To:
CITY OF LAGUNA NIGUEL
CITY COUNCIL AGENDA ITEM
FROM:
Honorable Mayor and Council Members
Trevor Agrelius, Finance Director
August 18, 2026 DATE:
SUBJECT: Annual Investment Report for Fiscal Year 2025-2026
RECOMMENDATION
Staff recommends that the City Council receive and file the City's Annual Investment Report for Fiscal Year 2025-2026 .
BACKGROUND
The City of Laguna Niguel prepares an annual investment report at the conclusion of every fiscal year. The report (Attachment A) details investment activity from July 1, 2025, through June 30, 2026. This report includes:
- Portfolio performance and comparison to benchmarks
- Review of trends regarding the size of the portfolio
- Investment risk in the portfolio
- Composition of the portfolio
- Investment income
- Investment policy compliance certification
The Investment, Banking, and Audit Committee reviewed the contents of the report on July 30, 2026. After completion of its review, the Committee unanimously recommended approving the Annual Investment Report with no revisions.
Highlights from the Fiscal Year 2025-2026 Annual Investment Report include:
- An average yield of 3.90% for the year, exceeding the prior year's average of
3.10%.
- The City's total cash and investments balance at June 30, 2026, is $63.4 million. - Investment income was $2.3 million in Fiscal Year 2025-2026 . - The City has $15.0 million invested in 10-year Treasury Notes at June 30, 2026. - The portfolio has a weighted average maturity of 1,236 days, or nearly 3.5 years.
FISCAL REVIEW
There is no fiscal impact resulting from this recommendation.
LEGAL REVIEW
No legal review is required for this report.
CONCLUSION
Staff recommends that the City Council receive and file the City's Annual Investment Report for Fiscal Year 2025-2026.
~o ~e ~
City Manager
Attachment:
Trevor Agrelius
Finance Director
A. City of Laguna Niguel Annual Investment Report for Fiscal Year Ended June 30, 2026
ATTACHMENT A
Annual Investment Report for Fiscal Year Ended June 30, 2026
CITY OF LAGUNA NIGUEL
ANNUAL INVESTMENT REPORT
Fiscal Year Ended
June 30, 2026
Prepared by:
Trevor Agrelius
Finance Director/City Treasurer
I
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Annual Investment Report
Table of Contents
Portfolio Performance and Comparison to Benchmarks
Review of Trends Regarding the ize of the Portfolio
Investment Risk in the Portfolio
Composition of the Portfolio
Investment Income
Investment Policy Compliance Cettification
1-3
4-5
6-8
9-10
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Annual l nvestme11t Report - FY 25-26
PORTFOLIO PERFORMANCE AND
COMPA RISON TO BENCHMARKS
The City's average weighted portfolio yield during FY 2025-26 was 3.90%, calculated by dividing total investment earnings by the average portfolio cost (excluding cash in bank) for each period and averaging the results over the fiscal year. This represented a significant increase from
3. I 0% in FY 2024-25 and exceeded the average yields of the 6-month, I-year, and 5-year U.S.
Treasury benchmarks during the same period. The average weighted yield on the City's investment portfolio was 4.04% at June 30, 2026, on a cash and investment balance of $63.4 million. The portfolio's weighted average days-to-maturity was 1,236 days at year-end. The City1s investment strategy continued to emphasize longer-term investments during FY 2025-26 to capture and preserve attractive market yields. As a result, the portfolio's average weighted days-to-maturity increased from 93 I days in FY 2024-25 to a record 1.400 days in FY 2025-26.
This marks the third consecutive year that the City has established a new record for portfolio maturity, following averages of 664 days in FY 2023-24 and 931 days in FY 2024-25. This positioning has helped the City maintain portfolio yields that compare favorably with market benchmarks while securing higher rate for a longer period.
Ci~ of lag_una Niguel's Portf}!lio JI Benchmark Comparisons Average Weighted Average 5-Year I-Year 6- Month
Cost/Book Value Days to Malurity Weighted Yield Treasur y Treasury Treasury LAIF Ju l-25 $ 65,229.750 1245 3.34% 3.96% 4. 10% 4.31% 4.26% Aug-25 $ 58,510.702 1357 3.77% 3.68% 3.83% 4.01% 4.25%
Sep--25 $ 56,256,604 1385 3.74% 3.74% 3.68% 3.83% 4.21% Oct-25 $ 52,154.384 1465 3.70% 3.7 1% 3.70% 3.79% 4. 15% ~ov-25 $ 53,379,729 1662 4.06% 3.59% 3.61% 3.74% 4. 10% Occ-25 $ 55,580,723 1569 4.04% 3.73% 3.48% 3.59% 4.03%
Ja n-26 $ 60,999, 158 1405 3.99% 3.79% 3.48% 3.61% 3.93% Feb-26 $ 57,413,239 l-l69 4.02% 3.51% 3.48% 3.60% 3.87% Mar-26 $ 57,169,087 1449 4.04% 3.92% 3.68% 3.72% 3.83%
.-\pr-26 $ 6 1,074,378 1332 4.03% 4.02% 3.72% 3.71% 3.81% May-26 $ 64,969,395 1229 4.02% 4. 13% 3.79% 3.78% 3.81% J un -26 $ 63,417,488 1236 4.04% 4. 19% 3.98% 4.01% 3.82% Irv Avc r as~ $ 58,846,220 1,400 3.90% ]Gii% 3.71% 3.81% 4.00% Page I
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Annual Investment Report - FY 25-26
PORTFOLIO PERFORMANCE AND
COMPARISON TO BENCHMARKS
The following chart compare the City' portfolio yield to the 5-year. I-year. and 6-month U ..
Treasury rates. as well as LAIF. During FY 2025-26, the City' portfolio performed favorably relative to the e benchmark , with yield increasing during the fir t half of the fiscal year and stabilizing at approximately 4.0% during 2026. At June 30, 2026, the portfolio yield of 4.04% exceeded the yields of the I-year Treasury, 6-month Treasury, and LAIF, and trailed only the 5- year Treasury. The City's investment strategy of prudently extending maturities allowed it to capture attractive long-term rates while maintaining the primary objectives of safety, liquidity, and yield.
Comparison to Benchmarks • F\ 2025-26
~.50%
-'-00%
3.50% •
3.00%
Jul-25 \ug-25 Sc p-25 Oct-25 :"lov-25 Dcc-25 ,Jan-26 Feb-26 \far -26 \pr -26 vlay-26 Jun-26 - City Portfolio
- 6- Month Treasury
- s-Year Treasury
LAIF
1-Year Treasury
Annual Investment Report - FY 25-26
PORTFOLIO PERFORMANCE AND
COMPARISON TO BENCHMARKS
The following chart compares the City's portfolio yield to LAIF over the past five fiscal years.
Both yields increased significant ly as interest rates rapidly increased in FY 2022-23. LAIF's yield experienced a sustained increase and exceeded the City's yield through most of FY 2023-24 and FY 2024-25. As the City continued to extend maturitie and reinvest at higher rate , portfolio yield steadily improved and reached 4.04% by June 30, 2026, surpassing LAIF's yield of 3.82%. The City's strategy of locking in longer-term investments has enabled it to maintain a competitive yield while preserving safety and liquidity.
5.00% '
4.50%
4.00% -r
3.50 % t
3.00% +
2.50 %
2.00%
1.50% ..
1.00% •
City & LAIF Portfolio Yields - 5 Year History
0.50% t- -=-~!!!!!!-~ -~ _~ _.~ ,, - - -- ··-
0.00% L T ,---T--,--· -----~ -~~- - -,-----,
QJ Q2 QJ Q4 QJ Q2 QJ Q4 QI Q2 QJ Q4 QI Q2 QJ Q4 QI Q2 QJ Q4 21-22 22-23 23-24 24-25 25-26
- City - LAIF
Annual Investment Report - FY 25-26
REVIEW OF TRENDS REGARDING THE SIZE OF
THE PORTFOLIO
The size of the City's portfolio fluctuates throughout the fiscal year due to the timing of cash receipts and di bursements. Portfolio balances generally decline between property tax allocation periods and increase following the City's major property tax receipts, which are typically received in December/January and April/May. During FY 2025-26, the portfolio balance ranged from a low of approximately $52.2 million in October 2025 to a high of approximately $65.2 million in July 2025. The portfolio ended the fiscal year at $63.4 million, a decrease of $3.0 million. or 4.5%, from the June 30, 2025 balance of $66.4 million. Despite the year-over-year decline. the portfolio balance remained strong by historical standards and continued to provide ample liquidity to meet the City's operating, capital. and reserve requirements.
Size of Portfolio - Monthly Trend
66,000,000
64,000,000
62,000,000
60,000,000
58,000,000
56.000,000
5.J,000,000
52,000,000
□ Ju l ) Aug □ S e pt □ Oct ■ N ov □ Dec mJon □ F e b III Mar Apr □ Ma y DJ11nc
Annual Investment Report - FY 25-26
REVIEW OF TRENDS REGARDING THE SIZE OF
THE PORTFOLIO
The City ended FY 2025-26 with a cash and investment balance of $63.4 million, a decrease of approximately $3.0 million, or 4.5%, from the June 30, 2025, balance of $66.4 million. While the portfolio balance has declined modestly over the past two fiscal years, it remains well above the levels experienced immediately after completing the construction of the Crown Valley Community Center, when the City's cash and investment balance reached a low of approximate ly $50.7 million at June 30. 2020. Since that time, the portfolio has increased by roughly $12.7 million, or 25%. reflecting the City's strong financial position and continued commitment to maintaining healthy reserves while funding ongoing operational and capital improvement needs.
Size of Portfolio - 10 Year Historical Trend
80,000,000
~0,000,000
60,000,000
50,000,000
J11ne 30
□ 2 01 7 ■ 2 018 □ :'0 1 9 ■ ~ 0 2 0 □ 20~~ 1 ■ 2022 202.:;
Annual Investment Report - FY 25-26
INVESTMENT RISK IN THE PORTFOLIO
A /though all investment, comain an elemenl of risk. the Cit_y ·s Investment Policy. procedures , one/ invesrment ,trategies are designed to limit expornre to risk. The different types o/ris/c are di L ussed be!OH', as they pertain to the por~folio .
Credit Risk
Credit risk is the risk that an i uer of a ecurity will fail to make timely payments of principal and/or interest to investors. Credit risk i commonly measured through credit ratings assigned by nationally recognized statistical rating organizations (NRSROs). It is the policy of the City of Laguna Niguel to invest public funds in a prudent manner that prioritizes the preservation of principal, maintains adequate liquidity to meet the City's cash flow requirements. and achieves a market rate of return consistent with these objectives. All investments shall be made in compliance with applicable tate laws and City policies governing the investment of public funds. The City manages credit risk through a variety of prudent investment practices, including:
, Invest in highly raled securities ondfincmcwlly sound issuen vvhile prohibiting higher risk investmenl type .
, Conducl transactions On(Y v1·irh pre-qualified financial in titutions one/ broker -deolers . , Diversi/j 1 investment to minimize exposure to individuol issuers and reduce potential losses.
, Monitor pooled inve tment , includ;ng the local Agencv Investment Fund (LA/F), monthly.
, Sqfeguard securities through an independent third-party cu todial agreement with G'. S.
Bank Trust Deportment.
Annual Investment Report - FY 25-26
INVESTMENT RISK IN THE PORTFOLIO
Market Risk
Market ri k i the risk that changes in financial market conditions. particularly interest rate fluctuation , may adversely affect the fair value of an investment. Generally, as interest rates ri e, the market value of fixed-income securitie declines. To mitigate market risk, the City structures its investment po1tfol io to align investment maturities with anticipated cash flow requirements, thereby minimizing the need to sell securities prior to maturity.
During (isc ol _veor 2025-26, the City did not ,ell wn1 mvestment ., prior lo maturity to meet cosh /7oiv needs.
Interest Rate Risk
Interest rate risk is the ri k that an investment may underperform current market rates due to changes in interest rates. Generally, investments with longer maturities are more sensitive to interest rate fluctuations than those with shorter maturities. The City manages interest rate ri k by maintaining a diversified portfolio with a mix of hot1-term and long-term inve tments and by structuring maturities to align with anticipated cash flow and liquidity needs. This approach provides a con istent schedule of maturing investment while reducing exposure to changes in market interest rates. The City further mitigates interest rate risk through a disciplined investment strategy that emphasizes holding securities to maturity.
The City's por{/o/io reflected an overage weighted moturity of 1,400 day!, during fiscal year 2025-26, compared with 931 days in fiscal year 2024-25. The portfolio continues to emphasize a balanced maturity structurE' r.le.~igned to capture available yields· while maintaining sufficient liquidity. The increase in weighted average maturity reflects the City' strategic use of longer term investments to lock in favorable yields. With interest rates having increased toward the rnd of the {tscol year and marker expectations indicating the possib ility of increase., in the federal funds rate. the City remains attentive to interest rate risk. However, through the mitigation strategies identified, intere t rate risk is considered manageable.
Annual Investment Report - FY 25-26
INVESTMENT RISK IN THE PORTFOLIO
Liquidity Risk
Liquidity risk is the risk that an investment may not be readily converted to cash without incurring a loss of value or penalty prior to maturity. Certain investments, such as non-negotiable certificates of deposit, may have limited liquidity and may be subject to penalties if redeemed before maturity.
The City minimizes liquidity risk by maintmnmg a portion of its portfolio in highly liquid investments. including money market mutualfund\· and LAIF, which provide immediate access to fimds ·when needed. In addition. the City structures its investment portfolio to align with anticipated cash flo1-v requirements, reducing the likelihood that investments will need to be liquidated prior to maturity.
COMPOSITION OF THE PORTFOLIO
Authorized Investments
The City's Investment Policy estab li shes the types of securities that are eligible for investment, subject to applicable restrictio ns and State law. Authorized investments include U.S. Treasury securities, Federal Agency securities, municipal bonds, collateralized or insured bank deposits and money market accounts , insured certificates of deposit, money market mutual funds, and LAIF.
During fiscal year 2025-26, the City's investment portfolio consisted solely of investrnents authorized under the City's Investment Polic..'y.
Annua l Investment Report - FY 25-26
COMPOSITION OF THE PORTFOLIO
Portfolio Diversification
It is the City's policy to maintain a diversified investment portfolio to reduce the risk of loss associated with overconcentration in any single maturity, issuer, financial institution, or class of ecurities. lnve tments are managed in accordance with California Government Code Sections 53600 through 53630, as well as the City's Investment Policy, which may impose more restrictive requirements. Diversification is achieved through the prudent allocation of funds among authorized investment types, issuers, and maturities while maintaining the primary objectives of the portfolio. The following table identifies the investment types authorized by the California Government Code and the City's Investment Policy, where more restrictive.
Maximum Maximum
Maximum Percentage Investments
Authorized lnvestmentType Maturity Allowed in One Issuer U.S. Treasury Obligations 5 Years* None None
Federal Agency Securities or U.S.
Government Sponsored Enterprise Securities 5 Years 60% 25% Municipal Bonds 5 Years 25% 5%
State Local Agency Investment Fund (LAIF) NIA 55% $40 Million Insured Certificates of Deposits NIA 30% $250,000
Insured Money Market Funds NIA None None
Money Market Mutual Funds NIA 20% 10%
Section 115 Pension Trust NIA 20% None
*IO ) ears !or $15.0 mil lion Economic Uncertainty Reserve
Annual Investment Report - FY 25-26
COMPOSITION OF THE PORTFO LIO
Portfolio Diversification
This chart provides the portfolio distribution across the investments permissible under the City's Investment Pol icy and provides the Fiscal Year average for each security type.
FHLB FfCB FNMII FIIL,\t/C To111/ Age11cy U.S. Treasury Certijic<ltes of Agency tlget1C)1 -lge11cy Agellly .~l1111i 8011ds L ✓ IIF i'v/011ey ,'vlarket Securities Bills/Notes Deposit
Securities Securities Securitiei Securities
Maxim um 25% 25% 25% 25% 60% \Jo L11rut 25% 55% 30% 20% July 13% 17% 13% 0% -14% -13% O0\i 0% 6% 7%
1Attgust OOo 19% 15% 0% J4°o ,14% 0% 0% 7°/o 15%
September QO,o 2000 15°1• ()010 35% 46% OOo QO;;, 7% 12% October 0% 19% l 7°10 O°'o 36% -19% 0% 001. 8% 7°0
November OOo 11% 9% go,o 27% 56% 0% ()Olo 8% Q%
December O"o 11% 8% 7010 26°0 54% ()O,o 0% 8% 12%
Jm111nry 0% 10% 7% 7°n 24% 49"/o ()010 0% 7% 20%
Febr1111ry 0°0 10% 8% 7% 26% 52% oo,;, 0% 7010 15°1 0
,'vfarch OOo 11°0 go,o 7% 26% 52% 0010 70,0 701. 8%
April OOo 10010 7% 7% 24% 19% O"o 15% 7% 5%
M"y 0°0 9",o 7% 6°10 22% -16% 3°
1 0 17% 6% 6%
J1111e 0010 9% 7°10 6% 23% -18% 3% 17°0 6% 3°10
FYrl l'emge 1°,o 13°10 10010 5% 29% ~9% 1% ,!% 7% 1001• Page I 0
Annual Investment Report - FY 25-26
INVESTMENT INCOME
Investment income in fiscal year 2025-26 was approximately $2.30 million, compared to approximately $1.93 million in fiscal year 2024-25, an increase of approximately $363,000 or
18.8%. Although the average investment portfolio balance decreased from $62.3 million in FY 2024-25 to $58.8 million in FY 2025-26, the portfolio's average weighted yield increased from
3.10% to 3.90% as the City continued to invest in higher-yielding securities and strategically extended maturities to lock in favorable market rates. The increase in yield more than offset the decline in average invested balances, resulting in higher overall investment earnings.
Investment income includes interest earned and realized gains and losses on all demand deposit accounts and investments. Governmental Accounting Standards Board (GASB) Statement o. 3 1, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, establishes the requirements for reporting inve tment valuation. Under GA B Statement No. 31, investments reported in the City's financial statements are generally measured at fair value, and any resulting unrealized gains or losses are reported as a component of investment income. Investments presented in the Annual Investment Report are reported at cost; therefore, investment income reported herein excludes unrealized gains and losses. Unrealized gains and losses are reflected in the City's Annual Comprehensive Financial Report (ACFR) in accordance with generally accepted accounting principles (GAAP).
Annual Investment Report - FY 25-26
INVESTMENT POLICY COMPLIANCE CERTIFI CATION
As City Manager and Finance Director/City Treasurer of the City of Laguna Niguel, we certify that we have complied with the annual Investment Policy adopted by the City Council effective June 3, 202 5.
~¼@!~
Tamara S. Letourneau
City Manager
Trevor Agrelius
Finance Director/City Treasurer
Date