STAFF REPORT
Meeting Date:
November 18, 2025
CONSENT
7 SUBJECT: MONTHLY TREASURER’S AND INVESTMENT REPORT (SEPTEMBER 2025) RECOMMENDATION: It is recommended that the City Council:
1. Receive and file the September 2025 Monthly Treasurer’s and Investment Report (which are the two attachments).
SUMMARY OF THE MATTER
A monthly report by the elected City Treasurer is required by the California Government Code. That report – shown as Attachment A - was modified to comply with the Laguna Beach Investment Policy.
The City Council holds the investment authority for the City’s portfolio. Council has delegated the management of short-term investments to the elected City Treasurer, Laura Parisi, and the management of surplus1 investments to the City Manager who utilizes Meeder Investments.
Attached are two reports for September 2025.
• At the end of September, Ms. Parisi managed $41,000,000 in cash and investments targeted for dry period liquidity that earned an average current yield of 3.123%. She also managed the bond and bank funds.
• An outside portfolio manager managed $106,000,000 invested in securities with durations after December 1, 2025, an average credit rating of AA and a current yield before the management fee of 1.93%.
• The outside portfolio manager has purchased primarily treasury securities and callable corporate bonds while employed by the City Council. The callable corporate bonds are generally callable a few months prior to the securities maturity date, and the callable risk is lower than callable agency bonds purchased in the past.
• The portfolio includes US government agency instruments (52% of the portfolio), high-yield, fully collateralized bank accounts (18%), treasury securities (14%), medium term corporate notes ((14%), negotiable CDs (1%) and supranational bonds (such as those issues by the World Bank – 1%).
DISCUSSION
The following is written by and an opinion of the City Manager. In recent Monthly Reports, Council Member Whalen asked why there is a difference in stated yield between the two portfolios. One part of the answer is how yield is reported, and the other part is because of the portfolios themselves. I’ll start with the reporting side first.
1 In this context, “surplus” means City funds not necessary for immediate liquidity purpose or otherwise earmarked or required for other immediate City costs/expenses. This is not meant to be construed as an overall budget surplus or something akin to that.
MONTHLY TREASURER’S AND INVESTMENT REPORT (SEPTEMBER 2025) November 18, 2025
Reporting of Yields. There has been a difference in the way that Treasurer Parisi and contractor Meeder Investments report yields. Both are correct in how they choose to report yield, though it makes comparisons difficult. As additional background, Treasurer Parisi notes that “there are over nine (9) ways of reporting yield according to the California Debt and Investment Advisory Committee (CDIAC).” Our investment custodian, US Bank, uses one method that has been the “historic” method used by the City. US Bank uses the Current Yield, which what the yield of the investment would be if you bought the security on the day the Monthly Report is made. It is the estimated annual income divided by the market value of the asset. If you buy a bond at 4.0% and the yields decrease, the market yield will be lower than
4.0% on that bond. This yield will fluctuate month-to-month with changes in market prices.
Meeder, however, uses Yield-at-Cost – which is the yield the portfolio will receive if we buy a bond and hold it to maturity. The same bond purchased above at 4.0% will have a 4.0% return on the investment if the bond is held to maturity. While market prices affect the Current Yield, the Yield-at-Cost remains constant if the bond is held to maturity.
Again, both are acceptable and correct ways of calculating yield.
The Yield of Both Portfolios. Our portfolio today has a variety of timed instruments. Some have overnight liquidity – which Ms. Parisi manages. The report shows about $41M in this portfolio. Meeder’s portion of the portfolio – about $106M – is in instruments that are not overnight.
The short-term portfolio (the $41M) includes Bank of America’s high-yield savings account and California’s pooled investment account, known as LAIF (the Local Agency Investment Fund). During some of the September period, the BofA account was earning 4.3%, and LAIF was earning 4.21%. With the recent Fed moves to lower rates, these two accounts now earn 3.8% and 4.12% respectively. The portfolio also had at least six US Agency instruments that were yielding 0.52% to 0.63%. Some of these rolled off the books recently as they matured. As noted, the overall current yield of the short-term portfolio was 3.123%.
The long-term portfolio (about $106M) is being built over time, with another $25 million assigned to Meeder to invest as of Summer 2025. Included in the long-term portfolio, though, are about 60 legacy bonds and other instruments somewhat similar to those in the short-term portfolio – these are yielding about
1.13% as a group. The yield on all of the Meeder-purchased investments (about 24 instruments) is about
4.10%. The combined yield of the long-term portfolio, as reported by Meeder using Yield-at-Cost, is
2.15%. Meeder charges a fee that varies by investment level – the annual fee on a $105.6M portfolio is about $66,704 yearly or about 0.063%. Therefore, the Yield at Cost on the portfolio managed by Meeder is about 2.087% when fees are included.
As more of an editorial comment, the purchases by Meeder over the course of the year have locked in yields for the City that we believe will be a positive for the City, as the Fed has cut rates by 0.50% this year and is expected to cut one more time in December. These purchases will provide more budget stability for the City over the long-term.
MONTHLY TREASURER’S AND INVESTMENT REPORT (SEPTEMBER 2025) November 18, 2025
The difference between how Meeder/Clearwater reports these – the difference between 1.93% and 2.15% - is attributable to US Bank calculating using Current Yield (market yield) and Meeder using Yield-at-Cost (book yield).
I appreciated both Treasurer Parisi’s and Mr. Balls’ input in this discussion, and would welcome further questions or comments by the Council or community.
FINANCIAL ANALYSIS
The recommended action has no financial impact to the budget.
ENVIRONMENTAL ANALYSIS
The recommended action has no environmental impact.
ATTACHMENTS
1. Report from City Treasurer - August (Pgs. 3-8)
2. Report from Investment Manager - August (Pgs. 9-32)
Submitted By: . Approved: David A Kiff
Dave Kiff, City Manager Dave Kiff, City Manager
Staff Report Prepared By: Coordinated With:
Dave Kiff, City Manager Laura Parisi, CPA, CCMT, City Treasurer Greg Balls, CFA, Meeder Investments
Michelle Bannigan, Finance Director