Agenda, regular meeting — Moreno Valley City Council, May 19, 2026 (part 2 of 4)

DEBT MANAGEMENT POLICY

Approved by: City Council & MVPFA
January 28, 2014
Revised: 2/7/17, 3/19/19, 4/21/20, 5/18/21, 6/20/23, 5/21/24, 5/19/26 e.) The City shall retain copies of all arbitrage reports and trustee statements as de scribed below under “Record
Keeping Requirements”.

d. Use of Bond Proceeds

i. The Responsible Officer and other appropriate City personnel shall:
a.) monitor the use of Bond proceeds and the use of Bond- financed assets (e.g., facilities, furnishings or equipment) throughout the term of the Bonds (and in some cases beyond the term of the Bonds) to ensure compliance with covenants and restrictions set forth in applicable City resolutions and Tax Certificates;

b.) maintain records identifying the assets or portion of assets that are financed or refinan ced with proceeds of each issue of Bonds;

c.) consult with Bond Counsel a nd other professional expert advisers in the review of any contracts or arrangements involving use of Bond-financed facilities to ensure
compliance with all covenants and restrictions set forth in applicable City resolutions and Tax Certificates;

d.) maintain records for any contracts or arrangements
involving the use of Bond-financed facilities as might be necessary or appropriate to document compliance with all covenants and restrictions set forth in applicable City resolutions and Tax Certificates; and

e.) meet at least annually with personnel responsible for Bond- financed assets to identify and discuss any existing or planned use of Bond-financed assets and to ensure that
those uses are consistent with all covenants and restrictions set forth in applicable City resolutions and Tax Certificates. f.) All relevant records and contracts shall be maintained as described below.

1. Record Keeping Requirements

a. Unless otherwise specified in applicable
City resolutions or Tax Certificates, the
City shall maintain the following
documents for the term of each issue of
Bonds (including refunding Bonds, if any)
plus at least three years:
b. a copy of the Bond closing transcript(s) and
other relevant documentation delivered to
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DEBT MANAGEMENT POLICY

Approved by: City Council & MVPFA
January 28, 2014
Revised: 2/7/17, 3/19/19, 4/21/20, 5/18/21, 6/20/23, 5/21/24, 5/19/26 the City at or in connection with closing of
the issue of Bonds;
c. a copy of all material documents relating to
capital expenditures financed or refinanced
by Bond proceeds, including (without
limitation) construction contracts, purchase
orders, invoices, trustee requisitions and
payment records, as well as documents
relating to costs reimbursed with Bond
proceeds and records identifying the assets
or portion of assets that are financed or
refinanced with Bond proceeds;
d. a copy of all contracts and arrangements
involving private business use of Bond-
financed assets; and
e. copies of all records of investments,
investment agreements, arbitrage reports
and underlying documents, including
trustee statements.

e. Identification and Correction of Violations: In the event that the use of bond proceeds or bond-financed assets, or the payments derived from such assets, are different than those expected at the time bonds are issued, the City should contact Bond Counsel in a timely manner to ensure that there is no adverse effect on the tax status of the bonds. Under existing Treasury Regulations, various “self-help” remedies are available to the City in the event of certain violations of the limits of use of bo nd proceeds, the investment of bond proceeds, and the use of the bond-financed assets. For example, a change in the use of the bond-financed assets after the issuance of the bonds that results in excessive private business use may be corrected through a 'remedial action' that is described in the Treasury Regulation Section 1.141-12. Such remedial actions include a defeasance of the portion of the bonds affected by the excessive private business use or using the disposition proceeds from the sale of the bond-financed assets for another qualified purpose. In the event that the self-help remedial actions in Treasury Regulation Section 1.141-12 are not available to the City, violations occurring through City action (or inaction) that potentially adversely affect the status of the bonds may be corrected through the Voluntary Closing Agreement Program as further described in IRS Notice 2008-31 and in Sections 7.2.3 of the Internal Revenue Manual.

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DEBT MANAGEMENT POLICY

Approved by: City Council & MVPFA
January 28, 2014
Revised: 2/7/17, 3/19/19, 4/21/20, 5/18/21, 6/20/23, 5/21/24, 5/19/26 APPENDIX A: GLOSSARY

AD VALOREM TAX
A tax calculated "according to the value" of property. Such a tax is based on the assessed valuation of real property and, in certain cases, on a valuation of tangible personal property. In most jurisdictions, the tax is a lien on the property enforceable by seizure and sale of the property. General restrictions, such as overall restrictions on rates, or the percent of charge allowed, sometimes apply. As a result, ad valorem taxes often function as the balancing element in local budgets.

ADVANCE REFUNDING
A procedure whereby outstanding bonds are refinanced by the proceeds of a new bond issue more than 90 days prior to the date on which outstanding bonds become due or are callable. Generally, either the entire outstanding issue is refunded (full re funding) or only the callable bond s are refunded (partial refunding).

Typically an advance refunding is performed to take advantage of interest rates that are significantly lower than those associated with the original bond issue. At time, however, an advance refunding is performed to remove restrictive language or debt service reserve requirements required by the original issue. Tax-exempt advance refunding bonds are prohibited after December 31, 2017, per changes in the tax code. Taxable bonds must be issued to advance refund tax-exempt bonds without optional redemption date more than 90 days after the proceeds of the taxable bonds are available. (See also “CURRENT REFUNDING”)

AMORTIZATION
The planned reduction of a debt obligation according to a stated maturity or redemption schedule.

ARBITRAGE
The gain that may be obtained by borrowing funds at a lower (often tax- exempt) rate and investing the proceeds at higher (often taxable) rates. The ab ility to earn arbitrage by issuing tax-e xempt securities has been severely curtailed by the Tax Reform Act of 1986, as amended.

ASSESSED VALUATION
The appraised worth of property as set by a taxing authority through assessments for purposes of ad valorem taxation. The method of establishing assessed valuation varies from state to state, with the method generally specified by state law. For example, in certain jurisdictions the assessed evaluation is equal to the full or market value of the property; in other jurisd ictions the assessed valuation is equal to a percentage of the full market value.

ASSESSMENT BONDS
Bonds issued to develop facilities and basic infrastructu re for the benefit of specific properties within the assessment district which directly benefit from the fac ilities. The key consideration here is the “direct and special benefit” to be received by the property subject to the assessment. Voter approval is not required.

Instead, a majority vote of the property owners with a majority of assessments is needed to authorize the issue.

The issuer's recourse for nonpayment is foreclosure. This type of bond is normally not rated. The bonds may be issued under the provisions of the various assessment bond acts of the State, whichever is most appropriate. (See also “Special Tax Bond” for a description of bonds issued pursuant to the Mello-Roos Act.)

BALLOON MATURITY
A maturity within a serial issue of securities which contains a disproportionately large percentage of the principal amount of the original issue. A balloon maturity is generally distinguished from a term bond by the fact that a term bond generally has the benefit of a sinking fund to smooth out the amount of principal paid from any 148
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DEBT MANAGEMENT POLICY

Approved by: City Council & MVPFA
January 28, 2014
Revised: 2/7/17, 3/19/19, 4/21/20, 5/18/21, 6/20/23, 5/21/24, 5/19/26 single year's operations. A balloon maturity increases the likelihood that the jurisdiction will need to refinance the securities for an extended period of time upon their initial maturity.

BASIS POINT
One one-hundredth of one percent (0.0001).

BOND
A security that represents an obligation to pay a specif ied amount of money on a specific date in the future, typically with periodic interest payments.

BOND ANTICIPATION NOTES
Notes issued to provide temporary financing, to be repaid from the proceeds of a subsequent long-term financing.

BOND COUNSEL
An attorney (or firm of attorneys) retained by the issuer to give a legal opinion concerning the validity of the securities. The bond counsel's opinion usually addresses the subject of tax exemption. Bond counsel may prepare, or review and advise the issuer regarding au thorizing resolutions or ordinances, trust indentures, official statements, validation proceedings and litigation.

BOND INSURANCE
Bond insurance is a type of credit enhancement whereby a monoline insurance company indemnifies an investor against default by the issuer. In the event of a fa ilure by the issuer to pay principal and interest in full and on time, investors may call upon the insurance company to do so. Once assigned, the municipal bond insurance policy generally is irrevocable. The insurance company receives an up-front fee, or premium, when the policy is issued.

BOOK-ENTRY-ONLY
Bonds that are issued in fully registered form but without certificates of ownership. The ownership interest of each actual purchaser is recorded on computer.

CALIFORNIA DEBT AND INVESTMENT ADVISORY COMMISSION (CDIAC) The CDIAC website provides information, education, an d technical assistance on debt issuance and public fund investments to local public agencies and other public finance professionals. CDIAC was created to serve as the state’s clearinghouse for public debt issuance information and to assist state and local agencies with the monitoring, issuance, and management of public debt. CDIAC is the website the Annual Debt Transparency Report (ADTR) must be submitted to.

CALL OPTION
The right to redeem a bond prior to its stated maturity, either on a given date or continuously. The call option is also referred to as the optional redemption provisi on. Often a "call premium" is added to the call option as compensation to the holders of the earliest bonds call ed. Generally, the earliest callable bonds called carry a 102% premium, the next earliest, a 101 % premium, and the balance of the bonds are called at par value.

CAPITAL APPRECIATION BOND
A bond without current interest coupons that is sold at a substantial discount from par. Investors are provided with a return based upon the accretion of value in the bond through maturity. (see zero coupon bond)

CAPITAL LEASE
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DEBT MANAGEMENT POLICY

Approved by: City Council & MVPFA
January 28, 2014
Revised: 2/7/17, 3/19/19, 4/21/20, 5/18/21, 6/20/23, 5/21/24, 5/19/26 The acquisition of a capital asset over time rather than merely paying a rental fee for temporary use. A lease-purchase agreement, in which provision is made for transfer of ownership of the property for a nominal price at the scheduled termination of the lease, is referred to as a capital lease.

CERTIFICATES OF PARTICIPATION
A lease agreement with another party (a lessor, such as a joint powers authority) to lease an asset over a defined period of time at a prearranged annual payment. Voter approval is generally not required. Lease payments are made primarily from general fund revenues. Current law requires the lessee to make lease payments only if the City has beneficial use of the facility to be leased. The legislative body ha s to appropriate annual debt service payments. For the security of the bondholders, a reserv e fund is normally established and held by a trustee until all bonds are paid. Interest during project construction must be capitalized. An "asset transfer" structure, whereby an existing facility is used as security to finance construction or acquisition of another project, may be used for flexibility. Sometimes this structure is styled as a “lease revenue bond,” which is functionally the same as Certificates of Participation.

COMMERCIAL PAPER (TAX-EXEMPT)
By convention, short-term, unsecured promissory notes issued in either registered or bearer form with a stated maturity of 270 days or less.

COMPETITIVE SALE
Sales of securities in which the securities are awarded to the bidder who offers to purchase the issue at the best price or lowest cost.

CONDUIT FINANCING
The issuance of securities by a governmental entity to finance a project that will primarily benefit a third party, typically a private corporation. The security for this type of financing is usually the credit of the private entity, rather than the governmental unit. Us ually such securities do not constitu te general obligations of the issuer since the private entity is liable for generating the pledged revenues for repayment. Industrial development bonds are a common type of conduit financing.

CONTINUING DISCLOSURE
The requirement by the Securities and Exchange Commission for most issuers of municipal debt to provide current financial information to the informational repositories for access by the general marketplace. Generally, SEC Rule 15c2-12 requires issuers of municipal securities and certain other “obligated persons” to make contractual promises to provide continuing information to the marketplace during the life of securities issues.

Under the rule, an underwriter is not permitted to purcha se or sell municipal securities in connection with a primary offering of $1.0 million or more unless it has entered into such a contractual arrangement with the issuer of the securities for the benefit of the holders of the securities.

In conduit issues, the obligation to maintain continuing disclosure efforts should be imposed on the project sponsors.

COUPON RATE
The interest rate on specific maturities of a bond issue. While the term "coupon' derives from the days when virtually all municipal bonds were in bearer form with coupons attached, th e term is still frequently used to refer to the interest rate on different maturities of bonds in registered form.

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DEBT MANAGEMENT POLICY

Approved by: City Council & MVPFA
January 28, 2014
Revised: 2/7/17, 3/19/19, 4/21/20, 5/18/21, 6/20/23, 5/21/24, 5/19/26

CURRENT REFUNDING
A procedure whereby outstanding bonds are refinanced by the proceeds of a new bond issue within 90 days of the date on which outstanding bonds become due or are callable. Generally, either the entire outstanding issue is refunded (full refunding) or onl y the callable bonds are refunded (partial refunding). Typically a current refunding is performed to take advantage of interest rates that are significantly lower than those associated with the original bond issue. At times, however, a current refunding is performed to remove restrictive language or debt service reserve requirements required by the original issue. (See also “ADVANCE REFUNDING”)

CUSIP NUMBER
The term CUSIP is an acronym for the Committee on Uniform Securities Identification Procedures. An identification number is assigned to each maturity of an issue, and is usually printed on the face of each individual certificate of the issue. The CUSIP numbers are intended to help facilitate the identification and clearance of municipal securities. As the municipal market has evolved, and new derivative products are devised, the importance of the CUSIP system for identification purposes has increased.

DEBT BURDEN
The ratio of outstanding tax-supported debt to the market value of property within a jurisdiction. The overall debt burden includes a jurisdiction's proportionate share of overlapping debt as well as the municipality's direct net debt.

DEBT LIMITATION
The maximum amount of debt that is legally permitted by a jurisdiction's charter, constitution, or statutory requirements.

DEBT SERVICE
The amount necessary to pay principal and interest requirements on outstanding bonds for a given year or series of years.

DEBT SERVICE RESERVE FUND
The fund into which moneys are placed which may be used to pay debt service if pledged revenues are insufficient to satisfy the debt service requirements. The debt service reserve fund may be entirely funded with bond proceeds, or it may only be partly funded at the time of the issuance and allowed to reach its full funding requirement over time, due to the accumulation of pledged revenues. If the debt service reserve fund is used in whole or part to pay debt service, the issuer usually is required to replenish the funds from the first available funds or revenues. A typical reserve requirement might be the maximum aggregate annual debt service for any year remaining until the bonds reach maturity. The size of the reserve fund, and the manner in which it is invested, may be subject to arbitrage regulations.

DEBT SERVICE RESERVE FUND SURETY
A form of insurance provided by a bond insurer to sa tisfy a reserve fund require ment for a bond issuance.

Under this arrangement, instead of depositing cash in a reserve fund the City would buy a surety policy by paying a one time premium equal to a percentage of the fair value of policy.

DEFAULT
The failure to pay principal or interest in full or on time. An actual default should be distinguished from technical default. The latter refers to a failure by an issuer to abide by certain covenants but does not necessarily result in a failure to pay principal or interest when due.

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DEBT MANAGEMENT POLICY

Approved by: City Council & MVPFA
January 28, 2014
Revised: 2/7/17, 3/19/19, 4/21/20, 5/18/21, 6/20/23, 5/21/24, 5/19/26

DEFEASANCE
Providing for payment of principal of premium, if any, and interest on debt through the first call date or scheduled principal maturity in accordance with the te rms and requirements of the instrument pursuant to which the debt was issued. A legal defe asance usually involves establishing an irrevocable escrow funded with only cash and US. government obligations.

DEPOSITORY TRUST COMPANY (DTC)
A limited purpose trust company organized under the New York Banking Law. DTC facilitates the settlement of transactions in municipal securities.

DERIVATIVES
Financial products whose value is derived from the value of an underlying asset, reference rate, or index.

Typically these agreements are contracts between a lend er/investor and a borrower and include interest rate swaps, caps, floors, collars, and forward purchase agreements.

DISCOUNT
The difference between a bond's par value and the price for which it is sold when the latter is less than par.

ELECTRONIC MUNICIPAL MARKET ACCESS SYSSTEM (EMMA)
Managed by the MSRB the EMMA webs ite was established to increase the transparency of the municipal securities market by providing free public access to municipal securities disclosures and data. EMMA provides investors, state and local governments and other market participants with key information and tools to put that information into context. EMMA is the location where all municipal issuers are to post or publish continuing disclosure information.

ENTERPRISE ACTIVITY
A revenue-generating project or business. The project often provides funds necessary to pay debt service on securities issued to finance the facility. The debts of su ch projects are self-liquidating when the projects earn sufficient monies to cover all debt service and other requirements imposed under the bond contract. Common examples include water and sewer treatment facilities and utility facilities.

MUNICIPAL ADVISOR
A consultant who advises an issuer on matters pertinent to a debt issue, such as structure, sizing, timing, marketing, pricing, terms, and bond ratings. A municipa l advisor has a fiduciary duty to protect the financial interest of the City.

FITCH INVESTORS SERVICE
A financial services company, founde d in 1913, which provides investors with an independent assessment of the credit worthiness of debt obligations.

FINAL OFFICIAL STATEMENT (FOS)
A document published by the issuer that generally discloses material information on a new issue of municipal securities including the purposes of the issue, how the securities will be repaid, and the financial, economic and social characteristics of the issuing government. Investors may use this information to evaluate the credit quality of the securities. (See also Official Statement)

FLOW OF FUNDS
The order in which pledged revenues must be disbursed, as set forth in the trust indenture or bond resolution.

In most instances, the pledged revenues are deposited into a general collection account or revenue fund as they 152
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DEBT MANAGEMENT POLICY

Approved by: City Council & MVPFA
January 28, 2014
Revised: 2/7/17, 3/19/19, 4/21/20, 5/18/21, 6/20/23, 5/21/24, 5/19/26 are received and subsequently transferred into the other accounts established by the bond resolution or trust indenture. The other accounts provide for payment of the costs of debt service, debt service reserve deposits, operation and maintenance costs, renewal and replacement, and other requirements.

GENERAL OBLIGATION BONDS
Bonds backed by the full faith and credit of the City. The taxing power is an unlimited ad valorem tax, usually on real estate and personal property. A special rate is incorporated in the property tax bill annually to pay for debt service. A two-thirds voter approval is required fo r authorization. Because it is secured by an unlimited tax levy, this structure has strong marketability and lower interest costs.

GENERAL OBLIGATION DEBT
Debt that is secured by a pledge of the ad valorem taxing power of the issuer. Also known as a full faith and credit obligation.

INDENTURE
A contract between the issuer and a trustee stipulating the characteristics of the financial instrument, the issuer's obligation to pay debt service, and the remedies available to the trustee in the event of a default.

INVESTMENT GRADE
The broad designation given bonds which have a high probability of being paid, and minor, if any, speculative features. Bonds rated “BBB” or higher by Standard & Poor’s Corporation, “Baa” or higher by Moody’s Investor’s Service, and “BBB” or higher by Fitch IBCA Rating Service ar e deemed by those agencies to be “investment grade.”

ISSUANCE COSTS
The costs incurred by the bond issuer during the planni ng and sale of securities. These costs include but are not limited to municipal advisory, disclosure counsel and bond counsel fees, printing and advertising costs, rating agency fees, and other expenses incurred in the marketing of an issue.

ISSUER COUNSEL
An attorney engaged by the issuer to represent its best interest in a debt transaction. Often this role is performed by bond counsel, however, at times separate counsel is engaged that does not have responsibility to issue the bond opinion as well as represent the issuer’s best interests.

JUNIOR LIEN BONDS
Bonds that have a subordinate claim against pledged revenues.

LEASE
An obligation wherein a lessee agrees to make payments to a lessor in exchange for the use of certain property.

The term may refer to a capital lease or to an operating lease.

LEASE REVENUE BONDS
Bonds that are secured by an obligation of one party to make annual lease payments to another for use and occupancy of an asset.

LESSEE
The party to a lease agreement that obtains use of a fa cility or piece of equipmen t on exchange for rental payments.

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DEBT MANAGEMENT POLICY

Approved by: City Council & MVPFA
January 28, 2014
Revised: 2/7/17, 3/19/19, 4/21/20, 5/18/21, 6/20/23, 5/21/24, 5/19/26 LESSOR
The owner of the property being leased.

LETTER OF CREDIT
Bank credit facility whereby a bank w ill honor the payment of an issuer's de bt, in the event that an issuer is unable to do so, thereby providing an additional source of security for bondholders for a predetermined period of time. A letter of credit often is referred to as an L/C or an LOC. Letter of Credit can be issued on a "stand-by" or "direct pay" basis.

LINE OF CREDIT
Bank credit facility wherein the bank agrees to lend up to a maximum amount of funds at some date in the future in return for a commitment fee.

MANAGER
The member (or members) of an underwriting syndicate -charged with the primary responsibility for conducting the affairs of the syndicate. The managers take the largest underwriting commitment.

UNDERWRITER
The underwriter serving as head of the syndicate. The lead Manager generally handles negotiations in a negotiated underwriting of a new issue of municipal securities or directs the process by which a bid is determined for a competitive underwriting. The lead Manager also is charged with allocating securities among the members of the syndicate in accordance with the terms of the syndicate agreement or agreement among underwriters.

UNDERWRITING GROUP
Any member of the management group.

MASTER LEASE AGREEMENTS
A lease agreement with a provider to lease equipment or facilities whose useful life is too short, or whose cost is too small to finance with conventional long-term debt. Various pieces and types of real and personal property from different vendors over a period of time can be acquired under one master lease agreement. Interest can be fixed or tied to an index. Financing costs are norma lly minimal, but the interest cost may be higher than with other instruments.

MARKS-ROOS BONDS
Bonds issued by a joint powers authority to buy other bond issues. By pooling bond issues, marketability can be improved and administration costs are reduced. Ofte n used in the case of a negotiated sale of successor agency debt in order to avoid the competitive sale requirements for such debt.

MOODY'S INVESTORS SERVICE, INC.

A financial service company, a subsidiary of Dun & Bradstreet Corp. has provided ratings for municipal securities and other financial information to investors since 1918.

MUNICIPAL SECURITIES RULEMAKING BOARD (MSRB)
A self-regulating organization established on September 5, 1975 whose mission is to protect investors, state and local governments and other municipal entities, and th e public interest by promoting a fair and efficient municipal securities market. The MSRB fulfills this mission by regulating the municipal securities firms, banks and municipal advisors that engage in municipal securiti es and advisory activities. To further protect market participants, the MSRB provides market transparency through its the EMMA website. 154
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DEBT MANAGEMENT POLICY

Approved by: City Council & MVPFA
January 28, 2014
Revised: 2/7/17, 3/19/19, 4/21/20, 5/18/21, 6/20/23, 5/21/24, 5/19/26

NEGOTIATED SALE
A sale of securities in which the terms of sale are determined through negotiation between the issuer and the purchaser, typically an underwriter, without competitive bidding

NET INTEREST COST (NIC)
The average interest cost of a bond issue calculated on the basis of simple interest. This calculation involves a fraction in which the numerator is the gross amount of interest to be paid over the bonds' life (adjusted for the amount of discount or premium granted at the time of sale), and the denominator is the average life of the bond issue multiplied by the issue's par value.

NOTE
A written promise to pay a certain amount of money on a specific date, with interest. By convention, the maturity of a note is one year or less, making it short-term debt. However, financial instruments with a longer stated maturity sometimes are called Notes. For example, a bond anticipation note can have maturities of two years or longer.

OFFICIAL STATEMENT (OS)
A document published by the issuer that generally discloses material information on a new issue of municipal securities including the purposes of the issue, how the securities will be repaid, and the financial, economic and social characteristics of the issuing government. Investors may use this information to evaluate the credit quality of the securities. (See also Final Official Statement)

OPERATING LEASE
A lease that enables the lessee to acquire the use of an asset only, not its ownership as in a capital lease. The lease term typically runs for only a portion of the asset's useful life.

ORIGINAL ISSUE DISCOUNT BONDS
Bonds which are sold at a substantial discount from their par value at the time of the original sale.

OVERLAPPING DEBT
The legal jurisdictions of local governments often overlap one another. In some cases, one unit of government is located entirely within the boundaries of another. Overlapping debt represents the proportionate share of debt that must be borne by one unit of government because another government with overlapping or underlying taxing authority issued its own bonds.

PAR VALUE
The face value or principal amount of a security.

PAYING AGENT
An agent of the issuer with responsibility for timely payment of principal and interest to bond holders.

PRELIMINARY OFFICIAL STATEMENT (POS)
The POS is a preliminary version of the official statement that is used by an issuer or underwriters to describe the proposed issue of municipal securities prior to the determination of the interest rate(s) and offering price(s).

The preliminary official statement, also called a "red herring,” often is examined upon by potential purchasers prior to making an investment decision.

PREMIUM
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DEBT MANAGEMENT POLICY

Approved by: City Council & MVPFA
January 28, 2014
Revised: 2/7/17, 3/19/19, 4/21/20, 5/18/21, 6/20/23, 5/21/24, 5/19/26 The excess of the price at which a bond is sold over its face value.

PRESENT VALUE
The value of a future amount or stream of revenues or expenditures in current dollars.

PRIVATE ACTIVITY BONDS
A bond where the use of bond proceeds is used for priv ate purposes. If deemed a private activity bond, the interest is not tax exempt unless the use of the procee ds meets certain requirements of the Internal Revenue Code.

PUT OPTION
The right to demand repayment of principal prior to a bond 's maturity. In the case of short-term variable rate debt, this right often is referred to as a variable-rate demand option.

REFUNDING
A procedure whereby an issuer refinances an outstanding bond issue by issuing new bonds.

REGISTERED BOND
A security on which the ownership is recorded by the issuer or its agent.

RESERVE FUND
A fund established by the indenture of a bond issue into which money is deposited for payment of debt service in case of a shortfall in current revenues.

REVENUE BONDS
Bonds secured by revenues generated by the facility that is financed or by dedicated user fees. Voter approval may or may not be required. Planning is more complex because costs and revenues affect each other. Credit enhancement (e.g., insurance, or letter of credit) may be needed because of the limited source of debt service payment.

SECONDARY MARKET
The market in which bonds are sold after their initial sale in the new issue market.

SENIOR LIEN BONDS
Bonds having a prior, or first claim on pledged revenues.

SERIAL BONDS
A bond issue in which the principal is repaid in periodic installments over the issue's life.

SOPHISTICATED INVESTOR
A purchaser of bonds, who is considered knowledgeable about the pricing and risk factors associated with the repayment of bonds. This type of investor usually purchases bonds in large dollar amounts, typically $100,000 or more.

SPECIAL ASSESSMENTS
A charge imposed against property or parcel of land that receives a special benefit by virtue of some public improvement that is not, or cannot be enjoyed by the pu blic at large. Special assessment debt issues are those that finance such improvements and are repaid by the assessments charged to the benefiting property owners.

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DEBT MANAGEMENT POLICY

Approved by: City Council & MVPFA
January 28, 2014
Revised: 2/7/17, 3/19/19, 4/21/20, 5/18/21, 6/20/23, 5/21/24, 5/19/26

STANDARD & POOR'S CORPORATION (S&P)
A financial service company, a subsidiary of S&P Glob al, Inc. -Company. S&P provides ratings for municipal securities and other financial information to investors.

TAX ALLOCATION BONDS
Bonds secured by property tax increment (property taxes generated on assessed value in excess of the frozen property tax base) in a redevelopment project area. These bonds are issued to promote economic development.

Voter approval is not required.

TAX INCREMENT
Property tax revenues derived from the incremental a ssessed value increases from the redevelopment project area’s frozen tax base.

TERM BONDS
A bond issue in which the entire principal matures on one date. Term bonds also refer to a particularly large maturity of a bond issue that is created by aggregating a series of maturities. In the latter instance, provision is made for mandatory structuring fund installments in advance of the term bond's maturity to reduce the burden of a particular large debt service payment in any one fiscal year.

TRUE INTEREST COST (TIC)
An expression of the average interest cost in present va lue terms. The true interest cost is a more accurate measurement of the bond issue's effective interest cost and should be used to ascertain the best bid in a competitive sale.

UNDERWRITER'S COUNSEL
An attorney engaged by the underwri ter(s) to represent its interests in a debt transaction. Generally underwriter's counsel prepares the bond purchase agreement between the issuer and the underwriter and, when more than one underwriter is involved, the agreement among underwriters.

VARIABLE RATE BOND
A bond on which the interest rate is reset periodically, usually no less often than semi-annually. The interest rate is reset either by means of an auction or through an index.

VENDOR LEASES
A vendor of equipment acts as the lessor and investor, and holds the lease for its fu ll term or may assign the lease. The motivating factor to the vendor is usually to encourage future sales of its product.

YIELD CURVE
A graph that plots the market yields on securities with different maturities, at a given point in time. The vertical axis represents the yields, while the horizontal axis depicts the time to maturity. The term structure of interest rates, as reflected by the yield curve, will vary according to market conditions, resulting in a wide variety of yield curve configurations.

YIELD-TO-MATURITY
The rate of return that an investor will receive if the bond remains outstanding and the investor holds the bond to maturity. The investor must take into account the price paid for the bonds, the dates of purchase and maturity, and the coupon rate on the bonds. The "yield to maturity" assumes that interest payments will be re-invested at the same coupon rate borne by the bond.

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DEBT MANAGEMENT POLICY

Approved by: City Council & MVPFA
January 28, 2014
Revised: 2/7/17, 3/19/19, 4/21/20, 5/18/21, 6/20/23, 5/21/24, 5/19/26

ZERO COUPON
A bond which does not pay interest periodically. Investors receive interest on the scheduled principal maturity date of the obligation.
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Approved by: City Council & MVPFA
January 28, 2014
Revised: 2/7/17, 3/19/19, 4/21/20, 5/18/21, 6/20/23, 5/21/24, 5/19/26

APPENDIX B: FORM OF FINANCING ASSISTANCE APPLICATION FOR CONDUIT DEBT

I. PROPOSED OWNER OF THE PROJECT

A. Official Company Name:__________________________________________________________

DBAs (if applicable): _____________________________________________________________

Official Mailing Address:___________________________________________________________

______________________________________________________________________________

Telephone:______________________ Fax:____________________________

Company Headquarters and address of primary operating location in

California:______________________________________________________________________

B. Form of Ownership: Co rporation ____________________________

Partnership:_________________ Sole Proprietorship________________________

Other (describe)__________________________________________________________

Is the proposed owner a subsidiary or affiliated directly or indirectly with any other organization? ___ If so, indicate relationship and name of related organization:
________________________________

If corporation, indicate state of incorporation:_____________________ and date qualified to do business in California (if incorporated elsewhere):_______________________

C. Officers Names & Home Address Other Business Affiliations

President ___________________________ ________________________________

___________________________ ________________________________

Vice President ___________________________ ________________________________ (Finance)
___________________________ ________________________________ 159
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DEBT MANAGEMENT POLICY

Approved by: City Council & MVPFA
January 28, 2014
Revised: 2/7/17, 3/19/19, 4/21/20, 5/18/21, 6/20/23, 5/21/24, 5/19/26

Secretary ___________________________ ________________________________

Directors ___________________________ ________________________________

___________________________ ________________________________

D. List name and home address of equity owners of 10% or more. If publicly held, indicate stock exchange traded on. If partnership, list General and Limited Partners and interest owned by each. If trust, list beneficiaries.

% of Equity
Name Home Addre ss Interest Owned

_______________________ ______________________________ __________________

E. Name, business address, and phone number of officer to whom all notices and communications concerning the project should be sent:

F. Principal Bank(s) of Account with name and phone number of contact person:

Name:___________________________ Contact:________________________________

Address:_______________________________________________________________________

Telephone:_______________________

Name:___________________________ Contact:________________________________

Address:_______________________________________________________________________

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Approved by: City Council & MVPFA
January 28, 2014
Revised: 2/7/17, 3/19/19, 4/21/20, 5/18/21, 6/20/23, 5/21/24, 5/19/26

Telephone:_______________________

G. Counsel to Applicant:

Name:_________________________________________________________________________

Address:_______________________________________________________________________

Telephone:___________________________ Fax:_____________________________

H. Bond Counsel on proposed project:

Name:_________________________________________________________________________

Address:_______________________________________________________________________

Telephone:___________________________ Fax:_____________________________

I. Investment Banker for proposed project:

Name:_________________________________________________________________________

Address:_______________________________________________________________________

Telephone:________________________ ___ Fax:_____________________________

J. Company History

List past tax-exempt financing transactions:

______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

Have any of these projects ever been in default? ________Yes ________No

If yes, please provide particulars:

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DEBT MANAGEMENT POLICY

Approved by: City Council & MVPFA
January 28, 2014
Revised: 2/7/17, 3/19/19, 4/21/20, 5/18/21, 6/20/23, 5/21/24, 5/19/26 ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ K. Is the firm or any of its principals currently or in the past 10 years been engaged in any litigation involving financing of the type and nature of that being proposed to the City. _____Yes _____No.

If yes, please provide the names of the principals and details of the litigation. Use additional pages if necessary.
______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

II. PROPOSED PROJECT

A. Give brief narrative explanation why project is being undertaken.

B. Narrative Description, including renderings if available of proposed project.

C. Proposed facilities to be constructed with bond proceeds (describe).

D. Does applicant now own the site of the proposed facility?_________ If not, has applicant entered into an option or commitment or other agreement to purchase it?

E. Estimated useful life of buildings, equipment, or off-site improvements.

F. Does the proposed project involve, in whole or in part, any of the following: residential real property; sports facilities; commercial prop erty; health care facilities; manu facturing facilities; entertainment facilities; or industrial land development activities? Yes_____ No_____ If yes, please explain.

Page 40 of 40 ends

DEBT MANAGEMENT POLICY

Approved by: City Council & MVPFA
January 28, 2014
Revised: 2/7/17, 3/19/19, 4/21/20, 5/18/21, 6/20/23, 5/21/24, 5/19/26

Start construction:_________________ Co mplete construction:_____________________

III. COST OF THE PROJECT

State the costs reasonably necessary to the acquisition or construction of the proposed project together with any machinery and equipment necessary or convenient in connection therewith, and including any utilities, access roads or apportionment facilities;

A. Land and Facilities $___________________________

B. Architectural and Engineer ing $___________________________

C. Construction Costs: $___________________________

D. Interest during constructi on: $___________________________

E. Financing, legal, miscellaneous
(from ______ to ______) $___________________________
(please specify)

F. Contingency (if appropriat e) $___________________________

TOTAL $___________________________

IV. SIGNIFICANT PUBLIC BENEFITS

Please furnish a description of the significant public be nefits that will arise from the issuance of bonds in the maximum amount proposed in the application.

A. Employment creation/displacement – will the completion of the project contribute to job creation? Explain.

B. Energy, mineral or natural or cultivated resource conservation – will the completion of the project lead to increased utilization of resources:

1. Estimate of increased utilization of resources.

2. Estimate of increases in cost to the public due to increased utilization.

C. Does construction of the project, or completion of the project, have any adverse environmental impacts, including additional waste disposal?

1. Estimate of the environmental impacts.

2. Include copies of any required Environmental Impact Reports. 163

Report to City Council

ID: 26-0205 Page 1

TO: Mayor and City Council

FROM: Felicia London, Chief Financial Officer/City Treasurer

AGENDA DATE: May 19, 2026

TITLE: ANNUAL STATEMENT OF INVESTMENT POLICY
(REPORT OF: FINANCIAL AND MANAGEMENT
SERVICES) (DISTRICT: NOT APPLICABLE)

TITLE SUMMARY: Annual Statement Of Investment Policy

DISTRICT: Not Applicable

Recommendation(s)

That the City Council:

1. Adopt the Annual Statement of Investment Policy.

SUMMARY

Staff recommend s that the City Council review and adopt the Annual Statement of Investment Policy, which includes only minor proposed updates.

California Government Code Sections 53600 and 53646, respectively, delineate the types of investments allowed, define various restrictions governing these investments , and suggest a periodic review of the investment report and investment policy by the governing body of the local agency. The City’s Investment Policy has established a review process whereby the Council reviews and adopts the policy annually. The policy identifies allowable investments, the reporting proc ess related to the investments, safekeeping measures in maintaining assets , and the roles of staff in the management of the investment program.

DISCUSSION
164

ID: 26-0205 Page 2

The City’s Investment Policy calls for the policy to be reviewed and adopted annually by the City Council. The policy was last revised in May 2025. The policy in its revised form has incorporated all the most recent changes made to the California Government Code, as well as the best practices which have been identified by the California Debt and Investment Advisory Commission (CDIAC). The policy was awarded an Investment Policy Certification by the California Municipal Treasurer’s Association (CMTA) in August 2024. Upon approval, the revised policy will be submitted for CMTA Certification.

Following a comprehensive review by staff and our investment management firm, Chandler Asset Management, Inc., only minor revisions were deemed necessary to ensure continued alignment with recognized industry best practices.

These revisions were discussed and approved by the Finance Subcommittee on April 28, 2026.

ALTERNATIVES

1. Adopt Annual Statement of Investment Policy. Staff recommends this alternative since this will allow for the timely review and adoption of the policy for the coming fiscal year.

2. Do not adopt Annual Statement of Investment Policy and provide staff with additional direction. Staff does not recommend this alternative since it will not allow for a timely review and adoption process prior to the start of the new fiscal year.

FISCAL IMPACT

No fiscal impact

NOTIFICATION

Posting of Agenda.

PREPARATION OF STAFF REPORT

Prepared By: Department Head Approval:

Alan Garcia Felica London Financial Operations Division Manager Chief Financial Officer/City Treasurer

Concurred By:

Patty Yhuit
Deputy Finance Director (Operations)

CITY COUNCIL GOALS

None
165

ID: 26-0205 Page 3

CITY COUNCIL STRATEGIC PRIORITIES

1. Economic Development

2. Public Safety

3. Library

4. Infrastructure

5. Beautification, Community Engagement, and Quality of Life

6. Youth Programs

166

ID: 26-0205 Page 4

167

ID: 26-0205 Page 5
Report Approval Details
Document Title: STAFFREPORT_FMS_ANNUAL STATEMENT OF
INVESTMENT POLICY 5.19.26.docx
Attachments: - 3.03 Investment Policy - 5.19.26 - Revised.pdf - 3.03 Investment Policy - 5.19.26 - Final.pdf
Final Approval Date: May 13, 2026

This report and all of its attachments were approved and signed as outlined below:

No Signature found
Alan Garcia
Natalia Medina
Felicia London, MPA
Launa Jimenez
Brian Mohan
Patty Rodriguez
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INVESTMENT POLICY

Approved by: City Council
December 17, 1996
Revised 1/13/98; 1/12/99; 2/8/00; 1/3/01; 5/14/02; 11/22/05; 2/26/08; 2/24/09; 3/23/10; 5/24/11; 4/24/12; 6/9/15; 6/9/16; 5/7/19; 5/18/20; 6/21/22; 6/20/23; 5/21/24; 5/20/25; 5/19/26 PURPOSE: The City Council of the City of Moreno Valley (City) and its related authorities and agencies recognizes its responsibility to properly direct the investments of funds under its care. It is the purpose of this policy to provide guidelines for the prudent investment of unexpended funds in a manner which allows for maximum security, while at the same time providing the best investment return to meet the daily cash flow demands of the City, and conform to all applicable statutes pertaining to the investment of public funds. In instances in which the Policy is more restrictive than Federal or State law, the Policy supersedes.

This investment policy was endorsed and adopted by the City Council and is effective as of the 1920 th
day of May, 20265, and replaces any previous versions.

I. Scope

A. Investments for the City and its related authorities and agencies will be made on a pooled basis including the City of Moreno Valley, the City of Moreno Valley Housing Authority , the Moreno Valley Community Services District, the Moreno Valley Pu blic Facilities Financing Corporation, the Moreno Valley Public Financing Authority, and the Moreno Valley Industrial Development Authority. These funds are accounted for in the City’s Annual Comprehensive Financial Report and include:

1. General Fund

2. Special Revenue Funds

3. Debt Service Funds

4. Capital Project Funds

5. Internal Service Funds

6. Agency Funds

7. Enterprise Funds

B. The City Council has the authority to allow investments that do not follow this policy as long as such investments are recommended by the City Manager and City Treasurer, and expressly authorized by the City Council.

C. At the time this policy is adopted, the portfolio may hold investments which were made in the past and in accordance with previous policies and existing State law, but do not meet the provisions of this policy.

These past investments are grandfathered as permissible investments. The City may choose to hold these investments until maturity; however, their matur ity cannot be extended without the expressed authorization of the City Council.

D. Funds excluded from this policy:

1. Bond Proceeds. Proceeds of debt issuance shall be invested in accordance with the City’s general investment philosophy as set forth in this policy. The overriding policy for the investment of bond proceeds will be dictated by the bond documents governing such funds as long as the documents are approved by the City Council or related governing board.

2. Deferred Compensation Plans. Investments related to the City’s deferred compensation plans are not subject to this policy since third-party administrators manage them and the individual plan participant’s direct investment and mutual fund selection. Deferred compensation plans must be approved by the City Council.

3. Health Reimbursement Arrangement (HRA)Voluntary Employees’ Beneficiary Association (VEBA) plan: Funds deposited into HRAVEBA plans on behalf of employees are managed under a separate investment policy and are held and managed by a third party fund manager. 169
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INVESTMENT POLICY

II. Prudence (Reference CA Govt. Code 53600 and 53646)

A. Prudent Investor Standard: Management of the City’s investments is governed by the Prudent Investor Standard as set forth in the California Government Code 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 agency, that a pr udent 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.

Within the limitations of this section and considering individual investments as part of an overall strategy, investments may be acquired as authorized by law.”

B. Investment officers acting in accordance with wr itten procedures and the investment policy and exercising due diligence shall be relieved of personal responsibility for an individual security’s credit risk or market price changes, provided deviations from expectations are reported in a timely fashion and appropriate action is taken to control adverse developments.

III. Objectives (Reference CA Govt. Code 53600.5)

A. The City’s investment philosophy sets the tone for its policies, practices, procedures and objectives that control the investment function. The investment of funds will be guided by the primary objectives of safety, liquidity and a reasonable market rate of return.

1. Safety – Safety of principal is the foremost objective of the investment program. The City will undertake investments in a manner that ensures the preservation of capital in the portfolio taken as a whole.

2. Liquidity – The City will maintain sufficient cash and sh ort-term investment instruments which, together with projected revenues, will provide suffic ient liquidity so that the City will be able to meet all operating requirements which might be reasonably anticipated including an amount to cover reasonably estimated contingencies.

3. Reasonable market rate of return (Yield) – The City’s investment portfolio will be designed with the objective to attain a benchmark rate of return throughout budgetary and economic cycles, commensurate with the City’s investment risk constraints and the cash flow characteristics of the portfolio.

B. The investment function will have the ongoing objectives of: assuring compliance with Federal, State and local laws governing the investment of public funds, maintaining reserves for long-term projects and contingencies, and establishing quality standards and limits related to the type of investments made and with which institutions investments are placed.

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INVESTMENT POLICY

A. The City of Moreno Valley Municipal Code specifies that the City Council will appoint the City Treasurer. By resolution, the City Council has appointed the Chief Financial Officer to serve as the City Treasurer. The Treasurer serves as the chief investment officer for the City and is authorized to invest or deposit the City’s funds in accordance with this policy, California Government Code Sections 53600 and 53630 et seq., and all other related Federal and State laws. The City Treasurer also serves as the Treasurer for the City of Moreno Valley Housing Authority, the Moreno Valley Public Financing Authority, the Moreno Valley Public Facilities Fina ncing Corporation, the Moreno Valley Community Services District and other related City entities. In the absence of the City Treasurer, and unless otherwise delegated, the Deputy Finance Director (Operations) will serve as the Acting Treasurer. The City Treasurer may appoint deputy treasur ers to act on behalf of the City. The City Treasurer will provide written authorization when delegating any of his/her authority. The City Council and City Treasurer will receive a minimum of 2 hours of fiscal and financial training once every 2 years.

B. The City Manager will provide periodic oversight to the investment function which includes but is not limited to reviewing monthly investment reports issued by the City Treasurer.

C. The City Council’s primary responsibilities over the investment function include approving the Investment Policy, annually reviewing such policy, reviewing quarterly investment reports issued by the Treasurer, authorizing bond documents and other unique financing transactions, and authorizing any deviations from the City’s investment policies.

D. The Finance Sub-Committee of the City Council w ill provide oversight to the investment function through the quarterly review of the investment report at their committee meetings.

E. The City may engage the services of one or more external investment managers to assist in the management of the City’s investment portfolio in a manner consistent with the City’s objectives. Such external managers may be granted discretion to purchase and sell in vestment securities in accordance with this Investment Policy. Such managers must be registered under the Investment Advisers Act of 1940.

V. Investment Procedures

A. The City Treasurer shall establish internal proce dures for the operation of the investment program consistent with this policy. These procedures shall include, but are not limited to, the following items:

1. Safekeeping

2. Master repurchase agreements

3. Wire transfer agreements

4. Collateral/Depository agreements

5. Broker/Dealer relationships

B. Cash handling and cash management are integral components of an effective investment management program. In keeping with the Administrative Policy on Cash Control, the aforementioned procedure manual shall include references to the following:

1. Cash collection practices

2. Depository practices

3. Cash flow issues

4. Cash flow projections

5. Anti-theft/Anti-fraud practices
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INVESTMENT POLICY

6. Banking agreements

7. Accounting practices

C. 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.

D. Allocation of Pool Interest

1. All interest earnings related to the investment pool will be allocated to the General Fund unless specifically directed by Federal or State statute, City Council directive or contractual agreement.

2. The allocation methodology will be maintained by the City Treasurer.

VI. Ethics and Conflict of Interest

A. All officials, staff members and consultants, invo lved in the investment functions will refrain from personal business activity that could conflict with the execution of the investment function or which may impair their ability to make impartial investment deci sions. Officials, staff members, and consultants, will disclose to the City Manager any financial interests with a financial institution, provider, dealer or broker that conducts business with the City.

B. Officials, staff members and consultants will further disclose any personal financial positions that could be related to the City’s cash and investment portfolio.

C. All bond issue participants, including but not limited to, underwriters, bond counsel, financial advisors, brokers and dealers will disclose any fee sharing arrangements or fee splitting to the City Manager prior to the execution of any transactions. The providers must disclose the percentage share and approximate dollar amount share to the City prior to the execution of any transactions.

D. All participants in the investment process are required to comply with terms of the Political Reform Act, Fair Political Practices Commission Regulations prom ulgated thereunder (2 C.C.R. §§ 18110 through 18998), the City’s Conflict of Interest Policy, including, without limitation, filing of Form 700, notification and recusal obligations, and Government Code section 1090 prohibitions.

VII. Investment Controls

A. The City Manager shall oversee and ensure that the City Treasurer implements and maintains a system of internal investment controls and segregated responsibilities of the investment function in order to prevent the following:

1. Fraud

2. Theft

3. Loss of principal

4. Loss of control over funds

5. Inaccurate reporting

6. Negligence

7. Over-reliance on a single employee for investment decisions

B. Internal controls should include but are not limited to (for a more specific list of internal controls see the investment management plan):

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1. Segregation of duties (e.g., the purchaser of investments is different than the person recording the transaction)

2. Reconciliation of investment report and cash balances

3. Dual authorization of transactions

C. An external auditor will review the investment program annually in order to provide reasonable assurance that policy and procedures are complied with.

VIII. Authorized Financial Dealers and Institutions (Reference CA Govt. Code 53601)

A. The City Treasurer will obtain financial informatio n from qualified instituti ons to determine if the institution markets in securities appropriate to the City’s needs, can assign qualified sales representatives, and can provide written agreement to abide by the conditions set forth in the City of Moreno Valley Investment Policy.

1. The City may engage the services of investment advisory firms to assist in the management of the portfolio (discretionary portfolio management) and investment advisors may utilize their own list of approved broker/dealers. Th e list of approved firms maintained by the investment advisor shall be provided to the City on an annual basis or upon request. The investment advisor will certify that they have read and are willing to comply with the City’s investment policy.

2. In the event that an external investment advisor is not used in the process of recommending a particular transaction in the City’s portfolio, any authorized broker/dealer from whom a competitive bid is obtained for the transaction will meet the following criteria and provide the required information to the City Treasurer.

B. The City Treasurer will maintain a list of financial institutions and broker/dealers authorized to provide investment services to the City who are authorized to provide investment services in the State of California. An eligible designation does not guarant ee that the City will do business with the firm or institution.

C. The following criteria will be used in determining investment providers

1. Broker/Dealers: The purchase by the City of any investment other than those purchased directly from the issuer shall be purchased from a broker/dealer firm designated as a “Primary Government Dealer” by the Federal Reserve Bank of New York or a regional dealer that qualifies under SEC Rule 15C3-1 (uniform net capital rule).

2. Banks: The City shall only purchase securities from banks which meet all of the following criteria:

a. Nationally or State chartered banks
b. Registered as investment securities dealers with the Securities and Exchange Commission c. Savings association or federal association (as defined in Section 5102 of the Financial Code) d. Independently rated in the “A” rating category or higher by two nationally recognized statistical ranking organizations

3. Investment Bankers, Underwriters and Financial Advisors: The purchase by the City of any investments from these providers in the course of completing a bond transaction must be expressly authorized by the City Council after such a provider discloses their commission, spread or fee in approximate dollar amount. Otherwise, the acquisition of such investments must be procured from the broker/dealers customarily used by the City.
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4. The Federal Reserve Bank: Direct purchases of Treasury bills, notes and bonds from the U.S.

Federal Reserve Banks branches are allowed and are exempt from quality requirements.

D. All financial institutions and broker/dealers who desi re to become qualified bidders for investment transactions must provide the following information to the City Treasurer:

1. A completed City of Moreno Valley Broker/Dealer Questionnaire

2. Audited financial statements

3. Proof of Financial Industry Regulatory Authority (FINRA) certification

4. Trading resolution

5. Proof of state registration

6. Certification of having read and willingness to comply with City’s investment policy

E. The City Treasurer will conduct an annual review of the financial condition and registrations of brokers/dealers on the City’s approved list.

F. A current audited financial statement is required to be on file for each financial institution and broker/dealer in which or with which the City invests.

G. Certificates of deposit will not be placed with an institution once it has received a Cease and Desist order from any bank regulatory agency.

IX. Authorized and Suitable Investments (w ith quality and limitation guidelines) (Reference CA Govt. Code 53601)

A. The California Government Code sections 53600 et seq. governs the allowable investments into which a local government agency can enter. These Government Code sections also stipulate as to the portfolio percentage limits and investment quality standard s for some but not all permitted investments. The Government Code sections provide a starting point for establishing the City quality standards, percentage limits and maturity levels. Should the Government Code become more restrictive than this policy, the Government Code restrictions shall prevail.

B. Whenever a maximum allowable percentage of the port folio is stipulated for any type of security as detailed below, the limit or maximum allowable is determined by the portfolio size or composition at the time of purchase.

C. Following is a table summarizing allowable investme nts for the City. This table summarizes and is consistent with California Government Code Sections 53600 and 53630 et seq.

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INVESTMENT
TYPE

MAXIMUUM

REMAINING

MATURITY

MAXIMUM
SPECIFIED %

OF PORTFOLIO

MINIMUM

QUALITY

REQUIREMENTS
GOVT.

CODE

SECTION
Local Agency Bonds 5 years — none — — none — 53601 (a) U.S. Treasury Obligations 5 years — none — — none — 53601 (b) State Obligations: CA and Others 5 years — none — — none — 53601 (d) CA Local Agency Obligations 5 years — none — — none — 53601 (e) U.S Agency Obligations 5 years — none — — none — 53601(f) Bankers’ Acceptances 180 da ys 40% — none — 53601 (g) Commercial Paper: Non-pooled Funds 270 397 days 40% of the agency’s invested funds (3)
“A-1/P-1/F-1”; if the
issuer has issued long-
term debt it must be rated
at least in the “A” ratings
category
53601(h)(2)(C)

Negotiable Certificates of Deposit 5 years 30% — none — 53601 (i) Placement Service Deposits 5 years 50% (2) — none — 53061.8 & 53635.8
Placement Service Certificates of Deposit 5 years 50% (2) — none — 53061.8 & 53635.8
Repurchase Agreements 1 year — none — — none — 53601 (j) Medium-Term Notes 5 years 30% “A” rating category by a
NRSRO(1)
53601(k)
Supranational Securities
(Only International Bank for Reconstruction and Development, International Finance Corporation, or Inter-American Development Bank are approved issuers)
5 years 30%
“AA” rating category by
a NRSRO(1)
53601(q)
Mutual Funds and Money Market Mutual Funds n/a 20% Multiple 53601(l) and 53601.6(b)
Collateralized Bank Deposits 5 years — none — — none — 53630 et seq. and 53601(n)
Mortgage Pass-Through Securities/Asset Backed
Securities/Collateralized Mortgage Backed
Securities (not issued by US Treasury or U.S.

Agencies)

5 years

20% (1)

“AA” rating category by
a NRSRO(1)
53601(o)
County Pooled Investment Funds n/a — none — — none — 27133 Joint Powers Authority Pool n/a — none — Multi ple 53601 (p) Local Agency Investment Fund (LAIF) n/a — none —Max as
defined by LAIF
— none — 16429.1
NRSRO = Nationally Recognized Statistical Rating Organization (1) The combination of Mortgage Pass-Through, Asset Backed and Collateralized Mortgage Backed securities may not exceed 20% of the portfolio. (2) No more than 30% of the agency’s money can be invested in qualifying Placement Service Deposits. Under a provision sunsetting on January 1, 2031, no more than 50% of the surplus funds may be invested in in placement service deposits. (3) No more than 25 % of the Agency’s investment assets under management may be invested in Commercial Paper. Under a provision sunsetting on January 1, 20262031, no more than 40% of the portfolio may be invested in Commercial Paper if the Agency’s investment assets under management are greater than $100,000,000.

D. Investment Pools: A thorough investigation of an Investment Pool account is required prior to investing, and on a continual basis. The investigation must include information, if available, on the following items before investing:

1. A description of eligible investment securitie s, and a written statement of investment policy.

2. A description of interest calculations and distribution and how gains and losses will be treated.

3. A description of how the securities are safeguarded (including the settlement process), and how often the securities are priced and the program audited.

4. A description of who may invest in the program, how often and what is the allowable size of deposits and withdrawals, and any limitations as to number of transactions.

5. A schedule for receiving stat ements and portfolio listings.

6. Are reserves, retained earnings, etc. utilized by the pool?

7. Is the pool eligible fo r bond proceeds and/or will it accept such proceeds?

E. Repurchase Agreements are legal and authorized by policy. In order to invest in repurchase agreements the City must obtain a signed Master Repurcha se Agreement from the participating bank or broker/dealer.

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1. The Government Code specifically prohibits certain types of investment instruments for municipalities. In addition to those prohibitions, the following investments are not permitted:

a. Reverse Repurchase Agreements
b. Financial futures or financial option contracts
c. Security lending
d. Securities with forward settlement date exceeding 45 days from the time of the investment is prohibited.

2. Additionally, the City shall not invest in any secu rity that could result in zero interest accrual if held to maturity. Under a provision sunsetting on January 1, 20262031, securities backed by the U.S. Government that could result in a zero- or negative-interest accrual if held to maturity are permitted.

3. Due to the complexity of the securities market and ever-changing market conditions, it is difficult to define derivatives and specifically prohibit their acquisition. Therefore, the City desires to limit the potential risk of derivatives by specifically prohibiting the most common types of derivatives with certain market exposures. These prohibited derivatives include but are not limited to: inverse floaters, interest only securities derived from mo rtgages, residual securities, structured notes, forward based derivatives, forward contracts, forward rate agreements, futures contracts, interest rate futures contracts, foreign currency futures contracts, option based derivatives, option contracts, interest rate caps, interest rate floors, swap contracts, interest rate swaps, interest rate collars, foreign currency swaps, cross currency exchange agreements, fixed rate currency swaps, basis swaps, equity swaps, fixed rate equity swaps, floating rate equity swaps and commodity swaps.

4. Leveraging

a. The City may not purchase investments on a margin or through a margin account.

b. The General Portfolio may not be leveraged by more than 30% through the issuance of tax and revenue anticipation notes (TRANS). The proceeds of any TRANS issue are to be invested in accordance with the guidelines in this policy, with investment maturities not to exceed the life of the TRANS.

c. The City may not leverage its investments through the use of reverse repurchase agreements.

X. Review of Investment Portfolio

A. The securities held by the City must be in compliance with paragraph IX Authorized and Suitable Investments and paragraph XIV Maximum Maturities at the time of purchase. At least quarterly the City Treasurer shall review the portfolio to identify any securities that do not comply with this policy. The City Treasurer shall establish procedures to report to the City Council major and critical incidences of noncompliance identified as a result of the portfolio review. (Also see paragraph XIII.E.)

XI. Collateralization (Reference CA Govt. Code 53601)

A. Bank Deposits: Under provisions of the Government Code, California banks and savings and loan associations are required to secure the City’s deposits by pledging government securities with a value of 176
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Approved by: City Council
December 17, 1996
Revised 1/13/98; 1/12/99; 2/8/00; 1/3/01; 5/14/02; 11/22/05; 2/26/08; 2/24/09; 3/23/10; 5/24/11; 4/24/12; 6/9/15; 6/9/16; 5/7/19; 5/18/20; 6/21/22; 6/20/23; 5/21/24; 5/20/25; 5/19/26 110% of principal and accrued interest. State law also allows financial institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of the City’s total deposits.

B. Certificates of Deposit:

1. The market value of securities that underlay certificates of deposit shall be valued at 110% of the market value of principal and accrued interest.

2. The City Treasurer, at his/her discretion may waiv e the collateral requirement for deposits up to the maximum dollar amount which are covered by the Federal Deposit Insurance Corporation.

C. Repurchase Agreements

1. The market value of securities that underlay certificates of deposit repurchase agreements shall be valued at 102% of the market value of principal and accrued interest.

2. The value shall be adjusted no less than week ly. Since the market value of the underlying securities is subject to daily market fluctuations, the investments in repurchase agreements shall be in compliance if the value of the underlying securities is brought back to 102% no later than the next business day.

2.3. Securities used as collateral for Repurchase Agreements will be delivered to an acceptable third- party custodian.

D. A clearly marked evidence of ownership, safekeeping receipt, must be supplied to the City and retained.

E. The City chooses to limit collateral to US Treasuries.

F. Collateral will always be held by an independent third-party with whom the entity has a current written custodial agreement.

G. The right of collateral substitution is granted based on the approval of the City Treasurer and City Manager.

XII. Safekeeping, Custody and Competitive Bids (Reference CA Govt. Code 53608)

A. Third-party safekeeping is required for all investme nts. Securities may be maintained by a banking institution or a broker/dealer firm for safekeeping as long as the securities are held in the City’s name.

B. Third-party safekeeping arrangements will be approved by the City Treasurer and will be corroborated by a written custodial agreement.

C. All investment transactions of th e City will be conducted using standard delivery vs. payment (DVP) procedures.

D. All securities held by the safekeeping custodian on behalf of the City shall have the City of Moreno Valley as the registered owner, and all interest a nd principal payments and withdrawals shall indicate the City of Moreno Valley as the payee.

E. All bank deposits will be FDIC insured or deposited with institutions that comply with the State collateral requirements for public funds.

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Approved by: City Council
December 17, 1996
Revised 1/13/98; 1/12/99; 2/8/00; 1/3/01; 5/14/02; 11/22/05; 2/26/08; 2/24/09; 3/23/10; 5/24/11; 4/24/12; 6/9/15; 6/9/16; 5/7/19; 5/18/20; 6/21/22; 6/20/23; 5/21/24; 5/20/25; 5/19/26 F. Securities used as collateral for repurchase agreemen ts with a maturity from one to seven days can be held in safekeeping by a third party bank trust department or by the broker/dealer’s safekeeping institution, acting as the agent for the City, under the terms of a custody agreement executed by the selling institution and by the City specifying the City’s “perfected” ownership of the collateral.

G. All investment transactions shall be conducted on a competitive basis with quotes from a minimum of three brokers or financial institutions when possible.

XIII. Diversification and Credit Risk Management

A. Investments contained within the portfolio will be diversified by security type, institution and maturity.

B. The diversification requirements included in Sec tion IX are designed to mitigate credit risk in the portfolio.

C. No more than 5% of the total portfolio may be invested in securities of any single issuer, other than the US Government, its agencies and instrumentalities, Supranational issuers, investment pools and money funds or money market mutual funds.

D. The City may elect to sell a security prior to its matu rity 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,

E. If securities owned by City are downgraded by any nationally recognized statistical ratings organization to a level below the quality required by this Investment Policy, it shall 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.

1. If a security is downgraded, the City Treasurer will use discretion in determining whether to sell or hold the security based on its current matur ity, the economic outlook for the issuer, and other relevant factors.

2. 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.

XIV. Maximum Maturities

A. The City Treasurer will maintain sufficient liquidity in cash and short-term investments, which together with projected revenue receipts will meet the cash fl ow requirements of the City for the upcoming six months.

B. The City will not directly invest in securities matu ring more than five years away from the settlement date. In any case, where a cash flow is matched with an investment which exceeds the five year limit, the investment must be approved by the City Council at least 90 days prior to the purchase of the security(ies).

C. The general portfolio does not include bond proceeds or deferred compensation funds.

D. To the extent possible, longer-term investment matu rities will be spaced so that a portion of such investments mature each year to cover unanticipated emergencies.

XV. Performance Standards

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Approved by: City Council
December 17, 1996
Revised 1/13/98; 1/12/99; 2/8/00; 1/3/01; 5/14/02; 11/22/05; 2/26/08; 2/24/09; 3/23/10; 5/24/11; 4/24/12; 6/9/15; 6/9/16; 5/7/19; 5/18/20; 6/21/22; 6/20/23; 5/21/24; 5/20/25; 5/19/26 A. The investment portfolio shall be designed with the objective of obtaining a rate of return throughout budgetary and economic cycles, commensurate with the investment risk constraints.

B. The investment performance objective for the portfolio shall be to earn a total rate of return over a market cycle which is approximately equal to the return on a market benchmark Index of similar securities, as determined by the City Treasurer.

C. Market Return (Benchmark): The City’s investment strategy is active. Given this strategy, the basis used by the Treasurer to determine whether market return is being achieved shall be to identify a benchmark which reflects a portfolio structure that is comparable to the City’s portfolio. Market risk will be reduced by diversifying the portfolio and by managing the duration of the portfolio to within +/- 20% of the benchmark duration. An example as it pertains to the long term portion of the portfolio would be the ICE Bank of America Merrill Lynch Index of 1to 5 Year Government securities.

XVI. Reporting (Reference CA Govt. Code 53607 and 53646(b))

A. The City Treasurer will provide a monthly report to the City Manager which will include the following information by security held at the end of the reporting period:

1. Investment Type

2. Issuer

3. Maturity Date

4. Par Value

5. Market Value

6. Book Value

7. Weighted Average Maturity

8. Source of Market Valuation

9. Monies maintained within the treasury

10. Funds, investments and loans that are under the management of contracted parties

B. Quarterly, and within 45 days of the completion of the quarter, the City Treasurer will submit a report to the City Council in open public meeting with the same investment information provided to the City Manager on a monthly basis with the addition of the following data:

1. A description of the compliance with the statement of investment policy, or manner in which the portfolio is not in compliance.

2. A statement denoting the ability of the City to meet cash flow requirements for the next six months, or provide an explanation as to why sufficient money shall, or may, not be available.

XVII. Investment Policy Adoption (Reference CA Govt. Code 53646(a)(2))

A. Annually, the City Treasurer will render to the City Council a Statement of Investment Policy, including any changes or revisions, to be reviewed and approved at a public meeting prior to or within 120 days of the end of the fiscal year.

XVIII. Record Retention

A. The following investment or cash management docum ents will be maintained in accordance with Chapter 2.60 of Title 2 of the City of Moreno Valley Municipal Code:

1. Investment Reports and supporting documentation
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2. Third-party statements of assets held

3. Investment permanent files

4. Market pricing documentation

INVESTMENT POLICY GLOSSARY

AGENCIES: See U.S. Agency Obligations
ANNUAL COMPREHENSIVE FINANCIAL REPORT: The official annual report for the city. It includes five combined statements for each individual fund and account group prepared in conformity with Generally Accepted Accounting Principles (G AAP). It also includes supporting schedules necessary to demonstrate compliance with GAAP, finance-related legal and contractual provisions, extensive introductory material, and a detailed Statistical Section.

ASSET BACKED SECURITIES (ABS): A financial security collateralized by a pool of assets such as loans, leases, credit card debt, royalties or receivabl es. For investors, asset- backed securities are an alternative to investing in corporate debt. An ABS is similar to a mortgage-backed security, except that the underlying securities are not mortgage-based.

BANKERS' ACCEPTANCE (BA): A draft or bill or exchange accepted by a bank or trust company.

The accepting institution guarantees payment of the bill and the issuer.

BANK/TIME DEPOSITS: A time deposit is an interest-bearing bank deposit account that has a specified date of maturity, such as a certificate of deposit (CD). The deposited funds must remain in the account for the fixed term to receive the stated interest rate. Ti me deposits are an alternative to the standard savings account, and will usually pay a higher rate of interest.

BENCHMARK: A comparative base for measuring the performance or risk tolerance of the investment portfolio. A benchmark should represent a close correlation to the level of risk and the average duration of the portfolio's investments.

BID: The price offered by a buyer of securities. (When selling securities, you ask for a bid.).

BROKER/DEALER: An individual or firm that brings buyers and sellers together in a securities transaction.

CALIFORNIA LOCAL AGENCY OBLIGATIONS: Bonds, notes, warrants, or other evidences of indebtedness of a local agency within this state, 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.

CERTIFICATE OF DEPOSIT (CD): A time deposit with a specific maturity evidenced by a Certificate.

Large-denomination CD's are typically negotiable. (See negotiable Certificates of Deposit)

COLLATERAL: Securities, evidence of deposit or other property, which a borrower pledges to secure repayment of a loan. Also refers to securities pledged by a bank to secure deposits of public monies.

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Approved by: City Council
December 17, 1996
Revised 1/13/98; 1/12/99; 2/8/00; 1/3/01; 5/14/02; 11/22/05; 2/26/08; 2/24/09; 3/23/10; 5/24/11; 4/24/12; 6/9/15; 6/9/16; 5/7/19; 5/18/20; 6/21/22; 6/20/23; 5/21/24; 5/20/25; 5/19/26 COLLATERALIZED BANK DEPOSITS: A bank deposit that is collateralized at least 100% (principal plus interest to maturity). The deposit is collateralized using assets set aside by the issuer such as Treasury securities or other qualified collateral to secure the deposit in excess of the limit covered by the Federal Deposit Insurance Corporation.

COLLATERALIZED MORTGAGE OBLIGATIONS (CMO): A type of mortgage-backed security that contains a pool of mortgages bundled together and sold as an investment. Organized by maturity and level of risk, CMOs receive cash flows as borrowers repay the mortgages that act as collateral on these securities.

In turn, CMOs distribute principal and interest pa yments to their investors based on predetermined rules and agreements.

COMMERCIAL PAPER: An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts payable and inventories and meeting short-term liabilities. Maturities on commercial paper rarely range longer than 270 days. Commercial paper is usually issued at a discount from face value and reflects prevailing market interest rates

CORPORATE MEDIUM-TERM NOTE: Corporate and depository institution debt securities with a maximum remaining maturity of five years or less, 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.

COUPON: (a) The annual rate of interest that a bond's issuer promises to pay the bondholder on the bond's face value. (b) A certificate attached to a bond evidencing interest due on a payment date.

DEALER: A dealer acts as a principal in all transactions, buying and selling for his own account.

DELIVERY VERSUS PAYMENT (DVP): Delivery of securities with a simultaneous exchange of money.

DERIVATIVES: Financial products dependent for their value on (or derived from) an underlying financial instrument, a commodity, or an index.

DISCOUNT: The difference between the cost price of a security and its maturity when quoted at lower than face value. A security selling below original offering price shortly after sale also is at a discount.

DIVERSIFICATION: Dividing investment funds among a variety of securities offering independent returns.

FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC):

A federal agency that insures bank
deposits up to $250,000 per deposit.

FEDERAL HOME LOAN BANKS (FHLB): Government sponsored wholesale banks (12 regional banks), which lend funds and provide correspondent banking services to member commercial banks, thrift institutions, credit unions and insurance com panies. The mission of the FHLBs is to liquefy the housing related assets of its members who must pur chase stock in their district Bank. (Also see Agencies)

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Approved by: City Council
December 17, 1996
Revised 1/13/98; 1/12/99; 2/8/00; 1/3/01; 5/14/02; 11/22/05; 2/26/08; 2/24/09; 3/23/10; 5/24/11; 4/24/12; 6/9/15; 6/9/16; 5/7/19; 5/18/20; 6/21/22; 6/20/23; 5/21/24; 5/20/25; 5/19/26 FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA): FNMA was chartered under the Federal National Mortgage Association Act in 1938. FNMA is a federal corporation working under the auspices of the Department of Housing and Urban Development (HUD). It is the largest single provider of residential mortgage funds in the United States. Fannie Mae, as the corporation is called, is a private stockholder-owned corporation. The corporation's purchases include a variety of adjustable mortgages, second loans and fixed- rate mortgages. FNMA's securities are also highly liquid and are widely accepted. FNMA assumes and guarantees that all security holders will receive timely payment of principal and interest. (Also see Agencies)

FINANCIAL FUTURES/FINANCIAL OPTIONS CONTRACTS: A futures contract is a legal agreement to buy or sell a particular commodity or asset at a pr edetermined price at a specified time in the future.

Futures contracts are standardized for quality and quantity to facilitate trading on a futures exchange. The buyer of a futures contract is taking on the obligation to buy the underlying asset when the futures contract expires. The seller of the futures contract is taking on the obligation to provide the underlying asset at the expiration date.

GOVERNMENT CODE: The Government Code of the State of California.

LEVERAGING: The use of borrowed capital as a funding source when investing to expand the firm's asset base and generate returns on risk capital. Lever age is an investment strategy of using borrowed money—specifically, the use of various financial in struments or borrowed capital—to increase the potential return of an investment. Leverage can also refer to the amount of debt a firm uses to finance assets. When one refers to a company, property or in vestment as "highly leveraged," it means that item has more debt than equity.

INVESTMENT POOLS: A state or local government pool offered to public entities for the investment of public funds.

LIQUIDITY: A liquid asset can be converted easily and rapidly into cash without a substantial loss.

LOCAL AGENCY BONDS: Bonds issued by the City of Moreno Valley, 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.

LOCAL AGENCY INVESTMENT FUND (LAIF): The aggregate of all funds from political subdivisions placed in the custody of the State Treasurer for investment and reinvestment.

MARKET VALUE: The price at which a security is trading and could presumably be purchased or sold.

MARKET RATE OF RETURN: A rate of return commensurate with the market for similar securities (maturity, credit rating, duration and liquidity) would be considered a market rate of return.

MATURITY: The date upon which the principal or stated value of an investment becomes due. The investment’s term or remaining maturity is measured from the settlement date to final maturity.

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Approved by: City Council
December 17, 1996
Revised 1/13/98; 1/12/99; 2/8/00; 1/3/01; 5/14/02; 11/22/05; 2/26/08; 2/24/09; 3/23/10; 5/24/11; 4/24/12; 6/9/15; 6/9/16; 5/7/19; 5/18/20; 6/21/22; 6/20/23; 5/21/24; 5/20/25; 5/19/26 MEDIUM TERM NOTES (MTN): A note that usually matures in five to 10 years. A corporate MTN can be continuously offered by a company to investors through a dealer with investors being able to choose from differing maturities, ranging from nine months to 30 years, though most MTNs range in maturity from one to 10 years.

MONEY MARKET MUTUAL FUNDS: Open-ended mutual fund that invests in commercial paper, banker's acceptances, repurchase ag reements, government securities, certificates of deposit and other highly liquid securities and pays money market rates of interest.

MORTGAGE PASS-THROUGH SECURITIES: Also called a pass-through, a security created when one or more mortgage holders form a collection (pool) of mortgages and sells shares or participation certificates in the pool. The cash flow from the collateral pool is "passed through" to the security holder as monthly payments of principal, interest, and prepayments. This is the predominant type of MBS traded in the secondary market.

NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATION
(NRSRO): Firms that review
the creditworthiness of the issuers of debt securities and express their opinions in the form of letter rating categories (e.g. AAA, AA, A, BBB, etc). The primary rating agenc ies are the following; S&P Global Ratings, Moody's Investor Services, Inc.; Fitch Ratings, Inc. and DBRS, Inc.

PLACEMENT SERVICE DEPOSITS : A private service that allows local agencies to invest in FDIC- insured deposits with one or more banks, savings and loans, and credit unions located in the United States. IntraFi (formerly known as CDARS) is an example of an entity that provides this service.

PORTFOLIO: Collection of securities held by an investor.

PRIMARY DEALER: A group of government securities dealers that serve as trading counterparties of the New York Federal Bank in implementing monetary policy. This role includes the obligations to (i) participate consistently in open market operations to carry out U.S. monetary policy under the direction of the Federal Open Market Committee (FOMC) and (ii) provide the New York Federal Banks's trading desk with market information and analysis helpful in the formation and implementation of monetary policy. Primary dealers are also required to participate in all auctions of U.S. government debt and to make reasonable ma rkets for the New York Federal Bank when it transacts for its foreign official account-holders.

RATE OF RETURN: The yield obtainable on a security based on its purchase price or its current market price. This may be the amortized yield to matu rity on a bond. The city calculates the rate of return based on the purchase price and the interest rate paid by the security when the Investment Report was prepared.

REPURCHASE AGREEMENT (repo): A form of short-term borrowing for dealers in government securities. In the case of a repo, a dealer sells government securities to investors, usually on an overnight basis, and buys them back the following day. (See Reverse Repurchase Agreement)

REVERSE REPURCHASE AGREEMENTS: For the party selling the security and agreeing to repurchase it in the future, it is a repo; for the party on t he other end of the transaction, buying the security and agreeing to sell in the future, it is a reverse repurchase agreement.

SAFEKEEPING: A service provided by banks and trust companies when the bank or trust company stores the securities, receives interest payments and redeems issues at maturity. 183
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SECONDARY MARKET: A market made for the purchase and sale of outstanding following the initial distribution.

SEC RULE 15C3-1:

See Uniform Net Capital Rule.

SECURITIES LENDING: The act of loaning a stock, derivative or other security to an investor or firm.

Securities lending requires the borrower to put up collat eral, whether cash, security or a letter of credit.

When a security is loaned, the title and the ownership are also transferred to the borrower.

SETTLEMENT DATE: The date that city cash has been exchanged for an investment. This will be considered the date that the investment is owned by the City.

STATE OBLIGATIONS: Registered state warrants or treasury notes or bonds of this state, including bonds payable solely out of the revenues from a re venue-producing property owned, controlled, or operated by the state or by a department, board, agency, or authority of the state.

STRUCTURED NOTE:

Notes issued by Government Sponsored Enterprises (FHLB, FNMA, etc.) and Corporations, which have imbedded options (e .g., call features, st ep-up coupons, floating rate coupons, derivative-based returns) into t heir debt structure. Their market performance is impacted by the fluctuatio n of interest rates, the volatility of the imbedded options and shifts in the shape of the yield curve.

SUPRANATIONALS: Development banks that share the same goal of providing an improved standard of living in their member countries, but each having different mandates. There are three banks (supranationals) in which California local agenci es can invest in their debt obligations: the International Bank for Reconstruction and Devel opment (IBRD), International Finance Corporation (IFC) and Inter-American Development Bank (IADB).

UNIFORM NET CAPITAL RULE: Securities and Exchange Commission requirement that member firms as well as nonmember broker-dealers in securities maintain a maximum ratio of indebtedness to liquid capital of 15 to 1; also called net capital rule and net capital ratio. Indebtedness covers all money owed to a firm, including margin loans and commitments to purchase securities, one reason new public issues are spread among members of underwriting syndicates. Liquid capital includes cash and assets easily converted into cash.

YIELD: The rate of annual income returns on an investment, expressed as a percentage. There are nine methods of calculating yield identified by the California Debt and Investment Advisory Commission. The Treasurer shall select the method he or she thinks would be most informative to the reader of the report.

U.S. AGENCY OBLIGATIONS:

A low-risk debt obligation that is issued by a U.S. government- sponsored enterprise (GSE) or other federally relat ed entity. Agency securities are issued by GSEs which include the Federal National Mortgage Association (FNMA), Federal Home Loan Bank, Federal Home Loan Mortgage Corporation (FHLMC), the Student Loan Marketing Association (SLMA).

U.S. TREASURY OBLIGATIONS: Debt obligations issued and backed by the full faith and credit of the US government. Because they are considered to have low credit or default risk, they generally offer lower yields relative to other bonds.
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U.S. TREASURY BILLS: A non-interest bearing discount securi ty issued by the U.S. Treasury to finance the national debt. Most bills are issued to mature in three months, six months, or one year.

U.S. TREASURY BONDS: Long-term coupon-bearing U.S. Treasu ry securities issued as direct obligations of the U.S. Government and having initial maturities of over 10 years.

U.S. TREASURY NOTES: Medium-term coupon-bearing U.S. Treasury securities issued as direct obligations of the U.S. Government and having initial maturities of one to 10 years. 185
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This investment policy was endorsed and adopted by the City Council and is effective as of the 19 th day
of May, 2026, and replaces any previous versions.

I. Scope

1. General Fund

2. Special Revenue Funds

3. Debt Service Funds

4. Capital Project Funds

5. Internal Service Funds

6. Agency Funds

7. Enterprise Funds

D. Funds excluded from this policy:

3. Health Reimbursement Arrangement (HRA): Funds deposited into HRA plans on behalf of employees are managed under a separate investment policy and are held and managed by a third party fund manager.
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II. Prudence (Reference CA Govt. Code 53600 and 53646)

A. Prudent Investor Standard: Management of the City’s investments is governed by the Prudent Investor Standard as set forth in the California Government Code 53600.3:

Within the limitations of this section and considering individual investments as part of an overall strategy, investments may be acquired as authorized by law.”

III. Objectives (Reference CA Govt. Code 53600.5)

IV. Delegation of Authority (Reference CA Govt. Code 41006 and 53607)

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Approved by: City Council
December 17, 1996
Revised 1/13/98; 1/12/99; 2/8/00; 1/3/01; 5/14/02; 11/22/05; 2/26/08; 2/24/09; 3/23/10; 5/24/11; 4/24/12; 6/9/15; 6/9/16; 5/7/19; 5/18/20; 6/21/22; 6/20/23; 5/21/24; 5/20/25; 5/19/26 Treasurer. The Treasurer serves as the chief investment officer for the City and is authorized to invest or deposit the City’s funds in accordance with this policy, California Government Code Sections 53600 and 53630 et seq., and all other related Federal and State laws. The City Treasurer also serves as the Treasurer for the City of Moreno Valley Housing Authority, the Moreno Valley Public Financing Authority, the Moreno Valley Public Facilities Fina ncing Corporation, the Moreno Valley Community Services District and other related City entities. In the absence of the City Treasurer, and unless otherwise delegated, the Deputy Finance Director (Operatio ns) will serve as the Acting Treasurer. The City Treasurer may appoint deputy treasur ers to act on behalf of the City. The City Treasurer will provide written authorization when delegating any of his/her authority. The City Council and City Treasurer will receive a minimum of 2 hours of fiscal and financial training once every 2 years.

B. The City Manager will provide periodic oversight to the investment function which includes but is not limited to reviewing monthly investment reports issued by the City Treasurer.

D. The Finance Sub-Committee of the City Council w ill provide oversight to the investment function through the quarterly review of the investment report at their committee meetings.

V. Investment Procedures

1. Safekeeping

2. Master repurchase agreements

3. Wire transfer agreements

4. Collateral/Depository agreements

5. Broker/Dealer relationships

1. Cash collection practices

2. Depository practices

3. Cash flow issues

4. Cash flow projections

5. Anti-theft/Anti-fraud practices

6. Banking agreements

7. Accounting practices

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Approved by: City Council
December 17, 1996
Revised 1/13/98; 1/12/99; 2/8/00; 1/3/01; 5/14/02; 11/22/05; 2/26/08; 2/24/09; 3/23/10; 5/24/11; 4/24/12; 6/9/15; 6/9/16; 5/7/19; 5/18/20; 6/21/22; 6/20/23; 5/21/24; 5/20/25; 5/19/26 C. 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.

D. Allocation of Pool Interest

2. The allocation methodology will be maintained by the City Treasurer.

VI. Ethics and Conflict of Interest

B. Officials, staff members and consultants will further disclose any personal financial positions that could be related to the City’s cash and investment portfolio.

VII. Investment Controls

1. Fraud

2. Theft

3. Loss of principal

4. Loss of control over funds

5. Inaccurate reporting

6. Negligence

7. Over-reliance on a single employee for investment decisions

B. Internal controls should include but are not limited to (for a more specific list of internal controls see the investment management plan):

1. Segregation of duties (e.g., the purchaser of investments is different than the person recording the transaction)

2. Reconciliation of investment report and cash balances 189
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3. Dual authorization of transactions

C. An external auditor will review the investment program annually in order to provide reasonable assurance that policy and procedures are complied with.

VIII. Authorized Financial Dealers and Institutions (Reference CA Govt. Code 53601)

C. The following criteria will be used in determining investment providers

2. Banks: The City shall only purchase securities from banks which meet all of the following criteria:

4. The Federal Reserve Bank: Direct purchases of Treasury bills, notes and bonds from the U.S.

Federal Reserve Banks branches are allowed and are exempt from quality requirements.

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D. All financial institutions and broker/dealers who desi re to become qualified bidders for investment transactions must provide the following information to the City Treasurer:

1. A completed City of Moreno Valley Broker/Dealer Questionnaire

2. Audited financial statements

3. Proof of Financial Industry Regulatory Authority (FINRA) certification

4. Trading resolution

5. Proof of state registration

6. Certification of having read and willingness to comply with City’s investment policy

E. The City Treasurer will conduct an annual review of the financial condition and registrations of brokers/dealers on the City’s approved list.

F. A current audited financial statement is required to be on file for each financial institution and broker/dealer in which or with which the City invests.

G. Certificates of deposit will not be placed with an institution once it has received a Cease and Desist order from any bank regulatory agency.

IX. Authorized and Suitable Investments (w ith quality and limitation guidelines) (Reference CA Govt. Code 53601)

C. Following is a table summarizing allowable investme nts for the City. This table summarizes and is consistent with California Government Code Sections 53600 and 53630 et seq.

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INVESTMENT
TYPE

MAXIMUUM

REMAINING

MATURITY

MAXIMUM
SPECIFIED %

OF PORTFOLIO

MINIMUM

QUALITY

REQUIREMENTS
GOVT.

CODE

SECTION
Local Agency Bonds 5 years — none — — none — 53601 (a) U.S. Treasury Obligations 5 years — none — — none — 53601 (b) State Obligations: CA and Others 5 years — none — — none — 53601 (d) CA Local Agency Obligations 5 years — none — — none — 53601 (e) U.S Agency Obligations 5 years — none — — none — 53601(f) Bankers’ Acceptances 180 da ys 40% — none — 53601 (g) Commercial Paper: Non-pooled Funds 397 days 40% of the agency’s invested funds (3)
“A-1/P-1/F-1”; if the
issuer has issued long-
term debt it must be rated
at least in the “A” ratings
category
53601(h)(2)(C)

Agencies)

5 years

20% (1)

“AA” rating category by
a NRSRO(1)
53601(o)
County Pooled Investment Funds n/a — none — — none — 27133 Joint Powers Authority Pool n/a — none — Multi ple 53601 (p) Local Agency Investment Fund (LAIF) n/a Max as defined by LAIF
— none — 16429.1
NRSRO = Nationally Recognized Statistical Rating Organization (1) The combination of Mortgage Pass-Through, Asset Backed and Collateralized Mortgage Backed securities may not exceed 20% of the portfolio. (2) No more than 30% of the agency’s money can be invested in qualifying Placement Service Deposits. Under a provision sunsetting on January 1, 2031, no more than 50% of the surplus funds may be invested in in placement service deposits. (3) No more than 25 % of the Agency’s investment assets under management may be invested in Commercial Paper. Under a provision sunsetting on January 1, 2031, no more than 40% of the portfolio may be invested in Commercial Paper if the Agency’s investment assets under management are greater than $100,000,000.

1. A description of eligible investment securitie s, and a written statement of investment policy.

2. A description of interest calculations and distribution and how gains and losses will be treated.

3. A description of how the securities are safeguarded (including the settlement process), and how often the securities are priced and the program audited.

4. A description of who may invest in the program, how often and what is the allowable size of deposits and withdrawals, and any limitations as to number of transactions.

5. A schedule for receiving stat ements and portfolio listings.

6. Are reserves, retained earnings, etc. utilized by the pool?

7. Is the pool eligible fo r bond proceeds and/or will it accept such proceeds?

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1. The Government Code specifically prohibits certain types of investment instruments for municipalities. In addition to those prohibitions, the following investments are not permitted:

2. Additionally, the City shall not invest in any secu rity that could result in zero interest accrual if held to maturity. Under a provision sunsetting on January 1, 2031, securities backed by the U.S.

Government that could result in a zero- or negative-interest accr ual if held to maturity are permitted.

4. Leveraging

a. The City may not purchase investments on a margin or through a margin account.

c. The City may not leverage its investments through the use of reverse repurchase agreements.

X. Review of Investment Portfolio

XI. Collateralization (Reference CA Govt. Code 53601)

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Approved by: City Council
December 17, 1996
Revised 1/13/98; 1/12/99; 2/8/00; 1/3/01; 5/14/02; 11/22/05; 2/26/08; 2/24/09; 3/23/10; 5/24/11; 4/24/12; 6/9/15; 6/9/16; 5/7/19; 5/18/20; 6/21/22; 6/20/23; 5/21/24; 5/20/25; 5/19/26 110% of principal and accrued interest. State law also allows financial institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of the City’s total deposits.

B. Certificates of Deposit:

1. The market value of securities that underlay certificates of deposit shall be valued at 110% of the market value of principal and accrued interest.

2. The City Treasurer, at his/her discretion may waiv e the collateral requirement for deposits up to the maximum dollar amount which are covered by the Federal Deposit Insurance Corporation.

C. Repurchase Agreements

1. The market value of securities that underlay repu rchase agreements shall be valued at 102% of the market value of principal and accrued interest.

3. Securities used as collateral for Repurchase Agreements will be delivered to an acceptable third- party custodian.

D. A clearly marked evidence of ownership, safekeeping receipt, must be supplied to the City and retained.

E. The City chooses to limit collateral to US Treasuries.

F. Collateral will always be held by an independent third-party with whom the entity has a current written custodial agreement.

G. The right of collateral substitution is granted based on the approval of the City Treasurer and City Manager.

XII. Safekeeping, Custody and Competitive Bids (Reference CA Govt. Code 53608)

B. Third-party safekeeping arrangements will be approved by the City Treasurer and will be corroborated by a written custodial agreement.

C. All investment transactions of th e City will be conducted using standard delivery vs. payment (DVP) procedures.

E. All bank deposits will be FDIC insured or deposited with institutions that comply with the State collateral requirements for public funds.

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Approved by: City Council
December 17, 1996
Revised 1/13/98; 1/12/99; 2/8/00; 1/3/01; 5/14/02; 11/22/05; 2/26/08; 2/24/09; 3/23/10; 5/24/11; 4/24/12; 6/9/15; 6/9/16; 5/7/19; 5/18/20; 6/21/22; 6/20/23; 5/21/24; 5/20/25; 5/19/26 F. Securities used as collateral for repurchase agreemen ts with a maturity from one to seven days can be held in safekeeping by a third party bank trust department or by the broker/dealer’s safekeeping institution, acting as the agent for the City, under the terms of a custody agreement executed by the selling institution and by the City specifying the City’s “perfected” ownership of the collateral.

G. All investment transactions shall be conducted on a competitive basis with quotes from a minimum of three brokers or financial institutions when possible.

XIII. Diversification and Credit Risk Management

A. Investments contained within the portfolio will be diversified by security type, institution and maturity.

B. The diversification requirements included in Sec tion IX are designed to mitigate credit risk in the portfolio.

2. 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.

XIV. Maximum Maturities

C. The general portfolio does not include bond proceeds or deferred compensation funds.

D. To the extent possible, longer-term investment matu rities will be spaced so that a portion of such investments mature each year to cover unanticipated emergencies.

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A. The investment portfolio shall be designed with the objective of obtaining a rate of return throughout budgetary and economic cycles, commensurate with the investment risk constraints.

XVI. Reporting (Reference CA Govt. Code 53607 and 53646(b))

A. The City Treasurer will provide a monthly report to the City Manager which will include the following information by security held at the end of the reporting period:

1. Investment Type

2. Issuer

3. Maturity Date

4. Par Value

5. Market Value

6. Book Value

7. Weighted Average Maturity

8. Source of Market Valuation

9. Monies maintained within the treasury

10. Funds, investments and loans that are under the management of contracted parties

1. A description of the compliance with the statement of investment policy, or manner in which the portfolio is not in compliance.

2. A statement denoting the ability of the City to meet cash flow requirements for the next six months, or provide an explanation as to why sufficient money shall, or may, not be available.

XVII. Investment Policy Adoption (Reference CA Govt. Code 53646(a)(2))

XVIII. Record Retention

A. The following investment or cash management docum ents will be maintained in accordance with Chapter 2.60 of Title 2 of the City of Moreno Valley Municipal Code:
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1. Investment Reports and supporting documentation

2. Third-party statements of assets held

3. Investment permanent files

4. Market pricing documentation

INVESTMENT POLICY GLOSSARY

BANKERS' ACCEPTANCE (BA): A draft or bill or exchange accepted by a bank or trust company.

The accepting institution guarantees payment of the bill and the issuer.

BID: The price offered by a buyer of securities. (When selling securities, you ask for a bid.).

BROKER/DEALER: An individual or firm that brings buyers and sellers together in a securities transaction.

CERTIFICATE OF DEPOSIT (CD): A time deposit with a specific maturity evidenced by a Certificate.

Large-denomination CD's are typically negotiable. (See negotiable Certificates of Deposit)

COLLATERAL: Securities, evidence of deposit or other property, which a borrower pledges to secure repayment of a loan. Also refers to securities pledged by a bank to secure deposits of public monies.

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COLLATERALIZED BANK DEPOSITS: A bank deposit that is collateralized at least 100% (principal plus interest to maturity). The deposit is collateralized using assets set aside by the issuer such as Treasury securities or other qualified collateral to secure the deposit in excess of the limit covered by the Federal Deposit Insurance Corporation.

In turn, CMOs distribute principal and interest pa yments to their investors based on predetermined rules and agreements.

COMMERCIAL PAPER: An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts payable and inventories and meeting short-term liabilities. Commercial paper is usually issued at a discount from face value and reflects prevailing market interest rates

COUPON: (a) The annual rate of interest that a bond's issuer promises to pay the bondholder on the bond's face value. (b) A certificate attached to a bond evidencing interest due on a payment date.

DEALER: A dealer acts as a principal in all transactions, buying and selling for his own account.

DELIVERY VERSUS PAYMENT (DVP): Delivery of securities with a simultaneous exchange of money.

DERIVATIVES: Financial products dependent for their value on (or derived from) an underlying financial instrument, a commodity, or an index.

DIVERSIFICATION: Dividing investment funds among a variety of securities offering independent returns.

FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC):

A federal agency that insures bank
deposits up to $250,000 per deposit.

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