RESOLUTION NO. XX-XX
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
LANCASTER, CALIFORNIA, RESCINDING RESOLUTION NO.
18-06 IN ITS ENTIRETY, AND ESTABLISHING A POLICY FOR
THE INVESTMENT OF PUBLIC FUNDS FOR THE CITY OF
LANCASTER.
WHEREAS, investment income is an important source of revenue to the City of Lancaster and one which requires protection from loss while maximizing yield; and WHEREAS, for several years the City has produced monthly investment reports; and WHEREAS, the City of Lancaster is required by State law to adopt an investment policy; and
WHEREAS, from time to time it becomes necessary to update the City of Lancaster Investment Policy.
NOW, THEREFORE, BE IT RESOLVED AS FOLLOWS:
Section 1.
Section 2.
hereby adopted.
Resolution No. 18-06 is hereby rescinded in its entirety.
The City of Lancaster's Investment Policy, as specified in Exhibit A, is PASSED, APPROVED, and ADOPTED this 24th day of March, 2026, by the following vote:
AYES:
NOES:
ABSTAIN:
ABSENT:
ATTEST: APPROVED:
ANDREA ALEXANDER
City Clerk, City of Lancaster
R. REX PARRIS
Mayor, City of Lancaster
Resolution No. XX-XX
STATE OF CALIFORNIA }
COUNTY OF LOS ANGELES }
CITY OF LANCASTER }
CERTIFICATION OF RESOLUTION
CITY COUNCIL
I, _, City of
Lancaster, CA do hereby certify that this is a true and correct copy of the original Resolution No.
XX-XX, for which the original is on file in my office.
WITNESS MY HAND AND THE SEAL OF THE CITY OF LANCASTER, on this _ day of -J
(seal)
Resolution No. XX-XX
Resolution No. XX-XX
Exhibit A
City of Lancaster
Investment Policy
The Investment Policy of the City of Lancaster (the City), in conformance with State laws, is intended to provide guidelines to the City Treasurer for the prudent investment of the City's temporary idle cash not governed by bond indentures or bond resolutions and to outline policies for maximizing the efficiency of the City's cash management system. All City funds will be invested in accordance with this Investment Policy and with applicable sections of the California Government Code.
This Investment Policy was adopted by the City Council of the City of Lancaster on March 24, 2016 and replaces any previous investment policy or investment procedures of the City.
SCOPE
This Investment Policy (the Policy) applies to the investment of all cash and various funds of the City as identified in the City's Comprehensive Annual Financial Report, with the exception of those cash assets governed by bond indentures, bond resolutions, employees' retirement and deferred compensation funds.
All cash shall be pooled for investment purposes. Per Section 53647 of California Government Code, interest on all deposits may be allocated to the General Fund unless otherwise required by Federal or State regulation or local ordinance.
OBJECTIVES
The City's cash management system is designed to accurately monitor and forecast expenditures and revenues, thus enabling the City to invest funds to the fullest extent possible within the guidelines of this Policy. The City's funds shall be invested in accordance with all applicable City codes and resolutions, California statutes, and Federal regulations, and in a manner designed to achieve a diversified portfolio after meeting the criteria established below, which are listed in priority order:
1. Preservation of capital and protection of investment principal.
2. Maintenance of sufficient liquidity to meet anticipated cash flows.
3. Attainment of a market rate of return.
4. Diversification to avoid incurring unreasonable market risks.
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Resolution No. XX-XX
DELEGATION OF AUTHORITY
The management responsibility for the City's investment program is delegated annually by the City Council to the City Treasurer (the Treasurer) in accordance with California Government Code Section 53607. The City's Finance Director serves as the Treasurer. The Treasurer may delegate the authority to conduct investment transactions and to manage the operation of the investment portfolio to the Deputy City Treasurer and to other specifically authorized employees. The Treasurer shall maintain a list of persons authorized to transact securities business for the City.
No person may engage in an investment transaction except as expressly provided under the terms of this Policy.
The Treasurer shall develop administrative procedures and internal controls, consistent with this Policy, for the operation of the City's investment program. Such procedures shall be designed to prevent losses of public funds arising from fraud, employee error, misrepresentation by third parties, or imprudent actions by employees of the City.
The City may engage the support services of outside investment advisors in regard to its investment program, so long as it can be clearly demonstrated that these services produce a net financial advantage or necessary financial protection of the City's financial resources.
PRUDENCE
The standard of prudence to be used for managing the City's investments shall be California Government Code Section 53600.3, the prudent investor standard, which states that "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 agency, 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 agency."
The City's overall investment program shall be designed and managed with a degree of professionalism that is worthy of the public trust. The City recognizes that no investment is totally without risk and that the investment activities of the City are a matter of public record. Accordingly, the City recognizes that occasional measured losses may occur in a diversified portfolio and shall be considered within the context of the overall portfolio's return, provided that adequate diversification has been implemented and that the sale of a security is in the best long-term interest of the City.
The Treasurer and authorized employees acting in accordance with written procedures and exercising due diligence shall be relieved of personal responsibility for an individual security's credit risk or market price changes, provided that the deviations from expectations are reported in a timely fashion to the City Council and appropriate action is taken to control adverse developments.
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ETHICS AND CONFLICTS OF INTEREST
Elected officials and employees involved in the investment process shall refrain from personal business activity that could conflict with proper execution of the investment program or that could impair or create the appearance of an impairment of their ability to make impartial investment decisions. Employees involved in the investment process shall disclose to the Treasurer any business interests they have in financial institutions that conduct business with the City and they shall subordinate their personal investment transactions to those of the City. In addition, the Treasurer and other Designated Employees shall comply with the reporting requirement of the City's Conflict of Interest Code and shall file a Statement of Economic Interests each year in accordance with California Government Code Section 87203 and regulations of the Fair Political Practices Commission.
AUTHORIZED SECURITIES AND TRANSACTIONS
All investments and deposits of the City shall be made in accordance with California Government Code Sections 16429.1, 53600-53609 and 53630-53686, except that, in accordance with California Government Code Section 5903(e), proceeds of bonds and any money set aside or pledged to secure payment of the bonds may be invested in securities or obligations described in the ordinance, resolution, indenture, agreement, or other instrument providing for the issuance of the bonds. Any amendments to these code sections will be assumed to be part of this Policy immediately upon being enacted. However, in the event that such amendments conflict with this Policy and past City investment practices, the City may delay adherence to the new requirements when it is deemed in the best interest of the City to do so. In such instances, after consultation with the City's attorney, the Treasurer will present a recommended course of action to the City Council for approval.
The City has further restricted the eligible types of securities and transactions as follows:
1. United States Treasury bills, notes, bonds, or strips with a final maturity not exceeding five years from the date of trade settlement.
2. Federal Instrumentality (government sponsored enterprise) debentures, discount notes, callable and step-up securities, with a final maturity not exceeding five years from the date of trade settlement. Subordinated debt may not be purchased.
3. Non-negotiable Certificates of Deposit with maturities not exceeding five years, in FDIC insured state or nationally chartered banks or savings banks with a California branch office and that qualify as a depository of public funds in the State of California as defined in California Government Code Section 53630.5. Certificates of Deposit in amounts exceeding Federal Deposit Insurance Corporation (FDIC) insurance coverage shall be secured in accordance with California Government Code Section 53652. The aggregate amount invested in Certificates of Deposit shall not exceed 25% of the City's total portfolio.
4. Placement Service Deposits: Deposits may be placed using a private sector entity that assists in the placement of deposits per section 53601.8 and 53635.8 in the Government Code. No more than 5% of the portfolio may be invested through any one private sector entity that assists in the placement of such deposits and the aggregate investment in Certificates of Deposit shall not exceed 25% of the portfolio.
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5. Medium-Term Notes 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, with a final maturity not exceeding five years from the date of trade settlement, and rated at least AA- or the equivalent by a nationally recognized statistical ratings organization (NRSRO). No more than 5% of the City's total portfolio shall be invested in any one issuer, and the aggregate investment in medium-term notes shall not exceed 30% of the City's total portfolio.
6. Prime Commercial Paper with a maturity not exceeding 270 days from the date of trade settlement with the highest ranking or of the highest letter and number rating as provided for by a NRSRO. The entity that issues the commercial paper shall meet all of the following conditions in either sub-paragraph A. or sub-paragraph B. below:
A. The entity shall (1) be organized and operating in the United States as a general corporation, (2) have total assets in excess of $500 million and (3) have debt other than commercial paper, if any, that is rated at least A or the equivalent by a NRSRO.
B. The entity shall (1) be organized within the United States as a special purpose corporation, trust, or limited liability company, (2) have program-wide credit enhancements, including, but not limited to, over-collateralization, letters of credit or surety bond and (3) have commercial paper that is rated at least A-1 or the equivalent by a NRSRO.
No more than 5% of the City's total portfolio shall be invested in the commercial paper of any one issuer, and the aggregate investment in commercial paper shall not exceed 25% of the City's total portfolio.
7. Eligible Banker's Acceptances with a maturity not exceeding 180 days from the date of trade settlement, issued by a FDIC insured commercial bank with combined capital and surplus of at least $250 million, whose senior long-term debt is rated at least A or the equivalent by a NRSRO at the time of purchase. No more than 2% of the City's total portfolio shall be invested in banker's acceptances of any one issuer, except that a banker's acceptance issued by a bank authorized to handle the City's daily primary banking needs may, when aggregated with the funds in demand deposits in all such authorized banks, be in an amount up to 10% of the City's total portfolio. The aggregate investment in banker's acceptances shall not exceed 15% of the City's total portfolio.
8. Repurchase Agreements with a final termination date not exceeding 30 days collateralized by U.S. Treasury obligations or Federal Instrumentality securities listed in items 1 and 2 above with the maturity of the collateral not exceeding ten years. For the purpose of this section, the term collateral shall mean purchased securities under the terms of the City's approved Master Repurchase Agreement. The purchased securities shall have a minimum market value including accrued interest of 102% of the dollar value of the funds borrowed. Collateral shall be held in the City's custodian bank and the market value of the collateral securities shall be marked-to-the-market daily.
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Repurchase Agreements shall be entered into only with broker/dealers and who are recognized as Primary Dealers with the Federal Reserve Bank of New York or have a Primary Dealer within their holding company structure. Repurchase agreement counterparties shall execute a City approved Master Repurchase Agreement. The Treasurer shall maintain a copy of the City's approved Master Repurchase Agreement along with a list of broker/dealers who have executed same.
9. State Obligations and Local Agency Issues: Municipal Bonds, registered treasury notes or bonds of any of the 50 states including bonds payable solely out of the revenues from a revenue producing property owned, controlled, or operated by a state or by a department, board, agency, or authority of any of the 50 states.
Bonds, notes, warrants, or other evidences of indebtedness of any local agency within California, including bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by the local agency, or by a department, board, agency, or authority of the local agency.
In addition, these securities must be rated at least AA- or the equivalent by a NRSRO with maturities not exceeding five years from the date of trade settlement. No more than 5% of the City's total portfolio shall be invested in any one municipal issuer. In addition, the aggregate investment in municipal bonds may not exceed 20% of the portfolio.
10. State of California's Local Agency Investment Fund (LAIF), in accordance with California Government Code Section 16429.1.
11. Money Market Mutual Funds registered under the Investment Company Act of 1940 that are "no-load" (meaning no commission or fee shall be charged on purchases or sales of shares); have a constant net asset value per share of $1.00; invest only in the securities and obligations authorized in the applicable California statutes. The fund must be rated in the highest category by at least two NRSROs or retain an investment advisor registered with the SEC or exempt from registration and which has not less than five years of experience investing in money market instruments with assets under management in excess of $500 million. No more than 10% of the City's total portfolio shall be invested in money market funds of any one issuer, and the aggregate investment in money market funds shall not exceed 20% of the City's total portfolio.
Securities that have been downgraded to a level that is below the minimum ratings described herein may be sold or held at the City's discretion. The portfolio will be brought back into compliance with Investment Policy guidelines as soon as is practicable.
The foregoing list of authorized securities and transactions shall be strictly interpreted. Any deviation from this list must be preapproved by resolution of the City Council.
PORTFOLIO MATURITIES AND LIQUIDITY
To the extent possible, investments shall be matched with anticipated cash flow requirements and known future liabilities. The City will not invest in securities maturing more than five years from the date of trade settlement, unless the City Council has by resolution granted authority to make Resolution No. XX-XX
such an investment at least three months prior to the date of investment.
Notwithstanding the above, reserve funds relating to bond issues may be invested in securities for more than five years if the maturity of such investments is made to coincide as nearly as practicable with the expected use of the funds.
DIVERSIFICATION
The City will diversify investment instruments to avoid incurring unreasonable risks in over investing in specific instruments, individual financial institutions or maturities. The following portfolio maximums shall apply:
Authorized Investment
Portfolio
Maximum
Maximum
Maturity
U.S. Treasury Securities No limit 5 Years
Federal Instrumentality Securities No limit 5 Years
Repurchase Agreements No limit 30 Days
Prime Commercial Paper 40%, 5% any one issuer 270 Days
Banker’s Acceptances 2%* 180 Days
Medium-Term Notes 30%, 5% any one issuer 5 Years
Certificates of Deposit 30% 5 Years
Municipal Bonds No limit, 5% any one issuer 5 Years
LAIF No limit N/A
Cal Class No limit N/A
Money Market Mutual Funds 20%, 10% any one issuer N/A
* Banker's acceptances issued by a bank authorized to handle the City's daily primary banking needs may, when aggregated with the funds in demand deposits in all such authorized banks, be in an aggregate amount up to 10% of the City's total portfolio. The aggregate investment in banker's acceptances shall not exceed 15% of the City's total portfolio.
SELECTION OF BROKER/DEALERS
The Treasurer shall maintain a list of broker/dealers approved for investment purposes, and it shall be the policy of the City to conduct transactions only with those brokers and the firms they represent. Each approved broker/dealer must possess an authorizing certificate from the California Commissioner of Corporations as required by Section 25210 of the California Corporations Code. The firms they represent must:
1. be recognized as Primary Dealers by the Federal Reserve Bank of New York or have a Primary Dealer within their holding company structure, or
2. report voluntarily to the Federal Reserve Bank of New York, or Resolution No. XX-XX
Resolution No. XX-XX
3. qualify under Securities and Exchange Commission (SEC) Rule 15c3-1 (Uniform Net Capital Rule).
In the event that an external advisor is not used in the process of recommending a particular transaction for the City's portfolio, each authorized broker/dealer shall be required to submit and annually update a City approved Broker/Dealer Information Request form which includes the firm's most recent audited financial statements. The Treasurer shall maintain a list of the broker/dealers that have been approved by the City, along with each firm's most recent broker/dealer Information Request form.
The City may purchase commercial paper from direct issuers even though they are not on the approved broker/dealer list as long as they meet the criteria outlined in Item 6 of the Authorized Securities and Transactions section of this Policy.
COMPETITIVE TRANSACTIONS
Each investment transaction shall be competitively transacted with authorized broker/dealers. At least three broker/dealers shall be contacted for each transaction and their bid and offering prices shall be recorded. If the City is offered a security for which there is no other readily available competitive offering, then the Treasurer will document quotations for comparable or alternative securities.
SELECTION OF BANKS
The Treasurer shall maintain a list of banks approved to provide depository and other banking services for the City. To be eligible for authorization, a bank shall qualify as a depository of public funds in the State of California as defined in California Government Code Section 53630.5, shall be a member of the FDIC and shall secure all deposits exceeding FDIC insurance coverage in accordance with California Government Code Section 53652.
SAFEKEEPING AND CUSTODY
The Treasurer shall select a bank to provide safekeeping and custodial services for the City, in accordance with the provisions of Section 53608 of the California Government Code. A City approved Safekeeping Agreement shall be executed with the custodian bank prior to utilizing that bank's safekeeping services. The custodian bank will be selected on the basis of its ability to provide satisfactory safekeeping services and the competitive pricing of them.
The purchase and sale of securities and repurchase agreement transactions shall be settled on a delivery versus payment basis. All securities shall be perfected in the name of the City. Sufficient evidence to title shall be consistent with modern investment, banking and commercial practices.
All investment securities purchased by the City will be delivered by book entry and will be held by the City's custodian bank or its Depository Trust Company (OTC) participant account.
The City's custodian shall be required to furnish the City a list of holdings on at least a monthly basis and safekeeping receipts or customer confirmations shall be issued for each transaction.
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INTERNAL CONTROL
The Treasurer shall provide for interim and annual review of the City's investment activities by an external independent auditor. This review will provide internal control by assuring compliance with the City's investment policies and procedures.
PORTFOLIO PERFORMANCE
The investment portfolio shall be designed to attain a market rate of return throughout budgetary and economic cycles, taking into account prevailing market conditions, risk constraints for eligible securities, and cash flow requirements. The performance of the City's investments shall be compared to the average yield on the U.S. Treasury security that most closely corresponds to the portfolio's actual weighted average effective maturity. When comparing the performance of the City's portfolio, its rate of return will be computed net of all fees and expenses.
REPORTING
Monthly, the Treasurer shall submit to the City Council a report of the City's investment portfolio.
Per California Government Code Section 53646(b), the report shall include the following information:
1. Investment type, issuer, date of maturity, par value and dollar amount invested in all securities, and investments and monies held by the City;
2. A description of the funds, investments and programs;
3. A market value as of the date of the report (or the most recent valuation as to assets not valued monthly) and the source of the valuation;
4. A statement of compliance with the investment policy or an explanation for non-compliance; and
5. A statement of the City's ability to meet expenditure requirements for six months, and an explanation of why money will not be available if that is the case.
POLICY REVIEW
The Treasurer shall review this Investment Policy annually. Any modifications thereto shall be approved by resolution of the City Council.
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GLOSSARY OF SELECTED TERMS
Cash Flow
A comparison of cash receipts (revenues) to required payments (debt service, operating expenses, etc.).
Credit Ratings
Various alphabetical and numerical designations used by credit rating or nationally recognized statistical rating organizations (NRSROs), institutional investors, Wall Street underwriters, and commercial rating companies to give relative indications of bond and note creditworthiness.
Long-term Ratings
The three most commonly used NRSROs are Standard & Peer's, Fitch Ratings, and Moody's. Standard & Peer's and Fitch Ratings use the same system, starting with their highest rating of AAA, AA, A, BBB, BB, B, CCC, CC, C and D for default. Moody's Investors Service uses Aaa, Aa, A, Baa, Ba, B, Caa, and Ca. Each of the services uses pluses (+), and minuses(-), or numerical modifiers to indicate steps within each category. The S&P ratings from AA to CCC may be modified by the addition of a plus (+) or (-) sign to show relative standing within the major rating categories. Moody's appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category. The top four letter categories are considered investment grade ratings.
Short-term Ratings
Standard & Poor's short-term ratings system is A-1+, A-3, B, C and/ for default. Fitch Ratings use F1+, F3, B, C and/ for default. Finally, Moody's uses P1 and P3, anything below P3 is considered not prime.
Credit Risk
The chance that an issuer will be unable to make scheduled payments of interest and principal on an outstanding obligation. Another concern for investors is that the market's perception of an issuer/borrower's credit will cause the market value of a security to fall, even if default is not expected.
Liquidity
The measure of the ability to convert an instrument to cash on a given date at full face or par value.
Liquidity Risk
The risk that a security, sold prior to maturity, will be sold at a loss of value. For a local agency, the liquidity risk of an individual investment may not be as critical as how the overall liquidity of the portfolio allows the agency to meet its cash needs.
Maturity
The date on which the principal or stated value of an investment becomes due and payable.
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Par Amount or Par Value
The principal amount of a note or bond which must be paid at maturity. Par, also referred to as the "face amount" of a security, is the principal value stated on the face of the security. A par bond is one sold at a price of 100 percent of its principal amount.
Portfolio
Combined holdings of more than one stock, bond, commodity, real estate investment, cash equivalent, or other asset. The purpose of a portfolio is to reduce risk by diversification.
Principal
The face amount or par value of a debt instrument, or the amount of capital invested in a given maturity.
Risk
The uncertainty of maintaining the principal or interest associated with an investment due to a variety of factors.
Yield
The current rate of return on an investment security generally expressed as a percentage of the security's current price.
Glossary excerpts from Local Agency Investment Guidelines published by the California Debt and Investment Advisory Commission, Update for 2026.
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GLOSSARY OF INVESTMENT INSTRUMENTS
Banker's Acceptance
A draft or bill or exchange accepted by a bank or trust company. The accepting institution, as well as the issuer, guarantees payment of the bill.
Bonds
A debt obligation of a firm or public entity. A bond represents the agreement to repay the debt in principal and, typically, in interest on the principal.
Callable Securities
An investment security that contains an option allowing the issuer to retire the security prior to its final maturity date.
Certificate of Deposit
A short-term, secured deposit in a financial institution that usually returns principal and interest to the lender at the end of the loan period. Certificates of Deposit (CDs) differ in terms of collateralization and marketability. Those appropriate to public agency investing include:
Negotiable Certificates of Deposit
Generally, short term debt instrument that usually 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. The majority of negotiable CDs mature within six months while the average maturity is two weeks. Negotiable CDs are traded in a secondary market and are payable upon order to the bearer or initial depositor (investor). Negotiable CDs are insured by FDIC up to $250,000, but they are not collateralized beyond that amount.
Non-Negotiable Certificates of Deposit
CDs that carry a penalty if redeemed prior to maturity. A secondary market does exist for non-negotiable CDs, but redemption includes a transaction cost that reduces returns to the investor. Non-negotiable CDs issued by banks and savings and loans are insured by the Federal Deposit Insurance Corporation up to the amount of $250,000, including principal and interest. Amounts deposited above this amount may be secured with other forms of collateral through an agreement between the investor and the issuer. Collateral may include other securities including Treasuries or agency securities such as those issued by the Federal National Mortgage Association.
Commercial Paper
An unsecured short-term promissory note issued by corporations or municipalities, with maturities ranging from 2 to 270 days.
Corporate Notes and Bonds
Debt instruments, typically unsecured, issued by corporations, with original maturities in most cases greater than one year and less than ten years.
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Government Sponsored Enterprises (GSE)
Privately held corporations with public purposes created by the U.S. Congress to reduce the cost of capital for certain borrowing sectors of the economy. Securities issued by GSEs carry the implicit backing of the U.S. Government, but they are not direct obligations of the U.S.
Government. For this reason, these securities will offer a yield premium over Treasuries.
Local Government Investment Pool (LGIP)
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.
Medium Term Note
Corporate or depository institution debt securities meeting certain minimum quality standards (as specified in the California Government Code) with a remaining maturity of five years or less.
Municipal Notes, Bonds, and Other Obligations
Obligations issued by state and local governments to finance capital and operating expenses.
Note
A written promise to pay a specified amount to a certain entity on demand or on a specified date.
Usually bearing a short-term maturity of a year or less (though longer maturities are issued - see "Medium-Term Note").
Repurchase Agreements
An agreement of one party (for example, a financial institution) to sell securities to a second party (such as a local agency) and simultaneous agreement by the first party to repurchase the securities at a specified price from the second party on demand or at a specified date.
Glossary excerpts from Local Agency Investment Guidelines published by the California Debt and Investment Advisory Commission, Update for 2026.