Agenda packet — Porterville City Council, March 5, 2024 (part 1 of 3)

City Council Agenda March 5, 2024

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CITY COUNCIL AGENDA
CITY HALL, 291 N. MAIN STREET

PORTERVILLE, CALIFORNIA
MARCH 5, 2024, 5:30 PM
The City of Porterville is allowing for electronic viewing of City Council Meetings. Porterville City Council Meetings will be live streamed on YouTube at
https://www.youtube.com/channel/UC5KuhSrNMNL9nwHJVtnJvvA Alternatively, this meeting will also be available via Zoom as a courtesy using the following information
City of Porterville – City Council Meeting of March 5, 2024 Please use the following link below to join the webinar:
https://us06web.zoom.us/j/81099633881?pwd=udmg9z6vTEfEwBgl5g67g8bxQCgzTg.1SiYsaSpcg DonCr0
Or via Telephone: 1-669-900-6833 Webinar ID: 810 9963 3881 Passcode: 766563 Call to Order
Roll Call

ORAL COMMUNICATIONS
This is the opportunity to address the City Council on any matter scheduled for Closed Session. Unless additional time is authorized by the Council, all commentary shall be limited to three minutes.

CITY COUNCIL CLOSED SESSION:

A. Closed Session Pursuant to:

1 - Government Code Section 54956.9(d) (3) – Conference with Legal Counsel – Anticipated Litigation – Significant Exposure to Litigation: Three (3) cases in which facts are not yet known to potential plaintiffs.
2 - Government Code Section 54956.9(d)(4) – Conference with Legal Counsel – Anticipated Litigation – Initiation of Litigation: Three (3) cases. 6:30 P.M. RECONVENE OPEN SESSION AND REPORT ON REPORTABLE ACTION

TAKEN IN CLOSED SESSION
Pledge of Allegiance Led by Council Member Weyhrauch
Invocation

PRESENTATIONS
Employee of the Month - Rafael Baez
Employee Service Awards
City Council Agenda March 5, 2024

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Bye Bye Mattress Presentation

ORAL COMMUNICATIONS
This is the opportunity to address the Council on any matter of interest, whether on the agenda or not. Please address all items not scheduled for public hearing at this time. Unless additional time is authorized by the Council, all commentary shall be limited to three minutes.

REPORTS
This is the time for all committee/commission/board reports; subcommittee reports; and staff informational items.

I. Staff Informational Reports

1. Proclamation Issuance Report (February 2024)

2. Permanent Local Housing Allocation 5-Year Plan Amendment

CONSENT CALENDAR
All Consent Calendar Items are considered routine and will be enacted in one motion. There will be no separate discussion of these matters unless a request is made, in which event the item will be removed from the Consent Calendar. All items removed from the Consent Calendar for further discussion will be heard at the end of Scheduled Matters.

1. Approval of Draft Minutes of February 20, 2024
Re: Considering approval of the City Council draft Minutes of February 20, 2024.

2. Authorization to Purchase Air Conditioner Units
Re: Consideration to award the replacement and installation of two (2) 2-ton commercial air conditioner units to TAM-N-TJ'Z Cooling Inc. for a total project amount not to exceed $14,980.

3. Emergency Operations Center Technology Upgrade
Re: Consideration to authorize staff to negotiate the purchase and installation of new technology upgrades from ITC for the amount of $54,700 and authorize a 10% contingency for unforeseen issues.

4. Authorization to Distribute Request for Proposals (RFP) for Consulting Services to Prepare the Community Development Block Grant (CDBG) Five-Year Consolidated Plan and Update the Analysis of Impediments or Prepare an Assessent of Fair Housing Re: Considering approval to distribute a Request for Proposals for Consulting Services to update the City of Porterville’s CDBG Consolidated Plan and update the Analysis of Impediments or prepare an Assessment of Fair Housing.

5. Award of Contract - Santa Fe Byway Revitalization and Beautification Project Re: Considering award of contract in the amount of $4,091,908.89 to S & B Sons, Inc. for the Santa Fe Byway Revitalization and Beautification Project consisting of improvements to the existing asphalt trail, installation of concrete edge bands along the trail, one (1) new picnic shelter, a new playground and workout equipment area with shelter, benches, water fountains, solar trail lighting, and new lights at intersections for improvements to public City Council Agenda March 5, 2024

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safety, which runs north to south between Henderson Avenue and Walnut Avenue along the old Santa Fe Railway.

6. Sports Complex Concession License
Re: That the City Council approve the Sports Complex Concession License renewal with Porterville Soccer League / South Valley Chivas contingent on any final edits to the License by the City Attorney.

7. HOME Investment Partnerships Program (HOME) Grant Funds Re: Consideration of a request to disencumber $400,000 in HOME Grant funds.

8. Program Supplement to the Administering Agency-State Agreement - Tule River Indian Tribe ATP Project
Re: Consideration to adopt the draft resolutions authorizing the Mayor to sign the Master Agreement and Program Supplement No. A426 to administering Agency-State Agreement for State-Aid Projects No. 06-5122S21.

9. California POST Team Building Workshop
Re: Consideration to approve the expenditure in the amount of $6,531.09 for police department command and management staff to participate in the California Peace Officer Standards and Training (POST) Team Building Workshop.

10. Consideration of Appointment of CalTIP Alternate Board Member Re: Consideration of the appointment of an individuals to serve as members on the California Transit Indemnity Pool Board.

11. Request for Proclamation - California Arbor Week - March 7 - 14, 2024 Re: Considering approval of a request to proclaim March 7th - 14th, 2024, as "California Arbor Week" in the City of Porterville.

12. Authorization to Become a Mattress Collection Site
Re: Authorization to partner with Bye Bye Mattress of the Mattress Recycling Council to become a mattress collection site and consider additional staff allocation to operate the Mattress Recovery Program.

13. Consideration of Updated Statement of Investment Policy Re: Consideration to adopt the draft resolution approving the updated Statement of Investment Policy.

A Council Meeting Recess Will Occur at 8:30 p.m., or as Close to That Time as Possible

PUBLIC HEARINGS

14. Consideration of a Tentative Parcel Map and Conditional Use Permit (PRC No. 21- 2028-C) to Authorize Development of a Convenience Store Including an Automobile Service Station and Off-sale Beer and Wine Licensing
Considering approval of a tentative subdivision map and CUP for project proposed on the northwest corner of North Grand Avenue and Highway 65.

SCHEDULED MATTERS

15. Porterville Veterans Homecoming Queen/Miss Porterville City Council Agenda March 5, 2024

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Re: Council to consider partnering with the Porterville Homecoming Queen/Miss Porterville Pageant for the promotion of Porterville.

16. Consideration of Draft Ordinance Regulating Unsafe and Unauthorized Camping and Storage of Personal Property, Protecting Critical Infrastructure, and Mitigating Harm to the Public Health, Safety and Welfare; and Consideration of Administrative Options to Address Homelessness Within the City of Porterville
Re: Review and consideration of draft Ordinance and administrative options to address homelessness within the City of Porterville.

17. Status and Review of Local Drought Emergency
Re: Considering approval of the conclusion of the Declaration of Local Emergency.

18. Status and Review of Declaration of Local Flood Emergency Re: Review of the Declaration of Local Emergency made on March 13, 2023, concerning the significant weather event and impacts or likely impacts relative to increased flow of the Tule River.

AB 1234 REPORTS
This is the time for all AB 1234 reports required pursuant to Government Code § 53232.3.

1. Flag Day Committee - February 20, 2024

2. Tulare County Task Force on Homelessness - February 21, 2024

3. Tulare County Regional Transit Agency (TCRTA) - February 21, 2024

4. Tulare County Association of Governments (TCAG) - February 26, 2024

5. Tulare County Economic Development Corp. (TCEDC) - February 28, 2024

ORAL COMMUNICATIONS

OTHER MATTERS

CLOSED SESSION
Any Closed Session Items not completed prior to 6:30 p.m. will be considered at this time.

ADJOURNMENT - to the meeting of March 19, 2024, at 5:30 p.m.

In compliance with the Americans with Disabilities Act and the California Ralph M. Brown Act, if you need special assistance to participate in this meeting, or to be able to access this agenda and documents in the agenda packet, please contact the Office of City Clerk at (559) 782-7464.

Notification 48 hours prior to the meeting will enable the City to make reasonable arrangements to ensure accessibility to this meeting and/or provision of an appropriate alternative format of the agenda and documents in the agenda packet.

Materials related to an item on this Agenda submitted to the City Council after distribution of the Agenda packet are available for public inspection during normal business hours at the Office of City City Council Agenda March 5, 2024

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Clerk, 291 North Main Street, Porterville, CA 93257, and on the City’s website at www.ci.porterville.ca.us.

Item No.

CITY COUNCIL AGENDA – MARCH 5, 2024
SUBJECT: 1. Proclamation Issuance Report (February 2024) SOURCE: Administrative Services
COMMENT:

Pursuant to the City Council Procedural Handbook, staff is herein providing a report on Proclamation Requests that were processed during the month of February 2024. For the period of February 1 to February 29, 2024, the following request was processed.

Date Organization Name of Event / Proclamation
01/12/2024 American Red Cross of
Central Valley
Red Cross Month (March 2024)
RECOMMENDATION: Information Only
ATTACHMENTS: 1. Proclamation Policy_12-19-23

2. Proclamation - Red Cross Month
Appropriated/Funded:

Review By:

Department Director:

Yuliana Andrade, Acting Administrative Services Director Final Approver: Patrice Hildreth, City Manager
G. Requests for Proclamations
The City routinely receives requests for proclamations. To qualify as a proclamation, the language should be ceremonial and not convey legislative action or represent that it is establishing City policy or directives. Each individual Council Member has the authority to grant and sign proclamations on their own respective behalf if they are processed in accordance with this Section. The City Council may grant and sign “City Proclamations,” only if the proclamation is approved by the City Council at a noticed and public City Council meeting in accordance with the Brown Act, and these proclamations shall be deemed to be “City Proclamations” and have the City Seal affixed.

Within one business day of receipt of a Request for Proclamation, staff shall scan and email the request to all City Council Members. In the event a Council Member is interested in granting the request, they shall individually notify staff of their interest. If more than one Council Member responds, the first responsive notification received by staff shall be the grantor. Staff shall then advise the remaining Council Members as to interest in signing the proclamation, and the Council Members shall have one business day to reply, after which the proclamation will be drafted with the appropriate number of signature blocks for execution by the Council Members. If more than two council members respond that they are interested in signing the proclamation, a consent calendar item will be prepared for the next scheduled city council meeting, for full City Council consideration. Approved City Proclamations may be signed by the Mayor, although the Mayor’s signature shall not be compelled. Additionally, the City Council may provide express authority regarding additional members who wish to also be signatories.

All signed proclamations will be made available in the Office of City Clerk for pick up by the requestor unless arrangements have been made for presentation at a certain event. Proclamations shall not be included on the Council Agenda nor presented at a Council Meeting unless approved by a majority of the entire Council. Staff shall provide a monthly informational report to the City Council identifying the proclamations for the preceding month. (Amended via Minute Order 15-121923, December 19, 2023.)

CITY COUNCIL AGENDA – MARCH 5, 2024
SUBJECT: 2. Permanent Local Housing Allocation 5-Year Plan Amendment SOURCE: Community Development
COMMENT: A Public Hearing notice was published for an amendment to the Permanent Local Housing Allocation (PLHA) 5-year plan, to take place at the City Council meeting scheduled for March 5, 2014. At this time, it is necessary to postpone this item to a later meeting as Staff is awaiting guidance from the State Department of Housing and Community Development (HCD) on the updated amendment template form provided by HCD. Without the requested information, the Public Hearing document could not be completed prior to this meeting. Staff will be bringing this item back to City Council at a future meeting, which will be publicly noticed.

RECOMMENDATION:

ATTACHMENTS:

Appropriated/Funded:

Review By:

Department Director:

Claudia Calderon, Acting Community Development Director Final Approver: Jason Ridenour, Acting Deputy City Manager Item No. 1.

CITY COUNCIL AGENDA – MARCH 5, 2024
SUBJECT: Approval of Draft Minutes of February 20, 2024 SOURCE: Administrative Services
COMMENT: Presented for Council's approval are the draft Minutes of February 20, 2024.

RECOMMENDATION: That the Council approve the draft Minutes of February 20, 2024.

ATTACHMENTS: 1. Draft Minutes 02-20-2024
Appropriated/Funded:

Review By:

Department Director:

Yuliana Andrade, Acting Administrative Services Director Final Approver: Yuliana Andrade, Acting Administrative Services Director

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CITY COUNCIL MINUTES
CITY HALL, 291 N. MAIN STREET

PORTERVILLE, CALIFORNIA
FEBRUARY 20, 2024, 5:30 PM
Call to Order at 5:30 p.m.

Roll Call: Council Member Greg Meister, Council Member Raymond Beltran, Council Member Donald Weyhrauch, Vice Mayor Kellie Carrillo, Mayor Martha A. Flores

ORAL COMMUNICATIONS
None.

CITY COUNCIL CLOSED SESSION:

A. Closed Session Pursuant to:
1 - Government Code Section 54956.95 – Liability Claim: Claimant: Esmeralda Espinoza.

Agency Claimed Against: City of Porterville.
2 - Government Code Section 54956.9(d)(3) – Conference with Legal Counsel – Anticipated Litigation – Significant exposure to Litigation: Two (2) cases in which facts are not yet known to potential plaintiff.
3 - Government Code Section 54956.9(d)(4) – Conference with Legal Counsel – Anticipated Litigation – Initiation of Litigation: Two (2) cases. 6:39 P.M. RECONVENE OPEN SESSION AND REPORT ON REPORTABLE ACTION

TAKEN IN CLOSED SESSION

City Attorney Lew reported action pertaining to A-1, as follows:

A-1. On a MOTION made by Vice Mayor Carrillo, and SECONDED by Council Member Beltran the City Council unanimously rejected the claim filed by Esmeralda Espinoza.

Documentation: M.O. 01-022024
Disposition: Claim rejected.

The Pledge of Allegiance was led by Council Member Beltran.

Invocation – a moment of silence was observed.

ORAL COMMUNICATIONS
• Greg Meister, Porterville, stated he opposed the council’s decision to not approve the medical freedom resolution at their last meeting.
• Kristy Martin, Porterville Chamber of Commerce, provided the council with recent and

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upcoming events.
• Josh Flowers, Strathmore, expressed his concern with his local government and his disappointment with council members.

REPORTS
I. City Commission and Committee Meetings

1. Parks & Leisure Services Commission - February 1, 2024 Commissioner Janet Uresti provided an update on the weed abatement, Shamrock Shapeup, the Military Banner program, youth sports, pool party reservations, and the upcoming Wall of Fame Ceremony as well as the Annual Youth Fishing Derby.

2. Library & Literacy Commission - February 13, 2024 – no report was provided.

3. Arts Commission – no report was provided.

4. Animal Control Commission – no report was provided.

5. Youth Commission - February 14, 2024 – no report was provided.

6. Transactions and Use Tax Oversight Committee (TUTOC) – no report was provided.

II. Staff Informational Reports

1. Water Conservation Phase IV Status Update - January 2024

2. Wall Of Fame

3. Youth Field Usage And Light Fees

CONSENT CALENDAR
Item No. 7 was removed for further discussion at the request of Council Member Meister.

COUNCIL ACTION: MOVED by Vice Mayor Carrillo, SECONDED by Council Member Weyhrauch that the City Council approve Items Nos. 1-6, 8 and 9. The motion carried unanimously.

1. APPROVAL OF DRAFT MINUTES OF FEBRUARY 6, 2024
Recommendation: That the Council approve the draft Minutes of February 6, 2024.

Documentation: M.O. 02-022024
Disposition: Approved.

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2. AUTHORIZATION TO PURCHASE RELIEF VALVES FOR THE

COMPRESSED NATURAL GAS FUELING STATION
Recommendation: That the City Council:

1. Authorize the purchase of relief valves for the CNG Fueling Station from Surface Pumps Inc. at a cost not to exceed $19,461 (inclusive of all parts, taxes, freight, and a 10% contingency); and

2. Authorize payment of said repair upon satisfactory receipt of parts.

Documentation: M.O. 03-022024
Disposition: Approved.

3. AUTHORIZATION FOR PRINTER/COPIER REPLACEMENT FOR THE

ADMINISTRATION DEPARTMENT
Recommendation: That the City Council approve the purchase of a copy machine for the Administration Department from California Business Machines utilizing Department budgeted funds in the amount of $9,500.00, plus the applicable sales tax.

Documentation: M.O. 04-022024
Disposition: Approved.

4. AUTHORIZATION TO REPAIR CITY WELL NO. 7
Recommendation: That the City Council:

1. Direct the Finance Director to initiate a Purchase Order to S. A. Camp Pump And Drilling for an amount not to exceed $10,330 (inclusive of all parts, taxes, labor, and contingency) for the repair of City Well No. 7; and

2. Direct the Finance Director to make payment to S.A. Camp Pump And Drilling upon receipt of the invoice approved by the Public Works Director.

Documentation: M.O. 05-022024
Disposition: Approved.

5. INTENT TO SET A PUBLIC HEARING - VACATION OF A PORTION OF

COLLEGE AVENUE
Recommendation: That the City Council:

1. Approve the resolution of intent to abandon a portion of College Avenue; and

2. Set the Council meeting of March 19, 2024, as the time and place for the Public Hearing.

Documentation: Resolution No. 05-2024

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Disposition: Approved.

6. PERMANENT LOCAL HOUSING ALLOCATION (PLHA) – REQUEST FOR

PROPOSALS (RFP) FUNDING RECOMMENDATIONS
Recommendation: That the City Council:

1. Award Central California Family Crisis Center in the amount of $34,973.53 for Permanent Supportive Housing (PSH) Operations and $20,000 for Emergency Shelter & Bridge Housing Operations;

2. Award Family Services of Tulare County in the amount of $12,894 for Permanent Supportive Housing Operations; and

3. Award Kings View in the amount of $87,963.98 for Navigation Center Operations and $18,216.76 for Emergency Shelter & Bridge Housing Operations.

Documentation: M.O. 06-022024
Disposition: Approved.

8. COMMUNITY CLEAN-UP EVENTS
Recommendation: That City Council:

1. Declare April 20, 2024, "Spring Clean-Up Day" and October 19, 2024, "Fall Clean-Up Day;"

2. Encourage all residents to clean up their properties and take advantage of these special opportunities offered by the City;

3. Authorize the City to accept trash, litter, and yard clippings delivered by City residents receiving City residential refuse service to the Spring and Fall Clean-Up Events for free disposal;
and

4. Authorize the cost of both events be funded from the Solid Waste Operating Budget.

Documentation: M.O. 07-022024
Disposition: Approved.

9. STATUS AND REVIEW OF LOCAL DROUGHT EMERGENCY
Recommendation: That the City Council receive and review the Declaration of Local Emergency, and determine the need exists to continue said Declaration.

Documentation: M.O. 08-022024
Disposition: Approved.

SCHEDULED MATTERS

10. CONSIDERATION OF APPOINTMENT OF CITY REPRESENTATIVE ON

PORTERVILLE FLAG DAY COMMITTEE

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Recommendation: That the City Council consider the appointment of Council Member Greg Meister to serve as a City Representative on the Porterville Flag Day Committee.

City Manager Hildreth introduced the item and Police Captain Josh Maniss presented the staff report.

COUNCIL ACTION: MOVED by Mayor Flores, SECONDED by Council Member Weyhrauch that the City Council appoint Council Member Meister to serve on the Porterville Flag Day Committee. The motion carried unanimously.

Documentation: M.O. 09-022024
Disposition: Approved.

11. ANIMAL SERVICES CONTRACTS WITH THE CITIES OF LINDSAY AND

WOODLAKE
Recommendation: That the City Council authorize the termination of current agreements for animal shelter services between the City of Porterville and the cities of Lindsay and Woodlake, and direct staff to provide written notice to the aforementioned cities consistent with the agreements.

City Manager Hildreth introduced the item and Police Captain Josh Maniss presented the staff report.

COUNCIL ACTION: MOVED by Council Member Weyhrauch, SECONDED by Council Member Meister that the City Council terminate the current agreements for animal shelter services between the City of Porterville and the cities of Lindsay and Woodlake. The motion carried unanimously.

Documentation: M.O. 10-022024
Disposition: Approved.

12. STATUS AND REVIEW OF DECLARATION OF LOCAL FLOOD

EMERGENCY
Recommendation: That the City Council receive the report of status and review of the Declaration of Local Emergency and determine the need exists to continue said Declaration.

City Manager Hildreth introduced the item and presented the staff report.

COUNCIL ACTION: MOVED by Council Member Weyhrauch, SECONDED by Vice Mayor Carrillo that the City Council approve the continuance of the Declaration of Local Flood Emergency. The motion carried unanimously.

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Documentation: M.O. 11-022024
Disposition: Approved.

7. CONSIDERATION OF UPDATED STATEMENT OF INVESTMENT POLICY Recommendation: That the City Council adopt the resolution approving the updated Statement of Investment Policy.

City Manager Hildreth introduced the item and presented the staff report.

Mayor Flores stated that the investment policy was reviewed by the Internal Audit Committee Meeting and was approved for inclusion on the agenda for Council consideration.

The council's consensus was to postpone this matter to the following meeting in order to allow for a thorough review of the investment policy by the council members, as well as the opportunity for them to meet with staff and provide feedback and ask questions.

Documentation: None.

Disposition: Direction given, item moved to a future meeting.

AB 1234 REPORTS

1. TCAG-California Association of Councils & Government Annual Conference - February 7-9, 2024
Mayor Floresspoke of those in attendance and provided updates on priority projects, theREAP budget, the legislative principles, and several discussion items.

2. Porterville Area Development Authority (PADA) - February 16, 2024 Due to the lack of a quorum during the meeting, a report was not provided.

ORAL COMMUNICATIONS
None.

OTHER MATTERS
• Council Member Beltran stated that he loves this time of year and encourages everyone to go out and enjoy the weather.
• Council Member Weyhrauch thanked the Internal City Audit Committee for their efforts in keeping the city finances in good shape, asked for a task revenue update, inquired if the city was able to share the Chamber Calendar, encouraged everyone to take time off for voting, and asked for an update on Love our Cities.
• Council Member Meister thanked the council for appointing him to the Flag Day Committee, expressed his excitement for the upcoming Wall of Fame ceremony, stated he was unable to attend the Coffee with a Cop, spoke of his father’s attendance at the council meeting, spoke of the time he spent with Alexandra Macedo in the Porterville community, and commended Parks

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and Leisure on the encampment cleanup efforts.
• Vice Mayor Carrillo thanked staff for the reports of the encampment cleanups, spoke of the great weather we are having, and wished her first grandson a Happy Birthday. • Mayor Martha A. Flores thanked those for who attended the CDBG Block Grant Community Meeting, spoke of her attendance at the Farm Worker Appreciation Day, and thanked city staff. • City Manager Hildreth urged everyone to drive safely.

CLOSED SESSION
None.

ADJOURNMENT
The City Council adjourned at 7:49 p.m. to the meeting of March 5, 2024, at 5:30 P.M.

Fernando Gabriel-Moraga,
Acting Chief Deputy City Clerk
SEAL
Martha A. Flores, Mayor
Item No. 2.

CITY COUNCIL AGENDA – MARCH 5, 2024
SUBJECT: Authorization to Purchase Air Conditioner Units SOURCE: Public Works
COMMENT: The City of Porterville Laboratory has two (2) 2-ton air conditioners that have recently failed and need to be replaced. The units were originally installed in 1994 and replacement parts are no longer available.

Staff contacted three (3) air conditioner companies for quotes. The quotes are as follows:

TAM-N-TJ'Z Inc. $14,000
Shaw's Home Comfort $38,746
Prosperity Air Conditioning and
Heating
Non-Responsive
TAM-N-TJ'Z Inc. submitted the lowest quote, therefore securing the purchase and installation of two (2) 2-ton air conditioners for a total project amount of $14,980, which includes a seven percent (7%) contingency. Expenditure for the purchase and installation of the air conditioning units is to be funded by the Laboratory Equipment Replacement Fund.

RECOMMENDATION: That City Council:

1. Award the replacement and installation of two (2) 2-ton commercial air conditioner units to TAM-N-TJ'Z Cooling Inc. for a total project amount not to exceed $14,980, which includes a seven percent contingency;

2. Direct the Finance Director to initiate a Purchase Order to TAM-N-TJ'Z Cooling Inc. for a total project amount not to exceed $14,980, which includes a seven percent contingency; and

3. Direct the Finance Director to make payment to TAM-N-TJ'Z Cooling Inc. upon receipt of the invoice approved by the Public Works Director.

ATTACHMENTS: 1. TAM-N-TJ'Z Quote

2. Shaw's Home Comfort Quote
Appropriated/Funded:

Review By:

Item No. 2.

Department Director:

Michael Knight, Public Works Director
Final Approver: Jason Ridenour, Acting Deputy City Manager

Item No. 3.

CITY COUNCIL AGENDA – MARCH 5, 2024
SUBJECT: Emergency Operations Center Technology Upgrade SOURCE: Police
COMMENT: The Porterville Police Department’s Emergency Operations Center (EOC) has been using the current technology in the Center since 2006 with minor upgrades necessary to keep it functioning. While this technology has been adequate, the department began noticing many deficiencies and malfunctions during March 2023 (Flood Fight) when the EOC was activated for an extended period of time.

Previously, Department staff have been able to locate replacement equipment to remedy these malfunctions and try to make the center work. Now, after the last activation, city staff realized shortcomings in several areas of the technology in this important operations center. This, coupled with technological advances in the industry, the equipment has been made obsolete and parts are harder to find. In addition, normal wear and tear on this equipment over the past 18 years has degraded it to the extent that it needs to be replaced.

Properly functioning technology in the Emergency Operations Center is vital to public safety during major events such as Flood Fight 2023. It directly affects officers, public safety management, and other city staff in their ability to provide continuous emergency services at the highest level during significant and/or catastrophic events.

Due to the above issues, the Department began exploring options to update the outdated technology in the Emergency Operations Center, which includes, but is not limited to, audiovisual updates, connectivity, and advanced electronics.

Purchasing equipment is a major and expensive project, and Department staff wanted to ensure that they researched a vendor with extensive experience in the field while also being familiar with the Porterville Police Department IT infrastructure. In doing so, staff contacted ITC, which is a local vendor currently working on public safety projects and is also our sole source provider for projects of this sort. ITC is a leading provider of technological projects and was able to provide a detailed description and mock-up defining exactly what would be necessary and purchased.

The cost of the technology upgrade, including the purchase and installation, is $54,700. The police department has approximately $27,000 available from the California Office of Emergency Services Customer Premise Equipment Fund for partial funding for this technology upgrade project. The remainder of the funding is available in the Police Department's Budget and Asset Forfeiture Funds.

Item No. 3.

RECOMMENDATION: That the City Council:

1. Authorize staff to negotiate the purchase and installation of new technology upgrades from ITC for the amount of $54,700 and authorize a 10% contingency for unforeseen issues;

2. Authorize staff to complete all documents necessary for these purchases; and,

3. Authorize payment upon completion of installation and acceptance of project.

ATTACHMENTS: 1. Video Wall_Tech Upgrade
Appropriated/Funded:

Review By:

Department Director:

Jake Castellow, Chief of Police
Final Approver: Jason Ridenour, Acting Deputy City Manager

Item No. 4.

CITY COUNCIL AGENDA – MARCH 5, 2024
SUBJECT: Authorization to Distribute Request for Proposals (RFP) for Consulting Services to Prepare the Community Development Block Grant (CDBG) FiveYear Consolidated Plan and Update the Analysis of Impediments or Prepare an Assessent of Fair Housing
SOURCE: Community Development
COMMENT: In 2020, the California Department of Housing and Community Development (HCD) adopted and certified the City of Porterville’s current CDBG Five-Year Consolidated Plan. In April 2024, City Council will consider the Action Plan for the final year of the current Consolidated Plan. The next Consolidated Plan will cover the planning period of 2025/26 through 2029/30 program years. Due to the complexity of the task, staff are unable to perform the necessary technical studies and functions required for the update. At this time, staff is requesting authorization to distribute a Request for Proposals (RFP) for a specialized consultant with expertise in this field.

The services to be rendered under this contract would consist of, but not be limited to, the preparation of Initial Studies, Impact Studies, and other documents as necessary to comply with federal guidelines. The selected consultant must have a substantial working knowledge of Housing and Urban Development (HUD) requirements and the ability to perform specialized studies, such as addressing special needs populations, updating the Analysis of Impediments or providing an Assessment of Fair Housing depending on what HUD requires at the time of contracting, as well as preparation of the Five-Year Consolidated Plan and serving as the main contact with HUD in working through the approval process which can be quite onerous.

The RFP will request fixed costs for the above-mentioned tasks and then a comprehensive fee schedule for all personnel, equipment, and indirect costs related to additional services that may be required. Funding for the completion of the Consolidated Plan is available in the General Fund.

RECOMMENDATION: That City Council authorize staff to distribute a Request for Proposal for Consulting Services to update the City of
Porterville’s CDBG Consolidated Plan, Analysis of Impediments and/or creation of Assessment of Fair Housing, if required by HUD.

ATTACHMENTS: 1. RFP for Consolidated Plan
Item No. 4.

Appropriated/Funded: JR
Review By:

Department Director:

Claudia Calderon, Acting Community Development Director Final Approver: Patrice Hildreth, City Manager
1 CITY OF PORTERVILLE

REQUEST FOR PROPOSALS FOR CONSULTING SERVICES FOR THE
PREPARATION OF THE U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT (HUD) 2025/26-2029/30 CONSOLIDATED PLAN AND OTHER

COMMUNITY DEVELOPMENT BLOCK GRANT (CDBG) UPDATES
RFP No._________
The City of Porterville is seeking a qualified consultant to prepare the City’s required five-year CDBG Consolidated Plan for 2025/26-2029/30; update the City’s Analysis of Impediments to Fair Housing Choices (AI) or prepare an Assessment for Fair Housing (AFH) if required by HUD; and review and update the City’s internal CDBG Policies and Procedures Manual and associated sample forms.

Submittal: One PDF version must be received via Public Purchase by:
4:00 p.m., Tuesday, April 9, 2024
Addressed to: Community Development Department
City of Porterville
291 N. Main Street
Porterville, CA 93257
Attention: Claudia Calderon
Email Subject: RFQ No. ____ Consultant Services for Development of Consolidated Plan Late or incomplete submittals will not be accepted and will be automatically disqualified from further consideration. All response packages and any accompanying documentation become the property of the City of Porterville and will not be returned.

INQUIRIES:

Proposal forms may be inspected and electronically downloaded at no cost, at the Public Purchase website, https://www.publicpurchase.com. No copies of said documents will be provided by the City. All addenda and correspondence during the bid process will be handled electronically through the Public Purchase website. No bid shall be received from an individual or company that is not an official proposal holder and has not registered and accessed the proposal documents from the Public Purchase website.

Questions regarding this project are due no later than Wednesday, April 3, 2024. 2 REQUEST FOR PROPOSALS (RFP)

FOR FIVE-YEAR CONSOLIDATED PLAN AND ANALYSIS OF

IMPEDIMENTS OR AN ASSESSMENT OF FAIR HOUSING
I. PROPOSED PROJECT
The City of Porterville (City) is soliciting proposals for consulting services from individuals or firms with expertise and understanding of the U.S. Department of Housing and Urban Development (HUD) as it relates to the Community Development Block Grant Program (CDBG) for the development of a Consolidated Plan (Plan) as required by HUD. The City is an entitlement jurisdiction and receives an annual CDBG allocation directly from HUD. The proposal will highlight the consultant’s capability to develop a five-year Plan that will establish goals and strategies for housing and community development in the City for 2025/26-2029/30.

A copy of the City’s 2020/21-2024/25 Plan is available on the City’s website:
https://www.ci.porterville.ca.us/departments/community_development/community_development_block _grant_program_(cdbg)/housing_planning_documents_and_reports.php The City’s Analysis of Impediments to Fair Housing Choice (AI) was updated in 2020, and is available on the City’s website:
http://www.ci.porterville.ca.us/depts/CommunityDevelopment /documents/PortervilleFinalAI.pdf. The AI will need to be reviewed and updated as needed. Staff will provide a copy of the City’s internal CDBG Policies and Procedures Manual to the selected firm.

The target start date and term for the proposed services is May 2024, through October 31, 2025, subject to negotiation of a final agreement.

II. SCOPE OF SERVICES
Five-Year Consolidated Plan
The required work, along with troubleshooting guidelines, can be found on the HUD Exchange at:
https://www.hudexchange.info/programs/consolidated-plan/guides/#consolidated-plantemplate-in-idis.

The required work must follow any and all amendments and updates, such as utilizing the HUD’s Office of Community Planning and Development (CPD) eCon Planning Suite, including the Consolidated Plan template in IDIS Online and the CPD Maps website. The eCon Planning Suite is designed to support grantees and the public to assess their needs and make strategic investment decisions by providing better data and tools and by creating a seamless planning and grants management framework. Overview information is available here: https://www.hudexchange.info/programs/consolidated-plan/ The Consultant will review and tabulate the information supplied by the City, HUD, the U.S. Census Bureau, sub-grantees, and input from citizens, to complete the required Plan components per the HUD regulations, including all required charts, tables, maps and final input into IDIS.

Update AI OR Assessment of Fair Housing
The City is not required to complete the Assessment of Fair Housing (AFH) until October 31, 2024; however an updated AI is needed, and the AFH may be required by the time of contracting. The Consultant will review and update the City’s AI as necessary. As part of the ConPlan, the City may be required to submit an AFFH certification, which requires the City to undertake Fair Housing Planning through 1.) the completion of Assessment to Fair Housing (AFH), 2.) actions to eliminate any identified impediments, and 3.) maintenance of AFFH records. The awarded consultant shall also assist to define, 3 and shall undertake the community/stakeholder participation process and data collection/analysis. The selected consultant will perform professional services under the supervision of the Community Development Department – Housing Division.

City’s Internal CDBG Policies and Procedures Manual
A copy of the City’s Internal CDBG Policies and Procedures Manual will be provided to the selected Consultant. The Consultant will review the current manual for compliance with HUD regulations and CDBG program administration.

III. CONSULTANT QUALIFICATIONS
The following lists the minimum qualification requirements of the respondent(s):
• At least five years of experience providing similar consulting services • At least three references of clients currently/previously served; at least one of the references to be a city
• Familiarity with HUD's eCon Planning Suite
• Knowledge of:
 CDBG Regulations
 Consolidated Plan Regulations
 Urban planning principles
 Methods of data collection, analysis and summarization (in narrative and graphic formats)
 Various housing and community development resources and governmental agencies • Past experience preparing Consolidated Plans using the eCon Planning Suite IV. PROPOSAL FORMAT
Proposals should include the following information:

1. Cover Letter, signed by the person authorized to bind the firm into an agreement

2. Complete legal name, address, telephone number, email address

3. DUNS number, and Tax Identification Number

4. Business organization including the date established, number of employees, and brief history of the firm.

5. Statement of qualifications included description of approach the Consultant will employ in carrying out the work described in the Scope of Services

6. Proposed time schedule for the Consolidated Plan, updates to the AI or prepare an Assessment of Fair Housing, and review of the City’s internal CDBG Policies and Procedures Manual, including target dates for public participation

7. At least three references of past clients with similar Scope of Services conducted and the period that was involved to complete the client’s projects. Include company name, address, contact name, and phone number

8. Proposed budget for complete project and hourly rate for staff person(s) (by staff position/title) V. EVALUATION OF PROPOSALS AND SELECTION PROCESS
The City will review and evaluate each qualification and proposal submission. The City reserves the right to obtain clarification or request additional information, including an interview with up to three firms. If an interview is required, they will be tentatively scheduled for April 23 and 24, 2024. Proposals will be evaluated and ranked according to the following criteria:
4 Criteria Points
Understanding of the project and scope of services 40
Experience of the consultant team in the disciples directly relevant to the project and scope of services 40
Proposed budget and fee structure 20
Maximum Score: 100
Following an evaluation of the proposals, it is expected that a preferred consultant will be selected for recommendation to the City Council. After a mutually acceptable contract between the City and the selected consultant has been negotiated, it will be submitted for approval to the City Council.

If the City and selected consultant cannot agree on a satisfactory contract, the City reserves the right to terminate negotiations. The City may then negotiate an agreement with the consultant which ranked second.

The City reserves the right to reject any and all proposals. In addition, the City will not reimburse costs associated with the preparation or presentation of the proposals.

VI. RIGHTS TO PROPOSALS
All proposals, upon submission to the City of Porterville, shall become the City’s property for its use as deemed appropriate. By submitting a proposal, the consultant covenants not to make any claim for or have any right to damages because of any misinterpretation or misunderstanding of the specification, or because of any misinformation or lack of information. Nothing contained in this RFP shall create any contractual relationship between the consultant and the City of Porterville. The City accepts no financial responsibility for costs incurred by any consultant in responding to this RFP. The City of Porterville has the following prerogatives with regard to proposals submitted:
• To accept or reject any or all proposals
• To award all or part of the project at its discretion • To adopt any or all parts of a proposal
• To utilize any or all ideas from proposals submitted
• To request additional information for the purposes of clarification • To correct any arithmetic errors in any or all proposalssubmitted • To change the deadline for submitting proposals upon appropriate notification to all consultants receiving the RFP
• To accept or negotiate any modifications to the scope and fee of any proposal following the deadline for receipt of all proposals and prior to contract award • To waive any irregularity or any non-conformity of proposals with this RFP,whether of a technical or substantive nature
VII. DISCLOSURE OF CONTENTS
All proposals accepted by the City shall become a matter of public record and shall be regarded as public, with the exception of those elements of each proposal that are identified by the consultant as business or trade secrets and plainly marked as “trade secret,” “confidential,” or “proprietary.” Each element of a proposal that the consultant desires not to be considered a public record must be clearly marked. Any 5 blanket statement (i.e. regarding entire pages, documents, or other non-specific designations) shall not be sufficient and shall not bind the City in any way whatsoever. If disclosure is required under the California Public Records Act or otherwise by law (despite the consultant’s request for confidentiality), the City shall not in any way be liable or responsible for the disclosure of any such records or part thereof.

VIII. AGREEMENT FOR SERVICES
The consultant will enter into an Agreement for Services with the City of Porterville based upon the contents of the RFP and the consultant’s proposal. The City’s standard form of agreement is included as Attachment A. The consultant must include with the proposal a description of any exceptions requested to the standard contract. If there are no exceptions requested, a statement to that effect must be included in the proposal.

IX. INSURANCE REQUIREMENTS
Prior to executing an Agreement for Services, the consultant will be required to provide to the City proof of the required insurance and endorsement. Consultants are encouraged to contact their insurance carriers during the proposal stage to ensure that the insurance requirements can be met if selected. Insurance requirements are listed in Section 16 of the attached standard Agreement for Services.

X. CITY BUSINESS LICENSE
A City of Porterville business license will be required for the consultant and any subcontractors.

XI. ASSIGNED REPRESENTATIVES
The City will assign a responsible representative to administer the contract, and to assist the consultant in obtaining information. The consultant also shall assign a responsible representative (project manager) and an alternate, who shall be identified in the proposal. The consultant’s representative will remain in responsible charge of the consultant’s duties from the notice to proceed through project completion.

If the consultant’s primary representative should be unable to continue with the project, then the alternate representative identified in the proposal shall become the project manager. The City’s representative shall first approve any substitution of representatives or subcontractors identified in the proposal in writing. The City reserves the right to review and approve/disapprove all key staff and subcontractor substitution or removal, and may consider such changes not approved to be a breach of contract.

Attachment
A – Professional Services Agreement
6 PROFESSIONAL SERVICES AGREEMENT
THIS AGREEMENT is made this day of ,2024, by the CITY OF PORTERVILLE, a municipal corporation, ("CITY") and _________, herein after referred to as “CONTRACTOR”.

RECITALS
The following recitals are a substantive part of this Agreement:

1. This Agreement is entered into pursuant to Porterville City Council action on _____, 2024, Minute Order No. _____.

2. CITY desiresto utilize the services of CONTRACTOR to prepare the City’s required fiveyear CDBG Consolidated Plan for 2025/26-2029/30; update the City’s Analysis of Impediments to Fair Housing Choices (AI) or prepare an Assessment for Fair Housing (AFH) if required by HUD; and review and update the City’s internal CDBG Policies and Procedures Manual and associated sample forms.

3. CONTRACTOR is qualified by virtue of experience, training, education and expertise to accomplish services.

AGREEMENT

IN CONSIDERATION OF MUTUAL COVENANTS AND AGREEMENTS HEREINAFTER set forth the parties hereto do contract and agree as follows:

SECTION 1. CONTRACT SERVICES:

CONSULTANT hereby agrees to provide the following services and materials, in a timely manner as described in the Scope of Work, Attachment A.

SECTION 2. PAYMENT:

In consideration for said services and materials, CITY shall pay CONSULTANT on a time and materials basis, and not to exceed _________ Dollars ($ ).

TIME OF PAYMENT: Progress payment requests shall be submitted by the 25th of each month.

CONSULTANT should receive payment within 45 days of the date the bill is received.

SECTION 3. COMPLETION DATE:

The services to be performed by CONSULTANT will be commenced upon execution of this agreement and all "work directives" shall be completed by _____. In the case of ongoing testing and results protocol, the CONSULTANT shall submit results as required to CITY, State and/or Federal governing agencies.
7 SECTION 4. FAMILIARITY WITH PROJECT:

CONSULTANT certifies and agrees that it is fully familiar with all of the details of the project required to perform its services. CONSULTANT agrees it will not rely upon any opinions and representations of CITY unless CITY is the only available source of said information.

SECTION 5. INDEPENDENT CONTRACTOR:

It is expressly understood that CONSULTANT is entering into this contract and will provide all services and materials required hereunder as an independent contractor and not as an employee of CITY. CONSULTANT specifically warrants that it will have in full force and effect, valid insurance covering:
(i) Professional Liability Insurance
Consultant shall maintain professional liability insurance that insures against professional errors and omissions that may be made in performing the Services to be rendered in connection with this Agreement, in the minimum amount of two million dollars ($2,000,000) per claim in the aggregate. Any policy inception date, continuity date, or retroactive date must be before the effective date of this agreement, and consultant agrees to maintain continuous coverage through a period of no less than three years after completion of the services required by this agreement.
(ii) General Liability
Consultant shall maintain commercial general liability insurance with coverage at least as broad as Insurance Services Office form CG 00 01, in an amount not less than two million dollars ($2,000,000) per occurrence for bodily injury, personal injury, and property damage, including without limitation, blanket contractual liability. If a general aggregate limit applies, either the general aggregate limit shall apply separately to this project or the general aggregate limit shall be twice the required occurrence limit. Consultant’s general liability policies shall be primary and shall not seek contribution from the City’s coverage, and be endorsed using Insurance Services Office form CG 20 10 (or equivalent) to provide that City and its officers, officials, employees, and agents shall be additional insureds under such policies.
(iii) Auto Liability
Consultant shall provide auto liability coverage for owned, non-owned, and hired autos using ISO Business Auto Coverage form CA 00 01, or the exact equivalent, with a limit of no less than one million dollars ($1,000,000) per accident. (iv) Worker’s Compensation
Consultant shall maintain Worker’s Compensation Insurance (Statutory Limits) and Employer’s Liability Insurance with limits of at least one million dollars 8 ($1,000,000). Consultant shall submit to City, along with the certificate of insurance, a Waiver of Subrogation endorsement in favor of City, its officers, agents, employees, and volunteers.
(v) Indemnity for Design Professional Services
To the fullest extent permitted by law, CONSULTANT shall indemnify, defend, and hold harmless the CITY, its officers, employees, agents and volunteers (“City indemnitees”), from and against any and all causes of action, claims, liabilities, obligations, judgments, or damages, including reasonable legal counsels’ fees and costs of litigation (“claims”), arising out of the CONSULTANT’s negligence, recklessness or willful misconduct in its performance of its obligations under this agreement or out of the operations conducted by CONSULTANT. In the event the City indemnitees are made party to any action, lawsuit, or other adversarial proceeding arising from CONSULTANT’s performance of this agreement, the CONSULTANT shall provide a defense to the City indemnitees, or at the CITY’s option, reimburse the City indemnitees their costs of defense, including reasonable legal counsels’ fees, incurred in defense of such claims. In no event shall the cost to defend exceed the charged to CONSULTANT exceed the CONSULTANT’s proportionate share of fault, unless one or more defendants are unable to pay its share of defense costs due to bankruptcy or dissolution, in which case all defense parties shall meet and confer concerning unpaid defense costs. (vi) Indemnity for Other than Professional Liability
As respects all acts or omissions which do not arise directly out of the performance of services, including but not limited to those acts or omissions normally covered by general and automobile liability insurance, CONSULTANT agrees to indemnify, defend (at CITY’s option), and hold harmless CITY, its elected and appointed officers, agents, employees, representatives, and volunteers from and against any and all claims, demands, defense costs, liability, or consequential damages of any kind or nature arising out of or in connection with CONSULTANT’s (or CONSULTANT’s subcontractors, if any) performance or failure to perform, under the terms of this Agreement; except to the extent those which arise out of the sole negligence or willful misconduct of CITY.

SECTION 6. WORKMANSHIP AND MATERIALS:

Every part of the work herein described shall be executed in a professional manner with competent, experienced personnel. Finished or unfinished material prepared under the agreement, prepared by CONSULTANT, shall become property of CITY. CONSULTANT hereby warrants that any materials prepared under this agreement shall be fit for the intended use contemplated by the parties.

No report, information or other data given or prepared or assembled by the CONSULTANT, pursuant to this Agreement, shall be made available to any individual or organization by the CONSULTANT, without prior written approval of the CITY. Notwithstanding the foregoing, 9 however, the CONSULTANT, shall not be required to protect or hold in confidence and confidential information which (1) is or becomes available to the public with the prior written consent of the CITY; (2) must be disclosed by law; or (3) must be disclosed in connection with any legal proceedings.

SECTION 7. ASSIGNMENT OF CONTRACT:

It is acknowledged by the parties that CITY has entered into this contract with the express understanding that CONSULTANT will perform all work. CONSULTANT shall not, without the written consent of CITY, assign, transfer or sublet any portion or part of this work, nor assign any payments to others.

SECTION 8. NO DISCRIMINATION:

CONSULTANT will not discriminate against any employee, or applicant for employment as required by applicable Federal and State law.

SECTION 9. CONFLICT OF INTEREST CODE:

CONSULTANT agrees to comply with the regulations of CITY'S "Conflict of Interest Code." Said code is in accordance with the requirements of the Political Reform Act of 1974.

CONSULTANT covenants that it presently has no interest, and shall not have any interest, direct or indirect, which would conflict in any manner with the performance of service required hereunder. The term "conflict" shall include, as a minimum, the definition of a "conflict of interest" under the California Fair Political Practices Act and the City of Porterville Conflict of Interest Code, as that term is applied to consultants.

SECTION 10. TERMINATION:

Either party for just cause may terminate this contract by giving seven (7) days written notice to the other party. Upon termination by CITY, CITY shall be relieved of any obligation to pay for work not completed including profit and overhead. CONSULTANT may be entitled to just and equitable compensation for satisfactory work completed, except CITY can withhold damages incurred as a result of the termination.

SECTION 11. INTEGRATION/MODIFICATION:

It is understood and agreed that this Service Agreement and each of the noted exhibits, which are incorporated by reference, represents the entire understanding of the CITY AND CONSULTANT as to those matters contained herein. NO prior oral or written understanding shall be of any force or effect with respect to those matters covered hereunder. This Agreement may not be modified or altered except in writing signed by the CITY and the CONSULTANT.

SECTION 12. ALTERNATIVE DISPUTE RESOLUTION/ATTORNEYS’ FEES:

In the event a dispute arises, the parties agree, prior to the initiation of formal court action, to make good faith efforts to resolve the dispute informally, including good faith efforts to engage 10 in mediation by an objective third party mediator.

Should it be necessary to institute legal proceedings to enforce any and all of the covenants and conditions of this Agreement, the prevailing party, as determined by the court or arbitrator, shall be entitled to recover its reasonable attorneys' fees and costs incurred in the action brought thereon.

SECTION 12. JURISDICTION/VENUE/WAIVER OF REMOVAL:

This Agreement shall be administered and interpreted under the laws of the State of California.

Jurisdiction of litigation arising from this Agreement shall be in that State. If either party initiates an action to enforce the terms hereof or declare rights hereunder, the parties agree that this Agreement is entered into and is to be performed in Tulare County, California. CONSULTANT hereby expressly waives any rights it might have to remove any such action to a county other than Tulare County as permitted pursuant to California Code of Civil Procedure Section 394.

SECTION 13. CONFLICT WITH LAW:

If any part of this Agreement is found to be in conflict with applicable laws, such part shall in inoperative, null and void insofar as it is in conflict with said law, but the remainder of the Agreement shall be in full force and effect.

SECTION 14. CONSTRUCTION:

This Agreement is the product of negotiation and compromise on the part of each party, and the parties agree, notwithstanding Civil Code Section 1654, that in the event of uncertainty the language will not be construed against the party causing the uncertainty to exist.

SECTION 15. AUTHORITY:

Each signatory to this Agreement represents that it is authorized to enter into this Agreement and to bind the party to which its signature represents.

IN WITNESS WHEREOF, the parties have executed this Service Agreement on the date and year first above written.

CITY OF PORTERVILLE CONSULTANT
By ________________________ By _________________________ Date ________________________ Date _________________________ Item No. 5.

CITY COUNCIL AGENDA – MARCH 5, 2024
SUBJECT: Award of Contract - Santa Fe Byway Revitalization and Beautification Project SOURCE: Engineering and Project Management
COMMENT: On February 29, 2024, staff received three (3) bids for the Santa Fe Byway Revitalization and Beautification Project. The project includes improvements to the existing asphalt trail, installation of concrete edge bands along the trail, one (1) new picnic shelter, a new playground and workout equipment area with shelter, benches, water fountains, solar trail lighting, and new lights at intersections for improvements to public safety. The Santa Fe Byway (formerly known as Rails-to-Trails) runs north to south between Henderson Avenue and Walnut Avenue along the old Santa Fe Railway.

The Engineer's Estimate of probable cost for the project was $3,783,692.47 (including $10,500 for the installation of lights by Southern California Edison at intersections). The low bid represented by S & B Sons, Inc. of Bakersfield is $4,091,908.89, which is $318,716.42 (8.4%) higher than the construction component of the Engineer's Estimate. An additional $409,190 is necessary for construction contingency (10%) and $409,190 is required for construction management, surveying, quality control, and inspection services (10%). The contractor's portion of the project includes the installation of playground equipment, exercise equipment, and two (2) sculptures/statues; the City is responsible for purchasing said items. The purchase of these items totals $180,000 ($115,000 for playground equipment, $45,000 for exercise equipment, and $20,000 for the sculptures/statues). This equates to a total construction cost of $5,090,288.89.

Funding for this project in the amount of $2,619,402 is provided by the Clean California Grant for the construction portion of the project. An additional $300,000 is provided by the Clean California Grant for the Construction Management and Quality Control Portion of the Project. The difference of $2,170,886.89 is available from Measure R - Alternate Transportation Funds to fully fund the project.

The bids are as follows:

Contractor Amount
S & B Sons, Inc.

Bakersfield, CA
$4,091,908.89
MAC General Engineering, Inc
Exeter, CA
$4,791,772.00
Item No. 5.

CAL Valley Construction
Fresno, CA
$6,525,257.00
Staff has found the low bid acceptable.

RECOMMENDATION: That city Council:

1. Award the Santa Fe Byway Revitalization and Beautification Project to S & B Sons, Inc. in the amount of $4,091,908.89;

2. Authorize progress payments up to 95% of the contract amount;

3. Authorize a 10% contingency to cover unforeseen costs;

4. Authorize 10% for construction management, quality control, and inspection services; and

5. Authorize the Engineering and Project Management Director to secure Measure R Funds to fully fund the project.

ATTACHMENTS: 1. Locator Map
Appropriated/Funded:

Review By:

Department Director:

Javier Sanchez, Engineering & Project Management Director Final Approver: Jason Ridenour, Acting Deputy City Manager

NORTH NORTH
Item No. 6.

CITY COUNCIL AGENDA – MARCH 5, 2024
SUBJECT: Sports Complex Concession License
SOURCE: Parks and Leisure Services
COMMENT: Non-profit organizations are entitled to request a License Agreement with the City for the purpose of authorizing them to exclusively utilize City facilities for fundraising concession sales. Past practice has been to award the Sports Complex Concession License to youth sports organizations who hold their games at the Sports Complex. Porterville Soccer League / South Valley Chivas holds games at the Sports Complex, and contacted City staff expressing an interest in being awarded the Concession License for 2024. They held the license in 2023, and other years in the past.

The License Agreement is for services to the public in general, for the sale of soft drinks, ice cream, hot dogs, pre-packaged food, general confectionery articles and products, and promotional items at the Sports Complex. The licensee shall keep and maintain all concession facilities, equipment and grounds in and around the concession building in good and sanitary condition.

Also, the licensee is to remain in good standing with the City for the duration of the term of the License Agreement. At its meeting on February 1, 2024, the Parks and Leisure Services Commission recommended awarding Porterville Soccer League / South Valley Chivas the 2024 Sports Complex Concession License. The current fee for concession building usage is $8.00 per hour. The fee is adjusted annually by the Consumer Price Index. The total fee incurred from the monthly usage is due by the 15th day of each month.

RECOMMENDATION: That the City Council approve the Sports Complex Concession License renewal with Porterville Soccer League / South Valley Chivas.

ATTACHMENTS: 1. Sports Complex Concession Locator Map

2. Sports Complex Concession License 2024
Appropriated/Funded:

Review By:

Department Director:

Donnie Moore, Parks and Leisure Services Director
Final Approver: Patrice Hildreth, City Manager
Item No. 6.

1 CITY OF PORTERVILLE

SPORTS COMPLEX

CONCESSION LICENSE
The City of Porterville, hereinafter referred to as “CITY” hereby grants to the Porterville Soccer League/South Valley Chivas, hereinafter referred to as “LICENSEE”, a license for services to the public in general, for the sale of soft drinks, ice creams, hot dogs, pre-packaged food, general confectionery articles and products, and promotional items at the Sports Complex Concession Building located at 2701 W. Scranton Ave., Porterville, California, for a term of commencing March 16, 2024, and ending February 28, 2025.

1. The LICENSEE’S appointment is conditional upon passing a drug/alcohol test, fingerprint clearance, and/or reference check.

2. The LICENSEE shall not sell or serve any type of alcoholic beverage on the premises.

3. The LICENSEE shall, at all times during the term of said License, keep and maintain the concession building open for the convenience of patrons at said Field during the hours in which said Field is being utilized for organized sports or at any other time the CITY deems the operation of the concession necessary for special activities. Failure to operate the concession facilities during the specified periods is a breach of this Agreement and shall constitute grounds for termination of this Agreement.

4. The LICENSEE shall keep and maintain all concession facilities, equipment and grounds at and around said concession building in good and sanitary condition and shall keep and maintain all of the concession fixtures and equipment in good condition and repair.

LICENSEE shall not make any additions to the facilities or grounds, or make any structural improvements to facilities, without receiving prior written consent of the CITY.

5. Each employee, volunteer or agent of LICENSEE should: a) be clean, neat, and wellgroomed; b) be professional, courteous, and friendly to the public; and c) adhere to the CITY personnel policy regarding dress code.

6. The LICENSEE shall lock the concession building upon closing the concession building.

The LICENSEE shall turn in all keys to the CITY five days after expiration of term.

7. In the event the LICENSEE coordinates placement of refrigerators or vending and dispensing machines at the facility, LICENSEE shall ensure such machines are removed or disengaged from City provided utilities promptly at the conclusion of each season. The LICENSEE shall also see to it that any type of machine or equipment does not block any door entrance.

8. In the event the LICENSEE shall fail, neglect or refuse to abide by and perform the terms, conditions, covenants, and agreements hereof, the CITY may, at its option, terminate and cancel this License, and in the event of a termination of this License, the LICENSEE shall 2 surrender up and deliver to the CITY complete possession of the premises where said License is being operated within 30 days after receiving notice to vacate. Notwithstanding the 30-day notice provision for breach of contract, the failure by LICENSEE to remain in good standing with CITY or comply with all applicable laws and regulations, or the apparent commission of a crime by LICENSEE or any of LICENSEE’S employees, contractors, agents, or volunteers during the term of this Agreement is grounds for immediate termination of this Agreement by the CITY.

9. Notwithstanding any provision of this agreement to the contrary, this agreement may be terminated by either party, with or without cause, by giving the other party thirty (30) days written notice of termination. Notice shall be given by personal delivery or first-class mail, return receipt requested.

10.If this Agreement is terminated by the CITY without cause prior to the conclusion of the initial License term, and a non-profit organization enters into a Concession License Agreement with the CITY for the facility, the CITY shall reimburse LICENSEE for any documented improvements made during the term of this License Agreement that were preapproved in writing by the CITY, including but not limited to any such structural improvements. In this event the concession fees collected for the facility as specified in paragraph 15 shall be credited against said start-up costs.

11.The LICENSEE shall not assign, transfer or convey this license or any of the rights or benefits hereunder to any person, firm or corporation without first securing the written consent of the CITY, and such consent may be withheld for any reason.

12.The CITY, by its authorized agents and servants, reserves the right of entry upon the premises where said license is being operated for purposes of inspection.

13.Nothing herein shall be construed as creating a partnership or joint venture between the CITY and the LICENSEE.

14.To the fullest extent permitted by law, LICENSEE (and its officers, employees, contractors, agents or volunteers) shall indemnify, defend and hold harmless, the CITY, its officers, agents, employees, and volunteers (“City Indemnitees”), from and against all causes of action, claims, liabilities, obligations, judgments, or damages, including reasonable legal counsels’ fees and costs of litigation (“claims”), arising out of or in any way connected with the use, occupation or employment of said License, or LICENSEE’s performance of this Agreement, including CITY’s active or passive negligence EXCEPT for such loss or damage arising from the sole negligence or willful misconduct of the CITY. In the event the City Indemnitees are made a party to any action, lawsuit, or other adversarial proceeding arising from LICENSEE’s performance of this Agreement, LICENSEE shall provide a defense to the City Indemnitees, or at the CITY’s option, reimburse City Indemnitees their costs of defense, including reasonable legal counsels’ fees, incurred in defense of such claims.

15. LICENSEE shall secure, at LICENSEE’s expense, liability insurance including product liability indemnifying the CITY and the LICENSEE in the sum of two million dollars 3 ($2,000,000) combined single limit for property damage and injury, including death, to one or more persons, and deposit with the CITY an original certificate of said insurance, and name the CITY, its officers, agents and employees as an additional insured on LICENSEE’s policy.

16.During the entire term of this License, the Licensee shall not suffer, allow, or permit any income, profit, or emolument gross and net from any of its activities arising from, connected with, or in any manner associated with the use and employment by the LICENSEE of this License to inure, to be paid to, or delivered to the benefit of any members, private shareholder, or individual; and/or income, profit, gross and net, or other rights or benefits which shall arise from the use and employment of this LICENSEE shall be used solely, positively and exclusively to meet the necessary expenses or upkeep and operation of the activities of the LICENSEE as such, and not any members, shareholders, or individual.

17.The LICENSEE shall pay monthly to the City a fee of $8.00 per hour for the use of the concession building by the 15th of each month. The payment will be made by Porterville Soccer League/South Valley Chivas. The fee will be adjusted July 1st of each year by the San Francisco Consumer Price Index.

18.The LICENSEE shall obtain a non-profit business license from the City of Porterville prior to the commencement date of this license agreement.

19.The LICENSEE shall maintain Workers’ Compensation Insurance for all its employees and volunteers who are in any way connected with the performance of LICENSEE’S concessionary interest to the extent as provided by law.

20.The LICENSEE shall maintain and keep adequate records of its sales from the Licensed premises and agrees to permit the CITY to examine said records on demand. In addition, the LICENSEE shall submit a completed “Monthly Concession Report” form to the City no later than the fifth day of the month following any month during which the LICENSEE conducted concession sales.

21.The LICENSEE shall have the right and privilege, provided it is not in default of the terms and provisions of the License, at the end of the term or sooner termination thereof, to remove from the Licensed premises all personal property belonging to the LICENSEE, together with their stocks, goods and wares and trade fixtures that LICENSEE may have installed, provided the same can be removed without material injury to the premises and the LICENSEE hereby acknowledges receipt of the premises in good condition and repair.

22.Attorney Fees. If any litigation is commenced between the parties to the Agreement concerning the Agreement or the rights and duties of either in relation to the Agreement, the party prevailing in that litigation shall be entitled, in addition to any other relief that may be granted in the litigation to a reasonable sum as and for its attorney’s fees in the litigation, which shall be determined by the court in that litigation or in a separate action brought for that purpose.
4 23.Each party has participated fully in the review and revision of the Agreement. Any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not apply in interpreting this Agreement. The language in this Agreement shall be interpreted as to its fair meaning and not strictly for or against any party.

IN WITNESS whereof the parties have executed this License Agreement at Porterville, California, this ____ day of March, 2024.

CITY OF PORTERVILLE PSL/SOUTH VALLEY CHIVAS
BY: _____________________________ BY:________________________ Martha A. Flores, Mayor Board Chairperson
ATTEST: APPROVED AS TO FORM:
____________________________________ ________________________________ BY: Patrice Hildreth, City Clerk Julia M Lew, City Attorney Item No. 7.

CITY COUNCIL AGENDA – MARCH 5, 2024
SUBJECT: HOME Investment Partnerships Program (HOME) Grant Funds SOURCE: Community Development
COMMENT: In October 2020, the City received notification that it had been awarded $400,000 in 2019 HOME grant funds from the California Department of Housing and Community Development (HCD) and subsequently received the Executed Standard Agreement No. 19-HOME-14972 in December 2021, after completion of General Setup Conditions. The City then received direction from HCD that the funds had to be placed on hold as their First Time Homebuyer (FTHB) guidelines were being audited at the Federal level, therefore placing all HOME grants on hold. On February 8, 2023, HCD held a webinar for HOME 2022-2023 NOFA Program Activities. HCD provided options that the City can take in order to replace the funding that was granted in 2020, and subsequently not allowed to spend, since the hold continues to this day and the grant funds received would have to be expended by October 2024.

The state has proposed that the City disencumber the $400,000 in grant funds, and submit another application for FTHB down payment assistance. This is the state's proposed solution for all jurisdictions in a situation where it is not feasible to spend the awarded funds by the expenditure deadline due to the restriction on using the funds.

In addition to the $400,000 in active grant funds awarded in 2020, the City currently has a balance of program income resulting from prior HOME grant loans being paid off and the funding accumulating as a result of not being able to use the funds. The balance is approximately $1.1 million. It is important to note that this program income, on which there is also a hold, has to be spent prior to spending any existing or new active grant funds.

Jurisdictions in receipt of grant funds typically have three years to spend the funds. In the last three years, the City has funded ten (10) first time home buyer loans with CDBG and CalHOME funds, since HOME could not be used. The amounts of those loans total $460,883.80. Additionally, in the same time frame, thirty (30) loans have been paid off, resulting in program income of $1,139,987.49, $810,874.66 of which is HOME program income.

Taking into account the program activity for the last three years, the expenditure timeline, and the current hold on HOME-funded loans, it is not advantageous to apply for additional funding at this time. Instead, staff recommends that the City take the steps necessary to disencumber the $400,000 in grant funds awarded in 2020, as advised by HCD. This will give the City an Item No. 7.
opportunity to collaborate with affordable housing developers on projects similar to Villa Siena, which was partially funded with a HOME grant. This will also allow the City to expend program income funds that have been accumulating during the hold.

RECOMMENDATION: That the City Council authorize the Mayor to sign a letter to the Department of Housing and Community Development requesting the disencumbrance of $400,000 in grant funds associated with 19-HOME-14972.

ATTACHMENTS: 1. Draft Letter
Appropriated/Funded:

Review By:

Department Director:

Claudia Calderon, Acting Community Development Director Final Approver: Jason Ridenour, Acting Deputy City Manager March 6, 2024

SENT VIA EMAIL

DEPARTMENT OF HOUSING AND COMMUNITY DEVELOPMENT
Division of Federal Financial Assistance
Housing Branch – HOME Program
2020 West El Camino Avenue, Suite 200
Sacramento, CA 95833
Subject: 19-HOME-14972 Grant Funds
Dear Ms. Castilleja:

On February 20, 2024, the City received an email communication from HCD regarding grant 19- HOME-14972. The email requested confirmation that no funds have been utilized on the grant and there will be no project or General Admin drawdowns submitted.

Additionally, it was requested that the City agree on a disencumbrance amount for 19-HOME14972, $390,000 unspent in FTHB, and $10,000 unspent in General Administration, for a total of $400,000.

This letter serves to confirm that our records do concur with those of HCD, and the City agrees with the request to disencumber $400,000 of the City of Porterville’s 19-HOME-14972 grant.

Sincerely,
Martha A. Flores
City of Porterville Mayor
Item No. 8.

CITY COUNCIL AGENDA – MARCH 5, 2024
SUBJECT: Program Supplement to the Administering Agency-State Agreement - Tule River Indian Tribe ATP Project
SOURCE: Public Works
COMMENT: The Department of Transportation has submitted the Master Agreement Administering Agency-State Agreement for State-Funded Projects No. 06- 5122S21 (Master Agreement) along with Program Supplement No. A426 to said master agreement and requests that the City execute both documents. The Master Agreement was revised to incorporate the various changes in regulations and policies. The executed Program Supplement shall become a part of the Master Agreement.

The attached Program Supplement is for the Tule River Tribe Village Corridor and Two Pedestrian Bridges Project.

RECOMMENDATION: That City Council:
1) Approve the program supplement by adopting a Resolution authorizing the Mayor to sign the subject program supplement; and
2) Direct the City Clerk to return the signed program supplement to the Department of Transportation.

ATTACHMENTS: 1. Master Agreement No. 06-5122S21

2. Program Supplement No. A426

3. Draft Resolution - Master Agreement No. 06-5122S21

4. Draft Resolution - Program Supplement No. A426
Appropriated/Funded:

Review By:

Department Director:

Javier Sanchez, Engineering & Project Management Director Final Approver: Jason Ridenour, Acting Deputy City Manager 06 City of Porterville
-------- ---------------------------------------------- District Administering Agency
Agreement No. 06-5122S21
This AGREEMENT, is entered into effective this _______ day of __________, 20___, by and between the City of Porterville, hereinafter referred to as "ADMINISTERING AGENCY," and the State of California, acting by and through its Department of Transportation (Caltrans), hereinafter referred to as "STATE", and together referred to as "PARTIES" or individually as a "PARTY."
RECITALS:

1. WHEREAS, the Legislature of the State of California has enacted legislation by which certain State funds are made available for use on local transportation related projects of public entities qualified to act as recipients of these state funds; and

2. WHEREAS, ADMINISTERING AGENCY has applied to the California Transportation Commission (CTC) and/or STATE for funding from a State-funded program (herein referred to as STATE FUNDS), as defined in the Local Assistance Program Guidelines (LAPG) and/or in the respective CTC Guidelines, for use on local authorized transportation related projects as a local administered project(s), hereinafter referred to as "PROJECT"; and

3. WHEREAS, said PROJECT will not receive any federal funds; and

4. WHEREAS, before STATE FUNDS will be made available for PROJECT, ADMINISTERING AGENCY and STATE are required to enter into an agreement to establish terms and conditions applicable to the ADMINISTERING AGENCY when receiving STATE FUNDS for a designated PROJECT facility and to the subsequent operation and maintenance of that completed facility.

NOW, THEREFORE, the PARTIES agree as follows:

MASTER AGREEMENT

ADMINISTERING AGENCY-STATE AGREEMENT

STATE-FUNDED PROJECTS

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ARTICLE I - PROJECT ADMINISTRATION

1. This AGREEMENT shall have no force or effect with respect to any program project unless and until a project- specific Program Supplement to this AGREEMENT for state funded projects, hereinafter referred to as "PROGRAM SUPPLEMENT", has been fully executed by both STATE and ADMINISTERING AGENCY.

2. The State approved project-specific allocation notification letter and approved CTC allocation documentation designate the party responsible for implementing PROJECT, type of work, and location of PROJECT for projects requiring CTC allocation by PROJECT component of work.

3. The PROGRAM SUPPLEMENT sets out special covenants as a condition for the ADMINISTERING AGENCY to receive STATE FUNDS from/through STATE for designated PROJECT. The PROGRAM SUPPLEMENT shall also show these STATE FUNDS that have been initially encumbered for PROJECT along with the matching funds to be provided by ADMINISTERING AGENCY and/or others. Execution of PROGRAM SUPPLEMENT by the PARTIES shall cause ADMINISTERING AGENCY to adopt all the terms of this AGREEMENT as though fully set forth therein in the PROGRAM SUPPLEMENT. Unless otherwise expressly delegated in a resolution by the governing body of ADMINISTERING AGENCY, and with written concurrence by STATE, the PROGRAM SUPPLEMENT shall be approved and managed by the governing body of ADMINISTERING AGENCY.

4. ADMINISTERING AGENCY agrees to execute and return each project-specific PROGRAM SUPPLEMENT. The PARTIES agree that STATE may suspend future allocations, encumbrances and invoice payments for any on- going or future STATE FUNDED PROJECT performed by ADMINISTERING AGENCY if any project-specific PROGRAM SUPPLEMENT is not returned, unless otherwise agreed by STATE in writing.

5. ADMINISTERING AGENCY further agrees, as a condition to the release and payment of STATE FUNDS encumbered for the PROJECT described in each PROGRAM SUPPLEMENT, to comply with the terms and conditions of this AGREEMENT and all the agreed-upon Special Covenants or Remarks incorporated within the PROGRAM SUPPLEMENT, and Cooperative/Contribution Agreement where appropriate, defining and identifying the nature of the specific PROJECT.

6. STATE FUNDS will not participate in any portion of PROJECT work performed in advance of the effective date of allocation by CTC, or by STATE for allocations delegated to STATE by CTC, for said PROJECT.

7. Projects allocated with STATE FUNDS will be administered in accordance with the current CTC STIP Guidelines, applicable chapter(s) of the LAPG, LAPM and/or any other instructions published by STATE.

8. ADMINISTERING AGENCY agrees to ensure compliance with all relevant State laws and requirements for work related to PROJECT, including the California Environmental Quality Act (CEQA).

9. ADMINISTERING AGENCY's eligible costs for preliminary engineering work includes all preliminary work directly related to PROJECT up to contract award for construction, including, but not limited to, environmental studies and permits (E&P), preliminary surveys and reports, laboratory work, soil investigations, the preparation of plans, specifications and estimates (PS&E), advertising for bids, awarding of a contract and project development contract administration.

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10. ADMINISTERING AGENCY's eligible costs for construction engineering include actual inspection and supervision of PROJECT construction work; construction staking; laboratory and field testing; and the preparation and processing of field reports, records, estimates, final reports, and allowable expenses of employees/consultants engaged in such activities.

11. Unless the PARTIES agree otherwise in writing, ADMINISTERING AGENCY's employees or its contracted engineering consultant shall be responsible for all PROJECT engineering work.

12. ADMINISTERING AGENCY shall not proceed with final design of PROJECT until final environmental approval of PROJECT. Final design entails the design work necessary to complete the PS&E and other work necessary for a construction contract but not required earlier for environmental clearance of that PROJECT.

13. If PROJECT is not on STATE-owned right-of-way, PROJECT shall be constructed in accordance with Chapter 11 of the LAPM that describes minimum statewide design standards for local agency streets and roads. The design standards for projects off the National Highway System (NHS) allow STATE to accept either the current Caltrans Highway Design Manual standards, the current FHWA-adopted American Association of State Highway and Transportation Officials (AASHTO) A Policy on Geometric Design of Highways and Streets standards, or the approved geometric design standards of ADMINISTERING AGENCY. Additionally, for projects off the NHS, STATE will accept ADMINISTERING AGENCY-approved standard specifications, standard plans, materials sampling and testing quality assurance programs that meet the conditions described in the then current Local Assistance Procedures Manual.

14. If PROJECT involves work within or partially within STATE-owned right-of-way, that PROJECT shall also be subject to compliance with the policies, procedures and standards of the STATE Project Development Procedures Manual and Highway Design Manual and where appropriate, an executed cooperative agreement between STATE and ADMINISTERING AGENCY that outlines the PROJECT responsibilities and respective obligations of the PARTIES. ADMINISTERING AGENCY and its contractors shall each obtain an encroachment permit through STATE prior to commencing any work within STATE rights-of-way or work which affects STATE facilities.

15. When PROJECT is not on the State Highway System (SHS) but includes work to be performed by a railroad, the contract for such work shall be prepared by ADMINISTERING AGENCY or by STATE, as the PARTIES may hereafter agree. In either event, ADMINISTERING AGENCY shall enter into an agreement with the railroad providing for future maintenance of protective devices or other facilities installed under the contract.

16. ADMINISTERING AGENCY shall comply with the provisions of sections 4450 and 4454 of the California Government Code, as well as other Department of General Services guidance, if applicable, for the contract PS&E for the construction of buildings, structures, sidewalks, curbs and related facilities for accessibility and usability. Further requirements and guidance are provided in Title 24 of the California Code of Regulations.

17. ADMINISTERING AGENCY shall provide a full-time public employee to be in responsible charge of each PROJECT. ADMINISTERING AGENCY shall provide or arrange for adequate supervision and inspection of each PROJECT. ADMINISTERING AGENCY may utilize consultants to perform supervision and inspection work for PROJECT with a

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fully qualified and licensed engineer. Utilization of consultants does not relieve ADMINISTERING AGENCY of its obligation to provide a full-time public employee to be in responsible charge of each PROJECT.

18. Unless otherwise provided in the PROGRAM SUPPLEMENT, ADMINISTERING AGENCY shall advertise, award, and administer the PROJECT construction contract or contracts.

19. The cost of maintenance, security, or protection performed by ADMINISTERING AGENCY or contractor forces during any temporary suspension of PROJECT or at any other time may not be charged to the PROJECT.

20. ADMINISTERING AGENCY shall submit PROJECT-specific award information to STATE's District Local Assistance Engineer, within sixty (60) days after contract award.

21. ADMINISTERING AGENCY shall submit the final report documents that collectively constitute a "Final Project Expenditure Report", LAPM Exhibit 17-M, within one hundred eighty (180) days of PROJECT completion. Failure by ADMINISTERING AGENCY to submit a "Final Project Expenditure Report", within 180 days of project completion will result in STATE imposing sanctions upon ADMINISTERING AGENCY in accordance with the Local Assistance Procedures Manual.

22. ADMINISTERING AGENCY shall comply with the Americans with Disabilities Act (ADA) of 1990 that prohibits discrimination on the basis of disability and all applicable regulations and guidelines issued pursuant to the ADA.

23. The Governor and the Legislature of the State of California, each within their respective jurisdictions, have prescribed certain nondiscrimination requirements with respect to contract and other work financed with public funds. ADMINISTERING AGENCY agrees to comply with the requirements of the FAIR EMPLOYMENT PRACTICES ADDENDUM, attached hereto as Exhibit A and further agrees that any agreement entered into by ADMINISTERING AGENCY with a third party for performance of work connected with PROJECT shall incorporate Exhibit A (with third party's name replacing ADMINISTERING AGENCY) as parts of such agreement.

24. ADMINISTERING AGENCY shall include in all contracts and subcontracts awarded when applicable, a clause that requires each subcontractor to comply with California Labor Code requirements that all workers employed on public works aspects of any project (as defined in California Labor Code sections 1720-1815) be paid not less than the general prevailing wage rates predetermined by the Department of Industrial Relations as effective at the date of contract award by the ADMINISTERING AGENCY.

ARTICLE II - RIGHTS-OF-WAY

1. No contract for the construction of a STATE FUNDED PROJECT shall be awarded until all necessary rights of way have been secured. Prior to the advertising for construction of PROJECT, ADMINISTERING AGENCY shall certify and, upon request, shall furnish STATE with evidence that all necessary rights-of-way are available for construction purposes or will be available by the time of award of the construction contract.

2. The furnishing of rights of way by ADMINISTERING AGENCY as provided for herein includes, and is limited to, the following, unless the PROGRAM SUPPLEMENT provides otherwise.
(a) Expenditures of capital and support to purchase all real property required for

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PROJECT free and clear of liens, conflicting easements, obstructions and encumbrances, after crediting PROJECT with the fair market value of any excess property retained and not disposed of by ADMINISTERING AGENCY. (b) The cost of furnishing of right-of-way as provided for herein includes, in addition to real property required for the PROJECT, title free and clear of obstructions and encumbrances affecting PROJECT and the payment, as required by applicable law, of damages to owners of remainder real property not actually taken but injuriously affected by PROJECT.
(c) The cost of relocation payments and services provided to owners and occupants pursuant to Government Code sections 7260-7277 when PROJECT displaces an individual, family, business, farm operation or nonprofit organization. (d) The cost of demolition and/or the sale of all improvements on the right-of-way after credit is recorded for sale proceeds used to offset PROJECT costs. (e) The cost of all unavoidable utility relocation, protection or removal. (f) The cost of all necessary hazardous material and hazardous waste treatment, encapsulation or removal and protective storage for which ADMINISTERING AGENCY accepts responsibility and where the actual generator cannot be identified, and recovery made.

3. ADMINISTERING AGENCY agrees to indemnify and hold STATE harmless from any liability that may result in the event the right-of-way for a PROJECT is not clear as certified by ADMINISTERING AGENCY, including, but not limited to, if said right-of-way is found to contain hazardous materials requiring treatment or removal to remediate in accordance with Federal and State laws. ADMINISTERING AGENCY shall pay, from its own non- matching funds, any costs which arise out of delays to the construction of PROJECT because utility facilities have not been timely removed or relocated, or because rights-of-way were not available to ADMINISTERING AGENCY for the orderly prosecution of PROJECT work.

ARTICLE III - MAINTENANCE AND MANAGEMENT

1. ADMINISTERING AGENCY will maintain and operate the property acquired, developed, constructed, rehabilitated, or restored by PROJECT for its intended public use until such time as the parties might amend this AGREEMENT to otherwise provide.

With the approval of STATE, ADMINISTERING AGENCY or its successors in interest in the PROJECT property may transfer this obligation and responsibility to maintain and operate PROJECT property for that intended public purpose to another public entity.

2. Upon ADMINISTERING AGENCY's acceptance of the completed construction contract or upon contractor being relieved of the responsibility for maintaining and protecting PROJECT, ADMINISTERING AGENCY will be responsible for the maintenance, ownership, liability, and the expense thereof, for PROJECT in a manner satisfactory to the authorized representatives of STATE and if PROJECT falls within the jurisdictional limits of another Agency or Agencies, it is the duty of ADMINISTERING AGENCY to facilitate a separate maintenance agreement(s) between itself and the other jurisdictional Agency or Agencies providing for the operation, maintenance, ownership and liability of PROJECT. Until those agreements are executed, ADMINISTERING AGENCY will be responsible for all PROJECT operations, maintenance, ownership and liability in a manner satisfactory to the authorized representatives of STATE. If, within ninety (90) days after receipt of notice from STATE that a PROJECT, or any portion thereof, is not

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being properly operated and maintained and ADMINISTERING AGENCY has not satisfactorily remedied the conditions complained of, the approval of future STATE FUNDED PROJECTS of ADMINISTERING AGENCY will be withheld until the PROJECT shall have been put in a condition of operation and maintenance satisfactory to STATE. The provisions of this section shall not apply to a PROJECT that has been vacated through due process of law with STATE's concurrence.

3. PROJECT and its facilities shall be maintained by an adequate and well-trained staff of engineers and/or such other professionals and technicians as PROJECT reasonably requires. Said operations and maintenance staff may be employees of ADMINISTERING AGENCY, another unit of government, or a contractor under agreement with ADMINISTERING AGENCY. All maintenance will be performed at regular intervals or as required for efficient operation of the complete PROJECT improvements.

4. ADMINISTERING AGENCY shall comply with all applicable law, including but not limited to, all applicable legal authority regarding construction standards.

ARTICLE IV - FISCAL PROVISIONS

1. All contractual obligations of STATE are subject to the appropriation of resources by the Legislature and the allocation of resources by the CTC.

2. STATE'S financial commitment of STATE FUNDS will occur only upon the execution of this AGREEMENT, the execution of each project-specific PROGRAM SUPPLEMENT and/or STATE's approved finance letter.

3. ADMINISTERING AGENCY agrees, as a minimum, to submit invoices in arrears for reimbursement of allowable PROJECT costs at least once every six months commencing after the STATE FUNDS are encumbered on either the project-specific PROGRAM SUPPLEMENT or through a project-specific finance letter approved by STATE. STATE reserves the right to suspend future allocations and invoice payments for any on-going or future STATE FUNDED project performed by ADMINISTERING AGENCY if PROJECT costs have not been invoiced by ADMINISTERING AGENCY for a sixmonth period

4. Invoices shall be submitted on a standardized billing summary template, in accordance with Chapter 5 of the LAPM to claim reimbursement by ADMINISTERING AGENCY. For construction invoices, pay estimates must be included.

5. ADMINISTERING AGENCY must retain at least one copy of supporting backup documentation for allowable costs incurred and claimed for reimbursement by ADMINISTERING AGENCY. ADMINISTERING AGENCY agrees to submit supporting backup documentation with invoices if requested by State. Acceptable backup documentation includes, but is not limited to, agency's progress payment to the contractors, copies of cancelled checks showing amounts made payable to vendors and contractors, and/or a computerized summary of PROJECT costs.

6. Payments to ADMINISTERING AGENCY can only be released by STATE as reimbursements of actual allowable PROJECT costs already incurred and paid for by the ADMINISTERING AGENCY.

7. Indirect Cost Allocation Plans/Indirect Cost Rate Proposals (ICAP/ICRP), Central Service Cost Allocation Plans and related documentation are to be prepared and provided to the Inspector General - Independent Office of Audits and Investigations for review and approval prior to ADMINISTERING AGENCY seeking reimbursement of

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indirect cost incurred within each fiscal year being claimed for reimbursement.

ICAPs/ICRPs must be prepared in accordance with the requirements set forth in 2 CFR, Part 200, Chapter 5 of the LAPM, and the ICAP/ICRP approval procedures established by STATE.

8. STATE will withhold the greater of either two (2) percent of the total of all STATE FUNDS encumbered for each PROGRAM SUPPLEMENT or $40,000 until ADMINISTERING AGENCY submits the Final Report of Expenditures for each completed PROGRAM SUPPLEMENT PROJECT.

9. The estimated total cost of PROJECT, the amount of STATE FUNDS obligated, and the required matching funds may be adjusted by mutual consent of the PARTIES with a finance letter, and an allocation notification letter when applicable. STATE FUNDING may be increased to cover PROJECT cost increases only if such additional funds are available and the CTC and/or STATE concurs with that increase in the form of an allocation and finance letter.

10. When such additional STATE FUNDS are not available, ADMINISTERING AGENCY agrees that any increases in PROJECT costs must be defrayed with ADMINISTERING AGENCY's own funds.

11. ADMINISTERING AGENCY shall use its own non-STATE FUNDS to finance the local share of eligible costs and all PROJECT expenditures or contract items ruled ineligible for financing with STATE FUNDS. STATE shall make the final determination of ADMINISTERING AGENCY's cost eligibility for STATE FUNDED financing with respect to claimed PROJECT costs.

12. ADMINISTERING AGENCY will reimburse STATE for STATE's share of costs for work performed by STATE at the request of ADMINISTERING AGENCY. STATE's costs shall include overhead assessments in accordance with section 8755.1 of the State Administrative Manual.

13. STATE FUNDS allocated by the CTC and/or STATE are subject to the timely use of funds provisions approved in CTC Guidelines and State procedures approved by the CTC and STATE.

14. STATE FUNDS encumbered for PROJECT are available for liquidation only for a limited period from the beginning of the State fiscal year when those funds were appropriated in the State Budget. STATE FUNDS not liquidated within these periods will be reverted unless a Cooperative Work Agreement (CWA) is submitted by ADMINISTERING AGENCY and approved by the California Department of Finance in accordance with Section 16304 of the Government Code. The exact date of fund reversion will be reflected in the STATE signed PROJECT finance letter.

15. Payments to ADMINISTERING AGENCY for PROJECT-related travel and subsistence (per diem) expenses of ADMINISTERING AGENCY forces and its contractors and subcontractors claimed for reimbursement or as local match credit shall not exceed rates authorized to be paid to rank and file STATE employees under current California Department of Human Resources (CalHR) rules unless a Cooperative Work Agreement (CWA) is submitted by ADMINISTERING AGENCY and approved by the California Department of Finance in accordance with Government Code section 16304. If the rates invoiced by ADMINISTERING AGENCY are in excess of CalHR rates, ADMINISTERING AGENCY is responsible for the cost difference, and any overpayments inadvertently paid by STATE shall be reimbursed to STATE by ADMINISTERING AGENCY on demand.

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16. ADMINISTERING AGENCY agrees to comply with California Government Code 4525- 4529.14. Administering Agency shall undertake the procedures described in California Government Code 4527(a) and 4528(a). Administering Agency shall also comply with 2 CFR Part 200 Uniform Administrative Requirements, Cost Principles and Audit Requirement for Federal Awards, excluding 2 CFR Part 200.318-200.326.

17. ADMINISTERING AGENCY agrees and will assure that its contractors and subcontractors will be obligated to agree that Contract Cost Principles and Procedures, 48 CFR, Federal Acquisition Regulations System, Chapter 1, Part 31, et seq., shall be used to determine the allowability of individual PROJECT cost items. Every recipient and sub-recipient receiving PROJECT funds under this AGREEMENT shall comply with Federal administrative procedures in accordance with 2 CFR, Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirement for Federal Awards, excluding 2 CFR Part 200.318-200.326Governments. ADMINISTERING AGENCY agrees to comply with the provisions set forth in 23 CFR Parts 140, 645 and 646 when contracting with railroad and utility companies.

18. Every recipient and sub-recipient receiving PROJECT funds under this AGREEMENT shall comply with 2 CFR 200 excluding 2 CFR Part 200.318-200.326, 48 CFR Chapter 1, Part 31, LAPM, Public Contract Code (PCC) 10300- 10334 (procurement of goods), PCC 10335-10381 (non-A&E services), California Government Code 4525-4529.5 including 4527(a) and 4528(a), and other applicable STATE regulations.

19. Any PROJECT costs for which ADMINISTERING AGENCY has received payment or credit that are determined by subsequent audit to be questioned, disallowed, or unallowable under 2 CFR, Part 200, 48 CFR, Chapter 1, Part 31, 23 CFR Parts 140, 645 and 646, LAPM, Public Contract Code (PCC) 10300-10334 (procurement of goods), PCC 10335-10381 (non-A&E services), California Government Code 4525-4529.5 including 4527(a) and 4528(a), and other applicable STATE regulations are subject to repayment by ADMINISTERING AGENCY to STATE and may result in STATE imposing sanctions on ADMINISTERING AGENCY as described in Chapter 20 of the Local Assistance Procedures Manual.

20. Should ADMINISTERING AGENCY fail to refund any moneys due upon written demand by STATE as provided herein or should ADMINISTERING AGENCY breach this AGREEMENT by failing to complete PROJECT without adequate justification and approval by STATE, then, within thirty (30) days of demand, or within such other period as may be agreed to in writing between the PARTIES hereto, STATE, acting through the State Controller, the State Treasurer, the CTC or any other public entity or agency, may intercept, withhold and demand the transfer of an amount equal to the amount paid by or owed to STATE for each PROJECT, from future apportionments, or any other funds due ADMINISTERING AGENCY from the Highway Users Tax Fund or any other sources of funds, and/or may also withhold approval of future STATE FUNDED projects proposed by ADMINISTERING AGENCY.

21. Should ADMINISTERING AGENCY be declared to be in breach of this AGREEMENT or otherwise in default thereof by STATE, and if ADMINISTERING AGENCY is constituted as a joint powers authority, special district, or any other public entity not directly receiving funds through the State Controller, STATE is authorized to obtain reimbursement from whatever sources of funding are available, including the withholding or transfer of funds, from those constituent entities comprising a joint powers authority or by bringing of an action against ADMINISTERING AGENCY or its constituent member entities, to recover all funds provided by STATE hereunder.

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22. ADMINISTERING AGENCY acknowledges that the signatory party represents the ADMINISTERING AGENCY and further warrants that there is nothing within a Joint Powers Agreement, by which ADMINISTERING AGENCY was created, if any exists, that would restrict or otherwise limit STATE's ability to recover STATE FUNDS improperly spent by ADMINISTERING AGENCY in contravention of the terms of this AGREEMENT.

ARTICLE V

AUDITS, THIRD PARTY CONTRACTING, RECORDS RETENTION AND REPORTS

1. STATE reserves the right to conduct technical and financial audits of PROJECT work and records and ADMINISTERING AGENCY agrees, and shall require its contractors and subcontractors to agree, to cooperate with STATE by making all appropriate and relevant PROJECT records available for audit and copying as required by paragraph three (3) of Article V.

2. ADMINISTERING AGENCY, its contractors and subcontractors shall establish and maintain a financial management system and records that properly accumulate and segregate reasonable, allowable, and allocable incurred PROJECT costs and matching funds by line item for the PROJECT. The financial management system of ADMINISTERING AGENCY, its contractors and all subcontractors shall conform to Generally Accepted Accounting Principles, enable the determination of incurred costs at interim points of completion, and provide support for reimbursement payment vouchers or invoices sent to or paid by STATE.

3. ADMINISTERING AGENCY, ADMINISTERING AGENCY's contractors and subcontractors, and STATE shall each maintain and make available for inspection and audit by STATE, the California State Auditor, or any duly authorized representative of STATE or the United States, all books, documents, papers, accounting records, and other evidence pertaining to the performance of such contracts, including, but not limited to, the costs of administering those various contracts, and ADMINISTERING AGENCY shall furnish copies thereof if requested. All of the above-referenced parties shall make such AGREEMENT and PROGRAM SUPPLEMENT materials available at their respective offices at all reasonable times during the entire PROJECT period and for three (3) years, or 35 years for Prop 1B funds, from the date of final payment to ADMINISTERING AGENCY.

4. ADMINISTERING AGENCY shall not award a construction contract over $25,000 on the basis of a noncompetitive negotiation for work to be performed under this AGREEMENT without the prior written approval of STATE. All contracts awarded by ADMINISTERING AGENCY intended or used as local match credit must meet the requirements set forth in this AGREEMENT regarding local match funds.

5. ADMINISTERING AGENCY shall comply with Chapter 10 (commencing with Section 4525) Division 5 of Title 1 of the Government Code and shall undertake the procedures described in California Government Code 4527(a) and 4528(a). Administering Agency shall comply with Chapter 10 of the LAPM for AE Consultant Contracts.

6. ADMINISTERING AGENCY shall comply with Government Code Division 5 Title 1 sections 4525-4529.5 and shall undertake the procedures described in California Government Code 4527(a) and 4528(a) for procurement of professional service contracts. Administering Agency shall follow Public Contract Code Section 10335- 10381 for other professional service contracts.

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7. Any subcontract entered into by ADMINISTERING AGENCY as a result of this AGREEMENT shall contain all of the provisions of Article IV, FISCAL PROVISIONS, and this ARTICLE V, AUDITS, THIRD-PARTY CONTRACTING, RECORDS RETENTION AND REPORTS and shall mandate that travel and per diem reimbursements and third- party contract reimbursements to subcontractors will be allowable as PROJECT costs only after those costs are incurred and paid for by the subcontractors.

8. To be eligible for local match credit, ADMINISTERING AGENCY must ensure that local match funds used for a PROJECT meet the fiscal provisions requirements outlined in ARTICLE IV in the same manner that is required of all other PROJECT expenditures.

9. Except as provided in this Article, this AGREEMENT is solely between and for the benefit of the PARTIES and there are no third-party beneficiaries.

ARTICLE VI - MISCELLANEOUS PROVISIONS

1. ADMINISTERING AGENCY agrees to use all PROJECT funds reimbursed hereunder only for transportation purposes that are in conformance with Article XIX of the California State Constitution and other California laws.

2. ADMINISTERING AGENCY shall conform to all applicable State and Federal statutes and regulations, and the Local Assistance Program Guidelines and Local Assistance Procedures Manual as published by STATE and incorporated herein, including all subsequent approved revisions thereto applicable to PROJECT unless otherwise designated in the project-specific executed PROJECT SUPPLEMENT.

3. This AGREEMENT is subject to any additional restrictions, limitations, conditions, or any statute enacted by the State Legislature or adopted by the CTC that may affect the provisions, terms, or funding of this AGREEMENT in any manner.

4. ADMINISTERING AGENCY and the officers and employees of ADMINISTERING AGENCY, when engaged in the performance of this AGREEMENT, shall act in an independent capacity and not as officers, employees or agents of STATE.

5. Each project-specific PROGRAM SUPPLEMENT shall separately establish the terms and funding limits for each described PROJECT funded under this AGREEMENT and that PROGRAM SUPPLEMENT. No STATE FUNDS are obligated against this AGREEMENT.

6. ADMINISTERING AGENCY certifies that neither ADMINISTERING AGENCY nor its principals are suspended or debarred at the time of the execution of this AGREEMENT, and ADMINISTERING AGENCY agrees that it will notify STATE immediately in the event a suspension or a debarment occurs after the execution of this AGREEMENT.

7. ADMINISTERING AGENCY certifies, by execution of this AGREEMENT, that no person or selling agency has been employed or retained to solicit or secure this AGREEMENT upon an agreement or understanding for a commission, percentage, brokerage, or contingent fee, excepting bona fide employees or bona fide established commercial or selling agencies maintained by ADMINISTERING AGENCY for the purpose of securing business. For breach or violation of this warranty, STATE has the right to annul this AGREEMENT without liability, pay only for the value of the PROJECT work actually performed, or in STATE's discretion, to deduct from the price of PROGRAM SUPPLEMENT consideration, or otherwise recover, the full amount of such commission, percentage, brokerage, or contingent fee.

Page 10 of 15 ends

8. In accordance with Public Contract Code section 10296, ADMINISTERING AGENCY hereby certifies under penalty of perjury that no more than one final unappealable finding of contempt of court by a federal court has been issued against ADMINISTERING AGENCY within the immediate preceding two (2) year period because of ADMINISTERING AGENCY's failure to comply with an order of a federal court that orders ADMINISTERING AGENCY to comply with an order of the National Labor Relations Board.

9. ADMINISTERING AGENCY shall disclose any financial, business, or other relationship with STATE that may have an impact upon the outcome of this AGREEMENT or any individual PROJECT encompassed within a PROGRAM SUPPLEMENT. ADMINISTERING AGENCY shall also list current contractors who may have a financial interest in the outcome of a PROJECT undertaken pursuant to this AGREEMENT. These disclosures shall be delivered to STATE in a form deemed acceptable by the STATE prior to execution of this AGREEMENT.

10. ADMINISTERING AGENCY hereby certifies that it does not have, nor shall it acquire, any financial or business interest that would conflict with the performance of any PROJECT initiated under this AGREEMENT.

11. ADMINISTERING AGENCY certifies that this AGREEMENT was not obtained or secured through rebates, kickbacks or other unlawful consideration either promised or paid to any STATE employee. For breach or violation of this warranty, STATE shall have the right, in its sole discretion, to terminate this AGREEMENT without liability, to pay only for PROJECT work actually performed, or to deduct from a PROGRAM SUPPLEMENT price or otherwise recover the full amount of such rebate, kickback, or other unlawful consideration.

12. Any dispute concerning a question of fact arising under this AGREEMENT that is not disposed of by agreement shall be decided by the STATE's Contract Manager, who shall be identified to ADMINISTERING AGENCY at the time of execution of this AGREEMENT and, as applicable , any time that Contract Manager changes during the duration of this AGREEMENT who may consider any written or verbal evidence submitted by ADMINISTERING AGENCY. The decision of the Contract Manager, issued in writing, shall be conclusive and binding on the PARTIES on all questions of fact considered and determined by the Contract Manager.

13. Neither the pendency of a dispute nor its consideration by the Contract Manager will excuse the ADMINISTERING AGENCY from full and timely performance in accordance with the terms of this AGREEMENT and each PROGRAM SUPPLEMENT.

14. Neither STATE nor any officer or employee thereof is responsible for any injury, damage or liability occurring by reason of anything done or omitted to be done by ADMINISTERING AGENCY under or in connection with any work, authority or jurisdiction of ADMINISTERING AGENCY arising under this AGREEMENT. It is understood and agreed that ADMINISTERING AGENCY shall fully defend, indemnify and save harmless STATE and all of its officers and employees from all claims and suits or actions of every name, kind and description brought forth under, including but not limited to, tortious, contractual, inverse condemnation or other theories or assertions of liability occurring by reason of anything done or omitted to be done by ADMINISTERING AGENCY under this AGREEMENT.

15. Neither ADMINISTERING AGENCY nor any officer or employee thereof is responsible for any injury, damage or liability occurring by reason of anything done or omitted to be done by STATE, under or in connection with any work, authority or

Page 11 of 15 ends

jurisdiction arising under this AGREEMENT. It is understood and agreed that STATE shall fully defend, indemnify and save harmless the ADMINISTERING AGENCY and all of its officers and employees from all claims, suits or actions of every name, kind and description brought forth under, including but not limited to, tortious, contractual, inverse condemnation and other theories or assertions of liability occurring by reason of anything done or omitted to be done by STATE under this AGREEMENT.

16. In the event of (a) ADMINISTERING AGENCY failing to timely proceed with effective PROJECT work in accordance with the project-specific PROGRAM SUPPLEMENT; (b) failing to maintain any applicable bonding requirements; and (c) otherwise materially violating the terms and conditions of this AGREEMENT and/or any PROGRAM SUPPLEMENT, STATE reserves the right to terminate funding for that PROJECT upon thirty (30) days' written notice to ADMINISTERING AGENCY.

17. No termination notice shall become effective if, within thirty (30) days after receipt of a Notice of Termination, ADMINISTERING AGENCY either cures the default involved or, if the default is not reasonably susceptible of cure within said thirty (30) day period the ADMINISTERING AGENCY proceeds thereafter to complete that cure in a manner and time line acceptable to STATE.

18. Any such termination shall be accomplished by delivery to ADMINISTERING AGENCY of a Notice of Termination, which notice shall become effective not less than thirty (30) days after receipt, specifying the reason for the termination, the extent to which funding of work under this AGREEMENT and the applicable PROGRAM SUPPLEMENT is terminated and the date upon which such termination becomes effective, if beyond thirty (30) days after receipt. During the period before the effective termination date, ADMINISTERING AGENCY and STATE shall meet to attempt to resolve any dispute. In the event of such termination, STATE may proceed with the PROJECT work in a manner deemed proper by STATE. If STATE terminates funding for PROJECT with ADMINISTERING AGENCY for the reasons stated in paragraph sixteen (16) of ARTICLE VI, STATE shall pay ADMINISTERING AGENCY the sum due ADMINISTERING AGENCY under the PROGRAM SUPPLEMENT and/or STATE-approved finance letter prior to termination, provided, however, ADMINISTERING AGENCY is not in default of the terms and conditions of this AGREEMENT or the project-specific PROGRAM SUPPLEMENT and that the cost of any PROJECT completion to STATE shall first be deducted from any sum due ADMINISTERING AGENCY.

19. In the case of inconsistency or conflicts with the terms of this AGREEMENT and that of a project-specific PROGRAM SUPPLEMENT and/or Cooperative Agreement, the terms stated in that PROGRAM SUPPLEMENT and/or Cooperative Agreement shall prevail over those in this AGREEMENT.

20. Without the written consent of STATE, this AGREEMENT is not assignable by ADMINISTERING AGENCY either in whole or in part.

21. No alteration or variation of the terms of this AGREEMENT shall be valid unless made in writing and signed by the PARTIES, and no oral understanding or agreement not incorporated herein shall be binding on any of the PARTIES.

Page 12 of 15 ends

City of Porterville
City of Porterville
IN WITNESS WHEREOF, the parties have executed this AGREEMENT by their duly authorized officer.

STATE OF CALIFORNIA

DEPARTMENT OF TRANSPORTATION
________________________________
Chief, Office of Project Management ________________________________ Oversight
Division of Local Assistance
Representative Name & Title
(Authorized Governing Body
Representative)
By______________________________ By______________________________ Date______________________________ Date______________________________ ________________________________

Page 13 of 15 ends

EXHIBIT A - FAIR EMPLOYMENT PRACTICES ADDENDUM

1. In the performance of this Agreement, ADMINISTERING AGENCY will not discriminate against any employee for employment on account of race, religious creed, color, national origin, ancestry, physical disability, mental disability, medical condition, genetic information, marital status, sex, gender, gender identity, gender expression, age, sexual orientation, or military and veteran status. ADMINISTERING AGENCY will take affirmative action to ensure that employees are treated during employment without regard to their race, religious creed, color, national origin, ancestry, physical disability, mental disability, medical condition, genetic information, marital status, sex, gender, gender identity, gender expression, age, sexual orientation, or military and veteran status. Such action shall include, but not be limited to, the following:
employment; upgrading; demotion or transfer; recruitment or recruitment advertising; layoff or termination; rates of pay or other forms of compensation; and selection for training, including apprenticeship. ADMINISTERING AGENCY shall post in conspicuous places, available to employees for employment, notices to be provided by STATE setting forth the provisions of this Fair Employment section.

2. ADMINISTERING AGENCY, its contractor(s) and all subcontractors shall comply with the provisions of the Fair Employment and Housing Act (Gov. Code, 12900 et seq.), and the applicable regulations promulgated thereunder (Cal. Code Regs., Title 2, 11000, et seq.). The applicable regulations of the Fair Employment and Housing Commission implementing Government Code section 12900(a-f), set forth in Chapter 5 of Division 4 of Title 2 of the California Code of Regulations are incorporated into this AGREEMENT by reference and made a part hereof as if set forth in full. Each of the ADMINISTERING AGENCY'S contractors and all subcontractors shall give written notice of their obligations under this clause to labor organizations with which they have a collective bargaining or other agreements, as appropriate.

3. ADMINISTERING AGENCY shall include the nondiscrimination and compliance provisions of this clause in all contracts and subcontracts to perform work under this AGREEMENT.

4. ADMINISTERING AGENCY will permit access to the records of employment, employment advertisements, application forms, and other pertinent data and records by STATE, the State Fair Employment and Housing Commission, or any other agency of the State of California designated by STATE, for the purposes of investigation to ascertain compliance with the Fair Employment section of this Agreement.

5. Remedies for Willful Violation:
(a) STATE may determine a willful violation of the Fair Employment provision to have occurred upon receipt of a final judgment to that effect from a court in an action to which ADMINISTERING AGENCY was a party, or upon receipt of a written notice from the Fair Employment and Housing Commission that it has investigated and determined that ADMINISTERING AGENCY has violated the Fair Employment Practices Act. (b) For willful violation of this Fair Employment Provision, STATE shall have the right to terminate this Agreement either in whole or in part, and any loss or damage sustained by STATE in securing the goods or services thereunder shall be borne and paid for by ADMINISTERING AGENCY and by the surety under the performance bond, if any, and STATE may deduct from any moneys due or thereafter may become due to ADMINISTERING AGENCY, the difference between the price named in the Agreement

Page 14 of 15 ends

and the actual cost thereof to STATE to cure ADMINISTERING AGENCY's breach of this Agreement.

Page 15 of 15 ends

00000A426
FOR STATE FUNDED PROJECTS NO 06-5122S21
0624000141
January 16, 2024
06-TUL-0-PTRV
ATPL-5122(096)
5122
This Program Supplement, effective 12/07/2023, hereby adopts and incorporates into the Administering Agency-State Agreement No. 06-5122S21 for State Funded Projects which was entered into between the ADMINISTERING AGENCY and the STATE with an effective date of and is subject to all the terms and conditions thereof. This PROGRAM SUPPLEMENT is executed in accordance with Article I of the aforementioned Master Agreement under authority of Resolution No. approved by the ADMINISTERING AGENCY on (See copy attached).

The ADMINISTERING AGENCY further stipulates that as a condition to the payment by the State of any funds derived from sources noted below encumbered to this project, Administering Agency accepts and will comply with the Special Covenants and remarks set forth on the following pages.

On North and South Reservation Road between Cow Mountain Road and Million Dollar Bridge; construct 2 new Class 1 bridges and reconfigure roa
Pedestrian bridges 0.0(MILES)
Estimated Cost State Funds Matching Funds

CITY OF PORTERVILLE
By ________________________________ By ________________________________ Title _______________________________
Date _______________________________
Attest _______________________________ Date _______________________________ Division of Local Assistance
I hereby certify upon my personal knowledge that budgeted funds are available for this encumbrance:

Accounting Officer _______________________ Date _______________ PROGRAM SUPPLEMENT NO.
to

ADMINISTERING AGENCY-STATE AGREEMENT
Adv. Project ID Date:

Location:

Project Number:

E.A. Number:

Locode:

PROJECT LOCATION:

TYPE OF WORK: LENGTH:

LOCAL OTHER
$168,000.00 $0.00 $0.00
Chief, Office of Project Implementation

STATE OF CALIFORNIA
Department of Transportation
$168,000.00
STATE $168,000.00
Program Supplement 06--512-A426- SERIAL 1Page of 4
01/16/2024

SPECIAL COVENANTS OR REMARKS
06-TUL-0-PTRV
ATPL-5122(096)

1. A. This PROJECT will be administered in accordance with the applicable CTC STIP guidelines and the Active Transportation Program guidelines as adopted or amended, the Local Assistance Procedures Manual (LAPM), the Local Assistance Program Guidelines (LAPG), and this PROGRAM SUPPLEMENT.

B. This PROJECT is programmed to receive State funds from the Active Transportation Program (ATP). Funding may be provided under one or more components. A component(s) specific fund allocation is required, in addition to other requirements, before reimbursable work can occur for the component(s) identified. Each allocation will be assigned an effective date and identify the amount of funds allocated per component(s).

This PROGRAM SUPPLEMENT has been prepared to allow reimbursement of eligible PROJECT expenditures for the component(s) allocated. Unless otherwise determined, the effective date of the component specific allocation will constitute the start of reimbursable expenditures.

C. STATE and ADMINISTERING AGENCY agree that any additional funds made available by future allocations will be encumbered on this PROJECT by use of a STATE-approved Allocation Letter and STATE Finance Letter. ADMINISTERING AGENCY agrees that STATE funds available for reimbursement will be limited to the amount allocated by the California Transportation Commission (CTC) and/or the STATE.

D. Upon ADMINISTERING AGENCY request, the CTC and/or STATE may approve supplementary allocations, time extensions, and fund transfers between components. Funds transferred between allocated project components retain their original timely use of funds deadlines, but an approved time extension will revise the timely use of funds criteria for the component(s) and allocation(s) requested. Approved supplementary allocations, time extensions, and fund transfers between components made after the execution of this PROGRAM SUPPLEMENT will be documented and considered subject to the terms and conditions thereof.

Documentation will consist of a STATE approved Allocation Letter, Fund Transfer Letter, Time Extension Letter, and Finance Letter, as appropriate.

E. This PROJECT is subject to the timely use of funds provisions enacted by the Active Transportation Program guidelines, as adopted or amended, and by approved CTC and State procedures as outlined below.

Funds allocated for the environmental & permits (E&P), plan specifications & estimate (PS&E), and right-of-way components are available for expenditure until the end of the second fiscal year following the year in which the funds were allocated.

Program Supplement 06--512-A426- SERIAL Page 2 of 4

SPECIAL COVENANTS OR REMARKS
06-TUL-0-PTRV
ATPL-5122(096)
Funds allocated for the construction component are subject to an award deadline and contract completion deadline. ADMINISTERING AGENCY agrees to award the contract within 6 months of the construction fund allocation and to complete and accept the construction within 36 months of award.

F. Award information shall be submitted by the ADMINISTERING AGENCY to the District Local Assistance Engineer immediately after project contract award and prior to the submittal of the ADMINISTERING AGENCY'S first invoice for the construction contract. Failure to do so will cause a delay in the State processing of invoices for the construction phase.

G. The ADMINISTERING AGENCY shall invoice STATE for environmental & permits (E&P), plans specifications & estimate (PS&E), and right-of-way costs no later than 180 days after the end of last eligible fiscal year of expenditure. For construction costs, the ADMINISTERING AGENCY has 180 days after project completion or contract acceptance to make the final payment to the contractor prepare the final Report of Expenditures and final invoice, and submit to STATE for verification and payment.

H. ADMINISTERING AGENCY agrees to submit the final report documents that collectively constitute a "Report of Expenditures" within one hundred eighty (180) days of PROJECT completion. Failure of ADMINISTERING AGENCY to submit a "Final Report of Expenditures" within 180 days of PROJECT completion will result in STATE imposing sanctions upon ADMINISTERING AGENCY in accordance with the current LAPM and the Active Transportation Program (ATP) Guidelines.

I. ADMINISTERING AGENCY indirect costs, as defined in 2 CFR, Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirement for Federal Awards, to be claimed must be allocated in accordance with an Indirect Cost Allocation Plan (ICAP), submitted, reviewed, and approved in accordance with Caltrans Audits and Investigations requirements which may be accessed at: www.dot.ca.gov/hq/audits/.

ADMINISTERING AGENCY agrees to comply with, and require all sub-recipients and project sponsors to comply with 2 CFR, Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirement for Federal Awards, and all applicable Federal and State laws and regulations.

ADMINISTERING AGENCY agrees, and will assure that its contractors and subcontractors will be obligated to agree, that Contract Cost Principles and Procedures, 48 CFR, Federal Acquisition Regulations System, Chapter 1, Part 31, et seq., and all applicable Federal and State laws and regulations, shall be used to determine the allowability of individual PROJECT cost items.

Any Fund expenditures for costs for which ADMINISTERING AGENCY has received Program Supplement 06--512-A426- SERIAL Page 3 of 4

SPECIAL COVENANTS OR REMARKS
06-TUL-0-PTRV
ATPL-5122(096)
payment or credit that are determined by subsequent audit to be unallowable under 2 CFR, Part 200, or 48 CFR, Chapter 1, Part 3, are subject to repayment by ADMINISTERING AGENCY to STATE. Should ADMINISTERING AGENCY fail to reimburse Funds due STATE within 30 days of demand, or within such other period as may be agreed in writing between the Parties hereto, STATE is authorized to intercept and withhold future payments due ADMINISTERING AGENCY from STATE or any third-party source, including, but not limited to, the State Treasurer, the State Controller, and the California Transportation Commission.

J. By executing this PROGRAM SUPPLEMENT, ADMINISTERING AGENCY agrees to comply with all reporting requirements in accordance with the Active Transportation Program guidelines, as adopted or amended.

K. This PROJECT has received funds from Active Transportation Program (ATP). The ADMINISTERING AGENCY agrees to administer the project in accordance with the CTC Adopted SB1 Accountability and Transparency Guidelines.

2. The ADMINISTERING AGENCY shall construct the PROJECT in accordance with the scope of work presented in the application and approved by the California Transportation Commission. Any changes to the approved PROJECT scope without the prior expressed approval of the California Transportation Commission are ineligible for reimbursement and may result in the entire PROJECT becoming ineligible for reimbursement.

Program Supplement 06--512-A426- SERIAL Page 4 of 4
RESOLUTION NO.

A RESOLUTION OF THE CITY COUNCIL OF THE CITY

OF PORTERVILLE AUTHORIZING THE MAYOR TO SIGN

MASTER AGREEMENT ADMINISTERING AGENCY-STATE
AGREEMENT FOR STATE-AID PROJECTS NO. 06-5122S21
BE IT RESOLVED by the City Council of the City of Porterville, that the Mayor is hereby authorized to execute the document known as Master Agreement Administering Agency-State Agreement for State-Aid Projects No. 06-5122S21, for the project approval and environmental documentation phase of the Tule River Tribe Village Corridor and Two Pedestrian Bridges Project.

PASSED, ADOPTED AND APPROVED this 5th day of March, 2024.

Martha A. Flores, Mayor
ATTEST:

Patrice Hildreth, City Clerk
By Fernando Gabriel-Moraga, Acting Chief Deputy City Clerk -2024
RESOLUTION NO.

A RESOLUTION OF THE CITY COUNCIL OF THE CITY

OF PORTERVILLE AUTHORIZING THE MAYOR TO SIGN
PROGRAM SUPPLEMENT NO. A426

TO ADMINISTERING THE AGENCY-STATE AGREEMENT
FOR STATE-AID PROJECTS NO. 06-5122S21
BE IT RESOLVED by the City Council of the City of Porterville that the Mayor is hereby authorized to execute the document known as Program Supplement No. A426 to administering Agency-State Agreement for State-Aid Projects No. 06-5122S21, for the project approval and environmental documentation phase of the Tule River Tribe Village Corridor and Two Pedestrian Bridges Project.

PASSED, ADOPTED AND APPROVED this 5th day of March, 2024.

Martha A. Flores, Mayor
ATTEST:

Patrice Hildreth, City Clerk
By Fernando Gabriel-Moraga, Acting Chief Deputy City Clerk -2024
Item No. 9.

CITY COUNCIL AGENDA – MARCH 5, 2024
SUBJECT: California POST Team Building Workshop
SOURCE: Police
COMMENT: The California Commission on Peace Officer Standards and Training (POST) Team Building Workshop (TBW) Program pairs independent specialized consultant services with the management team of a local agency to assist with problem-solving, developing organizational goals and objectives, and/or team building within the agency. POST has an approved list of over 20 presenters to present/facilitate the workshop. The facilitation of the workshop by a POSTapproved, impartial, non-client agency employee is crucial to the success of each workshop. Only POST-approved presenters, on the provided list, may be selected to conduct the workshop.

The Porterville Police Department applied for and was approved to take part in the above-described workshop. As such, staff reviewed the list of POSTapproved presenters and selected Tyler G. Burtis as the facilitator. Mr. Burtis has started the interactive three-phase process that includes:

Identification of Need: The POST-certified presenter is surveying the police department and developing preliminary information about the issue(s) to be addressed in the workshop, and is developing a 16-hour workshop.

Workshop Session: The department will participate in a 16-hour workshop of group work at a location selected by the client agency. The location is ideally away from the police department to allow managers to disconnect and focus on the issues of the workshop. In previous years, Shell Beach has proven to be a successful location, being far enough away but also close enough in the case of a catastrophic or major event requiring additional response. Therefore, it is the selected location this year. During the workshop, an action plan will be developed to solve identified problems, set goals or objectives, and/or team build. The police department will return the completed team building workshop action plan to POST within 90 days.

Follow-up Evaluation: The presenter will contact the police department following the workshop to aid in the implementation of action items identified in the action plan.

Team Building Workshops are certified under the California POST Reimbursement - Plan V. The police department will be reimbursed for all costs related to employee participation, including venue location, hotel costs, employee meals and incidentals (per diem), and travel (mileage).

Item No. 9.

RECOMMENDATION: That the City Council:

1. Approve the expenditure in the amount of $6,531.09 for police department command and management staff to participate in the California Peace Officer Standards and Training (POST) Team Building Workshop; and

2. Accept reimbursement from the California Peace Officer Standards and Training (POST) upon submission of the Training Reimbursement Request.

ATTACHMENTS: 1. PORTERVILLE POLICE DEPARTMENT - ESTIMATE

OF CHARGES - MEETING

2. PORTERVILLE POLICE DEPARTMENT - ESTIMATE

OF CHARGES - ROOMS
Appropriated/Funded:

Review By:

Department Director:

Jake Castellow, Chief of Police
Final Approver: Patrice Hildreth, City Manager
To: Tiffany Savoie RES # 378015
Porterville Police Department
From: Joey Flynn
Meeting & Events Coordinator

ESTIMATE OF CHARGES - MEETING
ALL ++ 2024
EVENT CHARGES: QUANTITY UNIT PRICE TOTAL
3/25/2024
Food & Beverage: COFFEE STATION - ESTIMATE ONLY 4 $35.00 $140.00 Other Charges: MEETING SETUP FEE 1 $550.00 $550.00
SUBTOTAL $690.00
SERVICE CHARGE (23%) $158.70
TAXES(7.75%) $65.77
DAY #1 TOTAL $914.47
3/26/2024
Food & Beverage: COFFEE STATION - ESTIMATE ONLY 3 $35.00 $105.00 Other Charges: MEETING SETUP FEE 1 $375.00 $375.00
SUBTOTAL $480.00
SERVICE CHARGE (23%) $110.40
TAXES(7.75%) $45.76
DAY #2 TOTAL $636.16
DAY #1 $914.47
DAY #2 $636.16
MEETING AND EVENTS TOTAL $1,550.63
EVENT CHARGES TOTAL $1,550.63

PREPAYMENT
AMOUNT DUE $1,550.63
*All numbers are Estimates Only. Final numbers may change based on a variety of factors.

To: Tiffany Savoie RES # 378015
Porterville Police Department
From: Joey Flynn
Meeting & Events Coordinator

ESTIMATE OF CHARGES - ROOMS
ALL ++ 2024
HOTEL ROOM CHARGES: QUANTITY UNIT PRICE TOTAL PRICE
3/24/2024 GUEST ROOMS 11 $159.00 $ 1,749.00
Nightly Facility Fee 11 $40.00 $ 440.00
3/25/2024 GUEST ROOMS 11 $159.00 $ 1,749.00
Nightly Facility Fee 11 $40.00 $ 440.00
SUB TOTAL $4,378.00
HOTEL TAX (14.75%) $645.76
TOTAL $5,023.76
HOTEL ROOMS TOTAL $5,023.76
HOTEL ROOMS TOTAL $5,023.76
DEPOSIT (VA 7660) ($500.00)

PREPAYMENT
AMOUNT DUE $4,523.76
*All numbers are Estimates Only. Final numbers may change based on a variety of factors.

Item No. 10.

CITY COUNCIL AGENDA – MARCH 5, 2024
SUBJECT: Consideration of Appointment of CalTIP Alternate Board Member SOURCE: Public Works
COMMENT:

On January 20, 2004, the City Council authorized the City's participation in the California Transit System Joint Powers Authority, which does business as the California Transit Indemnity Pool ("CalTIP") for liability coverage and vehicle physical damage coverage for the City's transit fleet. Through its participation in the JPA, the City has realized significant savings in premiums over coverage previously purchased in the open market.

Each member of CalTIP is represented on the Board of Directors and plays an active role in the organization. The Board meets twice yearly for study sessions to conduct business of the pool, as well as to keep Board Members informed of trends in transit, including operations, risk exposures, and effective loss control mechanisms to help prevent claims and manage losses.

All Board Members are staff members of the entities belonging to the pool, with majority being well-versed in transit, finance or risk management. The costs incurred by the Board Member attending the CalTIP meetings are reimbursed to the City of Porterville by CalTIP.

Currently, Public Works Director Mr. Michael Knight serves as the Board Member and City Manager Ms. Patrice Hildreth serves as the Alternate on the board. It is now proposed that the City Council appoint Acting Administrative Services Director Ms. Yuliana Andrade to serve as the Alternate Board Member, with Mr. Michael Knight continuing to serve as the Board Member.

RECOMMENDATION:

That the City Council:

1. Approve the draft resolution designating Public Works Director Michael Knight as the City's CalTIP Board Member, and Acting Administrative Services Director Yuliana Andrade as the Alternate Member; and

2. Authorize the Mayor to execute said Resolution for submission to CalTIP.

ATTACHMENTS: 1. Draft Resolution
Item No. 10.

Appropriated/Funded:

Review By:

Department Director:

Michael Knight, Public Works Director
Final Approver: Patrice Hildreth, City Manager
RESOLUTION NO. _____ - 2024

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PORTERVILLE DESIGNATING THE CITY’S REPRESENTATIVES TO THE CALIFORNIA TRANSIT

INDEMNITY POOL BOARD OF DIRECTORS
WHEREAS, the City Council acted on January 20, 2004, approving the City of Porterville’s membership in the California Transit Systems Joint Powers Authority, doing business as the California Transit Indemnity Pool (CalTIP); and
WHEREAS, the City of Porterville wishes to designate a representative of the City of Porterville to attend the CalTIP Board of Directors meetings and represent the City in its best interests; and
NOW THEREFORE, BE IT RESOLVED AND ORDERED that effective March 5, 2024, Mike Knight shall continue to be designated CalTIP Representative for the City of Porterville and, as such, is hereby authorized to be the CalTIP Board Member on behalf of the City of Porterville.

BE IT RESOLVED AND ORDERED that effective March 5, 2024, Yuliana Andrade shall be designated CalTIP Alternate Representative for the City of Porterville and, as such, is hereby authorized to be the Alternate CalTIP Board Member on behalf of the City of Porterville.

PASSED AND ADOPTED by the City Council of the City of Porterville, State of California, at a regular meeting of said Council held on March 5, 2024. ______________________________
Martha A. Flores, Mayor
ATTEST:

Patrice Hildreth, City Clerk
By: _________________________________
Fernando Gabriel-Moraga,
Acting Chief Deputy City Clerk
Item No. 11.

CITY COUNCIL AGENDA – MARCH 5, 2024
SUBJECT: Request for Proclamation - California Arbor Week - March 7 - 14, 2024 SOURCE: Administrative Services
COMMENT:

At its meeting on December 19, 2023, the Council amended the process by which proclamations are approved. The process requires that if more than two council members indicate interest in signing a requested proclamation, a consent calendar item will be prepared for the next scheduled City Council Meeting for full City Council consideration.

The Tule River Parkway Association & the Alta Peak Chapter of the California Native Plant Society has requested a proclamation to proclaim March 7th - 14th, 2024, as "California Arbor Week" in Porterville. Council Member Weyhrauch is sponsoring this Proclamation request. Because more than two members of Council indicated interest in signing, consistent with policy, the request is herein presented for consideration. If approved, the Proclamation will be drafted with the appropriate number of signature blocks for execution by the Council Members with an affixed City Seal.

RECOMMENDATION: That the City Council consider approval of the request to proclaim March 7th - 14th, 2024, as "California Arbor Week" in the City of Porterville.

ATTACHMENTS: 1. Proclamation Request - California Arbor Week - 2024 Appropriated/Funded: N/A
Review By:

Department Director:

Yuliana Andrade, Acting Administrative Services Director Final Approver: Patrice Hildreth, City Manager

Item No. 12.

CITY COUNCIL AGENDA – MARCH 5, 2024
SUBJECT: Authorization to Become a Mattress Collection Site SOURCE: Public Works
COMMENT: Staff is seeking Council approval to partner with the Mattress Recycling Council (MRC) to become a mattress collection site to reduce the amount of waste that goes into landfills and to discourage illegal dumping.

The Refuse operation has been considering this program since May 2021; it wasn't necessary at the time because Teapot Dome Landfill performed those services. However, in July 2022, the City was informed of the closing of the Teapot Dome Landfill, as access was restricted. Following the closure notice, Teapot Dome discontinued receiving mattresses in October 2023, and County Staff advised the City that they would not be reinstating the program at the Woodville Landfill. Therefore, the city is considering taking on the program to extend services to city residents. The need for a local mattress collection site is essential with the recent closure of the Teapot Dome Landfill. This leaves the south end of Tulare County without a site to dispose of mattresses properly.

The MRC operates the Bye Bye Mattress program and assists the mattress industry with fulfilling its legal obligations to support and administer this program. MRC educates the mattress industry concerning recycling laws and assists retailers and manufacturers with registration and reporting requirements.

The MRC works closely with local governments and waste management professionals and allows for the reimbursement of up to $2.50 per mattress collected.

MRC also promotes the California Illegally Dumped Mattress Collection Initiative. Illegally dumped mattresses have become an unfortunate eyesore throughout the City. Every year, the MRC allocates $1 million to fund this program. By registering, the Refuse Department would receive a reimbursement of up to $15.00 per unit for each mattress picked up within city limits. The initiative would require monthly reporting to MRC and encourage the Council to approve an additional staff member to collect the illegally dumped mattresses and stage them at the city corporation yard for processing.

A City of Porterville and MRC partnership would require a service agreement contract. Under this program, MRC will provide the trailer and hauling services to the Fresno mattress recycling facility. The City would be responsible for providing the staffing necessary to collect the items for disposal. Staff would ask the Council to consider an additional staffing allotment of one (1) Refuse Department Field Service Worker I position to operate this program if the Item No. 12.
partnership is approved. The Solid Waste Recycling budget would be the funding source for the additional staff allocation.

RECOMMENDATION: That the City Council:

1. Approve the partnership of the City of Porterville and Bye Bye Mattress with the Mattress Recycling Council,
and authorize the City Manager or their designee, the
Public Works Director, as the Signature Authority to
execute all documents necessary to implement and secure an agreement to become a mattress collection site; and

2. Approve a staff allotment increase by one (1) Field
Service Worker I position, funded by the Solid Waste
Recycling budget.

ATTACHMENTS: 1. CA-Collection-Sites-Info-Sheet (3)

2. MRC-2020-CA-IDMCI-Info-Sheet-1 (1)

3. City of Porterville.Agreement.DRAFT.02-15-2024(mlm)
(1)

4. MRC Guidelines- 2024 Labeled Attachment E
Appropriated/Funded:

Review By:

Department Director:

Michael Knight, Public Works Director
Final Approver: Jason Ridenour, Acting Deputy City Manager

CALIFORNIA
• Permitted solid waste facilities with a
California SWIS number are automatically
eligible.
• Nonprofits, CRV locations, scrap yards or other
small businesses may also qualify.
• Collection sites must not charge an individual
for dropping off a mattress.
• Mattress retailers must be registered with MRC
and collecting and remitting the recycling fee.

Eligibility Requirements

CALIFORNIA COLLECTION SITES

JOIN OUR COLLECTION NETWORK
Collection sites are an integral part of the
Mattress Recycling Council’s Bye Bye
Mattress program. By participating, you’ll
provide your community a no-cost option
for mattress recycling, divert valuable
material from the waste stream, support
local green jobs and help reduce illegal
dumping in your community.

Join the hundreds of locations that are
benefiting from the program’s services
and providing their residents or customers
a no‐cost option for mattress recycling.

Contact MRC today to be connected to the
program coordinator in your area.

Overview What We Provide
• Collection containers
• Compensation for handling and
loading mattresses into the
provided containers
• Transportation from your site to a
mattress recycler
• No‐cost mattress recycling services
• Promotional assistance
Participants must sign a contract
agreeing to these requirements:
• Provide a secure site
• Keep mattresses dry and segregated
• Pack mattresses efficiently to maximize
container capacity
• Complete required paperwork to track
outgoing shipments
Participation Requirements
Most mattresses and box springs discarded by California residents or collected in curbside bulky waste pickup are eligible for the program.

Acceptable and Unacceptable Items
• Severely damaged, wet, twisted,
frozen or soiled mattresses
or box springs
• Items infested with bed bugs
• Mattress pads or toppers
• Sleeping bags
• Pillows
• Car beds
• Infant carriers, lounge pads or
crib bumpers
• Juvenile products such as
carriages, baskets, cribs,
bassinets, dressing tables,
strollers and playpens or
their pads
• Water beds or camping
air mattresses
• Fold‐out sofa beds, futon
frames/bases
• Furniture
We are unable to accept:

MATTRESS RECYCLING COUNCIL’S BYE BYE MATTRESS:
(855) 494-8400, [email protected]
Or visit www.MattressRecyclingCouncil.org for details

CALIFORNIA

FREQUENTLY ASKED QUESTIONS

PROGRAM PARTICIPATION & CONTRACT TERMS
(855) 494-8400, [email protected]
Getting a contract signed by our city/county is a lengthy process, do you have a short‐term solution?
Yes! We have a one‐page online agreement to register as an MRC collection site. Through this simplified agreement, you will receive no‐cost storage, transportation and recycling.

To receive financial compensation for handling costs, the comprehensive contract is required.

Do we have to accept an unlimited amount
of mattresses?
No. Collection sites may establish a limit on the number of mattresses allowed at no‐cost per vehicle.

How much is the mattress handling reimbursement cost?
It is a flat per unit rate. The comprehensive contract must be completed in order to receive this. You must invoice MRC monthly and MRC pays net 30.

Can we charge businesses for mattress disposal?
You may choose to establish a maximum number to accept
at no‐cost per vehicle.

Through MRC’s Commercial Volume Program businesses can
deliver large quantities directly to participating recyclers for no‐cost recycling. Locations and contact information can be found at ByeByeMattress.com.

Businesses with at least 100 units qualify for no‐cost
transportation of the units to a participating recycler.

Coordination with MRC required.

What happens to mattresses that are too soiled or
contaminated to recycle?
Regardless of the condition of the mattress, participating collectors cannot charge individuals a disposal fee.

Are we compensated for disposal of soiled or
contaminated mattresses from commercial sources?
If your site accepts commercial volume for free, a soiled or contaminated unit would need to be accepted at no charge, but not placed in MRC’s container.

If your site does not accept commercial volume for free, you are still permitted to charge the customer.

Who will be paying the mattress transporter
and recycler?
MRC has contracts with transporters and recyclers throughout California. MRC pays these vendors directly.

What information, if any, do we need to take from an
individual dropping off their mattress?
You do not need to collect personal information, however, mattresses must have been used and discarded in California.

What type of promotional assistance does
MRC provide?
All collection sites are listed on ByeByeMattress.com and promoted through social media and a monthly newsletter.

MRC also provides participants with a press release, flyer, suggested online content and site signage. Requests to cover the cost of paid advertising are considered on a case‐by‐case basis. Download the Collection Site Publicity Toolkit for full details and examples of these materials.

Will MRC provide equipment or help us make some
improvements in order to accept mattresses?
MRC awards site improvement funding throughout the year.

Past recipients have used funding to implement weather
protection, enhance collection efficiency or improve
safety. Visit MRC’s Research page for the latest funding announcements and application materials.

Can MRC assist with illegally dumped units in
our community?
Yes! Please ask us about the Illegally Dumped Mattress
Collection Initiative. It requires a separate registration and has monthly reporting requirements. We would be happy to discuss the details and determine your eligibility.

CALIFORNIA
Eligible entities must be collecting
illegally dumped mattresses and box
springs from the public right‐of‐way.

Eligible entities include:
• Authorized solid waste operations
• Permitted solid waste facilities
• Urban and rural government entities
• Nonprofit organizations
See the reverse side for how we work
with third‐parties that are collecting on
behalf of an eligible entity.

Participant Eligibility

CALIFORNIA ILLEGALLY DUMPED

MATTRESS COLLECTION INITIATIVE
Overview
Each year, the Mattress Recycling Council (MRC) allocates $1 million to fund the California Illegally Dumped Mattress Collection Initiative (IDMCI). The maximum payout per unit is $15 (urban) and $20 (rural). Registration and monthly reporting is required. Participants may enroll at any time and also recycle the units with MRC’s Bye Bye Mattress program at no‐cost.

Participants must report the number of
units collected each month and maintain
the following documentation about each
mattress or box spring:
• The date the unit was collected
• The zip code it was collected from
• The end‐of‐life management of the
unit (recycled, landfill, etc.)
MRC requires partcipants submit data
within 45 days of the end of the reporting
month.

Reporting Obligations
• Registration is available on Re-TRAC.
https://connect.re‐trac.com/
registration/mrc‐idp
• Your registration will be reviewed
and approved by MRC within two
business days.

How to Sign Up

ILLEGALLY DUMPED MATTRESS
COLLECTION INITIATIVE CONTACT:

Taylor Grimes
(279) 999-2984
[email protected]
For details, visit:
www.MattressRecyclingCouncil.org
Mattresses and box springs illegally abandoned in the public right‐of‐way by California residents are eligible for IDMCI compensation. Units may be recycled through MRC’s Bye Bye Mattress program. However, if a unit is too damaged or contaminated for recycling, it is still accepted for compensation through IDMCI.

The following items are not eligible for IDMCI or recycling services:

Eligible and Ineligble Items
• Mattress pads or toppers
• Sleeping bags
• Car beds
• Water beds or camping air mattresses
• Fold‐out sofa beds
• Futon frames or bases
• Furniture
• Juvenile products such as carriages,
baskets, cribs, bassinets, dressing
tables, strollers and playpens or
their pads
• Infant carriers, lounge pads
or crib bumpers
California’s Used Mattress Recovery
& Recycling Act created the Mattress
Recycling Council and the Illegally
Dumped Mattress Collection Initiative.

This initiative is made possible by the
recycling fee that is required to be
collected when mattresses and box
springs are sold.

Ask us how to enroll and how to receive
no‐cost recycling of these units with
MRC’s Bye Bye Mattress program.

CALIFORNIA

ILLEGALLY DUMPED MATTRESS COLLECTION
INITIATIVE CONTACT:

Taylor Grimes: (279) 999-2984, [email protected] Why was this program created?
The Mattress Recycling Council (MRC) developed the Illegally Dumped Mattress Collection Initiative (IDMCI) to understand the extent of illegal mattress dumping by collecting community specific data. MRC uses this data to track dumping activities and develop solutions.

Who is eligible to receive payments from the IDMCI?
Authorized solid waste operations, permitted solid waste facilities, urban and rural government entities and nonprofits providing illegal dumping clean up projects on behalf of these entities are eligible to receive payments.

My municipality uses a franchised hauler(s) to collect
illegally dumped mattresses. Are we eligible to
receive compensation?
Yes, but only ONE entity may receive payment. If your
municipality has an arrangement with a franchise hauler to pick up illegally dumped units on behalf of the municipality, then your franchise hauler must provide documentation of the illegally dumped units collected.

My organization is a nonprofit that is contracted with
public entities to perform clean up duties in the public right‐of‐way. Is our nonprofit eligible to be reimbursed for any mattresses and box springs we collect and track?
Yes.

Do I have to be a contracted MRC collection location to receive compensation from the IDMCI?
No, but to be eligible for compensation, you must register with IDMCI and submit monthly reports. MRC requires participants input their data into Re-TRAC within 45 days of the end of the reporting month. Annual payments will be dispersed in the spring of the following year.

Are mattresses and box springs both eligible items that qualify for compensation?
Yes. Units that meet MRC quality guidelines outlined in your contract are also eligble for no-cost recycling with MRC’s Bye Bye Mattress program.

How much will I be compensated for collecting illegally dumped units?
For the calendar year 2021, MRC has allocated $1 million to the IDMCI. MRC will pay participants in urban areas up to $15.00 per unit and rural county participants up to $20.00 per unit.

Amount per unit is calculated at the close of the calendar year by dividing the total funded amount bythe number of illegally dumped units collected during the calendar year.

How do I know if my county qualifies as rural?
MRC follows Public Resources Code 40183-4 rev. 2008 that defines a rural county as one that disposes of less than 200,000 tons of waste annually. CalRecycle publishes a list annually.

When will MRC allocate payments from the IDMCI?
MRC will reimburse participants on an annual basis. Payments are made in the spring of the following year.

Our organization is a participating MRC collection
location. Can we put illegally dumped units we collect in our collection container?
Yes, you may place the illegally dumped units in your container as long as they meet the MRC quality guidelines outlined in your contract.

Can I just provide MRC with the total number of units at the end of the year for illegally dumped mattresses and box springs collected?
No. MRC requires participants input their data into Re-TRAC within 45 days of the end of the reporting month.

Can I receive reimbursement for illegally dumped
mattresses that must be landfilled due to the quality of the units?
Yes. Units that are excessively wet, dirty or damaged are not suitable for recycling. Units that meet MRC quality guidelines outlined in your contract are eligble for recycling.

Where can I register as a collector?
https://connect.re‐trac.com/registration/mrc‐idp
Frequently Asked Questions:
1 CollectionSite.DropOff.PPI (no; trans, bulky)
California Used Mattress Recycling Program
Collection Facility and Used Mattress Management Services Agreement This Agreement (“Agreement”) is effective on _______________________ (“Effective Date”) by and between City of Porterville Public Works, a municipality located at 555 N.

Prospect St., Porterville, CA 93257 (the “Service Provider”) and Mattress Recycling Council California, LLC, a Delaware limited liability company having its offices at 501 Wythe Street, Alexandria, VA 22314 (“MRC”).

RECITALS
Whereas, MRC is the “mattress recycling organization” certified by the State of California to plan and implement a Mattress recycling program in California (the “Program"), as set forth in California Public Resources Code §§ 42985 – 42994 (2014) (the “Act”), and is organized (among other things) to negotiate and execute agreements to collect and transport used Mattresses for Recycling; and
Whereas, MRC and the Service Provider wish to enter into this Agreement, which describes the terms and conditions under which the Service Provider will provide the Services described herein to MRC.

Now, therefore, for and in consideration of the terms of this Agreement and the mutual promises and covenants contained herein, the parties hereto agree as follows:

ARTICLE 1 – DEFINITIONS

1.1 "Consolidate” means (as applicable) accepting, handling, storing, and packing only acceptable Program Products into Collection Containers provided by, or approved for use by, MRC or its subcontractors in a manner that is efficient, complies with the requirements of MRC or its subcontractors, and is conducive to safe and efficient transport.

1.2 “Collection Containers” are containers provided by, MRC, the Service Provider or their contractors to hold and transport Program Products.

1.3 “Collection Facility(ies)” means all permanent or temporary collection facilities that are owned, leased, subleased, or otherwise controlled by the Service Provider and designated by the Program to collect Program Products, and as specifically identified in Attachment D (“Collection Facility Information”). 2 1.4 “Effective Date” means the date that the parties’ obligations begin under this Agreement. The Effective Date is the first date shown above.

1.5 “Foundation” means a ticking-covered structure used to support a Mattress or sleep surface. The structure may include constructed frames, foam, box springs, or other materials, used alone or in combination.

1.6 “Guidelines” mean the Mattress Recycling Council’s California Mattress Recycling Program Collection Guidelines, which provide an overview of the Program and which are amended from time to time. MRC reserves the right to update, change, modify, amend, add or remove terms, or otherwise alter the Guidelines at any time without prior notice. The current and effective Guidelines are posted and maintained at https://mattressrecyclingcouncil.org/wp-content/uploads/MRC-CAState-Guidelines.pdf. Notwithstanding any other term of this Agreement, MRC may provide notice of any amendments to the Guidelines via email to Service Provider at the email address set forth below in Article 12. The effective Guidelines as of the date of this Agreement are contained in Attachment E.

1.7 “Materials and Activities” mean materials, supplies, tools, vehicles, equipment, labor, water, light, power, facilities, construction of any nature, supervision, and all other services, acts, activities, resources, and goods, but not Collection Containers, necessary for or otherwise used by the Service Provider to collect, pack, and otherwise comply with and fully perform its obligations under the Agreement.

1.8 “Mattress” means resilient material or a combination of materials that is enclosed by a ticking (the outermost layer of fabric or related material of a Mattress) that is intended or promoted for sleeping upon, Foundations, Renovated Mattresses, Renovated Foundations, and futon Mattresses. “Mattress” does not include any of the following: (i) an unattached mattress pad, an unattached mattress topper, including any item with resilient filling, with our without ticking, that is intended to be used with or on top of a mattress, (ii) a sleeping bag or pillow, (iii) a car bed, (iv) juvenile products, including a carriage, basket, dressing table, stroller, playpen, infant carrier, lounge pad, crib or bassinet mattress, crib bumper, or any pad for such juvenile product, (v) a product that contains liquid or gaseous filled ticking, including any water bed and or any air mattress that does not contain upholstery material between the ticking and the mattress core, and/or (vi) any upholstered furniture that does not otherwise contain a detachable mattress, including, without limitation, a fold-out sofa bed, sleeper sofa or folding cot.

1.9 “Non-Conforming Units” are Program Products that must be disposed of as solid waste because they are contaminated or too damaged to recycle.

1.10 “Non-Program Products” mean products not covered by the Program, including out of state Units. Non-Program Products include: sleeping bags, pillows, an unattached mattress pad or mattress toppers (even items with resilient filling intended to be used with or on top of a mattress), car bed, crib or bassinet mattress, juvenile products or the pads used for such juvenile products, waterbeds, air mattresses that contain no upholstery material (such as a camping mattress), units manufactured by California Prison Industry Authority and sofa beds. 3 1.11 “Program Products” means and includes Mattresses, as defined herein, Foundations, and Renovated Mattresses or Renovated Foundations.

1.12 “Program” means the California Used Mattress Recycling Program created by MRC.

1.13 “Recycle” or “Recycling” means the process of collecting, sorting, cleansing, treating, and reconstituting materials that would otherwise become solid waste and returning them to the economic mainstream in the form of a raw material for new, reused, or reconstituted products which meet the quality standards necessary to be used in the marketplace. Recycling does not include, incineration, pyrolysis, distillation, or biological conversion other than composting.

1.14 “Recycler” means an entity that engages in the manual or mechanical separation of Mattresses to substantially recover components and commodities contained in Mattresses for the purpose of reuse or recycling.

1.15 “Renovate” or “Renovation” means altering a used Mattress or Foundation for the purpose of resale and includes one or more of the following: (a) replacing the Mattress ticking or filling; (b) adding additional filling; (c) rebuilding a used Mattress or (d) replacing components with new or post-consumer materials unless the material is a clean recycled material, consists of used electronic parts or controls, or is a used Mattress base that is not covered by ticking. Material sent to renovation will be considered Recycled material.
“Renovate” or “Renovation” does not include any of the following: (a)stripping a Mattress of its ticking or filling without adding new material; (b) sterilizing or sanitizing a Mattress without otherwise altering the Mattress; (c) altering a Mattress by a Renovator when a person retains the altered Mattress for lease, rental or personal use or (d) refurbishing that disqualifies a Mattress for a yellow wholesale renovator tag to be affixed to the Mattress, in accordance with the regulations adopted by the Department of Consumer Affairs.

1.16 “Retailer” means any party who sells Mattresses in California or offers to a Consumer a Mattress in California through any means, including, but not limited to, by remote offering, including sales outlets or catalogs, electronically through the internet, by telephone, or through the mail.

1.17 “Services” means all services for which Service Provider is responsible, as described in this Agreement and in the Attachments hereto, including any and all Materials and Activities.

1.18 “State” means the State of California.

1.19 “Temporary Collection Events” mean an event hosted by the Service Provider to Consolidate Program Products at locations within the State that are short in duration and not at permanent collection facilities.

1.20 “Transportation Providers” or “Transporter” means a contractor hired by MRC or Service Provider to transport Program Products from the Collection Facilities or Temporary Collection Events.
4 1.21 “Unit” means a single Mattress or box spring dropped off at or collected from a California resident or business at no charge. For example, an individual Mattress and an individual box spring would each constitute a single Unit.

ARTICLE 2 – TERM OF AGREEMENT

2.1 This Agreement will commence upon the Effective Date and will remain in full force and effect for a period of two (2) years (the “Initial Term”). This Agreement will automatically renew for additional successive one (1) year terms. Either party may terminate the contract for any reason upon thirty (30) days’ notice.

2.2 If the agreement is terminated, the Service Provider will, at no additional cost to MRC, immediately make all Collection Containers available for pick up by MRC’s Transporter.

ARTICLE 3 – GENERAL OBLIGATIONS OF THE SERVICE PROVIDER

3.1 In consideration of MRC’s payments, if any, to the Service Provider for Services, and for activities undertaken at MRC’s expense, the Service Provider will perform the Services provided for in Attachment A (“Scope of Services”) in conformity with the Program and Guidelines, except to the extent the Program and/or Guidelines conflict with the terms of this Agreement or any applicable Law.

3.2 The Service Provider will manage all Program Products Consolidated at the Collection Facilities only in accordance with Attachment A and will not dispose of Program Products in any other method without the prior written approval of MRC.

3.3 The Service Provider is responsible for and will manage, at its sole expense, any and all Non-Program Products it collects at the Collection Facilities or places in Collection Containers. MRC accepts no responsibility for such Non-Program Products and will not pay Service Provider any consideration in connection with such Non-Program Products.

3.4 The Service Provider will not charge any fees to California residents that drop off Program Products with the Service Provider, up to the maximum number as specified in Attachment D. Nothing in this Agreement prohibits the Service Provider from charging fees to California residents, businesses, or other entities for bulky or curbside collection of Program Products; California businesses or other entities that drop off Program Products; or California residents, business and other entities dropping off Non-Program Products or Program Products in excess of the quantities specified in Attachment D.

3.5 The Service Provider will inspect the Collection Containers upon arrival and determine whether they are in proper condition for use. MRC or its contractor is responsible for replacing any defective Collection Containers and repairing normal wear-and-tear to the Collection Containers. The Service Provider will immediately notify MRC if at any point during the term of the Agreement a Collection Container(s) is not in proper condition for use and will not use any such defective Collection Containers until they are repaired or replaced by MRC or its contractor.

If a Collection Container is functional, but is delivered in a damaged condition, the Service Provider will notify MRC or its contractor in writing of the nature and 5 location of such damage upon the arrival of the Collection Container. Service Provider will exercise reasonable care in securing and maintaining their premises and safeguarding Collection Container from damage.

3.6 The Service Provider will inspect each Unit before placing it in a Collection Container to confirm whether it is a Program Product. Service Provider will separate Non-Conforming Units, including Units contaminated with bed bugs or otherwise unsuitable for recycling, and will dispose of such Units as solid waste.

ARTICLE 4 – SERVICE PROVIDER REPRESENTATIONS AND WARRANTIES The Service Provider represents, covenants, and warrants that: it is a municipality in good standing and qualified to conduct business in California, and has all necessary approval, capacity, and authority to enter into this Agreement and fully perform its obligations under this Agreement.

ARTICLE 5 – MRC OBLIGATIONS

5.1 Upon receiving a request from the Service Provider, MRC will arrange for timely pick-up of Program Products Consolidated by the Service Provider. MRC or an MRC contractor will, at its expense, arrange for the transport to a Recycler.

5.2 MRC will make available to the Service Provider consumer brochures and signs identifying the site as an MRC drop-off location.

5.3 Unless the Service Provider elects to provide its own Collection Containers, MRC will assign, via email, an MRC approved Transporter. MRC’s Transporters will provide Collection Containers to the Service Provider. All Collection Containers furnished by a Transporter will remain the property of the Transporter.

ARTICLE 6 – TITLE AND RISK OF LOSS

6.1 The Service Provider (and not MRC) has title to and risk of loss and liability for any and all Program Products, Non-Conforming Units and Non-Program Products that the Service Provider receives. Notwithstanding the foregoing, once a Transportation Provider accepts for transportation any Program Products collected by the Service Provider under this Agreement and Consolidated on a Collection Container, title to and risk of loss as to those Program Products, will transfer to that Transportation Provider. MRC at no time takes title to or assumes liability for any Program Products, Non-Conforming Units or Non-Program Products.

However, MRC will require in its contracts with its Transportation Providers that they accept title and risk of loss immediately upon accepting any Program Products for transportation from the Service Provider.

6.2 MRC is not responsible for any damage to persons or property resulting from the use, misuse, or failure of any equipment used by the Service Provider, or by any of its employees or contractors, including the Collection Containers, even if such equipment is furnished, rented, or loaned to the Service Provider by MRC. 6 ARTICLE 7 – CONSIDERATION AND PAYMENT

7.1 As consideration under this Agreement, MRC or its contractors will; (i) facilitate the transportation of Program Products by Transportation Providers as set forth in this Agreement; (ii) pay the Service Provider for Services rendered as set forth in this Agreement; and (iii) perform other services incidental to the management of the Program.

7.2 MRC will pay Service Provider for Services rendered in the amount set forth in Attachment B (“Compensation Rates”). No other payment or reimbursement will be made for the Service Provider’s Collection of Program Products, furnishing of the Materials and Activities, or its performance of the Services.

7.3 The Service Provider will invoice MRC on a monthly basis, either by hardcopy or electronically, as determined by MRC. Invoices must include the information included in Attachment C (“Model Invoice”) and must state:
a. the unique, identifying invoice number;
b. the specific categories of Services provided for under the Agreement; c. the specific number of Units consolidated;
d. copies of each transportation Bill of Lading or equivalent shipping documentation; and
e. any additional information as agreed to in writing by the parties that is relevant to the Services being performed by the Service Provider.

7.4 MRC reserves the right to refuse payment of any invoice or portion thereof that is not received in an acceptable form or for Services performed by the Service Provider but not invoiced for more than 90 days.

7.5 All amounts invoiced by the Service Provider to MRC, or paid by MRC to the Service Provider, are subject to audit by MRC, as described below in ARTICLE 8 – AUDIT AND INSPECTION RIGHTS OF MRC.

7.6 The Service Provider will submit invoices to:

To: Mattress Recycling Council California, LLC
Attn: Accounts Payable
Phone: 1-855-229-1691
E-mail: [email protected]
Address: 501 Wythe Street, Alexandria, VA 22314
7 MRC will send Service Provider payments to:

To: City of Porterville Public Works
Attn: Michael Knight, Public Works Director
Phone: 559-782-7586
E-mail: [email protected]
Address: 555 N. Prospect St., Porterville, CA 93257

7.7 Provided that the Service Provider has supplied the required information and otherwise performed its obligations under this Agreement, MRC will pay such invoice within thirty (30) days of the date that MRC receives the invoice. In the event MRC has a good-faith objection to an invoice, MRC will pay the undisputed amount pursuant to the terms of this Agreement and notify in writing the Service Provider of said objections and describe in reasonable detail the basis for the objections. The Dispute Resolution provisions in ARTICLE 14 - DISPUTE RESOLUTION will be used to resolve such disputed portion of an invoice. During any such dispute, the Service Provider will continue with its responsibilities under this Agreement and will not stop providing the Services unless this Agreement is terminated. MRC will make all payments due to the Service Provider over which there is no good-faith dispute.

7.8 MRC’s payment of all or a part of an invoice neither relieves the Service Provider of any of its obligations under this Agreement nor constitutes a waiver of any claims by MRC.

7.9 The Service Provider warrants that, to the best of its knowledge, all documents, including invoices, billings, back-up information for invoices, and reports, submitted by the Service Provider to MRC to support amounts invoiced in connection with the Services truly reflect the facts about the activities and transactions to which they pertain. The Service Provider warrants that MRC, for whatever purpose, may rely upon all such documents and the data therein as being complete and accurate. The Service Provider will promptly notify MRC upon discovery of any instances where the Service Provider becomes aware of any discrepancies in relation to documents under this Article.

ARTICLE 8 – AUDIT AND INSPECTION RIGHTS OF MRC

8.1 MRC may audit and inspect, the Service Provider’s Collection Facilities during the Collection Facilities’ hours of operation, as well as any other site at which the Service Provider performs the Services. MRC will provide the Service Provider with at least twenty-four (24) hours’ notice before any such audit or inspection.

8.2 The Service Provider will permit MRC to audit, examine, and make excerpts and transcripts, for any books or records, and to make audits of any invoices, materials, records, and other data related to all other matters covered by this Agreement. 8 ARTICLE 9 – INDEMNIFICATION

9.1 The Service Provider, and its successors and assigns (collectively, the “Indemnifying Party”), will, to the fullest extent allowed by law, indemnify, defend, and hold harmless MRC and its sole member (as identified under MRC’s Certificate of Incorporation), and their member companies, officers, directors, stockholders, employees, successors, assigns, attorneys, agents, and invitees (collectively, the “Indemnified Parties”) from and against any and all claims, demands, actions, losses, liabilities, damages, and all expenses and costs incidental thereto (collectively, “Claims”), including cost of defense, settlement, arbitration, and reasonable attorney’s fees, resulting from injuries to or death of persons, including but not limited to employees of either party hereto, and damage to or destruction of property or loss of use thereof, including but not limited to the property of either party hereto, arising out of, pertaining to, or resulting from the acts or omissions of the Indemnifying Party, or the acts or omissions of anyone else directly or indirectly acting on behalf of the Indemnifying Party, its officers, agents, employees, or contractors, or for which the Indemnifying Party is legally liable under law regardless of whether caused in part by an Indemnified Party.

9.2 MRC, and its successors and assigns (collectively, the “MRC Indemnifying Party”), will, to the fullest extent allowed by law, indemnify, defend, and hold harmless the Service Provider and its officers, directors, stockholders, employees, successors, assigns, attorneys, agents, and invitees (collectively, the “MRC Indemnified Parties”) from and against any and all claims, demands, actions, losses, liabilities, damages, and all expenses and costs incidental thereto (collectively, “Claims”), including cost of defense, settlement, arbitration, and reasonable attorney’s fees, resulting from injuries to or death of persons, including but not limited to employees of either party hereto, and damage to or destruction of property or loss of use thereof, including but not limited to the property of either party hereto, arising out of, pertaining to, or resulting from the acts or omissions of the MRC Indemnifying Party, or the acts or omissions of anyone else directly or indirectly acting on behalf of the MRC Indemnifying Parties, or for which the MRC Indemnifying Party is legally liable under law excepting only such injury, death, or damage to the extent caused by the active negligence or willful misconduct of an MRC Indemnified Party.

9.3 The following provisions apply to Paragraphs 9.1 and 9.2 above:
a. This indemnity will not be limited by the types and amounts of insurance or self-insurance maintained by the Indemnifying or Indemnified Parties or their contractors;
b. Nothing in this indemnity will be construed to create any duty to, any standard of care with reference to, or any liability or obligation, contractual or otherwise, to any third party; and
c. The provisions of this indemnity will survive the expiration or termination of this Agreement.

9.4 MRC WILL NOT BE LIABLE FOR ANY INDIRECT, SPECIAL, CONSEQUENTIAL,

PUNITIVE, OR INCIDENTAL DAMAGES, WHETHER BASED ON BREACH OF 9 CONTRACT, TORT (INCLUDING NEGLIGENCE), OR ANY OTHER LEGAL THEORY, EVEN IF ADVISED OF SUCH POTENTIAL DAMAGES. NOTHING IN

THIS AGREEMENT CONSTITUTES A WAIVER OR LIMITATION OF ANY RIGHTS THAT MRC MAY HAVE UNDER THE APPLICABLE LAW.

ARTICLE 10 – INSURANCE

10.1 The Service Provider must maintain, at its own expense, the policies of the following minimum limits and coverage as set forth below:

Coverage Minimum Limits
a. Commercial General Liability $1,000,000 per occurrence $2,000,000 aggregate
b. Workers Compensation Statutory

10.2 The Required Insurance, except for worker’s compensation insurance, must contain or be endorsed to contain MRC California, LLC and its sole member and their officers, directors, agents, and employees, as additional insureds and a waiver of subrogation in favor of MRC California, LLC and its sole member and their officers, directors, agents, and employees. The Service Provider will obtain any endorsement that may be necessary to affect the waiver of subrogation. The Required Insurance policies (except for worker’s compensation) must contain (i) a written statement in the policies or in endorsements thereto that they are each primary insurance to any other insurance available to the Service Provider or to any additional insureds or additional named insureds, and (ii) a separation of insureds provision stating that the insurance applies separately to each insured against whom a claim is made or a suit is brought and that the actions or omissions of any insured that might give rise to application of an exclusion to coverage apply only to that insured actually committing the actions or omissions.

10.3 Service Provider must submit current evidence of insurance before Services begin. Certificates of insurance and renewals are to be sent via electronic mail to:
[email protected]. Insurance brokers shall remit all renewals to the same email address.

10.4 Service Provider is required to provide MRC with notification of any cancellation or change in Service Provider’s insurance coverage during the period of the Agreement with MRC with not less than thirty days’ notice prior to the date said cancellation or change becomes effective.

10.5 In the event a Certificate of Insurance required by this Article should expire or be cancelled during the term of this Agreement, Service Provider agrees to provide, at least thirty days prior to said expiration or cancellation, a new Certificate of Insurance evidencing coverage, as provided for herein, for not less than the remainder of the Agreement.
10 10.6 Compliance by Service Provider with the foregoing requirements to carry insurance and furnish certificates will not relieve Service Provider from liability assumed under the provisions of this Agreement.

10.7 Both Parties will require all third parties that it uses to provide any services under this contract to comply with the same insurance requirements specified above.

ARTICLE 11 – ASSIGNMENT AND SUBCONTRACTING

11.1 The Service Provider may not assign, novate, or otherwise transfer (including transfer by operation of law) this Agreement or the obligations and rights hereunder without the express written consent of MRC.

11.2 MRC reserves the right to subcontract its duties and rights under this Agreement (including the conduct of audits, inspections, and monitoring activity) to third parties. Service Provider agrees that such subcontractors to MRC will have the same rights and responsibilities as MRC, unless otherwise noted.

ARTICLE 12 – NOTICES
Except where otherwise expressly authorized, notice will be by first class certified or registered mail, or by commercial delivery service issuing a receipt for delivery. Notices will be addressed as set forth below. Either party may change the address information below by providing written notice to the other party. Notice is effective upon delivery, or if delivery is refused, when delivery is attempted.

To: Mattress Recycling Council California, LLC
Attn: Gayle Hanlon, Senior Counsel
Email: [email protected]
Address: 501 Wythe Street, Alexandria, VA 22314
To: City of Porterville Public Works
Attn: Michael Knight, Public Works Director
E-mail: [email protected]
Address: 555 N. Prospect St., Porterville, CA 93257
ARTICLE 13 – INDEPENDENT CONTRACTOR STATUS

13.1 The parties intend that the Service Provider, in performing the Services specified herein, is acting as an independent contractor and that the Service Provider will control the Services and the manner in which it is performed. This Agreement is not intended and may not be construed to create the relationship between the parties of agent, servant, employee, partnership, joint venture, or association.

13.2 Each party, or its subcontractors, as appropriate, is solely liable and responsible for providing all compensation and benefits due to, or on behalf of, all persons 11 performing Services on its behalf in connection with this Agreement. Neither party has any liability or responsibility for the payment of any salaries, wages, unemployment benefits, disability benefits, Federal, State, or local taxes, or other compensation, benefits, or taxes for any personnel provided by or on behalf of the other party.

13.3 Each party understands and agrees that all persons performing Services pursuant to this Agreement are, for purposes of Workers’ Compensation liability, solely employees of that party and not employees of the other party. Each party is solely liable and responsible for furnishing any and all Workers’ Compensation benefits to its employees as a result of any injuries arising from or connected with any Services performed by or on behalf of that party pursuant to this Agreement.

13.4 MRC has no authority to manage, direct, or supervise employees, representatives, or agents of the Service Provider, including how they perform the Services and achieve compliance with applicable Law. MRC does not have responsibility for making day-to-day and critical decisions regarding the Services, including the management or supervision of any activities comprising the Services.

13.5 Third-party Transportation Providers are independent contractors and are not employees, partners, or agents of either party. Neither party is liable for the acts or omissions of third-party Transportation Providers under this Agreement.

ARTICLE 14 – DISPUTE RESOLUTION

14.1 Subject to the conditions and limitations of this Article, any controversy or claim arising out of or relating to this Agreement will be exclusively settled by arbitration under the laws of the State of California, in accordance with the rules of the American Arbitration Association.

14.2 The parties agree to consolidation of any arbitration between them with any other arbitration involving, arising from, or relating to this Agreement.

14.3 Each party hereto accepts the jurisdiction of the courts of the State of California for the purposes of commencing, conducting, and enforcing an arbitration proceeding pursuant to this Article. Each party will accept service of notice of the other party’s intent to proceed with arbitration, and of any other step in connection therewith or enforcement thereof, if such notice is in writing and sent by certified letter addressed to said party according to Article 12, and such notice will have the same effect as if the party had been personally served within the State of California.

14.4 Any decision of an arbitrator engaged under this Article is final, binding, and enforceable upon both parties.

14.5 The Service Provider will continue with its responsibilities under this Agreement during any dispute.

14.6 The parties will continue to provide Services during the dispute resolution process in a diligent and timely manner in accordance with all applicable provisions of this Agreement.
12 14.7 Each party hereto will bear the costs and expenses incurred by it in connection with such arbitration processes. The cost of any independent decision maker will be shared equally between the parties.

ARTICLE 15 – CONFIDENTIALITY/PUBLICITY

15.1 The Service Provider will not disclose any details in connection with this Agreement to any person or entity without MRC’s prior written authorization, except as may be otherwise provided hereunder or required by law. However, in recognizing the Service Provider’s need to identify its services and related clients to sustain it, MRC will not inhibit the Service Provider from publishing its role in the Program within the following conditions:
a. The Service Provider may utilize and develop publicity material regarding the MRC Program only upon the prior written consent of MRC, which consent will not be unreasonably withheld; and
b. During the term of the Agreement, the Service Provider will not, and will not authorize another to, publish or disseminate any commercial advertisements, press releases, feature articles, or other materials using the name of MRC without the prior written consent of MRC, which consent will not be unreasonably withheld.

15.2 The Collection Facilities may be listed, referenced, or advertised as collection sites by MRC for the Program during the term of this Agreement.

ARTICLE 16- UNCONTROLLABLE CIRCUMSTANCES

16.1 Neither party will be liable for its failure to perform hereunder, in whole or in part, due to contingencies beyond its reasonable control (“Uncontrollable Circumstance(s)”), including, but not limited to strikes, riots, war, fire, acts of God or terrorism, pandemic, injunction, compliance with any applicable federal, state, local, and other laws, ordinances, rules, regulations or orders of any public body having jurisdiction, whether valid or invalid, whether now existing or hereafter created. For further clarification, Uncontrolled Circumstances do not include fluctuations in commodity or scrap prices, demand for such materials, or other such changes that affect the economic condition of the market as it relates to recycling and recycled goods.

16.2 The parties will use their best efforts to overcome or remove any Uncontrollable Circumstance and to minimize the effect of such Uncontrollable Circumstance and any costs resulting therefrom.

16.3 Each party will assume the risk of all losses and damages directly incurred by them except as otherwise limited pursuant to the terms of this Agreement, which arise out of an Uncontrollable Circumstance event. Neither party should be entitled to recover from the other revenues lost due to the occurrence of an Uncontrollable Circumstance, provided further, however, that each party is obligated in good faith and to the extent not detrimental to its interests and within any applicable provision 13 of law, to jointly attempt to mitigate the damages, costs and expenses arising out of an Uncontrollable Circumstance event.

16.4 The party asserting that an Uncontrollable Circumstance exists will, as a condition precedent to the right to claim the benefits of this Section, promptly after becoming aware of such Uncontrollable Circumstance, and in any event, within fifteen (15) calendar days from the date on which said party becomes or should have become aware of the occurrence of such Uncontrollable Circumstance, notify the other party of such event. This party will then, within fifteen (15) days of such initial notice, provide a written notice of the effect, if any, on either party's obligations under this Agreement, and available areas of mitigation or saving of the costs associated with such event. Each party will continue to keep the other party advised with respect to the anticipated impact of such Uncontrollable Circumstance.

ARTICLE 17 – MISCELLANEOUS PROVISIONS

17.1 No Waiver. The failure at any time to enforce any provision of this Agreement or failure to exercise any right herein granted does not constitute a waiver of such provision or of such right thereafter to enforce any or all of the provisions of this Agreement.

17.2 Selective Waiver. Either party may waive any default by the other party under this Agreement by an instrument in writing to that effect and no such waiver will extend to any subsequent or other default by the other party. No failure or delay on the part of either party to exercise any right hereunder operates as a waiver thereof.

Either party may elect to selectively and successively enforce its rights hereunder, such rights being cumulative and not alternative.

17.3 Entire Contract/Order of Precedence. This Agreement and all Attachments and exhibits hereto, and all referenced documents, including the Guidelines, constitute the entire agreement between the parties with respect to the matters herein, and integrates, merges, and supersedes all prior negotiations, representations, or agreements relating thereto, whether written or oral, except to the extent they are expressly incorporated herein. The provisions of this Agreement and the accompanying documents are to be construed and interpreted as consistent whenever possible. Any conflicts in this Agreement and the accompanying documents will be resolved in accordance with the following descending order of precedence:
a. Attachment A (“Scope of Services);
b. Attachment B (“Compensation Rates”);
c. The terms of this Agreement
d. Attachment E (“Guidelines”);
e. Attachment D (“Collection Facility Information”); and f. Attachment C (“Model Invoice”).
14 17.4 Amendment or Modification. Unless otherwise provided herein, no amendments, changes, alterations, variations, or modifications to this Agreement will be effective unless in writing and signed by the respective duly authorized officers of the parties hereto.

17.5 Additional Sites. Service Provider, either currently or in the future, may have additional sites, solid waste facilities, collection facilities or subsidiaries (“Additional Sites”) that it wishes to add to this Agreement. Additional Sites may become a Service Provider under this Agreement by executing its own Compensation Rate form in Attachment B and Collection Facility Information form in Attachment D. The Additional Sites will then be governed by the terms of this Agreement and the Attachments hereto (including its personalized Compensation Rate form in Attachment B and personalized Collection Facility Information form in Attachment D). Any changes or modifications made by an Additional Site to Attachment B and Attachment D will not affect other Service Providers that exist under this Agreement, nor will it change or modify any of the other Service Providers’ terms, conditions, responsibilities and/or liabilities under this Agreement.

17.6 Governing Law/Venue. This Agreement is executed and intended to be performed in the State of California, and the laws of that State will govern its interpretation and effect.

17.7 Severability. If any term, covenant, condition, or provision of this Agreement is held by a court of competent jurisdiction to be invalid, void, or unenforceable, the remainder of the provisions hereof will remain in full force and effect and will in no way be affected, impaired, or invalidated thereby.

17.8 Calendar Days. Any reference to the word “day” or “days” herein will mean calendar day or calendars days, respectively, including weekends and Federal Holidays, unless otherwise expressly provided. If a deadline falls on a weekend or Federal Holiday, the next business day will be the applicable deadline.

17.9 No Third-Party Beneficiary. This Agreement is intended solely for the benefit of the parties hereto, and no third party has any right or interest in any provision of this Agreement or as a result of any action or inaction by any party in connection therewith.

17.10 Authorization. Each party represents and warrants that it has full power and authority to enter into this Agreement and to perform its obligations set forth herein.

The representative(s) signing this Agreement on behalf of each party represents that he/she has the authority to execute this Agreement on behalf of the applicable party and to bind it to its contractual obligations hereunder.

17.11 Electronic Signatures. Unless otherwise prohibited by law or Service Provider policy, the parties agree that an electronic copy of a signed contract, or an electronically signed contract, has the same force and legal effect as a contract executed with an original ink signature. The term “electronic copy of a signed contract” refers to a writing as set forth in Evidence Code Section 1550. The term “electronically signed contract” means a contract that is executed by applying an electronic signature using technology approved by the Service Provider. 15 17.12 Survival of Terms. All services performed and deliverables provided pursuant to this Agreement are subject to the terms, conditions, price discounts and rates set forth herein, notwithstanding the expiration of the initial term of this Agreement or any extension thereof. Further, the terms, conditions and warranties contained in this Agreement that by their sense and context are intended to survive the completion of the performance, cancellation or termination of this Agreement will so survive, including but not limited to: ARTICLE 4 – SERVICE PROVIDER REPRESENTATIONS AND WARRANTIES; ARTICLE 6 – TITLE AND RISK OF LOSS; ARTICLE 8 – AUDIT AND INSPECTION RIGHTS OF MRC; ARTICLE 9 – INDEMNIFICATION; ARTICLE 10 – INSURANCE; ARTICLE 13 – INDEPENDENT CONTRACTOR STATUS; ARTICLE 14 – DISPUTE RESOLUTION; ARTICLE 15 – CONFIDENTIALITY/PUBLICITY; and ARTICLE 17 – MISCELLANEOUS.

IN WITNESS WHEREOF, the parties have each caused this Agreement to be executed by its duly authorized representative on the day and year set forth below.

By:
__________________________ _______________________________ Catherine Lyons, Manager Michael Knight, Public Works Director Mattress Recycling Council City of Porterville Public Works California, LLC
___________________________ ________________________________

DATE DATE
___________________________
MRC Legal Approval
A-1
ATTACHMENT A: SCOPE OF SERVICES
As part of the Services under this Agreement, the Service Provider will do the following:

1. Provide the Services necessary to Consolidate acceptable Program Products, up to the maximum number specified in Attachment D, that are dropped off by individual California residents for pick up by Transportation Providers.

2. Include no Non-Program Products, no Non-Conforming Units and no Units that are unsuitable for recycling, including Units contaminated with bed bugs, in the Collection Containers.

3. Notify MRC assigned Transporter before collection containers are full to allow adequate time for Transporter to schedule pick-up services.

4. Provide to MRC a minimum of ninety (90) days’ advance notice of any Temporary Collection Events conducted by the Service Provider that include the collection of Program Products dropped off by individual California residents free of charge to be picked up by Transportation Providers at the Temporary Collection Event.

B-1
ATTACHMENT B: COMPENSATION RATES
Service Provider:

Service Description Unit Price
Program Product
Consolidation
MRC will compensate Service
Provider for all Program Products
dropped off by California residents
for which a fee has not been
collected and which Service
Provider Consolidates in a
Collection Container.

The Service Provider will not place
Non-Program Products, NonConforming Units or Units that are unsuitable for Recycling, including
Units contaminated with bed bugs,
in Collection Containers.
$2.25 per Unit1
MRC and Service Provider hereby agree to the foregoing compensation rates, in accordance with the terms set forth herein.

MRC initials: _____ Service Provider initials: __
1 No sooner than one year following the effective date of this Agreement, and on an annual basis thereafter, the compensation rates may be adjusted based on actual percentage change to the Solid Waste Collection Producer Price Index (PPI) published by the Bureau of Labor Statistics (Series ID: PCU5621115621112) for the most recent available twelve-month period using published finalized numbers, not preliminary numbers. To be eligible for these adjustments, Service Provider makes a written request that is received by MRC no more than sixty days but at least thirty days in advance of the eligible adjustment effective date. No annual PPI adjustment will be made absent a written request. In each case, the PPI adjustment will be made for the most recent available and finalized twelve-month period only. Published preliminary PPI numbers released by the Bureau of Labor Statistics will not be included. Annual PPI adjustments that are not requested by Service Provider in accordance with this paragraph are forfeited.

C-1
ATTACHMENT C: MODEL INVOICE
Invoice Date: ________________________________
Service Provider:______________________________________________________ Collection Facility Location:_____________________________________________ Unique Identifying Invoice Number:_______________________________________ Dates of Service: _____________________________________________ Service
(refer to Attachment B of
Agreement for definitions of
below Service terms)
Quantity of
Units
Unit Price Invoiced
Amount
Program Product
Consolidation
$2.25 per Unit
TOTAL
The above invoice represents, to the best of my knowledge, complete and accurate information regarding the Services rendered and for which the Service Provider seeks payment through the Program. I hereby certify on behalf of the Service Provider that the attached back-up documentation is accurate.

Name: ______________________
Company Title: _____________________
D-1
ATTACHMENT D: COLLECTION FACILITY INFORMATION
Service Provider: City of Porterville Public Works
MRC and Service Provider hereby agree that all facilities listed in Attachment D are covered by the terms and conditions set forth in this Agreement.

MRC initials: _____ Service Provider initials: _____
Full name of site City of Porterville Public Works/Corporation Yard Full address of site 555 N. Prospect Street
Porterville, CA 93257
Phone number for general public (559) 782-7514
Days/hours open to the public 3rd Saturday of the month 8am-12pm Website address https://www.ci.porterville.ca.us/departments/public_works/index.php Contact person’s name and title Briana Spry, Field Services Superintendent Contact person’s phone number
& email address
559-782-7586
[email protected]
Maximum # of Units per vehicle,
per day for residents
10 Maximum # of Units per vehicle,
per day for other entities
0 Drop-off residency requirement?
(list cities, towns, counties or
eligible residential areas)
Tulare County residents
Will Mattresses collected as part
of bulky curbside programs be
placed in the MRC container?
(Yes or No, if yes, complete the
supplemental table.)
No
E-1
ATTACHMENT E: COLLECTION SITE GUIDELINES
[see attached PDF]

BYE BYE MATTRESS

CALIFORNIA

COLLECTION GUIDELINES
PUBLISHED NOVEMBER 2023

ATTACHMENT E
Program Materials ............................................ 4 Quality Standards ............................................. 7 Materials Collection & Handling .......................... 8 Transportation & Processing .............................. 10 Recordkeeping ................................................ 11 Program Withdrawal & Termination .................... 12 About the Guidelines
Staff at all participating collection sites must be knowledgeable regarding these guidelines before accepting mattresses. For simplicity, these guidelines will refer to mattresses and box springs as mattresses. These guidelines describe the program and what is required to participate. MRC reserves the right to update, change, modify, amend, add or remove terms or otherwise alter these guidelines at any time with or without prior notice.

About the Mattress Recycling Council
In 2013, California enacted Senate Bill 254 as amended which requires mattress manufacturers to create a recycling program for mattresses discarded in the state.

The bedding industry established the Mattress Recycling Council (MRC) to develop and operate the mattress recycling program known as Bye Bye Mattress.

What MRC Provides
MRC provides the following to participating collection sites:
• A collection container to store mattresses that is appropriate for the number of mattresses that the collection site expects to generate and the site’s available space
• Transportation from the collection site to a contracted recycler • No-cost mattress recycling services

TABLE OF CONTENTS
2 CONTACTS
MRC Program Coordinators
Mark Patti
California Program Manager
661-237-8174
[email protected]
Los Angeles, Santa Barbara, Ventura
Layla Chamberlin
Northern California Coordinator
925-233-5335
[email protected]
Alameda, Contra Costa, Lake, Marin,
Mendocino, Napa, San Francisco,
San Joaquin, San Mateo, Santa Clara,
Santa Cruz, Solano, Sonoma
Tyler Douthitt
Southern California Coordinator
949-534-6693
[email protected]
Imperial, Kern, Orange, Riverside
San Bernardino, San Diego
Jennifer Duran
Central California Coordinator
559-249-5753
[email protected]
Calaveras, Fresno, Inyo, Kings, Madera,
Mariposa, Merced, Mono, Monterey,
San Benito, San Luis Obispo, Stanislaus,
Tulare, Tuolumne
Christine Messer
Northern California Coordinator
916-908-3223
[email protected]
Alpine, Amador, Butte, Colusa, Del Norte,
El Dorado, Glenn, Humboldt, Lassen,
Modoc, Nevada, Placer, Plumas,
Sacramento, Shasta, Sierra, Siskiyou,
Sutter, Tehama, Trinity, Yolo, Yuba
3 PROGRAM MATERIALS

INCLUDED PRODUCTS
Mattresses: Defined as any sleep surface covered with ticking or fabric that contains resilient material such as steel innersprings, foam, fiber or other filling or upholstery materials, used alone or in combination, regardless of size or shape. This definition includes foam mattresses.

Futons: See mattress definition above. Futon mattresses must be detachable from the frame or base to be accepted. (Futon mattresses that do not detach from the frame or base are not included.)
Box springs (also commonly called foundations): A ticking or fabric-covered structure used to support a mattress or sleep surface and may be comprised of a frame, foam, springs or other structure, or other materials, used alone or in combination, regardless of whether the product is stationary or adjustable.

All items accepted for recycling by MRC must have been used and discarded in the state of California.
4 PROGRAM MATERIALS

EXCLUDED PRODUCTS
• Severely wet, damaged, twisted, frozen or soiled mattresses • Adjustable bases not covered in ticking or fabric
• Air mattresses that contain no upholstery material
(such as camping beds)
• Car beds
• California Prison Industry Authority units
• Collapsible roll-away beds
• Fold-out sofa beds
• Futon frames or bases
• Juvenile products including crib
mattresses, carriages, baskets,
dressing tables, strollers, playpens,
infant carriers, lounge pad,
crib bumpers
• Loose bedding, blankets or sheets
• Mattresses infested with bed bugs
or other living organisms
• Mattress pads and toppers
• Metal bed frames
• Out-of-state mattresses
• Pillows and cushions
• Sleeping bags
• Water beds
5 PROGRAM MATERIALS

MATTRESS INSPECTION AND EXAMINATION
Collection site staff should screen incoming mattresses to determine whether they are suitable for recycling and should remove mattresses that are:
• Excessively wet or frozen
• Severely twisted, punctured or crushed
• Infested with bed bugs or other living organisms
• Exceptionally soiled or moldy
Mattresses not suitable for recycling should be disposed of through your existing solid waste stream.

Bed Bug Identification
Mattresses and box springs infested with bed bugs are unacceptable for recycling and should be disposed of through your existing solid waste stream. Staff at collection sites should evaluate program materials for evidence of bed bug infestation. A training webinar focused on dispelling health related myths, identifying bed bugs and offering best practices for protecting staff can be found here: https://www.mattressrecyclingcouncil.org/resources Bed bugs are tan to brown in color,
but may appear redder if they
have fed.

Adult Bed Bugs are dorsally flat insects,
broadly oval and the size of an apple or
melon seed (1/4").

Nymphs look like adults in shape
but are smaller.

Eggs are white and barrel-shaped.

Signs of bed bug activity may be
more obvious than the insects
themselves. Look for clusters
of dark spots or smudges on
mattresses (fecal spots),
especially along seams. Eggs,
shed skins and all life stages
of bed bugs may also be
present in these ‘soiled’ areas.

For more information on bed bugs, please refer to the resources made possible by the Connecticut Coalition Against Bed Bugs at www.ct.gov/caes/CCABB 6 QUALITY STANDARDS
Unacceptable Quality
Shown here are examples to illustrate severe damage,
heavy soiling and infestation.

Other Conditions:
• Out-of-state mattresses
• Severely damaged or soiled mattresses
• Mattress that have been stripped
of padding components.
• Pillows and cushions
• Fold-out sofa beds and futon frames or bases
• Loose mattress pads, toppers
• Loose bedding, blankets, or sheets
• Water beds
• Fire damaged units
Acceptable Quality
IMPORTANT: Only units used and discarded
in California are accepted by the program.

Shown here are examples of acceptable units.
7 MATERIALS COLLECTION
& HANDLING
Each collection site will have unique operational considerations. Participating sites must make their own decisions about how to best manage their operations in the safest manner possible in accordance with applicable laws. At a minimum, each participating site must meet these requirements:

MINIMUM PROGRAM REQUIREMENTS
Each collection site must be secure with adequate space and staffing to handle and store acceptable mattresses.

Each collection site must have knowledge of and comply with all applicable federal, state and local laws. These may include, but are not limited to, zoning requirements, state permit requirements and OSHA or other workplace requirements. Please contact your Local Enforcement Agency (LEA) to confirm whether your site is in compliance with all applicable notifications or requirements for accepting mattresses for recycling at your site. In many cases, this will be your county or local Public Health Department.

Each collection site must maintain general liability insurance of at least $1,000,000 per occurrence.

Staff at each collection site must be trained and knowledgeable regarding these guidelines before accepting mattresses for recycling.

Collection sites must allow MRC access to confirm compliance with these guidelines.

Collection sites must keep mattresses dry by storing in weatherproof containers or under cover to maximize their recyclability. In addition, all collection sites must:
• Make every effort to place mattresses in MRC-designated storage containers immediately upon acceptance
• Do not store units on the ground for prolonged periods of time and make every effort to keep container doors closed
• Keep mattresses intact and not intentionally crush or puncture them • Efficiently stack mattresses to maximize the number of units loaded in each storage container
• Provide oversight to keep unacceptable items out of MRC-designated storage containers
• Remove any non-program materials from MRC-designated storage containers before transport to MRC recyclers
• Practice good housekeeping standards and keep storage containers and program materials in a neat and orderly condition
SITE

PERMITS

INSURANCE

TRAINING

STORING &

MATTRESSES
See page 9
for photos and
guidelines

SITE ACCESS
8 MATERIALS COLLECTION
& HANDLING
9 Acceptable Loading

1. Begin each stack with a queen or full size box spring.

This acts as a base pallet to create a secure stack and makes unloading of mattresses quick and efficient.

2. Mattresses should be stacked horizontally to the top of the trailer to maximize space.

3. In small quantities, king size mattresses can be placed vertically next to a stack of horizontal mattresses.

4. If there are more than 10 king size units, stack horizontally.

Unacceptable Loading
IMPORTANT: Do not load units vertically
or in an unsafe manner.

Please contact your Program Coordinator to learn more
about acceptable/non-acceptable units and appropriate
stacking and loading techniques.

LOADING MATTRESSES IN STORAGE CONTAINERS
Expected number of mattresses that should fit in various container sizes:

Container Type Number of Mattresses
20-foot sea container 30-45
40-foot sea container 75-95
40-yard roll-off container 35-50
48-foot trailer 110-180
53-foot trailer 125-190
28-foot trailer 60-95

TRANSPORTATION
& PROCESSING

TRANSPORTERS
MRC will assign each collection site a transporter to provide a storage container and transport services.
• MRC-contracted transporters will provide participating locations with evidence of automobile insurance coverage of at least $1,000,000 per occurrence • Each collection site must notify transporter at least two business days before a storage container is full of mattresses
• The assigned transporter will pick up full containers and drop off an empty container at the same time
• On the scheduled pick up day, the collection site must make the collection container readily accessible to the transporter
• At the time of pick-up, collection site staff must be present to sign a three-part Bill of Lading (BOL) supplied by the transporter that details the quantity of mattresses in the container and must provide appropriate copies of the BOL to the transporter
A collection site may choose to provide its own storage containers and transportation. These locations must contact the recycler directly to arrange for a convenient drop-off time.

RECYCLERS
Recyclers under contract with MRC will meet established recycling standards and accurately account for all mattresses received, the mattress components recycled (e.g., foam, steel, wood, fiber, etc.) and any residual disposal. Collection sites will be assigned an MRC recycler to best service your facility.
10 RECORDKEEPING
Bill of Lading:

A Bill of Lading (BOL) will be provided by the transporter. Before a full container leaves the site, the BOL must be completed and signed by facility staff.

Annual Reporting to CalRecycle:

Per the law, mattress recyclers, renovators, and solid waste facilities, as defined by Public Resources Code section 42986, must submit an annual report to CalRecycle by May 1 each year. The annual reports must meet the requirements listed in Title 14, California Code of Regulations (CCR) sections 18965-18967, which includes contact information and quantitative information. Annual reports are used by CalRecycle and MRC to assess the program and establish and update the mattress recycling goals for the state.

See CalRecycle’s website for more information:
https://www.calrecycle.ca.gov/Mattresses/AnnualReport/
11 A collection site’s participation in MRC's Bye Bye Mattress program in California is voluntary.

Either party may withdraw from participation in accordance with the terms in your contract.

Written notice to the other party is required. MRC reserves the right to remove any collection site not in compliance with these guidelines from further participation in the program.

PROGRAM WITHDRAWAL
& TERMINATION
12 Item No. 13.

CITY COUNCIL AGENDA – MARCH 5, 2024
SUBJECT: Consideration of Updated Statement of Investment Policy SOURCE: Finance
COMMENT: At its meeting on February 20, 2024, the City Council provided direction to continue the consideration of updating the Statement of Investment Policy to the City Council meeting of March 5, 2024. Staff met with Council Member Meister and Council Member Weyhrauch on February 28, 2024, to review the Statement of Investment Policy. Staff was directed to research investing in precious metals. Staff performed additional research in regard to the request and reached out to local agencies (Visalia, Hanford, Dinuba and Exeter), connecting with the cities of Visalia and Exeter. The local agencies informed Staff that their agencies do not invest in precious metals, stating the reasoning is that investing in precious metals is high risk and is not an allowable investment in their city policies. Staff also contacted the City's auditor and broker, and was informed that investing in precious metals is not in conformance with all pertinent existing laws of the state of California Government Code Sections 53600, et seq.

The City of Porterville's Statement of Investment Policy was last considered and approved by the City Council in July 2006. Staff has recently reviewed the investment policy and are proposing an updated version to clarify and strengthen the requirements for investing, safekeeping, and reporting of the City's investment portfolio. The revisions include additions to the list of authorized and acceptable investments. The updated policy continues to meet the statutory requirements governing the investment of public funds and has been prepared in conformance with all pertinent existing laws of the State of California Government Code Sections 53600, et seq. Allowable investment instruments per the State Government Code applicable to all local agencies are included in the Local Agency Investment Guidelines.

On January 24, 2024, the City's Audit Committee met to review the updated Statement of Investment Policy and recommended approval of the same.

RECOMMENDATION: That the City Council adopt the resolution approving the updated Statement of Investment Policy.

ATTACHMENTS: 1. Investment Policy 2006

2. Redline - Draft Updated Investment Policy

3. Investment Policy 2023

4. Draft Resolution
Item No. 13.

5. Local Agency Investment Guidelines
Appropriated/Funded:

Review By:

Department Director:

Janie Rodriguez, Finance Director
Final Approver: Jason Ridenour, Acting Deputy City Manager Attachment “A”
1 CITY OF PORTERVILLE
Statement of Investment Policy

INTRODUCTION
The City of Porterville has a fiduciary responsibility to maximize the productive use of its liquid assets entrusted to its care and to manage those public funds wisely and prudently. The purpose of this document is to identify various policies and procedures that enhance opportunities for a prudent and systematic investment policy and to organize and formalize investment-related activities. Related activities, which comprise good cash management, include accurate cash projections, the expeditious collection of revenue, the control of disbursements, cost-effective banking relations, and short-term borrowing programs which coordinate working capital requirements and investment opportunity. In concert with these requirements are the many facets of an appropriate and secure short-term investment program.

SCOPE
It is intended that this investment policy cover all funds and investment activities under the direct authority of the City of Porterville organization. This policy does not cover any funds held by the fiscal agent in connection with the issuance of any bonds by the City. Such funds shall be invested in accordance with the applicable trust indenture.

PHILOSOPHY
The basic premise underlying Porterville’s investment philosophy is to insure that money is always available when needed. An amount of not less than one month’s payables and one month’s payroll, about $2.5 million, is maintained in immediately available investments, such as the State Treasurer’s Local Agency Investment Fund or other cash equivalents. This may include commercial paper or banker’s acceptances.

Porterville takes an active investment posture in an attempt to earn a higher yield. This investment posture is best demonstrated by the City’s long-term investments. By taking advantage of the positive yield curve (i.e., longer term rates are higher than shorter maturities), in the long run, the City should average a higher yield.

The City’s investments will be limited to an average life of three years or less. When the market warrants purchase of longer maturities to capture a higher rate of return, purchases will be limited to United States Treasury Notes and Bonds and Mortgage Backed Securities. No investment will be made in securities that have a final maturity over five years.

The economy and various markets are monitored carefully to assess the probable course of interest rates. In a market with increasing interest rates, the City will attempt to invest in securities with shorter maturities. This makes funds available for other investments when the interest rates are higher. When interest rates appear to be near a relatively high rate, the City will attempt to purchase investments with medium to long-term maturities to lock in the higher rate of return.

When interest rates are falling, the City will invest in securities with longer maturities to hold the higher rate for a longer period of time.

The City will also take advantage of any new vehicle that becomes eligible for municipal investment only after a detailed study of the investment, its safety, liquidity, and yield.

Attachment “A”
2 PRUDENCE
The City adheres to the guidance provided by the “prudent person standard,” as set forth in Government Code section 53600.3, which specifically addresses public investing, as follows:
“Except as provided in subdivision (a) of Section 27000.3, all governing bodies of local agencies or persons authorized to make investment decisions on behalf of those local agencies investing public funds pursuant to this chapter are trustees and therefore fiduciaries subject to the prudent investor standard. When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a trustee shall act with care, skill, prudence, and diligence under the circumstances then prevailing, including, but not limited to, the general economic conditions and the anticipated needs of 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 by law.”
The primary objective is to safeguard the principal of the funds under the City’s control. The secondary objective is to meet the liquidity needs of the City. The third objective is to achieve a return on the funds. Porterville strives to maintain the level of investment of all funds as near 100% as possible through daily and projected cash flow determinations. Investments are made so maturities match or precede the cash needs of the City. The City will maintain adequate cash availability and maximum yield on invested funds while insuring that principal invested is protected from loss.

INVESTMENT CRITERIA
Criteria for selecting investments are:

1. Safety;

2. Liquidity; and

3. Yield.

Porterville attempts to obtain the highest yield available when selecting investments, provided that criteria for safety and liquidity are met. Because ordinarily yield curves are positively sloped, (i.e., longer term rates are higher than shorter maturities), the City attempts to ladder its maturities.

This meets anticipated cash needs in such a way that new investment money can be placed in maturities that carry a higher rate than is available in the extremely short market of 90 days or under.

Government and agency paper are the highest quality investments available in terms of safety and liquidity. Certificates of deposit, savings accounts, and bankers acceptances are insured or collateralized. Only direct-issue commercial paper, with A-1 Moody’s and Standard and Poor’s ratings, will be purchased. These quality-rating criteria shall apply at the time of investment.

Should a particular issuer fall below these standards (“be downgraded”) while the investment is in the City’s portfolio, the prudent investor rule shall apply. Negotiable Certificates of Deposit are not insured or collateralized.

Most investments are highly liquid, with the exception of collateralized certificates of deposit held by banks, savings and loans, and Small Business Administration notes. Maturities are selected to anticipate cash needs, thereby avoiding the need for forced liquidation.

Attachment “A”
3 STATE AND CHARTER REGULATIONS
The City operates its investment pool with many State and self-imposed constraints. In accordance with SB 564 and SB 866, effective January 1, 1996, the City Treasurer will bring this Policy before City Council annually for its reaffirmation. Government Code Section 53601 restricts the City portfolio mix to:

1. 30% in Medium Term Notes;

2. 30% in Negotiable Certificates of Deposit;

3. 40% in Bankers Acceptance Notes, not to exceed 180 days in maturity; and

4. 25% in Commercial Paper, not to exceed 270 days in maturity.

These restrictions primarily apply to short-term investments and are interpreted to apply at the time of investment. If, as the portfolio mix changes over time, a particular segment exceeds these restrictions, the prudent investor rule shall apply. The City does not buy stocks and it does not speculate.

The City will be selective in purchasing long-term negotiable certificates of deposit and medium term notes, placing such an investment only with a large stable institution.

MATURITY OF INVESTMENTS
The City of Porterville will operate a portfolio with an average life of three years or less. This is to insure liquidity and the ability to move with changing markets and interest rate movements.

Accordingly, no investment will be made in securities that have a final maturity over five years.

The long-term securities shall only be Treasury Notes and Bonds and Mortgage Backed Securities.

SECURITIES DEALERS AND BROKERS
The City of Porterville will undertake a yearly review of its broker/dealer relationships. The City will deal generally with the major broker/dealer firms or major banks in the country and then with only their institutional investment divisions. Primary government securities dealers are preferred for conducting transactions of all eligible securities. Primary dealers must report daily to the Federal Reserve, are very tightly regulated, and must keep specified levels of working capital.

Secondary dealers are those dealers who buy and sell securities in the open market. Secondary and other security dealers who wish to engage in transactions with the City must meet the City’s requirements for reliability and safety and be approved prior to purchase. These relationships are formalized through a corporate statement. The City will deal with both after meeting the City’s requirements.

The City shall also be open to contracting investment management services for a portion of the portfolio. That portion shall be limited to longer-term investments of two years or longer. Any investment management firm contracted shall meet criteria established by the Finance Department. All investments made under contract will be purchased in the City’s name and in accordance with the guidelines established by the City’s investment policy.

PERIODIC REPORTING
Also in accordance with SB 564 and SB 866, each quarter, the City Treasurer will issue a report of the City’s current investment portfolio, detailing securities, purchase and maturity date, and Attachment “A”
4 face and market value. This report will also confirm that current portfolio holdings are in compliance with this policy and that the City’s cash needs will be met.

Each quarter some of the long-term investments will be reviewed in order to determine if it is advantageous to sell those securities and purchase others. The review will consider current market conditions and various spread relationships among security types. The monitoring of the conditions set forth in this policy statement is the responsibility of the City Treasurer or delegate.

TYPES OF INVESTMENTS
Cash management and investment transactions are the responsibility of the City Treasurer or delegated investment officer. The following City of Porterville employees are defined as authorized investment officers:

John Longley, City Manager
John Lollis, Administrative Services Manager
Maria Bemis, Acting Chief Financial Officer
Investments are made in the following:

1. Securities of the U.S. Government
Securities of the Government include U.S. Treasury bills, notes and bonds.

U. S. Treasury Bills - are issued by the U.S. Treasury and are available in maturities out to one year. They are non-interest bearing and sold on a discount basis. The face amount is paid at maturity.

Treasury Notes - are issued by the U.S. Treasury with maturities from two to ten years.

They are issued in coupon form and many issues are also available in registered form.

Interest is payable at six month intervals until maturity.

Treasury Bonds - are issued by the U.S. Treasury with maturities of ten years to thirty years. The City may purchase the interest and/or principal of a U.S. Treasury Bond. A principal only instrument is commonly called a “stripped” or “zero” coupon. Stripped coupons are sold at discount basis. The face amount is paid at maturity.

2. Securities of U.S. Government Agencies
The United States Treasury initially financed the capital of U.S. Government agencies.

Government. The obligations of all the federal agencies described in the following sections are not guaranteed by the U.S. Government with the exception of Government National Mortgage Association, but are considered to be investments of the highest quality.

Federal National Mortgage Association (Fannie Mae) is a quasi-public corporation created by an act of Congress to assist the home mortgage market by purchasing mortgages insured by the Federal Housing Administration and the Farmers Home Administration, as well as those guaranteed by the Veterans Administration. FNMA issues Notes and Bonds. Notes are issued with maturities of less than one year with interest paid at maturity. Bonds are issued for 15 and 30 year maturities with interest Attachment “A”
5 paid semi-annually. Interest is computed on a 30/360-day basis. There is a strong secondary market in these securities. A secondary market means these instruments are actively traded, they are bought and sold daily.

Government National Mortgage Association (Ginnie Mae) is a wholly owned corporate instrumentality of the United States within the Department of Housing and Urban Development. A certificate collateralized by FHA/VA residential mortgages represents a share in a pool of FHA or VA mortgages. Ginnie Maes are registered securities.

Principal and interest are paid monthly and sent directly from the issuer of the pool, usually a mortgage banker, to the City. Original maturities range from 12 to 30 years with a 7 to 12-year assumed average life (Assumed average life is due to prepayments of mortgages).

Federal Farm Credit Banks are debt instruments issued to meet the financial needs of farmers and the national agricultural industry. Discount notes are issued monthly with 6 and 9-month maturities. Discount notes pay interest at maturity. Longer-term debentures (2-5 years) are also issued. Debentures pay interest semi-annually on a 30/360-day basis. These issues enjoy an established secondary market.

Small Business Administration Loans (SBA). The Small Business Administration is an independent agency of the United States government that furnishes financial and management assistance to small businesses. The SBA guarantees the principal portion of the loans it approves. Porterville purchases the guaranteed portion of these loans.

Maturity can be for 1 year to 30 years. These loans can be either set at a fixed rate or variable rate that is usually tied to the prime rate. Principal and interest are paid monthly on a 30/360-day basis.

Other U.S. government securities available to the City for investment purposes include:

Student Loan Marketing Association (SLMA or Sallie Mae), Aid for International Development (AID), and debentures of Tennessee Valley Authority (TVA). However, these instruments are not offered on a regular basis and do not offer the same liquidity as the before mentioned instruments.

3. Time Deposits or Certificates of Deposit
Time deposits are placed with commercial banks and savings and loan agencies. A time deposit is a receipt for funds deposited in a financial institution for a specified period of time at a specified rate of interest. Generally, the time is 3 months to 5 years.

Denominations can be any agreed upon amount and interest is normally calculated using Attachment “A”
6 actual number of days on a 360-day year and paid monthly. Deposits of $100,000 (commonly referred to as Jumbo C.D.’s) per institution are insured by the government and collateralized Certificates of Deposit can be supported by either 110% Government agency notes or 150% mortgages currently held by the bank or savings and loan. An institution must meet the following criteria to be considered by the City:

1. The institution must maintain a net worth to asset ratio of at least 3% and a positive earnings record;

2. The institution must be in compliance with the Financial Institution Reform Act (FIRREA) capital ratio requirements for risk-based, tangible, and core capital; and

3. The institution must make available a current FDIC call reports (banks) or FHLB report. A call report presents the financial condition of the institution to the agency with oversight responsibility of that institution.

4. Negotiable Certificates of Deposit
Negotiable Certificates of Deposit are a form of Certificate of Deposit that have been an important money market instrument since 1961 when commercial banks began issuing them and a secondary market developed to provide liquidity. Since these certificates of deposit can be traded in the secondary market, they are negotiable instruments, hence their name negotiable certificate of deposit. They are supported only by the strength of the institution from which they are purchased. This is a riskier investment that provides a higher yield than regular certificates of deposit. Some issues have quarterly floating rates that mean they will more closely approximate the market in yield. Interest is paid semiannually (quarterly on the floaters) computed on a 30/360-day basis. Maturities range from 3 months to 2 years. Negotiable Certificates of Deposit are generally issued in blocks of $1 million, $5 million, $10 million and so on.

The City will restrict its investments in Negotiable Certificates of Deposit to the 100 largest United States banks and 100 largest international banks according to asset size. The profitability of the financial institution as well as its financial stability is also taken into account prior to placing the investment. As a general rule, the City will not place more than 15% of its portfolio in Negotiable Certificates of Deposit with one institution or 20% of its portfolio with any one Commercial Bank or savings and loan association in any form of Certificate of Deposit.

5. Bankers Acceptance Notes
A banker’s acceptance (B.A.) is a unique credit instrument used to finance both domestic and international transactions. As a money market instrument, it is an attractive shortterm investment. When a bank “accepts” such a time draft, it becomes, in effect, a predated certified check payable to the bearer at some future, specified date. Little risk is involved because the commercial bank assumes primary liability once the draft is accepted. Banker’s acceptances are frequently in odd amounts. Maturities normally range from 30 up to 180 days. Banker’s acceptances are sold at a discount. This means, the face amount is received at maturity. The City will purchase B.A.’s only of the top 100 U.S. or Foreign Banks. The profitability of the financial institution as well as its financial stability is also taken into account prior to placing the investment.

6. Commercial Paper
Attachment “A”
7 Commercial paper is the trade name applied to unsecured promissory notes issued by finance and industrial companies to raise funds on a short-term basis. Commercial paper can be purchased on an interest bearing or discount basis. Interest bearing instruments pay interest semi-annually. Discounted instruments pay interest at maturity. The City will invest in commercial paper only if the yields are attractive, and if the paper is rated A-1 by Moody’s and by Standard & Poor’s rating services. Maturities range from 30 to 180 days with interest computed on a 30/360-day basis.

7. Medium Term Notes
In recent years, this financing mechanism has grown, providing capital to the private sector, and diminishing the Negotiable Certificate of Deposit market. The trend towards medium term notes related to buyer and seller flexibility and convenience. The notes are issued on any given date and maturing on a negotiated date. They generally range from 2 to 5 years in maturity. This market provides an excellent alternative to Negotiable C.D.’s.

The City will only purchase Medium Term Notes with ratings of A or better with maturities of 5 years or less. Their interest is calculated on a 30/360-day basis like Agency bonds.

Interest is paid semi-annually.

8. Local Agency Investment Fund demand deposit
The Local Agency Investment Fund (LAIF) was established by the state to enable treasurers to place funds in a pool for investments. The LAIF has been particularly beneficial to those jurisdictions with small portfolios. Each agency is limited to an investment of $15.0 million. Porterville uses this fund for short-term liquidity, investment, and yield when rates are declining. Funds are available on demand. At present, two accounts have been opened; one for the City and one for Porterville Redevelopment Agency. Interest is paid quarterly.

9. Central San Joaquin Valley Risk Management Authority (CSJVRMA) investment pool As a member city of the CSJVRMA, the City accepted the opportunity in July 2001 to participate in its sponsored investment pool. The pool is managed by Chandler Asset Management and invests in agency instruments such as Federal Home Loan Bank, treasuries and high-grade corporate stock. Funds are available on demand, with interest paid quarterly.

10. County of Tulare investment pool
Porterville participates in the County of Tulare’s investment pool that is managed by the County Treasurer, O. Gerald Fields. The County invests in the same type of Stateapproved instruments, as does the City. Funds are available on demand, and interest is paid quarterly.

Attachment “A”
1 CITY OF PORTERVILLE
Statement of Investment Policy

PHILOSOPHY
The basic premise underlying Porterville’s investment philosophy is to insure ensure that money is always available when needed. An amount of not less than one month’s payables and one month’s payroll, about $2.5 million, A minimum amount of 6 percent of the adopted operating budget for all funds is maintained in immediately available investments, such as the State Treasurer’s Local Agency Investment Fund or other cash equivalents. This may include commercial paper or banker’s acceptances.

The City’s investments will be limited to an average life of three years or less. When the market warrants purchase of longer maturities to capture a higher rate of return, purchases will be limited to United States Treasury Notes and Bonds and Mortgage Backed Securities, Federal Agencies Notes and Bonds, Medium Term Notes, Time Deposits or Certificates of Deposit, and Negotiable Certificate of Deposit. No investment will be made in securities that have a final maturity over five years.

When interest rates are falling, the City will invest in securities with longer maturities to hold the higher rate for a longer period of time.

Attachment “A”
2 The City will also take advantage of any new vehicle that becomes eligible for municipal investment only after a detailed study of the investment, its safety, liquidity, and yield.

INVESTMENT OBJECTIVES
As per California Government Code Section 53600.5, the primary objectives, in priority order of the City of Porterville’s investment activities shall be:

1. Safety: Safety of principal is the foremost objective of the investment program.

Investments of the City shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio with the objective of mitigating credit risk and interest rate or market risk.

Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. Investments will be limited to the types of securities authorized in this policy. The City will diversify its investment portfolio in order to minimize the impact of potential losses from any one type of security or from any one individual issuer.

Interest rate or market risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The investment portfolio will be structured so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities prior to maturity. Securities shall generally be held until maturity.

2. Liquidity: The City’s investment portfolio will remain sufficiently liquid to enable the City to meet all payment requirements, including but not limited to payroll, accounts payable, capital projects, debt service, and other payments which might be reasonably anticipated.

3. Yield: The City’s investment portfolio shall be designed and managed with the objective of maximizing return throughout budgetary and economic cycles, commensurate with the City’s investment risk constraints and the cash flow characteristics of the portfolio.

The Treasurer/Finance Director and staff will avoid any transactions that might impair public confidence in the City.

PRUDENCE PRUDENT INVESTOR STANDARD
The City adheres to the guidance provided by the “prudent person standard,” as set forth in Government Code section 53600.3, which specifically addresses public investing, as follows:. “Except as provided in subdivision (a) of Section 27000.3, all governing bodies of local agencies or persons authorized to make investment decisions on behalf of those local agencies investing public funds pursuant to this chapter are trustees and therefore fiduciaries subject to the prudent investor standard. When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a trustee shall act with care, skill, prudence, and diligence under the circumstances then prevailing, including, but not limited to, the general economic conditions and the anticipated needs of 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 Attachment “A”
3 by law.”
The primary objective is to safeguard the principal of the funds under the City’s control. The secondary objective is to meet the liquidity needs of the City. The third objective is to achieve a return on the funds. Porterville strives to maintain the level of investment of all funds as near 100% as possible through daily and projected cash flow determinations. Investments are made so maturities match or precede the cash needs of the City. The City will maintain adequate cash availability and maximum yield on invested funds while insuring that principal invested is protected from loss.

The ” prudent person standard” shall be applied in the context of managing an overall portfolio.

INVESTMENT CRITERIA
Criteria for selecting investments are:

1. Safety;

2. Liquidity; and

3. Yield.

This meets anticipated cash needs in such a way that new investment money can be placed in maturities that carry a higher rate than is available in the extremely short market of 90 days or under.

ETHICS AND CONFLICTS OF INTEREST
Investment officers shall disclose material interests in financial institutions with which they do business, disclose personal financial interests that could be related to the performance of the investment portfolio and refrain from undertaking personal investment transactions with the same individual with whom business is conducted on behalf of the City.

Attachment “A”
4 DELEGATION OF AUTHORITY
The City Council hereby delegates responsibility for the management of the investment program to the City Treasurer/Finance Director, who shall establish procedures for the operation of the investment program consistent with this investment policy. Under the provision of California Government Code 53603.3, the Treasurer/Finance Director is a trustee and a fiduciary subject to the prudent investor standard. The Treasurer/Finance Director will review the investment holdings monthly and ensure that they are in compliance with the City investment policy.

The Treasurer/Finance Director may delegate all or a portion of his/her investment authority. Prior to delegation, the Treasurer/Finance Director shall notify the City Council and request confirmation of the delegation. Delegation of investment authority will not remove or abridge the Treasurer/Finance Director’s investment responsibility.

SAFEKEEPING AND CUSTODY
Securities owned by the City shall be held in safekeeping by third-party custodians acting as agent for the City and shall be evidenced by safekeeping receipts. The purchase of securities shall be conducted on a standard delivery versus payment (DVP) basis that guarantees the transfer of securities only after payment is made. The DVP system eliminates principal risk, decreasing the probability of not meeting delivery and/or payment obligations and reducing the possibility of liquidity risk. The third-party custodians are required to provide monthly statements illustrating the balance of securities held by those custodians.

Investments in investment pools and some certificates of deposit are not subject to delivery or third-party safekeeping requirements.

INTERNAL CONTROLS
The Treasurer/Finance Director 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 controls shall include separation of duties, safekeeping of securities and written confirmation of phone transactions and wire transfers.

STATE AND CHARTER REGULATIONS
The City operates its investment pool with many State and self-imposed constraints. In accordance with SB 564 and SB 866, effective January 1, 1996, the City Treasurer will bring this Policy before City Council annually for its reaffirmation. Government Code Section 53601 restricts the City portfolio mix to:

1. 30% in Medium Term Notes;

2. 30% in Negotiable Certificates of Deposit;

3. 40% in Bankers Acceptance Notes, not to exceed 180 days in maturity; and

4. 25% in Commercial Paper, not to exceed 270 days in maturity.

The City will be selective in purchasing long-term negotiable certificates of deposit and medium term notes, placing such an investment only with a large stable institution.

Attachment “A”
5 MATURITY OF INVESTMENTS
The City of Porterville will operate a portfolio with an average life of three years or less. This is to insure liquidity and the ability to move with changing markets and interest rate movements.

Accordingly, no investment will be made in securities that have a final maturity over five years.

The long-term securities shall only be Treasury Notes and Bonds and Mortgage Backed Securities.

SECURITIES DEALERS AND BROKERS AUTHORIZED FINANCIAL DEALERS AND

INSTITUTIONS
The City of Porterville will undertake a yearly review of its broker/dealer relationships. The City will deal generally with the major broker/dealer firms or major banks in the country and then with only their institutional investment divisions. Primary government securities dealers are preferred for conducting transactions of all eligible securities. Primary dealers must report daily to the Federal Reserve, are very tightly regulated, and must keep specified levels of working capital.

The City of Porterville will maintain a list of banks, savings and loans, credit unions, and securities dealers authorized to provide investment services. Approved broker/dealers and financial institutions should meet all requirements established by federal and state law. Criteria to be considered in the selection will include creditworthiness, expertise and the types of securities.

Qualifying financial dealers and institutions must provide the City with audited financial statements, proof of National Association of Securities Dealers (NASD) certification, and a certification of having read, understood and agreeing to comply with this investment policy.

PERIODIC REPORTING
Also in accordance with SB 564 and SB 866, each quarter, On a quarterly basis, the City Treasurer/Finance Director will issue a report of the City’s current investment portfolio, detailing securities, purchase and maturity date, and face and market value, weighted average rate of earnings, weighted average days to maturity, and the percentage of liquid holdings. This report will also confirm that current portfolio holdings are in compliance with this policy and that the City’s cash needs will be met.

TYPES OF INVESTMENTS AUTHORIZED INVESTMENTS
Cash management and investment transactions are the responsibility of the City Treasurer or Attachment “A”
6 delegated investment officer. The following City of Porterville employees are defined as authorized investment officers:

John Longley, City Manager
John Lollis, Administrative Services Manager
Maria Bemis, Acting Chief Financial Officer
Investments are made in accordance with California State Code and include the following:

1. Securities of the U.S. Government
Securities of the Government include U.S. Treasury bills, notes and bonds.

Treasury Notes - are issued by the U.S. Treasury with maturities from two to ten years.

They are issued in coupon form and many issues are also available in registered form.

Interest is payable at six-month intervals until maturity.

2. Securities of U.S. Government Agencies
The United States Treasury initially financed the capital of U.S. Government agencies.

Notes are issued with maturities of less than one year with interest paid at maturity. Bonds are issued for 15 and 30 year maturities with interest paid semi-annually. Interest is computed publicly traded government-sponsored enterprise created to provide liquidity, stability and affordability to the mortgage market by purchasing mortgages from banks, savings and loans and mortgage companies. Fannie Mae issues both short-term debt with maturities of a year or less and long-term debt with maturities of over a year and can either be callable or noncallable with interest payments paid semi-annually on a 30/360- day basis. There is a strong secondary market in these securities. A secondary market means these instruments are actively traded, they are bought and sold daily.

Government National Mortgage Association (Ginnie Mae) is a wholly owned corporate instrumentality of the United States within the Department of Housing and Urban Attachment “A”
7 Development. A certificate collateralized by FHA/VA residential mortgages represents a share in a pool of FHA or VA mortgages. Ginnie Maes are registered securities.

Federal Home Loan Banks provide credit to member lending institutions such as savings and loan associations, cooperative banks, insurance companies and savings banks. The agency offers bonds in the public market with maturities of one year to ten years. These bonds are usually offered on a quarterly basis depending on the current demands of the housing industry. are cooperatively owned by member financial institutions and provide a steady supply of lendable funds to financial institutions such as community banks, credit unions, commercial and savings banks, insurance companies, and community development financial institutions. They provide liquidity to their members to support housing finance and community development through all economic cycles. The agency offers bonds in the public market with majority of issues between one and five years.

Interest is paid semi-annually on a 30/360 day basis.

Federal Farm Credit Banks (FFCB) Agency bonds are debt instruments issued to meet the financial needs of farmers and the national agricultural industry. Discount notes are issued monthly with 6 and 9-month maturities. Discount notes pay interest at maturity.

Longer-term debentures (2-5 years) are also issued. Debentures pay interest support rural communities and agriculture with reliable, consistent credit and financially related services. Fixed rate bonds which maybe callable or non-callable are regularly issued with typical maturities of one to five years. Designated bonds are non-callable securities with typical maturities of two to ten years. Interest payments are made semi-annually on a 30/360-day basis. These issues enjoy an established secondary market.

Federal Home Loan Mortgage Corporation (Freddie Macs) participation certificates are backed by 30-year conventional residential mortgages and are 100 percent guaranteed by the Federal Home Loan Mortgage Corporation. The Federal Home Loan Mortgage Corporation is wholly owned by the Federal Home Loan Banks. The Mortgage Corporation is a corporate instrumentality of the United States. Freddie Macs are registered securities. Principal and interest passed through the Mortgage Corporation and then to the City monthly. These instruments have an assumed life of approximately 12 years and pay is a publicly traded, government-sponsored enterprise created to promote stability and affordability in the housing market by purchasing mortgages from banks and other loan makers. Freddie Mac’s term debt products offer investors both short-term notes (maturities of one year or less) or callable medium-term notes, typically one to fifteen years and pays interest semi-annually on a 30/360-day basis.

Other U.S. government securities available to the City for investment purposes include:

Student Loan Marketing Association (SLMA or Sallie Mae), Aid for International Development (AID), and debentures of Tennessee Valley Authority (TVA). However, Attachment “A”
8 these instruments are not offered on a regular basis and do not offer the same liquidity as the before mentioned instruments.

3. Time Deposits or Certificates of Deposit
Time deposits are placed with commercial banks and savings and loan agencies or state or federal credit unions. A time deposit is a receipt for funds deposited in a financial institution for a specified period of time at a specified rate of interest. Generally, the time is 3 months to 5 years. Denominations can be any agreed upon amount and interest is normally calculated using actual number of days on a 360-day 365-day year and paid monthly. Deposits of $100,000 up to $250,000 (commonly referred to as Jumbo C.D.’s) per institution are insured by the government Federal Deposit Insurance Corporation (FDIC) and collateralized Certificates of Deposit can be supported by either 110% U.S.

Government agency notes or 150% mortgages currently held by the bank, or savings and loan or credit union. An institution must meet the following criteria to be considered by the City: maintain a net worth to asset ratio of at least 3% and a positive earnings record.

1. The institution must maintain a net worth to asset ratio of at least 3% and a positive earnings record;

2. The institution must be in compliance with the Financial Institution Reform Act (FIRREA) capital ratio requirements for risk-based, tangible, and core capital; and

6. Commercial Paper
Commercial paper is the trade name applied to unsecured promissory notes issued by finance and industrial companies to raise funds on a short-term basis. Commercial paper can be purchased on an interest bearing or discount basis. Interest bearing instruments pay interest semi-annually. Discounted instruments pay interest at maturity. The City will invest in commercial paper only if the yields are attractive, and if the paper is rated A-1 by Moody’s and by Standard & Poor’s rating services attains the highest letter and number rating as provided for by national recognized statistical-rating organization (NRSRO).

Maturities range from 30 to 180 days with interest computed on a 30/360-day basis.

7. Medium-Term Notes
In recent years, this financing mechanism has grown, providing capital to the private sector, and diminishing the Negotiable Certificate of Deposit market. The trend towards medium term notes related to buyer and seller flexibility and convenience. The notes are issued on any given date and maturing on a negotiated date. They generally range from 2 to 5 years in maturity. This market provides an excellent alternative to Negotiable C.D.’s.

A Medium-term note is a form of privately placed debt in a bond format. It refers to any fixed-income security with a maturity longer than 1 year, typically issued by financial institutions, corporations and public finance borrowers. The City will only purchase Medium Term Notes with ratings of A or its equivalent or better with maturities of 5 years or less. Their interest is calculated on a 30/360-day basis like Agency bonds. Interest is paid semi-annually.

8. Capital Stock
The City will only invest on water shares from local water companies as they become available.

89. Local Agency Investment Fund demand deposit
The Local Agency Investment Fund (LAIF) was established by the state to enable treasurers to place funds in a pool for investments. The LAIF has been particularly beneficial to those jurisdictions with small portfolios. Each agency is limited to an investment of $15.0 $75.0 million. Porterville uses this fund for short-term liquidity, investment, and yield when rates are declining. Funds are available on demand. At present, two accounts have been opened; one for the City and one for Porterville Redevelopment Agency. Interest and interest is paid quarterly.

9.10. Central San Joaquin Valley Risk Management Authority (CSJVRMA) investment pool As a member city of the CSJVRMA, the City accepted the opportunity in July 2001 to participate in its sponsored investment pool. The pool is managed by Chandler Asset Management and invests in agency instruments such as Federal Home Loan Bank, treasuries and high-grade corporate stock. Funds are available on demand, with interest Attachment “A”
Attachment A
paid quarterly on a monthly basis.

10.11. County of Tulare investment pool
Porterville participates in the County of Tulare’s investment pool that is managed by the County Treasurer, O. Gerald Fields. The County invests in the same type of Stateapproved instruments, as does the City. Funds are available on demand, and interest is paid quarterly.

12. California Cooperative Liquid Assets Securities System (CLASS) California CLASS is a Joint Powers Authority investment pool that provides public agencies the opportunity to invest funds on a cooperative basis in rated pools that are managed in accordance with state law. Its primary objective is to offer participants safety, daily and next-day liquidity and optimized returns. The funds is an investment option and diversification tool for short-term and medium-term investments. Funds are available on demand with interest paid on a monthly basis.

Investments not specifically approved by this policy are prohibited.

STATE AND CHARTER REGULATIONS DIVERSIFICATION REQUIREMENTS The City of Porterville will diversify its investment portfolio in order to reduce exposure to risk by combining a variety of investments, limiting investment in securities with higher credit risks, investing in instruments with varying maturities, and continuously investing a portion of the portfolio in readily available funds to ensure that appropriate liquidity is maintained to meet ongoing obligations.

The City operates its investment pool with many State and self-imposed constraints. In accordance with SB 564 and SB 866, effective January 1, 1996, the City Treasurer will bring this Policy before City Council annually for its reaffirmation. Government Code Section 53601 (et seq) restricts the City portfolio mix to:

1. 30% in Medium Term Notes, not to exceed 5 years in maturity;

2. 30% in Negotiable Certificates of Deposit, not to exceed 5 years in maturity;

3. 40% in Banker’s Acceptance Notes, not to exceed 180 days in maturity;

4. 25% in Commercial Paper, not to exceed 270 days in maturity; and

5. 50% in Placement Service Certificates of Deposit, not to exceed 5 years in maturity (On January 1, 2026, reverts back to 30% maximum percentage of the portfolio.) These restrictions primarily apply to short-term investments and are interpreted to apply at the time of investment. If, as the portfolio mix changes over time, a particular segment exceeds these restrictions, the prudent investor rule shall apply. The City does not buy stocks and it does not speculate. The City will be selective in purchasing long-term negotiable certificates of deposit and medium-term notes, placing such an investment only with a large stable institution.

MATURITY OF INVESTMENTS
The City of Porterville will operate a portfolio with an average life of three years or less. This is to insure ensure liquidity and the ability to move with changing markets and interest rate movements.

Accordingly, no investment will be made in securities that have a final maturity over five years.

The long-term securities shall only be Treasury Notes and Bonds and Mortgage Backed Securities.

Attachment “A”
Attachment A

INVESTMENT POLICY ADOPTION
The City’s investment policy shall be reviewed periodically by the City Council for consistency with the City’s overall investment objectives regarding preservation of principal, liquidity, return, and relevance to current law as well as to current financial and economic trends. Any modifications necessary must be approved by the City Council and the investment policy shall be adopted in its entirety by resolution of the City Council. 1 CITY OF PORTERVILLE
Statement of Investment Policy

PHILOSOPHY
The basic premise underlying Porterville’s investment philosophy is to ensure that money is always available when needed. A minimum amount of 6 percent of the adopted operating budget for all funds is maintained in immediately available investments, such as the State Treasurer’s Local Agency Investment Fund or other cash equivalents.

The City’s investments will be limited to an average life of three years or less. When the market warrants purchase of longer maturities to capture a higher rate of return, purchases will be limited to United States Treasury Notes and Bonds, Federal Agencies Notes and Bonds, Medium Term Notes, Time Deposits or Certificates of Deposit, and Negotiable Certificates of Deposit. No investment will be made in securities that have a final maturity over five years.

When interest rates are falling, the City will invest in securities with longer maturities to hold the higher rate for a longer period of time.

The City will also take advantage of any new vehicle that becomes eligible for municipal investment only after a detailed study of the investment, its safety, liquidity, and yield. 2 INVESTMENT OBJECTIVES
As per California Government Code Section 53600.5, the primary objectives, in priority order of the City of Porterville’s investment activities shall be:

1. Safety: Safety of principal is the foremost objective of the investment program.

The Treasurer/Finance Director and staff will avoid any transactions that might impair public confidence in the City.

PRUDENT INVESTOR STANDARD
The City adheres to the guidance provided by the “prudent person standard,” as set forth in California Government Code Section 53600.3.

The ” prudent person standard” shall be applied in the context of managing an overall portfolio.

Investments shall be made with judgement and care, under circumstances then prevailing, which persons of prudence, discretion and intelligence exercise in the management of their own affairs; not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived. Investment officers acting in accordance with written procedures and the investment policy and exercising due diligence, shall be relieved of personal responsibility for an individual security’s credit risk or market price changes, provided the deviations from expectations are reported in a timely fashion and appropriate action is taken to control adverse developments.
3 ETHICS AND CONFLICTS OF INTEREST
Investment officers shall disclose material interests in financial institutions with which they do business, disclose personal financial interests that could be related to the performance of the investment portfolio and refrain from undertaking personal investment transactions with the same individual with whom business is conducted on behalf of the City.

DELEGATION OF AUTHORITY
The City Council hereby delegates responsibility for the management of the investment program to the City Treasurer/Finance Director, who shall establish procedures for the operation of the investment program consistent with this investment policy. Under the provision of California Government Code 53603.3, the Treasurer/Finance Director is a trustee and a fiduciary subject to the prudent investor standard. The Treasurer/Finance Director will review the investment holdings monthly and ensure that they are in compliance with the City investment policy.

Investments in investment pools and some certificates of deposit are not subject to delivery or third-party safekeeping requirements.

The internal controls shall include separation of duties, safekeeping of securities and written confirmation of phone transactions and wire transfers.

AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS
The City of Porterville will maintain a list of banks, savings and loans, credit unions, and securities dealers authorized to provide investment services. Approved broker/dealers and financial institutions should meet all requirements established by federal and state law. Criteria to be considered in the selection will include creditworthiness, expertise and the types of securities.

1. Securities of the U.S. Government
Securities of the Government include U.S. Treasury bills, notes and bonds.

Treasury Notes - are issued by the U.S. Treasury with maturities from two to ten years.

They are issued in coupon form and many issues are also available in registered form.

Interest is payable at six-month intervals until maturity.

2. Securities of U.S. Government Agencies
The United States Treasury initially financed the capital of U.S. Government agencies.

But as they have grown and operated profitably over the years, the Treasury’s investment has been replaced in large measure by private capital. At the present time, obligations of only a few agencies are backed by the full faith and credit of the U.S. Government. The obligations of all the federal agencies described in the following sections are not guaranteed by the U.S. Government but are considered to be investments of the highest quality.

Federal National Mortgage Association (Fannie Mae) is a publicly traded governmentsponsored enterprise created to provide liquidity, stability and affordability to the mortgage market by purchasing mortgages from banks, savings and loans and mortgage companies. Fannie Mae issues both short-term debt with maturities of a year or less and long-term debt with maturities of over a year and can either be callable or noncallable with interest payments paid semi-annually on a 30/360-day basis.

Federal Home Loan Banks are cooperatively owned by member financial institutions and provide a steady supply of lendable funds to financial institutions such as community banks, credit unions, commercial and savings banks, insurance companies, and community development financial institutions. They provide liquidity to their members to support housing finance and community development through all economic cycles. The agency offers bonds in the public market with majority of issues between one and five years. Interest is paid semi-annually on a 30/360-day basis.

Federal Farm Credit Bank (FFCB) Agency bonds are debt instruments issued to support rural communities and agriculture with reliable, consistent credit and financially related services. Fixed rate bonds which maybe callable or non-callable are regularly issued with typical maturities of one to five years. Designated bonds are non-callable securities with typical maturities of two to ten years. Interest payments are made semi-annually on a 30/360-day basis.
5 Federal Home Loan Mortgage Corporation (Freddie Mac) is a publicly traded, government-sponsored enterprise created to promote stability and affordability in the housing market by purchasing mortgages from banks and other loan makers. Freddie Mac’s term debt products offer investors both short-term notes (maturities of one year or less) or callable medium-term notes, typically one to fifteen years and pays interest semiannually on a 30/360-day basis.

3. Time Deposits or Certificates of Deposit
Time deposits are placed with commercial banks, savings and loan agencies or state or federal credit unions. A time deposit is a receipt for funds deposited in a financial institution for a specified period of time at a specified rate of interest. Generally, the time is three months to five years. Denominations can be any agreed upon amount and interest is normally calculated using actual number of days on a 365-day year and paid monthly.

Deposits of up to $250,000 (commonly referred to as Jumbo C.D.’s) per institution are insured by the Federal Deposit Insurance Corporation (FDIC) and collateralized Certificates of Deposit can be supported by either 110% U.S. Government agency notes or 150% mortgages currently held by the bank, savings and loan or credit union. An institution must maintain a net worth to asset ratio of at least 3% and a positive earnings record;

5. Bankers’ Acceptance Notes
A banker’s acceptance (B.A.) is a unique credit instrument used to finance both domestic and international transactions. As a money market instrument, it is an attractive shortterm investment. When a bank “accepts” such a time draft, it becomes, in effect, a predated certified check payable to the bearer at some future, specified date. Little risk is involved because the commercial bank assumes primary liability once the draft is accepted. Banker’s acceptances are frequently in odd amounts. Maturities normally range from 30 up to 180 days. Banker’s acceptances are sold at a discount. This means, the face amount is received at maturity. The City will purchase B.A.’s only of the top 100 U.S. or Foreign Banks. The profitability of the financial institution as well as its financial stability is also taken into account prior to placing the investment. 6 6. Commercial Paper
Commercial paper is the trade name applied to unsecured promissory notes issued by finance and industrial companies to raise funds on a short-term basis. Commercial paper can be purchased on an interest bearing or discount basis. Interest bearing instruments pay interest semi-annually. Discounted instruments pay interest at maturity. The City will invest in commercial paper only if the yields are attractive, and if the paper attains the highest letter and number rating as provided for by a national recognized statistical-rating organization (NRSRO). Maturities range from 30 to 180 days with interest computed on a 30/360-day basis.

7. Medium-Term Notes
A Medium-term note is a form of privately placed debt in a bond format. It refers to any fixed-income security with a maturity longer than 1 year, typically issued by financial institutions, corporations and public finance borrowers. The City will only purchase Medium Term Notes with ratings of A or its equivalent or better, with maturities of five years or less. Their interest is calculated on a 30/360-day basis like Agency bonds.

Interest is paid semi-annually.

8. Capital Stock
The City will only invest on water shares from local water companies as they become available.

9. Local Agency Investment Fund
The Local Agency Investment Fund (LAIF) was established by the state to enable treasurers to place funds in a pool for investments. The LAIF has been particularly beneficial to those jurisdictions with small portfolios. Each agency is limited to an investment of $75.0 million. Porterville uses this fund for short-term liquidity, investment, and yield when rates are declining. Funds are available on demand and interest is paid quarterly.

10. Central San Joaquin Valley Risk Management Authority (CSJVRMA) Investment Pool As a member city of the CSJVRMA, the City accepted the opportunity in July 2001 to participate in its sponsored investment pool. The pool is managed by Chandler Asset Management and invests in agency instruments such as Federal Home Loan Bank, treasuries and high-grade corporate stock. Funds are available on demand, with interest paid on a monthly basis.

11. County of Tulare Investment Pool
Porterville participates in the County of Tulare’s investment pool that is managed by the County Treasurer. The County invests in the same type of State-approved instruments, as does the City. Funds are available on demand, and interest is paid quarterly. 7 12. California Cooperative Liquid Assets Securities System (CLASS) California CLASS is a Joint Powers Authority investment pool that provides public agencies the opportunity to invest funds on a cooperative basis in rated pools that are managed in accordance with state law. Its primary objective is to offer participants safety, daily and next-day liquidity and optimized returns. The fund is an investment option and diversification tool for short-term and medium-term investments. Funds are available on demand with interest paid on a monthly basis.

Investments not specifically approved by this policy are prohibited.

DIVERSIFICATION REQUIREMENTS
The City of Porterville will diversify its investment portfolio in order to reduce exposure to risk by combining a variety of investments, limiting investment in securities with higher credit risks, investing in instruments with varying maturities, and continuously investing a portion of the portfolio in readily available funds to ensure that appropriate liquidity is maintained to meet ongoing obligations.

The City operates its investment pool with many State and self-imposed constraints. Government Code Section 53601 (et seq) restricts the City portfolio to:

1. 30% in Medium Term Notes, not to exceed 5 years in maturity;

2. 30% in Negotiable Certificates of Deposit, not to exceed 5 years in maturity;

3. 40% in Banker’s Acceptance Notes, not to exceed 180 days in maturity;

4. 25% in Commercial Paper, not to exceed 270 days in maturity; and

5. 50% in Placement Service Certificates of Deposit, not to exceed 5 years in maturity (On January 1, 2026, reverts back to 30% maximum percentage of the portfolio.) These restrictions primarily apply to short-term investments and are interpreted to apply at the time of investment. If, as the portfolio mix changes over time, a particular segment exceeds these restrictions, the prudent investor rule shall apply. The City does not buy stocks and it does not speculate. The City will be selective in purchasing medium-term notes, placing such an investment only with a large stable institution.

MATURITY OF INVESTMENTS
The City of Porterville will operate a portfolio with an average life of three years or less. This is to ensure liquidity and the ability to move with changing markets and interest rate movements.

Accordingly, no investments will be made in securities that have a final maturity greater than five years.

PERIODIC REPORTING
On a quarterly basis, the City Treasurer/Finance Director will issue a report of the City’s current investment portfolio, detailing securities, purchase and maturity date, face and market value, weighted average rate of earnings, weighted average days to maturity, and the percentage of liquid holdings. This report will also confirm that current portfolio holdings are in compliance with this policy and that the City’s cash needs will be met.

The monitoring of the conditions set forth in this policy statement is the responsibility of the City Treasurer/Finance Director or delegate.
8 INVESTMENT POLICY ADOPTION
The City’s investment policy shall be reviewed periodically by the City Council for consistency with the City’s overall investment objectives regarding preservation of principal, liquidity, return, and relevance to current law as well as to current financial and economic trends. Any modifications necessary must be approved by the City Council and the investment policy shall be adopted in its entirety by resolution of the City Council.

RESOLUTION NO. ____ - 2024

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PORTERVILLE

APPROVING THE STATEMENT OF INVESTMENT POLICY
WHEREAS: An investment policy serves as the foundation of a local agency’s investment goals and priorities and describes the parameters for investing government funds and identifies the investment objectives, preferences or tolerance for risk, constraints on the investment portfolio, and how the investment program will be managed and monitored; and WHEREAS: The California Government Code contains specific provisions regarding the types of investments and practices permitted which are intended to promote the use of reliable, diverse and safe investment instruments to better ensure a prudently managed portfolio worthy of public trust; and
WHEREAS: The Statement of Investment Policy has been developed to provide guidance in the cash, treasury and investment management functions of the City, reducing the exposure to liability and protect the assets of the City with those specific provisions of the California Government Code having been incorporated into the updated Statement of Investment Policy; NOW, THEREFORE, BE IT RESOLVED: That the City Council of the City of Porterville does hereby approve the Statement of Investment Policy, in the form attached hereto as Exhibit A.

PASSED, APPROVED AND ADOPTED this 5
th day of March, 2024.

Martha A Flores, Mayor
ATTEST:

Patrice Hildreth, City Clerk
By: ________________________
Fernando Gabriel-Moraga,
Acting Chief Deputy City Clerk

CALIFORNIA DEBT AND INVESTMENT ADVISORY COMMISSION
Update for 2024
Reflects state law changes
effective as of January 1, 2024
CDIAC 23.07

LOCAL AGENCY

INVESTMENT

GUIDELINES
California Debt and Investment
Advisory Commission
The California Debt and Investment Advisory Commission (CDIAC) provides information, education, and technical assistance on debt issuance and public fund investments to local agencies and public finance professionals. CDIAC also serves as the State’s clearinghouse for public debt issuance information.

FIONA MA, CPA
State Treasurer and Chair

GAVIN NEWSOM
Governor
MALIA M. COHEN
State Controller

DAVID ALVAREZ
Assemblymember

AVELINO VALENCIA
Assemblymember

SANDIE ARNOTT
Treasurer-Tax Collector
County of San Mateo

NIKOLAI SKLAROFF
Capital Finance Director
San Francisco Public Utilities Commission

ROBERT BERRY
Executive Director
Additional information concerning this report or CDIAC programs may be obtained by contacting CDIAC directly via phone (916) 653-3269, fax (916) 654- 7440, e-mail ([email protected]) or by visiting CDIAC’s website: www. treasurer.ca.gov/cdiac.

All rights reserved. No part of the Local Agency Investment Guidelines: Update for 2024 may be reproduced without giving written credit to CDIAC. Permission to reprint with written credit given to CDIAC is hereby granted.

Contents
ABOUT THE LOCAL AGENCY INVESTMENT GUIDELINES. . . . . . . . . . . . 1 SUMMARY OF CHANGES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 CHAPTER I. THE ANNUAL INVESTMENT POLICY. . . . . . . . . . . . . . . . . . . 5 A. Should local agencies produce an investment policy? Should the investment policy be presented to the local agency’s legislative body?. . . . . 5 B. When should the investment policy be reviewed and updated? How should the investment policy be rendered to the legislative body?. . . . . . . 6 C. What information should be included in the investment policy?. . . . . . . . 7 D. How is the limit on a political contribution determined when selecting brokers and dealers?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 E. What constraints can county pools place on voluntary depositors?. . . . . . 9 CHAPTER II. FUND MANAGEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 A. Which investments are permissible? Which are prohibited?. . . . . . . . . . . 11 B. What requirements must a financial institution satisfy before a local agency may deposit its money in it?. . . . . . . . . . . . . . . . . . 15 C. When must investments contained in a local agency
investment portfolio comply with state law?. . . . . . . . . . . . . . . . . . . . . . 16 D. What funds should a local agency use to calculate
portfolio concentration compliance with state law?. . . . . . . . . . . . . . . . . . . 17 E. Must bond proceeds be invested in the securities set forth in statute?. . . . . 19 F. How does the Municipal Advisor (MA) Rule
affect investment of bond proceeds?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 G. Are all U.S. Agency bonds legal investments
for California local agencies?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 H. What are supranational securities?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 I. Can a local agency invest in an investment
pool administered by another state?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 J. What are “medium-term notes”?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 K. Are bonds issued by departments and financing authorities of the State of California permissible investments for local agencies?. . . . . . . . . . 25 L. What are the rules regarding the use of reverse repurchase agreements and securities lending agreements? Are “shorting” strategies allowed?. . . . . 25 M. What are the rules regarding the use of mutual funds and money market funds? Are exchange-traded funds permissible investments?. . . . . 27 N. What are the rules affecting the investment of
tax and revenue anticipation note (TRAN) and
grant anticipation note (GAN) proceeds?. . . . . . . . . . . . . . . . . . . . . . . . 29 O. What is an appropriate safekeeping arrangement for securities?. . . . . . . . 29 P. How does the Municipal Advisor (MA) Rule affect a local agency’s relationship with an investment advisor?. . . . . . . . . . . . . . . . . . 30 Q. What are the rules regarding the payment of interest earned on non-general fund deposits to an agency's general fund?. . . . . . . . . . . 31 R. Should local agencies invest in financial futures and option contracts? If so, in what manner should they be utilized?. . . . . . . . . . . . . 32 S. How long should a local agency retain trade ticket information?. . . . . . . 33 CHAPTER III. REPORTING REQUIREMENTS. . . . . . . . . . . . . . . . . . . . . . 34 A. What specific information regarding portfolio investments needs to be included in the report to the legislative body?. . . . . . . . . . . . 35 B. Should the report include market value
measures for individual securities?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 How should the market value of the portfolio be determined?. . . . . . . . . 37 How frequently should market value be checked?. . . . . . . . . . . . . . . . . . 38 C. Should an analysis of cash flows be prepared by the local agency in order to validate the six-month liquidity certification?. . . . . . . . . . . . . 38 D. What tools can be used to measure interest rate risk?. . . . . . . . . . . . . . . . 40 E. What action should the legislative body take with the report?. . . . . . . . . 43 F. How should agencies address difficulties in meeting
the 45-day requirement for submitting quarterly
investment reports to the legislative body?. . . . . . . . . . . . . . . . . . . . . . . . 43 CHAPTER IV. TREASURY OVERSIGHT COMMITTEES. . . . . . . . . . . . . . . 45 A. What options are available for structuring
the county treasury oversight committee?. . . . . . . . . . . . . . . . . . . . . . . . 45 B. Does the appointment of the treasurer to the county
treasury oversight committee create a conflict of interest?. . . . . . . . . . . . 47 C. What is the role of the county treasury oversight committee?. . . . . . . . . 48 D. Should other local agencies have treasury oversight committees?. . . . . . . 48 CALIFORNIA GOVERNMENT CODE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 GLOSSARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116

INDEX OF STATUTORY CHANGES
EFFECTIVE 1996 TO PRESENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 INDEX. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138

FIGURES
FIGURE 1: Allowable Investment Instruments Per State
Government Code (as of January 1, 2024)–
Applicable to All Local Agencies. . . . . . . . . . . . . . . . . . . . . . . . . 13 FIGURE 2: Government Code Requirements for Local Agency Investment in Money Market and Mutual Funds. . . . . . . . . . . . 28 FIGURE 3: Calculation of Weighted Average Maturity. . . . . . . . . . . . . . . . . 41 FIGURE 4: Duration—Gain/Loss of Market Value Matrix
for a $1000,000,000 Portfolio. . . . . . . . . . . . . . . . . . . . . . . . . . . 42 FIGURE 5: Approaches to Establishing the County
Treasury Oversight Committee. . . . . . . . . . . . . . . . . . . . . . . . . . 47 LOCAL AGENCY INVESTMENT GUIDELINES 1
About the Local Agency
Investment Guidelines
The Local Agency Investment Guidelines is intended to aid local officials in their efforts to implement existing laws pertaining to the investment of public funds.

Each year, CDIAC staff convenes a working group of public- and private-sector professionals to support its efforts to revise and update these Guidelines.

THOSE PARTICIPATING IN THE 2024 GUIDELINES INCLUDE:
• Constantine Baranoff, Attorney, Lozano Smith
• Bill Blackwill, Managing Director, Stifel
• Deborah Higgins, President, Higgins Capital Management • John Johnson, Asst. Auditor-Controller/Treasurer/Tax Collector, San Bernardino County
• Carol Lew, Shareholder, Stradling, Yocca, Carlson & Rauth, P.C. • Philip Marr, Senior Portfolio Manager, City of Los Angeles • Kent Morris, MBA, CTP, Director of Treasury, Irvine Ranch Water District • Laura Parisi, CPA, CFIP, City Treasurer, City of Laguna Beach • Rick Phillips, CCM, Chief Investment Strategist, Meeder Public Funds • Monique Spyke, Managing Director, Head of California Practice, PFM Asset Management LLC
This document briefly describes each issue, offers an interpretation of the minimum compliance requirements, and provides consensus recommendations where the working group deemed them necessary. These interpretations represent the best judgment of CDIAC and the professionals involved and are intended only as a guide for local agencies in their compliance. Agencies should rely only on their legal counsel for legal advice.

The Local Agency Investment Guidelines: Update for 2024 reflects current investment statutes. It is divided into chapters on investment policy, fund management, reporting requirements, and the treasury oversight committee. Please note that an issue may not fit neatly into the following four chapters.

LOCAL AGENCY INVESTMENT GUIDELINES 2
Generally speaking, all local agencies are subject to the reporting, fund management, and investment policy requirements. Only county governments may be subject to the county oversight committee requirements. Any jurisdiction that assumes it is not covered by these provisions should seek legal counsel. California Government Code Section 53600 states:

As used in this article, “local agency” means a county, city, city and county, including a chartered city or county, school district, community college district, public district, county board of education, county superintendent of schools, or any public or municipal corporation.

LOCAL AGENCY INVESTMENT GUIDELINES 3
Summary of Changes
The 2024 Local Agency Investment Guidelines incorporates the following California statutory changes: Government Code Section 53601 and 27000.7.

STATUTORY CHANGES

LOCAL FUNDS
Chapter 187, Statutes of 2023 (SB 882), Local Government Omnibus Act of 2023, amended Government Code section 53601 to clarify limitations imposed on public investment in a privately issued mortgage passthrough security, collateralized mortgage obligation, mortgage-backed or other pay-through bond, equipment lease-backed certificate, consumer receivable passthrough certificate, or consumer receivable-backed bond (“mortgage pass–through and asset-backed securities”) that are not issued or guaranteed by a public agency or issuer identified in subdivision (b) or (f). These types of securities, issued by private companies, are permissible investments under subdivision (o) so long as they meet the following limitations: 1. rated in a rating category of “AA” or its equivalent or better; 2. have a maximum remaining maturity of five years or less; and, 3. do not exceed the 20% of the local agency’s portfolio (see Figure 1).

A provision of this bill also amended 27000.7 to eliminate one of the options for a person to demonstrate eligibility to be elected or appointed to the office of county treasurer, county tax collector, and county treasurer-tax collector. The option to possess a valid certificate issued by the Treasury Management Association showing the person to be designated a Certified Cash Manager, with a minimum of 16 college semester units, or their equivalent, in accounting, auditing, or finance, was eliminated.

This bill made additional changes to various legislative code sections not related to public debt issuance or public fund investments.

FEDERAL AND REGULATORY CHANGES
No changes.

LOCAL AGENCY INVESTMENT GUIDELINES 4

OTHER CHANGES
The 2024 Local Agency Investment Guidelines includes changes to Chapter II:

Fund Management:

New guidance has been added to Chapter 2, Fund Management, II.D. What funds should a local agency use to calculate portfolio concentration compliance with state law? [Section 53601], to help an agency determine what funds are available for investment and what funds to include when calculating portfolio concentration limitations.

Chapter 2, II.M. What are the rules regarding the use of mutual funds and money market funds? [Sections 53601(l) And 53601.6(b)] now includes statements regarding the impermissibility of exchange-traded funds (ETFs) for public investment portfolios.

Glossary. The term, LIBOR, has been updated and the term, SOFR, has been added to the glossary.

All references to statutory code "sections" throughout this document shall refer to California Government Code unless otherwise stated.

LOCAL AGENCY INVESTMENT GUIDELINES 5
Chapter I. The Annual Investment Policy
A good investment policy encompasses the cash, treasury, and investment management functions of an agency. It serves as a guide for setting and achieving program objectives, defines rules and establishes benchmarks, and reduces the exposure to liability of both the investment staff and the governing board. It is also important to note that rating agencies pay close attention to an agency’s investment policy and portfolio in determining its credit rating.

From this point forward, all references to the word “section” refers to the California Government Code unless otherwise stated.

I. A Should local agencies produce an investment policy? Should the investment policy be presented to the local
agency’s legislative body? [Section 53646(a)]1
The investment policy serves as the foundation of a local agency’s investment goals and priorities. If the investment policy is carefully researched, effectively drafted, and reviewed regularly to assure that it continues to meet the agency’s goals/priorities for its portfolio, it can help protect the assets of the organization.

The existence of an approved investment policy demonstrates that the governing body is performing its fiduciary responsibilities, thereby, inspiring trust and confidence among the public that it serves.

MINIMUM LEGAL REQUIREMENTS:

Section 53646(a)(1) states that the treasurer of a county government may annually render to their board of supervisors and oversight committee an investment policy, which the board shall review and approve at a public meeting. In addition, the board shall review and approve any changes to the investment policy at a public meeting.

Section 53646(a)(2) states that the treasurer or chief fiscal officer of any other local agency may annually render to their legislative body and any oversight committee an investment policy, that the legislative body shall consider at a public 1 All statutory references are to the California Government Code unless otherwise noted.

LOCAL AGENCY INVESTMENT GUIDELINES 6
meeting. This raises questions about whether or not the policy should be adopted officially by the legislative body, and the time during the year that this “consideration” should take place.

CONSENSUS RECOMMENDATION:

An investment policy should always be in place. While not required by statute, it is in the best interest of the local agency to present and discuss the policy with the agency’s legislative body or oversight committee, and then have the policy approved by a vote of the legislative body. A public vote signifies that the legislative body shares fiduciary responsibility with the treasurer, increases the authority and legitimacy of the investment policy, and provides transparency and disclosure.

I. B When should the investment policy be reviewed and
updated? How should the investment policy be rendered
to the legislative body? [Section 53646(a)]
The size and complexity of the investment policy, portfolio, agency and the agency’s staff are factors that may affect the frequency of the investment policy review and revision.

MINIMUM LEGAL REQUIREMENT:

Section 53646(a) provides that if an investment policy is submitted to the local agency’s legislative body, it must be an agenda item at a public meeting. If submitted to a county board of supervisors, the board is required to review and approve the investment policy and any changes to it at the public meeting. The statute does not place the same specific approval requirements on other local agencies, but it does require consideration. The statute does not specify, however, when during the year that consideration or approval should occur.

CONSENSUS RECOMMENDATION:

Both the Association of Public Treasurers of the United States & Canada and the Government Finance Officers Association have established policy standards that recommend investment policies be reviewed annually. At a minimum, the internal treasury staff should conduct a review annually. Ideally, the review should be timed to coincide with the end of the state legislative cycle so that consideration may be given to any changes in statute that may impact the agency’s policy.

An update in the investment policy is warranted if treasury staff’s review results in a material change in policy due to either a change in statute or a change in the agency’s goals and objectives for safety, liquidity and yield. A change in statute, however, may not necessarily require a change in the policy. Many agencies’ policies are already more restrictive than statute. Likewise, an agency may choose to update its policy to restrict the purchase of a new investment product that is allowable by statute but that the agency deems to be too risky for its investment portfolio.

LOCAL AGENCY INVESTMENT GUIDELINES 7
Although rendering the investment policy to the legislative body or oversight committee is not required, it is highly recommended. If it is done, it should be done annually, on an established schedule, such as after the annual review and update.

For newly-elected legislative body members, election terms may not coincide with the investment policy review. But, because of the fiduciary responsibility of the legislative body, any newly-elected members should be made aware of the existence of the investment policy and its contents as soon as possible.

I. C What information should be included in the
investment policy? [Section 27133]
MINIMUM LEGAL REQUIREMENTS:

Except for county governments, the California Government Code does not contain any provisions specifying what must be included in the investment policy of a local agency. Section 27133 provides that county investment policies must contain:
• A list of securities or other instruments in which the county treasury may invest, according to
the law, including the maximum
percentage by type of security,
and the maximum term of any
security purchased;
• The manner of calculating and
apportioning the authorized costs
of investing, depositing, banking,
auditing, reporting, handling, and
managing of funds;
• Limits on the receipt of honoraria,
gifts, and gratuities for county
treasury oversight members from
advisors, brokers, dealers, bankers,
or other persons with whom the
county treasury conducts business;
• Criteria for selecting brokers and
dealers (including prohibitions
against selecting any broker, dealer,
or security firm within any consecutive 48-month period of making a campaign contribution exceeding
the limitations contained in Rule
G-37 of the Municipal Securities
Rulemaking Board);
• A requirement that the treasurer
provide the county treasury
oversight committee with an
investment report as required
by the Board of Supervisors;
• Terms and conditions under
which other local agencies that are
not required to deposit funds may
deposit funds in the county treasury if they so choose; and • Criteria for considering requests
to withdraw funds from the
county treasury.

LOCAL AGENCY INVESTMENT GUIDELINES 8
I. D How is the limit on a political contribution
determined when selecting brokers and dealers?
[Section 27133 (c) and MSRB Rule G-37]
The county treasury shall not select brokers and dealers who individually, or as a firm, have contributed more than the current limit established under Municipal Securities Regulatory Board (MSRB) Rule G-37.

MINIMUM LEGAL REQUIREMENT:

The county treasury is prohibited from selecting those brokers, brokerage firms, dealers, or securities firms having made political contributions within the last four years, which exceed the amount set forth in MSRB Rule G-37. For 2024, the limit is $250. This limit applies to the local treasurer, any member of the governing board of the local agency, or any candidate for those offices.

In addition to the provisions outlined in Section 27133 and MSRB Rule G-37, local agencies, the state, and the Fair Political Practices Commission (FPPC) may adopt additional standards on acceptable political contribution limits. For reference, the local treasurer, any member of the governing board of the local agency, and treasury staff are required to report any gift of $50 or more on his or her annual Form 700 submission to the FPPC.

The last two of the above elements directly refer to the duties counties have in maintaining a local government investment pool.

CONSENSUS RECOMMENDATION:

Although statute does not specify the contents of the investment policy for local agencies other than counties, it should include at a minimum, the first five elements required of counties. In addition, the policy should specify the funds to which the policy will and will not apply. For instance, bond proceeds are usually guided by the bond documents and thus, may not be a part of the investment policy. Similarly, pension funds are guided by other code sections and may have different investment objectives.

The Association of Public Treasurers of the United States & Canada offers an Investment Policy Program that provides public investors with guidance and technical assistance in developing a comprehensive written investment policy at www.aptusc.org. The California Municipal Treasurers Association (CMTA) has sample investment policies that were certified through CMTA's Investment Policy Certification Program. Additional sources for recommended elements of an investment policy can be found in CDIAC’s California Public Fund Investment Primer and Investment Policy Reporting Practices: An Informative Guide, and the Government Investment Officers Association’s Investment Policy Certification Program and Application.

LOCAL AGENCY INVESTMENT GUIDELINES 9
CONSENSUS RECOMMENDATION:

All treasury staff should be knowledgeable of the specific state and local laws and ordinances governing their receipt of political contributions, gifts, and honoraria.

Although the MSRB Rule G-37 applies to the local treasurer and the governing board of the local agency, treasury staff are likely subject to additional rules set forth by the FPPC and the local agency. If there is no policy on the receipt of political contributions, gifts, or honoraria at the local agency level, establish one and educate all agency employees who affect treasury decisions.

I. E What constraints can county pools place on
voluntary depositors? [Section 27133(g)]
County treasurers have difficulty predicting withdrawals of voluntary funds made by pool participants. As a result, questions commonly arise regarding how county pools should treat funds from voluntary depositors. In the absence of information on a depositor’s cash flow, an unanticipated withdrawal can create potential liquidity problems for the pool.

MINIMUM LEGAL REQUIREMENT:

State law does not require county pools to accept voluntary deposits.

CONSENSUS RECOMMENDATION:

Allow voluntary deposits only under a clearly written contract or memorandum of understanding. This agreement should spell out the exact rules for participating in the pool and provide the county treasurer with reasonable predefined discretion to establish the frequency and amount of voluntary funds that can be removed from the pool at a particular time. Another option is to ban voluntary deposits altogether if the county has confidence that other local agencies have reasonable investment alternatives.

LOCAL AGENCY INVESTMENT GUIDELINES 10
Chapter II. Fund Management
For the investment of county funds in a county treasury, Section 27000.3 establishes the Board of Supervisors as a fiduciary that is subject to the prudent investor standard unless it delegates its investment duties to the county treasurer. For other local agencies’ funds invested in the county treasury, the county treasurer serves as a fiduciary and is subject to the prudent investor standard.

Except as provided for in Section 27000.3, Section 53600.3 declares as a trustee each person, treasurer, or governing body authorized to make investment decisions on behalf of local agencies. As trustees these individuals are subject to the prudent investor standard. That is, they shall act with care, skill, prudence, and diligence under the circumstances then prevailing when investing, reinvesting, purchasing, acquiring, exchanging, selling, and managing funds. Section 53600.5 further stipulates that the objectives of any person investing public funds is to, first, safeguard principal; second, to meet the liquidity needs of the depositor; and lastly, to achieve a return or yield on the funds under its control (Section 27000.5 specifies the same objectives for county treasurers and boards of supervisors).

Risk is inherent throughout the investment process. There is investment risk associated with any investment activity and opportunity risk related to inactivity.

Market risk is derived from exposure to overall changes in the general level of interest rates while credit risk is the risk of loss due to the failure of the issuer of a security. The market value of a security varies inversely with the level of interest rates. If an investor is required to sell an investment with a 5% yield in a comparable 7% rate environment, that security will be sold at a loss. The magnitude of that loss will depend on the amount of time until maturity.

Purchasing certain allowable securities with a maturity of greater than five years from the settlement date, requires approval of the governing board (see Section 53601). Part of that approval process involves assessing and disclosing the risk and possible volatility associated with longer-term investments.

Another element of risk is liquidity risk. Instruments with extraordinary or special call features, sinking fund redemption structures, or those issued by little known issuers, are examples of “story bonds” and often are thinly traded. Their uniqueness often makes finding prospective buyers in a secondary market more difficult and, consequently, the securities’ marketability and prices may be dis- LOCAL AGENCY INVESTMENT GUIDELINES 11
counted. However, under certain market conditions, gains may also be possible with these types of securities.

Default risk represents the possibility that the borrower may be unable to repay the obligation as scheduled. Generally, securities issued by the federal government and its agencies are considered the most secure, while securities issued by private corporations, or negotiable certificates of deposit issued by commercial banks have a greater degree of risk. Securities with additional credit enhancements, such as bankers’ acceptances, collateralized repurchase agreements, and collateralized bank deposits, are somewhere between the two on the risk spectrum.

The vast majority of local agency portfolios are managed with a buy and hold investment strategy. Investments are purchased with the intent and capacity to hold them until maturity. At times, market forces or operations may dictate exchanging one security for another or selling a security before maturity. Continuous analysis and fine tuning of the investment portfolio are considered part of prudent investment management. This passive investment strategy is different from one in which securities are purchased with the intent to sell them before maturity at a profit or the use of leverage to enhance yield.

California Government Code contains specific provisions regarding the types of investments and practices permitted after considering the broad requirement of preserving principal and maintaining liquidity before seeking yield. These provisions are intended to promote the use of reliable, diverse, and safe investment instruments to better ensure a prudently managed portfolio worthy of public trust.

II. A Which investments are permissible? Which are prohibited? [Sections 16340, 16429.1, 27133, 53601, 53601.6, 53601.8, 53635, 53635.2, 53635.8, 53638, 53684, and 57603]
MINIMUM LEGAL REQUIREMENT:

Local agencies may invest only in those instruments specified in State law.

Sections 16340, 16429.1, 27133, 53601, 53601.6, 53601.8, 53635, 53635.2, 53635.8, 53638, 53684, and 57603 include a number of requirements on how and where public money may be invested. Figure 1 provides a synopsis of the permitted investment instruments and limitations on each, in which all local agencies may invest.

Section 53601 places limits on permissible securities. A five-year maximum maturity applies to all permissible securities unless otherwise stated in the code. A permissible security may exceed this limitation only if the legislative body has approved the investment either specifically or as a part of an investment program no less than three months prior to the investment. A permis- LOCAL AGENCY INVESTMENT GUIDELINES 12
sible investment’s term or remaining maturity is to be measured from the investment’s settlement date to final maturity. Any forward settlement that exceeds 45 days from the time of investment is prohibited.

Prohibited investments include securities not listed in Figure 1, as well as inverse floaters, range notes, and interest only strips derived from a pool of mortgages. This restriction does not apply to local agency investments in shares of beneficial interest issued by diversified management companies registered under the Investment Company Act of 1940 that are authorized for investment pursuant to subdivision (l) of Government Code Section 53601. Section 53601.6(b) prohibits investment by a local agency in any security that could result in a zero-interest accrual if held to maturity. However, beginning January 1, 2020, Section 53601.6(b), as amended by the Legislature, authorized local agencies to invest in securities issued by, or backed by the United States government that could result in zero- or negative-interest accrual if held to maturity, in the event of, and for the duration of, a period of negative market interest rates. A local agency may hold these instruments until their maturity date. This limited code exception allows local agencies the option of buying and holding onto zero- or negative-interest accrual United States government securities, if it would preserve more principal. This provision will sunset January 1, 2026.

Section 53601 provides that public agencies may invest in bonds issued by the local agency itself, but IRS rules may not support maintenance of the tax-exempt status. In 2008, the Legislature added Section 5925 to clarify that the purchase of bonds by the local agency that issued the bonds does not cancel, defease, or otherwise affect the bonds. With the addition of Section 5925 the repurchased or acquired bonds may be treated as outstanding bonds under state law to the extent provided by the issuer or the documents defining the rights of the bondholders. However, IRS rules that supported the maintenance of the tax-exempt status upon a purchase by a municipal issuer of its own debt sunset in 2010.

In 2019, the Legislature added Section 57600 et seq. authorizing local agencies to form a public bank. Furthermore, under 57603, local agencies that do not pool money in deposits or investments with other local agencies that have separate governing bodies as well as local agencies that pool money in deposits or investments with other local agencies, including local agencies that have the same governing body, are permitted to invest in debt securities or other obligations of a public bank.

CONSENSUS RECOMMENDATION:

Local agencies should include the list of permissible securities in the investment policy and modify the list to meet its unique needs. These modifications may include additional restrictions on the type and amount of specific authorized securities to reflect current federal tax and securities regulations and an agency’s risk tolerance.

The addition of Section Code 5925 authorizing state and local agencies to purchase their own bonds was intended to be complementary to Internal Revenue Service (IRS) Notice 2008-41 and 2008-88 that allowed municipal issuers to temporarily hold certain types of their own tax-exempt debt without extinguish- LOCAL AGENCY INVESTMENT GUIDELINES 13

INVESTMENT
TYPE

MAXIMUM

MATURITYC

MAXIMUM

SPECIFIED
% OF

PORTFOLIOD

MINIMUM

QUALITY

REQUIREMENTS
GOV'T
CODE

SECTIONS
Local Agency Bonds 5 years None None 53601(a)
U.S. Treasury Obligations 5 years None None 53601(b)
State Obligations—
CA And Others 5 years None None 53601(c)53601(d)
CA Local Agency Obligations 5 years None None 53601(e)
U.S Agency Obligations 5 years None None 53601(f)
Bankers’ Acceptances 180 days 40%E None 53601(g)
Commercial Paper—Non-Pooled FundsF
(under $100,000,000 of investments)
270 days
or less
25% of the
agency’s moneyG
Highest letter and
number rating by an
NRSROH
53601(h)(2)(c)
Commercial Paper—Non-Pooled FundsI
(min. $100,000,000 of investments)
270 days
or less
40% of the
agency’s moneyG
Highest letter and
number rating by an
NRSROH
53601(h)(2)(c)
Commercial Paper—
Pooled FundsJ
270 days
or less
40% of the
agency’s moneyG
Highest letter and
number rating by an
NRSROH
53635(a)(1)
Negotiable Certificates of Deposit 5 years 30%K None 53601(i) Non-negotiable Certificates of Deposit 5 years None None 53630 et seq.

Placement Service
Deposits 5 years 50%L None 53601.8 and 53635.8
Placement Service
Certificates of Deposit 5 years 50%L None 53601.8 and 53635.8 Repurchase Agreements 1 year None None 53601(j)
Reverse Repurchase Agreements and
Securities Lending Agreements 92 daysM 20% of the base
value of the portfolio NoneN 53601(j)
Medium-Term NotesO 5 years
or less 30% “A” rating category or its equivalent or better 53601(k) Mutual Funds And Money
Market Mutual Funds N/A 20%P MultipleQ, R 53601(l) and
53601.6(b)
Collateralized Bank DepositsS 5 years None None 53630 et seq. and 53601(n)
Mortgage Pass–Through and
Asset–Backed SecuritiesT
5 years
or lessT 20% “AA” rating category or
its equivalent or betterT 53601(o)
County Pooled
Investment Funds N/A None None 27133
Joint Powers Authority Pool N/A None MultipleU 53601(p) Local Agency Investment Fund (LAIF) N/A None None 16429.1 Voluntary Investment Program FundV N/A None None 16340
Supranational ObligationsW 5 years
or less 30% “AA” rating category or
its equivalent or better 53601(q)
Public Bank Obligations 5 years None None 53601(r), 53635(c) and 57603
FIGURE 1

ALLOWABLE INVESTMENT INSTRUMENTS PER STATE GOVERNMENT
CODE (AS OF JANUARY 1, 2024)A APPLICABLE TO ALL LOCAL AGENCIESB See “Table of Notes for Figure 1” on the next page for footnotes related to this figure. 14 A Sources: Sections 16340, 16429.1, 27133, 53601,
53601.6, 53601.8, 53630 et seq., 53635, 53635.8,
and 57603.

B Municipal Utilities Districts have the authority under the Public Utilities Code Section 12871 to invest in
certain securities not addressed here.

C Section 53601 provides that the maximum term of
any investment authorized under this section, unless
otherwise stated, is five years from the settlement
date. However, the legislative body may grant express
authority to make investments either specifically or
as a part of an investment program approved by the
legislative body that exceeds this five year remain-
ing maturity limit. Such approval must be issued no
less than three months prior to the purchase of any
security exceeding the five-year maturity limit.

D Percentages apply to all portfolio investments regardless of source of funds. For instance, cash from a reverse repurchase agreement would be subject to
the restrictions.

E No more than 30% of the agency’s money may be in
bankers’ acceptances of any one commercial bank.

F Applies to local agencies, other than counties or a
city and county, with less than $100 million of investment assets under management. Includes agencies defined as a city, a district, or other local agency that do not pool money in deposits or investment with
other local agencies, other than local agencies that
have the same governing body.

G Local agencies, other than counties or a city and
county, may purchase no more than 10% of the outstanding commercial paper and medium-term notes of any single issuer.

H Issuing corporation must be organized and operating
within the U.S., have assets in excess of $500 million, and debt other than commercial paper must be in a
rating category of "A" or its equivalent or higher by a na- tionally recognized statistical rating organization, or the issuing corporation must be organized within the U.S.
as a special purpose corporation, trust, or LLC, have
program wide credit enhancements, and have commercial paper that is rated “A-1” or higher, or the equivalent, by a nationally recognized statistical rating organization.

I Applies to counties or a city and county, and the City of Los Angeles that have $100 million or more of
investment assets under management.

J Includes agencies defined as a county, a city and
county, or other local agency that pools money in
deposits or investments with other local agencies,
including local agencies that have the same govern-
ing body. Local agencies that pool exclusively with
other local agencies that have the same governing
body must adhere to the limits set forth in Section
53601(h)(2)(C).

K No more than 30% of the agency’s money may be in
negotiable certificates of deposit that are authorized
under Section 53601(i).

L Effective January 1, 2020, no more than 50% of
the agency’s money may be invested in deposits,
including certificates of deposit, through a place-
ment service as authorized under 53601.8 (excludes
negotiable certificates of deposit authorized under
Section 53601(i)). On January 1, 2026, the maximum
percentage of the portfolio reverts back to 30%. In-
vestments made pursuant to 53635.8 remain subject
to a maximum of 30% of the portfolio.

M Reverse repurchase agreements or securities lending
agreements may exceed the 92-day term if the agree-
ment includes a written codicil guaranteeing a minimum earning or spread for the entire period between the sale of a security using a reverse repurchase
agreement or securities lending agreement and the
final maturity dates of the same security.

N Reverse repurchase agreements must be made with
primary dealers of the Federal Reserve Bank of New
York or with a nationally or state chartered bank that
has a significant relationship with the local agency.

The local agency must have held the securities used
for the agreements for at least 30 days.

O “Medium-term notes” are defined in Section 53601 as
“all corporate and depository institution debt securities with a maximum remaining maturity of five years or
less, issued by corporations organized and operating
within the United States or by depository institutions
licensed by the United States or any state and operating within the United States.” P No more than 10% invested in any one mutual fund.

This limitation does not apply to money market
mutual funds.

Q A mutual fund must receive the highest ranking by not less than two nationally recognized rating agencies
or the fund must retain an investment advisor who is
registered with the SEC (or exempt from registration),
has assets under management in excess of $500 million, and has at least five years' experience investing in instruments authorized by Sections 53601 and 53635.

R A money market mutual fund must receive the highest
ranking by not less than two nationally recognized
statistical rating organizations or retain an investment advisor registered with the SEC or exempt from reg-
istration and who has not less than five years' experience investing in money market instruments with assets under management in excess of $500 million.

S Investments in notes, bonds, or other obligations
under Section 53601(n) require that collateral be
placed into the custody of a trust company or the trust department of a bank that is not affiliated with the
issuer of the secured obligation, among other specific
collateral requirements.

T Security types authorized under Section 53601(o)
that are issued or guaranteed by an issuer identified
in subdivisions (b) or (f), are not subject to the limita- tions placed on privately issued securities authorized
in Section 53601(o)(2)(A)(B).

U A joint powers authority pool must retain an investment advisor who is registered with the SEC (or exempt from registration), has assets under manage-
ment in excess of $500 million, and has at least five
years' experience investing in instruments authorized
by Section 53601, subdivisions (a) to (o).

V Local entities can deposit between $200 million and
$10 billion into the Voluntary Investment Program
Fund, upon approval by their governing bodies.

Deposits in the fund will be invested in the Pooled
Money Investment Account.

W Only those obligations issued or unconditionally
guaranteed by the International Bank for Reconstruc-
tion and Development (IBRD), International Finance
Corporation (IFC), and Inter-American Development
Bank (IADB), with a maximum remaining maturity of
five years or less.

TABLE OF NOTES FOR FIGURE 1
LOCAL AGENCY INVESTMENT GUIDELINES 15
II. B What requirements must a financial
institution satisfy before a local agency
may deposit its money in it? [Section 53635.2]
Section 53635.2 states that all local agency money may be invested in investments set forth in 53601 or deposited for safekeeping in state or national banks, public banks, savings associations, federal associations, credit unions, or federally insured industrial loan companies in this state. It also specifies certain requirements that such financial institutions must satisfy to hold local agency money.

MINIMUM LEGAL REQUIREMENT:

To be eligible to receive local agency money, a financial institution must receive an overall rating of not less than “satisfactory” from the appropriate federal supervisory agency for meeting the criteria specified in Section 2906 of Title 12 of the U.S. Code (Community Reinvestment Act of 1977). The Community Reinvestment Act of 1977 (Act) requires financial institutions to demonstrate their commitment to meet2 Refer to CDIAC publication Issue Brief: Rule 144A Securities for a summary of securities in this class. ment or loss of tax-exempt status. However, these IRS provisions were meant to be temporary and sunset on December 31, 2010, with some remaining exceptions for certain variable rate debt subject to a qualified tender. Given the incongruity between Section 5925 and IRS rules, a local agency should seek legal guidance on the potential tax implications of purchasing its own debt especially if that debt does not clearly fall within the remaining IRS exceptions.

As a result of amendments to Government Code Sections 53601.8 and 53635.8, local agencies should review portfolio limitations for CDs and negotiable CDs in their investment policies.

Some investments, such as straight floaters or floating rate notes that are not otherwise prohibited, have the potential to result in zero-interest accrual. Before purchasing these types of investments, the local agency should evaluate all possible outcomes, and, as a safeguard, should consider including in its investment policy a statement establishing an acceptable positive spread or floor for all securities, which pay interest based on a spread to an index.

Also, while not expressly prohibited by State law, unregistered securities, such as Rule 144A securities, may not be purchased by local agencies that do not meet the threshold of $5 million investments and $100 million in securities. On August 26, 2020 the Securities and Exchange Commission expanded the definition of Qualified Institutional Buyers (QIB)2 to include any institution that qualifies as an accredited investor under Rule 501(a) under the Securities Act that are not otherwise stated in the definition of “qualified institutional buyer” provided they satisfy the $100 million threshold.

LOCAL AGENCY INVESTMENT GUIDELINES 16
II. C When must investments contained in a
local agency investment portfolio comply
with state law? [Section 53601]
California Government Code provides a description of the types of instruments permissible for local agency investment and specifies the timing of compliance with state law. Questions arise concerning the timing of any test of compliance with these requirements.

MINIMUM LEGAL REQUIREMENT:

Where Section 53601 specifies a percentage restriction on a certain category of investment, this share of the investment portfolio must be in compliance with state law at the time that investment is purchased. The law does not specify that the entire portfolio must be in compliance when new instruments are purchased. It also does not require “rebalancing” when subsequent maturities, sales, withdrawals, or similar non-purchase activities result in the remaining portfolio having one or more of the categories of investment rise above the percentage restrictions applicable at the time of purchase.

CONSENSUS RECOMMENDATION:

A local agency should contact the appropriate federal supervisory agency to determine if its financial institution meets the overall rating requirement.

Local agencies should be aware that in some instances ratings from federal supervisory agencies may not be current, as financial institutions are evaluated only every year or two. Additional inquiry may be necessary to obtain updated information if the last published rating is more than one year old. • The Comptroller of the Currency
with respect to national banks;
• The Board of Governors of the Federal Reserve System with respect to state chartered banks that are members of the Federal Reserve system and bank holding companies;
• The Federal Deposit Insurance
Corporation (FDIC) with respect
to state chartered banks, public
banks, and savings banks that are
not members of the Federal Reserve
system and the deposits of which
are insured by the FDIC; and
• The Director of Office of Thrift
Supervision with respect to savings
associations (the deposits of which
are insured by the FDIC) and savings holding companies. ing the credit needs of local communities in which they are chartered to do business.

For the purpose of the Act, the appropriate federal supervisory agency includes:

LOCAL AGENCY INVESTMENT GUIDELINES 17
II. D What funds should a local agency use to calculate portfolio concentration compliance with state law? [Section 53601] California Government Code provides a description of the types of instruments permissible for local agency investment and specifies the timing of compliance with state law. Questions arise about how to determine what local agency funds are available for investment, as well as what funds to include when calculating portfolio concentration for those permissible investments that are limited by state law.

MINIMUM LEGAL REQUIREMENT:

Section 53601 states that, “The legislative body of a local agency having moneys in a sinking fund or moneys in its treasury not required for the immediate needs of the local agency may invest any portion of the moneys that it deems wise or expedient in those investments set forth below” [Section 53601(a) through (r)].

Statute establishes portfolio concentration limitations for certain permissible investments; however, it does not specify the calculation methods for calculating these limitations at the time of investment.

CONSENSUS RECOMMENDATION:

Terms such as “base value”, “moneys”, “agency’s moneys”, or “agency’s surplus moneys” used when describing a portfolio limitation for a specific permissible investment in Section 53601 are referring to the agency’s determination of funds available for investment (as defined above in Minimum Legal Requirement). The determination as to whether to include certain agency funds, such as funds in an Where Section 53601 clarifies that the settlement date is to be used to measure final maturity, it does not change the date of purchase. To determine when an investment portfolio must be in compliance with state law, the date of purchase must be used, despite the length of maturity starting from the settlement date.

When local agencies purchase securities, the date of purchase and the date the purchase is settled may not always be the same.

CONSENSUS RECOMMENDATION:

In the event the portfolio or individual investments are deemed to be out of compliance with either statute or the investment policy, the local agency should have procedural guidelines in place that outline actions to take under various scenarios. Due to its fiduciary responsibility, early communication with and involvement of the legislative body concerning a major or critical event is of utmost importance. Therefore, the procedural guidelines should identify circumstances under which communication and discussion of the treasurer’s analysis and recommended course of action to the legislative body or oversight committee is warranted.

LOCAL AGENCY INVESTMENT GUIDELINES 18
Although the statute does not specify how an agency’s portfolio should be calculated at the time of investment, local agencies should consider its cash flow needs each time it considers purchasing securities to determine the available amount of moneys in its treasury not required for the immediate needs of the local agency. A cash flow analysis is intended to help an agency understand and, to the extent possible, control the organization’s cash resources. The goal is to ensure that cash is available to pay expenditures when needed and that temporarily unneeded cash can be invested optimally to maximize earnings on invested funds.3 When calculating portfolio compliance, it is recommended that the agency value its portfolio based on book value rather than market value. The book value of investments along with the agency’s funds available for investment should be used for portfolio compliance calculations. Percentages apply to all portfolio investments regardless of source of funds. agency checking account, as part of the funds available for investment should rely on agency practices. For example, if the agency uses funds in its checking account for the immediate, day-to-day needs of the agency, it is recommended to not include the funds in the checking account when calculating portfolio compliance.

A determination of funds available for investment under Section 53601 may vary agency to agency but generally are those accounted for in a local agency’s annual financial report. It is recommended that a local agency’s investment policy should specify the funds to which the policy will and will not apply. See Chapter 1, I.C.

What information should be included in the investment policy? ([Section 27133]).

Examples of moneys that can be available to invest under 53601 by local agency type:

CITIES/DISTRICTS
• General funds
• Reserve funds
• Bond Proceeds funds
• Debt Service funds
• Excess Enterprise funds

COUNTIES
• General funds
• Reserve funds
• Bond Proceeds funds
• Debt Service funds
• Excess Enterprise funds
• Voluntary Pool funds
3 Refer to CDIAC publication California Public Fund Investment Primer for more information on the purpose of cashflow forecasts.

LOCAL AGENCY INVESTMENT GUIDELINES 19
II. E Must bond proceeds be invested in the securities
set forth in statute? [Section 53601(m)]
Section 53601(m) allows greater flexibility with respect to the types of investments that may be made with bond proceeds. Specifically, the law permits money from bond proceeds, obligations under a lease, installment sales, or other agreements of a local agency to be invested in any security that meets the statutory provisions governing the issuance of the bond or other agreements made by the issuing agency. In so doing, this section of the code recognizes that outstanding contracts between issuers and bond holders may not comply with the investment statutes and gives local agencies greater discretion in how to invest bond proceeds.

MINIMUM LEGAL REQUIREMENT:

Bond proceeds may be invested in accordance with statutes or they may be invested in alternative vehicles if authorized by bond documents.

CONSENSUS RECOMMENDATION:

The agency’s investment policy should either require that bond proceeds be invested in accordance with statutes, reference applicable bond documents (such as, the indenture or rating agency requirements), or specify the types of investments authorized for bond proceeds. Bond proceeds may be invested in instruments with maturities longer than five years. Applying the five-year maturity limitation found in statute may result in less yield. When investing bond proceeds, maturities should match the cash flow needs of the project or fund.

As a part of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Pub. L. 111-203) (Dodd-Frank Act), the Securities and Exchange Commission (SEC) enacted regulations addressing the apparent conflict of interest between municipal bond underwriters providing both underwriting and advice on the investment of bond proceeds for the same debt issue. These regulations were incorporated in the Municipal Advisor Rule (MA Rule). The MA Rule states that broker-dealers providing advice to government clients have a fiduciary duty to their clients and must be registered as a municipal advisor. In order to avoid becoming a fiduciary to municipal issuers, many broker-dealers, who have a significant municipal underwriting business, have adopted policies prohibiting brokers from providing investment advice. The MA Rule provides II. F How does the Municipal Advisor (MA) Rule
affect investment of bond proceeds?
LOCAL AGENCY INVESTMENT GUIDELINES 20
specific exemptions to public agencies seeking to receive investment advice from broker-dealers, including receiving advice through a request for proposal (RFP) process or by entering into a formal relationship with an independent registered municipal advisor for advice.

MINIMUM LEGAL REQUIREMENT:

The MA Rule places no legal obligations on public agencies. The regulations address only the responsibilities of broker-dealers with respect to the bond proceeds.

CONSENSUS RECOMMENDATION:

Although the MA Rule does not specifically regulate the investment of bond proceeds by a local agency, it has materially affected the investment processes of many agencies. For example, treasury staff may have to adopt procedures, including the use of a mini-RFP that would exempt their brokers-dealer from being defined as a fiduciary. Local agency treasury staff should understand the MA Rule and its exemptions; have knowledge of the limitations of their broker-dealer firms as a result of the MA Rule; and address the MA Rule by adopting a policy regarding the investment of bond proceeds. Visit CDIAC’s Municipal Advisor Rule webpage for more information.

There has been a lot of discussion about the risk profile of certain products and derivatives issued by U.S. Agencies and U.S. government sponsored enterprises (GSEs). These Agencies and GSEs issue both traditional fixed-income securities (notes and bonds) as well as more complex, structured products including customized mortgage- and asset-backed securities and derivatives.4 The State’s investment laws, however, place no restrictions on these types of investments other than the prohibitions against inverse floaters, range notes, and interest-only strips derived from mortgage pools. Until January 1, 2026, local agencies are authorized to invest in securities, issued by, or backed by, the United States government that could result in zero- or negative-interest accrual if held to maturity, in the event of, and for the duration of, a period of negative market interest rates. A local agency may hold these instruments until their maturity dates.

II. G Are all U.S. Agency bonds legal investments for California local agencies? [Sections 53601(f) and 53601.6]
4 Refer to CDIAC publication Issue Brief Securitized Investments for a discussion of mortgage pass-through obligations and asset-backed securities.

LOCAL AGENCY INVESTMENT GUIDELINES 21
5 SLMA (Sallie Mae) terminated its ties to the federal government in 2004; bonds issued prior to 2005 are GSE debt; bonds issued in 2005 and after are corporate debt issued by the SLM Corporation.

In recent years, some GSE debt has been privatized and is now structured like corporate debt yet still falls under the limits of 53601(f) and 53601.6. The most commonly traded GSE debt includes that from the Federal Home Loan Bank (FHLB), Federal Farm Credit Bank (FFCB), Federal Home Loan Mortgage Corporation (Freddie Mac), Federal National Mortgage Association (Fannie Mae) and Federal Agricultural Mortgage Corporation (Farmer Mac). Other less common GSEs include Government National Mortgage Association (Ginnie Mae), Community Development Corporation (CDC), Student Loan Marketing Association (Sallie Mae)5 , Small Business Administration (SBA), Overseas Private Investment Corporation (OPIC), and Tennessee Valley Authority (TVA).

MINIMUM LEGAL REQUIREMENT:

Obligations, including bonds, notes, certificates of participation, or other instruments issued as U.S. Agencies or GSE debt are permissible investments under Section 53601(f). These investments are, however, subject to the prohibition against inverse floaters, range notes, and interest-only strips derived from a pool of mortgages in Section 53601.6. Until January 1, 2026, local agencies are authorized to invest in securities, issued by, or backed by, the United States government that could result in zero- or negative-interest accrual if held to maturity, in the event of, and for the duration of, a period of negative market interest rates. A local agency may hold these instruments until their maturity dates.

CONSENSUS RECOMMENDATION:

Local agencies should institute restrictions that recognize the different characteristics and risk profile of the variety of U.S. Agency and GSE debt instruments.

Factors such as the repayment pledge, size of the issue, prominence of the issuer in the market, and the complexity of the issue (such as call features, timing of interest and principal payments, or other options) will impact the risk profile and, thus, the balance of safety, liquidity, and yield in a local agency’s portfolio. With SBA loans or pools, for example, the principal and interest may be guaranteed by the U.S.

Government, but the prepayment or premium risk can be substantial. Investments in these types of products should only be entered into with a clear awareness, by both the legislative body and treasurer, of the risks involved and only if the local agency's staff have sufficient expertise and resources to manage such investments.

LOCAL AGENCY INVESTMENT GUIDELINES 22
II. H What are supranational securities? [Section 53601 (q)] A supranational organization is formed by a group of countries through an international treaty with specific objectives such as promoting economic development. Supranational organizations also issue debt in the United States. The most commonly recognized supranational debt is issued by the International Bank for Reconstruction and Development (IBRD or World Bank).

Section 53601 (q) allows local agencies to invest in bonds issued by one of three supranationals: World Bank, International Finance Corporation (IFC) and InterAmerican Development Bank (IADB), which were established by international treaties, incorporated into U.S. federal law by Congressional Acts and headquartered in Washington, D.C. Currently, these entities carry the highest credit ratings (AAA) based on their financial structure, policies, performance and capital support from shareholders. Securities issued by these supranationals include benchmark bonds, global bonds, structured notes, plain fixed and floating rate notes, discount notes as well as green bonds
MINIMUM LEGAL REQUIREMENT:

In order for local agencies to invest in bonds issued by supranationals, the bonds must meet the following criteria:
• Maturity of five years or less;
• Eligible for purchase and sale
within the US;
• In a rating category of "AA" or its
equivalent or better by a nationally
recognized statistical rating orginization (NRSRO); and • Cannot exceed 30% of the agency's investment portfolio.

LOCAL AGENCY INVESTMENT GUIDELINES 23
II. I Can a local agency invest in an investment pool
administered by another state? [Section 53601 (d)]
Section 53601 is prescriptive of the types of investments permissible for local agency investment. It specifies, among other things, the issuer of the security, the type of obligation and the maturity of the security.

MINIMUM LEGAL REQUIREMENT:

Section 53601 (d) allows local agencies to invest in the debt of another state or department, board, agency or authority and 53601(p) allows joint powers authorities (JPA) established pursuant to Section 6509.7 to invest in securities and obligations authorized under 53601 (a)-(q) as long as each member of the JPA has an equal proportional interest in the purchased securities. Furthermore, members of the JPA may include public agencies outside of California. However, local agencies are not permitted to invest in an investment pool administered by another state.

CONSENSUS RECOMMENDATION:

Local agency permissible investments do not include investment pools administered by another state as an investment option.

II. J What are “medium-term notes?” [Section 53601(k)]
Until recently, the statutes defined medium-term notes as those instruments meeting certain term-length and quality requirements. Amendments to Section 53601(k) have attempted to clarify some of the ambiguity surrounding this definition. A variety of reasons account for this past confusion. One is that the SEC treats “corporate notes” slightly differently than “medium-term notes.” Another is that brokers often refer to corporate obligations that have an original term to maturity longer than five years as corporate rather than medium-term notes, even though the remaining term to maturity for these notes may be less than five years.

MINIMUM LEGAL REQUIREMENT:

Section 53601(k) defines medium-term notes as “all corporate and depository institution debt securities with a maximum remaining maturity of five years or less, issued by corporations organized and operating in the United States.” Therefore, investments in any corporate or depository institution debt securities that mature within five years from the time of purchase are legal as long as they meet the minimum quality standards. Moreover, the statute specifies that local agencies may not classify investments as medium-term notes if they satisfy the definition of LOCAL AGENCY INVESTMENT GUIDELINES 24
• Organized – An entity organized as
a corporation in the United States.
• Operating – Engaged in business
activities for which it was organized
and maintaining a functioning office
(other than a representative office).
• Licensed – Permitted by the appropriate regulatory agency to operate and conduct business in
the United States (federal license)
or a specific state (state license).

Given that even the above interpretations do not provide certainty, local agencies should establish a method of determining whether a purchase of medium-term notes meets the requirements of Section 53601(k) in consultation with their legal counsel. The following provides additional general guidance and recommendations to consider:
other allowable investments authorized under state law. For example, a local agency could not consider a security that satisfies the definition of commercial paper as a medium-term note in its portfolio. In addition, a local agency, other than a county or a city and a county, may invest no more than 10% of its total investment assets in the commercial paper and the medium-term notes of any single issuer.

CONSENSUS RECOMMENDATION:

With many companies and depository institutions operating worldwide, the interpretation of the phrases “organized and operating in the United States” and “licensed by the United States or any state” comes into question. The terms organized, operating, and licensed are not specifically defined by statutes nor are they legal terms that hold specific meaning. For the purpose of applying Section 53601(k), the following interpretations, based upon usage and context, are offered as guidance to local agencies. • If an issuing entity is incorporated
in the U.S., but is a subsidiary of a
foreign-owned parent company the
stability of either the parent company or the economy of the country of the parent company should be
considered when purchasing debt
issued by these types of entities.
• Alternately, a local agency may
hold securities in a U.S. company
that is subsequently purchased by
or merges with a foreign company
(for example, the InBev merger
with Anheuser Busch in 2008).

The local agency should monitor
the merger or purchase to determine if it remains a prudent for the agency to hold the security.
• Identifying the venue for any
legal recourse in the event of a
bankruptcy or credit event would
assist the local agency in determining whether the organization is organized and operating in the
U.S. If the security is backed by
assets that are in the U.S., then
the investor may attempt to attach a claim on them in a U.S. court in the event of a bankruptcy
or default. If the security is not
backed by assetsin the U.S., then
the initial financing documents
of the underlying security may
provide a possible source to assist
with determining the legal venue.

LOCAL AGENCY INVESTMENT GUIDELINES 25
II. K Are bonds issued by departments and financing
authorities of the State of California permissible
investments for local agencies?[Section 53601(c)]
Securities issued by the State of California are permissible investments for local agencies under Section 53601(c). However, questions arise when considering whether bonds issued by departments or financing authorities of the State are also permissible under this section.

MINIMUM LEGAL REQUIREMENTS:

Section 53601(c) permits a local agency to invest in registered state warrants or treasury notes or bonds of this state, including bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by the state or by a department, board, agency, or authority of the state.

CONSENSUS RECOMMENDATION:

There are two conditions that a bond could meet to be a permissible investment under Section 53601(c). The first part of Section 53601(c), ”state warrants, treasury notes and bonds of this state”, refers to bonds issued by the State of California, for instance, general obligation bonds. This was the operative code section prior to the state’s issuance of revenue bonds.

The last part of the code section broadens the definition of permissible investments to include, “bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by the state or a department, board, agency, or authority of the state”. This describes state-issued revenue bonds. Issuance by a state authority or instrumentality alone is inadequate to meet the conditions in Section 53601(c) as the source of revenue for repayment must meet the qualifier included in the code section. For a security issued by a state authority or department, are the underlying agreements considered property owned/controlled/operated by the state? In general, if a public agency intends to purchase bonds issued by a state authority or department that are not clearly revenue bonds, an agency should consult counsel on the permissibility of such an investment.

II. L What are the rules regarding the use of reverse
repurchase agreements and securities lending agreements? Are shorting strategies allowed? [Section 53601(j)]
The intent of Section 53601(j) is to limit the imprudent use of reverse repurchase agreements (reverse repos) and securities lending agreements. In 1995, the Legislature, concerned about the use of reverse repurchase agreements for enhancing yield, imposed a number of restrictions on local governments.

LOCAL AGENCY INVESTMENT GUIDELINES 26
Section 53601(j) also applies the above restrictions to securities lending agreements with the exception that a local agency portfolio may not hold more than 20% of its base value in reverse repos and securities lending agreements combined.

Section 53601(j)(5) provides specific definitions for repurchase agreements, reverse repurchase agreements, and securities lending agreements. Agreements not meeting these specific definitions are therefore not authorized.

CONSENSUS RECOMMENDATION:

Both reverse repurchase agreements and securities lending agreements may be used to take advantage of certain short-term opportunities to improve yield and mitigate cash flow shortages. They should be entered into only when there is a clear understanding by both the legislative body and treasurer of the risks inherent in these types of agreements. The agency’s staff (or their municipal/investment advisor) must have sufficient expertise in the arrangement and management of these transactions.7 Although reverse repurchase agreements and securities lending agreements can be an effective short-term portfolio management tool in certain circumstances, they should not be confused with "short selling" or "margin selling." Reverse repurchase agreements are used to address cash flow concerns by entering into an agreement in which a counterparty will buy securities from a local agency. At the end of the agreement, the counterparty that purchased the securities will resell the securities to the local agency at a specified date and price. With a securities lending agreement, securities owned by the local agency are loaned to a borrower who provides an agreed-upon return and collateral to the local agency. At the conclusion of the agreement, the loaned securities are returned to the local agency and the collateral is returned to the borrower.
"Short selling" or "margin selling" is a practice where a margin account is established with delivery versus payment (DVP) settlement and securities are loaned • Reverse repos cannot constitute
more than 20% of the “market value”
of an agency’s portfolio;6
• Reverse repos are limited to 92 days
unless the minimum spread between
the rate on investment and cost of
funds is guaranteed in writing; and
• Securities used to make reverse
repos must be held for a minimum
of 30 days prior to the transaction.
6 For reverse repos purchased under Section 53601, the calculation is based upon the “base value” of the agency’s portfolio, which is defined as the dollar amount obtained by totaling all cash balances in the portfolio from all sources, excluding any amounts from reverse repos or similar borrowing methods. 7 Refer to CDIAC Issue Brief, Securities Lending Agreements, for a detailed discussion of these types of transactions.

MINIMUM LEGAL REQUIREMENTS:

Section 53601(j) imposes the following restrictions on reverse repos:

LOCAL AGENCY INVESTMENT GUIDELINES 27
II. M What are the rules regarding the use of mutual funds and money market funds? Are exchange-traded funds permissible investments? [Sections 53601(l) And 53601.6(b)]
8 Mutual fund as defined in Government Code Section 53601(1)(1). 9 Nationally Recognized Statistical Rating Organization.

Local agencies have the authority to invest in shares of mutual funds as described in Section 53601 (l) and 53601.6 (b) and in money market mutual funds as specified in the federal Investment Company Act of 1940. The permissible investments and strategies of the mutual fund or money market fund should be reviewed to determine whether or not they adhere to the parameters contained in both federal and state law. Questions arise about whether exchange-traded funds (ETFs) are a permissible investment under 53601(l) since they have characteristics similar to mutual funds.

MINIMUM LEGAL REQUIREMENT:

Local agencies can invest in shares of mutual funds that invest in the securities and obligations as authorized by subdivisions (a) to (k), inclusive, and subdivisions (m) to (q), inclusive, of Section 53601 and that comply with the investment restrictions of Section 53630. Local agencies can also invest in shares of mutual funds that are defined as money market mutual funds that follow regulations specified by the SEC under the Investment Company Act of 1940 (15 U.S.C. Sec. 80a-1, et seq.). The purchase price of shares shall not include any commission that the fund manager may charge and shall not exceed 20% of the agency’s funds that may be invested pursuant to this Section 53601.

In addition, no more than 10% of the agency’s funds may be invested in shares of any single mutual fund.8
Both mutual and money market mutual funds require
that they have attained the highest ranking or the highest letter and numerical rating provided by not less than two NRSROs.9 In addition they have retained an investment advisor registered or exempt from registration with the SEC with not less than five years’ experience managing their specific category of fund and have assets under management in excess of $500,000,000.

Local agencies may invest only in those instruments specified in State law. by a broker/dealer to the local agency. The loaned securities may be immediately sold with the intent of purchasing the securities back when market prices are lower to close out the margin position, thus profiting on the decline in value of the securities. Shorting strategies carry a high degree of risk of not only a zero return, but significant loss of asset value. They do not meet the risk-limiting intent of the legislature in the adoption of 53601(j), and are not considered a prudent investment for the public portfolio.

LOCAL AGENCY INVESTMENT GUIDELINES 28

CONDITIONS ALLOWING FOR INVESTMENT
MONEY
MARKET
FUNDS
MUTUAL
FUNDS
I. Must receive the highest ranking or the highest letter and numerical rating by no less than two nationally recognized rating services;
—or—
Must retain an investment advisor who is registered or exempt from registration with the SEC and has at least five years' experience investing in specified securities and managing assets in excess of $500 million.A
II. Must abide by the same investment restrictions and
regulations that apply to public agencies in California [Section 53601(a-k, m-o)].

III. Must follow regulations specified by the SEC under the investment company act of 1940 (15 U.S.C. Section 80a-1, et seq.).

FIGURE 2

GOVERNMENT CODE REQUIREMENTS FOR LOCAL AGENCY

INVESTMENT IN MONEY MARKET AND MUTUAL FUNDS
A The requirement for mutual funds is an investment advisor with experience investing in securities and obligations authorized in Sections 53601 and 53635. For money market funds, the advisor must have experience in managing the types of investments that can be purchased by money market funds as specified in SEC Regulation 2a-7.

CONSENSUS RECOMMENDATION:

The investment policy should specify criteria for selection of both mutual funds and money market funds by the investment official. Local agencies should review the permissible investments and strategies of the mutual fund or money market fund to determine whether or not they adhere to both federal and state law.

While similar to mutual funds, exchange-traded funds (ETFs) are not specifically addressed in Section 53601 nor contemplated under 53601(l); therefore, ETFs are not a permissible investment for local agencies. See Chapter 2, II. A. Which investments are permissible? Which are prohibited? [Sections 16340, 16429.1, 27133, 53601, 53601.6, 53601.8, 53635, 53635.2, 53635.8, 53638, 53684, and 57603])
LOCAL AGENCY INVESTMENT GUIDELINES 29
Sections 53601 and 53608 address the appropriate safekeeping arrangements for securities. While a third party institution is the standard used in safekeeping arrangements, securities may be held by the same firm from which they were purchased as long as the securities for safekeeping are in the name of or under the control of the local agency and kept in a legally separate trust department.

II. O What is an appropriate safekeeping arrangement
for securities? [Sections 53601 and 53608]
Existing statutes prevent agencies from using the proceeds of their temporary borrowing, specifically TRANs and GANs, to purchase long-term securities in order to achieve higher investment yields in a manner which could limit liquidity needed to ensure sufficient cash to repay the temporary borrowing when due.

MINIMUM LEGAL REQUIREMENT:

Government Code Sections 53821.5, 53841.5, 53852.5 and 53859.02(b) prohibit the investment of the proceeds of temporary borrowing in securities that have terms exceeding those of the temporary borrowing itself. In other words, proceeds from a temporary borrowing due June 20 may not be invested in securities that mature after June 20. The minimum legal requirements are clear for securities that have an identifiable term to maturity. However, the law is ambiguous when an agency invests the proceeds of temporary borrowing in items that do not have a specific maturity date, such as investments in county pools or other funds that may have an average maturity that is longer than the temporary borrowing.

CONSENSUS RECOMMENDATION:

The proceeds of temporary borrowing can be placed in investments that have no specific term to maturity so long as the proceeds can be removed within the term of the temporary borrowing without a penalty. Therefore, cash equivalent shares in liquid funds such as LAIF or county pools—where an agency has relatively quick access to its deposits—are legitimate investments for the proceeds of temporary borrowing, as long as withdrawals in amounts sufficient to repay the temporary borrowing when due are not restricted or penalized.

II. N What are the rules affecting the investment of
tax and revenue anticipation note (TRAN) and
grant anticipation note (GAN) proceeds?
[Sections 53821.5, 53841.5, 53852.5 and 53859.02(b)]
LOCAL AGENCY INVESTMENT GUIDELINES 30
II. P How does the Municipal Advisor (MA) Rule affect
a local agency’s relationship with an investment
advisor? [Section 53600.3]
The MA Rule states that broker-dealers providing advice to government clients on the investment of bond proceeds have a fiduciary duty to their clients and must be registered as a municipal advisor. In order to avoid becoming a fiduciary to municipal issuers, many broker-dealers, who have a significant municipal underwriting business, have adopted policies prohibiting brokers from providing investment advice. The MA Rule provides specific exemptions to public agencies seeking to receive investment advice from broker-dealers, including receiving advice through a request for proposal (RFP) process or by entering into a formal relationship with another independent registered municipal advisor who provides investment advice.

MINIMUM LEGAL REQUIREMENT:

The MA Rule places no legal obligations on public agencies. The regulations address only the responsibility of broker-dealers with respect to bond proceeds.

It is important to note that a local agency’s fiduciary responsibilities cannot be delegated regardless of the fiduciary standards imposed on other members of the municipal market. Section 53600.3 provides that a finance officer or treasurer MINIMUM LEGAL REQUIREMENT:

Section 53601 specifically allows local agencies to use a counterparty bank’s trust department or separate safekeeping department for the physical delivery of a security if the security is held in the name of the local agency. Section 53608 authorizes general safekeeping arrangements that allows local agencies to use for deposit for safekeeping a federal or state association (as defined by Section 5102 of the Financial Code), a trust company or a state or national bank located within this state or with the Federal Reserve Bank of San Francisco or any branch thereof within this state, or with any Federal Reserve bank or with any state or national bank located in any city designated as a reserve city by the Board of Governors of the Federal Reserve System, the bonds, notes, bills, debentures, obligations, certificates of indebtedness, warrants, or other evidences of indebtedness in which the money of the local agency is invested pursuant to this article or pursuant to other legislative authority. The local agency shall take from such financial institution a receipt for securities so deposited.

CONSENSUS RECOMMENDATION:

Industry standard is to set up a third-party (an institution other than the party that sold the agency the investment) safekeeping agreement. In order for the securities to be held by the same institution that sold the security, they must be kept in a separate area of the institution such as its trust department. The security must be in the local agency’s name or “perfected” by transferring the security through a signed agreement that contains a description of the security.

LOCAL AGENCY INVESTMENT GUIDELINES 31
can delegate duties to an external investment manager via a principal-agent relationship, but they cannot delegate fiduciary responsibility.

CONSENSUS RECOMMENDATION:

Local agencies rely on municipal advisors to help make decisions about issuing municipal securities and investing bond proceeds. Registered investment advisors hold a fiduciary responsibility to their clients by virtue of their registration with the SEC under the Investment Advisor Act of 1940. Nonetheless, the fiduciary responsibility that ultimately rests with the legislative body and the treasurer cannot be wholly delegated to an external investment manager.

Under the MA Rule, when an investment adviser consents to act in the capacity of an Independent Registered Municipal Advisor (IRMA), the local agency is able to exchange information with broker-dealers that do not have a fiduciary duty to the agency. When a local agency retains an IRMA, it agrees to consult the IRMA when considering information provided by broker-dealers. Further, when a local agency has an IRMA they should communicate that information to the market. Local agencies should ensure that the professionals they use are registered with the SEC and MSRB by checking the MSRB’s Municipal Advisor Registration webpage.

II. Q What are the rules regarding the payment of
interest earned on non-general fund deposits to an
agency's general fund? [Section 53647]
Many local agencies have the opportunity to earn interest on funds held in governmental accounts other than the general fund.

MINIMUM LEGAL REQUIREMENT:

Section 53647 provides that interest earned on a local agency's deposits shall be paid quarterly to the general fund of the agency unless otherwise directed by law.

Alternatively, if directed by the governing body of the local agency, interest shall be paid to the fund containing the principle upon which the interest accrued.

CONSENSUS RECOMMENDATION:

Although all interest earned on its deposits should be paid to the agency's general fund on a quarterly basis, the governing body may direct that the interest be allocated to the fund in which the interest earning principle was deposited. It is important to note that other directives provided in law or contract for the payment of interest to a specific fund (e.g., funds held by a trustee) are overriding exceptions.

LOCAL AGENCY INVESTMENT GUIDELINES 32
II. R Should local agencies invest in financial futures and option contracts? If so, in what manner
should they be utilized? [Sections 53601.1]
In addition to the permitted investments in Section 53601 such as treasuries, agencies, money markets, medium-term notes, and pooled investments, local agencies are permitted to invest in financial futures and option contracts in relation to any of these authorized investments. Local agencies can use a financial futures contract to potentially hedge risk because the buyer/seller are obligated to purchase/sell an asset at a predetermined future date and price thereby limiting a local agency's exposure to price fluctuations.10 Financial options contracts, which allows the buyer to buy or sell an obligation at a specified price for a specified time, are more risky and usually expire with a zero value.11 MINIMUM LEGAL REQUIREMENT:

Section 53601.1 states that the authority of a local agency to invest funds pursuant to Section 53601 includes, in addition thereto, authority to invest in financial futures or financial option contracts in any of the investment categories enumerated in that section.

CONSENSUS RECOMMENDATION:

Although the language in Section 53601.1 is very broad in its application to execute option and futures contracts on any investment categories enumerated in Section 53601, extreme care should be taken when using these strategies. Option and futures strategies are complicated and should only be used to hedge matched positions in securities currently held in the portfolio as a means to limit the risk of adverse price movements of a given security. Option and futures contracts should not be utilized in the public portfolio as a high-yield strategy.

An imprudent high-yield options and future strategy involves taking “naked” positions. “Naked” positions are those option and futures contract strategies placed on securities that are not covered by matched positions held in the portfolio. A “naked” position will require acquisition of securities in the marketplace at the prevailing market price in order to close out the position, which could result in unlimited risk and large asset losses. A high-risk, high-yield option and futures strategy is not consistent with the prudent investor standards established in Section 53600.3 and safety-liquidity-yield objectives established under Section 53600.5.
10 Brian Beers. "How are Futures Used to Hedge a Position?" Investopedia (Updated October 3, 2021)). Accessed January 2023. www.investopedia.com/ask/answers/06/futureshedge.asp. 11 Beth Gaston Moon. "Understanding Options Risk." InvestorPlace (April 12, 2012). Accessed February 2018. https://investorplace.com/2012/04/understanding-options-risk/#.WnSdQK6nG70.

LOCAL AGENCY INVESTMENT GUIDELINES 33
II. S How long should a local agency
retain trade ticket information?
Pursuant to SEC’s Rules 17a-3 and 17a-4 detailing the record-keeping requirements for broker-dealers, trade blotters or records of sales and purchases are required to be retained for six years. Trade confirmations, on the other hand, are required to be kept for three years. Given that there is no specific state requirement requiring a period of time that trade ticket information should be retained, local agencies may consider adopting such guidelines.

MINIMUM LEGAL REQUIREMENT:

There are no existing legal requirements pertaining to the retention of trade tickets.

CONSENSUS RECOMMENDATION:

Trade ticket information includes the price, yield, Committee on Uniform Securities Identification Procedures (CUSIP) reference number of the security as well as net money including principal, accrued interest, and total money. It also identifies the broker-dealer with whom the trade was done. It is important to retain trade ticket information for several reasons, most importantly for compliance and audit reasons. In addition, if there are any questions regarding a particular trade, it would be beneficial to have documentation. To be prudent, trade tickets should be kept for at least six years. Local agencies should consider adopting their own agency guidelines for retention of financial records, including trade ticket information.

LOCAL AGENCY INVESTMENT GUIDELINES 34
Chapter III. Reporting Requirements
Reporting requirements and recommendations are imposed on local agencies in Sections 53646 and 53607.

Section 53646 states that the treasurer or chief fiscal officer of a local agency may file reports on the status of their investment portfolios with their respective legislative body, internal auditor, and chief executive officer. These reports generally are intended to provide the legislative body the ability to meet its fiduciary obligations as a trustee and to increase the disclosure of the agency’s investment activities to those outside the agency. Section 53646 states that if the quarterly investment portfolio report is submitted, it must contain, among other things, a listing of investments, fund balances, activity, and return on investments made by the local agency. Quarterly reports should reflect the current positions and past performance of a portfolio of investments for the period of time under consideration.

Section 53646(e) states that for local agency funds that have been placed in a county investment pool, LAIF, FDIC-insured bank deposits, National Credit Union Shared Insurance Fund-insured accounts in a credit union, accounts insured or guaranteed pursuant to California Financial Code Section 14858, or some combination of the above, the treasurer may substitute the most recent account statement received from those entities in lieu of the information on these investments that is otherwise required by this section. Section 53646(f) states that securities, investments, or monies held by a school district or county office of education in individual accounts that are less than twenty-five thousand dollars ($25,000) may be excluded from the report.

Local agency treasurers to whom the authority to invest or reinvest funds or to sell or exchange securities has been delegated by the legislative body of a local agency are required by Section 53607 to submit a monthly report of transactions to the legislative body.

LOCAL AGENCY INVESTMENT GUIDELINES 35
III. A What specific information regarding portfolio investments needs to be included in the report to the legislative
body? [Section 53646(b)(1-4) and 53607]
Section 53646 specifically encourages treasurers to prepare the quarterly investment report to enable the legislative body to perform its fiduciary duty and provide full disclosure of the public entity's investment activities.

MINIMUM LEGAL REQUIREMENTS:

If the treasurer or chief fiscal officer of a local agency elects to submit or if the legislative body mandates the submission of a quarterly investment report to the legislative body pursuant to Section 53646, it must do so within 45 days after the end of the quarter and include the following information:
12 Refer to CDIAC publication California Public Fund Investment Primer for definitions of investment types.
13 “Dollar amount invested” is defined as cost, however, best practice uses amortized cost or book value. Confusion exists as to the meaning of the words “held by the local agency” found in Government Code Section 53646(b)(1). Several standards have been suggested to clarify this phrase, including “ownership,” “control,” “under direct management by,” “possession,” and “accountability for the funds.” Each of these suggestions would lead to different determinations as to the specific funds required to be reported. The apparent intent of the Legislature in enacting this requirement was to provide for comprehensive disclosure of local agency investments. • Type of investment (i.e. U.S.

Treasury security, commercial
paper);12
• Issuer name;
• Date of maturity;
• Par amount;
• Dollar amount invested in all securities, and investments and monies held by the local agency;13
• A description of the funds, investments, and programs (including lending programs) managed by
contracted parties (i.e. LAIF, investment pools, outside money managers, and securities lending agents); • Current market value as of the
date of the report of all funds
held by the local agency and under the management of any outside party that is not also a local agency or LAIF and the source of
the valuation;
• A statement of compliance with
the investment policy or an explanation for non-compliance; and • A statement of the local agency’s
ability to meet its pool’s expenditure requirements for the next six months, as well as an explanation
of why sufficient money will not
be available if that is the case.

The legislative body of the local agency may elect to require this report on a monthly basis. Furthermore, the legislative body may require the treasurer to provide additional information beyond that listed above.

LOCAL AGENCY INVESTMENT GUIDELINES 36

1. A listing of individual securities held
at the end of the reporting period
by authorized investment category.

2. Average life and final maturity of all
investments listed.

3. Coupon, discount or earnings rate.

4. Par value, amortized book value and
market value.

5. Percentage of the portfolio represented by each
investment category.

6. A description of the funds, investments, and programs (including lending programs) managed by
contracted parties (i.e. LAIF, investment pools, outside money managers, and securities lending agents).

7. A statement of compliance with the
investment policy or an explanation
for non-compliance.

8. A statement of the local agency’s
ability to meet its pool’s expenditure requirements for the next six months, as well as an explanation
of why sufficient money will not be
available if that is the case.

Local agency funds that have been placed in a county investment pool, LAIF, FDIC insured bank deposits, National Credit Union Shared Insurance Fundinsured accounts in a credit union, accounts insured or guaranteed pursuant to California Financial Code Section 14858, or some combination of the above, may substitute the most recent account statement received from those entities in lieu of the information recommended above.

In addition to the reporting requirement set forth by Section 53646, a local agency treasurer who has been delegated authority to invest or reinvest funds of the local agency by the legislative body under Section 53607 must submit a report to the legislative body accounting for transactions made during the month.

This reporting requirement is separate and distinct from the quarterly report submitted under Section 53646. If the legislative body has delegated authority to the treasurer and has elected to require the quarterly report under Section 53646 on a monthly basis, it may be very practical and efficient to merge the elements of If the local agency’s legislative body delegates, to the local agency’s treasurer, its authority to invest or reinvest the agency’s funds or sell or exchange the agency’s securities, the treasurer shall make a monthly report of those transactions to the legislative body, pursuant to Section 53607. The delegation of authority may be made for a period of one year. The requirement to submit the transaction report lasts until the authority is revoked or expires. In contrast to the specific information required in the quarterly report under Section 53646(b), the contents of the monthly report of transactions required under Section 53607 are not enumerated.

CONSENSUS RECOMMENDATION:

Based upon the public benefits achieved by reporting, it is recommended that the treasurer or designated official provide the local agency’s legislative body a quarterly investment report that provides a clear picture of the status of the current investment portfolio. The quarterly investment report should include the following:

LOCAL AGENCY INVESTMENT GUIDELINES 37
III. B Should the report include market value measures
for individual securities? [Section 53646(b)(1)]
The market value of each security in a portfolio must be computed before determining the portfolio’s overall market value.

MINIMUM LEGAL REQUIREMENT:

Section 53646(b)(1) states: “With respect to all securities held by the local agency, and under management of any outside party that is not also a local agency or the LAIF, the report shall also include a current market value as of the date of the report, and shall include the source of this same valuation.” CONSENSUS RECOMMENDATION:

The law is not clear whether “all” securities implies the market value of the overall portfolio or each security. The level of detail to be presented in the report depends on the portfolio activity and the audience. The report for internal treasury staff and the oversight committee should list the individual market value for each security. This approach gives a more complete picture of the health of a portfolio and brings individual investment performance to the attention of those responsible for compliance oversight. For the legislative body, the report should be a summary with aggregate market value listed and include a footnote stating that data on particular investments is available upon request.

HOW SHOULD THE MARKET VALUE OF
THE PORTFOLIO BE DETERMINED?
In establishing market value of the portfolio as required by Section 53646(b)(1), the Government Finance Officers Association recommends that local entities obtain independent third-party assessment of investments and risk from a reputable source.

The most common approach is to request pricing information from the agency’s safekeeping service, custodial service, or trustee. Agencies may need to contract with pricing service companies for more complex securities. These companies specialize in giving the current market price for a broad range of securities.

An alternative way to determine the value of securities in a portfolio is to perform an in-house analysis by collecting information from different sources such as dealer quotes, online computer information, and certain publications that provide price estimates. These sources may not be as up-to-date or accurate as a pricthe quarterly report with the month’s transactions and provide a combined report on a monthly basis. While the elements of each reporting requirement may be different they may be combined in one report.

LOCAL AGENCY INVESTMENT GUIDELINES 38
ing service, but they offer a relatively inexpensive method to make price estimates.

Finally, to assess the value of securities where specific prices are not available, a treasurer can either tie the spread of a recent investment to a benchmark security that is easy to value or use a matrix pricing formula. A matrix pricing formula displays the prices of a variety of different securities which are then used as a basis for approximating the value of the security in question. These formulas are particularly useful for short-term securities that mature between 90 and 180 days.

MINIMUM LEGAL REQUIREMENT:

Section 53646(b)(1) provides that the agency shall include the current market value as of the reporting period date and the source of the valuation.

CONSENSUS RECOMMENDATION:

To provide the most unbiased method of reporting current market values, the local agency should obtain an independent valuation of the portfolio from a reputable source, such as, a broker or other financial institution, custodial bank, available publications or other pricing services. The independent sources should not be a party to the transaction. For example, the broker that sold the security should not be used to provide the valuation. The agency should use the best sources of market price information available. Prices for securities are estimates that carry a certain degree of error regardless of the approach used and will fluctuate over time due to market conditions. It is imperative that local officials pay extra attention to estimates on complex, infrequently traded, or highly customized securities.

HOW FREQUENTLY SHOULD MARKET VALUE BE CHECKED?
MINIMUM LEGAL REQUIREMENT:

None. Government Code does not specify frequency of market valuation.

CONSENSUS RECOMMENDATION:

Frequency of market valuation will be dependent on the complexity of the securities in the portfolio and the frequency of trading. For infrequent or passive investors, market value should be “marked-to-market” quarterly at a minimum.

For a more active portfolio, the industry standard is monthly.

III. C Should an analysis of cash flows be prepared by the local agency in order to validate the six-month
liquidity certification? [Section 53646]
A public agency is required to include a statement indicating that the projected cash flow is adequate to meet expected obligations over the next six months or provide an explanation as to why sufficient money may or may not be available.

LOCAL AGENCY INVESTMENT GUIDELINES 39
MINIMUM LEGAL REQUIREMENT:

Section 53646(b)(3) addresses the requirement for the local agency to include a statement denoting the ability of the local agency to meet its pool’s expenditure requirements for the next six months or provide an explanation as to why sufficient money may or may not be available. There are no other requirements for identifying cash flows and setting liquidity targets at the local agency.

Section 53646(c) requires the treasurer or chief fiscal officer to report whatever additional information or data may be required by the legislative body of the local agency.

CONSENSUS RECOMMENDATION:

An analysis of cash flows is not required. However, the treasurer should be prepared to discuss cash flow projections and methodology at the request of legislative or oversight bodies. This analysis may list basic projections—based on historical data, market sensitivity or other relevant information—that support the cash flow liquidity statement. There are no guarantees when it comes to predicting future obligations. A sound justification for the expenditure statement gives the finance officer added protection against decisions that originally looked good but turned out poorly because of unforeseen circumstances.

The nature of the analysis will vary greatly depending on the size, sophistication, and complexity of the local agency staff and portfolio. Best practices dictate that cash flow statements should be prepared on a regular basis. However, in some agencies it may not be practicable or necessary, for instance, for LAIF-only participants.

An analysis of cash flows is the precursor to portfolio management and should be prepared and updated, as needed, at least for internal investment staff use.

Those who manage investment pools need to pay close attention to the needs and accuracy of the requests of participants to ensure accurate cash flow projections. Incomplete information about a pool’s investors not only compromises the legitimacy of the six-month cash flow statement, but also adds substantially to the liquidity risk of the pool.

In the case of investment pools, all participants’ cash flow needs must be taken into account in preparing the six month cash flow statement. The pool administrator or manager should keep close tabs on mandatory and voluntary pool participants’ cash flows needs and establish clear criteria for the deposit and withdrawal of their funds. Also, the pool administrator or manager should obtain expected deposit/disbursement information from pool participants at the time of major fund deposits or updates of cash flow projections.

LOCAL AGENCY INVESTMENT GUIDELINES 40
III. D What tools can be used to measure interest rate risk? Interest rate risk, also known as market risk, is the risk that a security’s value or price will decline as interest rates rise in the general market. Weighted average maturity (WAM) and duration are commonly used measures of interest rate risk.

WAM measures the portfolio’s “average life.” Duration considers all of the cash flow receipts not just the last cash flow as in WAM and provides an approximate percentage change in the value of a security or portfolio for a given change in interest rates.14 Some local agencies have inquired whether they should include this information in their report.

MINIMUM LEGAL REQUIREMENT:

Existing statutes do not require local agencies to report an interest rate risk measure in their portfolios. Section 16480.7 requires the State Treasurer to submit a quarterly report to the Pooled Money Investment Board that includes the weighted average maturity of the investments in the Pooled Money Investment Account.

CONSENSUS RECOMMENDATION:

Local agencies should consider including the WAM or duration measurement in the report. The type of duration measure (e.g. modified and/or effective duration) used will depend on the type of investments being analyzed and the capacity of the agency to perform or source the calculations. While duration will present greater precision than WAM in the measurement of interest rate risk, given the need for specialized software to perform calculations or an external source for duration information, an agency may find greater utility in the easier to calculate WAM. The decision on which metric to use will be based on the needs and resources of the local agency.

Local agencies also should consider whether their investment policies should provide guidance on acceptable ranges or limits for the respective measure used.

These figures trigger a number of valuable considerations about the status of the portfolio for both internal and external purposes including liquidity, cash flow, and average maturity (for example, WAM). WAM is a relatively simple calculation which may be determined by dividing the sum of the days to maturity multiplied by the book value for each security by the total book value of the portfolio.

Figure 3 shows an example of how WAM is calculated:
14 Refer to CDIAC publications California Public Fund Investment Primer and Duration Basics.

LOCAL AGENCY INVESTMENT GUIDELINES 41
15 Refer to CDIAC publication Investing in Callable Securities – September 2020 Update for a summary of callable securities. Refer to CDIAC publication Issue Brief: Benefits and Limitations of Option-Adjusted Spread Analysis for general guidance about option-adjusted spread (OAS) and how to interpret OAS values.

PAR
VALUE

SECURITY

DESCRIPTION

DAYS TO

MATURITY
BOOK
VALUE

DAYS BY

BOOK VALUE
$1,350,000
5,000,000
5,000,000
5,000,000
5,000,000
5,000,000
5,000,000
Repurchase Agreements
Local Agency Inv. Fund
Fed Natl. Mtg. Assn.

Fed Home Loan Bank
U.S. Treasury Note
Fed Natl. Mtg. Assn.

Fed Farm Credit Bank
1 1
185
550
720
822
910
$1,350,000
5,000,000
4,886,108
5,000,000
4,985,156
5,000,000
4,988,941
1,350,000
5,000,000
903,930,041
2,750,000,000
3,589,312,500
4,110,000,000
4,539,936,255
TOTAL $31,210,206 15,899,528,796
FIGURE 3

CALCULATION OF WEIGHTED AVERAGE MATURITY
Duration is a more complex computation and requires the proper software to perform the specific calculations for each security and then for the entire portfolio. Three types of duration are commonly used.

MACAULAY DURATION. The simplest method of calculating duration which measures the number of years required to recover the true cost of a security and is the only type of duration measurement quoted in “years.” MODIFIED DURATION. Builds upon Macaulay duration to measure the price sensitivity of an investment to interest rate changes and assumes the cash flows of an investment do not change as interest rates change. Modified duration is quoted as a percentage of value change as interest rates change. Figure 4 is an example of a basic modified duration application.

EFFECTIVE DURATION. Further refines modified duration using an iterative estimation process and is typically used with floating rate, asset-backed, and pass-through securities and more generally, with securities that have call option features. Effective duration takes into account embedded options of a security (e.g., call features or sinking fund schedule) and adjusts the price of the investment to reflect changes in the value of those embedded options.15 Thus, effective duration requires simulations of many possible interest rate scenarios to calculate the duration to call and provides a wider assessment of risk for a portfolio containing more than fixed rate securities.

Due to the complexity of calculating effective duration, no example appears below.

WAM =
∑ Days to Maturity Multiplied
by Book Value of Each Investment = 15,899,528,796 =
509 Days
or 1.42
Total Book Value $31,210,206 Years
LOCAL AGENCY INVESTMENT GUIDELINES 42

PORTFOLIO MODIFIED DURATION

1.2 2.7 5.0 6.0
RATE
CHANGE
.25%
.50%

1.50%

2.00%

5.00%
$300,000
600,000
1,800,000
2,400,000
6,000,000
$675,000
1,350,000
4,050,000
5,400,000
13,500,000
$1,250,000
2,500,000
7,500,000
10,000,000
25,000,000
$1,500,000
3,000,000
9,000,000
12,000,000
30,000,000
FIGURE 4
DURATION—GAIN/LOSS OF MARKET VALUE MATRIX
FOR A $100,000,000 PORTFOLIO
Modified duration measures the approximate change in the market value of assets as a result of a change in market interest rates. Thus, for a portfolio with a market value of $100,000,000 and a duration of 1.2, as interest rates increase by 1.5%, the portfolio’s market value would be expected to decrease by $1,800,000. Specifically:
$100,000,000 x 1.2 x 0.015 = $1,800,000
portfolio size duration interest rate increase portfolio market value decrease
$100,000,000 x 1.2 x 0.02 = $2,400,000
portfolio size duration interest rate increase portfolio market value increase
Conversely, for the same portfolio, if interest rates were to decrease by 2%, the portfolio’s market value increases by approximately $2,400,000. Specifically:

Securities or portfolios with higher duration carry more interest rate risk and have higher price volatility (i.e., sensitivity of the security’s price to changes in market interest rates) than those with lower durations. For example, if the same $100,000,000 portfolio had a duration of 2.7, a 1.5% increase in market interest rates will produce a greater change in the portfolio’s market value:

For a 2% decrease in interest rates:
$100,000,000 x 2.7 x 0.015 = $4,050,000
portfolio size duration interest rate increase portfolio market value decrease
$100,000,000 x 2.7 x 0.02 = $5,400,000
portfolio size duration interest rate increase portfolio market value decrease
LOCAL AGENCY INVESTMENT GUIDELINES 43
III. F How should agencies address difficulties in meeting the 45-day requirement for submitting quarterly investment
reports to the legislative body? [Section 53646(b)]
It can be difficult for an agency to collect all the appropriate information for the report, have an oversight committee (if a jurisdiction has one) review or approve it, and present it to the legislative body within 45 days of the quarter’s end. Various factors such as the length and diversity of the portfolio, size of staff, and type and availability of computer software can influence the amount of time it takes to compile a report.

MINIMUM LEGAL REQUIREMENT:

Section 53646(b) requires that if the quarterly investment report is submitted to the legislative body, it may be rendered within 45 days of the end of the quarter.

III. E What action should the legislative body take
with the report? [Section 53646]
Section 53646(b) states that the “treasurer or chief fiscal officer may render a quarterly report to the chief executive officer, internal auditor, and the legislative body” within 45 days of the quarter’s end. Questions arise as to whether the legislative body needs to discuss and approve the report during a regular meeting, have it placed on the consent calendar, or only receive a copy.

MINIMUM LEGAL REQUIREMENT
Section 53646(b) only states that the report may be rendered to the legislative body. It does not require the legislative body to take action on this report.

CONSENSUS RECOMMENDATION
If presented to the legislative body of the local agency, it should discuss the report as necessary and take action on the report in public session. The report could be listed as a consent calendar item or as a non-consent calendar item, depending on the preferences of the legislative body. Possible actions of the governing body on the report could include: receiving and filing the report, approving or disapproving the report (with or without amendments), or asking staff for further information/clarification. In addition, if presented to an investment oversight body, the oversight body should discuss the reports at their own meetings.

LOCAL AGENCY INVESTMENT GUIDELINES 44
CONSENSUS RECOMMENDATION:

A report, as complete as possible, should be submitted within the allotted 45 days. If current values for certain investments are not available within the time frame to complete the report in a timely fashion, submit the report on time and indicate in the report the most recent valuation and its date and then submit updated values to the legislative body at the soonest possible date thereafter. It should be available for individual legislative body members to review within 45 days of quarter end. This may include providing a copy to each member, including it in agenda materials for a public meeting, or actually presenting the report at a public meeting of the legislative body.

LOCAL AGENCY INVESTMENT GUIDELINES 45
Chapter IV. Treasury
Oversight Committees
Section 27131 and 27132 through 27132.4 consider the formation, composition, and role of a county treasury oversight committee. These code sections provide that the function of the treasury oversight committee is to monitor and review the county investment policy by conducting or causing an annual audit and discussing its findings at a public meeting. The rationale behind the creation of an oversight committee is to give local agencies and private sector citizens a say in the policies governing the investment pool.

IV. A What options are available for structuring the county treasury oversight committee? [Sections 27131 and
27132 through 27132.4]
The statutes governing the structure of county treasury oversight committees are meant to bring together a representative and knowledgeable committee while limiting conflicts of interest with the treasurer and the treasury functions subject to oversight. However the composition is subject to specific requirements that can make it difficult for local agencies to recruit and staff a committee.

Specifically, the statutes prohibit individuals from employment with or securing employment within one year of serving on a county treasury oversight committee with underwriting, bond counsel or broker-dealer firms doing business with the county treasurer. Committee members are also prohibited from making individual political contributions to, or being employed by an entity that makes political contributions to, or from doing any fund raising on behalf of any candidate for office of the governing board of any agency that deposits funds in the county treasury in the previous three years.

MINIMUM REQUIREMENT:

Section 27131(a) states that the board of supervisors in any county that invests surplus money may establish a treasury oversight committee. If established, the committee must consist of three to eleven members, the exact number determined by the board of supervisors in consultation with the county treasurer.

Members must be appointed from the following categories:

LOCAL AGENCY INVESTMENT GUIDELINES 46
• Be employed by an entity that
has contributed to the campaign
of a candidate for the office of
local treasurer;
• Be employed by an entity that has
contributed to the campaign of a
candidate for membership on a
legislative body of any local agency
that has deposited funds in the
county treasury in the previous
three years or during the period
the employed person is a member
of the committee;
• Directly or indirectly raise money
for a candidate for local treasurer
or a member of the governing
board of any local agency that
has deposited funds in the county
treasury while a member of the
committee; and
• Secure employment with, or be
employed by, bond underwriters,
bond counsel, security brokerages
or dealers, or financial services
firms, with whom the treasurer is
doing business during the period
that the person is a member of the
committee or for one year after
leaving the committee.

CONSENSUS RECOMMENDATION:

County legislative bodies should decide if an oversight committee is necessary and if they should have private sector individuals from the restricted firm types serve on the committee. If so, the county may choose one of three options to compose the committee (Figure 5).

If the committee is composed of public and private sector members (Option 1), the members, for their term of service and one year following, cannot work for firms doing business with the treasurer. As a way to obtain the participation of private sector professions employed by firms doing business with the treasurer, a county may create an advisory board of the county treasury oversight committee (Option 2). However, a county that chooses Option 2 and forms an advi1. County treasurer.

2. County auditor, auditor-controller, or finance director as the case may be.

3. A representative appointed by
the board of supervisors.

4. A representative selected by a
majority of the presiding officers
of the governing bodies of the
school districts and community
college districts in the county.

5. County superintendent of
schools or their designee.

6. A representative selected by a
majority of the presiding officers of the legislative bodies of the special districts that are required or authorized to deposit funds in the county treasury.

A majority of the public members of the committee shall have expertise in or an academic background in public finance. The other public members shall be economically diverse and bipartisan in political registration. Committee members cannot:

LOCAL AGENCY INVESTMENT GUIDELINES 47

VARIOUS OPTIONS AVAILABLE TO LOCAL GOVERNMENTS

1. A committee of both public and private sector members.

2. A committee of public sector officials that has an advisory board made up of private sector professionals and citizens.

3. A committee that only consists of individuals who work for agencies that have funds invested in the pool.

FIGURE 5

APPROACHES TO ESTABLISHING THE COUNTY

TREASURY OVERSIGHT COMMITTEE
IV. B Does the appointment of the treasurer to the county treasury oversight committee create a conflict of interest?
[Sections 27131 and 27132]
Since the oversight committee’s central task is to oversee the treasurer’s policies, some believe that allowing the treasurer to sit on the oversight committee represents a conflict of interest. Others claim that a treasurer who donates money to their own campaign cannot be on the county treasury oversight committee because the law bars those who contribute to the campaign of someone running for treasurer while serving on the committee from participation.

MINIMUM LEGAL REQUIREMENT:

None. Sections 27131 and 27132 do not specify whether or not the county treasurer should be a member of the oversight committee. Section 27132 specifically lists the county treasurer as a potential member of the county treasury oversight committee.

CONSENSUS RECOMMENDATION:

The question of whether or not a county treasurer should sit on the treasury oversight committee must be made by the county board of supervisors and the treasurer. Their answer should consider the advantages and disadvantages of having someone with the treasurer’s influence and expertise sit on the committee and the future employment implications to the treasurer since any person who serves on a county treasury oversight committee is prohibited from seeking employment with the financial services industry for one year after leaving the sory board whose membership criteria is less stringent than the criteria used to compose an oversight committee is advised to consult legal counsel. Finally, the county may establish an oversight committee composed exclusively of individuals unaffiliated with private sector firms doing business with the treasurer. The easiest way to do so is to draw members of the committee from the public agencies investing funds with the county treasurer (Option 3).

LOCAL AGENCY INVESTMENT GUIDELINES 48
IV. C What is the role of the county treasury oversight committee? [Sections 27134 and 27137]
MINIMUM LEGAL REQUIREMENT:

Sections 27134 and 27137 limit the oversight committee’s functions to monitoring and reviewing the county treasury’s compliance with the investment policy and reporting provisions of the Government Code through an annual audit.

CONSENSUS RECOMMENDATION:

The statutes address concerns that individuals serving on the treasury oversight committees may try to micro-manage decisions that should be left to the treasurer.

Considerations by the committee regarding the risk and structure of a portfolio are permitted in the law, however, any attempts to direct individual investment decisions, select individual investment advisors, brokers, or dealers, or impinge on the day-to-day operations of the county treasurer are discouraged. The local agency should clearly stipulate that the responsibilities of the treasury oversight committee are to focus on investment policy issues and to audit the portfolio for compliance with the policy.
committee. It should not in any way hinge on whether a treasurer donated money to his or her own campaign. Contributing money to one’s own campaign does not represent a legitimate conflict of interest in the context of the treasury oversight committee.

Specifying that the treasurer does not serve as the chair of the oversight committee is one approach to lessening the “conflict of interest” concern.

IV. D Should other local agencies have
treasury oversight committees?
It is not uncommon to find treasury oversight committees in cities and other local agencies even though the law does not require them to have such a committee.

An important issue in the decision to establish a committee is the level of discretion accorded the agency treasurer in making investment decisions: the more discretion, the greater the need for oversight procedures. However, even in situations where an agency has a great deal of discretion, some believe an oversight committee merely duplicates work that can be better performed by the governing board or auditors. Others support the view that an oversight committee provides valuable information to the investment staff and involves members of the com- LOCAL AGENCY INVESTMENT GUIDELINES 49
munity in an important government function. If other local agencies decide that they want to engage an oversight committee, its role with respect to reviewing investment policies and quarterly investment reports should be clearly specified.

MINIMUM LEGAL REQUIREMENT:

There are no legal requirements for local agencies to have oversight committees.

CONSENSUS RECOMMENDATION:

Local agencies that are not counties should consider if an oversight committee is appropriate based on its current oversight procedures, complexity of its portfolio, frequency with which it purchases securities, and skill level of its staff. The limitations and restrictions associated with membership on a county treasury oversight committee do not apply to committees formed by other local government entities.

LOCAL AGENCY INVESTMENT GUIDELINES 50
CODE

SECTION
TITLE

DESCRIPTION

ACQUISITION OF BONDS
5925 Repurchase investment

LOCAL AGENCY INVESTMENT FUND (LAIF)
16340 Voluntary Investment Program Fund
16429.1 Creation, maintenance, and operation
16429.2 Local investment advisory board
16429.3 Deposits; prohibited transfers and loans; impoundment or seizure 16429.4 Right of withdrawal

COUNTY TREASURER - DUTIES GENERALLY
27000 Custody and payment of moneys
27000.1 Investment of county funds; delegation and revocation of authority by board of supervisors; responsibility for transactions 27000.3 Prudent investor standard; use in transactions with public funds 27000.5 Objectives; managing public funds
27000.6 Effective date of specified provisions; candidate eligibility and continuing education programs; county ordinances; authority to repeal ordinances
27000.7 Eligibility for offices of county treasurer and tax collector; criteria; application of section
27000.8 County treasurers and tax collectors serving on January 1, 1996; service for remaining term; continuing education; certification; violation
27000.9 Continuing education; requirements beginning in 2000; certification; violation
27001 Certificates of auditor; filing; preservation
27002 Accounts of receipts and expenditures; requisites 27002.1 Photographic records of receipts and expenditures 27003 Separate accounts; general account
California Government Code
LOCAL AGENCY INVESTMENT GUIDELINES 51
27005 Disbursements on warrants; checks or
electronic funds transfers; exception
27006 Disbursements on warrants based on orders; payment of warrants 27007 Possession of money; special deposits
27008 Certificates of auditor necessary for receipt of money 27009 Receipt for deposit of moneys into county treasury 27010 Receipt of gifts and bequests
27011 Deposit of private money prohibited; penalty
27012 Conferences between controller and treasurers regarding administration of applicable law; expenses
27013 Administrative cost of investing, depositing or handling funds; reimbursement of county

COUNTY TREASURY OVERSIGHT COMMITTEES
27130 Legislative findings and declarations
27131 Establishment; determinations of size and membership 27132 Membership; pool of candidates
27132.1 Member employment by campaign contributors
27132.2 Member fundraising
27132.3 Member employment in financial services industry 27132.4 Open meetings; Ralph M. Brown Act
27133 Periodic investment policy; preparation by treasurer; committee review and oversight
27134 Periodic audits by committee; article compliance
27135 Costs of compliance; reimbursement
27136 Withdrawal of funds from county treasury pool;
requests; evaluation; approval criteria
27137 Day-to-day operations and decisions; committee involvement

INVESTMENT OF SURPLUS
53600 Local agency
53600.3 Prudent investor standard; investments on behalf of local agencies 53600.5 Objectives; managing public funds
53600.6 Legislative findings and declarations;
solvency and creditworthiness
53601 Local agencies; authorized investments
53601.1 Investment in financial futures or financial option contracts 53601.2 Limited liability corporation
53601.5 Investments; qualified purchase agent
53601.6 Prohibited investments
53601.8 Investment in placement service assisted deposits, including certificates of deposit
LOCAL AGENCY INVESTMENT GUIDELINES 52
53602 Investment in legal investments for savings banks; securities of public districts
53603 Direct purchase of securities
53604 Sale or exchange of securities; reinvestment of proceeds 53605 Sale of securities; application of proceeds to original purposes 53606 Cancellation of bonds issued by purchaser; resale 53607 Delegation of duties to treasurer; monthly report 53608 Deposit of securities; receipt; delegation of authority 53609 Eligible securities for investment of funds held by local agency pursuant to deferred compensation plans
53610 Proposition 1A receivables; purchase by local agency 57603 Investments in public bank obligations

HEALTH FUND INVESTMENTS
53620 Investment funds designated for employee
retiree health benefits' payments
53621 Delegation of the governing body's investment
authority to designated officers
53622 Funds to pay employee retiree health benefits; discharge of duties of the governing body or designated officer

DEPOSIT OF FUNDS
16340 The Voluntary Investment Program Fund
53630 Definitions
53630.1 Legislative findings and declarations;
solvency and creditworthiness
53630.5 Additional definitions
53631 Deposits to pay principal, interest or warrants of bonds; electronic funds disbursement
53632 Classes of deposits
53632.5 Classes of security for deposits
53633 Determination of amounts to be deposited in each class 53634 Transfers from inactive to active deposits
53635 Local agency investments; commercial paper;
concentration limits
53635.2 Deposit of money belonging to or in custody of local agency 53635.7 Agency consideration when borrowing funds
in excess of $100,000
53635.8 Investment in placement service assisted deposits, including certificates of deposit
53636 Deposited money as in treasury of local agency
53637 Selection of depositary; interest
53638 Maximum deposits
53639 Expense of transporting money
LOCAL AGENCY INVESTMENT GUIDELINES 53
53640 Checks, drafts, and other exchange
53641 Receipt or other evidence of deposit
53642 Withdrawals; check or order
53643 Deposit by treasurer
53644 Withdrawals on demand; penalties; notice
53645 Interest; computation; payment
53646 Investment policy statement; review and approval; legislative body or oversight committee; reports
53647 Interest; payment into fund
53647.5 Interest on bail money on deposit
53648 Deposits and contracts pursuant to federal law or rule 53648.5 Termination of agreement with depository
53649 Contracts with depositories; contents; filing
53651 Eligible securities to be used as security for deposits 53651.2 Eligible security; promissory note
53651.4 Report of independent certified public accountant; depository using eligible securities; state bank; national bank; fee 53651.6 Letter of credit; terms
53652 Value required to secure active or inactive deposits; market value 53653 Waiver of security on federally insured deposits; interest 53654 Addition or substitution of securities;
withdrawal or release of securities
53655 Perfection of security interest in favor of local agencies 53656 Authorization for holding of security by agent of depository; agents of depository; securities subject to order of depository; exception; release of security; conditions
53657 Authorization to act as agent of depository;
application; form; fee; approval or denial
53658 Maintenance of separate pool for each depository; security interest of local agency
53659 Placement of securities with Federal Reserve or other approved bank; authority by contract
53660 Certification and report by agent of depository
53661 Administrator
53663 Determination of amounts to be deposited as inactive and active deposits
53664 Individual reports; privileged status
53665 Default by depository; payment by agent of depository; excess funds; drawing on letter of credit
53666 Liability of administrator
53667 Expenses of administrator; levy of assessment
on depositories; payments; penalty
53669 Responsibility for money on deposit
LOCAL AGENCY INVESTMENT GUIDELINES 54
53676 Treasurer’s responsibility for securities
53678 Charges for handling and safekeeping of securities 53679 Money under control or coming into possession
of officers and employees other than treasurer
53679.1 Accounting practices; declaration of existing law 53680 Money under control of tax collectors
53681 Deposit in other than prescribed manner; forfeiture of office 53682 Contracts for services by depository; requirements 53683 Consideration as costs applied pro rata against earned interest 53684 Local agencies; excess funds; investment by county treasurer 53686 Local agency fund audit reports
57600 Public bank deposits

TEMPORARY BORROWING
53821.5 Tax and Revenue Anticipation Notes
53840 County Short-term Loans
53841 Limitations on short-term borrowing
53841.5 Tax and Revenue Anticipation Notes
53850 Local agency definition
53851 Local agency borrowing power
53852 Use of proceeds
53852.5 Tax and Revenue Anticipation Notes
53859 Definitions
53859.01 Local agency borrowing power
53859.02 Grant Anticipation Notes
LOCAL AGENCY INVESTMENT GUIDELINES 55
Government Code Section 5925
5925
The purchase or other acquisition of bonds by or on behalf of the state or local government that issued the bonds does not cancel, extinguish, or otherwise affect the bonds and the bonds shall be treated as outstanding bonds for all purposes except to the extent otherwise determined by the issuer or otherwise provided in the constituent instruments defining the rights of the holders of the bonds.

Government Code Section 16340
16340
(a) (1) The Voluntary Investment Program Fund is hereby created within the State Treasury, for the receipt of voluntary deposits from local entities. (2) For purposes of this section, a “local entity” includes, but is not limited to, any city, county, school district, or special district. (b) Each local entity that is approved by its governance body to deposit moneys in the fund shall deposit no less than a total of two hundred million dollars ($200,000,000). The total amount of moneys that may be deposited in the fund from all eligible sources shall not exceed, at any point in time, a total of ten billion dollars ($10,000,000,000), or lesser amount as determined by the Director of Finance, in consultation with the Treasurer.
(c) The terms and conditions of deposits made into the fund shall be set by the Director of Finance, in consultation with the Treasurer. Those terms shall include, but not be limited to, the size of the deposit from a particular local entity, the length of time those moneys shall be held in deposit in the fund, the availability of funds for withdrawal by the local entity depositing the funds, and the annual rate of interest paid on deposits, as described in subdivision (e). However, the director and the Treasurer may only permit deposits that do not exceed funds needed to address an actual or anticipated cash shortfall in the General Fund not exceeding the amounts of existing appropriations, including continuing and continuous appropriations, to which resulting proceeds are to be applied. (d) Moneys held in the Fund shall be invested by the Treasurer in investments authorized pursuant to Sections 16430 and 16480 through the Pooled Money Investment Account, and whenever the Controller determines that moneys in the General Fund, after allowing for internal borrowing from other funds are, or are expected to be, insufficient for the payment of all appropriations made by the Legislature which are to be paid out of the moneys in the General Fund, the State Controller may, based upon his or her estimate of the probable income to the General Fund during the then fiscal year and the probable dates of receipt thereof, may draw a demand or demands against appropriations made from the General Fund to be paid in the then current fiscal year prior to the receipt of the income, and deliver the demand or demands to the Treasurer. The Treasurer LOCAL AGENCY INVESTMENT GUIDELINES 56
shall register the demand or demands for nonpayment and may borrow moneys from the fund in an amount or amounts that is no greater than the demand or demands provided. The borrowing, together with the interest owed upon the account thereon, shall be paid exclusively from moneys in the General Fund on probable or reasonably anticipated revenues that are expected to be forthcoming within a short period of time, but not excepting recourse to internal borrowing from other funds in the event insufficient moneys are available from the General Fund. Repayment of any of those borrowings shall be considered a priority payment, equivalent to any other loan repayment made from the General Fund to another state fund.
(e) Notwithstanding any other law, the rate of interest to be earned by the depositors shall be the base apportionment rate based on their pro rata share of the earnings of the Pooled Money Investment Account on a quarterly basis at the end of each quarter plus an enhanced amount. The pro rata share shall be determined by a dollar day participation. The base apportionment rate applied to dollar day participation in the fund shall be the quarter-to-date average yield of the Pooled Money Investment Account for the current quarter. The enhancement amount paid to depositors in the fund shall be determined by the Director of Finance, in consultation with the Treasurer, and shall be added to the base rate earned by the Pooled Money Investment Account at the time the apportionment is made. The total interest cost described in this subdivision shall not exceed that provided for in paragraph (1) of subdivision (d) of Section 16731.
(f) Notwithstanding Section 13340, moneys in the fund are hereby continuously appropriated for payment of interest expenditures to depositors calculated in accordance with subdivision (e), other related expenses as determined by the Department of Finance, and return of deposits to depositors according to terms and conditions set by the Director of Finance, in consultation with the Treasurer. The amounts paid for interest and other related expenses shall be attributable to the fiscal year in which the borrowing occurred which is also the fiscal year upon which the appropriations against which the demand or demands were made.
(g) The Department of Finance shall determine the budget items to be used for the recording and reporting of interest expenditures and other related expenses pursuant to this section.
(h) Deposits in the fund shall be tracked separately for each participant in the state’s accounting system, and shall be deemed to be assets of each participant. These assets shall be reflected as such on each participant’s individual financial statements. (i) These deposits are, and may only be used, to cover short-term cash needs of the state and are, and shall be, in compliance with the provisions of Proposition 58 of March 2004 as stated in subdivision (c), Section 1.3 of Article XVI of the California Constitution. Deposits and borrowing from the fund shall comply with the state’s debt limit restrictions.
(j) Actions by the Director of Finance, in consultation with the Treasurer, in implementing and administering the investment program provided for in this LOCAL AGENCY INVESTMENT GUIDELINES 57
section and the Treasurer’s and Controller’s actions in borrowing from the fund shall be exempt from the provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3). (k) Upon projection of insufficient cash in the General Fund, the Director of Finance, in consultation with the Treasurer and Controller, may utilize provisions similar to Section 16381 to facilitate the implementation of the program.

Government Code Section 16429.1-16429.4
16429.1
(a) There is in trust in the custody of the Treasurer the Local Agency Investment Fund, which fund is hereby created. The Controller shall maintain a separate account for each governmental unit having deposits in this fund. (b) Notwithstanding any other provisions of law, a local governmental official, with the consent of the governing body of that agency, having money in its treasury not required for immediate needs, may remit the money to the Treasurer for deposit in the Local Agency Investment Fund for the purpose of investment. (c) Notwithstanding any other provisions of law, an officer of any nonprofit corporation whose membership is confined to public agencies or public officials, or an officer of a qualified quasi-governmental agency, with the consent of the governing body of that agency, having money in its treasury not required for immediate needs, may remit the money to the Treasurer for deposit in the Local Agency Investment Fund for the purpose of investment.
(d) Notwithstanding any other provision of law or of this section, a local agency, with the approval of its governing body, may deposit in the Local Agency Investment Fund proceeds of the issuance of bonds, notes, certificates of participation, or other evidences of indebtedness of the agency pending expenditure of the proceeds for the authorized purpose of their issuance. In connection with these deposits of proceeds, the Local Agency Investment Fund is authorized to receive and disburse moneys, and to provide information, directly with or to an authorized officer of a trustee or fiscal agent engaged by the local agency, the Local Agency Investment Fund is authorized to hold investments in the name and for the account of that trustee or fiscal agent, and the Controller shall maintain a separate account for each deposit of proceeds.
(e) The local governmental unit, the nonprofit corporation, or the quasi-governmental agency has the exclusive determination of the length of time its money will be on deposit with the Treasurer.
(f) The trustee or fiscal agent of the local governmental unit has the exclusive determination of the length of time proceeds from the issuance of bonds will be on deposit with the Treasurer.
(g) The Local Investment Advisory Board shall determine those quasi-governmental agencies which qualify to participate in the Local Agency Investment Fund.

LOCAL AGENCY INVESTMENT GUIDELINES 58
(h) The Treasurer may refuse to accept deposits into the fund if, in the judgment of the Treasurer, the deposit would adversely affect the state’s portfolio. (i) The Treasurer may invest the money of the fund in securities prescribed in Section 16430. The Treasurer may elect to have the money of the fund invested through the Surplus Money Investment Fund as provided in Article 4 (commencing with Section 16470) of Chapter 3 of Part 2 of Division 4 of Title 2. (j) Money in the fund shall be invested to achieve the objective of the fund which is to realize the maximum return consistent with safe and prudent treasury management.
(k) All instruments of title of all investments of the fund shall remain in the Treasurer’s vault or be held in safekeeping under control of the Treasurer in any federal reserve bank, or any branch thereof, or the Federal Home Loan Bank of San Francisco, with any trust company, or the trust department of any state or national bank.
(l) Immediately at the conclusion of each calendar quarter, all interest earned and other increment derived from investments shall be distributed by the Controller to the contributing governmental units or trustees or fiscal agents, nonprofit corporations, and quasi-governmental agencies in amounts directly proportionate to the respective amounts deposited in the Local Agency Investment Fund and the length of time the amounts remained therein. An amount equal to the reasonable costs incurred in carrying out the provisions of this section, not to exceed a maximum of 5 percent of the earnings of this fund and not to exceed the amount appropriated in the annual Budget Act for this function, shall be deducted from the earnings prior to distribution. The amount of this deduction shall be credited as reimbursements to the state agencies, including the Treasurer, the Controller, and the Department of Finance, having incurred costs in carrying out the provisions of this section. (m) The Treasurer shall prepare for distribution a monthly report of investments made during the preceding month.
(n) As used in this section, “local agency,” “local governmental unit,” and “local governmental official” includes a campus or other unit and an official, respectively, of the California State University who deposits moneys in funds described in Sections 89721, 89722, and 89725 of the Education Code. 16429.2
There is created the Local Investment Advisory Board consisting of five members.

The chairman shall be the State Treasurer or his or her designated representative. Two members who are qualified by training and experience in the field of investment or finance, shall be appointed by the State Treasurer. Two members who are treasurers, finance or fiscal officers or business managers, employed by any county, city or local district or municipal corporation of this state, shall be appointed by the Treasurer.

The term of office of each appointed member of the board is two years, but each appointed member serves at the pleasure of the appointing authority. A vacancy LOCAL AGENCY INVESTMENT GUIDELINES 59
in the appointed membership, occurring other than by expiration of term, shall be filled in the same manner as the original appointment, but for the unexpired term only.

Members of the board who are not state officers or employees shall not receive a salary, but shall be entitled to a per diem allowance of fifty dollars ($50) for each day’s attendance at a meeting of the board, not to exceed three hundred dollars ($300) in any month. All members shall be entitled to reimbursement for expenses incurred in the performance of their duties under this part, including travel and other necessary expenses.

The board’s primary purpose shall be to advise and assist the State Treasurer in formulating the investment and reinvestment of moneys in the Local Agency Investment Fund, and the acquisition, retention, management, and disposition of investments of the fund. The board, from time to time, shall review those policies and advise therein as it considers necessary or desirable. The board shall advise the State Treasurer in the management of the fund and consult the State Treasurer on any matter relating to the investment and reinvestment of moneys in the fund.
16429.3
Moneys placed with the Treasurer for deposit in the Local Agency Investment Fund by cities, counties, special districts, nonprofit corporations, or qualified quasi-governmental agencies shall not be subject to either of the following:
(a) Transfer or loan pursuant to Sections 16310, 16312, or 16313. (b) Impoundment or seizure by any state official or state agency. 16429.4
The right of a city, county, city and county, special district, nonprofit corporation, or qualified quasi-governmental agency to withdraw its deposited moneys from the Local Agency Investment Fund, upon demand, may not be altered, impaired, or denied, in any way, by any state official or state agency based upon the state’s failure to adopt a State Budget by July 1 of each new fiscal year.

Government Code Section 27000-27013
27000
The county treasurer shall receive and keep safely all money belonging to the county and all other money directed by law to be paid to him and apply and pay it out, rendering the account as required by law.
27000.1
Subject to Section 53607, the board of supervisors may, by ordinance, delegate to the county treasurer the authority to invest or reinvest the funds of the county LOCAL AGENCY INVESTMENT GUIDELINES 60
and the funds of other depositors in the county treasury, pursuant to Chapter 4 (commencing with Section 53600) of Part 1 of Division 2 of title 5. The county treasurer shall thereafter assume full responsibility for those transactions until the board of supervisors either revokes its delegation of authority, by ordinance, or decides not to renew the annual delegation, as provided in Section 53607. Nothing in this section shall limit the county treasurer’s authority pursuant to Section 53635 or 53684.
27000.3
(a) With regard to county funds deposited in the county treasury, the board of supervisors is the agent of the county who serves as a fiduciary and is subject to the prudent investor standard, unless a delegation has occurred pursuant to Section 53607 in which case the county treasurer shall be the agent of the county with respect to these funds, serve as a fiduciary, and be subject to the prudent investor standard and the board of supervisors shall not be the agent, serve as a fiduciary, or be subject to the prudent investor standard.
(b) With regard to funds deposited in the county treasury that are deposited by local agencies other than the county and at the discretion of those local agencies, the county treasurer serves as a fiduciary subject to the prudent investor standard. (c) When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, the county treasurer or the board of supervisors, as applicable, shall act with care, skill, prudence, and diligence under the circumstances then prevailing, specifically including, but not limited to, the general economic conditions and the anticipated needs of the county and other depositors, 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 county and the other depositors. Within the limitations of this section and considering individual investments as part of an overall investment strategy, investments may be acquired as authorized by law.

Nothing in this chapter is intended to grant investment authority to any person or governing body except as provided in Sections 53601, 53607, and 53635. 27000.5
When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, the primary objective of the county treasurer or the board of supervisors, as the case may be, shall be to safeguard the principal of the funds under the treasurer’s or the board’s control. The secondary objective shall be to meet the liquidity needs of the depositor. The third objective shall be to achieve a return on the funds under his or her control.
27000.6
The provisions of Sections 27000.7, 27000.8, and 27000.9 shall become effective only in those counties in which, prior to the first date of the period for filing declarations of candidacy for the office of county treasurer, county tax collector, or county treasurer-tax collector, the board of supervisors by majority vote at LOCAL AGENCY INVESTMENT GUIDELINES 61
a regular meeting with all members present, enact an ordinance adopting the provisions of those sections. That ordinance may be repealed by the board of supervisors at any time.
27000.7
(a) A person shall not be eligible for election or appointment to the office of county treasurer, county tax collector, or county treasurer-tax collector of any county unless that person meets at least one of the following criteria:
(1) The person has served in a senior financial management position in a county, city, or other public agency dealing with similar financial responsibilities for a continuous period of not less than three years, including, but not limited to, treasurer, tax collector, auditor, auditor-controller, or the chief deputy or an assistant in those offices. (2) The person possesses a valid baccalaureate, masters, or doctoral degree from an accredited college or university in any of the following major fields of study:
business administration, public administration, economics, finance, accounting, or a related field, with a minimum of 16 college semester units, or their equivalent, in accounting, auditing, or finance. (3) The person possesses a valid certificate issued by the California Board of Accountancy pursuant to Chapter 1 (commencing with Section 5000) of Division 3 of the Business and Professions Code, showing that person to be, and a permit authorizing that person to practice as, a certified public accountant. (4) The person possesses a valid charter issued by the Institute of Chartered Financial Analysts showing the person to be designated a Chartered Financial Analyst, with a minimum of 16 college semester units, or their equivalent, in accounting, auditing, or finance.
(b)(1) This section shall only apply to any person duly elected or appointed as a county treasurer, county tax collector, or county treasurer-tax collector on or after January 1, 1998.
(2) The amendments made by the act adding this paragraph apply to any person duly elected or appointed as a county treasurer, county tax collector, or county treasurer-tax collector on or after January 1, 2024.
27000.8
Any duly elected county treasurer, county tax collector, or county treasurer-tax collector serving in that office on January 1, 1996, may serve for his or her remaining term of office during which period of time the requirements of this section shall not apply. After the election of a county treasurer, county tax collector, or county treasurer-tax collector to office, that person shall complete a valid continuing course of study as prescribed in this section, and shall during the person’s four-year term of office on or before June 30 of the fourth year, render to the Controller a certification indicating that the person has successfully completed a continuing education program consisting of, at a minimum, 48 hours, or an LOCAL AGENCY INVESTMENT GUIDELINES 62
equivalent amount of continuing education units within the discipline of treasury management, tax collection, public finance, public administration, governmental accounting, or directly related subjects, offered by a recognized state or national association, institute, or accredited college or university, or the California Debt and Investment Advisory Commission, that provides the requisite educational programs prescribed in this section. The willful or negligent failure of any elected county treasurer, county tax collector, or county treasurer-tax collector to comply with the requirements of this section shall be deemed a violation of this section. 27000.9
Notwithstanding any other requirement of law, any duly appointed county officer serving in the capacity of county treasurer, county tax collector, or county treasurer-tax collector shall, beginning in 2000, complete a valid continuing course of study as prescribed in this section, and shall, on or before June 30 of each two-year period, render to the Controller, a certification indicating that the county officer has successfully completed a continuing education program consisting of, at a minimum, 24 hours or an equivalent amount of continuing education units within the discipline of treasury management, tax collection, public finance, public administration, governmental accounting, or directly related subjects, offered by a recognized state or national association, institute, or accredited college or university, or the California Debt and Investment Advisory Commission, that provides the requisite educational programs prescribed in this section. The willful or negligent failure of any county officer serving in the capacity of county treasurer, county tax collector, or county treasurer-tax collector to comply with the requirements of this section shall be deemed a violation of this section.
27001
The treasurer shall file and keep the certificates of the auditor delivered to him or her when money is paid into the treasury.

Notwithstanding Sections 26201, 26202, and 26205, the treasurer may destroy any certificate pursuant to this section under either of the following circumstances:
(a) The certificate has been filed for more than five years. (b) The certificate has been filed for more than one year, and all of the following conditions are complied with:
(1) The record, paper, or document is photographed, microphotographed, reproduced by electronically recorded video images on magnetic surfaces, or recorded on optical disk or reproduced on any other medium that does not permit additions, deletions, or changes to the original document and is produced in compliance with Section 12168.7 for recording of permanent records or nonpermanent records if the copy is kept or maintained for five years from the date of the document. (2) The device used to reproduce the record, paper, or document on film or any other medium is one that accurately reproduces the original thereof in all details.

A duplicate copy of any record reproduced in compliance with Section 12168.7 LOCAL AGENCY INVESTMENT GUIDELINES 63
for recording of permanent or nonpermanent records, whichever applies, shall be deemed an original.
(3) The photographs, microphotographs, or other reproductions on film or any other medium are placed in conveniently accessible files and provision is made for preserving, examining, and using the same.
(4) The record, paper, or document is reproduced and preserved utilizing other information technology.
27002
The treasurer shall keep an account of the receipt and expenditure of all money received or paid out by him or her in books provided for the purpose. He or she shall enter in the books the amount, the time, from whom, and on what account all money was received by him or her, and the warrant number, the amount, time, and on what account all disbursements were made by him or her. 27002.1
(a) The treasurer may, in lieu of entering in books an account of the receipt and expenditure of all money received or paid out by him or her as provided in Section 27002, photograph, microphotograph, photocopy, or enter into an electronic data-processing system that utilizes optical transmission and filing, all receipts for money received by him or her and all warrants paid out by him or her. (b) Every reproduction described in subdivision (a) shall be deemed and considered an original, and a transcript, exemplification, or certified copy of any of those reproductions shall be deemed and considered a transcript, exemplification, or certified copy, as the case may be, of the original. (c) All reproductions described in subdivision (a) shall be properly indexed and placed in convenient, accessible files. Each roll of microfilm shall be deemed and constitute a book, and shall be designated and numbered, and provision shall be made for preserving, examining, and using it. A duplicate of each roll of microfilm shall be made and kept in a safe and separate place. 27003
The treasurer shall keep his or her books or any other authorized form of record so that the amounts received and paid out on account of separate funds or specific appropriations are exhibited in separate and distinct accounts, and the whole receipts and expenditures shown in one general or cash account. 27005
The treasurer shall disburse the county money and all other money placed in his or her custody by official authority only on county warrants, checks, or electronic fund transfers issued by the county auditor, except for the making of legal investments.

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27006
The treasurer shall disburse the money in the treasury on county warrants only when they are based on orders of the board of supervisors, upon order of the superior court, or as otherwise provided by law. In the payment of the warrants he may issue his order, check, or draft drawn upon proper funds that are on deposit in any bank.
27007
The treasurer shall keep all money belonging to the State, or any county of the State in his own possession until disbursed according to law. He shall not place the money in the possession of any person to be used for any purpose, nor shall he loan or in any manner use, or permit any person to use it, except as provided by law. This section does not prohibit him from making special deposits for the safe-keeping of public money, but he is liable therefore on his official bond. 27008
(a) The treasurer shall not receive money into the treasury or for deposit with him or her as treasurer, unless it is accompanied by the certificate of the auditor. (b) Notwithstanding subdivision (a), the auditor and treasurer may establish alternate control procedures for the treasurer to receive or deposit money without the certificate of the auditor.
27009
The treasurer shall give a receipt to each person who deposits money into the county treasury.
27010
The treasurer may receive any money constituting gift, bequest, or devise, and pay it out in accordance with the terms thereof, or, if none are fixed, according to law.
27011
Any county officer who knowingly accepts or allows any deposit in the county treasury of money from any private and unofficial source is guilty of a misdemeanor, punishable by imprisonment in the county jail for not less than six months nor more than one year, or by a fine of not less than five hundred dollars ($500) and not more than five thousand dollars ($5,000), or by both that fine and imprisonment, and shall forfeit his or her office.
27012
The Controller may summon county treasurers or the authorized representative of any county treasurer to meet with the Controller or his or her duly LOCAL AGENCY INVESTMENT GUIDELINES 65
authorized representatives, in those groups and at that place or those places within the state as may be designated by the Controller for the purpose of discussing the interpretation, procedures, uniformity of operation, and efficient administration of the Revenue and Taxation Code and the Government Code.

The actual and necessary expenses of any county officer or his or her authorized representative that are incurred while traveling to and from or while attending any meeting called pursuant to this section by the Controller shall be a charge against the county, to be paid in the same manner as other county charges are paid, provided that prior approval of the board of supervisors has been obtained.
27013
Notwithstanding any other provision of law, any treasurer, or other authorized county officer, who invests, deposits or otherwise handles funds for public agencies for the purpose of earning interest or other income on such funds as permitted by law, may deduct from such interest or income, before distribution thereof, the actual administrative cost of such investing, depositing or handling of funds and of distribution of such interest or income. Such cost reimbursement shall be paid into the county general fund.

Government Code Section 27130-27137
27130
The Legislature finds and declares that local agencies, including school districts, should participate in reviewing the policies that guide the investment of those funds. The Legislature further finds and declares that by pooling deposits from local agencies and other participants, county treasuries operate in the public interest when they consolidate banking and investment activities, reduce duplication, achieve economies of scale, and carry out coherent and consolidated investment strategies. The Legislature further finds and declares that the creation of county treasury oversight committees will promote the public interest by involving depositors in the management of their funds and by enhancing the security and investment return on their funds by providing a more stable and predictable balance for investment by establishing criteria for the withdrawal of funds.
27131
(a) The board of supervisors in each county or city and county may, if the county or city and county is investing surplus funds, establish a county treasury oversight committee. The board of supervisors, in consultation with the county treasurer, shall determine the exact size of the committee, which shall consist of from 3 to 11 members, and the categories from which the members shall be represented, as specified in subdivisions (a) to (g), inclusive, of Section 27132. Members shall be nominated by the treasurer and confirmed by the board of supervisors.

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(b) In recognition of the state and local interests served by the action made optional in subdivision (a), the Legislature encourages local agencies to continue taking the action formerly mandated by this section. However, nothing in this subdivision may be construed to impose any liability on a local agency that does not continue to take the formerly mandated action.
27132
The county treasury oversight committee, pursuant to Section 27131, shall consist of members appointed from the following:
(a) The county treasurer.
(b) The county auditor, auditor-controller, or finance director, as the case may be. (c) A representative appointed by the county board of supervisors. (d) The county superintendent of schools or his or her designee. (e) A representative selected by a majority of the presiding officers of the governing bodies of the school districts and community college districts in the county. (f) A representative selected by a majority of the presiding officers of the legislative bodies of the special districts in the county that are required or authorized to deposit funds in the county treasury.
(g) Up to five other members of the public.
(1) A majority of the other public members shall have expertise in, or an academic background in, public finance. (2) The other public members shall be economically diverse and bipartisan in political registration.
27132.1
A member may not be employed by an entity that has (a) contributed to the campaign of a candidate for the office of local treasurer, or (b) contributed to the campaign of a candidate to be a member of a legislative body of any local agency that has deposited funds in the county treasury, in the previous three years or during the period that the employee is a member of the committee. 27132.2
A member may not directly or indirectly raise money for a candidate for local treasurer or a member of the governing board of any local agency that has deposited funds in the county treasury while a member of the committee. 27132.3
A member may not secure employment with, or be employed by, bond underwriters, bond counsel, security brokerages or dealers, or financial services firms, LOCAL AGENCY INVESTMENT GUIDELINES 67
with whom the treasurer is doing business during the period that the person is a member of the committee or for one year after leaving the committee. 27132.4
Committee meetings shall be open to the public and subject to the Ralph M.

Brown Act (Chapter 9 (commencing with Section 54950) of Part 1 of Division 2 of Title 5).
27133
In any county that establishes a county treasury oversight committee pursuant to this article, the county treasurer shall annually prepare an investment policy that will be reviewed and monitored by the county treasury oversight committee. The investment policy shall include all of the following:
(a) A list of securities or other instruments in which the county treasury may invest, according to law, including the maximum allowable percentage by type of security.
(b) The maximum term of any security purchased by the county treasury. (c) The criteria for selecting security brokers and dealers from, to, or through whom the county treasury may purchase or sell securities or other instruments.

The criteria shall prohibit the selection of any broker, brokerage, dealer, or securities firm that has, within any consecutive 48-month period following January 1, 1996, made a political contribution in an amount exceeding the limitations contained in Rule G-37 of the Municipal Securities Rulemaking Board, to the local treasurer, any member of the governing board of the local agency, or any candidate for those offices.
(d) Limits on the receipt of honoraria, gifts, and gratuities from advisors, brokers, dealers, bankers, or other persons with whom the county treasury conducts business by any member of the county treasury oversight committee. These limits may be in addition to the limits set by a committee member’s own agency, by state law, or by the Fair Political Practices Commission. (e) A requirement that the county treasurer provide the county treasury oversight committee with an investment report as required by the board of supervisors. (f) The manner of calculating and apportioning the costs, authorized by Section 27013, of investing, depositing, banking, auditing, reporting, or otherwise handling or managing funds. (g) The terms and conditions under which local agencies and other entities that are not required to deposit their funds in the county treasury may deposit funds for investment purposes.
(h) Criteria for considering requests to withdraw funds from the county treasury, pursuant to Section 27136. The criteria shall include an assessment of the effect of a proposed withdrawal on the stability and predictability of the investments in the county treasury.

LOCAL AGENCY INVESTMENT GUIDELINES 68
27134
The county treasury oversight committee shall cause an annual audit to be conducted to determine the county treasury’s compliance with this article. The audit may include issues relating to the structure of the investment portfolio and risk. 27135
The costs of complying with this article shall be county charges and may be included with those charges enumerated under Section 27013. 27136
(a) Notwithstanding any other provision of law, any local agency, public agency, public entity, or public official that has funds on deposit in the county treasury pool and that seeks to withdraw funds for the purpose of investing or depositing those funds outside the county treasury pool, shall first submit the request for withdrawal to the county treasurer before withdrawing funds from the county treasury pool.
(b) The county treasurer shall evaluate each proposed withdrawal for its consistency with the criteria adopted pursuant to subdivision (h) of Section 27133.

Prior to approving a withdrawal, the county treasurer shall find that the proposed withdrawal will not adversely affect the interests of the other depositors in the county treasury pool.
27137
Nothing in this article shall be construed to allow the county treasury oversight committee to direct individual investment decisions, select individual investment advisors, brokers, or dealers, or impinge on the day-to-day operations of the county treasury.

Government Code Section 53600-53610
53600
As used in this article, “local agency” means county, city, city and county, including a chartered city or county, school district, community college district, public district, county board of education, county superintendent of schools, or any public or municipal corporation.
53600.3
Except as provided in subdivision (a) of Section 27000.3, all governing bodies of local agencies or persons authorized to make investment decisions on behalf of those local agencies investing public funds pursuant to this chapter are trustees and therefore fiduciaries subject to the prudent investor standard. When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public LOCAL AGENCY INVESTMENT GUIDELINES 69
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.
53600.5
When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, the primary objective of a trustee shall be to safeguard the principal of the funds under its control. The secondary objective shall be to meet the liquidity needs of the depositor. The third objective shall be to achieve a return on the funds under its control. 53600.6.

The Legislature hereby finds that the solvency and creditworthiness of each individual local agency can impact the solvency and creditworthiness of the state and other local agencies within the state. Therefore, to protect the solvency and creditworthiness of the state and all of its political subdivisions, the Legislature hereby declares that the deposit and investment of public funds by local officials and local agencies is an issue of statewide concern.
53601.

This section shall apply to a local agency that is a city, a district, or other local agency that does not pool money in deposits or investments with other local agencies, other than local agencies that have the same governing body. However, Section 53635 shall apply to all local agencies that pool money in deposits or investments with other local agencies that have separate governing bodies. The legislative body of a local agency having moneys in a sinking fund or moneys in its treasury not required for the immediate needs of the local agency may invest any portion of the moneys that it deems wise or expedient in those investments set forth below. A local agency purchasing or obtaining any securities prescribed in this section, in a negotiable, bearer, registered, or nonregistered format, shall require delivery of the securities to the local agency, including those purchased for the agency by financial advisers, consultants, or managers using the agency’s funds, by book entry, physical delivery, or by third-party custodial agreement.

The transfer of securities to the counterparty bank’s customer book entry account may be used for book entry delivery.

For purposes of this section, “counterparty” means the other party to the transaction. A counterparty bank’s trust department or separate safekeeping department may be used for the physical delivery of the security if the security is held in the name of the local agency. Where this section specifies a percentage limitation for a particular category of investment, that percentage is applicable LOCAL AGENCY INVESTMENT GUIDELINES 70
only at the date of purchase. For purposes of compliance with this section, an investment’s term or remaining maturity shall be measured from the settlement date to final maturity. A security purchased in accordance with this section shall not have a forward settlement date exceeding 45 days from the time of investment. Where this section does not specify a limitation on the term or remaining maturity at the time of the investment, no investment shall be made in any security, other than a security underlying a repurchase or reverse repurchase agreement or securities lending agreement authorized by this section, that at the time of the investment has a term remaining to maturity in excess of five years, unless the legislative body has granted express authority to make that investment either specifically or as a part of an investment program approved by the legislative body no less than three months prior to the investment:
(a) Bonds issued by the local agency, including bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by the local agency or by a department, board, agency, or authority of the local agency. (b) United States Treasury notes, bonds, bills, or certificates of indebtedness, or those for which the faith and credit of the United States are pledged for the payment of principal and interest. (c) Registered state warrants or treasury notes or bonds of this state, including bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by the state or by a department, board, agency, or authority of the state.
(d) Registered treasury notes or bonds of any of the other 49 states in addition to California, including bonds payable solely out of the revenues from a revenueproducing 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. (e) Bonds, notes, warrants, or other evidences of indebtedness of a local agency within this state, including bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by the local agency, or by a department, board, agency, or authority of the local agency. (f) Federal agency or United States government-sponsored enterprise obligations, participations, or other instruments, including those issued by or fully guaranteed as to principal and interest by federal agencies or United States governmentsponsored enterprises. (g) Bankers’ acceptances otherwise known as bills of exchange or time drafts that are drawn on and accepted by a commercial bank. Purchases of bankers’ acceptances shall not exceed 180 days’ maturity or 40 percent of the agency’s moneys that may be invested pursuant to this section. However, no more than 30 percent of the agency’s moneys may be invested in the bankers’ acceptances of any one commercial bank pursuant to this section.

This subdivision does not preclude a municipal utility district from investing moneys in its treasury in a manner authorized by the Municipal Utility District Act (Division 6 (commencing with Section 11501) of the Public Utilities Code).

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(h) Commercial paper of “prime” quality of the highest ranking or of the highest letter and number rating as provided for by a nationally recognized statistical rating organization (NRSRO). The entity that issues the commercial paper shall meet all of the following conditions in either paragraph (1) or (2):
(1) The entity meets the following criteria:
(A) Is organized and operating in the United States as a general corporation. (B) Has total assets in excess of five hundred million dollars ($500,000,000). (C) Has debt other than commercial paper, if any, that is rated in a rating category of “A” or its equivalent or higher by an NRSRO. (2) The entity meets the following criteria:
(A) Is organized within the United States as a special purpose corporation, trust, or limited liability company.
(B) Has program wide credit enhancements including, but not limited to, overcollateralization, letters of credit, or a surety bond. (C) Has commercial paper that is rated “A-1” or higher, or the equivalent, by an NRSRO. Eligible commercial paper shall have a maximum maturity of 270 days or less. Local agencies, other than counties or a city and county, that have less than one hundred million dollars ($100,000,000) of investment assets under management, may invest no more than 25 percent of their moneys in eligible commercial paper. Local agencies, other than counties or a city and county, that have one hundred million dollars ($100,000,000) or more of investment assets under management may invest no more than 40 percent of their moneys in eligible commercial paper. A local agency, other than a county or a city and a county, may invest no more than 10 percent of its total investment assets in the commercial paper and the medium-term notes of any single issuer. Counties or a city and county may invest in commercial paper pursuant to the concentration limits in subdivision (a) of Section 53635.
(i) Negotiable certificates of deposit issued by a nationally or state-chartered bank, a savings association or a federal association (as defined by Section 5102 of the Financial Code), a state or federal credit union, or by a federally licensed or state-licensed branch of a foreign bank. Purchases of negotiable certificates of deposit shall not exceed 30 percent of the agency’s moneys that may be invested pursuant to this section. For purposes of this section, negotiable certificates of deposit do not come within Article 2 (commencing with Section 53630), except that the amount so invested shall be subject to the limitations of Section 53638.

The legislative body of a local agency and the treasurer or other official of the local agency having legal custody of the moneys are prohibited from investing local agency funds, or funds in the custody of the local agency, in negotiable certificates of deposit issued by a state or federal credit union if a member of the legislative body of the local agency, or a person with investment decision-making authority in the administrative office manager’s office, budget office, auditorcontroller’s office, or treasurer’s office of the local agency also serves on the board of directors, or any committee appointed by the board of directors, or the credit LOCAL AGENCY INVESTMENT GUIDELINES 72
committee or the supervisory committee of the state or federal credit union issuing the negotiable certificates of deposit. (j)(1) Investments in repurchase agreements or reverse repurchase agreements or securities lending agreements of any securities authorized by this section, as long as the agreements are subject to this subdivision, including the delivery requirements specified in this section. (2) Investments in repurchase agreements may be made, on an investment authorized in this section, when the term of the agreement does not exceed one year. The market value of securities that underlie a repurchase agreement shall be valued at 102 percent or greater of the funds borrowed against those securities and the value shall be adjusted no less than quarterly. Since the market value of the underlying securities is subject to daily market fluctuations, the investments in repurchase agreements shall be in compliance if the value of the underlying securities is brought back up to 102 percent no later than the next business day. (3) Reverse repurchase agreements or securities lending agreements may be utilized only when all of the following conditions are met:
(A) The security to be sold using a reverse repurchase agreement or securities lending agreement has been owned and fully paid for by the local agency for a minimum of 30 days prior to sale.
(B) The total of all reverse repurchase agreements and securities lending agreements on investments owned by the local agency does not exceed 20 percent of the base value of the portfolio.
(C) The agreement does not exceed a term of 92 days, unless the agreement includes a written codicil guaranteeing a minimum earning or spread for the entire period between the sale of a security using a reverse repurchase agreement or securities lending agreement and the final maturity date of the same security. (D) Funds obtained or funds within the pool of an equivalent amount to that obtained from selling a security to a counterparty using a reverse repurchase agreement or securities lending agreement shall not be used to purchase another security with a maturity longer than 92 days from the initial settlement date of the reverse repurchase agreement or securities lending agreement, unless the everse repurchase agreement or securities lending agreement includes a written codicil guaranteeing a minimum earning or spread for the entire period between the sale of a security using a reverse repurchase agreement or securities lending agreement and the final maturity date of the same security.
(4)(A) Investments in reverse repurchase agreements, securities lending agreements, or similar investments in which the local agency sells securities prior to purchase with a simultaneous agreement to repurchase the security may be made only upon prior approval of the governing body of the local agency and shall be made only with primary dealers of the Federal Reserve Bank of New York or with a nationally or state-chartered bank that has or has had a significant banking relationship with a local agency.

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(B) For purposes of this chapter, “significant banking relationship” means any of the following activities of a bank:
(i) Involvement in the creation, sale, purchase, or retirement of a local agency’s bonds, warrants, notes, or other evidence of indebtedness. (ii) Financing of a local agency’s activities.
(iii) Acceptance of a local agency’s securities or funds as deposits. (5)(A) “Repurchase agreement” means a purchase of securities by the local agency pursuant to an agreement by which the counterparty seller will repurchase the securities on or before a specified date and for a specified amount and the counterparty will deliver the underlying securities to the local agency by book entry, physical delivery, or by third-party custodial agreement. The transfer of underlying securities to the counterparty bank’s customer book-entry account may be used for book-entry delivery.
(B) “Securities,” for purposes of repurchase under this subdivision, means securities of the same issuer, description, issue date, and maturity. (C) “Reverse repurchase agreement” means a sale of securities by the local agency pursuant to an agreement by which the local agency will repurchase the securities on or before a specified date and includes other comparable agreements. (D) “Securities lending agreement” means an agreement under which a local agency agrees to transfer securities to a borrower who, in turn, agrees to provide collateral to the local agency. During the term of the agreement, both the securities and the collateral are held by a third party. At the conclusion of the agreement, the securities are transferred back to the local agency in return for the collateral. (E) For purposes of this section, the base value of the local agency’s pool portfolio shall be that dollar amount obtained by totaling all cash balances placed in the pool by all pool participants, excluding any amounts obtained through selling securities by way of reverse repurchase agreements, securities lending agreements, or other similar borrowing methods.
(F) For purposes of this section, the spread is the difference between the cost of funds obtained using the reverse repurchase agreement and the earnings obtained on the reinvestment of the funds.
(k) Medium-term notes, defined as all corporate and depository institution debt securities with a maximum remaining maturity of five years or less, issued by corporations organized and operating within the United States or by depository institutions licensed by the United States or any state and operating within the United States. Notes eligible for investment under this subdivision shall be rated in a rating category of “A” or its equivalent or better by an NRSRO. Purchases of mediumterm notes shall not include other instruments authorized by this section and shall not exceed 30 percent of the agency’s moneys that may be invested pursuant to this section. A local agency, other than a county or a city and a county, may invest no more than 10 percent of its total investment assets in the commercial paper and the medium-term notes of any single issuer.

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(l)(1) Shares of beneficial interest issued by diversified management companies that invest in the securities and obligations as authorized by subdivisions (a) to (k), inclusive, and subdivisions (m) to (q), inclusive, and that comply with the investment restrictions of this article and Article 2 (commencing with Section 53630). However, notwithstanding these restrictions, a counterparty to a reverse repurchase agreement or securities lending agreement is not required to be a primary dealer of the Federal Reserve Bank of New York if the company’s board of directors finds that the counterparty presents a minimal risk of default, and the value of the securities underlying a repurchase agreement or securities lending agreement may be 100 percent of the sales price if the securities are marked to market daily. (2) Shares of beneficial interest issued by diversified management companies that are money market funds registered with the United States Securities and Exchange Commission under the Investment Company Act of 1940 (15 U.S.C.

Sec. 80a-1 et seq.).
(3) If investment is in shares issued pursuant to paragraph (1), the company shall have met either of the following criteria:
(A) Attained the highest ranking or the highest letter and numerical rating provided by not less than two NRSROs. (B) Retained an investment adviser registered or exempt from registration with the United States Securities and Exchange Commission with not less than five years’ experience investing in the securities and obligations authorized by subdivisions (a) to (k), inclusive, and subdivisions (m) to (q), inclusive, and with assets under management in excess of five hundred million dollars ($500,000,000). (4) If investment is in shares issued pursuant to paragraph (2), the company shall have met either of the following criteria:
(A) Attained the highest ranking or the highest letter and numerical rating provided by not less than two NRSROs. (B) Retained an investment adviser registered or exempt from registration with the United States Securities and Exchange Commission with not less than five years’ experience managing money market mutual funds with assets under management in excess of five hundred million dollars ($500,000,000). (5) The purchase price of shares of beneficial interest purchased pursuant to this subdivision shall not include any commission that the companies may charge and shall not exceed 20 percent of the agency’s moneys that may be invested pursuant to this section. However, no more than 10 percent of the agency’s funds may be invested in shares of beneficial interest of any one mutual fund pursuant to paragraph (1).
(m) Moneys held by a trustee or fiscal agent and pledged to the payment or security of bonds or other indebtedness, or obligations under a lease, installment sale, or other agreement of a local agency, or certificates of participation in those bonds, indebtedness, or lease installment sale, or other agreements, may be invested in accordance with the statutory provisions governing the issuance of LOCAL AGENCY INVESTMENT GUIDELINES 75
those bonds, indebtedness, or lease installment sale, or other agreement, or to the extent not inconsistent therewith or if there are no specific statutory provisions, in accordance with the ordinance, resolution, indenture, or agreement of the local agency providing for the issuance. (n) Notes, bonds, or other obligations that are at all times secured by a valid first priority security interest in securities of the types listed by Section 53651 as eligible securities for the purpose of securing local agency deposits having a market value at least equal to that required by Section 53652 for the pupose of securing local agency deposits. The securities serving as collateral shall be placed by delivery or book entry into the custody of a trust company or the trust department of a bank that is not affiliated with the issuer of the secured obligation, and the security interest shall be perfected in accordance with the requirements of the Uniform Commercial Code or federal regulations applicable to the types of securities in which the security interest is granted. (o)(1) A mortgage passthrough security, collateralized mortgage obligation, mortgage-backed or other pay-through bond, equipment lease-backed certificate, consumer receivable passthrough certificate, or consumer receivable-backed bond. (2) For securities eligible for investment under this subdivision not issued or guaranteed by an agency or issuer identified in subdivision (b) or (f), the following limitations apply:
(A) The security shall be rated in a rating category of “AA” or its equivalent or better by an NRSRO and have a maximum remaining maturity of five years or less. (B) Purchase of securities authorized by this paragraph shall not exceed 20 percent of the agency’s surplus moneys that may be invested pursuant to this section. (p) Shares of beneficial interest issued by a joint powers authority organized pursuant to Section 6509.7 that invests in the securities and obligations authorized in subdivisions (a) to (r), inclusive. Each share shall represent an equal proportional interest in the underlying pool of securities owned by the joint powers authority.

To be eligible under this section, the joint powers authority issuing the shares shall have retained an investment adviser that meets all of the following criteria:
(1) The adviser is registered or exempt from registration with the United States Securities and Exchange Commission.
(2) The adviser has not less than five years of experience investing in the securities and obligations authorized in subdivisions (a) to (q), inclusive. (3) The adviser has assets under management in excess of five hundred million dollars ($500,000,000).
(q) United States dollar denominated senior unsecured unsubordinated obligations issued or unconditionally guaranteed by the International Bank for Reconstruction and Development, International Finance Corporation, or InterAmerican Development Bank, with a maximum remaining maturity of five years or less, and eligible for purchase and sale within the United States. Investments under this subdivision shall be rated in a rating category of “AA” or its equivalent LOCAL AGENCY INVESTMENT GUIDELINES 76
or better by an NRSRO and shall not exceed 30 percent of the agency’s moneys that may be invested pursuant to this section.
(r) Commercial paper, debt securities, or other obligations of a public bank, as defined in Section 57600.

This section shall remain in effect only until January 1, 2026, and as of that date is repealed.
53601.1
The authority of a local agency to invest funds pursuant to Section 53601 includes, in addition thereto, authority to invest in financial futures or financial option contracts in any of the investment categories enumerated in that section. 53601.2
As used in this article, “corporation” includes a limited liability company. 53601.5
The purchase by a local agency of any investment authorized pursuant to Section 53601 or 53601.1, not purchased directly from the issuer, shall be purchased either from an institution licensed by the state as a broker-dealer, as defined in Section 25004 of the Corporations Code, or from a member of a federally regulated securities exchange, from a national or state-chartered bank, from a savings association or federal association (as defined by Section 5102 of the Financial Code) or from a brokerage firm designated as a primary government dealer by the Federal Reserve bank.
53601.6
(a) A local agency shall not invest any funds pursuant to this article or pursuant to Article 2 (commencing with Section 53630) in inverse floaters, range notes, or mortgage-derived, interest-only strips.
(b) (1) Except as provided in paragraph (2), a local agency shall not invest any funds pursuant to this article or pursuant to Article 2 (commencing with Section 53630) in any security that could result in zero interest accrual if held to maturity. However, a local agency may hold prohibited instruments until their maturity dates. The limitation in this subdivision shall not apply to local agency investments in shares of beneficial interest issued by diversified management companies registered under the Investment Company Act of 1940 (15 U.S.C.

Sec. 80a-1 et seq.) that are authorized for investment pursuant to subdivision (l) of Section 53601.
(2) Notwithstanding the prohibition in paragraph (1), a local agency may invest in securities issued by, or backed by, the United States government that could result in zero- or negative-interest accrual if held to maturity, in the event of, and for the duration of, a period of negative market interest rates. A local agency may hold these instruments until their maturity dates.

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(c) This section shall remain in effect only until January 1, 2026, and as of that date is repealed.
53601.8
Notwithstanding any other provision of this code, 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 bank, savings and loan association, or credit union that uses a private sector entity that assists in the placement of deposits. The following conditions shall apply:
(a) The local agency shall choose a nationally or state-chartered commercial bank, savings bank, savings and loan association, or credit union in this state to invest the funds, which shall be known as the “selected” depository institution. (b) The selected depository institution may use a private sector entity to help place local agency deposits with one or more commercial banks, savings banks, savings and loan associations, or credit unions that are located in the United States and are within the network used by the private sector entity for this purpose. (c) The selected depository institution shall request that the local agency inform it of depository institutions at which the local agency has other deposits, and the selected depository institution shall provide that information to the private sector entity.
(d) Any private sector entity used by a selected depository institution to help place its local agency deposits shall maintain policies and procedures requiring all of the following:
(1) The full amount of each deposit placed pursuant to subdivision (b) and the interest that may accrue on each such deposit shall at all times be insured by the Federal Deposit Insurance Corporation or the National Credit Union Administration. (2) Every depository institution where funds are placed shall be capitalized at a level that is sufficient, and be otherwise eligible, to receive such deposits pursuant to regulations of the Federal Deposit Insurance Corporation or the National Credit Union Administration, as applicable.
(3) At the time of the local agency’s investment with a selected depository institution and no less than monthly thereafter, the private sector entity shall ensure that the local agency is provided with an inventory of all depository institutions in which deposits have been placed on the local agency’s behalf, that are within the private sector entity’s network.
(4) Within its network, the private sector entity shall ensure that it does not place additional deposits from a particular local agency with any depository institution identified pursuant to subdivision (c) as holding that local agency’s deposits if those additional deposits would result in that local agency’s total amount on deposit at that depository institution exceeding the Federal Deposit Insurance Corporation or the National Credit Union Administration insurance limit.

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(e) If a selected depository uses two or more private sector entities to assist in the placement of a local agency’s deposits, the selected depository shall ensure that it does not place additional deposits from a particular local agency with a depository institution if those additional deposits would result in that local agency’s total amount on deposit at that depository institution exceeding the Federal Deposit Insurance Corporation or the National Credit Union Administration insurance limit. (f) The selected depository institution shall serve as a custodian for each such deposit.
(g) On the same date that the local agency’s funds are placed pursuant to subdivision (b) by the private sector entity, the selected depository institution shall receive an amount of insured deposits from other financial institutions that, in total, are equal to, or greater than, the full amount of the principal that the local agency initially deposited through the selected depository institution pursuant to subdivision (b).
(h) Notwithstanding subdivisions (a) to (g), inclusive, a credit union shall not act as a selected depository institution under this section unless both of the following conditions are satisfied:
(1) The credit union offers federal depository insurance through the National Credit Union Administration.
(2) The credit union is in possession of written guidance or other written communication from the National Credit Union Administration authorizing participation of federally insured credit unions in one or more deposit placement services and affirming that the moneys held by those credit unions while participating in a deposit placement service will at all times be insured by the federal government.
(i) It is the intent of the Legislature that this section shall not restrict competition among private sector entities that provide placement services pursuant to this section.
(j) The deposits placed pursuant to this section shall be subject to Section 53638 and shall not, in total, exceed 30 percent of the agency’s funds that may be invested for this purpose. (k) This section shall become operative on January 1, 2026. 53602
The legislative body shall invest only in notes, bonds, bills, certificates of indebtedness, warrants, or registered warrants which are legal investments for savings banks in the State, provided, that the board of supervisors of a county may, by a four-fifths vote thereof, invest in notes, warrants or other evidences of indebtedness of public districts wholly or partly within the county, whether or not such notes, warrants, or other evidences of indebtedness are legal investments for savings banks.

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53603
The legislative body may make the investment by direct purchase of any issue of eligible securities at their original sale or after they have been issued. 53604
The legislative body may sell, or exchange for other eligible securities, and reinvest the proceeds of, the securities purchased. 53605
From time to time, the legislative body shall sell the securities so that the proceeds may be applied to the purposes for which the original purchase money was placed in the sinking fund or the treasury of the local agency. 53606
The bonds purchased, which were issued by the purchaser, may be canceled either in satisfaction or sinking fund obligations or otherwise. When canceled, they are no longer outstanding, unless in its discretion, the legislative body holds then uncanceled. While held uncanceled, the bonds may be resold. 53607
The authority of the legislative body to invest or to reinvest funds of a local agency, or to sell or exchange securities so purchased, may be delegated for a oneyear period by the legislative body to the treasurer of the local agency, who shall thereafter assume full responsibility for those transactions until the delegation of authority is revoked or expires, and shall make a monthly report of those transactions to the legislative body. Subject to review, the legislative body may renew the delegation of authority pursuant to this section each year. 53608
The legislative body of a local agency may deposit for safekeeping with a federal or state association (as defined by Section 5102 of the Financial Code), a trust company or a state or national bank located within this state or with the Federal Reserve Bank of San Francisco or any branch thereof within this state, or with any Federal Reserve bank or with any state or national bank located in any city designated as a reserve city by the Board of Governors of the Federal Reserve System, the bonds, notes, bills, debentures, obligations, certificates of indebtedness, warrants, or other evidences of indebtedness in which the money of the local agency is invested pursuant to this article or pursuant to other legislative authority. The local agency shall take from such financial institution a receipt for securities so deposited. The authority of the legislative body to deposit for safekeeping may be delegated by the legislative body to the treasurer of the local agency; the treasurer shall not be responsible for securities delivered to and receipted for by a financial institution until they are withdrawn from the financial institution by the treasurer.

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53609
Notwithstanding the provisions of this chapter or any other provisions of this code, funds held by a local agency pursuant to a written agreement between the agency and employees of the agency to defer a portion of the compensation otherwise receivable by the agency’s employees and pursuant to a plan for such deferral as adopted by the governing body of the agency, may be invested in the types of investments set forth in Sections 53601 and 53602 of this code, and may additionally be invested in corporate stocks, bonds, and securities, mutual funds, savings and loan accounts, credit union accounts, life insurance policies, annuities, mortgages, deeds of trust, or other security interests in real or personal property. Nothing herein shall be construed to permit any type of investment prohibited by the Constitution.

Deferred compensation funds are public pension or retirement funds for the purposes of Section 17 of Article XVI of the Constitution. 53610
(a) For purposes of this section, “Proposition 1A receivable” means the right to payment of moneys due or to become due to a local agency, pursuant to clause (iii) of subparagraph (B) of paragraph (1) of subdivision (a) of Section 25.5 of Article XIII of the California Constitution and Section 100.06 of the Revenue and Taxation Code.
(b) Notwithstanding any other law, a local agency may purchase, with its revenue, Proposition 1A receivables sold pursuant to Section 53999. (c) A purchaser of Proposition 1A receivables pursuant to this section shall not offer them for sale pursuant to Section 6588.

Government Code Section 53620-53622
53620
Notwithstanding Section 53601 or 53635, the governing body of a local agency may invest funds designated for the payment of employee retiree health benefits in any form or type of investment deemed prudent by the governing body pursuant to Section 53622. 53621
The authority of the governing body to invest or to reinvest funds intended for the payment of employee retiree health benefits, or to sell or exchange securities purchased for that purpose, may be delegated by the governing body to designated officers.

LOCAL AGENCY INVESTMENT GUIDELINES 81
53622
(a) Funds intended for the payment of employee retiree health benefits shall only be held for the purpose of providing benefits to participants in the retiree health benefit plan and defraying reasonable expenses of administering that plan. (b) The governing body or designated officer, when making investments of the funds, shall discharge its duties with respect to the investment of the funds. (1) Solely in the interest of, and for the exclusive purposes of providing benefits to, participants in the retiree health benefit plan, minimizing employer contributions thereto, and defraying reasonable expenses of administering the plan. (2) With the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with these matters would use in the conduct of an enterprise of a like character and with like aims. (3) Shall diversify the investments of the funds so as to minimize the risk of loss and to maximize the rate of return, unless under the circumstances it is clearly prudent not to do so.

Government Code Section 53630-53686
53630
As used in this article:
(a) “Local agency” means county, city, city and county, including a chartered city or county, a community college district, or other public agency or corporation in this state.
(b) “Treasurer” means treasurer of the local agency.
(c) “Depository” means a state or national bank, savings association or federal association, a state or federal credit union, or a federally insured industrial loan company, in this state in which the moneys of a local agency are deposited. (d) “Agent of depository” means a trust company or trust department of a state or national bank located in this state, including the trust department of a depository where authorized, and the Federal Home Loan Bank of San Francisco, which is authorized to act as an agent of depository for the purposes of this article pursuant to Section 53657. (e) “Security” means any of the eligible securities or obligations listed in Section 53651.
(f) “Pooled securities” means eligible securities held by an agent of depository for a depository and securing deposits of one or more local agencies. (g) “Administrator” means the Administrator of Local Agency Security of the State of California.

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(h) “Savings association or federal association” means a savings association, savings and loan association, or savings bank as defined by Section 5102 of the Financial Code.
(i) “Federally insured industrial loan company” means an industrial loan company licensed under Division 7 (commencing with Section 18000) of the Financial Code, the investment certificates of which are insured by the Federal Deposit Insurance Corporation.
(j) “Corporation” includes a limited liability company. 53630.1
The Legislature hereby finds that the solvency and creditworthiness of each individual local agency can impact the solvency and creditworthiness of the state and other local agencies within the state. Therefore, to protect the solvency and creditworthiness of the state and all of its political subdivisions, the Legislature hereby declares that the deposit and investment of public funds by local officials and local agencies is an issue of statewide concern.
53630.5
(a) The definitions in Section 1750 of, and Chapter 1 (commencing with Section 99) of Division 1 of, the Financial Code apply to this section. (b) In this article, for purposes of being a depository of moneys belonging to or being in the custody of a local agency, the phrases “state or national bank located in this state,” “state or national bank,” “state or national bank in this state,” and “state or national banks in the state” include, without limitation, any of the following:
(1) Any California branch office of a foreign (other state) state bank that the bank is authorized to maintain under the law of its domicile and federal law. (2) Any California branch office of a foreign (other state) national bank that the bank is authorized to maintain under federal law.
(3) Any California branch office of a foreign (other nation) bank that the bank is licensed to maintain under Article 3 (commencing with Section 1800) of Chapter 20 of Division 1.1 of the Financial Code. (4) Any California federal branch of a foreign (other nation) bank that the bank is authorized to maintain under federal law.
53631
Under those conditions as the treasurer of a local agency fixes with the approval of the legislative body, he or she may establish accounts at banks within or without the state and deposit money in those accounts to the extent necessary to pay the principal and interest of bonds to pay any warrant that has been presented for payment, or to fund any electronic disbursement of funds from the treasury of the local agency. This article does not apply to deposits for those purposes.

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53632
There are three classes of deposits:
(a) Inactive deposits.
(b) Active deposits.
(c) Interest-bearing active deposits.
53632.5
There are three classes of security for deposits:
(a) Securities described in subdivision (m) of Section 53651. (b) Securities described in subdivision (p) of Section 53651. (c) Securities enumerated in Section 53651, except for those described in subdivisions (m) and (p) of that section. 53633
The treasurer shall determine the amounts of money to be deposited as inactive, active, and interest-bearing active deposits, except as otherwise provided in Section 53679.
53634
The treasurer may call in money from inactive deposits and place it in active deposits as current demands require. When there is money in his possession for which there is no demand as inactive deposits, he may place it as active deposits. 53635
(a) This section shall apply to a local agency that is a county, a city and a county, or other local agency that pools money in deposits or investments with other local agencies, including local agencies that have the same governing body. However, Section 53601 shall apply to all local agencies that pool money in deposits or investments exclusively with local agencies that have the same governing body.

This section shall be interpreted in a manner that recognizes the distinct characteristics of investment pools and the distinct administrative burdens on managing and investing funds on a pooled basis pursuant to Article 6 (commencing with Section 27130) of Chapter 5 of Division 2 of Title 3.

A local agency that is a county, a city and county, or other local agency that pools money in deposits or investments with other agencies may invest in commercial paper pursuant to subdivision (h) of Section 53601, except that the local agency shall be subject to the following concentration limits:

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(1) No more than 40 percent of the local agency’s money may be invested in eligible commercial paper.
(2) No more than 10 percent of the total assets of the investments held by a local agency may be invested in any one issuer’s commercial paper. (b) Notwithstanding Section 53601, the City of Los Angeles shall be subject to the concentration limits of this section for counties and for cities and counties with regard to the investment of money in eligible commercial paper. (c) A local agency subject to this section may invest in commercial paper, debt securities, or other obligations of a public bank, as defined in Section 57600. 53635.2
As far as possible, all money belonging to, or in the custody of, a local agency, including money paid to the treasurer or other official to pay the principal, interest, or penalties of bonds, shall be deposited for safekeeping in state or national banks, public banks, savings associations, federal associations, credit unions, or federally insured industrial loan companies in this state selected by the treasurer or other official having legal custody of the money; or may be invested in the investments set forth in Section 53601. To be eligible to receive local agency money, a bank, savings association, federal association, or federally insured industrial loan company shall have received an overall rating of not less than “satisfactory” in its most recent evaluation by the appropriate federal financial supervisory agency of its record of meeting the credit needs of California’s communities, including low- and moderate-income neighborhoods, pursuant to Section 2906 of Title 12 of the United States Code. Sections 53601.5 and 53601.6 shall apply to all investments that are acquired pursuant to this section. 53635.7
In making any decision that involves borrowing in the amount of one hundred thousand dollars ($100,000) or more, the legislative body of the local agency shall discuss, consider, and deliberate each decision as a separate item of business on the agenda of its meeting as prescribed in Chapter 9 (commencing with Section 54950). As used in this section, “borrowing” does not include bank overdrafts or security lending. 53635.8
Notwithstanding any other provision of this code, 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 bank, savings and loan association, or credit union that uses a private sector entity that assists in the placement of deposits. The following conditions shall apply:
(a) The local agency shall choose a nationally or state-chartered commercial bank, savings bank, savings and loan association, or credit union in this state to invest the funds, which shall be known as the “selected” depository institution.

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(b) The selected depository institution may use a private sector entity to help place local agency deposits with one or more commercial banks, savings banks, savings and loan associations, or credit unions that are located in the United States and are within the network used by the private sector entity for this purpose. (c) The selected depository institution shall request that the local agency inform it of depository institutions at which the local agency has other deposits, and the selected depository institution shall provide that information to the private sector entity. (d) Any private sector entity used by a selected depository institution to help place its local agency deposits shall maintain policies and procedures requiring all of the following:
(1) The full amount of each deposit placed pursuant to subdivision (b) and the interest that may accrue on each such deposit shall at all times be insured by the Federal Deposit Insurance Corporation or the National Credit Union Administration. (2) Every depository institution where funds are placed shall be capitalized at a level that is sufficient, and be otherwise eligible, to receive such deposits pursuant to regulations of the Federal Deposit Insurance Corporation or the National Credit Union Administration, as applicable.
(3) At the time of the local agency’s investment with a selected depository institution and no less than monthly thereafter, the private sector entity shall ensure that the local agency is provided with an inventory of all depository institutions in which deposits have been placed on the local agency’s behalf, that are within the private sector entity’s network.
(4) Within its network, the private sector entity shall ensure that it does not place additional deposits from a particular local agency with any depository institution identified pursuant to subdivision (c) as holding that local agency’s deposits if those additional deposits would result in that local agency’s total amount on deposit at that depository institution exceeding the Federal Deposit Insurance Corporation or the National Credit Union Administration insurance limit. (e) If a selected depository uses two or more private sector entities to assist in the placement of a local agency’s deposits, the selected depository shall ensure that it does not place additional deposits from a particular local agency with a depository institution if those additional deposits would result in that local agency’s total amount on deposit at that depository institution exceeding the Federal Deposit Insurance Corporation or the National Credit Union Administration insurance limit. (f) The selected depository institution shall serve as a custodian for each such deposit.
(g) On the same date that the local agency’s funds are placed pursuant to subdivision (b) by the private sector entity, the selected depository institution shall receive an amount of insured deposits from other financial institutions that, in total, are equal to, or greater than, the full amount of the principal that the local LOCAL AGENCY INVESTMENT GUIDELINES 86
agency initially deposited through the selected depository institution for investment pursuant to subdivision (b). (h) Notwithstanding subdivisions (a) to (g), inclusive, a credit union shall not act as a selected depository institution under this section unless both of the following conditions are satisfied:
(1) The credit union offers federal depository insurance through the National Credit Union Administration.
(2) The credit union is in possession of written guidance or other written communication from the National Credit Union Administration authorizing participation of federally insured credit unions in one or more deposit placement services and affirming that the moneys held by those credit unions while participating in a deposit placement service will at all times be insured by the federal government. (i) It is the intent of the Legislature that this section shall not restrict competition among private sector entities that provide placement services pursuant to this section.
(j) The deposits placed pursuant to this section shall be subject to Section 53638 and shall not, in total, exceed 30 percent of the agency’s funds that may be invested for this purpose. 53636
Money so deposited is deemed to be in the treasury of the local agency. 53637
The money shall be deposited in any bank, savings association or federal association, state or federal credit union, or federally insured industrial loan company with the objective of realizing maximum return, consistent with prudent financial management, except that money shall not be deposited in any state or federal credit union if a member of the legislative body of a local agency, or any person with investment decision making authority of the administrative office, manager’s office, budget office, auditor-controller’s office, or treasurer’s office of the local agency, also serves on the board of directors, or any committee appointed by the board of directors, or the credit committee or supervisory committee, of the state or federal credit union.
53638
(a) The deposit shall not exceed the shareholder’s equity of any depository bank. For the purposes of this subdivision, shareholder’s equity shall be determined in accordance with Section 463 of the Financial Code, but shall be deemed to include capital notes and debentures.
(b) The deposit shall not exceed the total of the net worth of any depository savings association or federal association, except that deposits not exceeding a total of five hundred thousand dollars ($500,000) may be made to a savings associa- LOCAL AGENCY INVESTMENT GUIDELINES 87
tion or federal association without regard to the net worth of that depository, if such deposits are insured or secured as required by law. (c) The deposit to the share accounts of any regularly chartered credit union shall not exceed the total of the unimpaired capital and surplus of the credit union, as defined by rule of the Commissioner of Business Oversight, except that the deposit to any credit union share account in an amount not exceeding five hundred thousand dollars ($500,000) may be made if the share accounts of that credit union are insured or guaranteed pursuant to Section 14858 of the Financial Code or are secured as required by law. (d) The deposit in investment certificates of a federally insured industrial loan company shall not exceed the total of the unimpaired capital and surplus of the insured industrial loan company.
53639
Except as otherwise provided in Section 53682, the depository shall bear the expenses of transportation of money to and from the depository. 53640
Except as otherwise provided in Section 53682, the depository shall handle, collect, and pay all checks, drafts, and other exchange without cost to the local agency.
53641
When money is deposited in a depository, the treasurer or other authorized official shall take and preserve a receipt, certificate of deposit, or other evidence of the deposit as he or she requires.
53642
The money deposited may be drawn out by check or order of the treasurer or other official authorized to make such deposit.
53643
The treasurer may deposit any part of the money as agreed upon between the treasurer and the depository.
53644
If an agreement is not made:
(a) Active deposits and interest thereon are subject to withdrawal upon the demand of the treasurer or other authorized official, subject to any penalties which may be prescribed by federal law or regulation.
(b) Inactive deposits are subject to notice of at least thirty days before withdrawal.

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53645
Interest shall be computed and paid by the depository, as follows:
(a) For active deposits upon which interest is payable, interest shall be computed on the average daily balance for the calendar quarter, and shall be paid quarterly. (b) For inactive deposits, interest shall be computed on a 360-day basis, and shall be paid quarterly.
53646
(a)(1) In the case of county government, the treasurer may annually render to the board of supervisors and any oversight committee a statement of investment policy, which the board shall review and approve at a public meeting.

Any change in the policy shall also be reviewed and approved by the board at a public meeting.
(2) In the case of any other local agency, the treasurer or chief fiscal officer of the local agency may annually render to the legislative body of that local agency and any oversight committee of that local agency a statement of investment policy, which the legislative body of the local agency shall consider at a public meeting.

Any change in the policy shall also be considered by the legislative body of the local agency at a public meeting.
(b)(1) The treasurer or chief fiscal officer may render a quarterly report to the chief executive officer, the internal auditor, and the legislative body of the local agency.

The quarterly report shall be so submitted within 45 days following the end of the quarter covered by the report. Except as provided in subdivisions (e) and (f), this report shall include the type of investment, issuer, date of maturity par and dollar amount invested on all securities, investments and moneys held by the local agency, and shall additionally include a description of any of the local agency’s funds, investments, or programs, that are under the management of contracted parties, including lending programs. With respect to all securities held by the local agency, and under management of any outside party that is not also a local agency or the State of California Local Agency Investment Fund, the report shall also include a current market value as of the date of the report, and shall include the source of this same valuation. (2) The quarterly report shall state compliance of the portfolio to the statement of investment policy, or manner in which the portfolio is not in compliance. (3) The quarterly report shall include a statement denoting the ability of the local agency to meet its pool’s expenditure requirements for the next six months, or provide an explanation as to why sufficient money shall, or may, not be available. (4) In the quarterly report, a subsidiary ledger of investments may be used in accordance with accepted accounting practices. (c) Pursuant to subdivision (b), the treasurer or chief fiscal officer shall report whatever additional information or data may be required by the legislative body of the local agency.

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(d) The legislative body of a local agency may elect to require the report specified in subdivision (b) to be made on a monthly basis instead of quarterly. (e) For local agency investments that have been placed in the Local Agency Investment Fund, created by Section 16429.1, in National Credit Union Share Insurance Fund-insured accounts in a credit union, in accounts insured or guaranteed pursuant to Section 14858 of the Financial Code, or in Federal Deposit Insurance Corporation-insured accounts in a bank or savings and loan association, in a county investment pool, or any combination of these, the treasurer or chief fiscal officer may supply to the governing body, chief executive officer, and the auditor of the local agency the most recent statement or statements received by the local agency from these institutions in lieu of the information required by paragraph (1) of subdivision (b) regarding investments in these institutions. (f) The treasurer or chief fiscal officer shall not be required to render a quarterly report, as required by subdivision (b), to a legislative body or any oversight committee of a school district or county office of education for securities, investments, or moneys held by the school district or county office of education in individual accounts that are less than twenty-five thousand dollars ($25,000). (g) In recognition of the state and local interests served by the actions made optional in subdivisions (a) and (b), the Legislature encourages the local agency officials to continue taking the actions formerly mandated by this section. However, nothing in this subdivision may be construed to impose any liability on a local agency that does not continue to take the formerly mandated action. 53647
(a) Interest on all money deposited belongs to, and shall be paid quarterly into the general fund of, the local agency represented by the officer making the deposit, unless otherwise directed by law. (b) Notwithstanding the provisions of subdivision (a), and except as otherwise directed by law, if the governing body of the local agency represented by the officer making the deposit so directs, such interest shall be paid to the fund which contains the principal on which the interest accrued.
53647.5
Notwithstanding any other provision of law, interest earned on any bail money deposited by a court in a bank account pursuant to Section 1463.1 of the Penal Code and Section 53679 of this code shall, be allocated for the support of that court. 53648
Notwithstanding this article, the treasurer may deposit moneys in, and enter into contracts with, a state or national bank, savings association or federal association, federal or state credit union, or federally insured industrial loan company, pursuant to a federal law or a rule of a federal department or agency adopted pursuant to the law if the law or rule conflicts with this article in regulating the payment of interest on deposits of public moneys by any of the following:

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(a) Banks which are Federal Reserve System members or whose deposits are insured by the Federal Deposit Insurance Corporation. (b) Savings associations or federal associations which are federal home loan bank members or whose deposits are insured by the Federal Savings and Loan Insurance Corporation.
(c) State or federal credit unions whose accounts are insured by the National Credit Union Share Insurance Fund or guaranteed by the California Credit Union Share Guaranty Corporation or insured or guaranteed pursuant to Section 14858 of the Financial Code, unless a member of the legislative body of a local agency, or any person with investment decision making authority of the administrative office, manager’s office, budget office, auditor-controller’s office, or treasurer’s office of the local agency, also serves on the board of directors, or any committee appointed by the board of directors, or the credit committee or supervisory committee, of the state or federal credit union. (d) A federally insured industrial loan company.
53648.5
Upon the removal by federal law of the conflicting federal law or rule the agreement between the treasurer or other authorized official and a depository may be terminated by either party.
53649
The treasurer is responsible for the safekeeping of money in his or her custody and shall enter into any contract with a depository relating to any deposit which in his or her judgment is to the public advantage. The depository, and the agent of depository to the extent the agent of depository has been notified of deposits and the amount thereof, are responsible for securing moneys deposited pursuant to such a contract in accordance with Section 53652. One copy of each contract shall be filed with the auditor, controller, secretary, or corresponding officer of the local agency. The contract shall:
(a) Fix the duration of deposits, if appropriate.
(b) Fix the interest rate, if any.
(c) Provide conditions for withdrawal and repayment.
(d) Provide for placement of pooled securities in a named agent of depository in accordance with Section 53656.
(e) Grant authority for agent of depository to place securities for safekeeping in accordance with Section 53659.
(f) Set forth in accordance with Section 53665 the conditions upon which the administrator shall order pooled securities converted into money for the benefit of the local agency, and the procedure therefor.

LOCAL AGENCY INVESTMENT GUIDELINES 91
(g) Provide for compliance in all respects with the provisions of this article and other applicable provisions of law.
(h) Provide, upon notice to the treasurer from the administrator, that a treasurer may withdraw deposits in the event a depository fails to pay the assessments, fines, or penalties assessed by the administrator or may withdraw authorization for the placement of pooled securities in an agent of depository in the event that the agent of depository fails to pay the fines or penalties assessed by the administrator. 53651
Eligible securities are any of the following:
(a) United States Treasury notes, bonds, bills or certificates of indebtedness, or obligations for which the faith and credit of the United States are pledged for the payment of principal and interest, including the guaranteed portions of small business administration loans, so long as the loans are obligations for which the faith and credit of the United States are pledged for the payment of principal and interest. (b) Notes or bonds or any obligations of a local public agency (as defined in the United States Housing Act of 1949) or any obligations of a public housing agency (as defined in the United States Housing Act of 1937) for which the faith and credit of the United States are pledged for the payment of principal and interest. (c) Bonds of this state or of any local agency or district of the State of California having the power, without limit as to rate or amount, to levy taxes or assessments to pay the principal and interest of the bonds upon all property within its boundaries subject to taxation or assessment by the local agency or district, and in addition, limited obligation bonds pursuant to Article 4 (commencing with Section 50665) of Chapter 3 of Division 1, senior obligation bonds pursuant to Article 5 (commencing with Section 53387) of Chapter 2.7, and revenue bonds and other obligations payable solely out of the revenues from a revenue-producing property owned, controlled or operated by the state, local agency or district or by a department, board, agency or authority thereof. (d) Bonds of any public housing agency (as defined in the United States Housing Act of 1937, as amended) as are secured by a pledge of annual contributions under an annual contribution contract between the public housing agency and the Public Housing Administration if such contract shall contain the covenant by the Public Housing Administration which is authorized by subsection (b) of Section 22 of the United States Housing Act of 1937, as amended, and if the maximum sum and the maximum period specified in the contract pursuant to that subsection 22(b) shall not be less than the annual amount and the period for payment which are requisite to provide for the payment when due of all installments of principal and interest on the obligations.
(e) Registered warrants of this state.
(f) Bonds, consolidated bonds, collateral trust debentures, consolidated debentures, or other obligations issued by the United States Postal Service, federal land LOCAL AGENCY INVESTMENT GUIDELINES 92
banks or federal intermediate credit banks established under the Federal Farm Loan Act, as amended, debentures and consolidated debentures issued by the Central Bank for Cooperatives and banks for cooperatives established under the Farm Credit Act of 1933, as amended, consolidated obligations of the federal home loan banks established under the Federal Home Loan Bank Act, bonds, debentures and other obligations of the Federal National Mortgage Association or of the Government National Mortgage Association established under the National Housing Act, as amended, bonds of any federal home loan bank established under that act, bonds, debentures and other obligations of the Federal Home Loan Mortgage Corporation established under the Emergency Home Finance Act of 1970, and obligations of the Tennessee Valley Authority. (g) Notes, tax anticipation warrants or other evidence of indebtedness issued pursuant to Article 7 (commencing with Section 53820), Article 7.5 (commencing with Section 53840) or Article 7.6 (commencing with Section 53850) of this Chapter 4.
(h) State of California notes.
(i) Bonds, notes, certificates of indebtedness, warrants or other obligations issued by: (1) any state of the United States (except this state), or the Commonwealth of Puerto Rico, or any local agency thereof having the power to levy taxes, without limit as to rate or amount, to pay the principal and interest of such obligations, or (2) any state of the United States (except this state), or the Commonwealth of Puerto Rico, or a department, board, agency or authority thereof except bonds which provide for or are issued pursuant to a law which may contemplate a subsequent legislative appropriation as an assurance of the continued operation and solvency of the department, board, agency or authority but which does not constitute a valid and binding obligation for which the full faith and credit of such state or the Commonwealth of Puerto Rico are pledged, which are payable solely out of the revenues from a revenue-producing source owned, controlled or operated thereby; provided the obligations issued by an entity described in (1), above, are rated in one of the three highest grades, and such obligations issued by an entity described in (2), above, are rated in one of the two highest grades by a nationally recognized investment service organization that has been engaged regularly in rating state and municipal issues for a period of not less than five years. (j) Obligations issued, assumed or guaranteed by the International Bank for Reconstruction and Development, Inter-American Development Bank, the Government Development Bank of Puerto Rico, the Asian Development Bank, the International Finance Corporation, or the African Development Bank. (k) Participation certificates of the Export-Import Bank of the United States. (l) Bonds and notes of the California Housing Finance Agency issued pursuant to Chapter 7 (commencing with Section 51350) of Part 3 of Division 31 of the Health and Safety Code.
(m) Promissory notes secured by first mortgages and first trust deeds which comply with Section 53651.2.

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(n) Any bonds, notes, warrants, or other evidences of indebtedness of a nonprofit corporation issued to finance the construction of a school building or school buildings pursuant to a lease or agreement with a school district entered into in compliance with the provisions of Section 39315 or 81345 of the Education Code, and also any bonds, notes, warrants or other evidences of indebtedness issued to refinance those bonds, notes, warrants, or other evidences of indebtedness as specified in Section 39317 of the Education Code. (o) Any municipal securities, as defined by Section 3(a)(29) of the Securities Exchange Act of June 6, 1934, (15 u.s.c. Sec. 78, as amended), which are issued by this state or any local agency thereof.
(p) With the consent of the treasurer, letters of credit issued by the Federal Home Loan Bank of San Francisco which comply with Section 53651.6. 53651.2
(a) To be an eligible security under subdivision (m) of Section 53651, a promissory note placed in a securities pool on or after January 1, 1987, shall comply with all of the following provisions:
(1) Each promissory note shall be secured by a first mortgage or first trust deed on improved 1 to 4 unit residential real property located in California, shall be fully amortized over the term of the note, and shall have a term of no more than 30 years. Any first mortgage or first trust deed which secures a promissory note providing for negative amortization shall be removed from the securities pool and replaced with an eligible security under subdivision (m) of Section 53651 if the loan to value ratio exceeds 85 percent of the original appraised value of the security property as a consequence of negative amortization. (2) Each promissory note shall be eligible for sale to the Federal National Mortgage Association, the Government National Mortgage Association, or the Federal Home Loan Mortgage Corporation; provided, however, that up to 25 percent of the total dollar amount of any promissory note securities pool established pursuant to Section 53658 may consist of promissory notes with loan amounts which exceed the maximum amounts eligible for purchase by the Federal National Mortgage Association, the Government National Mortgage Association, or the Federal Home Loan Mortgage Corporation, but which do not exceed: (i) five hundred thousand dollars ($500,000) in the case of a single family dwelling; (ii) one million dollars ($1,000,000) in the case of a 2, 3, or 4 unit dwelling. (b) The following shall not constitute eligible securities under subdivision (m) of Section 53651:
(1) Any promissory note on which any payment is more than 60 days past due. (2) Any promissory note secured by a mortgage or deed of trust as to which there is a lien prior to the mortgage or deed of trust. For the purposes of this paragraph, no lien specified in Section 766 of the Financial Code shall be considered a prior encumbrance unless any installment or payment thereunder (other than a rental or royalty under a lease) is due and delinquent.

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(3) Any promissory note secured by a mortgage or deed of trust as to which a notice of default has been recorded pursuant to Section 2924 of the Civil Code or an action has been commenced pursuant to Section 725a of the Code of Civil Procedure.
(c) The depository may exercise, enforce, or waive any right granted to it by the promissory note, mortgage, or deed of trust.
(d) For purposes of this article, the market value of a promissory note which is an eligible security under subdivision (m) of Section 53651, shall be determined in accordance with the regulations adopted by the Treasurer under paragraph (2) of subdivision (m) of Section 53651, as the regulations and statute were in effect on December 31, 1986. However, if and when regulations on the subject are adopted by the administrator, the market value shall be determined in accordance with those regulations of the administrator.
53651.4
(a) A depository that uses eligible securities of the class described in subdivision (m) of Section 53651 shall, within 90 days after the close of each calendar year or within a longer period as the administrator may specify, file with the administrator a report of an independent certified public accountant regarding compliance with this article and with regulations and orders issued by the administrator under this article with respect to eligible securities of that class. The report shall be based upon the audit, shall contain the information, and shall be in the form the administrator may prescribe. The depository shall provide a copy of the report to the treasurer on request.
(b) If a depository that is a state bank files with the administrator, not less than 90 days before the beginning of the calendar year, a notice that it elects to be examined by the administrator instead of filing a report of an independent certified public accountant under subdivision (a) for that calendar year, the depository shall be exempt from subdivision (a) for that calendar year and shall for that calendar year be subject to examination by the administrator regarding compliance with this article and with regulations and orders under this article with respect to eligible securities of the class described in subdivision (m) of Section 53651. The administrator shall provide a report to a treasurer with deposits in the examined state bank upon request of the treasurer.
(c) A national bank may apply to the administrator to be examined, and the administrator, in his or her discretion, may examine a national bank for the purposes of satisfying the requirements of subdivision (a). The administrator shall provide a report to a treasurer with deposits in the examined national bank upon request of the treasurer.
(d) Whenever the administrator examines a depository pursuant to subdivision (b) or (c), the depository shall pay, within 30 days after receipt of a statement from the administrator, a fee of seventy-five dollars ($75) per hour for each examiner engaged in the examination.

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53651.6
(a) To be an eligible security under subdivision (p) of Section 53651, a letter of credit shall be in such form and shall contain such provisions as the administrator may prescribe, and shall include all of the following terms:
(1) The administrator shall be the beneficiary of the letter of credit. (2) The letter of credit shall be clean and irrevocable and shall provide that the administrator may draw upon it up to the total amount in the event of the failure of the depository savings association or federal association or if the depository savings association or federal association refuses to permit the withdrawal of funds by a treasurer.
53652
To secure active or inactive deposits a depository shall at all times maintain with the agent of depository eligible securities in securities pools, pursuant to Sections 53656 and 53658, in the amounts specified in this section. Uncollected funds shall be excluded from the amount deposited in the depository when determining the security requirements for the deposits. (a) Eligible securities, except eligible securities of the classes described in subdivisions (m) and (p) of Section 53651, shall have a market value of at least 10 percent in excess of the total amount of all deposits of a depository secured by the eligible securities.
(b) Eligible securities of the class described in subdivision (m) of Section 53651 shall have a market value at least 50 percent in excess of the total amount of all deposits of a depository secured by those eligible securities. (c) Eligible securities of the class described in subdivision (p) of Section 53651 shall have a market value of at least 5 percent in excess of the total amount of all deposits of a depository secured by those eligible securities. For purposes of this article, the market value of a letter of credit which is an eligible security under subdivision (p) of Section 53651 shall be the amount of credit stated in the letter of credit.
53653
When in his or her discretion local conditions so warrant, the treasurer may waive security for the portion of any deposits as is insured pursuant to federal law, notwithstanding this article. For deposits equivalent to and not less than the maximum amount insured pursuant to federal law for which a treasurer has waived security under this section, a treasurer at his or her discretion may also waive security for the interest accrued on the deposits which, when added to the deposits, would cause the sum of the interest and deposits to exceed the maximum amount insured pursuant to federal law, provided that the interest is computed by the depository on the average daily balance of the deposits, paid monthly and computed on a 360-day basis.

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53654
(a) The depository may add securities to the pool or substitute securities of equal value for those in the pool at any time, but shall not interchange classes of security, as defined in Section 53632.5, without prior approval of the treasurer. (b) Withdrawal of securities from the pool without replacement at equal value may be ordered only by two duly authorized officers or employees of the depository who satisfy the requirements as may be set by the administrator. (c) The agent of depository is responsible for the safekeeping and disbursement of securities placed in its custody by a depository. It shall release securities only upon presentation by the depository of the most reasonably current statement of the total deposits subject to this article held by the depository, such statement to be verified and countersigned by two duly authorized officers, other than those who ordered the withdrawal of securities. A copy of this statement shall be forwarded to the administrator concurrently by the agent of depository. 53655
A placement of securities by a depository with an agent of depository pursuant to this article shall have the effect of perfecting a security interest in those securities in the local agencies having deposits in that depository notwithstanding provisions of the Uniform Commercial Code to the contrary and notwithstanding that the agent of depository may be the trust department of the depository. 53656
(a) At the time the treasurer enters into a contract with the depository pursuant to Section 53649, he or she shall authorize the agent of depository designated by the depository, but including the trust department of the depository only when acceptable to both the treasurer and the depository, to hold securities of the depository in accordance with this article to secure the deposit of the local agency. (b) Only those trust companies and trust departments, or the Federal Home Loan Bank of San Francisco, which have been authorized by the administrator pursuant to Section 53657 shall be authorized by treasurers to act as agents of depository. (c) The securities are subject to order of the depository in accordance with Section 53654 except when the provisions of subdivision (i) of Section 53661 and Section 53665 are in effect.
(d) An agent of depository shall not release any security held to secure a local agency deposit in a depository unless the administrator issues an order authorizing the release where either of the following occurs:
(1) A state or federal regulatory agency has taken possession of the depository. (2) A conservator, receiver, or other legal custodian has been appointed for the depository.

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53657
(a) No person shall act as an agent of depository unless that person is a trust company located in this state, the trust department of a bank located in this state, or the Federal Home Loan Bank of San Francisco, and is authorized by the administrator to act as an agent of depository.
(b)(1) An application for authorization shall be in such form, shall contain such information, shall be signed in such manner, and shall (if the administrator so requires) be verified in such manner, as the administrator may prescribe. (2) The fee for filing an application for authorization with the administrator shall be five hundred dollars ($500).
(3) If the administrator finds, with respect to an application for authorization, that the applicant is competent to act as an agent of depository and that it is reasonable to believe the applicant will comply with all applicable provisions of this article and of any regulation or order issued under this article, the administrator shall approve the application. If the administrator finds otherwise, the administrator shall deny the application. (4) When an application for authorization has been approved, the applicant shall file with the administrator an agreement to comply with all applicable provisions of this article and of any regulation or order issued under this article. The agreement shall be in such form, shall contain such provisions, and shall be signed in such manner as the administrator may prescribe.
(5) When an application for authorization has been approved, the applicant has complied with paragraph (4), and all conditions precedent to authorizing the applicant to act as agent of depository have been fulfilled, the administrator shall authorize the applicant to act as agent of depository.
53658
An agent of a depository may hold and pool securities to secure deposits for one or more depositories pursuant to Section 53656, but shall maintain a separate pool for each said depository. Each local agency shall have an undivided security interest in the pooled securities in the proportion that the amount of its deposits bears to the total amount of deposits secured by the pooled securities. 53659
Whenever an agent of depository accepts securities pursuant to Section 53656 it may, with the authorization of the depository, place such securities for safekeeping with a Federal Reserve Bank or branch thereof or with any bank located in a city designated as a reserve city by the Board of Governors of the Federal Reserve System or with the Federal Home Loan Bank of San Francisco or with a trust company located in this state. Authority for such placement together with the names of the banks or, including the Federal Home Loan Bank of San Francisco, trust companies to be so used, shall be contained in the contract between the treasurer and the depository required in Section 53649.

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53660
When deposits of a local agency are secured by pooled securities pursuant to Section 53656, the agent of depository shall make available to the treasurer for review at a mutually agreed upon time and location all of the following information which may be in the form of a copy of the report required in subdivision (e) of Section 53661:
(a) A certification that there are securities in the pool in the amounts required by Section 53652 to secure deposits.
(b) A certified report of the individual securities then on deposit in the pool with the location and total market value thereof.
(c) The total amount of deposits then reported by the depository to be secured by the pool.
53661
(a) The Commissioner of Business Oversight shall act as Administrator of Local Agency Security and shall be responsible for the administration of Sections 53638, 53651, 53651.2, 53651.4, 53651.6, 53652, 53654, 53655, 53656, 53657, 53658, 53659, 53660, 53661, 53663, 53664, 53665, 53666, and 53667. (b) The administrator shall have the powers necessary or convenient to administer and enforce the sections specified in subdivision (a). (c)(1) The administrator shall issue regulations consistent with law as the administrator may deem necessary or advisable in executing the powers, duties, and responsibilities assigned by this article. The regulations may include regulations prescribing standards for the valuation, marketability, and liquidity of the eligible securities of the class described in subdivision (m) of Section 53651, regulations prescribing procedures and documentation for adding, withdrawing, substituting, and holding pooled securities, and regulations prescribing the form, content, and execution of any application, report, or other document called for in any of the sections specified in subdivision (a) or in any regulation or order issued under any of those sections.
(2) The administrator, for good cause, may waive any provision of any regulation adopted pursuant to paragraph (1) or any order issued under this article, where the provision is not necessary in the public interest.
(d) The administrator may enter into any contracts or agreements as may be necessary, including joint underwriting agreements, to sell or liquidate eligible securities securing local agency deposits in the event of the failure of the depository or if the depository fails to pay all or part of the deposits of a local agency. (e) The administrator shall require from every depository a report certified by the agent of depository listing all securities, and the market value thereof, which are securing local agency deposits together with the total deposits then secured by the pool, to determine whether there is compliance with Section 53652. These reports may be required whenever deemed necessary by the administrator, but shall be required at least four times each year at the times designated by the Comptrol- LOCAL AGENCY INVESTMENT GUIDELINES 99
ler of the Currency for reports from national banking associations. These reports shall be filed in the office of the administrator by the depository within 20 business days of the date the administrator calls for the report. (f) The administrator may have access to reports of examination made by the Comptroller of the Currency insofar as the reports relate to national banking association trust department activities which are subject to this article. (g)(1) The administrator shall require the immediate substitution of an eligible security, where the substitution is necessary for compliance with Section 53652, if (i) the administrator determines that a security listed in Section 53651 is not qualified to secure public deposits, or (ii) a treasurer, who has deposits secured by the securities pool, provides written notice to the administrator and the administrator confirms that a security in the pool is not qualified to secure public deposits. (2) The failure of a depository to substitute securities, where the administrator has required the substitution, shall be reported by the administrator promptly to those treasurers having money on deposit in that depository and, in addition, shall be reported as follows:
(A) When that depository is a national bank, to the Comptroller of the Currency of the United States.
(B) When that depository is a state bank, to the Commissioner of Business Oversight.
(C) When that depository is a federal association, to the Office of the Comptroller of the Currency.
(D) When that depository is a savings association, to the Commissioner of Business Oversight. (E) When that depository is a federal credit union, to the National Credit Union Administration.
(F) When that depository is a state credit union or a federally insured industrial loan company, to the Commissioner of Business Oversight. (h) The administrator may require from each treasurer a registration report and at appropriate times a report stating the amount and location of each deposit together with other information deemed necessary by the administrator for effective operation of this article. The facts recited in any report from a treasurer to the administrator are conclusively presumed to be true for the single purpose of the administrator fulfilling responsibilities assigned to him or her by this article and for no other purpose.
(i)(1) If, after notice and opportunity for hearing, the administrator finds that any depository or agent of depository has violated or is violating, or that there is reasonable cause to believe that any depository or agent of depository is about to violate, any of the sections specified in subdivision (a) or any regulation or order issued under any of those sections, the administrator may order the depository or agent of depository to cease and desist from the violation or may by order suspend or revoke the authorization of the agent of depository. The order may LOCAL AGENCY INVESTMENT GUIDELINES 100
require the depository or agent of depository to take affirmative action to correct any condition resulting from the violation.
(2)(A) If the administrator makes any of the findings set forth in paragraph (1) with respect to any depository or agent of depository and, in addition, finds that the violation or the continuation of the violation is likely to seriously prejudice the interests of treasurers, the administrator may order the depository or agent of depository to cease and desist from the violation or may suspend or revoke the authorization of the agent of depository. The order may require the depository or agent of depository to take affirmative action to correct any condition resulting from the violation. (B) Within five business days after an order is issued under subparagraph (a), the depository or agent of depository may file with the administrator an application for a hearing on the order. The administrator shall schedule a hearing at least 30 days, but not more than 40 days, after receipt of an application for a hearing or within a shorter or longer period of time agreed to by a depository or an agent of depository. If the administrator fails to schedule the hearing within the specified or agreed to time period, the order shall be deemed rescinded. Within 30 days after the hearing, the administrator shall affirm, modify, or rescind the order; otherwise, the order shall be deemed rescinded. The right of a depository or agent of depository to which an order is issued under subparagraph (a) to petition for judicial review of the order shall not be affected by the failure of the depository or agent of depository to apply to the administrator for a hearing on the order pursuant to this subparagraph.
(3) Whenever the administrator issues a cease and desist order under paragraph (1) or (2), the administrator may in the order restrict the right of the depository to withdraw securities from a security pool; and, in that event, both the depository to which the order is directed and the agent of depository which holds the security pool shall comply with the restriction.
(4) In case the administrator issues an order under paragraph (1) or (2) suspending or revoking the authorization of an agent of depository, the administrator may order the agent of depository at its own expense to transfer all pooled securities held by it to such agent of depository as the administrator may designate in the order. The agent of depository designated in the order shall accept and hold the pooled securities in accordance with this article and regulations and orders issued under this article.
(j) In the discretion of the administrator, whenever it appears to the administrator that any person has violated or is violating, or that there is reasonable cause to believe that any person is about to violate, any of the sections specified in subdivision (a) or any regulation or order issued thereunder, the administrator may bring an action in the name of the people of the State of California in the superior court to enjoin the violation or to enforce compliance with those sections or any regulation or order issued thereunder. Upon a proper showing a permanent or preliminary injunction, restraining order, or writ of mandate shall be granted, and the court may not require the administrator to post a bond. (k) In addition to other remedies, the administrator shall have the power and authority to impose the following sanctions for noncompliance with the sec- LOCAL AGENCY INVESTMENT GUIDELINES 101
tions specified in subdivision (a) after a hearing if requested by the party deemed in noncompliance. Any fine assessed pursuant to this subdivision shall be paid within 30 days after receipt of the assessment.
(1) Assess against and collect from a depository a fine not to exceed two hundred fifty dollars ($250) for each day the depository fails to maintain with the agent of depository securities as required by Section 53652.
(2) Assess against and collect from a depository a fine not to exceed one hundred dollars ($100) for each day beyond the time period specified in subdivision (b) of Section 53663 the depository negligently or willfully fails to file in the office of the administrator a written report required by that section. (3) Assess against and collect from a depository a fine not to exceed one hundred dollars ($100) for each day beyond the time period specified in subdivision (e) that a depository negligently or willfully fails to file in the office of the administrator a written report required by that subdivision. (4) Assess and collect from an agent of depository a fine not to exceed one hundred dollars ($100) for each day the agent of depository fails to comply with any of the applicable sections specified in subdivision (a) or any applicable regulation or order issued thereunder.
(l)(1) In the event that a depository or agent of depository fails to pay a fine assessed by the administrator pursuant to subdivision (k) within 30 days of receipt of the assessment, the administrator may assess and collect an additional penalty of 5 percent of the fine for each month or part thereof that the payment is delinquent.
(2) If a depository fails to pay the fines or penalties assessed by the administrator, the administrator may notify local agency treasurers with deposits in the depository. (3) If an agent of depository fails to pay the fines or penalties assessed by the administrator, the administrator may notify local agency treasurers who have authorized the agent of depository as provided in Sections 53649 and 53656, and may by order revoke the authorization of the agent of depository as provided in subdivision (i). (m) The amendments to this section enacted by the Legislature during the 1999– 2000 Regular Session shall become operative on January 1, 2001. 53663
(a) Each agent of depository shall report in writing to the administrator within two business days after any withdrawal, substitution or addition of pooled securities and shall state the name and market value of the securities withdrawn, substituted or added together with the total deposits then secured by the pool.

This information shall be available from the administrator to the treasurer upon request.
(b) Each depository shall report in writing to the administrator weekly, giving the total amount of all deposits held by the depository pursuant to this article.

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The report shall be as of close of business on Wednesday of each week and shall be delivered to the office of the administrator, deposited in the United States mail, postage prepaid, or delivered electronically via email, or other electronic means approved by the administrator, addressed to the office of the administrator, within five business days. Where there has occurred no change in the deposits required to be held by the depository pursuant to this article, the report required by this subdivision need only state that fact.
53664
The individual reports specified in Sections 53654, 53660, 53661, and 53663 are not public documents and are not open to inspection by the public. 53665
If a depository fails to pay all or part of the deposits of a local agency secured by pooled securities in accordance with the contract provided for in Section 53649, and on demand of its treasurer or other authorized official and the treasurer files a report with the administrator, or if the depository fails:
(a) In case the pooled securities consist of securities other than securities of the class described in subdivision (p) of Section 53651, the administrator shall order the agent of depository holding the pooled securities to convert into money that portion of the pooled securities necessary to produce an amount equal to the sum of (i) the deposits of the local agency, (ii) any accrued interest due on the deposits, and (iii) the reasonable expenses of the agent of depository in complying with the order of the administrator and to pay the sum of items (i) and (ii) to the treasurer in satisfaction of the deposits. The agent of depository shall be reimbursed out of the proceeds of the conversion for its reasonable expenses in complying with the order of the administrator, as approved by the administrator. Any excess moneys resulting from the conversion shall be retained by the agent of depository as part of the securities pool until the depository substitutes for the excess moneys securities having a market value sufficient to bring the total of pooled securities up to the amount required by Section 53652.
(b) In case the pooled securities consist of a security of the class described in subdivision (p) of Section 53651, the administrator shall draw on the letter of credit an amount equal to the sum of (i) the deposits of the local agency, (ii) any accrued interest on the deposits, and (iii) the reasonable expenses of the administrator in paying the deposits and pay the sum of items (i) and (ii) to the treasurer in satisfaction of the deposits.
53666
The only liability that shall attach to the administrator as the result of the operation of this article is that which would attach as a result of other laws of this state.

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53667
(a) Expenses incurred by the administrator in carrying out the duties and responsibilities assigned to the administrator by the sections specified in subdivision (a) of Section 53661, shall be borne by the Local Agency Deposit Security Fund, which is hereby created and continuously appropriated to the administrator for the administration of the sections specified in subdivision (a) of Section 53661.

This fund shall consist of fines levied pursuant to Section 53661, fees collected pursuant to the sections specified in subdivision (a) of Section 53661, and assessments levied pursuant to this section. (b) Each fiscal year the administrator shall levy an assessment on a pro rata basis on those depositories which at any time during the preceding fiscal year held local agency deposits. The total assessment levied on all of those depositories shall be in an amount which, when added to the amount of fines and fees that the administrator estimates will be collected during the fiscal year when the assessment is levied, is sufficient in the judgment of the administrator to meet the expenses of the administrator in administering the sections specified in subdivision (a) of Section 53661 and to provide a reasonable reserve for contingencies. The basis of the apportionment of the assessment among the depositories assessed shall be the proportion that the average amount of local agency deposits held by each of those depositories bears to the average total amount of local agency deposits held by all of those depositories as shown by the reports of depositories to the administrator for the preceding fiscal year, as required in subdivision (e) of Section 53661; provided, however, that the amount of the assessment levied on each of those depositories shall be not less than twenty-five dollars ($25).
(c) The administrator shall notify each depository by mail of the amount levied against it. The depository shall pay the amount levied within 20 days after such notice into the Local Agency Deposit Security Fund for the administration of the sections specified in subdivision (a) of Section 53661. If payment is not made to the administrator within such time, the administrator shall assess and collect, in addition to the annual assessment, a penalty of 5 percent of the assessment for each month or part thereof that the payment is delinquent. If a depository fails to pay the assessment or penalties assessed by the administrator, the administrator may notify local agency treasurers with deposits in the depository.
53669
The treasurer or other authorized official is not responsible for money while it is deposited pursuant to this article.
53676
The treasurer is not responsible for securities delivered to and receipted for by any bank, savings and loan association, credit union, federally insured industrial loan company, or trust company.

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53678
The charges for the handling and safekeeping of any such securities are not a charge against the treasurer but shall be paid by the depository owning the securities. 53679
So far as possible, all money belonging to a local agency under the control of any of its officers or employees other than the treasurer shall, and money deposited as bail coming into the possession of a judge or officer of a superior court may, be deposited as active deposits in the state or national bank, inactive deposits in the state or national bank or state or federal association, federal or state credit union, or federally insured industrial loan company in this state selected by the officer, employee, or judge of the court. For purposes of this section, an officer or employee of a local agency and a judge or officer of a superior court are prohibited from depositing local agency funds or money coming into their possession into a state or federal credit union if an officer or employee of the local agency, or a judge or officer of a superior court, also serves on the board of directors, or any committee appointed by the board of directors, or the credit committee or supervisory committee, of the particular state or federal credit union. That money is subject to this article except:
(a) Deposits in an amount less than that insured pursuant to federal law are not subject to this article.

For deposits in excess of the amount insured under any federal law a contract in accordance with Section 53649 is required and the provisions of this article shall apply.
(b) Interest is not required on money deposited in an active deposit by a judge or officer of a superior court.
(c) Interest is not required on money deposited in an active deposit by an officer having control of a revolving fund created pursuant to Chapter 2 (commencing with Section 29300) of Division 3 of Title 3.
(d) Interest is not required on money deposited in an active deposit by an officer having control of a special fund established pursuant to Article 5 (commencing with Section 29400) or Article 6 (commencing with Section 29430) of Chapter 2 of Division 3 of Title 3.
53679.1
Notwithstanding any other provision of law, the accounting practices of each county utilized prior to the effective date of this section relating to interest on trust funds shall be deemed appropriate and to have been made under the direction of the board of supervisors of that county. This section is declaratory of the law in existence prior to the enactment of this section.

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53680
A tax collector of a local agency shall immediately deposit with the treasurer all money under his control, unless he deposits the money in a depositary pursuant to this article under permission and instructions of the treasurer having authority to make such deposit.
53681
An officer or employee of a local agency who deposits money belonging to, or in the custody of, the local agency in any other manner than that prescribed in this article is subject to forfeiture of his office or employment. 53682
Notwithstanding any other provision in this article except Section 53652, the treasurer may deposit moneys in and enter into contracts with any depository, as defined in subdivision (c) of Section 53630, for services to be rendered by that depository that in the treasurer’s judgment are to the public advantage. One copy of each contract entered into under this section shall be filed with the auditor or corresponding officer of the local agency. The contract shall:
(a) Fix the duration of compensating deposits, if any.
(b) Fix the interest rate of that compensating deposit, if any. (c) Specify the services to be rendered by the depository. (d) Indicate whether the depository shall bear the expenses of transportation of the money to and from the depository.
(e) Fix the consideration payable by the agency for such services. (f) Specify who may deposit moneys into the treasurer’s active account and how those persons are to make those deposits.
53683
Notwithstanding any other provision in this article, the consideration payable by the agency as specified in subdivision (e) of Section 53682 shall be paid by the treasurer by applying such consideration as costs applied on a pro rata basis against the interest earned by all the agencies for which the treasurer invests. 53684
(a) Unless otherwise provided by law, if the treasurer of any local agency, or other official responsible for the funds of the local agency, determines that the local agency has excess funds which are not required for immediate use, the treasurer or other official may, upon the adoption of a resolution by the legislative or governing body of the local agency authorizing the investment of funds pursuant to this section and with the consent of the county treasurer, deposit the excess funds in the county treasury for the purpose of investment by the county trea- LOCAL AGENCY INVESTMENT GUIDELINES 106
surer pursuant to Section 53601 or 53635, or Section 20822 of the Revenue and Taxation Code.
(b) The county treasurer shall, at least quarterly, apportion any interest or other increment derived from the investment of funds pursuant to this section in an amount proportionate to the average daily balance of the amounts deposited by the local agency and to the total average daily balance of deposits in the investment pool. In apportioning and distributing that interest or increment, the county treasurer may use the cash method, the accrual method, or any other method in accordance with generally accepted accounting principles. Prior to distributing that interest or increment, the county treasurer may deduct the actual costs incurred by the county in administering this section in proportion to the average daily balance of the amounts deposited by the local agency and to the total average daily balance of deposits in the investment pool.
(c) The county treasurer shall disclose to each local agency that invests funds pursuant to this section the method of accounting used, whether cash, accrual, or other, and shall notify each local agency of any proposed changes in the accounting method at least 30 days prior to the date on which the proposed changes take effect. (d) The treasurer or other official responsible for the funds of the local agency may withdraw the funds of the local agency pursuant to the procedure specified in Section 27136.
(e) Any moneys deposited in the county treasury for investment pursuant to this section are not subject to impoundment or seizure by any county official or agency while the funds are so deposited.
(f) This section is not operative in any county until the board of supervisors of the county, by majority vote, adopts a resolution making this section operative in the county.
(g) It is the intent of the Legislature in enacting this section to provide an alternative procedure to Section 51301 for local agencies to deposit money in the county treasury for investment purposes. Nothing in this section shall, therefore, be construed as a limitation on the authority of a county and a city to contract for the county treasurer to perform treasury functions for a city pursuant to Section 51301.
53686
(a) Any audit conducted relating to the investment of local agency funds and other funds by the county treasurer in the county fund maintained pursuant to Section 53684 shall be rendered to the depositary, the auditor, the controller, the secretary, or the corresponding officer of the local agency, the treasurer or other official responsible for the funds of any local agency that has funds on deposit in the county treasury, and the presiding judge of any superior court that has ordered, pursuant to Section 3412, Section 3413, or Section 3611 of the Probate Code, that assets of an estate be deposited with the county treasurer for deposit or investment.

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(b) Any report rendered pursuant to Section 53646 shall be provided to the treasurer or other official responsible for the funds of any local agency that has funds on deposit in the county treasury.

Government Code Section 53820 – 53821.5
53820
As used in this article, “local agency” means county, city, regional park district, school district, community college district, or any other municipal or public corporation or district. 53821.

Subsequent to approval of the final budget and levy of taxes, if funds are needed for the immediate requirements of a local agency in any fiscal year to pay obligations lawfully incurred in the fiscal year and before the receipt of income for the fiscal year sufficient to meet the payments, money may be borrowed by:
(a) The legislative body of a county on the recommendation of the auditor and treasurer.
(b) The legislative body of the county having the largest area within the regional park district on the recommendation of the auditor and treasurer. (c) A school district, county board of education, or community college district on the request of two-thirds of the members of its governing board, approved by the county auditor and treasurer.
(d) A regional park district on the request of four-fifths of the members of its legislative body, approved by the auditor and treasurer of the county having the largest area within the district.
(e) The legislative body of a city on the recommendation of the city treasurer and chief accounting officer.
(f) The legislative body of any other municipal or public corporation or district on the recommendation of the officers performing the functions of auditor and treasurer. 53821.5
Proceeds of sales or funds set aside for the repayment of any notes issued pursuant to this article shall not be invested for a term that exceeds the term of the notes.

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Government Code Section 53840-53841.5
53840
It is hereby declared the intention of the Legislature by the enactment of this article to provide an alternative procedure under which short term loans may be procured by those counties in which the board of supervisors has declared it to be county policy to make advances of current operating requirements to subsidiary political subdivisions required by law to deposit their funds in the county treasury as such advances are authorized by the provisions of Section 25 of Article XIII of the State Constitution. In any such county the board of supervisors, upon recommendation of the county treasurer with the approval of the county auditor, may borrow on July 1st or thereafter such amounts as may be required to meet current obligations payable by the county treasury, pending collection of the revenue provided for the year in progress. Amounts so borrowed shall be evidenced by notes signed by the chairman of the board of supervisors, the county auditor and the county treasurer, and the liability created thereby shall be secured by a lien on all revenue to accrue to the county treasury from any source during the year then in progress. 53841
Any amounts borrowed by a county as provided in the preceding section shall not exceed 85 percent of the total of taxes levied for all purposes on said county’s tax roll for the next preceding fiscal year, and at no time during the year for which borrowed shall the unpaid total of the amounts so borrowed as shown by the auditor’s accounts at the close of any month be allowed to remain at more than 85 percent of the uncollected balance of taxes for the current year as shown by said accounts.
53841.5
Proceeds of sales or funds set aside for the repayment of any notes issued pursuant to this article shall not be invested for a term that exceeds the term of the notes.

Government Code Section 53850-53851.5
53850
(a) As used in this article, “local agency” means a county, city and county, city, school district of any type, community college district, county board of education, or any other municipal or public corporation or district. (b) For purposes of this article only, “local agency” also includes a charter school.

This subdivision does not make a charter school a local agency for any purpose other than for this article.

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53851
The powers conferred by this article are in addition to and an alternative to any power conferred by any other law for borrowing by a local agency and any amount borrowed hereunder shall not be considered in any limitation on the amount which may be borrowed by any such local agency under any other law. 53852
On or after the first day of any fiscal year a local agency may borrow money pursuant to this article, the indebtedness to be represented by a note or notes issued to the lender pursuant to this article. The money borrowed may be used and expended by the local agency for any purpose for which the local agency is authorized to use and expend moneys, including but not limited to current expenses, capital expenditures, investment and reinvestment, and the discharge of any obligation or indebtedness of the local agency.
53852.5
Proceeds of sales or funds set aside for the repayment of any notes issued pursuant to this article shall not be invested for a term that exceeds the term of the notes.

Government Code Section 53859-53859.02
53859
As used in this article: (a) “local agency” means county, city and county, city, school district, community college district, or any other municipal or public corporation or district. (b) “Grant anticipation note” means a note issued upon the security of specified accounts receivable from state or federal governments, including, without limitation, grants, loans, or a combination of both, for which funds have been appropriated and committed to a local agency.
(c) “Loan” includes, but is not limited to, a borrowing by a local agency represented or to be represented by bonds of a local agency. 53859.01
The powers conferred by this article are in addition to an alternative to any powers conferred by any other law for borrowing by a local agency and any amount borrowed hereunder shall not be considered in any limitation on the amount which may be borrowed by any such local agency under any other law. 53859.02
(a) A local agency may borrow money pursuant to this article, the indebtedness to be represented by a grant anticipation note or notes issued to the lender pursu- LOCAL AGENCY INVESTMENT GUIDELINES 110
ant to this article. The money borrowed may be used and expended by the local agency solely for the purpose for which the grant or loan is to be received. (b) Proceeds of sales or funds set aside for the repayment of any notes issued pursuant to this article shall not be invested for a term that exceeds the term of the notes.

Government Code Section 57600-57607
57600
For purposes of this division:
(a) “Local financial institution” means a certified community development financial institution, a credit union, as defined in Section 165 of the Financial Code, or a small bank or an intermediate small bank, as defined in Section 25.12 of Title 12 of the Code of Federal Regulations.
(b) (1) “Public bank” means a corporation, organized under the Nonprofit Mutual Benefit Corporation Law (Part 3 (commencing with Section 7110) of Division 2 of Title 1 of the Corporations Code) or the Nonprofit Public Benefit Corporation Law (Part 2 (commencing with Section 5110) of Division 2 of Title 1 of the Corporations Code) for the purpose of engaging in the commercial banking business or industrial banking business, that is wholly owned by a local agency, local agencies, or a joint powers authority formed pursuant to the Joint Exercise of Powers Act (Article 1 (commencing with Section 6500) of Chapter 5 of Division 7 of Title 1) that is composed only of local agencies. (2) A local agency located within a county with a population of less than 250,000 may organize a public bank only if it does so as part of a joint powers authority formed for those purposes.
(3) For purposes of paragraph (2), population shall be based on the most recent estimate of population data determined by the Demographic Research Unit of the Department of Finance.
(c) “Public bank license” means a certificate of authorization to transact business as a bank as described in Section 1042 of the Financial Code. 57601
(a) If a public bank is organized as a nonprofit mutual benefit corporation, the articles of incorporation shall include the following purpose statement: “This corporation is a nonprofit mutual benefit corporation organized under the Nonprofit Mutual Benefit Corporation Law as a public bank. The purpose of the corporation is to engage in the commercial banking business or industrial banking business and any other lawful activities which are not prohibited to a public bank by applicable laws or regulations.”
(b) If a public bank is organized as a nonprofit public benefit corporation, the articles of incorporation shall include the following purpose statement: “This corporation is a nonprofit public benefit corporation and is not organized for LOCAL AGENCY INVESTMENT GUIDELINES 111
the private gain of any person. It is organized under the Nonprofit Public Benefit Corporation Law for the public purpose of engaging in the commercial banking business or industrial banking business as a public bank.” (c) Notwithstanding Sections 5410 and 7411 of the Corporations Code, a public bank may make distributions to its members.
(d) All provisions of law applicable to nonprofit corporations generally, including, but not limited to, the Nonprofit Corporation Law (Division 2 (commencing with Section 5000) of Title 1 of the Corporations Code) shall apply to public banks. Whenever a provision of this division applicable to public banks is inconsistent with a provision of law applicable to nonprofit mutual benefit corporations or nonprofit public benefit corporations generally, the provision of this division shall apply, and the inconsistent provision of law applicable to nonprofit mutual benefit corporations or nonprofit public benefit corporations generally shall not apply to a public bank.
57602
(a) A public bank shall obtain and maintain deposit insurance provided by the Federal Deposit Insurance Corporation under the Federal Deposit Insurance Act (12 U.S.C. Sec. 1811 et seq.).
(b) In seeking and retaining insurance, a public bank may do all things and assume and discharge all obligations required of it that are not in conflict with state law. 57603
(a) Before engaging in business, a public bank shall obtain a certificate of authorization to transact business as a bank pursuant to Division 1.1 of the Financial Code (commencing with Section 1000).
(b) A local agency shall comply with the requirements of Section 53638 with respect to its deposits in a public bank unless, with the prior approval of the Commissioner of Business Oversight, the public bank and the local agency depositor agree otherwise.
(c) Notwithstanding Section 23010, a county may lend any of its available funds to any public bank.
(d) Notwithstanding Section 53601, any local agency that does not pool money in deposits or investments with other local agencies that have separate governing bodies may invest in debt securities or other obligations of a public bank. (e) Notwithstanding Section 53635, any local agency that pools money in deposits or investments with other local agencies, including local agencies that have the same governing body, may invest in debt securities or other obligations of a public bank.
(f) Notwithstanding Section 53635.2, a public bank shall be eligible to receive local agency money.

Porterville City CouncilMarch 5, 2024

Porterville City Council
March 5, 2024