09.E Report FY 2026 Q4 Investment Report 2026-09-01 — Pismo Beach City Council, September 1, 2026

PISMO BEACH CITY COUNCIL STAFF REPORT
Agenda Item #9.E
September 1, 2026

TITLE:

Quarterly Investment Report for the Three Months of April through June 2026 – the Fourth Quarter of Fiscal Year (FY) 2026

RECOMMENDATION:

No action recommended; for information only.

EXECUTIVE SUMMARY:

This report updates City Council on the City’s investment portfolio as of the quarter ending on June 30, 2026. This report complies with regulations set forth in California State Government Code Section 53646 in which the City Treasurer is required to submit to the legislative body (City Council) a quarterly report containing various information on the City’s investments. Pursuant to Government Code Section 6505.5, this information is being provided here to the Pismo Beach Public Financing Authority, the Pismo Beach Public Financing Agency, and the Central Coast Blue Regional Recycled Water Authority, through the members of the City Council who sit on those boards.

The report includes all investments managed by the City, including funds invested in various securities, the City’s pooled funds invested in various financial instruments, and funds held in reserve with fiscal agents.
• Table A (Attachment 1) provides a summary of the City’s cash, investments, and earnings based on book value as of June 30, 2026.
• Tables B and C (Attachments 2 and 3) provides details on the investment type, issuer, maturity date, book value, market value, and interest rates as of June 30, 2026 for the General Fund Reserve and City Pooled Funds A, respectively.

All of the City’s investments and the City’s allocation of funds in the various financial instruments comply with State Government Code Sections 53610—53686 and with the City’s Investment Policy’s primary objective to safeguard the principal. Additionally, the City of Pismo Beach’s invested funds as described in this report comply with the City’s Investment Policy and meet the City’s pooled expenditure requirements for the next six months.

Description of Cash and Investment Accounts
Negotiable Certificates of Deposit (CDs), US Government Agency Securities (GASs), Corporate Bonds (Corp Bonds), US Treasury Notes (Treasuries), Mortgage-Backed Securities (MBSs), and Bank Notes
• General Fund Reserves: The City has three reserves invested in various financial instruments that mature at various periods over the next five years. The total amount invested for these three reserves is $9.42 million, earning 3.54% on average of interest during Fiscal Year (FY) 2026. Specifics of each reserve are provided below:
o General Fund Reserve: The City adopted a Fiscal Policy that maintains a General Fund Reserve of 25% of budgeted annual operating expenditures. This Reserve Council Agenda 9-1-2026 9.E-1

should be $8.83 million, which is 25% of the FY 2026 budgeted annual operating expenditures. Currently, $8.77 million is invested in various CDs, GASs, Corp Bonds, and Treasuries earning 3.63% on average per year and $239 thousand is pending investment.
o City Building Reserve: The City Council created a City Building Reserve of $500 thousand for the maintenance and upkeep of City facilities and buildings. Currently, this Reserve is $500,000 and is invested in various CDs and GASs earning on average 2.42% per year during FY 2026.
o Risk Management Reserve: The City Council established a Risk Management Reserve, contributing $50 thousand each year to a maximum of $250 thousand.

Currently, this Reserve is $250 thousand, which is invested in CDs earning 2.37% on average per year.
• City-Pooled Funds A (for deferred capital projects): Based on the City’s 10-year capital plan and the cash flow needs for the next five years, the City has invested $50.11 million in various CDs, GASs, Corp Bonds, MBSs, Treasuries, and Bank Notes that mature at various periods over the next five years and have a 3.66% average interest rate during FY 2026.

Other Financial Instruments
City-Pooled Funds B (for current year expenditures): The City follows the practice of pooling cash for all funds in financial instruments. Interest earned on pooled cash and investments is allocated quarterly to the various funds based on the respective fund’s average quarterly cash balance. As of June 30, 2026, the City-Pooled Funds B are allocated or invested as described below.
• $18.89 million in U.S. Bank Checking & Sweep: This account is the City’s primary checking and sweep account, where the account earned on average 3.26%. • $10.49 million in Local Agency Investment Fund (LAIF): LAIF is a State investment pool earning 3.92% annually and is one of the City’s main savings accounts where cash is held for current year expenditures.
• $5.54 million in PFM Asset Management California Asset Management Program (CAMP) Pool is a California Joint Powers Authority (JPA) is a State investment pool earning 3.79% annually and is one of the City’s main savings accounts where cash is held for current year expenditures.
• $184 thousand in the U.S. Bank Custodian: This is where interest from various investments is deposited and also where matured securities are temporarily deposited earning 3.55% annually.

OPEB Trust Account
The Governmental Accounting Standards Board (GASB) requires public-sector entities to account for the promise to provide other post-employment benefits (OPEB) over the working life of the employee rather than on a pay-as-you-go basis. The City has an actuarial study performed every two years to determine how much to set aside each year to partially or completely fund the City’s future obligations for retiree health costs.

The City’s Other Post-Employment Benefits (OPEB) Trust Account is held with the California Employers’ Retiree Benefit Trust (CERBT) Fund. This trust was established to Council Agenda 9-1-2026 9.E-2

receive employer contributions that prefund retiree health and other post-employment benefit (OPEB) costs for retirees and their beneficiaries. The CERBT Fund helps the City finance future obligations primarily through investment earnings generated by CalPERS, which are projected to average approximately 6.75% annually, though actual returns fluctuate quarterly.

Until FY 2024, the City’s OPEB Trust Account carried an unfunded liability, and the City made annual contributions equal to the Actuarially Determined Contribution (ADC) to reduce that liability. By the end of FY 2024, the Trust became overfunded, allowing the City to be reimbursed for its FY 2025 and FY 2026 retiree health costs. Additionally, no new contributions were made to the Trust in FY 2026. Maintaining an OPEB Trust allows the City to treat these contributions as an asset to offset future retiree health costs, rather than carrying them as a long-term liability on the City’s balance sheet.

Portfolio Allocation
Per California Government Code 53600 et seq., and the City's Investment Policy, the City may invest up to a maximum percentage of the entire portfolio of funds in authorized financial instruments. Table 1 and Chart 1 show a summary of the authorized financial instruments, the maximum percentage limits, the book value as of June 30, 2026 of the City’s funds, and the percentage of the total City’s pooled funds that are invested in each financial instrument.

Table 1: Investment Portfolio as of June 30, 2026

Financial Instrument
Maximum
%
Book Value as
of 6/30/26
% of
Portfolio
Council Agenda 9-1-2026 9.E-3

Portfolio Liquidity
The portion of the City’s portfolio that is managed by the City Treasurer (all accounts except the Bond Funds and OPEB Trust Account) is sufficiently liquid to meet the City’s expenditure requirements for the next 6 months. The majority of funds are invested in LAIF, which has a liquidity of one day. Table 2 and Chart 2 illustrate the liquidity of the City’s managed portfolio.

Table 2: Liquidity of the City’s Managed Portfolio

Checking
Account, 20%
Treasury
Notes, 20%
Corporate
Bond, 16%Negotiable
Certificates of
Deposit, 12%
Local Agency
Investment
Fund, 11%
Mortgage
Backed
Securities, 10%
PFM Asset
Mgmt CAMP,
6%
US Government
Agency
Obligations, 5%
Bank Note, 1%
Chart 1: Investment Portfolio as of June 30, 2026
Liquidity Amount
0 to 30 days 35,094,601$
FY 2027 11,954,765
FY 2028 11,291,437
FY 2029 13,836,987
FY 2030 8,959,722
FY 2031 13,489,082
94,626,593$
Council Agenda 9-1-2026 9.E-4

Investment Value

Book Value: The book value represents the initial outlay for an investment and is the amount carried on a balance sheet. In the past quarter ending June 30, 2026, the City’s total book value of cash and investments was $102.48 million. This is $1.74 million greater than the last quarter’s ending balance. In general, there are a number of factors that impact changes in cash and investment balances from quarter to quarter. These changes may include receiving periodic payments (e.g., property taxes are received in December and April), large payments on debt service or capital projects, seasonal revenues and expenditures, and other factors affecting cash flow. Table 3 illustrates the book value as of the quarter ending June 30, 2026 compared to the previous quarter.

Table 3: Book Value Comparison

0 10,000 20,000 30,000 40,000
0 to 30 days
FY 2027
FY 2028
FY 2029
FY 2030
FY 2031
Portfolio Amount ($ thousands)
Li
q
u
i
d
i
t
y

P
e
r
i
o
d
Chart 2: Liquidity of the City’s Managed Portfolio
TOTAL 102,475,008$ 100,733,836$ 1,741,172$
Council Agenda 9-1-2026 9.E-5

Market Value: The market value represents the current price at which a security can be traded and is the value of an investment comparing the various aspects of the security to other factors in the market such as interest rates. The market value as of June 30, 2026 for CDs, GASs, Corporate Bonds, MBSs, Treasuries, and Bank Notes was $59.27 million, which is $267 thousand less than the book value, as illustrated in Table 4. The City expects to hold onto the majority of its investments to maturity and would receive the book value of its investment.

Table 4: Book Value to Market Value Comparison

Investment Earnings
In the past quarter ending June 30, 2026, the City’s total interest earnings were a gain of $1.40 million, including a $766 thousand gain in the City’s managed portfolio and a $574 thousand gain in OPEB. The annual interest earnings for FY 2026 was $4.73 million, which is a gain of 4.62% for the year for the City’s entire portfolio and a gain of 3.02% for the City’s managed portfolio, as illustrated in Table 5. Note that as the City’s cash and investments change, the interest earnings change correspondingly.

The portfolio’s weighted average duration for General Fund Reserves and City Pooled Funds – A is 2.11 years. This duration indicates limited sensitivity to interest rate changes and supports the City’s objectives of safety and liquidity.

Table 5: Annual Investment Earnings

Total All Securities 59,531,993$ 59,265,241$ (266,752)$ TOTAL 102,475,008$ 1,398,031$ 4,730,665$ 4.62%
Total Managed Portfolio 94,626,593$ 766,179$ 2,854,836$ 3.02% Council Agenda 9-1-2026 9.E-6

Performance
The City’s Investment Policy outlines the objectives of the City’s investments, in priority order, as:
• Safety of principal to ensure the preservation of,
• Liquidity to enable the City to all operating requirements which might be reasonably anticipated; and
• Return on investments commensurate with the City’s investment risk constraints identified in the Investment Policy and the cash flow characteristics of the portfolio  All three objectives have been met.

The annual interest earnings rate for FY 2026 was 4.62% for the City’s entire portfolio.

The annual interest earnings rate for FY 2026 was 3.02% for the City’s managed portfolio (excludes Bond funds and OPEB Trust Account). This is compared to LAIF, which is earned 3.92% as of June 30, 2026, or the 2-year U.S. Treasury Note, which earned 4.20% as of June 30, 2026. The following Table 6 lists the various performance measures regarding the various annual earnings rate for the City’s entire portfolio, the City’s managed portfolio, and the two benchmarks of LAIF and the 1-year U.S. Treasury Note.

Table 6: City Portfolio Investment Earnings Compared to Performance Measures

Performance Measure
City’s Annual Earnings Rate for entire Portfolio 4.62%
City’s Annual Earnings Rate for Managed Portfolio 3.02% LAIF Average Annual Earnings Rate 3.92%
2-Year U.S. Treasury Note 4.20%

Future Outlook
Economic activity continues to grow at a solid pace despite heightened uncertainty, partly related to conflict in the Middle East. Productivity and capital investment remain strong, while employment growth has kept pace with labor-force growth and unemployment has remained relatively stable. Inflation continues to exceed the Federal Reserve’s 2% target, partly due to supply disruptions and higher prices in sectors such as energy.

The Federal Open Market Committee (FOMC) long-term objective is to promote maximum employment alongside price stability, defined as inflation averaging 2 percent over time.

To support these objectives, the FOMC chose to keep the federal funds rate target range unchanged at 3.50% to 3.75%. Future policy decisions will be guided by incoming economic data, shifts in the outlook, and an ongoing evaluation of risks.

While rates have stabilized and shown some variability, they remain subject to change based on economic conditions and monetary policy. The City Treasurer continues to Council Agenda 9-1-2026 9.E-7

invest across the 1- to 5-year securities and diversify the City’s portfolio across various sectors. This approach is designed to lock in currently favorable rates, supporting continued strength in interest earnings.

FISCAL IMPACT:

No fiscal impact from the report itself—information only.

ATTACHMENTS:

1.Table A: Summary Table for ALL Funds, including Book Values and Earnings Data for Investments in Other Financial Instruments

2.Table B: For the General Fund Reserve—Basic Data on Investments in Securities

3.Table C: For City Pooled Funds A—Basic Data on Investments in Securities Submitted by: Nadia Feeser, Administrative Services Director/City Treasurer City Manager Approval:

Council Agenda 9-1-2026 9.E-8

Investment Name Name of Institution Type of Investment Current
Earnings
Rate
Book Value
as of 6/30/26
Actual Interest
Earned 4th
Quarter Ending
6/30/26
Year-to-Date
Interest
Earned
Ending
6/30/26
* Data
Source
General Fund Reserves US Bank CDs/GASs/Corp
Bonds/Treasuries

3.54% avg 9,523,785 79,917$ 276,595$ 1 City Pooled Funds - A US Bank CDs/GASs/ Corp
Bonds/ MBSs/
Treasuries/ Bank
Notes

3.66% avg 50,008,208 381,756 1,427,054 1 Total All Securities 59,531,993$ 461,673$ 1,703,650$ City Pooled Funds - B US Bank Custody 3.55%183,733$ 3,956$ 21,367$ 1 City Pooled Funds - B Local Agency Invest.

Fund (LAIF)
State Investment Pool 3.92% 10,487,352 102,433 174,461 2 City Pooled Funds - B PFM Asset Mgmt
CAMP
JPA Investment Pool 3.79%5,536,547 51,701 464,406 3 City Pooled Funds - B US Bank Checking & Sweep 3.26% 18,886,967 146,416 490,953 4 City Pooled Funds - B 35,094,601$ 304,506$ 1,151,187$ City Pooled Funds total A + B 85,102,809$ 686,262$ 2,578,241$ Funds Held with Fiscal
Agent
Bond funds: Wilmington
Trust
2017 Pier Project 291$ 294$ 1,636$ 5 Funds Held with Fiscal
Agent
Bond funds: Wilmington
Trust
2017B CREBs 141 144 1,154 5
Funds Held with Fiscal
Agent
Bond funds: Wilmington
Trust
2024 Public Safety
Facility
1,201,619 57,091 858,262 5 Calpers Benefit Trust
OPEB Trust Account CalPERS Benefit Trust
Account
Various managed by
CalPERS
6,646,364$ 574,323$ 1,014,777$ 6
TOTAL, Cash and Investments at June 30, 2026:102,475,008$ 1,398,031$ 4,730,665$ TOTAL for City Managed Portfolio, Cash and Investments:94,626,593$ 766,179$ 2,854,836$ Notes:
* Data Sources for Book Values and Actual Interest Earned:
1 = Monthly investment statement from US Bank
2 = Monthly statement from Local Agency Investment Fund 3 = Monthly statement from PFM Asset Management LLC
4 = Monthly reconciled bank statement from US Bank
5 = Monthly statement from Wilmington Trust
6 = Monthly statement from CalPERS Benefit Trust Account City of Pismo Beach
Table A: Summary Table for All Funds,
including Book Values & Earnings Data for Investments in Other Financial Instruments Council Agenda 9-1-2026 9.E-9
Attachment 1

City of Pismo Beach
June 30, 2026 QUARTERLY INVESTMENT REPORT
Table B: For the General Fund Reserves - Basic Data on Investments in Securities:

Government Agency Securities, Bank Certificates of Deposit, Corporate Bonds, Treasury Notes CUSIP Issuer Name Coupon Acq Date Maturity Type S&P Par Value Book Value IDC Market Value
Gain/ Loss Days to
Stated
Maturity
57636QBL7 Mastercard (39.54%)4.60% 6/8/2026 6/8/2031 Corporate Bond A+99.846 235,219 234,901 (318) 1,804 59013KPN0 Merrick Bank 1.10% 11/9/2021 11/9/2026 CD 98.97 245,000 242,477 (2,524) 132 66989HBG2 Novartis Capital 4.40% 3/18/2026 3/18/2031 Corporate Bond AA-99.265 249,900 248,163 (1,738) 1,722 70962LAS1 Pentagon Federal
Credit Union (20.4%)

0.90% 9/29/2021 9/29/2026 CD 99.239 50,000 49,600 (400) 91 69353RFZ6 PNC Bank 4.43% 10/8/2025 7/21/2028 Corporate Bond A 99.832 402,428 399,328 (3,100) 752 87164X2C9 Synchrony Bank 4.60% 9/15/2023 9/15/2028 CD 100.695 245,000 246,703 1,703 808 88413QDL9 Third Federal Savings
Bank

3.50% 6/28/2022 6/28/2027 CD 99.36 245,000 243,432 (1,568) 363 89235MLC3 Toyota Financial
Savings Bank

0.95% 7/15/2021 7/15/2026 CD 99.871 245,000 244,684 (316) 15 91282CJN2 US Treasury 4.38% 12/10/2024 11/30/2028 Treasury Note N/A 100.461 403,703 401,844 (1,859) 884 91282CKN0 US Treasury 4.63% 6/5/2026 4/30/2031 Treasury Note N/A 101.789 509,902 508,945 (957) 1,765 91282CMU2 US Treasury 4.00% 12/4/2025 3/31/2030 Treasury Note N/A 99.363 304,969 298,089 (6,880) 1,370 91282CKF7 US Treasury (9.77%)4.13% 4/15/2026 3/31/2031 Treasury Note N/A 99.625 202,051 199,534 (2,517) 1,735 Total $ 9,523,785 $ 9,469,989
Council Agenda 9-1-2026 9.E-11
Attachment 2

City of Pismo Beach
June 30, 2026 QUARTERLY INVESTMENT REPORT
Table C: For City Pooled Funds A - Basic Data on Investments in Securities:

Government Agency Securities, Bank Certificates of Deposit, Corporate Bonds, Mortgage-Backed Securities, Treasury Notes CUSIP Issuer Name Coupon Acq Date Maturity Type S&P Par Value Book Value IDC Market Value
Gain/ Loss Days to
Stated
Maturity
Council Agenda 9-1-2026 9.E-12
Attachment 3

City of Pismo Beach
June 30, 2026 QUARTERLY INVESTMENT REPORT
Table C: For City Pooled Funds A - Basic Data on Investments in Securities:

Pismo Beach City CouncilSeptember 1, 2026

Pismo Beach City Council
September 1, 2026