Contractor shall promptly reimburse City for any premium paid by City or City may withhold amounts sufficient to pay the premiums from payments due to Contractor.
I. Evidence of Insurance. Prior to the performance of Services under this Agreement, Contractor shall furnish City’s Risk Manager with a certificate or certificates of insurance and all original endorsements evidencing and effecting the coverages required under this Section 14. The endorsements are subject to City’s approval.
Contractor may provide complete, certified copies of all required insurance policies to City. Contractor shall maintain current insurance certificates and endorsements on file with City’s Risk Manager at all times during the term of this Agreement. Contractor shall provide proof to City’s Risk Manager that insurance policies expiring during the term of this Agreement have been renewed or replaced with other policies providing at least the same coverage. Contractor shall furnish such proof at least two weeks prior to the expiration of the coverages.
The endorsements are to be signed by a person authorized by that insurer to bind coverage on its behalf. The endorsements must specifically name the CITY OF PICO RIVERA and its elected and appointed officials, officers, employees, attorneys, agents, designated volunteers, and independent contractors in the role of City officials as insureds or additional insureds. The City reserves the right to require complete, certified copies of all required insurance policies at any time.
J. Indemnity Requirements not Limiting. Procurement of insurance by Contractor shall not be construed as a limitation of Contractor’s liability or as full performance of Contractor’s duty to indemnify City under Section 13 of this Agreement.
K. Subcontractor Insurance Requirements. Contractor shall require each of its subcontractors that perform Services under this Agreement to maintain insurance coverage that meets all of the requirements of this Section 14.
L. Replacement Insurance. Contractor agrees that it will not cancel, reduce or otherwise modify the insurance coverage. Contractor agrees that if it does not keep the required insurance in full force and effect, and such insurance is available at a reasonable cost, the City may take out the necessary insurance and pay the premium thereon, and the repayment thereof shall be deemed an obligation of the Contractor and the cost of such insurance may be deducted, at the option of the City, from payments due to the Contractor. This shall be in addition to all other legal options available to the City to enforce the insurance requirements.
M. Subcontractors. Contractor shall ensure all Subcontractors and their employees are listed as additional insureds on all of the Contractor’s insurance.
15. Antitrust Claims. Contractor offers and agrees to assign to City all rights, title, and interest in and to all causes of action it may have under Section 4 of the Clayton Act (15 U.S.C. Section 15) or under the Cartwright Act (Chapter 2 (commencing with Section 16700) of Part 2 of Division 7 of the California Business and Professions Code) arising Maintenance Services Agreement
GENERAL BUILDING MANAGEMENT
from purchases of goods, services, or materials pursuant to this Agreement. This assignment shall be made and become effective at the time City tenders final payment to Contractor without further acknowledgment by the parties.
16. Familiarity with Work.
A. By executing this Agreement, Contractor represents that it has 1) Thoroughly investigated and considered the scope of services to be performed;
2) Carefully considered how the services should be performed; and 3) Understands the facilities, difficulties, and restrictions attending performance of the services under this Agreement.
B. If services involve work upon any site, Contractor warrants that it has or will investigate the site and is or will be fully acquainted with the conditions there existing, before commencing the services hereunder. Should Contractor discover any latent or unknown conditions that may materially affect the performance of the services, Contractor will immediately inform City of such fact and will not proceed except at Contractor’s own risk until written instructions are received from City.
17. Independent Contractor. Contractor is and shall at all times remain, as to City, a wholly independent contractor. Neither City nor any of its agents shall have control over the conduct of Contractor or any of Contractor’s employees, except as herein set forth; and Contractor is free to dispose of all portions of its time and activities which it is not obligated to devote to City in such a manner and to such persons, firms, or corporations as Contractor wishes except as expressly provided in this Agreement. Contractor shall have no power to incur any debt, obligation, or liability on behalf of City, bind City in any manner, or otherwise act on behalf of City as an agent. Contractor shall not, at any time or in any manner, represent that it or any of its agents, servants or employees, are in any manner agents, servants or employees of City. Contractor agrees to pay all required taxes on amounts paid to Contractor under this Agreement, and to indemnify and hold City harmless from any and all taxes, assessments, penalties, and interest asserted against City by reason of the independent contractor relationship created by this Agreement. Contractor shall fully comply with the workers’ compensation law regarding Contractor and its employees. Contractor further agrees to indemnify and hold City harmless from any failure of Contractor to comply with applicable workers’ compensation laws. City shall have the right to offset against the amount of any compensation due to Contractor under this Agreement any amount due to City from Contractor as a result of its failure to promptly pay to City any reimbursement or indemnification arising under this Section.
18. Workers’ Compensation Insurance. California Labor Code Sections 1860 and 3700 provide that every contractor will be required to secure the payment of Maintenance Services Agreement
GENERAL BUILDING MANAGEMENT
compensation to its employees. In accordance with the provisions of California Labor Code Section 1861, Contractor hereby certifies as follows:
“I am aware of the provisions of Section 3700 of the Labor Code which require every employer to be insured against liability for workers’ compensation or to undertake selfinsurance in accordance with the provisions of that code, and I will comply with such provisions before commencing the performance of the work of this contract.”
19. Nondiscriminatory Employment. Contractor shall not unlawfully discriminate against any individual based on race, color, religion, nationality, gender, sex, sexual orientation, age or condition of disability. Contractor understands and agrees that it is bound by and will comply with the nondiscrimination mandates of all statutes and local ordinances and regulations.
20. Debarred, Suspended or Ineligible Contractors. Contractor shall not be debarred throughout the duration of this Agreement. Contractor shall not perform work with debarred subcontractors pursuant to California Labor Code Section 1777.1 or 1777.7 or any other federal of State law providing for the debarment of contractors from public works. If the Contractor of any Subcontractor becomes debarred or suspended during the duration of the Project, the Contractor shall immediately notify the City.
21. Compliance with Laws. Contractor shall comply with all applicable federal, state and local laws, ordinances, codes and regulations in force at the time Contractor performs pursuant to this Agreement.
22. Contractor’s Representations. Contractor represents, covenants and agrees that:
a) Contractor is licensed, qualified, and capable of furnishing the labor, materials, and expertise necessary to perform the services in accordance with the terms and conditions set forth in this Agreement; b) there are no obligations, commitments, or impediments of any kind that will limit or prevent its full performance under this Agreement; c) there is no litigation pending against Contractor, and Contractor is not the subject of any criminal investigation or proceeding; and d) to Contractor’s actual knowledge, neither Contractor nor its personnel have been convicted of a felony.
23. Conflicts of Interest. Contractor agrees not to accept any employment or representation during the term of this Agreement or within 12 months after completion of the work under this Agreement which is or may likely make Contractor “financially interested,” as provided in Government Code Sections 1090 and 87100, in any decisions made by City on any matter in connection with which Contractor has been retained pursuant to this Agreement.
24. Third Party Claims. City shall have full authority to compromise or otherwise settle any claim relating to this Agreement at any time. City shall timely notify Contractor of the Maintenance Services Agreement
GENERAL BUILDING MANAGEMENT
receipt of any third-party claim relating to the Agreement. City shall be entitled to recover its reasonable costs incurred in providing this notice.
25. Non-Assignability; Subcontracting. The experience, knowledge, capability and reputation of Contractor, its principals and employees were a substantial inducement for the City to enter into this Agreement. Contractor shall not assign or transfer any interest in this Agreement nor any part thereof, whether by assignment or novation, without City’s prior written consent. Transfers restricted hereunder shall include the transfer to any person or group of persons acting in concert of more than twenty-five percent (25%) of present ownership and/or control of Contractor. In the event of any such unapproved transfer, including any bankruptcy proceeding, this Agreement shall be void. Any purported assignment without written consent shall be null, void, and of no effect; and Contractor shall hold harmless, defend and indemnify City and its officers, officials, employees, agents and representatives with respect to any claim, demand or action arising from or relating to any unauthorized assignment. No approved transfer shall release the Contractor or any surety of Contractor of any liability hereunder with the express consent of the City.
26. Applicable Law. The validity, interpretation, and performance of this Agreement shall be controlled by and construed under the laws of the State of California, excluding California’s choice of law rules. Venue for any such action relating to this Agreement shall be in the Los Angeles County Superior Court.
27. Attorneys’ Fees and Costs. If either party to this Contract is required to initiate or defend or made a party to any action or proceeding in any way connected with this Contract, the prevailing party in such action or proceeding, in addition to any other relief which may be granted, whether legal or equitable, shall be entitled to reasonable attorney's fees. Attorney's fees shall include attorney's fees on any appeal, and in addition a party entitled to attorney's fees shall be entitled to all other reasonable costs for investigating such action, taking depositions and discovery and all other necessary costs the court allows which are incurred in such litigation. All such fees shall be deemed to have accrued on commencement of such action and shall be enforceable whether or not such action is prosecuted to judgment.
28. Titles. The titles used in this Agreement are for convenience only and shall in no way define, limit or describe the scope or intent of this Agreement or any part of it.
29. Authority. The persons executing this Agreement on behalf of Contractor warrants and represents that they have the authority to execute this Agreement on behalf of Contractor and have the authority to bind Contractor to the performance of its obligations hereunder.
30. Integration; Amendment. It is understood that there are no oral agreements between the Parties hereto affecting this Agreement and this Agreement supersedes and cancels any and all previous negotiations, arrangements, agreements and understandings, if any, between the Parties, and none shall be used to interpret this Maintenance Services Agreement
GENERAL BUILDING MANAGEMENT
Agreement. This Agreement may be amended at any time by the mutual consent of the Parties by an instrument in writing.
31. Incorporation by Reference. All Exhibits attached hereto are incorporated herein by reference. The documents, City insurance requirements, together with this written Agreement (and all Exhibits, documents and laws referenced therein), shall constitute the entire agreement between the parties as to the subject matter of this Agreement. In the event of any conflict between this Agreement and any Exhibit hereto, the provisions of this Agreement shall control.
32. Entire Agreement. This Agreement, including any other documents incorporated herein by specific reference, represents the entire and integrated agreement between City and Contractor. This Agreement supersedes all prior oral or written negotiations, representations or agreements. This Agreement may not be modified or amended, nor any provision or breach waived, except in a writing signed by both parties which expressly refers to this Agreement.
33. Construction. In the event of any asserted ambiguity in, or dispute regarding the interpretation of any matter herein, the interpretation of this Agreement shall not be resolved by any rules of interpretation providing for interpretation against the party who causes the uncertainty to exist or against the party who drafted this Agreement or who drafted that portion of this Agreement.
34. Non-waiver of Terms, Rights and Remedies. Waiver by either party of any one or more of the conditions of performance under this Agreement shall not be a waiver of any other condition of performance under this Agreement. In no event shall the making by City of any payment to Contractor constitute or be construed as a waiver by City of any breach of covenant, or any default which may then exist on the part of Contractor, and the making of any such payment by City shall in no way impair or prejudice any right or remedy available to City with regard to such breach or default.
35. Notice. Except as otherwise required by law, any notice or other communication authorized or required by this Agreement shall be in writing and shall be deemed received on (a) the day of delivery if delivered by hand or overnight courier service during Contractor’s or City’s regular business hours or (b) on the third business day following deposit in the United States mail, postage prepaid, to the addresses listed below, or at such other address as one party may notify the other:
To City:
Steve Carmona
City Manager
City of Pico Rivera
6615 Passons Blvd
Pico Rivera, CA 90660
Maintenance Services Agreement
GENERAL BUILDING MANAGEMENT
To Contractor:
Charles Han
Vice President
General Building Management
3171 W Olympic Blvd
Los Angeles, CA 90006
36. Counterparts. This Agreement may be executed in counterpart originals, duplicate originals, or both, each of which is deemed to be an original for all purposes.
37. Severability. If any term or portion of this Agreement is held to be invalid, illegal, or otherwise unenforceable by a court of competent jurisdiction, the remaining provisions of this Agreement shall continue in full force and effect. [Signatures on next page]
Maintenance Services Agreement
GENERAL BUILDING MANAGEMENT
IN WITNESS WHEREOF, the parties hereto have executed the within Agreement the day and year written below:
CITY OF PICO RIVERA
By: ____________________________
Steve Carmona, City Manager
ATTEST:
By: ____________________________
Cynthia Ayala, City Clerk
APPROVED AS TO FORM:
By: ____________________________
Arnold M. Alvarez-Glasman,
City Attorney
CONTRACTOR
General Building Management
By: ____________________________
Printed Name: Charles Han _________
Title: Vice President _______________
Exhibit A- 1 of 21
EXHIBIT A
Scope of Work
Exhibit A-2- of 21
Exhibit A-3- of 21
Exhibit A-4- of 21
Exhibit A-5- of 21
Exhibit A-6- of 21
Exhibit A-7- of 21
Exhibit A-8- of 21
Exhibit A-9- of 21
Exhibit A-10- of 21
Exhibit A-11- of 21
Exhibit A-12- of 21
Exhibit A-13- of 21
Exhibit A-14- of 21
Exhibit A-15- of 21
Exhibit A-16- of 21
Exhibit A-17- of 21
Exhibit A-18- of 21
Exhibit A-19- of 21
Exhibit A-20- of 21
Exhibit A-21- of 21
Exhibit B 1 of 2
EXHIBIT B
APPROVED FEE SCHEDULE
Exhibit B 2 of 2
Exhibit B 3 of 2
Tuesday, December 10, 2024
A Regular Meeting of the Successor Agency to the Pico Rivera Dissolved Redevelopment Agency was held in the Council Chamber, Pico Rivera City Hall, 6615 Passons Boulevard, Pico Rivera, California.
Meeting was jointly held with the City Council, Water Authority and the Successor Agency to the Dissolved Redevelopment Agency. Items appear as listed on the combined agenda for the meeting of December 10, 2024.
Chairman Lara called the meeting to order at 6:04 p.m. on behalf of the Successor Agency.
PRESENT: Camacho, Garcia, Lutz, Sanchez, Lara
ABSENT: None
PUBLIC COMMENTS: None
CONSENT CALENDAR:
10. Minutes:
• Received and filed Successor Agency to the Pico Rivera Dissolved Redevelopment Agency regular meeting of June 11, 2024.
11. Approval of the 2025-26 Recognized Obligation Payment Schedule and Corresponding Administrative Budget. (700)
1. Approved Resolution No. SA-24-30 of the Successor Agency to the Pico Rivera Redevelopment Agency approving the Recognized Obligation Payment Schedule (ROPS) for the period of July 1, 2025 – June 30, 2026 (ROPS 2025-26) and approving of the Successor Agency Administrative Budget for the fiscal year 2025-26. .
Resolution No. SA-24-30 A RESOLUTION OF THE SUCCESSOR AGENCY
TO THE DISSOLVED REDEVELOPMENT AGENCY OF THE CITY OF PICO
RIVERA, CALIFORNIA, ESTABLISHING THE RECOGNIZED OBLIGATION PAYMENT SCHEDULE 2025-26 FOR JULY 1, 2025, THROUGH JUNE 30, 2026, APPROVING THE EXPENDITURE OF RESERVE AND OTHER
FUNDS, AND APPROVING THE ADMINISTRATIVE BUDGET FOR FISCAL YEAR 2025-26
Motion by Vice Chairman Garcia, seconded by Director Lutz to approve Consent Calendar Items No. 10 and 11. Motion carries by the following roll call vote:
AYES: Camacho, Garcia, Lutz, Sanchez, Lara
NOES: None
CONSENT CALENDAR ITEMS PULLED FOR FURTHER DISCUSSION: None 8 12-10-24. Successor Agency Minutes
REGULAR AGENDA: None
CLOSED SESSION(S): None
ADJOURNMENT:
Chairman Garcia adjourned the Successor Agency to the Dissolved Redevelopment Agency meeting at 7:12 p.m. in memory of Ruth Gutierrez, 50-year resident of Pico Rivera.
There being no objection it was so ordered.
AYES: Camacho, Lara, Lutz, Sanchez, Garcia
NOES: None
________________________________
John R. Garcia, Chairman
ATTEST:
_______________________________
Cynthia Ayala, Agency Secretary
I hereby certify that the foregoing is a true and correct report of the proceedings of the Successor Agency to the Pico Rivera Dissolved Redevelopment Agency regular meeting dated December 10, 2024 and received and filed by the Successor Agency to the Pico Rivera Dissolved Redevelopment Agency on April 8, 2025. ________________________________
Cynthia Ayala, Agency Secretary
To: Chairman and Directors
From: Executive Director
Meeting Date: April 8, 2025
Subject: RESOLUTION APPROVING THE INVESTMENT POLICY FOR THE SUCCESSOR AGENCY FOR FISCAL YEAR 2025-2026
Recommendation:
1. Approve a resolution approving the Investment Policy for the Successor Agency for fiscal year (FY) 2025-26 to include Placement Service Funds as permissible investments for the Successor Agency.
Fiscal Impact:
There is no fiscal impact to the General Fund associated with the approval of the above recommendation.
Background:
The Investment Policy (Policy) for the City of Pico Rivera (City) is intended to provide guidelines for the prudent investment of the City's available resources and outline policies for maximizing the efficiency of the City's cash management process. The ultimate goal of an investment policy is to enhance the City’s economic status while protecting its pooled cash. In accordance with California Government Code (Gov.
Code) Section 53646(a)(2), an annual rendering of the Policy shall be presented to the Successor Agency (Agency Board) for consideration at a public meeting. Additionally, the Policy states that it will be reviewed at least annually and presented to the Agency Board for review and approval.
Discussion:
The primary objective of the Policy is to provide a framework of approved securities in which the City can legally invest. The Policy drives the cash, treasury, and investment management functions of the City, and serves as a guide for setting and achieving program objectives, defining rules, establishing benchmarks, and reducing exposure to risks. It is also important to note that rating agencies pay close attention to a city’s investment policy and portfolio in determining its credit rating, which is a key element when seeking financing options for the City.
9 SUCCESSOR AGENCY TO PRRA AGENDA REPORT- MEETING OF APRIL 8, 2025
RESOLUTION APPROVING THE INVESTMENT POLICY FOR THE SUCCESSOR AGENCY FOR FISCAL YEAR 2025-2026
The Policy is based on Gov. Code Sections 53600 through 53609; and 53630 through 53686. These laws, as well as guidelines set forth by the Association of Public Treasurers of the United States and Canada, the California Debt and Investment Advisory Commission (CDIAC), the California Municipal Treasurers Association (CMTA), and the Government Finance Officers Association (GFOA), have aided City staff in policy development. The state laws and established guidelines encompass a broad array of allowable investments and investment standards to suit the different needs of California's local agencies. The Policy is more conservative than what is allowed by state law as it further restricts the percentage of allowable credit investments. The Policy applies to the City's Pooled Investment Portfolio, Bond Proceeds Portfolio, and Special Districts Portfolio. These portfolios encompass all funds under the oversight of the City Treasurer or approved designee.
Currently, the City utilizes the services of Chandler Asset Management (Chandler), the City’s investment adviser, to invest and manage $34 million of the City’s idle cash. The remaining funds, which ranges from $80 to $85 million, are invested in the Local Agency Investment Fund (LAIF) operated by the State Treasurer and in the Commercial Bank of California Insured Cash Sweep.
To ensure the portfolio’s safety, the City only selects investments with the highest credit quality. The Chandler Managed Portfolio is composed primarily of Treasury Securities and Federal Government-sponsored entity debt, otherwise known as federal agency securities. Federal agency securities, such as Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac), benefit from the backing of the Federal government.
Utilizing CMTA guidelines, the Gov. Code, and the expertise of Chandler, the Policy is presented in Exhibit A of the resolution. The Gov. Code allows for a limited scope of investments since public funds are invested, and the overall goal is the preservation of these funds. It is in the City’s best interest to fully avail itself of the investments allowed per Gov. Code Section 53600, et seq.
The City submitted the attached Policy to the CMTA after it was adopted on August 1, 2023. It was independently evaluated by three (3) raters and was given a passing score by each rater. The passing score earned the City a “Certified” distinction.
The City has updated its investment policy annually to align with the latest Gov. Code requirements. Since the June 2024 update, the Gov. Code has updated its recommendation for the following section 8.0, which is reflected in Exhibit A:
• 8.0 Authorized and Suitable Investments:
“No more than 50% of the total portfolio held by a local agency may be invested in a combination of placement service funds (e.g., CDARS) and Certificates of Deposit. Under a provision sunsetting on January 1, 2031, the maximum percentage of the total portfolio reverts back to 30%.” SUCCESSOR AGENCY TO PRRA AGENDA REPORT- MEETING OF APRIL 8, 2025
RESOLUTION APPROVING THE INVESTMENT POLICY FOR THE SUCCESSOR AGENCY FOR FISCAL YEAR 2025-2026
Chandler also reviewed the Policy and made this recommended change. After this revision, the Policy is still in line with best practices to ensure security, maintain liquidity, and seek yield where appropriate. This proposed Policy adheres to CMTA’s best practices and demonstrates to external rating agencies that the City is committed to safeguarding taxpayer dollars and taking full advantage of investments, as allowed per Gov. Code Section 53600, et seq.
The Administrative Services Department presents the monthly investment transaction report and the quarterly investment report to the Agency Board in line with the recommendations and requirements set by the CMTA and the State of California. City staff will continue reviewing the Policy on an annual basis and present the investment transaction report monthly and the Schedule of Investment quarterly to the Agency Board.
Conclusion:
Staff recommends the Agency Board approve a resolution ratifying the Investment Policy for the City of Pico Rivera for FY 2025-26 to help ensure the safety and liquidity of the City’s idle cash. The enclosed Policy conforms to Government Code sections 53600 through 53609 and 53630 through 53686. All permitted investment types are represented in Exhibit A within Enclosure 1.
Steve Carmona
SC:AG:JG:JA:ep
Enclosure: 1) Resolution/Exhibit A
RESOLUTION NO. SA-25-__
A RESOLUTION OF THE SUCCESSOR AGENCY TO THE DISSOLVED
REDEVELOPMENT AGENCY OF THE CITY OF PICO RIVERA,
CALIFORNIA, APPROVING THE “INVESTMENT POLICY” FOR FISCAL YEAR 2025-26
WHEREAS, the City of Pico Rivera and the Successor Agency to the Dissolved Redevelopment Agency of the City of Pico Rivera (Successor Agency) have funds not required to satisfy immediate financial obligations; and WHEREAS, the subject funds should be wisely and prudently invested in approved investment instruments; and
WHEREAS, the Investment Policy for the City of Pico Rivera and Successor Agency (Policy), attached hereto as Exhibit A and made part of this Resolution, states it should be reviewed and approved by the City Council at least annually at a public meeting; and WHEREAS, the City’s and Successor Agency’s Treasurer/Director of Administrative Services and the City’s outside investment advisor, Chandler Asset Management, have determined that the existing and amended Policy adequately complies with California Government Code Section 53600, et seq., government investment requirements; and WHEREAS, the Policy was presented and considered by the City and Successor Agency for ratification at a duly noticed public meeting as required under Government Code Section 53646(a).
NOW, THEREFORE, BE IT RESOLVED by the Successor Agency to the Dissolved Redevelopment Agency of the City of Pico Rivera as follows:
SECTION 1. The Policy is hereby ratified and adopted for FY 2025-26 pursuant to the requirements outlined in Government Code Section 53600, et seq.
SECTION 2. The Successor Agency Secretary shall attest to the passage of this resolution, and it shall thereupon be in full force and effect.
APPROVED AND PASSED this 8th day of April 2025.
________________________________
John R. Garcia, Chairman
ATTEST: APPROVED AS TO FORM:
_____________________________ ________________________________ Cynthia Ayala, Agency Secretary Arnold M. Alvarez-Glasman, Agency Counsel AYES:
NOES:
Enclosure 1
9a
Page | i
CITY OF PICO RIVERA
Administrative Services Department
Investment Policy for
the City of Pico Rivera
and Successor Agency
Exhibit A
City of Pico Rivera
Investment Policy
Page | ii
TABLE OF CONTENTS
1.0 Policy ..............................................................................3
2.0 Scope..............................................................................3
3.0 Prudence.........................................................................4
4.0 Objective ........................................................................5
5.0 Delegation of Authority ...................................................6
6.0 Ethics and Conflicts of Interest .......................................7
7.0 Authorized Financial Dealers and Institutions .................8
8.0 Authorized and Suitable Investments..............................8
9.0 Review of Investment Portfolio .....................................14
10.0 Investment Pools/Mutual Funds....................................14
11.0 Collateralization............................................................15
12.0 Safekeeping and Custody.............................................15
13.0 Diversification ...............................................................16
14.0 Maximum Maturities......................................................16
15.0 Internal Controls ...........................................................17
16.0 Cash Management .......................................................17
17.0 Performance Standards................................................18
18.0 Reporting......................................................................18
19.0 Investment Policy Adoption...........................................19
20.0 Glossary .......................................................................20 City of Pico Rivera
Administrative Services Department
6615 Passons Boulevard
Pico Rivera, CA 90660
Phone 562.801.4392 • Fax 562.942.8828
City of Pico Rivera
Investment Policy April 2025
Page | 3
1.0 Policy
The purpose of this document is to provide guidelines for the prudent investment of the City and Successor Agency’s idle cash and outline policies for maximizing the efficiency of the City/Successor Agency’s cash management system. The ultimate goal is to ensure security, maintain liquidity, and seek yield where appropriate. This investment policy is in accordance with the provisions in Sections 16429.1 and 53600 through 53684 of the California Government Code. (For the purposes of the remainder of this policy, any reference to “City” is inclusive of the Successor Agency.)
2.0 Scope
Included in the scope of the City’s investment policy are the following major guidelines and practices to be used in achieving the City’s primary investment objectives:
• Investment Authority and Responsibilities
• Eligible Financial Institutions
• Authorized Investments
• Investment Parameters
• Cash Management
• Evaluation of Investment Performance
• Investment Reporting
• Investment Policy Review and Adoption
It is intended that this policy cover all funds and investment activities under the direct authority of the City of Pico Rivera, Pico Rivera Successor Agency (formerly known as the Redevelopment Agency), Pico Rivera Housing Assistance Agency, the Pico Rivera Water Authority, and all other funds and investment activities under the direct authority of the Pico Rivera City Treasurer, except for bond proceeds which are governed by their respective indenture agreements.
Subject to the prior written consent and approval of the City Treasurer and City Manager, City of Pico Rivera
Investment Policy April 2025
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financial assets held and invested by trustees or fiscal agents are excluded from this policy. However, such assets are nevertheless subject to the regulations established by the State of California pertaining to investments by local agencies as well as the related bond indentures.
3.0 Prudence
Pursuant to California Government Code, Section 53600.3, all persons authorized to make investment decisions on behalf of the City are trustees and therefore fiduciaries subject to the Prudent Investor Standard:
“…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 prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the Agency.
Within the limitations of this section and considering individual investments as part of an overall strategy, investments may be acquired as authorized by law.” Investment officers and other authorized persons responsible for managing City funds acting in accordance with written procedures and this investment policy and exercising due diligence shall be relieved of personal responsibility for an individual security’s credit risk or market price changes provided that the Investment officers or other authorized persons acted in good faith. Deviations from expectations of a security’s credit or market risk should be reported to the governing body in a timely fashion and appropriate action should be taken to control adverse developments.
City of Pico Rivera
Investment Policy April 2025
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4.0 Objective
In accordance with Government Code Section 53600.5, the primary objectives, in priority order, of investment activities shall be safety, liquidity, and yield:
Safety
Safety of principal is the foremost objective of the investment program. Investments shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. The objective will be to mitigate credit risk and interest rate risk.
Credit Risk – is the risk of loss due to the failure of an issuer of a security. The City will minimize credit risk by:
o Limiting investments to the safest types of securities o Diversifying the investment portfolio so that potential losses on individual securities will be minimized.
Market Rate Risk – is the risk of market fluctuations due to overall changes in the general level of interest rates. The City will minimize the market rate risk by:
o Structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity
o Investing operating funds primarily in shorter-term securities, money market mutual funds, or similar investment pools
Liquidity
The investment portfolio shall remain sufficiently liquid to meet all operating requirements that may be reasonably anticipated. This is accomplished by structuring the portfolio so that securities mature concurrent with cash needs to meet anticipated demands (static liquidity). Furthermore, since all possible cash demands cannot be anticipated, the portfolio should consist largely of securities with active secondary or resale markets City of Pico Rivera
Investment Policy April 2025
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(dynamic liquidity). A portion of the portfolio also will be placed in money market mutual funds or local government investment pools which offer same-day liquidity for short term funds.
Yield
The investment portfolio shall be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account the investment risk constraints and liquidity needs. Return on investment is of secondary importance compared to the safety and liquidity objectives described above. The City will invest in relatively low risk securities in anticipation of earning a fair return relative to the risk being assumed. Securities shall not normally be sold prior to maturity with the following exceptions:
o A security with declining credit may be sold early to minimize loss of principal.
o A security swap would improve the quality, yield, or target duration in the portfolio.
o Liquidity needs of the portfolio require that the security be sold.
5.0 Delegation of Authority
The City Council is responsible for the management of the City’s funds, including the administration of this investment policy. Management responsibility for the cash management of the City’s funds is hereby delegated to the Treasurer.
The Treasurer will be responsible for all transactions undertaken and will establish a system of procedures and controls to regulate the activities of subordinate officials and employees. Such procedures will 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 Treasurer.
City of Pico Rivera
Investment Policy April 2025
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The City may engage the services of one or more external investment advisers, who are registered under the Investment Advisers Act of 1940, to assist in the management of the City’s investment portfolio in a manner consistent with the City’s objectives. External investment advisers may be granted discretion to purchase and sell investment securities in accordance with this investment policy.
The City's overall investment program shall be designed and managed with a degree of professionalism that is worthy of the public trust. The City recognizes that in a diversified portfolio, occasional measured losses may be inevitable and must be considered within the context of the overall portfolio’s return and the cash flow requirements of the City.
6.0 Ethics and Conflicts of Interest
The City adopts the following policy concerning conflicts of interest:
Officers and employees involved in the investment process shall refrain from personal business activity that could conflict with proper execution and management of the investment program, or that could impair their ability to make impartial decisions.
Officers and employees involved in the investment process shall disclose to the City Clerk any material interest in financial institutions that conduct business with the City of Pico Rivera and they shall further disclose any personal financial/investment positions that could be related to the performance of the City’s investment portfolio.
Officers and employees shall not undertake personal investment transactions with the same individual with whom business is conducted on behalf of the City.
If there is an event subject to disclosure that could impair the ability of an officer or employee to make impartial decisions, the officer or employee must notify the City Manager in writing within ten (10) days.
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7.0 Authorized Financial Dealers and Institutions
Pursuant to the State Code, Section 53601.5, the City shall transact business only with issuers, banks, savings and loans and registered investment securities dealers. The purchase of any investment, other than those purchased directly from the issuer, shall be purchased either from an institution licensed by the State of California as a broker/dealer, as defined in Section 25004 of the Corporations Code, who is a member of the National Association of Securities Dealers or a member of a Federally regulated securities exchange, a National or State-Chartered Bank, a Federal or State Association (as defined by Section 5102 of the Financial Code), or a brokerage firm designated as a Primary Government Dealer by the Federal Reserve Bank.
The Director of Finance will maintain a list of financial institutions authorized to provide investment services to the City, will not give full discretionary authority to external investment managers and will not use external investment managers to purchase or sell securities or manage the City’s portfolio unless specifically approved by the City Council with a contract signed by the Mayor and City Attorney.
8.0 Authorized and Suitable Investments
Investment of City funds is governed by the California Government Code Sections 16429.1 and 53601. Investments may not have a term or maturity at the time of investment of longer than that authorized by Section 53601 or five (5) years unless the City Council has granted prior express authority. The percentage limitations shall apply to investments at the time of purchase. This investment policy further restricts the permitted investments to those below:
State Treasurer Local Agency Investment Fund (LAIF)
Government Code Section 16429.1: The City may invest up to the maximum amount pursuant to LAIF policy. LAIF is a diversified investment pool administered by the California State Treasurer. Monies invested with LAIF are pooled with State monies in City of Pico Rivera
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order to earn the maximum rate of return consistent with safe and prudent treasury management. The City, Housing Authority and Successor Agency have separate accounts, so the combined limit is three times the LAIF Policy maximum.
Local Government Investment Pools
Government Code Section 53601(p): The City may invest in a joint powers authority organized pursuant to Section 6509.7 that invests in the securities and obligations authorized in 53601 (a) to (q), inclusive. There is no issuer limitation for Local Government Investment Pools.
US Government and Federal Agency Obligations
Government Code Sections 53601 (b) and (f): There is no limitation on the maximum of the City’s portfolio that may be invested in U.S. government obligations, U.S. government agency obligations, and U.S. government instrumentality obligations, which have a liquid market with a readily determinable market value. The maximum percent of agency callable securities in the total portfolio will be 20%.
Bankers Acceptances
Government Code Section 53601 (g): Up to twenty percent (20%) of the City’s total portfolio may be invested in Bankers Acceptances which are defined as bills of exchange or time drafts, drawn on and accepted by a commercial bank, which are eligible for purchase by the Federal Reserve System, although no more than 5% of the total portfolio may be invested in Bankers Acceptances with any one commercial bank. Additionally, the maturity periods cannot exceed 180 days. Government Code Section 53601(g) allows 40% (30% with one bank).
Municipal Securities
Government Code Section 53601 (C): Up to 30% of the City’s total portfolio may be invested in obligations of the City, the State of California and any local agency within in City of Pico Rivera
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the State of California. The securities must be “A” rated by one NRSRO. No more than 5% per issuer.
Government Code Section 53601 (D): Up to 30% of the City’s total portfolio may be invested in obligations of any of the other 49 states in addition to California, including bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by a state or by a department, board, agency, or authority of any of the other 49 states, in addition to California. The securities must be in the rating category of “A” rated by one NRSRO. No more than 5% per issuer.
Commercial Paper
Government Code Section 53601 (h): A maximum of twenty-five percent (25%) of the City’s portfolio may be invested in highest short-term rating category tier (e.g. A-1, P-1, F-1 or higher) commercial paper as rated by Moody’s, Standard and Poor’s or Fitch rating service. Issuing corporations must be organized and operating in the United States, have $500 million total assets, and have at least an “A” rating category (by Moody’s, Standard and Poor’s or Fitch) on debt other than commercial paper. The maturity period cannot exceed 270 days. No more than 5% of the portfolio may be invested in any single issuer.
Repurchase Agreements
Government Code Section 53601 (j): Although permitted by State Statute, repurchase agreements and reverse repurchase agreements will not be used without prior City Council approval.
Certificates of Deposit and Passbook Savings Accounts
Government Code Section 53601 (i): There is no limit as to the amount of the investment portfolio that may be deposited in passbook savings accounts. Negotiable certificates of deposit are limited to thirty percent (30%) of the City’s total portfolio which may be invested. For Negotiable certificates of deposits greater than the FDIC insured amount, City of Pico Rivera
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the issuer must be have short term ratings category of “A-1” or long term ratings of “A” by a NRSRO. No more than 5% of the portfolio may be invested in any single issuer.
Corporate Medium Term Notes
Government Code Section 53601 (k): A maximum of 30% of the City’s total portfolio may be invest in corporate medium term notes. The issuer is a corporation 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. The securities are rated in a rating category of “A” or its equivalent or better by at least one NRSRO. No more than 5% of the portfolio may be invested in any single issuer.
Asset Backed, Mortgage-Backed, Mortgage Pass-Through Securities, and Collateralized Mortgage Obligations.
Government Code Section 53601 (o): A maximum of 20% of the City’s total portfolio may be invested in the above mentioned securities from issuers not defined in US Government and Federal Agency Obligations section. The securities must be rated in rating category of “AA” or better by one NRSRO. No more than 5% of the total portfolio may be invested in any single issuer.
Supranational Securities
Government Code Section 53601 (q): A maximum of 20% of the City’s total portfolio may be invested in Supranational securities. The City can only purchase US dollar denominated senior unsecured unsubordinated obligations issued or unconditionally guaranteed by the International Bank for Reconstruction and Development, International Finance Corporation, or Inter-American Development Bank. The securities must be rated “AA” rating category or better by one NRSRO. No more than 10% of the total portfolio may be invested in any single issuer.
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Money Market Funds
Government Code Section 53601 (l): Shares of beneficial interest issued by diversified management companies that are money market funds registered with the Securities and Exchange Commission under the Investment Company Act of 1940 (15 U.S.C. Sec 80al et seq.) may be purchased if they meet the requirements of Government Code Section 53601 (l). No more than 20 percent of the total portfolio of the investments held by a local agency may be invested in mutual funds, and no more than 10 percent in any one mutual fund.
Placement Service Deposits
Government Code Section 53601.8: A local agency that has the authority under law to invest funds, at its discretion, may invest a portion of its surplus funds in deposits at a commercial bank, savings back, savings and loan association, or credit union that uses a private sector entity that assists in the placement of deposits. The private placement service that allows local agencies to purchase more than $250,000 in demand deposits, money market accounts, or CDs from a single financial institution while still maintaining FDIC insurance coverage. The financial institution facilitates the trading of deposits among the participating institutions in amounts that are less than $250,000 each so that FDIC coverage is maintained. No more than 50 percent of the total portfolio held by a local agency may be invested in a combination of placement service funds (e.g., CDARS) and Certificates of Deposit. Under a provision sunsetting on January 1, 2031, the maximum percentage of the total portfolio reverts back to 30%.
Other Investments
Other investments that are or become legal investments pursuant to the State of California Government Code may be purchased only after the specific approval by the City Council.
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Prohibited Investments
The City of Pico Rivera shall not invest in any investment instrument/pool/fund unless specifically allowed under the “Investment Types” section of this policy.
The City of Pico Rivera shall comply with Government Code Section 53631.5 which states, “[a] local agency shall not invest any funds pursuant to this article in inverse floaters, range notes, or interest-only strips that are derived from a pool of mortgages” and that “[a] local agency shall not invest any funds pursuant to this article in any security that could result in zero interest accrual if held to maturity.” Under a provision sunsetting on January 1, 2026, securities backed by the U.S. Government that could result in a zeroor negative-interest accrual if held to maturity are permitted.
The purchase of a security with a forward settlement date exceeding 45 days from the time of the investment is prohibited.
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Legislative Changes
Any State of California legislative action that further restricts allowable maturities, investment types or percentage allocations will be incorporated into the City of Pico Rivera Investment Policy and supersede any and all previous applicable language. If the City is holding an investment that is subsequently prohibited by a legislative change, the City may hold that investment, if it is deemed prudent by the Investment Officer, until the maturity date to avoid an unnecessary loss.
9.0 Review of Investment Portfolio
The securities held at the City of Pico Rivera must be in compliance with Section 8.0 Authorized and Suitable Investments at the time of purchase. Because some securities may not comply with Section 8.0 Authorized and Suitable Investments subsequent to the date of purchase, The Treasurer shall at least annually review the portfolio to identify those securities that so not comply. The Treasurer shall establish procedures to report to the City of Pico Rivera and to its oversight committee, should one exist, major and critical incidences of noncompliance identified through the review of the portfolio.
10.0 Investment Pools/Mutual Funds
As stated, a thorough investigation of an investment pool or mutual fund is required prior to investing and on a continual basis. At a minimum, the following information shall be on file for each pool and/or mutual fund:
1. A description of eligible investment securities, and a written statement of investment policy and objectives;
2. A description of interest calculations, how interest is distributed, and how gains and losses are treated;
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3. A description of how these securities are safeguarded (including the settlement process), and how often these securities are priced and the program audited;
4. A description of who may invest in the program, how often, and the size of deposits and withdrawals;
5. A schedule for receiving statements and portfolio listings;
6. Whether reserves, retained earnings, etc. are utilized by the pool/fund;
7. A fee schedule and when and how fees are assessed; and
8. Whether the pool/fund is eligible for bond proceeds and/or will it accept such proceeds.
11.0 Collateralization
California law requires that public funds be collateralized. The depository must secure its public fund accounts by maintaining with the agent of the depository government securities having a market value of at least one hundred ten percent (110%) of the value of the public fund accounts. If a depository uses mortgage-backed securities (i.e., promissory notes secured by first mortgages or first deeds of trust) as collateral for public deposits, the market value of the mortgage-backed securities must be at least one hundred fifty percent (150%) of the value of the public fund accounts.
The collateralization requirement may be waived to the extent that funds are federally insured (currently up to $250,000 per institution). For deposits equivalent to the maximum insured amount, security may also be waived for interest accrued on the deposit provided the interest is computed by the depository on the average daily balance of the deposits, paid monthly and computed on a 360-day basis.
12.0 Safekeeping and Custody
Securities will be held by an independent third-party custodian selected by the City as evidenced by safekeeping receipts in the City’s name and monthly reports from the custodian. All investment transactions shall be conducted on a delivery-versus-payment City of Pico Rivera
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basis.
13.0 Diversification
The investments shall be diversified by:
• The diversification requirements included in the “Authorized Investments” section of this policy are designed to mitigate credit risk in the portfolio. No more than 5% of the total portfolio may be deposited with or invested in securities issued by any single issuer unless otherwise specified in this policy. • Avoiding investment in securities that have low ratings • Investing in securities with varying maturities, and
• Continuously investing a portion of the portfolio in readily available funds such as local government investment pools (LAIF), or money market funds to ensure that appropriate liquidity is maintained in order to meet ongoing obligations.
14.0 Maximum Maturities
In order to minimize the impact of market risk, it is intended that all investments will be held to maturity.
To the extent possible, the City shall attempt to match its investments with anticipated cash flow requirements. Unless matched to a specific cash flow, the City will not directly invest in securities maturing more than five (5) years from the date of purchase or in accordance with state and local statutes and ordinances.
Investments may be sold prior to maturity for cash flow, appreciation purposes or in order to limit losses; however, no investment shall be made based solely on earnings anticipated from capital gains.
Because of inherent difficulties in accurately forecasting cash flow requirements, a portion of the portfolio should be continuously invested in readily available funds.
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15.0 Internal Controls
The Director of Finance is responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the City are protected from loss, theft or misuse. The internal control structure shall be designed to provide reasonable assurance that these objectives are met. The concept of reasonable assurance recognizes that (1) the cost of a control should not exceed the benefits likely to be derived and (2) the valuation of costs and benefits requires estimates and judgments by management.
Accordingly, the investment officer shall establish a process for an annual independent review by an external auditor to assure compliance with policies and procedures. The internal controls shall address the following points:
• Control of collusion.
• Separation of transaction authority from accounting and recordkeeping. • Custodial safekeeping.
• Avoidance of physical delivery securities.
• Clear delegation of authority to subordinate staff members. • Written confirmation of transactions for investments and wire transfers. • Development of a wire transfer agreement with the lead bank and third party custodian
16.0 Cash Management
To obtain a reasonable return on public funds, the following cash management practices will be followed:
• Maintain maximum investment of all City funds not required to meet immediate cash flow needs.
• Except for cash in certain restricted and special funds, the City will consolidate cash balances from all funds to maximize investment earnings. Investment City of Pico Rivera
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income will be allocated to the various funds based on their respective participation and in accordance with generally accepted accounting principles. • Maximize the City’s cash flow through immediate deposit of all receipts, use of direct deposit when available, and appropriate timing of payment to vendors. • Maximize cash flow information available through the use of only one operating bank account.
17.0 Performance Standards
The investment portfolio will be designed to obtain a market average rate of return during budgetary and economic cycles, taking into account the City’s investment risk constraints and cash flow needs.
The investment portfolio shall be structured to optimize the return given the risk constraints and cash flow needs.
Investment performance shall be continually monitored and evaluated by the Investment Officer. Investment performance statistics and activity reports shall be generated on a quarterly basis for presentation to the City Council.
The Investment officer shall monitor and evaluate the portfolio’s performance relative to the chosen market benchmark(s), which will be included in the quarterly investment report. The Investment officer shall select an appropriate, readily available index to use as a market benchmark.
18.0 Reporting
Monthly transaction reports will be submitted by the Treasurer to the City Council within 45 days of the end of the reporting period in accordance with California Government Code Section 53607. The City Treasurer shall prepare and submit a quarterly investment report to the City Council. This report will include the following elements relative to the investments held at quarter-end.
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1. Face value
2. Security description
3. Coupon rate
4. Maturity date
5. Investment rating
6. Investment type
7. Purchase date
8. Cost of security
9. Purchase yield
10. Estimated market value
11. Amortized premium/discount
12. Statement relating the report to the Statement of Investment Policy
13. Statement of sufficiency of funds to meet the next six months’ obligations
19.0 Investment Policy Adoption
The Statement of Investment Policy shall be submitted annually to the City Council for adoption. The policy shall be reviewed at least annually to ensure its consistency with the overall objectives of the City and its relevance to current law and financial and economic trends. Any modifications made thereto must be approved by the City Council.
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20.0 Glossary
AGENCIES. Shorthand market terminology for any obligation issued by a governmentsponsored entity (GSE), or a federally related institution. Most obligations of GSEs are not guaranteed by the full faith and credit of the US government. Examples are:
FFCB. The Federal Farm Credit Bank System provides credit and liquidity in the agricultural industry. FFCB issues discount notes and bonds.
FHLB. The Federal Home Loan Bank provides credit and liquidity in the housing market. FHLB issues discount notes and bonds.
FHLMC. Like FHLB, the Federal Home Loan Mortgage Corporation provides credit and liquidity in the housing market. FHLMC, also called “FreddieMac” issues discount notes, bonds and mortgage pass-through securities.
FNMA. Like FHLB and FreddieMac, the Federal National Mortgage Association was established to provide credit and liquidity in the housing market. FNMA, also known as “FannieMae,” issues discount notes, bonds and mortgage passthrough securities.
GNMA. The Government National Mortgage Association, known as “GinnieMae,” issues mortgage pass-through securities, which are guaranteed by the full faith and credit of the US Government.
PEFCO. The Private Export Funding Corporation assists exporters. Obligations of PEFCO are not guaranteed by the full faith and credit of the US government.
TVA. The Tennessee Valley Authority provides flood control and power and promotes development in portions of the Tennessee, Ohio, and Mississippi River valleys. TVA currently issues discount notes and bonds.
ASKED. The price at which a seller offers to sell a security.
ASSET BACKED SECURITIES. Securities supported by pools of installment loans or leases or by pools of revolving lines of credit.
AVERAGE LIFE. In mortgage-related investments, including CMOs, the average time to expected receipt of principal payments, weighted by the amount of principal expected.
BANKER’S ACCEPTANCE. A money market instrument created to facilitate international trade transactions. It is highly liquid and safe because the risk of the trade transaction is transferred to the bank which “accepts” the obligation to pay the investor.
BENCHMARK. A comparison security or portfolio. A performance benchmark is a partial market index, which reflects the mix of securities allowed under a specific investment policy.
BID. The price at which a buyer offers to buy a security.
BROKER. A broker brings buyers and sellers together for a transaction for which the broker receives a commission. A broker does not sell securities from his own position.
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CALLABLE. A callable security gives the issuer the option to call it from the investor prior to its maturity. The main cause of a call is a decline in interest rates. If interest rates decline since an issuer issues securities, it will likely call its current securities and reissue them at a lower rate of interest. Callable securities have reinvestment risk as the investor may receive its principal back when interest rates are lower than when the investment was initially made.
CERTIFICATE OF DEPOSIT (CD). A time deposit with a specific maturity evidenced by a certificate. Large denomination CDs may be marketable.
CERTIFICATE OF DEPOSIT ACCOUNT REGISTRY SYSTEM (CDARS). A private placement service that allows local agencies to purchase more than $250,000 in CDs from a single financial institution (must be a participating institution of CDARS) while still maintaining FDIC insurance coverage. CDARS facilitates the trading of deposits between the California institution and other participating institutions in amounts that are less than $250,000 each, so that FDIC coverage is maintained.
COLLATERAL. Securities or cash pledged by a borrower to secure repayment of a loan or repurchase agreement. Also, securities pledged by a financial institution to secure deposits of public monies.
COLLATERALIZED MORTGAGE OBLIGATIONS (CMO). Classes of bonds that redistribute the cash flows of mortgage securities (and whole loans) to create securities that have different levels of prepayment risk, as compared to the underlying mortgage securities.
COMMERCIAL PAPER. The short-term unsecured debt of corporations.
COST YIELD. The annual income from an investment divided by the purchase cost.
Because it does not give effect to premiums and discounts which may have been included in the purchase cost, it is an incomplete measure of return.
COUPON. The rate of return at which interest is paid on a bond.
CREDIT RISK. The risk that principal and/or interest on an investment will not be paid in a timely manner due to changes in the condition of the issuer.
CURRENT YIELD. The annual income from an investment divided by the current market value. Since the mathematical calculation relies on the current market value rather than the investor’s cost, current yield is unrelated to the actual return the investor will earn if the security is held to maturity.
DEALER. A dealer acts as a principal in security transactions, selling securities from and buying securities for his own position.
DEBENTURE. A bond secured only by the general credit of the issuer.
DELIVERY VS. PAYMENT (DVP). A securities industry procedure whereby payment for a security must be made at the time the security is delivered to the purchaser’s agent.
DERIVATIVE. Any security that has principal and/or interest payments which are subject to uncertainty (but not for reasons of default or credit risk) as to timing and/or amount, or any security which represents a component of another security which has been separated from other components (“Stripped” coupons and principal). A derivative City of Pico Rivera
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is also defined as a financial instrument the value of which is totally or partially derived from the value of another instrument, interest rate, or index.
DISCOUNT. The difference between the par value of a bond and the cost of the bond, when the cost is below par. Some short-term securities, such as T-bills and banker’s acceptances, are known as discount securities. They sell at a discount from par, and return the par value to the investor at maturity without additional interest. Other securities, which have fixed coupons, trade at a discount when the coupon rate is lower than the current market rate for securities of that maturity and/or quality.
DIVERSIFICATION. Dividing investment funds among a variety of investments to avoid excessive exposure to any one source of risk.
DURATION. The weighted average time to maturity of a bond where the weights are the present values of the future cash flows. Duration measures the price sensitivity of a bond to changes in interest rates. (See modified duration).
FEDERAL FUNDS RATE. The rate of interest charged by banks for short-term loans to other banks. The Federal Reserve Bank through open-market operations establishes it.
FEDERAL OPEN MARKET COMMITTEE. A committee of the Federal Reserve Board that establishes monetary policy and executes it through temporary and permanent changes to the supply of bank reserves.
LEVERAGE. Borrowing funds in order to invest in securities that have the potential to pay earnings at a rate higher than the cost of borrowing.
LIQUIDITY. The speed and ease with which an asset can be converted to cash.
LOCAL AGENCY INVESTMENT FUND (LAIF). A voluntary investment fund open to government entities and certain non-profit organizations in California that is managed by the State Treasurer’s Office.
LOCAL GOVERNMENT INVESTMENT POOL. Investment pools that range from the State Treasurer’s Office Local Agency Investment Fund (LAIF) to county pools, to Joint Powers Authorities (JPAs). These funds are not subject to the same SEC rules applicable to money market mutual funds.
MAKE WHOLE CALL. A type of call provision on a bond that allows the issuer to pay off the remaining debt early. Unlike a call option, with a make whole call provision, the issuer makes a lump sum payment that equals the net present value (NPV) of future coupon payments that will not be paid because of the call. With this type of call, an investor is compensated, or "made whole."
MARGIN. The difference between the market value of a security and the loan a broker makes using that security as collateral.
MARKET RISK. The risk that the value of securities will fluctuate with changes in overall market conditions or interest rates.
MARKET VALUE. The price at which a security can be traded.
MARKING TO MARKET. The process of posting current market values for securities in a portfolio.
MATURITY. The final date upon which the principal of a security becomes due and payable.
The investment’s term or remaining maturity is measured from the settlement date to final maturity.
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MEDIUM TERM NOTES. Unsecured, investment-grade senior debt securities of major corporations which are sold in relatively small amounts on either a continuous or an intermittent basis. MTNs are highly flexible debt instruments that can be structured to respond to market opportunities or to investor preferences.
MODIFIED DURATION. The percent change in price for a 100 basis point change in yields.
Modified duration is the best single measure of a portfolio’s or security’s exposure to market risk.
MONEY MARKET. The market in which short-term debt instruments (T-bills, discount notes, commercial paper, and banker’s acceptances) are issued and traded.
MORTGAGE PASS-THROUGH SECURITIES. A securitized participation in the interest and principal cash flows from a specified pool of mortgages. Principal and interest payments made on the mortgages are passed through to the holder of the security.
MUNICIPAL SECURITIES. Securities issued by state and local agencies to finance capital and operating expenses.
MUTUAL FUND. An entity which pools the funds of investors and invests those funds in a set of securities which is specifically defined in the fund’s prospectus. Mutual funds can be invested in various types of domestic and/or international stocks, bonds, and money market instruments, as set forth in the individual fund’s prospectus. For most large, institutional investors, the costs associated with investing in mutual funds are higher than the investor can obtain through an individually managed portfolio.
NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATION (NRSRO).
A credit rating agency that the Securities and Exchange Commission in the United States uses for regulatory purposes. Credit rating agencies provide assessments of an investment's risk. The issuers of investments, especially debt securities, pay credit rating agencies to provide them with ratings. The three most prominent NRSROs are Fitch, S&P, and Moody's.
NEGOTIABLE CD. A short-term debt instrument that pays interest and is issued by a bank, savings or federal association, state or federal credit union, or state-licensed branch of a foreign bank. Negotiable CDs are traded in a secondary market and are payable upon order to the bearer or initial depositor (investor).
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.
PREMIUM. The difference between the par value of a bond and the cost of the bond, when the cost is above par.
PREPAYMENT SPEED. A measure of how quickly principal is repaid to investors in mortgage securities.
PREPAYMENT WINDOW. The time period over which principal repayments will be received on mortgage securities at a specified prepayment speed.
PRIMARY DEALER. A financial institution (1) that is a trading counterparty with the Federal Reserve in its execution of market operations to carry out U.S. monetary policy, City of Pico Rivera
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and (2) that participates for statistical reporting purposes in compiling data on activity in the U.S. Government securities market.
PRUDENT PERSON (PRUDENT INVESTOR) RULE. A standard of responsibility which applies to fiduciaries. In California, the rule is stated as “Investments shall be managed with the care, skill, prudence and diligence, under the circumstances then prevailing, that a prudent person, acting in a like capacity and familiar with such matters, would use in the conduct of an enterprise of like character and with like aims to accomplish similar purposes.”
REALIZED YIELD. The change in value of the portfolio due to interest received and interest earned and realized gains and losses. It does not give effect to changes in market value on securities, which have not been sold from the portfolio.
REGIONAL DEALER. A financial intermediary that buys and sells securities for the benefit of its customers without maintaining substantial inventories of securities and that is not a primary dealer.
REPURCHASE AGREEMENT. Short-term purchases of securities with a simultaneous agreement to sell the securities back at a higher price. From the seller’s point of view, the same transaction is a reverse repurchase agreement.
SAFEKEEPING. A service to bank customers whereby securities are held by the bank in the customer’s name.
STRUCTURED NOTE. A complex, fixed income instrument, which pays interest, based on a formula tied to other interest rates, commodities, or indices. Examples include inverse floating rate notes which have coupons that increase when other interest rates are falling, and which fall when other interest rates are rising, and "dual index floaters," which pay interest based on the relationship between two other interest rates - for example, the yield on the ten-year Treasury note minus the Libor rate.
Issuers of such notes lock in a reduced cost of borrowing by purchasing interest rate swap agreements.
SUPRANATIONAL. A Supranational is a multi-national organization whereby member states transcend national boundaries or interests to share in the decision making to promote economic development in the member countries.
TOTAL RATE OF RETURN. A measure of a portfolio’s performance over time. It is the internal rate of return, which equates the beginning value of the portfolio with the ending value; it includes interest earnings, realized and unrealized gains, and losses in the portfolio.
U.S. TREASURY OBLIGATIONS. Securities issued by the U.S. Treasury and backed by the full faith and credit of the United States. Treasuries are considered to have no credit risk, and are the benchmark for interest rates on all other securities in the US and overseas. The Treasury issues both discounted securities and fixed coupon notes and bonds.
TREASURY BILLS. All securities issued with initial maturities of one year or less are issued as discounted instruments, and are called Treasury bills. The Treasury currently issues three- and six-month T-bills at regular weekly auctions. It also issues “cash management” bills as needed to smooth out cash flows.
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TREASURY NOTES. All securities issued with initial maturities of two to ten years are called Treasury notes, and pay interest semi-annually.
TREASURY BONDS. All securities issued with initial maturities greater than ten years are called Treasury bonds. Like Treasury notes, they pay interest semi-annually.
VOLATILITY. The rate at which security prices change with changes in general economic conditions or the general level of interest rates.
YIELD TO MATURITY. The annualized internal rate of return on an investment which equates the expected cash flows from the investment to its cost.
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APPENDIX 1
The authorized investment officers as stated in accordance with the City of Pico Rivera Investment Policy, are responsible for administering an investment program which:
• Adheres to the Statement of Investment Policy
• Prioritizes safety and liquidity
• Determines risk and optimizes return
• Provides for a system of due diligence in making investment decisions.
Delivery vs. Payment – all trades of marketable securities will be executed by delivery vs. payment to ensure that securities are deposited in an eligible financial institution prior to the release of City funds.
INVESTMENT
PROCESS
COUNCIL
MEETING
DATE
COUNCIL MEMBER REQUEST DETAIL DIRECTOR(S)
ACTION TAKEN: Memo; Staff
Report; Closed Session;
Presentation; Follow-up
Meeting; City Manager Reports;
Informal Action
DISCUSSION
ITEM
ACTION
ITEM DATE
STATUS:
Complete;
Pending;
On-going;
In-Progress
2/11/2025 Garcia/Lara Pico Boys relocation discussion Future City Council meeting In Progress
GOOD OF THE ORDER