City of Santa Ana
EXHIBIT 2
JUNE 16, 2026
INVESTMENT POLICY
STATEMENT 2026-27
TABLE OF CONTENTS
Page
Contents
CITY OF SANTA ANA .............................................................................................................................. 1
1.0 POLICY ......................................................................................................................................... 1
2.0 SCOPE ......................................................................................................................................... 1
3.0 PRUDENCE .................................................................................................................................. 2
4.0 OBJECTIVES ................................................................................................................................ 3
5.0 DELGATION OF AUTHORITY ........................................................................................................ 6
6.0 ETHICS AND CONFLICTS OF INTEREST ................................................................................... 7
7.0 AUTHORIZED FINANCIAL INSTITUTIONS AND QUALIFIED BROKER-DEALERS ......................... 8
8.0 AUTHORIZED AND SUITABLE INVESTMENTS ............................................................................. 8
9.0 PROHIBITED INVESTMENTS AND INVESTMENT PRACTICES................................................ 15
10.0 INVESTMENT POOLS/MUTUAL FUNDS .................................................................................... 16
11.0 COLLATERALIZATION/SECURITY FOR DEPOSIT OF PUBLIC FUNDS ...................................... 17
12.0 SAFEKEEPING AND CUSTODY .................................................................................................. 17
13.0 DIVERSIFICATION ..................................................................................................................... 18
14.0 INTERNAL CONTROLS .............................................................................................................. 18
15.0 REPORTING ............................................................................................................................... 19
16.0 POLICY CONSIDERATIONS ...................................................................................................... 20
17.0 POLICY REVIEW, CERTIFICATION, AND ADOPTION ................................................................. 21
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CITY OF SANTA ANA
ANNUAL STATEMENT OF INVESTMENT POLICY
JULY 1, 2026 – JUNE 30, 2027
INTRODUCTION: The purpose of this Statement of Investment Policy is to provide specific criteria for the prudent investment of City of Santa Ana (City) funds and to set investment objectives, policies, establish guidelines, and define responsibilities for the investment of idle or unexpended funds for the City. The ultimate investment goal is to enhance the City's economic status while protecting the funds under management and meeting the City's daily cash flow demands.
1.0 POLICY
The policy of the City of Santa Ana is to invest idle or unexpended funds within the scope of this investment policy prudently and suitably, so that it will provide, within the parameters of this investment policy, the highest reasonable investment return relative to the risk being assumed while maintaining maximum security and meeting all cash flow demands. This policy is intended to comply with Federal law and the California Code regarding the investment of public funds. In instances where this policy is more restrictive than Federal or State law, this policy shall control.
This policy is fixed and general in nature; it defines authorized investments and guides the investment decisions and security selection process. The City’s Investment Policy will be regularly reviewed and adjusted to create an investment portfolio suitable for the City under current conditions.
2.0 SCOPE
2.1 Applicability of Investment Policy
This investment policy applies to all funds and investment transactions of the City. These funds are accounted for in the Annual Comprehensive Financial Report (ACFR), which includes the following:
• General Fund
• Special Revenue Funds
• Capital Projects Funds (includes restricted bond proceeds) • Enterprise Funds (includes restricted bond proceeds)
• Trust and Agency Funds
• Internal Service Funds
• Any new fund created by the City of Santa Ana,
unless specifically exempted
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The restricted bond proceeds are invested in compliance with this investment policy and applicable bond resolutions. Individual employee retirement contribution funds and deferred
compensation are excluded from this policy.
2.2 Pooling of Funds
Except for cash in certain restricted and special funds, the City of Santa Ana will consolidate cash balances from all funds to maximize investment earnings and increase efficiency in investment pricing, safekeeping, and administration. Investment income will be allocated to the various funds based on their respective participation and in accordance with generally accepted accounting principles.
3.0 PRUDENCE
3.1 Standard of Care – Prudent Investor
The City investment program shall be managed professionally and prudently, worthy of the public trust and review. The standard of prudence to be used by City Investment Officials shall be the "prudent investor rule" standard. It shall be applied in the context of managing the overall investment portfolio.
The “prudent investor rule,” pursuant to California Government Code Section 53600.3, provides that investments shall be made with judgment and care. When investing, reinvesting, or managing public funds, a trustee shall act with care, skill, prudence, and diligence under the circumstances then prevailing. Investment officers acting in accordance with written procedures and this investment policy, and exercising due diligence, shall be relieved of personal responsibility for an individual security's credit risk or market price changes, provided that deviations from exceptions are reported in a timely fashion and that the liquidity and the sale of securities are carried out in accordance with the terms of this policy.
The California Government Code governs the City, Sections 16429.1 and Title 5, Division 2, Part 1, Chapter 4, entitled Financial Affairs, commencing with section 53630. Each investment transaction and the entire portfolio must comply with California Government Code, Sections 53600 and 53635 et seq., and this policy.
3.2 Written Investment Procedures
City Investment Officials shall establish written procedures, consistent with this investment policy, for the operation of the investment program. Procedures should include, but not be limited to: authorized personnel, segregation of duties, internal controls, wire transfer July 1, 2026 -
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agreements, daily cash flow review, basis for awarding bids, portfolio inventory, and reporting. The procedures document is intended to provide guidance for staff and to ensure continuity in the event of an interruption to the services of the Treasury and Customer Services Manager and/or Assistant Finance Director.
4.0 OBJECTIVES
The primary objectives, in priority order, for the City of Santa Ana’s investment activities shall be Safety, Liquidity, and Yield:
4.1 Safety of Principal
Safety of principal is the foremost objective of the City of Santa Ana; care must be taken to ensure the preservation of capital and the protection of principal. Each investment transaction shall be undertaken to ensure the preservation of capital in the overall portfolio. The objective is to mitigate credit and interest rate risk by following the guidelines below.
A. Credit Risk
Credit Risk is the risk of loss arising from the failure of the security's issuer or backer to redeem the
outstanding debt on the stated maturity date. Credit risk also encompasses the overall market perception of the
issuer's financial strength and capacity . The City of
Santa Ana will minimize credit risk by:
i. Limiting investments to authorized investments
as set forth in Section 8 of this investment policy;
ii. Pre-qualifying the financial institutions, broker - dealers, intermediaries, and advisors with which
the City will do business;
iii. Diversifying the inve stment portfolio so that
potential losses on individual securities will be
minimized.
iv. Holding a minimum percentage of the total
portfolio in highly marketable short -term
treasuries, checking with interest, government
pooled account, or a combination of all three.
The minimum percentage shall be set monthly by
the FMSA Investment Advisory Committee based
on a rolling twenty-four-month analysis of the
City’s minimum cash position requirements
adjusted for any exceptional anticipated cash
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outflows.
B. Market or Interest Rate Risk
Market or interest rate risk is the risk that the market value of securities in the portfolio may fall due to
changes in general interest rates. The City of Santa
Ana will minimize interest market interest rates by:
i. Structuring the investment portfolio so that
securities mature to meet cash requirements
for ongoing operations, thereby avoiding the
need to sell securities on the open market
prior to maturity, and
ii. By investing operating funds primarily in
shorter-term securities, money market mutual
funds, or similar investment pools and limiting
the average maturity of the portfolio to 3 years
using the securities’ stated final maturities.
4.2 Liquidity
The investment portfolio shall remain sufficiently liquid to meet all reasonably anticipated operating requirements . This is accomplished by structuring the portfolio so that securities mature in concert with cash needs , meeting anticipated demands (static liquidity). Furthermore, since all possible cash demands cannot be anticipated, the portfolio should consist largely of securities with active secondary or resale markets (dynamic liquidity). The City’s cash flow shall be updated daily and considered before investing in securities, thereby reducing the need to sell investments for liquidity.
4.3 Yield (Return on Investment)
The City's investment portfolio shall be designed to achieve a market-average rate of return across budgetary and economic cycles, while accounting for investment risk constraints and liquidity needs. Investment return is to be accorded secondary importance compared to the safety and liquidity objectives described above. The core of the investment portfolio will focus on relatively low -risk securities, with the expectation of earning a reasonable return commensurate with the risk assumed. It is the City's general policy to hold investments until their market value equals or exceeds the security's amortized cost or book value. Securities shall not be sold prior to maturity, except as follows:
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A. a declining credit security could be sold early to
minimize loss of principal;
B. a simultaneous purchase of a security and the sale of another (security swap) to enhance the quality, yield,
or target duration in the portfolio; or
C. a sale of a specific security prior to its maturity and a capital gain or loss recorded to improve the credit
quality, liquidity, or rate of return of the portfolio in response to market conditions and/or City risk
preferences;
D. general liquidity needs of the investment portfolio
require that a security be sold;
E. prepayment of City debt or contribution servicing
obligation. In the event the City is presented with an
option to prepay a City debt or contribution servicing
obligation, the following analysis will be conducted
to compare the amortized savings that may be
realized by exercising such prepayment option and:
i. the current portfolio yield;
ii. the trend of the debt or contribution servicing obligation; iii. whether variances in the trend are substantial;
iv. the City’s net cash position; and
v. the market value of investment instrument(s)
recommended by staff to be liquidated to
fulfill a prepayment election.
When selling a security before maturity, City Investment Officials and/or officers (see generally subsection 5.1 et seq. - Investment Authority and Responsibility) must be prepared to justify the reasons and explain any gains or losses.
Compliance with the investment policy does not measure
return but rather manages risk. Policy compliance does not provide a benchmark to meet or exceed, but serves as a model to follow. The City will benchmark its investment performance against an agreed-upon Treasury index.
The City shall strive to maintain one hundred percent
(100%) of idle funds invested after consideration of a
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compensating balance to cover the cost of services
provided by the City’s depository bank. Daily cash flow projections determine the funds available for investment .
Investments are monitored to ensure that legal limits on investment types are not exceeded.
5.0 DELGATION OF AUTHORITY
5.1 Investment Authority and Responsibility
The authority to conduct investment transactions rests with the Executive Director of the Finance and Management Services Agency (FMSA), who serves as the chief fiscal officer and City Treasurer.
The Executive Director for (FMSA), under the general direction of the City Council, shall be responsible for all investment transactions undertaken and shall establish a system of controls to regulate the investment activities of subordinate officials.
5.2 Delegation of Authority
The Executive Director for FMSA, or their designee, shall invest all funds for the City in accordance with the City's adopted investment policy. The Executive Director for FMSA hereby delegates day-to-day responsibility for the investment of City funds to the FMSA Financial Analyst. Managerial and supervisory responsibility for the investment of City funds may be held by either the Assistant Director of Finance and Management Services (Assistant Director) or the Treasury and Customer Services Manager (Treasury Manager). Each designee shall act in accordance with the established policies and internal controls set forth in the investment policy.
The Executive Director may engage external investment
management advisors to assist in managing the City’s investment portfolio in a manner consistent with the City’s objectives. Such advisors may be granted discretion to purchase and sell investment securities in accordance with the Policy. Such advisors must be registered with the Securities and Exchange Commission and possess experience in public funds investment management. Such engagement and /or delegation by the Executive Director shall not remove or diminish her/his investment responsibility.
5.3 Assignment of Activities
Supporting and ancillary activities, including but not limited to:
cash flow analysis, municipal or corporate bond credit worthiness evaluation, investment risk assessment, portfolio analysis, purchase and sale recommendation, safekeeping, policy and investment procedures review recommendation, and monthly and July 1, 2026 -
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quarterly reporting, may be assigned to qualified persons within Treasury or within the FMSA Accounting or Administrative Services divisions as deemed appropriate by either the Director and/or Assistant Finance Director.
5.4 Qualified Persons
Qualified Persons shall refer to: (1) persons holding either a California Municipal Treasurers Association, California Treasury Certificate and/or Certified California Municipal Treasurer Certificate; or an Association of Public Treasurers of the United States and Canada, Certified Public Finance Administrator Certificate, or a National Association of State Treasurers Certificate in Public Treasury Management; or (2) persons who are performing investment related duties under the guidance and direction of certificate holders. Working together, Investment Officials and Qualified Persons comprise the FMSA investment staff.
5.5 FMSA Investment Advisory Committee
To provide a regular departmental forum and consultative body for evaluating investment portfolio performance and strategy, internal procedures and controls, and making recommendations to the Executive Director of FMSA, in their capacity as chief fiscal officer and City Treasurer, an FMSA Investment Advisory Committee is established. All authorized Investment Officials are de facto standing members of the FMSA Investment Advisory Commit tee. At the discretion of the Executive Director for FMSA, other FMSA investment staff may be authorized to serve on the committee.
Meetings shall be held regularly, with the frequency determined by the Executive Director for FMSA. The FMSA Investment Advi sory Committee’s evaluations and recommendations are subject to approval by the Executive Director of FMSA, who serves as the committee chair.
6.0 ETHICS AND CONFLICTS OF INTEREST
6.1 Investment Officials and Officers
Investment Officials, officers, and employees involved in the investment process shall refrain from personal business activities that could conflict with the proper execution and management of the investment program or impair their ability to make impartial decisions.
Investment Officials, officers, and employees shall disclose any material interests in financial institutions with which they conduct business. They shall further disclose any personal financial or investment positions that could relate to the performance of the July 1, 2026 -
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investment portfolio. Investment Officials, officers, and employees shall refrain from engaging in personal investment transactions with the same individual with whom they conduct business on behalf of the City of Santa Ana.
6.2 Statement of Economic Interests
Investment Officials and officers authorized to approve investment decisions shall submit an annual Statement of Economic Interests, also known as Form 700, in accordance with California Government Code Section 1090 et seq. The Form 700 provides transparency and ensures accountability in two ways:
1) It provides necessary information to the public about officials’ and officers’ personal financial interests to ensure that officials and officers are making decisions in the best interest o f the public and not enhancing their personal finances.
2) It serves as a reminder to the public official of potential conflicts of interest so the official or officer can abstain from making or participating in governmental decisions that are deemed conflicts of interest.
7.0 AUTHORIZED FINANCIAL INSTITUTIONS AND QUALIFIED BROKER-
DEALERS
7.1 If the City utilizes a SEC registered external investment advisor, the advisor shall maintain a list of authorized broker -dealers and complete the appropriate due diligence required by the SEC. The external investment advisor may use its own list of approved broker/dealers and financial institutions for investment purposes on behalf of the City. The investment advisor shall submit the list of approved broker-dealers to the City’s FMSA investment staff annually. The Executive Finance Director may restrict the use of a broker/dealer which may be deemed unsuitable.
8.0 AUTHORIZED AND SUITABLE INVESTMENTS
8.1 Allowable Investment Instruments – State Law
California Government Code Section 53601 establishes allowable investment instruments for all local agencies, along with maximum maturities, maximum specified percentages of the total portfolio, and minimum quality requirements. Section 53601.1 authorizes local agencies to invest in financial futures or financial option contracts in any of the allowable investment categories enumerated in section 53601. The City may invest in any of the investments July 1, 2026 -
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described in the table in Figure 1. Where the table 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.
8.2 Authorized Investments
The City of Santa Ana further restricts permitted investments to those listed below, and, where applicable, the Investment Advisory Committee may reduce the maximum specified percentages of the total portfolio (concentration limits) and may increase minimum quality requirements. Within this scope, the City diversifies its investments by investment type, maturity dates, concentration limits, and qualit y requirements.
A. United States Treasury Bills, Notes, and Bonds for which the full faith and credit of the United States is pledged for payment of principal and interest. Purchases of this Category shall not have maturities exceeding 5 years. There is no percentage limit in this category.
B. Obligations issued by a Federal Agency or a United States Government-Sponsored Enterprise. Federal Agency issues
include, but are not limited to, GNMA (Government National Mortgage Association), FFCB (Federal Farm Credit Bank), FHLB (Federal Home Loan Bank), FHLMC (Federal Home
Loan Mortgage Corporation), FNMA (Federal National
Mortgage Association), FHA (Federal Housing Administration), and TVA (Tennessee Valley Authority). Although there is no percentage limitation on these issues, purchases in this category shall not have more than 5 years to maturity, and the “prudent investor” shall apply to a single agency name, as U.S.
Government backing is implied rather than guaranteed.
C. Supranational Obligations in United States dollar-denominated senior unsecured, unsubordinated obligations issued or
unconditionally guaranteed by the International Bank for Reconstruction and Development, International Finance
Corporation, or Inter -American Development Bank, with a maximum remaining maturity of five years or less, and eligible for purchase or sale within the United States. Investments under this subdivision shall be rated “AA” or better by a Nationally Recognized Statistical Rating Organiz ation
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(NRSRO). They shall not exceed thirty percent (30%) of the cost value of the investment portfolio.
D. Bills of exchange or time drafts drawn on and accepted by a commercial bank, otherwise known as banker’s acceptances, which are eligible for purchase by the Federal Reserve
System. Purchases of banker’s acceptances may not exceed one hundred eighty (180) days or forty percent (40%) of the cost value of the Fund, which may be invested pursuant to this section. However, no more than thirty percent (30%) of the City’s cost value of the investment portfolio may be invested in the banker’s acceptances of any one commercial bank
pursuant to this section.
E. Commercial paper of “prime” quality of the highest ranking or of the highest letter and number rating as provided for by an NRSRO. The entity that issues the commercial paper shall be organized and operating within the United States, as a general corporation, shall have total assets in excess of five hundred million dollars ($500,000,000), and have debt other than commercial paper, if any, that is rated "A" or higher by NRSRO. The entity is organized within the United States as a special purpose corporation, trust, or limited liability company; has program wide credit enhancements including, but not limited to: over-collateralization, letters of credit, or a surety bond; 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 two hundred
seventy (397) days or less. The City may purchase no more than ten percent (10%) of the outstanding commercial paper of any single corporate issue. Purchases of commercial
paper may not exceed twenty -five percent (40%) of the
investment portfolio.
F. Repurchase Agreements. For purposes of this section, the term "repurchase agreement” means a purchase of
securities by the local agency pursuant to an agreement by which the seller will repurchase the securities on or before a specified date and for a specified amount and will deliver the underlying securities to a third-party custodian. The City may invest in repurchase agreements with primary dealers of the Federal Reserve with which the City has entered into a
Securities Industry and Financial Markets Association
(SIFMA) Master Repurchase Agreement (MRA), which
specifies terms and conditions of repurchase agreements.
The market value of securities used as collateral for
repurchase agreements shall not be allowed to fall below one hundred two percent (102%) of the value of the
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repurchase agreement. It shall be adjusted at least quarterly by the tri -party custodial agent. The investments in
repurchase agreements shall comply if the underlying
securities are brought back up to one hundred two percent (102%) no later than the next bus iness day. The underlying collateral shall be limited to United States Government Treasury Bills, Notes, and Bonds, or obligations issued by a Federal Agency or United States Government-sponsored
enterprises obligations. Upon the written approval of the Executive Director for FMSA, substituted securities may be pledged as collateral. They shall consist only of investments permitted under this investment policy, with a maximum maturity of five (5) years. If the broker defaults, the collateral securities can be sold. Since the securities are valued daily, the sale proceeds are likely to equal or exceed the
repurchase agreement amount. Purchases in this category shall not exceed one (1) year or twenty percent (20%) of the cost value of the investment portfolio. Retail repurchase agreements and reverse agreements shall not be authorized for purchase
G. 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 state-licensed branch of a foreign bank. However, the City shall not invest in negotiable certificates of deposit issued by a state or federal credit union if a member of the City Council or any City personnel with investment decision making authority also serves on the board of directors, or any committee appointed by the board of directors, or the credit committee or the supervisory committee of the state or federal credit union issuing the negotiable certificates of deposit. Effective January 1, 2026, the maximum percentage of the portfolio shall revert to thirty percent (30%) . Investments made pursuant to Government Code Section 53635.8 remain
subject to a maximum of thirty percent (30%) of the cost value of the investment portfolio. The amounts so invested shall be subject to the limitations of Government Code
Section 53638, which generally provides that the deposit shall not exceed the shareholder’s equity of any depository bank, or the total net worth of any depository savings
association or federal association, or the total of the unimpaired capital and surplus of an insured industrial loan company. Purchases in this category shall not have more than five (5) years to maturity.
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H. Local Agency Investment Fund - State Pool. The City may invest in the Local Agency Investment Fund (LAIF)
established by the State Treasurer under California
Government Code Section 16429.1 for the benefit of local agencies. LAIF provides daily liquidity; therefore, there is no final stated maturity for this investment category. Although there is no percentage limitation on this fund, the "prudent investor" rule shall apply for a single agency name. In keeping with LAIF deposit-limit investments, City LAIF investments shall not exceed $75 million per active account, unless the State Treasurer authorizes a higher deposit limit for regular accounts during the term of this Statement of Investment Policy, in which case City LAIF investments may increase to that limit.
I. California Cooperative Liquid Assets Securities System (CLASS) Prime Fund – Joint Powers of Authority Pool . The City may invest in the California CLASS Prime Fund
established by a joint exercise of powers entity authorized under California Government Code Section 6509.7 for the benefit of all public agencies in the State of California that have authority to invest their treasury funds. The California CLASS Prime Fund provides daily liquidity; therefore, there is no final stated maturity for this investment category.
Although there is no percentage limitation on this fund, the “prudent investor” rule shall apply for a single agency name.
The California CLASS Prime Fund does not limit a maximum or minimum investment balance; therefore, its investments may increase or decrease based on pool performance, daily cash flow needs, etc.
J. Municipal Bonds. The City may invest in notes or bonds of any of the fifty (50) states, as well as the debt of any local agency within the State of California. Notes, warrants, or other evidence of indebtedness of any local agency within this state, including bonds payable solely from the revenues of a revenue-
producing property owned, controlled, or operated by the local agency, or by a department, board, agency, or authority of the local agency. Investments in this category shall be restricted to instruments that have a rating of “A” or higher, or the equivalent, by at least one of the following nationally recognized statistical rating organizations: Moody’s, Standard & Poor’s, or Fitch. Purchases in this category shall not have more than five (5) years to maturity. There is no percentage limit in this category.
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K. Medium Term Corporate Notes (MTN) are 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 shall be rated in a rating category of "A" or higher by a nationally recognized rating service. Purchases in this category shall not exceed five (5) years to maturity or thirty percent (30%) of the cost value of the investment portfolio. Purchases in a single issuer in this category shall not exceed five percent (5%) of the cost value of the investment portfolio.
L. A mortgage pass -through security, collateralized mortgage obligation, mortgage- backed or other pay -through bond, equipment lease- backed certificate, consumer receivable pass-through certificate, or consumer receivable- backed bond. Securities eligible for investment under this
subdivision shall be rated in a rating category of “AAA” or its equivalent or better by an NRSRO and have a maximum
remaining maturity of five years or less. Purchase of
securities authorized by this subdivision shall not exceed 10 percent (10%) of the agency's surplus moneys that may be invested pursuant to this section.
M. Shares of beneficial interest, otherwise known as money market shares, are issued by diversified management
companies that are money market funds registered with the Securities and Exchange Commission under the Investment Company Act of 1940. The company shall have met either of the following criteria:
i. Attain the highest ranking or the highest letter
and numerical rating provided by not less than
two NRSROs, and
ii. Retained an investment adviser registered or
exempt from registration with the Securities
and Exchange Commission with not less than
five (5) years’ experience investing in the
securities and obligations authorized by
subsection (a) t o (k), inclusive, and
subdivisions (m) to (o), inclusive, of Section
53601 of the Government Code and with assets
under management in excess of five-hundred,
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million dollars ($500,000,000). The purchase
price of shares of beneficial interest (mutual
funds) purchased pursuant to this subdivision
shall not include any commission that these
companies may charge. Investments in this
category shall be restricted to money market
mutual funds that seek to maintain a Net Asset
Value of $1. Money market mutual funds
provide daily liquidity; therefore, there is no
final stated maturity for this investment
category. Investments in mutual funds shall be
restricted to funds that have the highest
ranking or the highest letter and numerical
rating provided by not less than two of the
following nationally recognized statistical
rating organizations: Moody's, Standard &
Poor's or Fitch. Purchases in this category
shall not exceed twenty percent ( 20%) of the
book value of the investment portfolio.
Purchases in a single mutual fund shall not
exceed ten percent 10% of the book value of
the Portfolio.
8.3 Suitability of Investments
Suitability, not simply return, is the standard for selecting investments for the portfolio. The Executive Director for FMSA, and all authorized Investment Officials and other supporting FMSA investment staff shall review the following when selecting or recommending investments for the City:
• Sufficient liquidity to meet current obligations
• Appropriate level of market risk
• Diversified portfolio
• Legal investments
• Market rate of return
The Executive Director of FMSA and his/her designees are not required to invest in all investment options authorized under this Statement of Investment Policy. Selection will be based on cash flow characteristics, exposure to market risk, rate of return, the technical ability of the staff responsible for administering the program, and the availability of time and tools for staff to engage in conservative yet effective management of the City’s investment portfolio.
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9.0 PROHIBITED INVESTMENTS AND INVESTMENT PRACTICES
9.1 Ineligible Investments - State Law
Certain investments, however, are prohibited by California Government Code Section 53601.6. Accordingly, the City shall not invest in any inverse floaters, range notes, mortgage- derived or interest-only strips, or other securities that could result in zero interest accrual if held to maturity. However, prohibited securities purchased and currently held in the City's portfolio as of the date of this policy's adoption, which were previously allowed under the California Government Code but are now prohibited due to changes in the Code, may be held until their maturity dates.
9.2 Disallowed Investments- Higher Perceived Risk
Besides investments prohibited by statute, this policy disallows investments in the following due to a higher perceived risk:
• Investment agreements - contracts regarding funds
deposited by an investor are often separated into
those offered by banks and those offered by
insurance companies, commonly known as
Guaranteed Investment Contracts (GICs) or
Guaranteed Investment Agreements (GIAs);
• Securities lending agreements- agreements allowing
local agencies to earn incremental income on their
investment portfolio by loaning securities in their
portfolio to financial services companies for a limited time;
• Unregistered securities- purchases of private resales of unregistered securities to institutions, such as the Securities Act of 1933, Section 5, Rule 14A
securities.
9.3 Prohibited Investment Practices
Assets of the City shall not be invested pursuant to the following investment practices:
• Trading of securities strictly for speculation or solely for the realization of short-term trading gains.
• A contract providing for the compensation of an agent or fiduciary solely based upon the performance of the
invested assets.
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• If a fiduciary or other third party with custody of public investment transaction records of the City fails to
produce records within a reasonable time, when
requested by the City, the City shall make no new
investments with or through the fiduciary or third
party. It shall not renew maturing investments with or
through the fiduciary or third party.
10.0 INVESTMENT POOLS/MUTUAL FUNDS
Government-sponsored investment pools (Local Agency Investment Fund (LAIF), County Pools, Joint Powers Authority Pools, and the State Treasury Voluntary Investment Program Fund) are sources for short - term cash management.
Before seeking City Council approval to participate in one or more additional investment pools/money market mutual funds, the Executive Director for FMSA or their designees will conduct a thorough investigation of the prospective pool before recommending City investment.
Before recommending investing in a prospective pool, the following issues must be reviewed and considered:
The pool must meet the requirements of the state
statute describing eligible investment securities and
include a written statement of investment policy and
objectives.
A description of interest calculations and how they are distributed, and how gains and losses are treated.
i. A description of how the securities are safeguar ded (including the settlement processes), and how often
the securities are priced and the program audited.
ii. A description of who may invest in the program, size and frequency of minimum and maximum deposits,
how many withdrawal transactions are allowed (daily,
monthly, quarterly, annually, etc.), and whether
advance notice is required for withdrawal
transactions.
iii. A description of how and who in the governing body of the program is authorized to make program
changes, including frequency. The description must
include how program participants are informed of
program changes and their impacts.
iv. A schedule for receiving statements and portfolio
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listings.
v. A description of how reserves, retained earnings,
etc., are utilized by the pool.
vi. A model of the fee schedule, and when and how it is assessed.
vii. A description of eligibility and/or acceptance of bond proceeds.
viii. The pool must contain only the types of investment allowed by the California Code.
Upon approval for participation in one or more additional investment pools, the FMSA investment staff shall, on an annual basis, investigate and reconfirm the pool’s compliance with items listed above and shall monitor the pool’s performance reports.
11.0 COLLATERALIZATION/SECURITY FOR DEPOSIT OF PUBLIC FUNDS
Money must be deposited in state or national banks, state or federal savings associations, or state or federal credit unions in the State of California. It may be in inactive deposits, active deposits, or interest- bearing active deposits. The deposits cannot exceed the amount of the bank's or savings and loan's paid-up capital and surplus.
The bank or savings and loan must secure the active and inactive deposits with eligible securities having a market value of one hundred ten percent (110%) of the total amount of the deposits. State law also allows first trust deeds with a value of one hundred fifty percent (150%) of the total amount of the deposits as an eligible security . A third class of collateral is letters of credit drawn on the Federal Home Loan Bank (FHLB).
The Treasurer may, at their discretion, waive security for the portion of a deposit insured under federal law. Currently, the first two hundred fifty thousand dollars ($250,000) of a deposit is federally insured.
12.0 SAFEKEEPING AND CUSTODY
In accordance with California Government Code Section 53601, to protect against potential losses caused by collapse of individual securities dealers, all securities owned by the City, except securities used as collateral for repurchase agreements, shall be kept in safekeeping with "perfected interest" by the City’s custodial bank or a third-party bank trust department, acting as agent for the City under the terms of a custody agreement executed by the bank and by the City. Perfected interest refers to the establishment of a superior ownership right in and legal control over July 1, 2026 -
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the securities assets held by the bank custodian on the City’s behalf. It is intended to protect the City from the custodial bank’s creditors in the event of a bank default and bankruptcy filing . All securities, excepting investments which are not deliverable (such as LAIF, California CLASS Prime Fund, direct time certificates of deposit, and money market mutual funds), will be received and delivered using standard “delivery versus payment”. Delivery versus payment refers to the delivery of securities in exchange for money at the time of delivery, rather than for a signed receipt.
13.0 DIVERSIFICATION
The purpose of diversification is to reduce overall portfolio risk, achieve market-rate returns, and enable the City to meet all anticipated cash requirements. The investment portfolio shall consist of various types of securities approved by state statute and this Statement of Investment Policy. Investments shall vary by issuer, asset class, industry, and maturity to meet the City’s financial obligations. Diversifying the investment portfolio will help mitigate losses resulting from the failure of any one issuer. Investments shall also be diversified across structures and embedded options within the security.
The investments shall be diversified by:
• Limiting investments to avoid over-concentration in
securities of a specific issuer (excluding treasury bills). • Limiting investment in securities that have higher credit risks. • Limiting certificates of deposit to the maximum federally insured amount.
• Investing in securities with varying maturities.
• Investing a minimum percentage of the total portfolio as established by the FMSA Investment Advisory Committee
in highly marketable short -term treasuries, checking
accounts with interest, government pooled account, or a combination of all three (See Section 4.1 (A)(iv)).
14.0 INTERNAL CONTROLS
The Executive Director for FMSA is responsible for establishing and maintaining an internal control structure designed to ensure that the entity's assets are protected from loss, theft, or misuse. The Finance Department, with oversight and approval from the Executive Director for FMSA, has developed a system of internal investment controls and a July 1, 2026 -
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segregation of responsibilities for investment functions to ensure adequate internal control over these functions. No investment personnel may engage in an investment transaction except as provided under this policy and the procedure established by the Executive Director for FMSA.
Internal control procedures address:
• Control of collusion
• Control of fraud
• Control of misrepresentation by third parties
• Control of employee error
• Separation of transaction authority from accounting and record keeping
• Custodial safekeeping
• Delivery versus payment
• Clear delegation of authority
• Confirmation of transactions for investment and wire transfers • Written procedures for placing investment transactions • FMSA Investment Advisory Committee
In addition, cash balances are reconciled daily by non- investment employees and reconfirmed by the City's accounting staff. Accounting staff also regularly verify investment activities and holdings, and the FMSA Investment Advisory Committee reviews them. The Executive Director for FMSA, at his/her discretion, shall establish a process for annual independent reviews by an external auditor, to the extent contemplated by generally accepted auditing standards, as part of the City’s annual audit.
15.0 REPORTING
Government Code Section 53646(b)(1) previously mandated that annual investment policies and quarterly reports be rendered to the legislative body (for the City of Santa Ana, the City Council) . AB 2853 amended Government Code Section 53646, making these requirements permissive rather than mandatory. Although the Annual Statement of Investment Policy and Quarterly Reports to the City Council are no longer required, we believe it is both prudent and consistent with the spirit of the City’s Sunshine Policy to continue providing these documents . The Executive Director for FMSA shall therefore continue to render to the City Council an annual Statement of Investment Policy and to the City Manager and the City July 1, 2026 -
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Council regular reports containing detailed information on all securities, investments, and monies of the City. Pursuant to Government Code 53607, the reports shall include monthly transactions for the reporting period. The reports will be submitted to the City Manager and City Council monthly and formally rendered to the City Council quarterly as part of a scheduled open City Council Meeting agenda within forty-five (45) days following the end of each quarter.
The report will contain the following information on the funds that are subject to this investment policy:
1) Type of investment and name of issuer;
2) Date of maturity;
3) Par amount;
4) Dollar amount invested in all securities, investments, and monies held by the City (amortized cost or book value); 5) Weighted average maturity of the investments;
6) Current market value as of the date of report of all funds held by the City and under the management of any outside party that is not also a local agency or LAIF, and the source of the valuation;
7) Source of the market value information;
8) A list of any funds, investments, or programs, including loans, under the management of contracted parties such
as LAIF, investment. pools, outside money managers, and securities lending agents);
9) A statement of compliance with the investment policy or an explanation for non-compliance; and
10) 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.
16.0 POLICY CONSIDERATIONS
16.1 Exemptions
Any investment currently held that does not meet the guidelines of this policy shall be exempt from the requirements of this policy, provided it complied with State of California law and the City’s investment policy in effect at the time of purchase. At maturity or liquidation, such funds shall be reinvested only as provided by this policy.
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16.2 Stabilization Fund
Except for cash in certain restricted and special funds, the consolidation of cash balances from all funds and the
maintenance of portfolio liquidity (both static and dynamic), as provided for in this policy, together with the monthly affirmation to the City Manager and City Councilmembers of the City’s ability to meet its pool’s expenditure requirements for the next six months, shall be deemed to functionally meet and exceed the
requirements of Article VI., Sec. 610, of the City of Santa Ana Charter as relates to the maintenance of a stabilization fund.
16.3 Amendments
In the event this policy is amended prior to the end of its twelve- month fiscal year term, the amended Statement of Investment Policy shall be resubmitted to City Council for review and adoption by City Council Resolution.
16.4 Approval
This Statement of Investment Policy is approved by City Council on this 16th day of June, 2026, pursuant to City Council Resolution #2026-XXX.
17 POLICY REVIEW, CERTIFICATION, AND ADOPTION
17.1 Policy Review
This Statement of Investment Policy shall be reviewed at least annually to ensure its consistency with the overall objectives of preservation of PRINCIPAL, LIQUIDITY, AND YIELD, and to: 1) reflect changes in applicable California state codes, 2) maintain its relevance to current financial and economic trends, and 3) meet the needs of the City of Santa Ana.
17.2 Policy Certification
This certified Statement of Investment Policy will be resubmitted to the Association of Public Treasurers of the United States and Canada (APTUS&C) and the California Municipal Treasurers Association (CMTA) for review and re- certification every five (5) years, or more often in the event of significant legislative changes, changes in industry standards, or substantive non- administrative modifications to the body of the policy statement, exclusive of revisions or additions to appendices or glossaries. In FY 2019-20, the City of Santa Ana received Investment Policy Certifications July 1, 2026 -
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from both the APTUS&C at the international North American level and the CMTA at the state level. In FY 2021-22, the City of Santa Ana received a state-level Investment Policy Certification from the CMTA.
17.3 Adoption
The Executive Director of FMSA shall present this Statement of Investment Policy annually to the City Council and the City Manager. The City Council shall annually review and adopt this Statement of Investment Policy by resolution at a public meeting.
Submitted to the Santa Ana City Council for approval, this 16th day of June 2026.
________________________________________
Alex Trinidad, CPA
Executive Director & City Treasurer
Finance & Management Services Agency
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ALLOWABLE INVESTMENT INSTRUMENTS PER STATE GOVERNMENT
CODE (AS OF JANUARY 1, 2026)A APPLICABLE TO ALL LOCAL AGENCIESB See “Table of Notes for Figure 1” on the next page for footnotes related to this figure.
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)
397 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)
397 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