%
3.91%
Q3 2025/26 Portfolio Concentration
↗
Issuer Concentration
Treasuries, Fannie Mac, and FHLB are the only 10%+ issuers $
Interest Rate Exposure
Only 9% of our bonds are true callables, reducing reinvestment risk ✓
Portfolio Duration
Shifted ~20% of portfolio from short-term to longer-term bonds Yield Enhancement
Increased spreads on 12% of portfolio via new/expanded sectors We purchased $130 million in securities this quarter that reduced our issuer concentration and evened out the portfolio across maturity dates Bond Maturity
$456M
TOTAL
< 1 Year (23%)
1-2 Years (21%)
2-3 Years (20%)
3-4 Years (20%)
4-5 Years (16%)
Q3 FY2025/26 Investment Compliance
Overall bond portfolio meets compliance requirements for:
Investment limits
Issuer limits
Maximum maturities
Credit ratings (84% are AAA or AA rated)
Overall cash/LGIP portfolio meets compliance for:
Investable limits
Portfolio share
The cash and bond portions of the portfolio are both fully compliant this quarter with the City’s Investment Policy Statement and the California General Code
Deferred Compensation Program
Mission Square
Average Returns (%)
15.5%
14.0%
3 Years
8.4%
7.4%
5 Years
Mission Square
Peer Group
Nationwide
Average Returns (%)
14.5%
13.0%
3 Years
8.1%
7.0%
5 Years
Nationwide
Peer Group
↗
Outperformance
Both carriers beat peer benchmarks by 100-150bps
$
Low Fees
Plan fees held at ~12 bps — well below industry averages ✓
Oversight
Treasurer oversees plan with HR, Finance, and City Manager ★
Employee Benefit
Tax‑advantaged 457(b) with broad investment choices
Huntington Beach’s $210 million employee deferred compensation plan has consistently outperformed peer benchmarks while charging lower fees
Internal and External Initiatives
Invest Soundly
The team has built a sound investment structure over the last six months and is currently stabilizing long-term returns to minimize variability for Huntington Beach PHASE 1: BUILD STRUCTURE
PHASE 2: STABILIZE RETURNS
Investment Baseline
Streamlined Investment Policy to sharpen focus and increase resident accessibility Deepen team expertise and recapture excess funds to reinvest elsewhere Annual Yields
Generating highest investment income for City in over a decade Lock-in current high yields for 3-5 year time horizon to stabilize investment income Portfolio Mix
Expanded broker/dealer network size and instituted rigorous bid process Diversify portfolio mix across investment classifications with larger spreads Cash Flow
Maximizing utilization of asset-liability model to guide bond investing Build detailed cash flow model reflecting final 2026-2027 adopted budget and CIP
Maximize Collections
The team is transforming its processes to harness the City’s robust technological capabilities so it can quickly scale auditing capabilities while reducing human error rates PHASE 1: CAPTURE FUNDS
PHASE 2: EXPAND DEFINITIONS
Hotel and STR TOTs
Finalized seven hotel TOT audits and launched Deckard AI-driven STR platform Complete remaining 14 hotel TOT audits and identify STR non/under-payment Citation Collections
Maximize collections of $1M+ in dormant citations from pandemic era Increase citation timeliness/collection rates through new Data Ticket platform Self-Reported Fees
Build/streamline databases for business licenses, oil wells, and utility user taxes Develop automated auditing capabilities and explore business case for select outsourcing Technology Adoption
Automate manual processes and eliminate paperwork to reduce errors Leverage electronic bank feeds and shift payment methods to minimize processing
Build Platforms
We have piloted a series of new programs for Huntington Beach residents and businesses that we will focus on scaling to reach more a broader audience over the rest of 2026 PHASE 1: PILOT PROGRAMS
PHASE 2: EXTEND ACCESS
Resident Services
Digital platform with custom water usage data and user-friendly electronic billing Payment kiosks in City Hall and Agentic AI software for municipal services call center Business Services
Presentations and easy-to-use guides for local businesses on taxes/fees $500K ADA accessibility grant program and fully electronic business license applications Financial Awareness
Comprehensive financial literacy workshops and monthly investment scam classes Establish seasonal tax prep location and offer financial programs in multiple languages Novel Partners
Partnerships with other departments and non-profits for scams, tax prep, and finances Leverage local colleges and County to expand services and test workforce development