CITY OF SANTA BARBARA
CITY COUNCIL
Randy Rowse
Mayor
Kelly McAdoo
City Administrator
Mike Jordan
Mayor Pro Tempore
Mike Jordan
Ordinance Committee Chair
Sarah J. Knecht
City Attorney
Alejandra Gutierrez
Finance Committee Chair
Eric Friedman
Meagan Harmon
Oscar Gutierrez
Kristen W. Sneddon
City Hall
735 Anacapa Street
http://www.SantaBarbaraCA.gov
JUNE 25, 2024, 2:00 PM
AGENDA
IN-PERSON PUBLIC COMMENT: At the beginning of each meeting of the City Council, Finance Committee, or Ordinance Committee, any member of the public may address the City Council concerning any item not on the Council's agenda. Any person wishing to make such address should first complete and deliver a "Request to Speak" form prior to the time that public comment is taken up by the City Council. Each speaker will be given a total of 3 minutes to address the Council. Pooling of time is not allowed during general public comment. The time allotted for general public comment at the beginning of the 2:00 p.m. session is 30 minutes.
Any member of the public who did not speak during the 2:00 p.m. session but who submitted a request to do so during the 2:00 p.m. 30 minute session may do so at the end of the meeting when the additional “Public Comment (If Necessary)” is announced. The City Council, upon majority vote, may decline to hear a speaker on the grounds that the subject matter is beyond their jurisdiction.
REMOTE PUBLIC COMMENT: Members of the public wishing to speak must “raise their hand” in the Zoom platform by selecting the virtual hand icon when their item is called. The keyboard shortcut for this is Alt+Y for Windows and Option+Y for Macs. City staff will activate the speaker’s microphone when the speaker’s name is called. The speaker will then need to unmute themselves. The keyboard shortcut for this is Alt+M for Windows or Command-Shift-A for Macs.
HOW TO REMOTELY OBSERVE AND/OR SPEAK LIVE AT A MEETING
• Web: https://santabarbaraca-gov.zoom.us/webinar/register/WN_JJS2kazqRyu2i83tshCkPw (Participation via Zoom)
• Telephone: Dial 1-669-900-6833, Enter Webinar ID: 894 2384 2846 (press *9 to raise/lower hand; press *6 to mute/unmute) • Online Streaming: Council meetings are streamed live at www.SantaBarbaraCA.gov/CAP • TV: Each regular City Council meeting is broadcast live in English and Spanish on City TV Channel 18 and rebroadcast in English on Wednesdays and Thursdays at 7:00 p.m. and Saturdays at 8:00 a.m., and in Spanish on Sundays at 3:00 p.m.
Each televised Council meeting is closed captioned for the hearing impaired. Check the City TV program guide at www.santabarbaraca.gov/citytv for rebroadcasts of Finance and Ordinance Committee meetings.
WRITTEN PUBLIC COMMENT: Public comments may also be submitted via email to [email protected] prior to the beginning of the Council Meeting. All public comments submitted via email will be provided to City Council and will become part of the public record.
(CONTINUED ON NEXT PAGE)
ORDER OF BUSINESS: Regular meetings of the Finance Committee and the Ordinance Committee begin at 12:00 p.m. The regular City Council meeting begins at 2:00 p.m. in the Council Chambers at City Hall.
REPORTS: Copies of the reports relating to agenda items are available for review at http://www.SantaBarbaraCA.gov/CAP.In accordance with state law requirements, this agenda generally contains only a brief general description of each item of business to be transacted or discussed at the meeting. Should you wish more detailed information regarding any particular agenda item, you are encouraged to obtain a copy of the Council Agenda Report (a "CAR") online at the City's website (http://www.SantaBarbaraCA.gov/CAP). Materials related to an item on this agenda submitted to the City Council after distribution of the agenda packet are posted to the City’s website as soon as reasonably feasible.
CONSENT CALENDAR: The Consent Calendar is comprised of items that will not usually require discussion by the City Council. A Consent Calendar item is open for discussion by the City Council upon request of a Councilmember, City staff, or member of the public. Items on the Consent Calendar may be approved by a single motion. Should you wish to comment on an item listed on the Consent Agenda, after turning in your "Request to Speak" form, you should come forward to speak or raise your hand in Zoom at the time the Council considers the Consent Calendar.
SPANISH INTERPRETATION: If you need interpretation of your communications to Council from Spanish into English, please contact the City Clerk’s Office at 564-5309 or by email at [email protected]. If possible, notification of at least 48 hours will usually enable the City to make arrangements.
INTERPRETACIÓN EN ESPAÑOL: Si necesita una interpretación del español al inglés, para sus comunicaciones al Consejo, comuníquese con la Oficina del Secretario Municipal al 564-5309, o por correo electrónico a [email protected]. Si es posible, la notificación de al menos 48 horas generalmente permitirá a la Ciudad hacer los arreglos.
AMERICANS WITH DISABILITIES ACT: If you need auxiliary aids or services or staff assistance to attend or participate in this meeting, please contact the City Administrator's Office at 564-5305 or by email at [email protected]. If possible, notification at least 48 hours prior to the meeting will usually enable the City to make reasonable arrangements. For those who need accessibility accommodation in using the “raise hand” function and/or registering to participate in the Zoom session, please contact the Clerk’s office by 5:00 p.m. the day before the meeting for assistance. Additionally, a speaker may email [email protected] by 5:00 p.m. the day before a meeting, stating which item they wish to speak on. Specialized services, such as sign language interpretation or documents in Braille, may require additional lead time to arrange. 06/25/2024 Santa Barbara City Council Final Agenda Page 1 JUNE 25, 2024 AGENDA
REGULAR CITY COUNCIL MEETING - 2:00 P.M.
CALL TO ORDER
PLEDGE OF ALLEGIANCE
ROLL CALL
CEREMONIAL ITEMS
1. Subject: Juneteenth - June 19, 2024 (120.04)
2. Subject: LGBTQ+ Pride Month - June 2024 (120.04)
CHANGES TO THE AGENDA
CONSENT CALENDAR
3. Subject: Minutes (000.00)
Recommendation: That Council waive reading and approve the minutes for the special meetings of November 30, 2023, and May 7, 2024; and regular meetings of June 4, 2024, and June 11, 2024.
4. Subject: Proposed Ballot Measure on Transaction and Use Tax Increase to Maintain Essential Local Services for the November 5, 2024 General Election [Ordinance Adoption] (110.03)
Recommendation: That Council adopt, by reading of title only, an Ordinance of the Council of the City of Santa Barbara Authorizing the Imposition of the Santa Barbara Essential Local Services Tax, Subject to Approval by the Electors, by the Addition of Chapter 4.15 to Title 4 of the Santa Barbara Municipal Code.
5. Subject: Records Destruction for Airport Department [Resolution] (160.06) Recommendation: That Council adopt, by reading of title only, a Resolution of the Council of the City of Santa Barbara relating to the Destruction of Records held by the Airport Department in the Operations Division.
06/25/2024 Santa Barbara City Council Final Agenda Page 2
6. Subject: Statement of Investment Policy and Delegation of Investment Authority for Fiscal Year 2025 [Resolution] (260.01)
Recommendation: That Council adopt, by reading of title only, a Resolution of the Council of the City of Santa Barbara Adopting the Investment Policy for the City and Rescinding Resolution No. 23-138.
7. Subject: Resolution Amending the Schedule of Penalties, Fees, and Service Charges to Correct Clerical Error [Resolution] (230.05) Recommendation: That Council adopt, by reading of title only, a Resolution of the Council of the City of Santa Barbara Directing the City Clerk to Correct Clerical Errors by Inserting Omitted Pages into Resolution 24-068 Adopted on June 11, 2024, Which Shall Become Effective on July 1, 2024, and Amend the City of Santa Barbara Schedule of Penalties, Fees, and Service Charges.
8. Subject: May 2024 Investment Report (260.02)
Recommendation: That Council accept the May 2024 Investment Report.
9. Subject: Non-Profit Organization Leases at the Westside and Franklin Community Centers [Agreement] (570.07)
Recommendation: That Council:
A. Authorize the Parks and Recreation Director to execute annual lease agreements for office space at the Westside Community Center for the Independent Living Resource Center, and Momentum Work, Inc.; and B. Authorize the Parks and Recreation Director to execute annual lease agreements for office space at the Franklin Community Center for California Rural Legal Assistance, Inc., and the Santa Barbara County Immigrant Legal Defense Center.
10. Subject: Authorization to Amend the Legal Services Agreement with Liebert Cassidy Whitmore for Special Counsel Services [Agreement] (350.01) Recommendation: That Council authorize the City Administrator to execute a second amended legal services agreement with Liebert Cassidy Whitmore (contract #22300093) to increase the not-to-exceed amount from $100,000 to $115,000 for special counsel services related to existing personnel matters. 06/25/2024 Santa Barbara City Council Final Agenda Page 3
CONSENT PUBLIC HEARINGS
11. Subject: Public Hearing Regarding Parking and Business Improvement Area Annual Assessment Report for Fiscal Year 2025 [Resolution] (550.1) Recommendation: That Council:
A. Consider any appropriate protests to the Parking and Business Improvement Area Annual Assessment Report for Fiscal Year 2025, as required under the California Parking and Business Improvement Area Law of 1989; and
B. Adopt, by reading of title only, a Resolution of the Council of the City of Santa Barbara, Fixing and Assessing the Parking and Business Improvement Area Assessment Rates for Fiscal Year 2025, and Confirming Approval of the Parking and Business Improvement Area Annual Assessment Report for Fiscal Year 2025.
12. Subject: California Environmental Quality Act (CEQA) Exemption Determination for 515 West Los Olivos Street Housing Project (630.02) Recommendation: That Council determine the proposed housing development project is a sustainable communities project and is exempt from further environmental review under Public Resources Code § 21155.1 [Implementation of the Sustainable Communities Strategy].
GENERAL PUBLIC COMMENT
PULLED CONSENT ITEMS
COUNCILMEMBER COMMITTEE ASSIGNMENT REPORTS
06/25/2024 Santa Barbara City Council Final Agenda Page 4
CITY COUNCIL ADMINISTRATIVE AND ATTORNEY REPORTS
PUBLIC HEARINGS
13. Subject: Downtown Santa Barbara Community Benefit Improvement District Resolution of Formation and Levying Assessment [Resolution] (290.00) Recommendation: That Council:
A. Hold a public hearing regarding the formation of the Downtown Santa Barbara Community Benefit Improvement District (Downtown Santa Barbara CBID); and tabulate all assessment ballots returned to the City pursuant to procedures set forth in the Resolution of Intention; and B. If the assessment balloting does not result in a majority protest, then waive first reading and adopt, by reading of title only, a Resolution of the Council of the City of Santa Barbara Forming the Downtown Santa Barbara Community Benefit Improvement District Pursuant to Chapter 4.45 of the Santa Barbara Municipal Code and Levying the Assessment in Connection with Such District.
14. Subject: Public Hearing on Proposed Changes to Water, Wastewater, and Solid Waste Rates (540.01)
Recommendation: That Council:
A. Hold a public hearing, consider all written protests, and determine if there is a majority protest regarding proposed increases to water and wastewater rates for Fiscal Years 2025-2028 and solid waste rates for Fiscal Year 2025, as required by California Constitution article XIII D, § 6; and B. If there is no majority written protest, direct staff to prepare a rate schedule setting the water and wastewater rates for Fiscal Years 2025-2028, and solid waste rates for Fiscal Year 2025, and update the schedules within the City of Santa Barbara Schedule of Penalties, Fees, Rates, and Service Charges resolution for adoption on July 2, 2024.
COUNCIL AND STAFF COMMUNICATIONS
COUNCILMEMBER ENGAGEMENTS
PUBLIC COMMENT (IF NECESSARY)
ADJOURNMENT
Agenda Item No. 1
File Code No. 120.04
Agenda Item No. 2
File Code No. 120.04
11/30/2023 Santa Barbara City Council Minutes Page 1 of 2
CITY OF SANTA BARBARA
CITY COUNCIL MINUTES
SPECIAL MEETING
NOVEMBER 30, 2023
CHASE PALM PARK BEACH HOUSE, 236 E CABRILLO BLVD
CALL TO ORDER
Mayor Randy Rowse called the meeting to order at 1:02 p.m.
PLEDGE OF ALLEGIANCE
Mayor Rowse.
ROLL CALL
Councilmembers present: Eric Friedman, Alejandra Gutierrez (1:03 p.m.), Oscar Gutierrez, Mike Jordan, Meagan Harmon (1:32 p.m.); Kristen W. Sneddon, Mayor Randy Rowse.
Councilmembers absent: None.
Staff present: Assistant City Administrator René Eyerly, City Attorney Sarah Knecht, City Clerk Services Manager Sarah Gorman.
CITY COUNCIL ADMINISTRATIVE AND ATTORNEY REPORTS
1. Subject: Budget Schedule and Legislative Update to City Council (230.05) Recommendation: That Council hear a presentation from staff and provide feedback related to the upcoming Fiscal Year (FY) 2025 budget hearing schedule and current State legislation.
Documents:
- November 30, 2023, report from the City Administrator. - PowerPoint presentation prepared and made by staff.
Agenda Item No. 3
File Code No. 000.00
11/30/2023 Santa Barbara City Council Minutes Page 2 of 2 Speakers:
- Staff: Finance Director Keith DeMartini; Senior Assistant to the City Administrator Brandon Beaudette; Senior Assistant to the City Administrator Barbara Andersen.
- Townsend Public Affairs: Eric O’Donnell; Carlin Shelby - Members of the Public: None.
Discussion:
- Councilmembers discussed the proposed budget hearing schedule and a proposed additional meeting before the February 29, 2024 meeting.
Councilmembers also discussed anticipated issues for 2024, including housing affordability, retail theft, electrical bicycle safety, and homelessness/behavioral health reforms.
- Councilmembers’ questions were answered.
PUBLIC COMMENT FOR ITEMS LISTED ON THE AGENDA
No one wished to speak.
ADJOURNMENT
Mayor Rowse adjourned the meeting at 4:15 p.m.
Approved and adopted by the City Council of the City of Santa Barbara on June 25, 2024.
SANTA BARBARA CITY COUNCIL SANTA BARBARA
CITY CLERK'S OFFICE
_______________________________ ATTEST: ______________________________
RANDY ROWSE SARAH GORMAN
MAYOR CITY CLERK SERVICES MANAGER
05/07/2024 Santa Barbara City Council Minutes Page 1 of 2
CITY OF SANTA BARBARA
CITY COUNCIL MINUTES
SPECIAL MEETING
MAY 7, 2024
COUNCIL CHAMBERS, 735 ANACAPA STREET
CALL TO ORDER
Mayor Randy Rowse called the meeting to order at 10:01 a.m.
PLEDGE OF ALLEGIANCE
Mayor Rowse.
ROLL CALL
Councilmembers present: Eric Friedman, Alejandra Gutierrez, Oscar Gutierrez (10:10 a.m.), Meagan Harmon, Mike Jordan, Mayor Randy Rowse.
Councilmembers absent: Councilmember Kristen Sneddon.
Staff present: Interim City Administrator Sarah Knecht, Acting City Attorney Tava Ostrenger, Deputy City Clerk Austin Taylor.
RECESS
Mayor Rowse recessed to closed session at 10:02 a.m. and stated that no reportable action is anticipated.
CLOSED SESSION
1. Subject: Conference with Real Property Negotiators (330.03) Recommendation: That Council hold a closed session pursuant to Government Code Section 54956.8 to discuss the proposal of price and terms of payment for a lease of the real property located at 916, 918, and 920 State Street.
Real Property: 916, 918, and 920 State Street (APN 039-322-052) City Negotiators: Sarah J. Knecht, Interim City Administrator; John S. Doimas, Assistant City Attorney; Heather A. Minter, Deputy City Attorney-Lessor
05/07/2024 Santa Barbara City Council Minutes Page 2 of 2 Negotiating Party: Santa Barbara International Film Festival (SBIFF) a 501(c)(3) non-profit arts and educational organization;
Sean Pratt;
Roger Durling
Under Negotiation: Price and terms of lease agreement
SCHEDULING: Duration, 30 mins; anytime
REPORT: None anticipated
Documents:
- May 7, 2024, report from the City Attorney.
Time:
- 10:03 a.m. – 11:00 a.m.
No report made.
PUBLIC COMMENT ON ITEMS LISTED ON THE AGENDA
No one wished to speak.
ADJOURNMENT
Mayor Rowse adjourned the meeting at 11:00 a.m.
Approved and adopted by the City Council of the City of Santa Barbara on June 25, 2024.
SANTA BARBARA CITY COUNCIL SANTA BARBARA
CITY CLERK'S OFFICE
_______________________________ ATTEST: ______________________________
RANDY ROWSE SARAH GORMAN
MAYOR CITY CLERK SERVICES MANAGER
06/04/2024 Santa Barbara City Council Minutes Page 1 of 12
CITY OF SANTA BARBARA
CITY COUNCIL MINUTES
REGULAR MEETING
JUNE 4, 2024
COUNCIL CHAMBERS, 735 ANACAPA STREET
CALL TO ORDER
Mayor Randy Rowse called the meeting to order at 2:00 p.m. (The Finance Committee and Ordinance Committee, which generally meet at 12:00 p.m., did not meet on this day.)
PLEDGE OF ALLEGIANCE
Mayor Rowse.
ROLL CALL
Councilmembers present: Eric Friedman, Alejandra Gutierrez, Oscar Gutierrez, Meagan Harmon, Mike Jordan, Kristen W. Sneddon, Mayor Randy Rowse.
Councilmembers absent: None.
Staff present: City Administrator Kelly McAdoo, City Attorney Sarah J. Knecht, City Clerk Services Manager Sarah Gorman.
CEREMONIAL ITEMS
1. Subject: Employee Recognition – Service Award Pins (120.04) Recommendation: That Council authorize the City Administrator to express the City’s appreciation to employees who are eligible to receive service award pins for their years of service through June 30, 2024.
Action: City Administrator Kelly McAdoo read the names of the pin recipients and expressed her gratitude for their years of service.
CHANGES TO THE AGENDA
There were no changes to the agenda.
06/04/2024 Santa Barbara City Council Minutes Page 2 of 12 CONSENT CALENDAR (Item Nos. 2-15)
The titles of the Ordinances and Resolutions were read.
Motion:
Councilmembers Friedman/Harmon to approve the consent calendar Items 2- 11 and 14 - 15 as recommended.
Vote:
Unanimous roll call vote.
2. Subject: Minutes (000.00)
Recommendation: That Council waive reading and approve the minutes for the special meetings of February 13, 2024, February 22, 2024, March 5, 2024, and March 12, 2024; and for the regular meetings of February 6, 2024, February 13, 2024, February 27, 2024, March 12, 2024, and May 7, 2024.
Action: Approved the recommendation.
3. Subject: Loan to Housing Authority for $5,000,000 for Development of Property Located at 200 North La Cumbre Road [Ordinance Introduction; Resolution] (660.04)
Recommendation: That Council:
A. Introduce and subsequently adopt, by reading of title only, an Ordinance of the Council of the City of Santa Barbara Approving a Thirty-Year Loan Agreement with the Housing Authority of the City of Santa Barbara in the Amount of $5,000,000 for Development of the Real Property Located at 200 North La Cumbre Road to Be Used for Permanent Affordable Housing, to Be Secured by a Deed of Trust and a 90-Year Affordability Control Covenant Imposed on Real Property and Authorizing the Community Development Director to Execute Such Agreements, Subject to Approval as to Form by the City Attorney, as Necessary; and
B. Adopt, by reading of title only, a Resolution of the Council of the City of Santa Barbara Amending Resolution No. 23-076, Adopting the Budget for Fiscal Year 2024, to Approve an Increase in Fiscal Year 2024 Expenditure Appropriations in the Affordable Housing Fund in the Amount of $5,000,000 Funded by Affordable Housing Fund Reserves to Fund a Loan Agreement with the Housing Authority of the City of Santa Barbara for Development of Real Property Located at 200 North La Cumbre Road.
Action: Approved the recommendations; Resolution No. 24-054 (June 4, 2024, report from the Community Development Director; proposed Ordinance; proposed Resolution).
06/04/2024 Santa Barbara City Council Minutes Page 3 of 12
4. Subject: Purchase Order with CIO Solutions, Limited Partnership, for Storage Area Network Replacement [Resolution] (520.02)
Recommendation: That Council:
A. Adopt, by reading of title only, a Resolution of the Council of the City of Santa Barbara Amending Resolution No. 23-076, Adopting the Budget for Fiscal Year 2024, to Approve an Increase of Revenue and Expenditure Appropriations in Fiscal Year 2024 in the Police Department General Fund Budget in the amount of $243,804;
B. Approve and increase appropriations in the Police Department Computer Aided Dispatch (CAD) Records Management System (RMS) Fund, funded from reserves, in the amount of $180,122, and authorize the transfer of $180,122 to the Police Department General Fund;
C. Approve and increase appropriations in the Police Department California Law Enforcement Telecommunication System (CLETS) Joint Powers Agreement (JPA) Fund, funded from reserves, in the amount of $63,682, and authorize the transfer of $63,682 to the Police Department General Fund;
D. Approve and increase the appropriations and estimated revenues in the Police Department General Fund in the amount of $243,804 for the purchase of Storage Area Network (SAN) equipment for the Police Department; and
E. Waive the formal bid process, as authorized by Municipal Code Section
4.52.070(L), best interest waiver, and authorize the City General Services Manager to issue a purchase order not to exceed $243,804 with CIO Solutions for the SAN replacement.
Action: Approved the recommendations; Resolution No. 24-055 (June 4, 2024, report from the Police Chief; proposed Resolution).
5. Subject: Extraordinary Water Use Billing Adjustment Policy [Resolution] (540.01)
Recommendation: That Council adopt, by reading of title only, a Resolution of the Council of the City of Santa Barbara Adopting the Extraordinary Water Use Billing Adjustment Policy.
Action: Approved the recommendation; Resolution No. 24-056 (June 4, 2024, report from the Public Works Director; proposed Resolution). 06/04/2024 Santa Barbara City Council Minutes Page 4 of 12
6. Subject: Projects for Fiscal Year 2024-2025 Funded by SB 1: the Road Repair and Accountability Act [Resolution] (530.04)
Recommendation: That Council adopt, by reading of title only, a Resolution of the Council of the City of Santa Barbara Adopting Projects for Fiscal Year 2024-2025 Funded by SB 1: the Road Repair and Accountability Act.
Action: Approved the recommendation; Resolution No. 24-057 (June 4, 2024, report from the Public Works Director; proposed Resolution).
7. Subject: Appropriation of General Fund Disaster Reserves for Emergency Repairs on City Streets [Resolution] (530.04)
Recommendation: That Council adopt, by reading of title only, a Resolution of the Council of the City of Santa Barbara Amending Resolution No. 23-076, Adopting the Budget for Fiscal Year 2024, to Appropriate General Fund Disaster Reserves for Unanticipated Emergency Repairs on City Streets.
Action: Approved the recommendation; Resolution No. 24-058 (June 4, 2024, report from the Public Works Director; proposed Resolution).
8. Subject: Amendment to Position Salary Control Resolution 23-081 with Updates to Classification and Compensation for Certain Positions [Resolution] (410.06)
Recommendation: That Council adopt, by reading of title only, a Resolution of the Council of the City of Santa Barbara Amending Resolution 23-081, the Position Salary Control Resolution for Fiscal Year 2024, to Amend the Established Salary for Positions as Listed and to Establish Classifications Listed.
Action: Approved the recommendation; Resolution No. 24-059 (June 4, 2024, report from the Human Resources Director; proposed Resolution).
9. Subject: Contract Amendment for Construction Support Services for the Santa Barbara Airport South Terminal Apron Redevelopment Project [Resolution; Agreement] (560.04)
Recommendation: That Council:
A. Authorize the Public Works Director to execute the Second Contract Amendment to City Professional Services Agreement No. 26,747 with Kimley Horn, Inc., in the amount of $107,550 for construction support services, and approve expenditures of up to $10,755 for extra services that may result from necessary changes in the scope of work; and 06/04/2024 Santa Barbara City Council Minutes Page 5 of 12 B. Adopt, by reading of title only, a Resolution of the Council of the City of Santa Barbara amending Resolution No. 23-076, Adopting the Budget for Fiscal Year 2024, to Reprogram Funds for the South Terminal Apron Redevelopment Project.
Action: Approved the recommendations; Resolution No. 24-060; Agreement No. 26,747.2 (June 4, 2024, report from the Public Works Director; proposed Resolution).
10. Subject: Contracts for Construction of the Mission Creek at Oak Park Restoration Project [Resolution; Agreement] (530.03)
Recommendation: That Council:
A. Award a contract with CGS Engineering Corporation, in their low bid amount of $615,633.01 for construction of the Mission Creek at Oak Park Restoration Civil Engineering Project, Bid No. 5019A; and authorize the Public Works Director to execute the contract and approve expenditures up to $61,563.30 to cover any cost increases that may result from contract change orders for extra work and differences between estimated bid quantities and actual quantities measured for payment;
B. Award a contract with Wilson Environmental Contracting, Inc., in their low bid amount of $198,598.20 for construction of the Mission Creek at Oak Park Restoration Landscape Project, Bid No. 5049; and authorize the Sustainability and Resilience Director to execute the contract and approve expenditures up to $19,859.82 to cover any cost increases that may result from contract change orders for extra work and differences between estimated bid quantities and actual quantities measured for payment; and C. Adopt a Resolution of the Council of the City of Santa Barbara Amending Resolution No. 23-076, Adopting the Budget for Fiscal Year 2024 to Appropriate Creeks Capital Fund Reserves for the Mission Creek Restoration Project at Oak Park.
Action: Approved the recommendations; Resolution No. 24-061; Agreement Nos. 28,518 and 28,519 (June 4, 2024, report from the Public Works Director; proposed Resolution).
11. Subject: Fiscal Year 2024 Interim Financial Statements for the Ten Months Ended April 30, 2024 (250.02)
Recommendation: That Council accepts the Fiscal Year 2024 Interim Financial Statements for the ten months ended April 30, 2024.
06/04/2024 Santa Barbara City Council Minutes Page 6 of 12 Action: Approved the recommendation (June 4, 2024, report from the Finance Director).
14. Subject: Agreement with New Beginnings to Provide Case Management and Housing Navigation Services to Persons Experiencing Vehicular Homelessness [Agreement] (660.04)
Recommendation: That City Council authorize the Community Development Director to execute an agreement in the amount of $1,393,875 with New Beginnings, a California nonprofit organization, to provide outreach, case management, and housing navigation services to persons experiencing vehicular homelessness in the City of Santa Barbara, with funds made available by the California Encampment Resolution Funding grant program.
Action: Approved the recommendation; Agreement No. 28,523 (June 4, 2024, report from the Community Development Director).
,
15. Subject: Best Interest Waiver for Primary Coagulant Chemical Purchase at the William B. Cater Water Treatment Plant (540.1)
Recommendation: That Council:
A. Waive the formal bid procedures as authorized by Santa Barbara Municipal Code section 4.52.070(L); and
B. Authorize the General Services Manager to issue an annual purchase order to Summit Chemical Specialty Products in the amount of $400,000 for the purchase of Sumaclear 830B and Sumaclear 1000 coagulant chemicals, with the option to renew the annual purchase order for an additional four years, subject to Council’s adoption of the budget.
Action: Approved the recommendations (June 4, 2024, report from the Public Works Director).
GENERAL PUBLIC COMMENT
Members of the Public: Robert Forouzandeh; Gene Deering; Chris Parker; Steve Brown; John Norris; Nick Gonzales; Loy Beardsmore; Natalia Govoni; Aron Ashland; Mary Ellen Brooks.
PULLED CONSENT ITEMS
12. Subject: Amendment to Professional Services Agreement for Permit, Plan Check, and Inspection Services [Agreement] (610.01)
06/04/2024 Santa Barbara City Council Minutes Page 7 of 12 Recommendation: That Council authorize the Community Development Director to execute the sixth amendment to increase the amount of Santa Barbara City Agreement No. 26,979 with Interwest Consulting Group, Inc., by $120,000, for a total contract amount of $705,000, to provide permit, plan check, and inspection services.
Documents:
- June 4, 2024, report from the Community Development Director Speakers:
- Staff: Administrative Analyst Raven Rutledge.
Motion:
Councilmembers Friedman/Jordan to approve the recommended action; Agreement No. 26,979.6.
Vote:
Unanimous roll call vote.
13. Subject: Agreements for Fiscal Year 2025 with Partner Agencies in Support of Daytime Navigation and Workforce Development Center [Agreements] (660.04)
Recommendation: That Council:
A. Authorize the City Administrator to execute a sublease agreement with the Santa Barbara Alliance for Community Transformation for 621 Chapala Street;
B. Authorize the Community Development Director to execute a funding agreement in the amount of $133,000 with the Santa Barbara Alliance for Community Transformation for day-to-day management and operations of the Daytime Navigation and Workforce Development Center at 621 Chapala Street, with the option to extend the agreement for an additional two years in an amount not to exceed $100,000; and
C. Authorize the Community Development Director to execute a funding agreement in the amount of $81,506 with City Net for an on-site case manager at the Daytime Navigation and Workforce Development Center.
Documents:
- June 4, 2024, report from the Community Development Director Speakers:
- Members of the public: Elizabeth Adams; Rich Sander.
06/04/2024 Santa Barbara City Council Minutes Page 8 of 12 Motion:
Councilmembers Friedman/Jordan to approve the recommended action; Agreement Nos. 28,520, 28,521, and 28,522.
Vote:
Unanimous roll call vote.
COUNCILMEMBER COMMITTEE ASSIGNMENT REPORTS
- Councilmember O. Gutierrez attended the following meeting or event: 1. Peru trip with Mayor Rowse organized by Sister Cities Board.
CITY COUNCIL ADMINISTRATIVE AND ATTORNEY REPORTS
FINANCE DEPARTMENT
16. Subject: Fiscal Year 2025 Operating and Capital Budget Deliberations (230.05)
Recommendation: That Council:
A. Approve certain adjustments to the Fiscal Year 2025 Recommended Budget identified by staff as detailed in the Schedule of Recommended Adjustments; and
B. Provide final direction to staff based on the Council’s review of the Fiscal Year 2025 Recommended Budget over the last several weeks.
Documents:
- June 4, 2024, report from the Finance Director.
- PowerPoint presentation prepared and made by staff.
Speakers:
- Staff: Finance Director Keith DeMartini; Budget Manager Natalija Glusac; Public Works Manager Sarah Clark.
- Members of the Public: Kathy Janega-Dykes; Trey Pinner.
Discussion:
- Staff presented to Council topics including staff recommended adjustments and Council considered Council budget requests.
Councilmembers’ questions were answered.
Motion:
Councilmembers Friedman/A. Gutierrez to approve staff recommended adjustments.
Vote:
Majority roll call vote (Noes: Councilmember O. Gutierrez) 06/04/2024 Santa Barbara City Council Minutes Page 9 of 12 Motion:
Councilmembers Sneddon/Friedman to direct staff to examine reclassifying the Downtown Parking Enterprise Fund into the General Fund.
Vote:
Majority roll call vote (Noes: Councilmember A. Gutierrez) Motion:
Councilmembers Sneddon/Jordan to direct staff to review in lieu fees and consider possible increases; to direct staff to consider hiring personnel to assist the Fire Department with duties related to that of a Warehouse Specialist; and to direct staff to consider possible cost savings for not owning revenue control equipment.
Councilmember Sneddon withdrew the motion.
Motion:
Councilmembers Sneddon/Jordan to direct staff to review in lieu fees and consider possible increases; and to direct staff to consider possible cost savings for not owning revenue control equipment.
Vote:
Unanimous roll call vote.
Motion:
Councilmembers A. Gutierrez/Sneddon to direct staff to consider hiring personnel to assist the Fire Department with duties related to those of a Warehouse Specialist.
Vote:
Motion failed (Noes; Councilmembers Harmon, Friedman, Jordan; Rowse; Yes; Councilmembers Sneddon, O. Gutierrez, A. Gutierrez).
Motion:
Councilmember Sneddon for 90-minute free parking in the garages and surface lots.
The motion failed for lack of a second.
Motion:
Councilmember Sneddon to move consideration of local passes in the budget to be brought forward next week.
06/04/2024 Santa Barbara City Council Minutes Page 10 of 12 Substitute motion:
Councilmember Sneddon/O. Gutierrez to move inclusion of 90-minute free parking in the garages and surface lot in the budget to be brought forward next week.
Vote:
Motion failed (Noes; Councilmembers A. Gutierrez, Harmon, Friedman, Jordan; Mayor Rowse; Yes; Councilmembers Sneddon, O. Gutierrez).
Councilmember Sneddon rescinded the motion to consider local passes.
Motion:
Councilmember Sneddon/Harmon to approve Clean Community transfer to Downtown Parking.
Vote:
Unanimous roll call vote.
Motion:
Councilmember A. Gutierrez/Friedman to pass all measure C items including parking garages floor and deck, Rey Road public lot improvement; Lot 9 repair, revenue control system; Amtrak building column repair, Measure C increase to expenditure.
Councilmember Friedman withdrew his second to the motion.
The motion failed for lack of a second.
Motion:
Councilmember Sneddon/Friedman to pass the following Measure C items:
parking garages floor and deck, Rey Road public lot improvement; Lot 9 repair; Amtrak building column repair.
Vote:
Unanimous roll call vote.
Motion:
Councilmember Friedman/A. Gutierrez to approve the $1.5 million for the revenue control system.
Vote:
Motion failed (Noes: Councilmembers Jordan, Harmon, Sneddon, Mayor Rowse; Yes; Councilmembers Friedman, A. Gutierrez, O. Gutierrez). 06/04/2024 Santa Barbara City Council Minutes Page 11 of 12 Motion:
Councilmembers Jordan/Sneddon to include the $1.5 million for the revenue control system in the budget with the direction to staff to bring back choices that relate to contract timeline, including non-ownership and third party revenue sharing and expense sharing.
Vote:
Unanimous roll call vote.
RECESS
4:22 p.m. – 4:46 p.m.
17. Subject: Proposed Ballot Measure on Transaction and Use Tax Increase to Maintain Essential Local Services for the November 5, 2024, General Election (110.03)
Recommendation: That Council hear a presentation from staff regarding an update on Vision 2030 and Fiscal Sustainability Initiative and the need to pursue additional revenue sources to maintain essential City services, and direct Staff to place an appropriate resolution and ordinance for the proposed transaction and use tax increase for formal action on the June 11, 2024 meeting agenda.
Documents:
- June 4, 2024, report from the Finance Director.
- PowerPoint presentation prepared and made by staff.
Speakers:
- Staff: Assistant City Administrator Rene Eyerly; Finance Director Keith DeMartini; Assistant City Attorney Dan Hentschke.
- Consultants: Robb Kornicke; Adam Sonenshein.
- Members of the Public: Rob Fredericks; Dianne Black; Frank Rodriguez; Laura Robinson; Linda Honikman.
Discussion:
- Staff presented to Council topics including the General Fund budget outlook, Vision 2030 and fiscal sustainability, public opinion polling, recent public outreach, and the proposed ballot measure.
Councilmembers’ questions were answered.
Motion:
Councilmembers Friedman/Jordan to approve staff recommendation with language as proposed.
Vote:
Majority vote in favor (Noes: Councilmember A. Gutierrez)
COUNCIL AND STAFF COMMUNICATIONS
06/04/2024 Santa Barbara City Council Minutes Page 12 of 12
COUNCILMEMBER ENGAGEMENTS
- No engagements were reported.
PUBLIC COMMENT (IF NECESSARY)
No one wished to speak.
ADJOURNMENT
Mayor Rowse adjourned the meeting at 6:34 p.m.
Approved and adopted by the City Council of the City of Santa Barbara on June 25, 2024.
SANTA BARBARA CITY COUNCIL SANTA BARBARA
CITY CLERK'S OFFICE
_______________________________ ATTEST: ______________________________
RANDY ROWSE SARAH GORMAN
MAYOR CITY CLERK SERVICES MANAGER
06/11/2024 Santa Barbara City Council Minutes Page 1 of 17
CITY OF SANTA BARBARA
CITY COUNCIL MINUTES
REGULAR MEETING
JUNE 11, 2024
COUNCIL CHAMBERS, 735 ANACAPA STREET
CALL TO ORDER
Mayor Randy Rowse called the meeting to order at 2:01 p.m. (The Finance Committee and Ordinance Committee, which normally meet at 12:00 p.m., did not meet this day).
PLEDGE OF ALLEGIANCE
Mayor Rowse.
ROLL CALL
Councilmembers present: Eric Friedman, Alejandra Gutierrez, Oscar Gutierrez (2:03 p.m.), Meagan Harmon, Mike Jordan, Kristen W. Sneddon, Mayor Randy Rowse.
Councilmembers absent: None.
Staff present: City Administrator Kelly McAdoo, City Attorney Sarah J. Knecht, City Clerk Services Manager Sarah Gorman.
CHANGES TO THE AGENDA
City Administrator Kelly McAdoo stated that recommendation B from Item 12, Interviews for the Single Family Design Board, will occur as part of Item 15, Appointments to City Advisory Groups.
CONSENT CALENDAR (Item Nos. 1 – 11)
The titles of the Ordinances and Resolutions were read.
Motion:
Councilmembers Harmon/Friedman to approve the entirety of the consent calendar as recommended.
Vote:
Unanimous roll call vote.
06/11/2024 Santa Barbara City Council Minutes Page 2 of 17
1. Subject: Minutes (000.00)
Recommendation: That Council waive reading and approve the minutes for the special meetings of February 27, 2024, March 19, 2024, April 9, 2024, May 14, 2024, and May 15, 2024; and for the regular meetings of December 12, 2023, March 5, 2024, March 19, 2024, April 9, 2024, May 14, 2024, and May 21, 2024.
Action: Approved the recommendation.
2. Subject: Loan to Housing Authority for $5,000,000 for Development of Property Located at 200 North La Cumbre Road [Ordinance Adoption] (620.06)
Recommendation: That City Council adopt, by reading of title only, an Ordinance of the Council of the City of Santa Barbara Approving a 30-Year Loan Agreement with the Housing Authority of the City of Santa Barbara in the Amount of $5,000,000 for Development of the Real Property Located at 200 North La Cumbre Road to Be Used for Permanent Affordable Housing, to Be Secured by a Deed of Trust and a 90-Year Affordability Control Covenant Imposed on Real Property and Authorizing the Community Development Director to Execute Such Agreements, Subject to Approval as to Form by the City Attorney, as Necessary.
Action: Approved the recommendation; Ordinance No. 6155 (June 11, 2024, report from the Community Development Director; proposed Resolution).
3. Subject: Intent to Levy Parking and Business Improvement Area Assessment Rates and Annual Assessment Report for Fiscal Year 2025 [Resolution] (550.1)
Recommendation: That Council:
A. Adopt, by reading of title only, a Resolution of the Council of the City of Santa Barbara Declaring Council’s Intention to Levy Parking and Business Improvement Area Assessment Rates for Fiscal Year 2025, at a Public Hearing to be held on June 25, 2024, at 2:00pm.
B. Approve the Parking and Business Improvement Area Annual Assessment Report for Fiscal Year 2025.
Action: Approved the recommendations; Resolution No. 24-062 (June 11, 2024, report from the Public Works Director; proposed Resolution).
4. Subject: State Water Resources Control Board Funding Acceptance for the California Extended Water and Wastewater Payment Program [Resolution] (540.03)
06/11/2024 Santa Barbara City Council Minutes Page 3 of 17 Recommendation: That Council adopt, by reading of title only, a Resolution of the Council of the City of Santa Barbara Accepting State Water Resources Control Board California Extended Water and Wastewater Arrearage Payment Program Funds, Authorizing City Staff to Disburse the Funds in Accordance with Program Criteria, and Amending Resolution No. 23-076, Adopting the Budget for Fiscal Year 2024, to Appropriate the Funds for Relief to Customers of the Water and Wastewater Systems for Unpaid Water Bills.
Action: Approved the recommendation; Resolution No. 24-063 (June 11, 2024, report from the Public Works Director; proposed Resolution).
5. Subject: Adoption of a Resolution Relating to the General Municipal Election of November 5, 2024 [Resolution] (110.03)
Recommendation: That Council:
A. Adopt, by reading of title only, a Resolution of the Council of the City of Santa Barbara Calling for the Holding of a General Municipal Election to be Held in the City on Tuesday, November 5, 2024, for the Election of Certain Officers as Required by the Provisions of the Charter and Applicable Provisions of the California Elections Code; and
B. Request and authorize the Board of Supervisors of the County of Santa Barbara to operate the General Municipal Election to be held on November 5, 2024.
Action: Approved the recommendations; Resolution No. 24-064 (June 11, 2024, report from the City Administrator; proposed Resolution).
6. Subject: Adoption of Resolution Implementing Proposed Changes to the Membership Composition of the Living Wage Advisory Committee [Resolution] (140.06)
Recommendation: That Council adopt, by reading of title only, a Resolution of the Council of the City of Santa Barbara Approving Proposed Changes to the Membership Composition of the Living Wage Advisory Committee.
Action: Approved the recommendation; Resolution No. 24-065 (June 11, 2024, report from the Finance Director; proposed Resolution).
7. Subject: Contract for Construction Management Services for the Santa Barbara Police Station Project [Agreement] (700.08)
Recommendation: That Council authorize the Public Works Director to execute a Professional Services Agreement with TynanGroup, Inc. for Construction Management for Pre-Construction Services for the Santa Barbara Police Station 06/11/2024 Santa Barbara City Council Minutes Page 4 of 17 Project in the amount up to $206,920, and for Construction Services in the amount up to $2,264,650, for a total contract amount of $2,471,570, and to authorize expenditures of up to $247,157 for extra services that may result from necessary changes in the scope of work, for a maximum contract amount of $2,718,727.
Action: Approved the recommendation; Agreement No. 28,524 (June 11, 2024, report from the Public Works Director).
8. Subject: Crossing Guard Agreements with Santa Barbara Unified and Hope School Districts [Agreement] (150.05)
Recommendation: That Council:
A. Authorize the Public Works Director to execute a Memorandum of Understanding with the Santa Barbara Unified School District, including Peabody School, for School Crossing Guard services from July 1, 2023 through June 30, 2024; and
B. Authorize the Public Works Director to execute a Memorandum of Understanding with the Hope School District for School Crossing Guard Services from July 1, 2023, through June 30, 2026.
Action: Approved the recommendations; Agreement Nos. 28,525 and 28,526 (June 11, 2024, report from the Public Works Director).
9. Subject: Grant Agreement with Old Spanish Days [Agreement] (180.02) Recommendation: That Council authorize the City Administrator to execute a grant agreement with Old Spanish Days in the amount of $151,790, covering the period from July 1, 2023 to June 30, 2025.
Action: Approved the recommendation; Agreement No. 28,527 (June 11, 2024, report from the City Administrator).
10. Subject: Request for Indefinite Continuance of Appeal Hearing of Planning Commission’s Approval of the 101 Garden Street Hotel Project (640.07) Recommendation: That Council move to continue indefinitely the appeal hearing of the Planning Commission’s approval of the 101 Garden Street Hotel Project, originally set for June 25, 2024.
Action: Approved the recommendation (June 11, 2024, report from the Community Development Director).
06/11/2024 Santa Barbara City Council Minutes Page 5 of 17
11. Subject: Water Supply Update (540.11)
Recommendation: That Council receive an update on the City’s water supply condition (informational only).
Action: Approved the recommendation (June 11, 2024, report from the Public Works Director).
GENERAL PUBLIC COMMENT
Members of the Public: Kristen Miller; Anne Pazier; Tom Patton; Tony Vallejo; Lizzie Rodriguez; Kathy Odell; Rylee Heathman; Angelina Dettamanti; Stephen Meade; Sullivan Israel; George Nicks; Liz Rodriguez.
PULLED CONSENT ITEMS
None.
COUNCILMEMBER COMMITTEE ASSIGNMENT REPORTS
None.
CITY COUNCIL ADMINISTRATIVE AND ATTORNEY REPORTS
MAYOR AND COUNCIL REPORTS
12. Subject: Interviews for Single Family Design Board (140.05) Recommendation: That Council:
A. Hold interviews of applicants for Single Family Design Board; and B. Make appointments to fill the two vacancies in Single Family Design Board.
Documents:
- June 11, 2024, report from the City Administrator’s Office.
Speakers:
- Staff: Deputy City Clerk Norma Welche.
No candidates appeared for interviews.
FINANCE DEPARTMENT
13. Subject: Adoption of the Operating and Capital Budget for Fiscal Year 2025 [Resolution] (230.05)
06/11/2024 Santa Barbara City Council Minutes Page 6 of 17 Recommendation: That Council:
A. Adopt, by reading of title only, a Resolution of the Council of the City of Santa Barbara Adopting the Budget for the Fiscal Year 2025 by Appropriating Moneys for the Use and Support of Said City from the Funds and to the Purposes Herein Specified;
B. Adopt, by reading of title only, a Resolution of the Council of the City of Santa Barbara Establishing the City’s Appropriation Limitation for Fiscal Year 2025;
C. Adopt, by reading of title only, a Resolution of the Council of the City of Santa Barbara Amending the City of Santa Barbara Schedule of Penalties, Fees, and Service Charges;
D. Adopt, by reading of title only, a Resolution of the Council of the City of Santa Barbara Amending the City of Santa Barbara Waterfront Harbor Slip, Mooring, and User Fees;
E. Adopt, by reading of title only, a Resolution of the Council of the City of Santa Barbara to Adopt the Abandoned Shopping Cart Recovery Fee; F. Adopt, by reading of title only, a Resolution of the Council of the City of Santa Barbara Authorizing Classified and Unclassified Positions in the City’s Service Effective June 29, 2024, and Providing a Schedule of Classifications and Salaries for the Same in Accordance with the Operating Budget for Fiscal Year 2025;
G. Adopt, by reading of title only, a Resolution of the Council of the City of Santa Barbara Authorizing the Continuation of Capital and Special Project Appropriations to Fiscal Year 2025; and
H. Adopt, by reading of title only, a Resolution of the Council of the City of Santa Barbara Authorizing the Public Works Director to Execute Water Purchase Agreements, in a Form Approved by the City Attorney, and in Accordance with the Appropriation in the Approved Budget as May be Amended from Time to Time.
The titles of the Resolutions were read.
Documents:
- June 11, 2024, report from the Finance Director.
- PowerPoint presentation prepared and made by staff.
- Proposed Resolutions.
06/11/2024 Santa Barbara City Council Minutes Page 7 of 17 Mayor Rowse announced that he would be recusing himself from consideration of Item D because he owns a boat slip.
Councilmember Friedman announced that he would be recusing himself from consideration of Item E because it affects his employer and his employer is a source of income to him.
Speakers:
- Staff: Finance Director Keith DeMartini; Budget Manager Natalija Glusac; Human Resources Director Wendy Levy; Waterfront Director Michael Wiltshire.
Mayor Rowse was excused from Council Chambers at 2:50 p.m.
Speakers:
- Members of the Public: Chris Rowland; Laird Erdman; Michael Hauge; Ray Benanate.
Discussion:
- Staff presented to Council topics including the budget process.
Councilmembers’ questions were answered.
Motion:
Councilmembers Harmon/Sneddon to increase slip fees 5% across the board with a request that the Harbor Commission review the discussion and return with a package that better supports live-aboards and makes up the delta for the budget.
Substitute motion:
Councilmembers Friedman/A. Gutierrez to move forward with staff recommendation D with direction for the Harbor Commission to study the longer-term issue of slip fees; Resolution No. 24-069.
Vote on substitute motion:
Majority roll call vote (Noes: Councilmembers Harmon, Sneddon; Abstain:
Mayor Rowse)
Councilmember Friedman was excused from Council Chambers at 3:40 p.m.
Mayor Rowse returned to Council Chambers at 3:41 p.m.
Motion:
Councilmembers Jordan/Harmon to approve recommendation E; Resolution No. 24-070.
Vote:
Majority roll call vote (Abstain: Councilmember Friedman.) 06/11/2024 Santa Barbara City Council Minutes Page 8 of 17 Councilmember Friedman returned to Council Chambers at 3:45 p.m.
Speakers:
- Members of the Public: Jenna Berg.
Motion:
Councilmembers Sneddon/Jordan to refer the Chamber of Commerce economic development plan to Finance Committee for future analysis and recommendation.
Vote:
Unanimous roll call vote.
Motion:
Councilmembers Friedman/Jordan to approve recommendation C with the following amendment to the Finance Administrative Fee: the old language of “Effective July 1, 2024, a (4%) managed service fee will be applied to all credit card purchases” will be replaced with “Effective July 1, 2024, a convenience fee of up to (4%) may be applied to credit card purchases,” and to provide direction to the Harbor Commission to review the live-aboard fee and report back to City Council; Resolution No. 24-068.
Vote:
Majority roll call vote (Noes: Councilmember Sneddon.)
Motion:
Councilmembers Friedman/Jordan to approve recommendation G; Resolution No. 24-072.
Vote:
Unanimous roll call vote.
Motion:
Councilmembers Jordan/Friedman to approve recommendations, A, B, F, and H, which are the balance of the recommended actions; Resolution Nos. 24-066, 24-067, 24-071, and 24-073.
Vote:
Unanimous roll call vote.
14. Subject: Proposed Ballot Measure on Transaction and Use Tax Increase to Maintain Essential Local Services for the November 5, 2024 General Election [Ordinance Introduction; Resolution] (110.03)
Recommendation: That Council:
A. Introduce and subsequently adopt, by reading of title only, an Ordinance of the Council of the City of Santa Barbara Authorizing the Imposition of the Santa Barbara Essential Local Services Tax, Subject to Approval by the 06/11/2024 Santa Barbara City Council Minutes Page 9 of 17 Electors, by the Addition of Chapter 4.15 to Title 4 of the Santa Barbara Municipal Code; and
B. Adopt, by reading of title only, a Resolution of the Council of the City of Santa Barbara Ordering the Submission to the Qualified Electors of the City of Santa Barbara a Measure Relating to an Establishment of a General Transaction and Use (Sales) Tax at the Consolidated General Municipal Election to be held on November 5, 2024
The titles of the Ordinance and Resolution were read.
Documents:
- June 11, 2024, report from the Finance Director.
- PowerPoint presentation prepared and made by staff.
- Proposed Ordinance.
- Proposed Resolution.
Speakers:
- Staff: Finance Director Keith DeMartini; Assistant City Administrator René Eyerly.
- Member of the Public: Cecilia Harris.
Motion:
Councilmembers Friedman/A. Gutierrez to approve the staff recommendations; Resolution No. 24-074.
Vote:
Unanimous roll call vote.
MAYOR AND COUNCIL REPORTS
15. Subject: Appointments to City Advisory Groups (140.05) Recommendation: That Council:
A. Make appointments to the City’s Advisory Groups, including Single Family Design Board Special Recruitment; and
B. Make corrections to the term end dates of some positions for certain Advisory Groups.
Documents:
- June 11, 2024, report from the City Administrator.
Speakers:
- Staff: Deputy City Clerk Norma Welche.
- Single Family Design Board Applicant: Shanar Moslehy. 06/11/2024 Santa Barbara City Council Minutes Page 10 of 17 The following applicants were appointed by Council:
Architectural Board of Review
Motion:
Councilmembers Friedman/Jordan to appoint William Anderson by acclamation.
Vote:
Unanimous roll call vote.
Appointment:
William Anderson was appointed to the Architectural Board of Review, Licensed Architect – City Category, with a term expiring December 31, 2027.
Arts Advisory Committee
Motion:
Councilmembers Harmon/Friedman to appoint Carole Goodman and Soheyla Valleie by acclamation.
Vote:
Unanimous roll call vote.
Appointments:
Carol Goodman was appointed to the Arts Advisory Committee with a term expiring December 31, 2025. Soheyla Valleie was appointed to the Arts Advisory Committee with a term expiring December 31, 2027.
Building and Fire Code Board of Appeals
Motion:
Councilmembers Harmon/O. Gutierrez to appoint Nick Koonce and Paul Spieler by acclamation.
Vote:
Unanimous roll call vote.
Appointments:
Nick Koonce was re-appointed to the Building and Fire Code Board of Appeals with a term expiring June 30, 2028. Paul Spieler was re-appointed to the Building and Fire Code Board of Appeals with a term expiring June 30, 2028.
06/11/2024 Santa Barbara City Council Minutes Page 11 of 17 Central Coast Commission for Senior Citizens
Motion:
Councilmembers Friedman/Harmon to appoint E. Howard Green by acclamation.
Vote:
Unanimous roll call vote.
Appointment:
E. Howard Green was re-appointed to the Central Coast Commission for Senior Citizens with a term expiring June 30, 2026.
Civil Service Commission
Motion:
Councilmembers Sneddon/O. Gutierrez to appoint Craig Smith by acclamation.
Vote:
Unanimous roll call vote.
Appointment:
Craig Smith was appointed to the Civil Service Commission with a term expiring December 31, 2027.
Community Events and Festivals Committee
Motion:
Councilmembers Harmon/O. Gutierrez to appoint Roger Perry and Dacia Harwood by acclamation.
Vote:
Unanimous roll call vote.
Appointments:
Roger Perry was appointed to the Community Events and Festivals Committee, Business/Lodging/Retail Industry Category, with a term expiring December 31, 2027. Dacia Harwood was appointed to the Community Events and Festivals Committee, Business/Lodging/Retail Industry Category, with a term expiring December 31, 2027.
County of Santa Barbara Library Advisory Committee
Motion:
Councilmembers Friedman/O. Gutierrez to appoint Amber Caldwell by acclamation.
Vote:
Unanimous roll call vote.
06/11/2024 Santa Barbara City Council Minutes Page 12 of 17 Appointment:
Amber Caldwell was re-appointed to the County of Santa Barbara Library Advisory Committee with a term expiring June 30, 2025.
Creeks Advisory Committee
Motion:
Councilmembers O. Gutierrez/Friedman to appoint Conway “Todd” RulonMiller.
Vote:
Majority roll call vote (Noes: Councilmembers Sneddon).
Appointment:
Conway “Todd” Rulon-Miller was appointed to the Creeks Advisory Committee, Non-City Resident Category, with a term expiring December 31, 2027.
Downtown Parking Committee
Motion:
Councilmembers Jordan/O. Gutierez to appoint Anita Stahl by acclamation.
Vote:
Unanimous roll call vote.
Appointments:
Anita Stahl was appointed to the Downtown Parking Committee, City Resident Category, with a term expiring December 31, 2027.
Housing Authority Commission
Motion:
Councilmembers Friedman/Jordan to appoint Megan Turley and Mary Fenger.
Vote:
Unanimous roll call vote.
Appointments:
Megan Turley was appointed to the Housing Authority Commission, Public at Large – City Resident Category, with a term expiring September 14, 2028. Mary Fenger was re-appointed to the Housing Authority Commission, Senior Tenant – City Resident Category, with a term expiring June 30, 2026. 06/11/2024 Santa Barbara City Council Minutes Page 13 of 17 Neighborhood Advisory Council
Motion:
Councilmembers Harmon/A. Gutierrez to appoint Sebastian Aldana, Jr. by acclamation.
Vote:
Unanimous roll call vote.
Appointment:
Sebastian Aldana, Jr. was re-appointed to the Neighborhood Advisory Council, Eastside Neighborhood Representative Category, with a term expiring December 31, 2027.
Rental Housing Mediation Board
Motion:
Councilmembers Sneddon/Jordan to appoint Scott Barash and E. Howard Green by acclamation.
Vote:
Unanimous roll call vote.
Appointments:
Scott Barash was appointed to the Rental Housing Mediation Board, Landlord Mediator – County Resident Category, with a term expiring December 31, 2027. E. Howard Green was appointed to the Rental Housing Mediation Board, Tenant Mediator – City Resident Category, with a term expiring December 31, 2025.
Santa Barbara Youth Council
Motion:
Councilmembers Friedman/A. Gutierrez to appoint Clara Stump and Kieran Stone by acclamation.
Vote:
Unanimous roll call vote.
Motion:
Councilmembers Sneddon/A. Gutierrez to appoint Sindy Zavala.
Vote:
Unanimous roll call vote.
Motion:
Councilmembers A. Gutierrez/Sneddon to appoint Ahtziri Bernal and Itzel Leon.
Vote:
Unanimous roll call vote.
06/11/2024 Santa Barbara City Council Minutes Page 14 of 17 Appointments:
Clara Stump was re-appointed to the Santa Barbara Youth Council, SMHS – County Resident Category, with a term expiring June 30, 2026. Kieran Stone was appointed to the Santa Barbara Youth Council, DPHS – City Resident Category, with a term expiring June 30, 2026. Sindy Zavala was re-appointed to the Santa Barbara Youth Council, Local Private High School/Independent Studies – County Resident Category, with a term expiring June 30, 2026. Ahtziri Bernal was appointed to the Santa Barbara Youth Council, Public at Large – City Resident Category, with a term expiring June 30, 2026. Itzel Leon was appointed to the Santa Barbara Youth Council, Public at Large – City Resident Category, with a term expiring June 30, 2025.
Single Family Design Board
Motion:
Councilmembers O. Gutierrez/ Harmon to appoint Shanar Moslehy.
Vote:
Unanimous roll call vote.
Appointment:
Shanar Moslehy was appointed to the Single Family Design Board, Professional Qualifications Category, with a term expiring June 30, 2026.
Water Commission
Motion:
Councilmembers Sneddon/Friedman to appoint Lindsay Coony by acclamation.
Vote:
Unanimous roll call vote.
Appointment:
Lindsay Coony was appointed to the Water Commission with a term expiring December 31, 2027.
RECESS
4:30 p.m. – 4:50 p.m.
15. Subject: Appointments to City Advisory Groups (140.05) (CONT’D) Motion:
Councilmembers Friedman/Harmon to approve recommendation B.
Vote:
Unanimous roll call vote.
06/11/2024 Santa Barbara City Council Minutes Page 15 of 17 The following Advisory Group member’s term end dates were corrected:
Citizens’ Oversight Committee
Steve Epstein, Business Community (City)
Original term end date: June 20, 2026
New term end date: December 31, 2026
Jarrett Gorin, Qualified Elector (City)
Original term end date: June 20, 2026
New term end date: December 31, 2026
Francis X. Peters Jr, Qualified Elector (City)
Original term end date: June 20, 2026
New term end date: December 31, 2026
Eric Grossman, Qualified Elector (City)
Original term end date: June 20, 2026
New term end date: December 31, 2026
Community Development and Human Services Committee
Robert Permut, Senior Community
Original term end date: June 30, 2026
New term end date: December 31, 2026
Jennifer Lemberger, Eastside Community
Original term end date: June 30, 2026
New term end date: December 31, 2026
Historic Landmarks Commission
Cassandra Ensberg, Licensed Architect (City)
Original term end date: June 30, 2026
New term end date: December 31, 2026
Living Wage Advisory Committee
Daniel Ramirez, Nominee of the Santa Barbara Downtown Organization Original term end date: December 31, 2026
New term end date: June 30, 2027
Single Family Design Board
Dawn Sherry, Licensed Architect
Original term end date: December 31, 2024
New term end date: June 30, 2025
COMMUNITY DEVELOPMENT DEPARTMENT
16. Subject: Short-Term Vacation Rental Discussion (610.01) Recommendation: That Council discuss the City’s existing Short-Term Vacation Rental Laws and Regulations and direct staff to return to Council with specific proposals to implement Municipal Code revisions, including staffing, budget, and regulatory requirements necessary to implement those policy directions. 06/11/2024 Santa Barbara City Council Minutes Page 16 of 17 Documents:
- June 11, 2024, report from the Community Development Director. - PowerPoint presentation prepared and made by staff.
Speakers:
- Staff: City Planner Allison DeBusk; Assistant City Attorney John Doimas.
- Members of the Public: Andy Mattun; Tiffany Haller; Paul Sterne; Noah Blaustein; Anna Marie Gott, Ian Baucke; Eric Nelson, 805-708-4410; Jenna Berg.
Discussion:
- Council direction was provided.
COUNCIL AND STAFF COMMUNICATIONS
COUNCILMEMBER ENGAGEMENTS
- Councilmember Friedman attended the following meeting or event: 1. RITA event;
2. Environmental Defense Center event; 3. 80th Anniversary of D-Day event. - Councilmember A. Gutierrez attended the following meeting or event: 1. Moms Demand Action event; 2. Meetings with constituents.
- Councilmember O. Gutierrez attended the following meeting or event: 1. Closing of Derf’s restaurant; 2. Bike ride with community members; 3. Staff presentation of proposed renovations at Douglas Family Preserve; 4. Met with member of Access Advisory committee; 5. Attended 101 community meeting in Montecito; 6. SBCC alumni event; 7. AI art gallery at SB cast; 8. Delta Airlines launch event; 9. TVSB 49th anniversary event; 10. Ortega Park Moms Demand Action community cleanup; 11. Ortega Park Pride Event; 12. EEDC event; 13. John Palminteri’s birthday event .
- Councilmember Sneddon attended the following meeting or event: 1. First SBCC alumni event; 2. Kellum DeForrest Series; 3. Desalination plant tour; 4 Wildlife Care Network Baby Shower; 5. Tour with waterfront director of Army Corps of Engineers of dredging; 6. Celebration of life for Donna Sharpe. - Mayor Rowse attended the following meeting or event: 1. Don Sharp celebration of life; 2. Marborg event.
PUBLIC COMMENT (IF NECESSARY)
No one wished to speak.
06/11/2024 Santa Barbara City Council Minutes Page 17 of 17
ADJOURNMENT
Mayor Rowse adjourned the meeting at 6:45 p.m.
Approved and adopted by the City Council of the City of Santa Barbara on June 25, 2024.
SANTA BARBARA CITY COUNCIL SANTA BARBARA
CITY CLERK'S OFFICE
_______________________________ ATTEST: ______________________________
RANDY ROWSE SARAH GORMAN
MAYOR CITY CLERK SERVICES MANAGER
1 ORDINANCE NO. ________
AN ORDINANCE OF THE COUNCIL OF THE CITY OF
SANTA BARBARA AUTHORIZING THE IMPOSITION OF
THE SANTA BARBARA ESSENTIAL LOCAL SERVICES
TAX, SUBJECT TO APPROVAL BY THE ELECTORS, BY
THE ADDITION OF CHAPTER 4.15 TO TITLE 4 OF THE
SANTA BARBARA MUNICIPAL CODE
THE CITY COUNCIL OF THE CITY OF SANTA BARBARA DOES ORDAIN AS FOLLOWS:
SECTION 1. The City Council finds and determines as follows:
A. The City provides general municipal services and facilities, such as police, fire, parks and recreation, streets, bridges, stormwater protection, libraries, youth and senior programs, a local housing trust fund, homeless services, and other general fund services that are vital to the health, safety, and general welfare of the people of Santa Barbara.
B. The City's revenues are insufficient to fully provide general municipal services and facilities to fully provide general municipal services and facilities, including maintaining 9-1-1 emergency fire, paramedic, and police response, keeping neighborhood fire stations open, improving housing affordability, addressing homelessness, keeping public areas and parks safe and clean, maintaining library services, stormwater protection, improving natural disaster preparedness, retaining local businesses and jobs, and other general governmental uses at the level that is necessary or desirable at the level that is necessary or desirable.
C. The funding made available by this Chapter, together with other available revenues, generate approximately $15,600,000 to enable the City to maintain its essential general municipal services and facilities and to make payments to its local housing trust fund.
D. The proceeds of the taxes imposed by this chapter may be used for any lawful purpose of the City, as authorized by ordinance, resolution, or action of the City Council or by ordinance adopted by the electorate of the City.
E. The tax established by this ordinance shall not be imposed until approved by the City’s electors at an election called for that purpose as required by the California Constitution.
SECTION 2. Title 4 of the Santa Barbara Municipal Code is amended by the addition of Chapter 4.15 which reads as follows:
Chapter 4.15 SANTA BARBARA ESSENTIAL LOCAL SERVICES TAX
4.15.010 Short Title
4.15.020 Declaration of Findings
4.15.030 Purposes
4.15.040 Contract with State
Agenda Item No. 4
File Code No. 110.03
2 4.15.050 Transactions Tax Rate
4.15.060 Place of Sale
4.15.070 Use Tax Rate
4.15.080 Adoption of Provisions of State Law
4.15.090 Permit Not Required
4.15.100 Exemptions and Exclusions
4.15.110 Amendments to State Law
4.15.120 Enjoining Collection Forbidden
4.15.130 Audit
4.15.140 Severability
4.15.150 Effective and Operative Dates
4.15.160 Definitions
4.15.170 Termination and Repeal
4.15.010 Short Title.
This Chapter shall be known as the Santa Barbara Essential Local Services Tax Act.
4.15.020 Declaration of Findings.
A. The City's revenues are insufficient to fully provide general municipal services and facilities, including maintaining 9-1-1 emergency fire, paramedic, and police response, keeping neighborhood fire stations open, improving housing affordability, addressing homelessness, keeping public areas and parks safe and clean, maintaining library services, stormwater protection, improving natural disaster preparedness, retaining local businesses and jobs, and other general governmental uses at the level that is necessary or desirable.
B. The funding made available by this chapter, together with other available revenues, will enable the City to provide essential local services as described in subsection A, including contributing to the Local Housing Trust Fund, meeting budgeted operating expenses, acquiring necessary supplies, equipment, and materials, and maintaining and repairing City buildings, facilities, parks, and other property.
C. The proceeds of the taxes imposed by this chapter may be used for any lawful purpose of the City, as authorized by ordinance, resolution, or action of the City Council or by ordinance adopted by the electorate of the City.
4.15.030 Purposes.
This Chapter is adopted to achieve the following, among other purposes, and directs that the provisions hereof be interpreted in order to accomplish those purposes:
1. To impose a retail transaction and use tax in accordance with the provisions of Part 1.6 (commencing with Section 7251) of Division 2 of the Revenue and Taxation Code and Section 7285.9 of Part 1.7 of Division 2.
2. To adopt a retail transaction and use tax ordinance that incorporates provisions identical to those of the Sales and Use Tax Law of the State of California insofar as those provisions are not inconsistent with the requirements and limitations contained in Part 1.6 of Division 2 of the Revenue and Taxation Code. 3 3. To adopt a retail transaction and use tax ordinance that imposes a tax and provides a measure therefore that can be administered and collected by the California Department of Tax and Fee Administration in a manner that adapts itself as fully as practicable to, and requires the least possible deviation from, the existing statutory and administrative procedures followed by the Department in administering and collecting the California State Sales and Use Taxes.
4. To adopt a retail transaction and use tax ordinance that can be administered in a manner that will be, to the greatest degree possible, consistent with the provisions of Part 1.6 of Division 2 of the Revenue and Taxation Code, minimize the cost of collecting the transactions and use taxes, and at the same time, minimize the burden of recordkeeping upon persons subject to taxation under the provisions of this Chapter.
4.15.040 Contract with State.
Before the operative date of this Chapter, the City will contract with the Board to perform all functions incident to the administration and operation of this chapter; provided, that if the City shall not have contracted with the Board before the operative date, it shall nevertheless so contract and in such a case the operative date shall be the first day of the first calendar quarter following the execution of such a contract. The City Finance Director is authorized to execute contracts under this section.
4.15.050 Transactions Tax Rate.
For the privilege of selling tangible personal property at retail, a tax is hereby imposed upon all retailers in the incorporated territory of the City at the rate of one-half percent of the gross receipts of any retailer from the sale of all tangible personal property sold at retail in said territory on and after the operative date of this chapter. The tax imposed by this section is additional to the tax imposed under Chapter 4.14 of this Code.
4.15.060 Place of Sale.
For the purposes of this Chapter, all retail sales are consummated at the place of business of the retailer unless the tangible personal property sold is delivered by the retailer or his/her agent to an out-of-state destination or to a common carrier for delivery to an out-of-state destination. The gross receipts from such sales shall include delivery charges, when such charges are subject to the state sales and use tax, regardless of the place to which delivery is made. In the event a retailer has no permanent place of business in the State or has more than one place of business, the place or places at which the retail sales are consummated shall be determined under rules and regulations to be prescribed and adopted by the State Board of Equalization.
4.15.070 Use Tax Rate.
An excise tax is hereby imposed on the storage, use or other consumption in the City of tangible personal property purchased from any retailer on and after the operative date of this chapter for storage, use or other consumption in said territory at the rate of one-half percent of the sales price of the property. The sales price shall include delivery charges when such charges are subject to state sales or use tax regardless of the place to which delivery is made.
4 4.15.080 Adoption of Provisions of State Law.
A. Except as otherwise provided in this chapter and except insofar as they are inconsistent with the provisions of Part 1.6 of Division 2 of the Revenue and Taxation Code, all the provisions of Part 1 (commencing with Section 6001) of Division 2 of the Revenue and Taxation Code are hereby adopted and made a part of this chapter as though fully set forth herein, except as otherwise provided in Subsection B.
B. Wherever the State of California is named or referred to as the taxing agency, the name of this City shall be substituted, therefore. However, the substitution shall not be made when:
1. The word "State" is used as a part of the title of the State Controller, State Treasurer, State Board of Control, State Board of Equalization, State Treasury, or the Constitution of the State of California.
2. The result of that substitution would require action to be taken by or against this City or any agency, officer, or employee thereof rather than by or against the Board, or other agency or department of the State, in performing the functions incident to the administration or operation of this Chapter.
3. In those sections including but not necessarily limited to sections referring to the exterior boundaries of the State of California, where the result of the substitution would be to:
a. Provide an exemption from this tax with respect to certain sales, storage, use or other consumption of tangible personal property which would not otherwise be exempt from this tax while such sales, storage, use or other consumption remain subject to tax by the State under the provisions of Part 1 of Division 2 of the Revenue and Taxation Code; or
b. Impose this tax with respect to certain sales, storage, use or other consumption of tangible personal property which would not be subject to tax by the state under the said provision of that code.
4. In Sections 6701, 6702 (except in the last sentence thereof), 6711, 6715, 6737, 6797, or 6828 of the Revenue and Taxation Code.
C. The word "City" shall be substituted for the word "State" in the phrase "retailer engaged in business in this State" in Section 6203 of the Revenue and Taxation Code and in the definition of that phrase in Section 6203.
4.15.090 Permit Not Required.
If a seller's permit has been issued to a retailer under Section 6067 of the Revenue and Taxation Code, an additional transactor's permit shall not be required by this Chapter.
4.15.100 Exemptions and Exclusions.
A. There shall be excluded from the measure of the transaction tax and the use tax the amount of any sales tax or use tax imposed by the State of California or by any city, city and county, or county pursuant to the Bradley-Burns Uniform Local Sales and Use Tax Law or the amount of any state-administered transaction or use tax.
B. There are exempted from the computation of the amount of transaction tax the gross receipts from:
5 1. Sales of tangible personal property, other than fuel or petroleum products, to operators of aircraft to be used or consumed principally outside the county in which the sale is made and directly and exclusively in the use of such aircraft as common carriers of persons or property under the authority of the laws of this State, the United States, or any foreign government.
2. Sales of property to be used outside the City which is shipped to a point outside the City, pursuant to the contract of sale, by delivery to such point by the retailer or his or her agent, or by delivery by the retailer to a carrier for shipment to a consignee at such point. For the purposes of this paragraph, delivery to a point outside the City shall be satisfied:
a. With respect to vehicles (other than commercial vehicles) subject to registration pursuant to Chapter 1 (commencing with Section 4000) of Division 3 of the Vehicle Code, aircraft licensed in compliance with Section 21411 of the Public Utilities Code, and undocumented vessels registered under Division 3.5 (commencing with Section 9840) of the Vehicle Code by registration to an out-of-City address and by a declaration under penalty of perjury, signed by the buyer, stating that such address is, in fact, his or her principal place of residence; and
b. With respect to commercial vehicles, by registration to a place of business out-of-City and declaration under penalty of perjury, signed by the buyer, that the vehicle will be operated from that address.
3. The sale of tangible personal property if the seller is obligated to furnish the property for a fixed price pursuant to a contract entered into prior to the operative date of this Chapter.
4. A lease of tangible personal property which is a continuing sale of such property, for any period of time for which the lessor is obligated to lease the property for an amount fixed by the lease prior to the operative date of this Chapter.
5. For the purposes of paragraphs 3 and 4 of this Subsection, the sale or lease of tangible personal property shall be deemed not to be obligated pursuant to a contract or lease for any period of time for which any party to the contract or lease has the unconditional right to terminate the contract or lease upon notice, whether or not such right is exercised.
C. There are exempted from the use tax imposed by this chapter, the storage, use or other consumption in this City of tangible personal property:
1. The gross receipts from the sale of which have been subject to a transactions tax under any state-administered transactions and use tax ordinance.
2. Other than fuel or petroleum products purchased by operators of aircraft and used or consumed by such operators directly and exclusively in the use of such aircraft as common carriers of persons or property for hire or compensation under a certificate of public convenience and necessity issued pursuant to the laws of this State, the United States, or any foreign government. This exemption is in addition to the exemptions provided in Sections 6366 and 6366.1 of the Revenue and Taxation Code of the State of California.
3. If the purchaser is obligated to purchase the property for a fixed price pursuant to a contract entered into prior to the operative date of this Chapter. 6 4. If the possession of, or the exercise of any right or power over, the tangible personal property arises under a lease which is a continuing purchase of such property for any period of time for which the lessee is obligated to lease the property for an amount fixed by a lease prior to the operative date of this Chapter.
5. For the purposes of paragraphs 3 and 4 of this subsection, storage, use, or other consumption, or possession of, or exercise of any right or power over, tangible personal property shall be deemed not to be obligated pursuant to a contract or lease for any period of time for which any party to the contract or lease has the unconditional right to terminate the contract or lease upon notice, whether or not such right is exercised.
6. Except as provided in paragraph 7 of this subsection, a retailer engaged in business in the City shall not be required to collect use tax from the purchaser of tangible personal property, unless the retailer ships or delivers the property into the City or participates within the City in making the sale of the property, including, but not limited to, soliciting or receiving the order, either directly or indirectly, at a place of business of the retailer in the City or through any representative, agent, canvasser, solicitor, subsidiary, or person in the City under the authority of the retailer.
7. "A retailer engaged in business in the City" shall also include any retailer of any of the following: vehicles subject to registration pursuant to Chapter 1 (commencing with Section 4000) of Division 3 of the Vehicle Code, aircraft licensed in compliance with Section 21411 of the Public Utilities Code, or undocumented vessels registered under Division 3.5 (commencing with Section 9840) of the Vehicle Code. That retailer shall be required to collect use tax from any purchaser who registers or licenses the vehicle, vessel, or aircraft at an address in the City.
D. Any person subject to use tax under this chapter may credit against that tax any transaction tax or reimbursement for transaction tax paid to a district imposing, or retailer liable for a transaction tax pursuant to Part 1.6 of Division 2 of the Revenue and Taxation Code with respect to the sale to the person of the property the storage, use or other consumption of which is subject to the use tax.
4.15.110 Amendments to State Law.
All amendments subsequent to the effective date of the ordinance codified in this chapter to Part 1 of Division 2 of the Revenue and Taxation Code relating to sales and use taxes and which are not inconsistent with Part 1.6 and Part 1.7 of Division 2 of the Revenue and Taxation Code, and all amendments to Part 1.6 and Part 1.7 of Division 2 of the Revenue and Taxation Code, shall automatically become a part of this chapter; provided, however, that no such amendment shall operate so as to affect the rate of tax imposed by this Chapter.
4.15.120 Enjoining Collection Forbidden.
No injunction or writ of mandate or other legal or equitable process shall issue in any suit, action or proceeding in any court against the State or the City, or against any officer of the State or the City, to prevent or enjoin the collection under this chapter, or Part 1.6 of Division 2 of the Revenue and Taxation Code, of any tax or any amount of tax required to be collected.
7 4.15.130 Audit.
The proceeds of the tax imposed pursuant to this Chapter, as well as the expenditure thereof, shall be audited annually by an independent accounting firm. The audit results may be combined with the audit of other City funds, so long as the proceeds are reported separately. The City Council shall discuss the results of such audit at a meeting of the City Council that is open to the public. The report of such audit shall be posted on the City's website.
4.15.140 Severability.
If any provision of this Chapter or the application thereof to any person or circumstance is held invalid, the remainder of the chapter and the application of such provision to other persons or circumstances shall not be affected thereby.
4.15.150 Effective and Operative Dates.
This Chapter relates to the levying and collecting of City transaction and use taxes and shall take effect immediately upon adoption by the City Council. However, no tax imposed by this chapter shall be effective unless that tax has been approved by majority vote of the City electorate at an election as required by article XIIIC, section 2(b) of the California Constitution and applicable law. Notwithstanding the effective date, this chapter and the tax imposed by it will be operative on the first day of the first quarter commencing 110 days after the date of the election at which the tax is approved (the “operative date”).
4.15.160 Definitions.
As used in this Chapter, the term “City” means the City of Santa Barbara and the term “Board” means the California Department of Tax and Fee Administration.
4.15.170 Termination and Repeal.
The authority to levy the taxes imposed by this Chapter shall be in effect until and unless this Chapter is repealed.
SECTION 3. This ordinance relates to the levying and collecting of City transaction and use taxes and to an election called for the purpose of obtaining voter approval of the tax authorized by this ordinance. This ordinance is effect immediately upon adoption by the City Council. However, no tax imposed under the chapter adopted by this ordinance will be effective unless that tax has been approved by majority vote of the City electorate at an election as required by article XIIIC, section 2(b) of the California Constitution and applicable law. It is the Council’s intention, concurrently with the introduction of this ordinance, or as soon thereafter as is feasible, to adopt resolutions and take other actions necessary to place a measure to approve imposition of a transaction and use tax authorized by this ordinance on the ballot of the general election schedule for November 5, 2024.
CITY OF SANTA BARBARA
COUNCIL AGENDA REPORT
AGENDA DATE: June 25, 2024
TO: Mayor and Councilmembers
FROM: Administration Division, Airport Department Division SUBJECT: Records Destruction for Airport Department [Resolution] RECOMMENDATION:
That Council adopt, by reading of title only, a Resolution of the Council of the City of Santa Barbara Relating to the Destruction of Records Held by the Airport Department in the Operations Division.
DISCUSSION:
The City Council adopted Resolution No. 16-005 on February 9, 2016, approving the City of Santa Barbara Records Management Policies and Procedures Manual. The Manual contains the records retention and disposition schedules for all City departments. The schedules are a comprehensive listing of records created or maintained by the City, the length of time each record should be retained, and the legal retention authority. If no legal retention authority is cited, the retention period is based on standard records management practice.
Pursuant to the Manual, the Airport Director submitted a request for records destruction to the City Clerk Services Manager to obtain written consent from the City Attorney. The City Clerk Services Manager agreed that the list of records proposed for destruction conformed to the retention and disposition schedules. The City Attorney has consented in writing to the destruction of the proposed records.
The Airport Director requests the City Council to approve the destruction of the Airport Department records in the Operations Division listed on Exhibit A of the proposed Resolution, without retaining a copy.
PREPARED BY: Maureen Graham, Executive Assistant
SUBMITTED BY: Chris Hastert, Airport Director
APPROVED BY: Kelly McAdoo. City Administrator
Agenda Item No. 5
File Code No. 160.06
1 RESOLUTION NO.
A RESOLUTION OF THE COUNCIL OF THE CITY OF
SANTA BARBARA RELATING TO THE DESTRUCTION OF
RECORDS HELD BY THE AIRPORT DEPARTMENT IN THE
OPERATIONS DIVISION.
WHEREAS, the City Council adopted Resolution No. 16-005 on February 9, 2016, approving the City of Santa Barbara Records Management Policies and Procedures Manual;
WHEREAS, the City of Santa Barbara Records Management Policies and Procedures Manual contains the records retention and disposition schedules for all City departments.
The records retention and disposition schedules are a comprehensive listing of records created or maintained by the City, the length of time each record should be retained, and the legal retention authority. If no legal retention authority is cited, the retention period is based on standard records management practice;
WHEREAS, Government Code section 34090 provides that, with the approval of the City Council and the written consent of the City Attorney, the head of a City department may destroy certain city records, documents, instruments, books or papers under the Department Head’s charge, without making a copy, if the records are no longer needed; WHEREAS, the Airport Director submitted a request for the destruction of records held by the Airport Department to the City Clerk Services Manager to obtain written consent from the City Attorney. A list of the records, documents, instruments, books or papers proposed for destruction is attached hereto as Exhibit A and shall hereafter be referred to collectively as the “Records”;
WHEREAS, the Records do not include any records affecting title to real property or liens upon real property, court records, records required to be kept by statute, records less than two years old, video or audio recordings that are evidence in any claim or pending litigation, or the minutes, ordinances or resolutions of the City Council or any City board or commission;
WHEREAS, the City Clerk Services Manager agrees that the proposed destruction conforms to the City’s retention and disposition schedules; WHEREAS, the City Attorney consents to the destruction of the Records; and WHEREAS, the City Council of the City of Santa Barbara finds and determines that the Records are no longer required and may be destroyed.
2 NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF SANTA BARBARA that the Airport Director, or his designated representative, is authorized and directed to destroy the Records without retaining a copy.
EXHIBIT A
AIRPORT DEPARTMENT
Records Series Date(s)
Identification Badge Files April 2022 – December 25, 2023
CITY OF SANTA BARBARA
COUNCIL AGENDA REPORT
AGENDA DATE: June 25, 2024
TO: Mayor and Councilmembers
FROM: Treasury Division, Finance Department
SUBJECT: Statement of Investment Policy and Delegation of Investment Authority for Fiscal Year 2025 [Resolution]
RECOMMENDATION:
That Council adopt, by reading of title only, a Resolution of the Council of the City of Santa Barbara Adopting the Investment Policy for the City and Rescinding Resolution No. 23- 138.
DISCUSSION:
State law under the California Government Code Section 53600 establishes legally permitted investments for local governments. Except for County governments, State law does not contain any provisions specifying what must be included in the investment policy of a local agency. If a local agency’s policy is submitted to the legislative body, it must be an agenda item at a public meeting and approved by a simple majority vote of the legislative body.
While not required by the State law, each year, the City Council adopts a Statement of Investment Policy, which further defines the suitable and authorized investments for the City. In some cases, the City’s policy is more fiscally conservative/ restrictive than what is allowed under State law. The City’s policy serves as a guide for setting and achieving its own investment objectives and defines guidelines for the management of the portfolio.
Revisions to the annual investment policy are made each year, as needed, in order to incorporate policy or statutory changes affecting the City’s investment program and daily investing activities. Policy revisions are generally technical in nature, such as process changes or language clarifications.
As provided under the Investment Policy, Council formally delegates authority to the City Treasurer (i.e., the City Administrator) to invest and reinvest funds and to sell or exchange securities for a one-year period, as detailed on page 4 of the proposed Investment Policy.
Agenda Item No. 6
File Code No. 260.01
Council Agenda Report
Statement of Investment Policy and Delegation of Investment Authority for Fiscal Year 2025 [Resolution]
June 25, 2024
Management and oversight of the investment program is delegated to the Finance Director. The City may engage the services of one or more external investment advisers, who are registered under the Investment Advisers Act of 1940, to assist in the management of the City’s investment portfolio in a manner consistent with the City’s objectives. External investment advisers may be granted discretion to purchase and sell investment securities in accordance with this investment policy.
In line with Vision 2030 and focusing on optimizing revenue from existing revenue sources and ongoing efforts to streamline and enhance the investment portfolio’s management and performance, the City has hired Chandler Asset Management to manage the City’s investment portfolio, starting in Fiscal Year 2025. The City of Santa Barbara currently works indirectly with Chandler Asset Management, as they are the adviser for the Authority for California Cities Excess Liability (ACCEL) insurance JPA of which the City is a member.
Although the Finance Department usually submits the annual policy update to Council in the last quarter of the calendar year to capture any changes in statute that may impact the City’s policy, the Investment Policy is being updated at this time to include revisions suggested by Chandler Asset Management. The revisions align the Investment Policy with Chandler Asset Management’s investment strategy for the City’s portfolio and investment policy best-practices.
The significant changes to the Investment Policy, by page numbers, are as follows:
Page 3: Removal of Objectives B through J, to align with investment policy bestpractices. The primary objectives of the City’s Investment Policy are safety, liquidity, and yield (return on investment), in that order.
Page 4: Addition of language to Section III. C. Delegation of Authority, to allow the City to engage in services with Investment Advisers.
Page 7: Addition of language to Section IV. Authorized Financial Dealers and Institutions, to bring Investment Policy into accordance with California Government Code Section 53601.5.
Page 7/8: Addition of language to Section IV. Authorized Financial Dealers and Institutions, to align with investment policy best-practices that deposits will be FDIC insured and allows Investment Advisers to have sole discretion in selection of brokers/dealers.
Page 9: Replacement of language to Section VI. Suitable and Authorized Investments, to clarify and update language around restricting eligible investments to the guidelines set forth in this section.
Page 9/10/11: Addition of language to Section VI.A. Investment Types, to align with investment policy-best practices where maximum maturity does not exceed 5 years and no more than 30% of surplus funds are invested in any single issuer. Page 15: Removal of reverse repurchase agreements or securities lending agreements as an allowable investment type, per investment policy best-practices.
Council Agenda Report
Statement of Investment Policy and Delegation of Investment Authority for Fiscal Year 2025 [Resolution]
June 25, 2024
Page 15: Removal of language around dollar amount allowed to be invested in the Local Agency Investment Fund (LAIF) for simplification of language, as $75 million is the amount permitted by LAIF.
Page 17: Addition of asset-backed, mortgage-backed securities as authorized types of investments, to allow for Chandler Asset Management to meet the City’s investment objectives.
Page 18: Addition of Section B Investment Pools and Mutual Funds, as authorized types of investments, to allow for Chandler Asset Management to meet the City’s investment objectives.
Page 19: Update to language in Section D Social Responsibility, to clarify investments that are discouraged in entities for military systems not used for our national defense.
Page 21: Addition of Section C Risk Management, per investment policy bestpractices.
Staff recommends all changes shown in the red-lined sections of Attachment 1 (“Annual Statement of Investment Policy – Fiscal Year 2025”).
BUDGET/FINANCIAL INFORMATION:
There are no direct budget or financial impacts by adopting the revised Statement of Investment Policy. Through the partnership with Chandler, staff anticipate enhanced and more active management of the City ‘s investment portfolio, including a greater degree of safety and security of the City’s investments as well as additional returns on investments.
ATTACHMENTS: 1. Annual Statement of Investment Policy – Fiscal Year 2025 Redlined Version
2. Annual Statement of Investment Policy – Fiscal Year 2025 PREPARED BY: Salvatore Parrilla, Treasury Analyst
SUBMITTED BY: Lyndsay Maas, Assistant Finance Director
APPROVED BY: Kelly, McAdoo, City Administrator
City of Santa Barbara
Finance Department
Statement of InvestmentPolicy
Calendar YearsFiscal Year 2025 2023 2024
and 20242025
Effective July 1, 2024 11/07/2023
ATTACHMENT 1
- 1 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Calendar Years 2023 and 2024Fiscal Year 2025
TABLE OF CONTENTS
I. MISSION STATEMENT .................................................................................................................................. 2 A. POOLING OF FUNDS................................................................................................................................................2 B. FUNDS INCLUDED BY THIS POLICY ..............................................................................................................................2 C. FUNDS EXCLUDED FROM THIS POLICY.........................................................................................................................2 II. GENERAL OBJECTIVES .................................................................................................................................... 2 A. SAFETY.................................................................................................................................................................2 B. LIQUIDITY .............................................................................................................................................................3 C. YIELD (RETURN ON INVESTMENT)..............................................................................................................................3 III. STANDARDS OF CARE................................................................................................................................. 4 A. PRUDENCE............................................................................................................................................................4 B. ETHICS AND CONFLICTS OF INTEREST..........................................................................................................................4 C. DELEGATION OF AUTHORITY ....................................................................................................................................4 D. INTERNAL CONTROLS ..............................................................................................................................................6 IV. AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS.............................................................................. 7 V. SAFEKEEPING AND CUSTODY ......................................................................................................................... 8 VI. SUITABLE AND AUTHORIZED INVESTMENTS .............................................................................................. 9 A. INVESTMENT TYPES ................................................................................................................................................9 B. INVESTMENT POOLS AND MUTUAL FUNDS................................................................................................................18 C. COLLATERALIZATION.............................................................................................................................................18 D. SOCIAL RESPONSIBILITY .........................................................................................................................................19 E. INVESTMENTS NOT APPROVED ...............................................................................................................................19 F. EXCEPTIONS TO PROHIBITED AND RESTRICTED INVESTMENTS........................................................................................20 VII. INVESTING PARAMETERS......................................................................................................................... 20 A. DIVERSIFICATION .................................................................................................................................................20 B. MAXIMUM MATURITIES........................................................................................................................................20 C. RISK MANAGEMENT .............................................................................................................................................21 VIII. REPORTING.............................................................................................................................................. 22 A. MONTHLY REPORTING TO CITY COUNCIL ..................................................................................................................22 B. QUARTERLY REPORTING TO CITY COUNCIL ................................................................................................................22 C. PERFORMANCE STANDARDS ...................................................................................................................................23 IX. INVESTMENT POLICY COMPLIANCE AND ADOPTION ............................................................................... 23 A. POLICY COMPLIANCE AND CHANGES ........................................................................................................................23 B. ANNUAL STATEMENT OF INVESTMENT POLICY ...........................................................................................................25 X. GLOSSARY OF TERMS................................................................................................................................... 27 - 2 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Calendar Years 2023 and 2024Fiscal Year 2025
I. MISSION STATEMENT
It is the policy of the City to invest public funds in a manner that will provide maximumsecurity, adequate liquidity and sufficient yield, while meeting the daily cash flow demands of the City and conforming to all statutes and regulations governing the investment of public funds.
SCOPE
This investment policy applies to all the financial assets of City of Santa Barbara. These funds are accounted for in the City’s audited Annual Comprehensive Annual Financial Report. If the City invests funds on behalf of another agency and, if that agency does not have its own policy, the City's investment policy shall govern the agency's investments.
A. Pooling of Funds
Except for cash in certain restricted and special funds, the City shall consolidate cash balances from all funds to maximize investment earnings. Investment income shall be allocated to various funds as identified in the investment procedures manual in accordance with generally accepted accounting principles.
B. Funds Included by this Policy
General Fund
Special Revenue Funds
Capital Project Funds
Enterprise Funds
Internal Service Funds
Trust and Agency Funds
Any new fund created by City Council unless specifically exempted C. Funds Excluded from this Policy
Bond Proceeds. Investment of bond proceeds shall be subject to the conditions and restrictions of bond documents and are not governed by this policy. Bond investment conditions and restrictions shall be reviewed by the Finance Committee and forwarded to City Council for approval. Other funds excluded include post-retirement medical funds and pension rate mitigation funds.
II. GENERAL OBJECTIVES
The primary objectives, in priority order, of the City’s investment activities are safety, liquidity and yield.
A. Safety
Preservation 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. The objective shall be to mitigate credit - 3 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Calendar Years 2023 and 2024Fiscal Year 2025
risk and interest rate risk. To attain this objective, the City shall diversify its investments by investing funds among several financial institutions and a variety of securities offering independent returns.
B. Credit Risk
C. The City shall minimize credit risk, the risk of loss due to the failure of the security issuer or backer, by:
D. Limiting investments to the safest types of securities E. Pre-qualifying the financial institutions, broker/dealers, intermediaries, and advisers with which the City will do business
F. Diversifying the investment portfolio so as to minimize the impact any single industry/investment class can have on the portfolio
G. Interest Rate Risk
H. To minimize the negative impact of material changes in the market value of securities in the portfolio, the City shall:
I. Structure the investment portfolio so that securities mature concurrent with cash needs to meet anticipated demands, thereby avoiding the need to sell securities on the open market prior to maturity
J. Invest operating funds primarily in shorter-term securities, money market mutual funds, and the State of California’s Local Agency Investment Fund (LAIF)
K.B. Liquidity
The City’s investment portfolio shall remain sufficiently liquid to enable the City to meet all operating requirements which might be reasonably anticipated without requiring a sale of securities. Since all possible cash demands cannot be anticipated, the portfolio should consist largely of securities with active secondary or resale markets. A portion of the portfolio also may be placed in money market mutual funds or LAIF, which offeroffers same-day liquidity for short-term funds.
L.C. Yield (Return on Investment)
The City’s investment portfolio shall be designed with the objective of attaining a benchmark rate of return throughout budgetary and economic cycles, commensurate with the City’s investment risk constraints and the liquidity characteristics of the portfolio. Return on investment is of secondary importance compared to the safety and liquidity objectives described above. The core of investments is limited to relatively low risk securities in anticipation of earning a fair return relative to the risk being assumed.
- 4 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Calendar Years 2023 and 2024Fiscal Year 2025
III. STANDARDS OF CARE
A. Prudence
The standard of prudence to be used by City investment officials shall be the “Prudent Investor Standard” in that 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 City, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of an enterprise of a like character and with like aims. This standard shall be applied in the context of managing the overall portfolio. City 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 deviations from expectations are reported in a timely fashion and appropriate action is taken to control adverse developments.
B. Ethics and Conflicts of Interest
Officers and employees involved in the City investment process shall refrain from personal business activity that could conflict with proper execution of the investment program, or that could impair their ability to make impartial investment decisions. City employees and investment officials shall disclose any material financial interests in financial institutions that conduct business within their jurisdiction, and they shall further disclose any personal financial/investment positions that could be related to the performance of the City immediately to the City of Santa Barbara Treasurer or designee and annually to the Fair Political Practices Commission. City employees and officers shall refrain from undertaking personal investment transactions with the same individual with whom business is conducted on behalf of the City.
C. Delegation of Authority
Authority to manage the City’s investment program is derived from the Charter of the City of Santa Barbara. City Council shall delegate to the Treasurer, for a 1-year period, the authority to invest or to reinvest funds, or to sell or exchange securities. The Treasurer and/or designees shall thereafter assume full responsibility for those transactions until the delegation of authority is revoked or expires.
Management responsibility for the investment program is delegated to the Finance Director who shall establish a separate written investment procedures manual. The operation of the investment program shall be consistent with this policy and the investment procedures manual. Such procedures shall include explicit delegation of authority to persons responsible for investment transactions. No person may engage in an investment transaction except as provided under the terms of this policy and the procedures established by the Finance Director. The Assistant Finance Director is authorized to conduct investment- related activities, under the supervision of the Finance Director, on behalf of the City. The City may engage the services of one or more external investment advisers, who are registered under the Investment Advisers Act of 1940, to assist in the management of the City’s investment portfolio in a manner consistent with the City’s objectives. External investment advisers may be granted discretion to purchase and sell investment securities in accordance with this investment policy.
All Apart from investment purchases and sales conducted by the City’s investment - 5 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Calendar Years 2023 and 2024Fiscal Year 2025
adviser, investment purchases and sales require signature approval from the Treasurer and Finance Director or their designee, by the close of business on the next business day following the purchase or sale.
- 6 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Calendar Years 2023 and 2024Fiscal Year 2025
The following documents are by reference incorporated in the investment procedures manual:
1. Listing of authorized personnel
2. Relevant investment statutes and ordinances
3. Repurchase agreements and tri-party agreements
4. Listing of authorized broker/dealers and financial institutions
5. Credit ratings and/or reports for securities purchased and financial institutions used
6. Safekeeping agreements
7. Sample investment reports
8. Investment accounting documents
9. Methodology for calculating rate of return
10. Banking services contracts
11. Cash flow forecasting
12. Collateral/depository agreements
D. Internal Controls
The Finance Director is responsible for establishing and maintaining a system of written internal controls. These controls shall be reviewed annually with an independent external auditor who will notify the City Council if there is a material non-compliance with its policies and procedures. The internal controls shall be designed to prevent losses of public funds arising from fraud, employee error, and misrepresentation by third parties, unanticipated changes in financial markets, or imprudent action by City employees and officers. The internal structure shall be designed to provide reasonable assurance that these objectives are met. The concept of reasonable assurance recognizes that (1) the cost of a control should not exceed the benefits likely to be derived, and (2) the valuation of costs and benefits requires estimates and judgments by management.
The internal controls shall address the following points:
1. Control of collusion
2. Separation of transaction authority from accounting and record-keeping
3. Custodial safekeeping
4. Delivery versus payment (DVP)
5. Clear delegation of authority to subordinate staff members
6. Written confirmation of transactions for investments and wire transfers
7. Wire transfer agreements
- 7 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Calendar Years 2023 and 2024Fiscal Year 2025
IV. AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS
The Finance Director shall establish selection criteria for pre-approval of financial institutions and security broker/dealers to do business with the City of Santa Barbara. The Finance Director shall maintain a list of City approved financial institutions and security broker/dealers who are authorized to provide investment services to the City. These may include primary dealers, or regional dealers that qualify under Securities & Exchange Commission Rule 15C3-1 (uniform net capital rule). In accordance with Section 53601.5, institutions eligible to transact investment business with the City include:
▪ Institutions licensed by the state as a broker-dealer. ▪ Institutions that are members of a federally regulated securities exchange. ▪ Primary government dealers as designated by the Federal Reserve Bank and nonprimary government dealers. ▪ Nationally or state-chartered banks.
▪ The Federal Reserve Bank.
▪ Direct issuers of securities eligible for purchase.
To qualify for consideration, a financial institution or a security broker/dealer must also have an office in California and that office must perform the transactions with the City.
All financial institutions and broker/dealers who desire to become qualified for investment transactions must supply the following to the Finance Director as appropriate:
▪ Current audited financial statements
▪ Proof of Financial Industry Regulatory Authority (FINRA), formerly National Association of Security Dealers (NASD), certification
▪ Trading resolution
▪ Complete broker/dealer questionnaire
▪ Proof of State of California registration
▪ For banking institutions, a statement of compliance with the Federal Reserve Bank of New York’s capital guideline
▪ Statement of having read, understood and agreeing to comply with the City’s investment policy and depository contracts
The Finance Director shall annually review each of the approved financial institutions and security broker/dealers selected for current State of California registrations and financial condition.
Public deposits will be made only in qualified public depositories as established by State law.
Deposits will be insured by the Federal Deposit Insurance Corporation, or, to the extent the amount exceeds the insured maximum, will be collateralized in accordance with State law.
Selection of broker/dealers used by an external investment adviser retained by the City will be - 8 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Calendar Years 2023 and 2024Fiscal Year 2025
at the sole discretion of the adviser. Where possible, transactions with broker/dealers shall be selected on a competitive basis and their bid or offering prices shall be recorded. If there is no other readily available competitive offering, best efforts will be made to document quotations for comparable or alternative securities. When purchasing original issue instrumentality securities, no competitive offerings will be required as all dealers in the selling group offer those securities at the same original issue price.
V. SAFEKEEPING AND CUSTODY
All security transactions, including collateral for repurchase agreements, entered into by the City shall be conducted on a delivery-versus-payment (DVP) basis which will ensure that securities are deposited in an eligible financial institution prior to the release of funds. Securities shall be held by a third-party custodian designated by the Finance Director and evidenced by safekeeping receipts with a written custodial agreement. The only exception to the foregoing shall be depository accounts and securities purchases made with: LAIF, time certificates of deposit, and money market mutual funds, since the purchased securities are not deliverable.
Settlement instructions sent to the safekeeping agent shall require dual authorization unless the trade is executed by the City’s investment adviser. The Treasurer and the Finance Director, and if applicable, their designee, shall be bonded to protect the public against possible embezzlement and malfeasance. Safekeeping procedures shall be reviewed annually by an independent external auditor and any irregularities noted should be reported promptly to the Treasurer or designee and City Council.
- 9 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Calendar Years 2023 and 2024Fiscal Year 2025
VI. SUITABLE AND AUTHORIZED INVESTMENTS
The City shall be governed by the California Government Code, Sections 53600 et seq. Within the investments permitted by the Code, the City seeks to further restrict eligible investments to the guidelines listed below. In the event a discrepancy is found between this policy and the Code, the more restrictive parameters will take precedence.If the Code is amended to allow additional investments or is changed regarding the limits on certain categories of investments, the City is authorized to conform to the changes in the revised Code, provided that the changes are not specifically prohibited by the City's policy. The City shall be required to present those any changes to Code in the annual review of the policy and to incorporate the new legislation within the policy. Surplus funds are defined as funds not required for the immediate necessities of the City and include investments in individually managed portfolio(s), money market fund(s) and/or State LAIF, and all portfolio limitations and restrictions shall apply to this aggregate amount. For purposes of compliance with the California Government Code and the City’s Investment Policy, the credit rating requirement for medium-term notes, deposit notes, bank notes and commercial paper shall be based on the quality ratings at the time of purchase. If the quality rating of the issuer is downgraded, subsequent to purchase, by any of the Nationally Recognized Statistical-Rating Organizations below "A", or its equivalent, it shall be reported to the Finance Committee and City Council with a recommendation, and ongoing information shall be provided if the bond is not sold. Percentage limitations of surplus funds invested are noted for the various investment instruments. Where there is a specified percentage limitation for a particular category of investments, that percentage is applicable only at the date of purchase.
A later increase or decrease in a percentage resulting from a change in values or assets shall not constitute a violation of that restriction.
The City is empowered by statute to invest in the following types of securities and those that the investment managers are trained and competent to handle.
A. Investment Types
1. Bonds, notes, or other forms of indebtedness issued by the City, including bonds payable solely out of the revenues from a revenue producing property owned, controlled, or operated by the City or by a department, board, agency, or authority of the local agency.
2. United States Treasury notes, bonds, bills, or certificates of indebtedness, or those any other government obligation for which the full faith and credit of the United States are pledged for the payment of principal and interest. There are no limits on the dollar amount or percentage that the City may invest in U.S.
Treasuries, provided that the maximum maturity is five (5) years.
3. Federal Agency or United States government-sponsored enterprise obligations (GSE), participations, or other instruments, including those issued by or fully guaranteed as to principal and interest by federal agencies or United States government-sponsored enterprises. There are no limits on the dollar amount or percentage that the City may invest in Federal Agency or Government-Sponsored Enterprises (GSEs), provided that:
▪ No more than 30% of surplus funds may be invested in any single Agency/GSE issuer.
▪ The maximum maturity does not exceed five (5) years.
- 10 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Calendar Years 2023 and 2024Fiscal Year 2025
▪ The maximum percent of Agency callable securities in the portfolio will be 20%.
4. State of California and Local Agency Obligations. Registered state warrants or treasury notes or bonds of this state, including bonds payable solely out of the revenues from revenue-producing property owned, controlled, or operated by the state or by a department, board, agency, or authority of the state; and bonds, notes, warrants, or other evidence of indebtedness of any local agency within this state including bonds payable solely out of the revenues from revenue-producing property owned, controlled, or operated by the local agency, or by a department, board, agency, or authority of the local agency. Notes eligible for investment, other than those issued by the City or operated by a department, board, agency, or authority of the local agency, shall be rated in a rating category of "A" or its equivalent or better by two at least one Nationally Recognized Statistical-Rating Organizations (NRSRO). Moreover:
▪ No more than 5% of surplus funds may be invested in any single issuer. ▪ No more than 30% of surplus funds may be in municipal securities issued by the City, the state of California, its political subdivisions, or the registered treasury notes or bonds of the other 49 states in addition to California combined.
▪ The maximum maturity does not exceed five (5) years.
- 11 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Calendar Years 2023 and 2024Fiscal Year 2025
5. 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.
▪ The securities must be rated in a rating category of “A” or its equivalent or better by at least one NRSRO.
▪ No more than 5% of surplus funds may be invested in any single issuer. ▪ No more than 30% of surplus funds may be in municipal securities issued by the City, the state of California, its political subdivisions, or the registered treasury notes or bonds of the other 49 states in addition to California combined.
▪ The maximum maturity does not exceed five (5) years.
4.6. Medium-Term Notes, defined as all corporate and depository institution debt securities with a maximum remaining maturity of 5 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. Purchases of medium-term notes may not exceed 30 percent of the City's surplus funds. Notes eligible for investment shall be rated in a rating category of "A" or its equivalent or better by two Nationally Recognized Statistical- Rating Organizationsat least one NRSRO. Investments in medium-term notes for any single non- government issuer shall be limited to no more than 5 percent of surplus funds per issuer. for issuers rated “AA” or its equivalent or better by two Nationally Recognized Statistical-Rating Organizations, and to no more than 3 percent for issuers rated in a rating category of “A” or its equivalent or better by two Nationally Recognized Statistical-Rating Organizations.
5.7. Bankers Acceptances otherwise known as bills of exchange or time drafts, drawn on and accepted by a commercial bank, which are eligible for purchase by the Federal Reserve System. Purchased bankers acceptances may not exceed 180 days maturity or 40 percent of the City's surplus funds, and no more than 10 5 percent of the City's surplus funds may be invested in the bankers’ acceptances of any single commercial bank. Issuers must be institutions which have short-term debt obligations rated “A-1” or its equivalent or better by at least one NRSRO, or long-term debt obligations which are rated in a rating category of “A” or its equivalent, or better by at least one NRSRO.
6.8. Commercial Paper of “prime” quality of the highest ranking or the highest letter and number rating as provided for by a Nationally Recognized StatisticalRating Organization. The entity that issues the commercial paper shall meet all of the following conditions in either paragraph (a) or paragraph (b):
a. The entity is organized and operating in the United States as a general corporation and has total assets in excess of $500,000,000. In addition, its debt other than commercial paper, if any, must be rated in a rating - 12 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Calendar Years 2023 and 2024Fiscal Year 2025
category of “A” or higher by a Nationally Recognized Statistical-Rating Organization.
b. The entity is organized within the United States as a special purpose corporation, trust, or limited liability company and has a program wide credit enhancement including, but not limited to, over collateralization, letters of credit, or surety bond. In addition, the entity has commercial paper that is rated “A-1” or higher, or the equivalent, by a Nationally Recognized Statistical-Rating Organization.
Eligible commercial paper shall have a maximum maturity of 270 days or less.
Under a provision sunsetting on January 1, 2026,Tthe City may not invest more than 40 percent of its surplus funds in commercial paper, and the City may invest no more than 5% in any single issuer, and no more than 10% of its total investment assets in the commercial paper and the medium-term notes of any single issuer.
7. Negotiable Certificates of Deposit issued by a nationally or state-chartered bank or savings association or federal association or 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 15 30 percent of the City's surplus money invested and shall be limited to no more than 3 5 percent of any single issuer. Deposit notes and bank notes purchased through a broker or dealer shall be included with negotiable
- 13 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Calendar Years 2023 and 2024Fiscal Year 2025
8. 9.
10. certificates of deposit in calculating allowable maximum percentages.
Purchases of negotiable certificates of deposit, deposit notes and bank notes of up to
11.9. $250,000 are allowable in any institution that insures its deposits with the Federal Deposit Insurance Corporation, while purchases greater than $250,000 shall be rated in a category of "A" or its equivalent or better by two Nationally Recognized Statistical-Rating Organizationsat least one NRSRO.
Maturities for negotiable certificates of deposit shall not exceed five years.
12.10. Time Deposits. The City may invest in non-negotiable Certificates of Deposit at commercial banks and savings and loan associations that are collateralized in accordance with the California Government Code. To be eligible to receive City funds, the depository institution shall have received an overall rating of not less than “satisfactory” in its most recent evaluation of its record of meeting the credit needs of California’s communities, including low and moderate-income neighborhoods. In selecting depositories, the credit worthiness of institutions shall be considered. Banks and Savings and Loan Associations seeking to establish an investment relationship with the City shall submit an audited financial report that shall be reviewed for compliance with the City's investment standards. Any institution not providing an audited annual financial report shall be removed from the approved list and all funds maturing will be withdrawn. A list of eligible institutions shall be maintained in the investment procedures manual. Qualification shall be determined by the following criteria:
a. Tangible capital must equal or exceed 1.5 percent; core capital must equal or exceed 4 percent; and, risk-based capital must equal 8 percent of assets adjusted for assigned risk-weightings.
b. Return on Assets of a minimum of 0.5 percent; a Return on Equity of a minimum of 8 percent; an Equity to Assets Ratio of a minimum of 5 percent; and, City investments shall be no greater than 0.5 percent of the total assets of the depository.
c. Independent auditor's statement must have a clean opinion.
13.11. Savings accountsCollateralized Bank Deposits. Savings accounts when used in conjunction with the City's checking accounts at a qualified bank where funds are collateralized in accordance with the California Government Code 53651. There are no limits on the dollar amount or percentage that the City may invest in collateralized bank deposits
12. U.S. Government money market funds registered with the Securities and Exchange Commission and which comply with rule 2a7 of the Investment Company Act of 1940. The fund must be comprised of only U.S. Treasury bills, notes and bonds, repurchase agreements, and obligations issued or guaranteed as to principal and interest by the U.S. Government or its agencies or instrumentalities. The percentage of repurchase agreements in the fund shall be reviewed and approved based on the fund's policy limits. The dollar weighted average maturity of the portfolio shall be less than 90 days and the portfolio is - 14 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Calendar Years 2023 and 2024Fiscal Year 2025
managed to maintain a $1.00 share price. Also, the fund shall meet either of the following criteria: (a) attained the highest ranking or the highest letter and numerical rating provided by not less than two Nationally Recognized Statistical-Rating Organizations; (b) retained an investment adviser registered or exempt from registration with the Securities and Exchange Commission with not less than 5 years' experience managing money market mutual funds with assets under management in excess of $500,000,000. Purchase of securities authorized by this section shall not exceed 20 percent of the City’s surplus money invested and no more than 10 percent may be invested in any single money market fund.
14. - 15 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Calendar Years 2023 and 2024Fiscal Year 2025
not less than 5 years' experience managing money market mutual funds with assets under management in excess of $500,000,000. Purchase of securities authorized by this section shall not exceed 20 percent of the City’s surplus money invested and no more than 10 percent may be invested in any single money market fund.
15.13. Repurchase Agreements. Investments in repurchase agreements or reverse repurchase agreements or securities lending agreements of any securities authorized by the Code, so long as the proceeds of the repurchase agreement are invested solely to supplement the income normally received from these securities. The City shall adopt as a standard the Bond Market Association Master Repurchase Agreement and shall maintain a list of approved counterparts and limit counter parties to primary dealers rated "A" or better by two Nationally Recognized Statistical-Rating Organizations. Reverse repurchase agreements and securities lending agreements shall require City Council authorization separate from City Council approval of this policy.
Securities lending agreements shall include the following safeguard measures:
terms of lending agreements, indemnification provisions, reinvestment guidelines, liquidity provisions, credit risks and monitoring requirements.
Additionally, any securities lending agreement shall be reviewed by the City Attorney to ensure the City’s interests are properly protected. a. Investments in repurchase agreements may be made, on any authorized investment, when the term of the agreement does not exceed 1 year. b. Reverse repurchase agreements or securities lending agreements may be utilized when the security to be sold on the reverse repurchase agreement or securities lending agreement has been owned and fully paid for by the City for a minimum of 30 days prior to sale; the total of all reverse repurchase agreements on investments owned by the City does not exceed 20 percent of the base value of the portfolio; and 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 sale of a security using a reverse repurchase agreement and the final maturity date of the same security.
16. Local Agency Investment Fund (LAIF). The City may invest in LAIF up to the
17. $75,000,000 maximum established by the California State Treasurer on January 1, 2020 in accordance with State lawamount permitted by LAIF; therefore, there is a
18. $75,000,000 deposit limit for the City of Santa Barbara. The City's investment in LAIF is based on, among other criteria, the following information provided by LAIF: a written statement of portfolio management goals, objectives and policies, including a description of eligible investment securities; a disclosure of LAIF's safekeeping practices; eligible LAIF participants, the monthly transaction limit, and minimum and maximum deposit and withdrawal amounts permitted; calculation of quarterly earnings and apportionment, including gains and losses; disclosure of administrative costs and the assessment process; monthly statements of the City's transaction activity and balances; monthly summaries - 16 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Calendar Years 2023 and 2024Fiscal Year 2025
of LAIF investment data, including market valuation and accrued - 17 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Calendar Years 2023 and 2024Fiscal Year 2025
19. 20.
21. interest; and a description of the audit process. At least quarterly, the Finance Director shall report to the Finance Committee on the composition of the LAIF portfolio.
22.14. The California Government Code states that moneys placed for deposit in LAIF are in trust in the custody of the State Treasurer and cannot be borrowed or be withheld from the City. Further, the right of the City to withdraw its deposited money from the LAIF upon demand may not be altered, impaired, or denied in any way by any state official or agency based upon the State’s failure to adopt a budget by July 1 of each new fiscal year.
23.15. 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 or better by a Nationally Recognized Statistical-Rating Organizationat least one NRSRO and shall not exceed 30 percent of the agency’s City’s moneys that may be invested pursuant to this section. No more than 10% of surplus funds may be invested in any single issuer.
24.16. 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).
17. Placement service deposits and placement service certificates of deposit 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, as defined in Section 53601.8. No more than 30 percent of the City's surplus funds may be invested in time deposits, including certificates of deposit, through a placement service as authorized under Section 53601.8.
25. Local Government Investment Pools. Shares of beneficial interest issued by a joint powers authority organized pursuant to Section 6509.7
18. 19. Asset-backed, mortgage-backed, mortgage passthrough securities, and collateralized mortgage obligations from issuers not defined in paragraphs 2 and 3 of this section, provided that:
▪ The securities are rated in a rating category of “AA” or its equivalent or better by a NRSRO.
▪ No more than 20% of the total surplus funds may be invested in these securities.
▪ No more than 5% of the total surplus funds may be invested in any single Asset-Backed or Commercial Mortgage security issuer.
- 18 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Calendar Years 2023 and 2024Fiscal Year 2025
▪ The maximum legal final maturity does not exceed five (5) years.
B. Investment Pools and Mutual Funds
The City shall conduct a thorough investigation of any pool or mutual fund prior to making an investment, and on a continual basis thereafter. The Treasurer or designee shall develop a questionnaire which will answer the following general questions:
▪ A description of eligible investment securities, and a written statement of investment policy and objectives.
▪ A description of interest calculations and how it is distributed, and how gains and losses are treated.
▪ A description of how the securities are safeguarded (including the settlement processes), and how often the securities are priced and the program audited.
▪ A description of who may invest in the program, how often, what size deposit and withdrawal are allowed.
▪ A schedule for receiving statements and portfolio listings. ▪ Are reserves, retained earnings, etc. utilized by the pool/fund? ▪ A fee schedule, and when and how is it assessed.
▪ Is the pool/fund eligible for bond proceeds and/or will it accept such proceeds?
B.C. Collateralization
Collateralization shall be required on two types of investments: certificates of deposit and repurchase (and reverse) agreements. A collateral agreement must be current and on file before any funds can be transferred for collateralized certificates of deposit. Collateral shall be held by an independent third party with whom the City has a current written custodial agreement. A clearly marked evidence of ownership (safekeeping receipt) must be supplied to the City and retained. The right of collateral substitution is granted.
1. Certificates of Deposit
a. Government Securities used as collateral require 102 percent of market value to the face amount of the deposit
b. Promissory Notes secured by first trust deeds used as collateral require 150 percent of market value to the face amount of the deposit c. Irrevocable Letters of Credit issued by the Federal Home Loan Bank of San Francisco require 105 percent of market value to the face amount of the deposit
2. Repurchase and Reverse Repurchase Agreements
- 19 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Calendar Years 2023 and 2024Fiscal Year 2025
a. Only U.S. Treasury securities or Federal Agency securities are acceptable collateral. All securities underlying repurchase agreements must be delivered to the City’s custodian bank versus payment or be handled under a properly executed tri-party repurchase agreement. The total market value of all collateral for each repurchase agreement must equal or exceed 102 percent of the total dollar value of the money invested by the City for the term of the investment. For any repurchase agreement with a term of more than 1 day, the value of the underlying securities must be reviewed on an ongoing basis according to market conditions. Market value must be calculated each time there is a substitution of collateral. b. The City or its trustee shall have a perfected first security interest under the Uniform Commercial Code in all securities subject to the repurchase agreement.
C.D. Social Responsibility
In addition to and subordinate to the objectives set forth in Section III herein, investment of funds should be guided by the following socially responsible investment goals when investing in corporate securities and depository institutions.
Investments shall be made in compliance with the socially responsible goals to the extent that such investments achieve substantially equivalent safety, liquidity and yield compared to investments permitted by state law. Prior to making investments, the City’s Finance Director will reasonably verify an entity’s support of the socially responsible goals listed below through direct contact or through the use of a third party resource. The entity will be evaluated at the time of purchase of the security.
Investments are encouraged in entities that support community well-being through safe, environmentally sound, practices and fair labor practices. Investments are encouraged in entities that support equality of rights regardless of race, sex, religion, age, national or ethnic origin, sexual orientation, or disability. Investments are encouraged in entities that promote community economic development. Investments are discouraged in entities that manufacture, distribute or provide financing for tobacco products, weapons, and military systems not used for our national defense, nuclear power and fossil fuels. Investments are discouraged in entities that exhibit corrupt corporate ethics and governance.
D.E. Investments Not Approved
Any security type or structure not specifically approved by this policy is hereby prohibited. Security types, which are thereby prohibited include, but are not limited to: investment pools (except State LAIF), shares of beneficial interest issued by diversified management companies (except U. S. Government money market funds), collateralized mortgage obligations (CMO's), mortgage pass-through securities, reverse repurchase agreements used as a leveraging vehicle, "exotic" derivatives structures such as range notes, dual index notes, inverse floating-rate notes, leveraged or de-leveraged floating-rate notes, interest-only strips that are derived from a pool of mortgages and any security that could result in zero interest accrual if held to maturity, or any other complex variable or structured note with an unusually high degree of volatility or risk. Local governments that are not Qualified Institutional Buyers (QIB) as defined by the Securities and Exchange Commission are prohibited from purchasing Private Placement Securities. The SEC defines a QIB as having at least $100,000,000 in securities owned and invested. - 20 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Calendar Years 2023 and 2024Fiscal Year 2025
E.F. Exceptions to Prohibited and Restricted Investments
1. The City shall not be required to sell securities prohibited or restricted in this policy, or any future policies, or prohibited or restricted by new State regulations, if purchased prior to their prohibition and/or restriction. Insofar as these securities provide no notable credit risk to the City, holding of these securities until maturity is approved. At maturity or liquidation, such monies shall be reinvested only as provided by this policy.
2. The City 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. The City may hold these instruments until their maturity dates. (This section shall remain in effect starting January 1, 2021 and only until January 1, 2026).
VII. INVESTING PARAMETERS
A. Diversification
The City shall diversify its investments by security type, issuer, maturity, and financial institutions. No percentage limitations are established for United States government, United States government agencies and United States government sponsored enterprises; however percentage limitations are established for other permitted investments, as noted in Section VII of this policy. The investments shall be diversified by limiting investments to avoid overconcentration in securities from a specific issuer or business sector (excluding U.S. Treasury securities), limiting investment in securities that have higher credit risks, and investing in securities with varying maturities.
The City recognizes that investment risks can result from issuer defaults, market price changes or various technical complications leading to temporary illiquidity. Portfolio diversification is employed as a way to control risk. Investment managers are expected to display prudence in the selection of securities as a way to minimize default risk. No individual investment transaction shall be undertaken which jeopardizes the total capital position of the overall portfolio. To control market price risks, volatile investment instruments shall be avoided. To control risks of illiquidity, a minimum of 10 percent of the total portfolio shall be held in highly marketable U.S. Treasury Bills and Notes and/or the State of California Local Agency Investment Fund and/or Money Market Funds and/or securities maturing within 90 days.
B. Maximum Maturities
To the extent possible, the City will attempt to match its investments with anticipated cash flow requirements. Where there is no specified maturity limitation on an investment, no investment shall be made in any security which, at the time of the investment, has a term remaining to maturity in excess of 5 years (measured from the settlement date to final maturity, with a forward settlement date not to exceed 45 days from the time of investment), unless the City Council has granted express authority to make that investment no less than 3 months prior to the investment. - 21 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Calendar Years 2023 and 2024Fiscal Year 2025
C. In addition to the 5 year limitation on investments specified in this policy, the average maturity of the City's combined portfolio shall not exceed 2.5 years without prior approval of the City Council.
C. Risk Management
1.Mitigating Credit Risk in the Portfolio—Credit risk is the risk that a security or a portfolio will lose some or all its value due to a real or perceived change in the ability of the issuer to repay its debt. The City will mitigate credit risk by adopting the following strategies:
▪ The diversification requirements included in the “Authorized Investments” section of this policy are designed to mitigate credit risk in the portfolio. ▪ No more than 5% of the total portfolio may be deposited with or invested in securities issued by any single issuer unless otherwise specified in this policy. ▪ The City may elect to sell a security prior to its maturity and record a capital gain or loss in order to manage the quality, liquidity or yield of the portfolio in response to market conditions or City’s risk preferences. ▪ If a security owned by the City is downgraded to a level below the requirements of this policy, making the security ineligible for additional purchases, 1) it shall be reported to the City Council with a recommendation, and ongoing information shall be provided if the bond is not sold, and 2) any actions taken related to the downgrade by the investment adviser will be communicated to the Treasurer or designee in a timely manner.
2.Mitigating Market Risk in the Portfolio— Market risk is the risk that the portfolio value will fluctuate due to changes in the general level of interest rates. The City recognizes that, over time, longer-term portfolios have the potential to achieve higher returns. On the other hand, longer-term portfolios have higher volatility of return. The City will mitigate market risk by providing adequate liquidity for shortterm cash needs, and by making longer-term investments only with funds that are not needed for current cash flow purposes. The City further recognizes that certain types of securities, including variable rate securities, securities with principal paydowns prior to maturity, and securities with embedded options, will affect the market risk profile of the portfolio differently in different interest rate environments.
The City, therefore, adopts the following strategies to control and mitigate its exposure to market risk:
▪ The City will maintain a minimum of six months of budgeted operating expenditures in short term investments to provide sufficient liquidity for expected disbursements.
▪ The maximum stated final maturity of individual securities in the portfolio will be five (5) years, except as otherwise stated in this policy. ▪ The duration of the portfolio will generally be approximately equal to the duration (typically, plus or minus 20%) of a Market Benchmark, an index selected by the City, based on the City’s investment objectives, constraints and risk tolerances.
If the quality rating of the issuer is downgraded, subsequent to purchase, by any of the Nationally - 22 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Calendar Years 2023 and 2024Fiscal Year 2025
Recognized Statistical-Rating Organizations below "A", or its equivalent, it shall be reported to the Finance Committee and City Council with a recommendation, and ongoing information shall be provided if the bond is not sold.
VIII.
IX.VIII. REPORTING
The Treasurer or designee shall submit investment reports to the City Council that provide a clear picture of the status of the current investment portfolio and shall contain sufficient information to permit an independent organization to evaluate the performance of the investment program.
Based on the discretion of Finance Committee, an independent advisor may be contracted, from time to time to perform one or more of the following functions: confirm that the portfolio is in compliance with the Government Code of the State of California and with the Statement of Investment Policy of the City of Santa Barbara; present an evaluation of the portfolio and investment strategy recommendations; and, provide any other information that may be helpful to Finance Committee in their review of the portfolio.
A. Monthly Reporting to City Council
The Treasurer or designee shall submit to City Council, within 30 days following the end of the month, an investment report that summarizes all securities in the portfolio and a separate listing of investment transactions occurring during the month. The report shall be prepared by the Assistant Finance Director and approved by the Finance Director. The report shall include:
1. Investment type
2. Purchase date
3. Maturity date
4. Credit quality
5. Coupon and yield
6. Book value
7. Market value
8. Book gain/loss
9. Market gain/loss
10. Source of valuation
11. Average days to maturity
12. Variable rate(s) or call features
B. Quarterly Reporting to City Council
In addition to the components required in the monthly investment report, within 45 days following the end of the quarter, a narrative shall accompany the portfolio report addressing noteworthy items, deviations from the investment policy, comments on the fixed income markets and economic conditions, possible changes in the portfolio going forward, and thoughts on
- 23 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Calendar Years 2023 and 2024Fiscal Year 2025
investment strategies. The quarterly report shall also include a statement of compliance with the investment policy and a statement of the ability to meet expenditures for the next 6 months (or an explanation as to why sufficient money shall, or may, not be available).
C. Performance Standards
The investment portfolio shall be managed in accordance with the parameters specified within this policy and always with consistently safe and prudent treasury management. Securities shall not be sold prior to maturity with the following exceptions:
• A security with declining credit sold early to minimize loss of principal • A security swap that would improve the quality, yield, or target duration in the portfolio
• Unforeseen liquidity needs of the portfolio require that the security be sold • A security that, subsequent to purchase, fails to meet the City’s socially responsible goals
Market Yield (Benchmark)
: The Treasurer or designee shall monitor and evaluate the portfolio’s performance relative to the chosen market benchmark(s), which will be included in the Treasurer’s quarterly report. The Treasurer or designee shall select an appropriate, readily available index to use as a market benchmark.The City’s overall investment strategy is passive: investments are generally held to maturity. The quarter-to-date LAIF apportionment rate, the 3-month U.S. Treasury Bill and the 2-year U.S. Treasury Note shall also be considered useful benchmarks of the City’s portfolio performance.
Marking to Market
: The market value of the portfolio shall be calculated at least monthly and a statement of the market value of the portfolio shall be issued at least quarterly. This will ensure that review of the investment portfolio, in terms of value and price volatility, has been performed. In defining market value, consideration shall been given to pronouncements from the Government Accounting Standards Board (GASB) that address the reporting of investment assets and investment income for all investment portfolios held by governmental entities. The fair value of all securities reported in the City’s portfolio is based on currently quoted market prices.
X.IX. INVESTMENT POLICY COMPLIANCE AND ADOPTION
A. Policy Compliance and Changes
Any deviation from the policy shall be reported to Finance Committee at the next scheduled meeting and to City Council as part of the monthly review of the portfolio The Treasurer or designee shall promptly notify Finance Committee and City Council of any material change in the policy and any modifications to the policy must be - 24 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Calendar Years 2023 and 2024Fiscal Year 2025
approved by Finance Committee and City Council.
- 25 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Calendar Years 2023 and 2024Fiscal Year 2025
B. Annual Statement of Investment Policy
The Treasurer or designee shall render a written Statement of Investment Policy that shall be reviewed at least annually by Finance Committee and City Council to ensure its consistency with the overall objectives of preservation of principal, liquidity and return, and its relevance to current law and financial and economic trends. City Council shall consider the annual Statement of Investment Policy and any changes therein at a public meeting. The Statement of Investment Policy shall be adopted by resolution of City Council.
- 26 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Calendar Years 2023 and 2024Fiscal Year 2025
- 27 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Calendar Years 2023 and 2024Fiscal Year 2025
X. GLOSSARY OF TERMS
AGENCY: A debt security issued by a federal or federally sponsored agency. Federal agencies are backed by the full faith and credit of the U.S. Government (i.e. Government National Mortgage Association). Federally sponsored agencies (FSA's) are backed by each particular agency with a market perception that there is an implicit government guarantee (i.e. Federal National Mortgage Association).
ASK: The price at which securities are offered for sale; also known as offering price.
BENCHMARK: A comparative base for measuring the performance or risk tolerance of the investment portfolio. A benchmark should represent a close correlation to the level of risk and the average duration of the portfolio’s investments.
BID: The price offered by a buyer of securities. (When you are selling securities, you ask for a bid.) BOND PROCEEDS: The money paid to the issuer by the purchaser or underwriter of a new issue of municipal securities. These moneys are used to finance the project or purpose for which the securities were issued and to pay certain costs of issuance as may be provided in the bond contract.
BOOK VALUE: The value at which a debt security is shown on the holder's balance sheet. Book value is often acquisition cost plus/minus amortization and accretion, which may differ significantly from the security’s current value in the market.
BROKER: Someone who brings buyers and sellers together and is compensated for his/her service.
CD PLACEMENT SERVICE: A service that allows local agencies to purchase more than $250,000 in CDs from a single financial institution while still maintaining FDIC insurance coverage. See “CDARS”.
CDARS (CERTIFICATE OF DEPOSIT ACCOUNT REGISTRY SYSTEM): A private CD placement service that allows local agencies to purchase more than $250,000 in CDs from a single financial institution (must be a participating institution of CDARS) while still maintaining FDIC insurance coverage.
CDARS is currently the only entity providing this service. CDARS facilitates the trading of deposits between the California institution and other participating institutions in amounts that are less than $250,000 each, so that FDIC coverage is maintained.
CERTIFICATE OF DEPOSIT (CD): A time deposit with a specific maturity evidenced by a certificate.
Large denomination CDs are typically negotiable.
COLLATERAL: Securities, evidence of deposit or other property which a borrower pledges to secure repayment of a loan. Also refers to securities pledged by a bank to secure deposits of public monies.
ANNUAL COMPREHENSIVE FINANCIAL REPORT (ACFR): The official annual financial report for a public agency. It includes combined statements for each individual fund and account group prepared in conformity with GAAP. It also includes supporting schedules necessary to demonstrate compliance with finance-related legal and contractual provisions, extensive introductory material, and detailed statistical section.
CREDIT QUALITY: The measurement of the financial strength of a bond issuer. This measurement helps an investor to understand an issuer's ability to make timely interest payments and repay the loan principal upon maturity. Generally, the higher the credit quality of a bond issuer, the lower the interest rate paid by the issuer because the risk of default is lower. Credit quality ratings are provided by a Nationally Recognized Statistical-RatingOrganization.
CREDIT RISK: The risk to an investor that an issuer will default in the payment of interest and/or principal on a security.
CUSTODIAN: A bank or other financial institution that keeps custody of stock certificates and other assets.
- 28 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Calendar Years 2023 and 2024Fiscal Year 2025
CURRENT YIELD (CURRENT RETURN): A yield calculation determined by dividing the annual interest received on a security by the current market price of that security.
DEALER: A dealer, as opposed to a broker, acts as a principal in all transactions, by buying and selling for his/her own account.
DELIVERY VERSUS PAYMENT: There are 2 methods of delivery of securities: delivery versus payment and delivery versus receipt. Delivery versus payment, also referred to as “cash on delivery”, is delivery of securities with an exchange of money for the securities. Delivery versus receipt is delivery of securities with an exchange of a signed receipt for the securities.
DERIVATIVES: (1) financial instruments whose return profile is linked to, or derived from, the movement of one or more underlying index or security, and may include a leveraging factor, or (2) financial contracts based upon notional amounts whose value is derived from an underlying index or security (interest rates, foreign exchange rates, equities or commodities).
DIVERSIFICATION: Dividing investment funds among a variety of security types by sector, maturity and quality ratings offering independentreturns.
DURATION: A measure of the timing of the cash flows, such as the interest payments and the principal repayment, to be received from a given fixed-income security. This calculation is based on three variables: term to maturity, coupon rate, and yield to maturity. The duration of a security is a useful indicator of its price volatility for given changes in interest rates.
FAIR VALUE: The amount at which an investment could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.
FEDERAL CREDIT AGENCIES: Agencies of the Federal Government set up to supply credit to various classes of institutions and individuals, e.g., savings and loan associations, small-business firms, students, farmers, farm co-operatives, andexporters.
FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC): The federal agency that insures bank deposits up to $250,000 per deposit at participating banking institutions. In an effort to increase consumer confidence in the banking system, the previous $100,000 insurance limit was temporarily increased to $250,000 in 2008, extended to 2013, and then permanently increased on July 21, 2010 with the passage of the Wall Street Reform and Consumer ProtectionAct.
FEDERAL HOME LOAN BANKS (FHLB): Government sponsored wholesale banks (currently 12 regional banks) that lend funds and provide correspondent banks services to member commercial banks, thrift institutions, credit unions and insurancecompanies.
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA): FNMA is a federal corporation working under the auspices of the Department of Housing and Urban Development (HUD). It is the largest single provider of residential mortgage funds in the United States. Fannie Mae, as the corporation is called, is a private stockholder-owned corporation. The corporation’s purchases include a variety of adjustable mortgages and second loans, in addition to fixed-rate mortgages.
FEDERAL OPEN MARKET COMMITTEE (FOMC): Consists of 7 members of the Federal Reserve Board and 5 of the 12 Federal Reserve Bank Presidents. The President of the New York Federal Reserve Bank is a permanent member, while the other Presidents serve on a rotating basis. The Committee periodically meets to set Federal Reserve guidelines regarding purchases and sales of Government Securities in the open market as a means of influencing the volume of bank credit and money.
FEDERAL RESERVE SYSTEM: The central bank of the United States created by Congress and consisting of a 7 member Board of Governors in Washington, D.C., 12 Regional Banks and approximately 3,000 commercial banks that are members of thesystem.
FINANCIAL INDUSTRY REGULATORY AUTHORITY (FINRA): A private corporation that acts as a selfregulatory organization (SRO) of all stock market operations in the United States, including brokerage - 29 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Calendar Years 2023 and 2024Fiscal Year 2025
firms and exchange markets. Its regulatory mandate includes authority over firms that distribute mutual fund shares as well as other securities.
GOVERNMENT ACCOUNTING STANDARDS BOARD (GASB): A standard-setting body, associated with the Financial Accounting Foundation, which prescribes standard accounting practices for governmental units.
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA or Ginnie Mae): Securities influencing the volume of bank credit guaranteed by GNMA and issued by mortgage bankers, commercial banks, savings and loan associations, and other institutions. Security holder is protected by full faith and credit of the U.S. Government. Ginnie Mae securities are backed by the FHA, VA, or FMHA mortgages.
The term “pass-throughs” is often used to describe GinnieMaes.
GOVERNMENT SECURITIES: An obligation of the U.S. government, backed by the full faith and credit of the government. These securities are regarded as the highest quality of investment securities available in the U.S. securities market. See "Treasury Bills, Notes, and Bonds." INTEREST RATE RISK: The risk associated with declines or rises in interest rates which cause an investment in a fixed-income security to increase or decrease in value.
INTERNAL CONTROLS: An internal control structure designed to ensure that the assets of the entity are protected from loss, theft, or misuse. The internal control structure is designed to provide reasonable assurance that these objectives are met. The concept of reasonable assurance recognizes that 1) the cost of a control should not exceed the benefits likely to be derived and 2) the valuation of costs and benefits requires estimates and judgments by management. Internal controls should address the following points:
▪ Control of collusion - Collusion is a situation where 2 or more employees are working in conjunction to defraud their employer.
▪ Separation of transaction authority from accounting and record keeping - By separating the person who authorizes or performs the transaction from the people who record or otherwise account for the transaction, a separationof duties is achieved. ▪ Custodial safekeeping - Securities purchased from any bank or dealer including appropriate collateral (as defined by state law) shall be placed with an independent third party for custodial safekeeping.
▪ Avoidance of physical delivery securities - Book-entry securities are much easier to transfer and account for since actual delivery of a document never takes place. Delivered securities must be properly safeguarded against loss or destruction. The potential for fraud and loss increases with physically delivered securities.
▪ Clear delegation of authority to subordinate staff members - Subordinate staff members must have a clear understanding of their authority and responsibilities to avoid improper actions.
Clear delegation of authority also preserves the internal control structure that is contingent on the various staff positions and their respective responsibilities. ▪ Written confirmation of transactions for investments and wire transfers - Due to the potential for error and improprieties arising from telephone and electronic transactions, all transactions should be supported by written communications and approved by the appropriate person. Written communications may be via fax if on letterhead and if the safekeeping institution has a list of authorized signatures.
▪ Development of a wire transfer agreement with the lead bank and third-party custodian - The designated official should ensure that an agreement will be entered into and will address the following points: controls, security provisions, and responsibilities of each party making and receiving wire transfers.
- 30 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Calendar Years 2023 and 2024Fiscal Year 2025
LIQUIDITY: A liquid asset is one that can be converted easily and rapidly into cash without a substantial loss of value. In the money market, a security is said to be liquid if the spread between bid and asked prices is narrow and reasonable size can be done at those quotes.
LOCAL AGENCY INVESTMENT FUND (LAIF): Chapter 730, Statutes of 1976 of the State of California, established the Local Agency Investment Fund. This fund enables local governmental agencies to remit money not required for immediate needs to the State Treasurer for the purpose of investment. In order to derive the maximum rate of return possible, the State Treasurer has elected to invest these monies with State monies as a part of the Pooled Money Investment Account. Each local governmental unit has the exclusive determination of the length of time its money will be on deposit with the State Treasurer. At the end of each calendar quarter, all earnings derived from investments are distributed by the State Controller to the participating government agencies in proportion to each agency's respective amounts deposited in the Fund and the length of time such amounts remained therein. Prior to the distribution, the State's costs of administering the program are deducted from the earnings.
MARK-TO-MARKET: The process whereby the book value or collateral value of a security is adjusted to reflect its current market value.
MARKET RISK: The risk that the value of a security will increase or decrease as a result of changes in market conditions.
MARKET VALUE: The current price at which a security is trading and could presumably be purchased or sold at that particular point in time.
MASTER REPURCHASE AGREEMENT: A written contract covering all future transactions between the parties to repurchase-reverse repurchase agreements that establish each party’s rights in the transactions. A master agreement will often specify, among other things, the right of the buyer-lender to liquidate the underlying securities in the event of default by the seller-borrower.
MATURITY: The date upon which the principal or stated value of a financial obligation is due and payable.
MONEY MARKET MUTUAL FUND: Mutual funds that invest solely in money market instruments (shortterm debt instruments, such as Treasury bills, commercial paper, bankers' acceptances, repos and federal funds).
MUTUAL FUND: An investment company that pools money and can invest in a variety of securities, including fixed-income securities and money market instruments. Mutual funds are regulated by the Investment Company Act of 1940 and must abide by Securities and Exchange Commission (SEC) disclosure guidelines.
NATIONALLY RECOGNIZED STATISTICAL-RATING ORGANIZATION (NRSRO): Standard and Poor’s, Moody’s, and Fitch Financial Services are examples of such organizations.
OFFER: An indicated price at which market participants are willing to sell a security or commodity. Also referred to as the "Ask” or “Ask Price”.
PLACEMENT SERVICE CERTIFICATES OF DEPOSIT: Certificates of deposit placed with a private sector entity that assists in the placement of certificates of deposit with eligible financial institutions located in the United States.
PLACEMENT SERVICE DEPOSIT: Deposits at depository institutions placed by a private sector placement service entity.
PAR VALUE: The amount of principal that must be paid at maturity. Also referred to as the face amount of a bond, normally quoted in $1,000 increments perbond. - 31 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Calendar Years 2023 and 2024Fiscal Year 2025
PORTFOLIO: Combined holding of more than one stock, bond, commodity, real estate investment, cash equivalent, or other asset. The purpose of a portfolio is to reduce risk by diversification.
PRINCIPAL: The face value or par value of a debt instrument, or the amount of capital invested in a given security.
PRIMARY DEALER: A group of government securities dealers who submit daily reports of market activity and monthly financial statements to the Federal Reserve Bank of New York and are subject to its informal oversight. Primary dealers include Securities and Exchange Commission (SEC) registered securities broker/dealers, banks and a few unregulated firms.
PRINCIPAL: (1) The face amount or par value of a debt instrument. (2) One who acts as a dealer buying and selling for his own account.
PUBLIC BANK: A corporation, organized as either a nonprofit mutual benefit corporation or a nonprofit public benefit corporation for the purpose of engaging in the commercial banking business or industrial banking business that is wholly owned by a local agency, as specified, local agencies, or a joint powers authority.
RATE OF RETURN: The yield obtainable on a security based on its purchase price or its current market price. This may be the amortized yield to maturity on a bond or the current income return.
REINVESTMENT RISK: The risk that a fixed-income investor will be unable to reinvest income proceeds from a security holding at the same rate of return currently generated by that holding.
REPURCHASE AGREEMENT (RP OR REPO): A holder of securities sells these securities to an investor with an agreement to repurchase them at a fixed price on a fixed date. The security "buyer" in effect lends the "seller" money for the period of the agreement, and the terms of the agreement are structured to compensate the buyer for this. Dealers use RP extensively to finance their positions. Exception: When the Fed is said to be doing RP, it is lending money that is increasing bank reserves.
REVERSE REPURCHASE AGREEMENT: An agreement of one party (for example, a financial institution) to purchase securities at a specified price from a second party (such as a public agency) and a simultaneous agreement by the first party to resell the securities at a specified price to the second party on demand or at a specific date.
RISK: Degree of uncertainty of return on an asset.
RULE 2A-7 OF THE INVESTMENT COMPANY ACT: Applies to all money market mutual funds and mandates such funds to maintain certain standards, including a 13-month maturity limit and a 90-day average maturity on investments, to help maintain a constant net asset value of $1.00.
SAFEKEEPING SERVICE: A service to customers rendered by banks for a fee whereby securities and valuables of all types and descriptions are held in the bank's vault for protection and security.
SECONDARY MARKET: A market is made for the purchase and sale of outstanding issues following the initial distribution.
SECURITIES LENDING: 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.
STRUCTURED NOTES: Notes issued by Government Sponsored Enterprises, (FHLB, FNMA, FHLMC, etc.), and Corporations that have imbedded options, (e.g., call features, step-up coupons, floating rate coupons, derivative-based returns), into their debt structure. Their market performance is impacted by the fluctuation of interest rates, the volatility of the imbedded options and shifts in the shape of the yield curve.
- 32 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Calendar Years 2023 and 2024Fiscal Year 2025
SUPRANATIONAL INSTITUTIONS: International institutions formed by two or more governments that transcend boundaries to pursue mutually beneficial economic or social goals. There are three supranational institutions that issue obligations that are eligible investments for California local agencies:
the International Bank for Reconstruction and Development (IBRD), International Finance Corporation (IFC), and Inter-American Development Bank (IADB).
SWAP: Trading one asset for another.
TOTAL RETURN: The sum of all investment income plus changes in the capital value of the portfolio.
TREASURY BILLS: Short-term U.S. government non-interest bearing discounted debt securities with maturities of no longer than 1 year and issued in minimum denominations of $10,000. Auctions of 3- and 6-month bills are weekly, while auctions of 1-year bills are monthly. The yields on these bills are monitored closely in the money markets for signs of interest rate trends.
TREASURY BOND: A long-term coupon-bearing U.S. Treasury security issued as a direct obligation of the U.S. Government and having an initial maturity of more than 10 years and issued in minimum denominations of $1,000.
TREASURY NOTE: A medium-term coupon-bearing U.S. Treasury security issued as a direct obligation of the U.S. Government and having an initial maturity of from 1 to 10 years and issued in denominations ranging from $1,000 to $1 million or more.
UNIFORM NET CAPITAL RULE: Securities and Exchange Commission (SEC) Rule 15C3-1 outlining requirements that member firms as well as nonmember broker-dealers in securities maintain a maximum ratio of indebtedness to liquid capital of 15 to 1; also called net capital rule and net capital ratio.
Indebtedness covers all money owed to a firm, including margin and commitments to purchase securities, one reason new public issues are spread among members of underwriting syndicates. Liquid capital includes cash and assets easily converted into cash.
VOLATILITY: A degree of fluctuation in the price and valuation of securities.
YIELD: The current rate of return on an investment security generally expressed as a percentage of the security’s current price. (a) INCOME YIELD is obtained by dividing the current dollar income by the current market price for the security. (b) NET YIELD or YIELD TO MATURITY is the current income yield minus any premium above par or plus any discount from par in purchase price, with the adjustment spread over the period from the date of purchase to the date of maturity of the bond.
City of Santa Barbara
Finance Department
Statement of InvestmentPolicy
Fiscal Year 2025
Effective July 1, 2024
ATTACHMENT 2
- 1 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
TABLE OF CONTENTS
I. MISSION STATEMENT .................................................................................................................................. 2 A. POOLING OF FUNDS................................................................................................................................................2 B. FUNDS INCLUDED BY THIS POLICY ..............................................................................................................................2 C. FUNDS EXCLUDED FROM THIS POLICY.........................................................................................................................2 II. GENERAL OBJECTIVES .................................................................................................................................... 2 A. SAFETY.................................................................................................................................................................2 B. LIQUIDITY .............................................................................................................................................................3 C. YIELD (RETURN ON INVESTMENT)..............................................................................................................................3 III. STANDARDS OF CARE................................................................................................................................. 3 A. PRUDENCE............................................................................................................................................................3 B. ETHICS AND CONFLICTS OF INTEREST..........................................................................................................................3 C. DELEGATION OF AUTHORITY ....................................................................................................................................4 D. INTERNAL CONTROLS ..............................................................................................................................................5 IV. AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS.............................................................................. 5 V. SAFEKEEPING AND CUSTODY ......................................................................................................................... 6 VI. SUITABLE AND AUTHORIZED INVESTMENTS .............................................................................................. 7 A. INVESTMENT TYPES ................................................................................................................................................7 B. INVESTMENT POOLS AND MUTUAL FUNDS................................................................................................................11 C. COLLATERALIZATION.............................................................................................................................................12 D. SOCIAL RESPONSIBILITY .........................................................................................................................................12 E. INVESTMENTS NOT APPROVED ...............................................................................................................................13 F. EXCEPTIONS TO PROHIBITED AND RESTRICTED INVESTMENTS........................................................................................13 VII. INVESTING PARAMETERS......................................................................................................................... 13 A. DIVERSIFICATION .................................................................................................................................................13 B. MAXIMUM MATURITIES........................................................................................................................................14 C. RISK MANAGEMENT .............................................................................................................................................14 VIII. REPORTING.............................................................................................................................................. 15 A. MONTHLY REPORTING TO CITY COUNCIL ..................................................................................................................15 B. QUARTERLY REPORTING TO CITY COUNCIL ................................................................................................................16 C. PERFORMANCE STANDARDS ...................................................................................................................................16 IX. INVESTMENT POLICY COMPLIANCE AND ADOPTION ............................................................................... 17 A. POLICY COMPLIANCE AND CHANGES ........................................................................................................................17 B. ANNUAL STATEMENT OF INVESTMENT POLICY ...........................................................................................................17 X. GLOSSARY OF TERMS................................................................................................................................... 18 - 2 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
I. MISSION STATEMENT
It is the policy of the City to invest public funds in a manner that will provide maximumsecurity, adequate liquidity and sufficient yield, while meeting the daily cash flow demands of the City and conforming to all statutes and regulations governing the investment of public funds.
SCOPE
This investment policy applies to all the financial assets of City of Santa Barbara. These funds are accounted for in the City’s audited Annual Comprehensive Financial Report. If the City invests funds on behalf of another agency and, if that agency does not have its own policy, the City's investment policy shall govern the agency's investments.
A. Pooling of Funds
Except for cash in certain restricted and special funds, the City shall consolidate cash balances from all funds to maximize investment earnings. Investment income shall be allocated to various funds as identified in the investment procedures manual in accordance with generally accepted accounting principles.
B. Funds Included by this Policy
General Fund
Special Revenue Funds
Capital Project Funds
Enterprise Funds
Internal Service Funds
Trust and Agency Funds
Any new fund created by City Council unless specifically exempted C. Funds Excluded from this Policy
Bond Proceeds. Investment of bond proceeds shall be subject to the conditions and restrictions of bond documents and are not governed by this policy. Bond investment conditions and restrictions shall be reviewed by the Finance Committee and forwarded to City Council for approval. Other funds excluded include post-retirement medical funds and pension rate mitigation funds.
II. GENERAL OBJECTIVES
The primary objectives, in priority order, of the City’s investment activities are safety, liquidity and yield.
A. Safety
Preservation 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. The objective shall be to mitigate credit - 3 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
risk and interest rate risk. To attain this objective, the City shall diversify its investments by investing funds among several financial institutions and a variety of securities offering independent returns.
B. Liquidity
The City’s investment portfolio shall remain sufficiently liquid to enable the City to meet all operating requirements which might be reasonably anticipated without requiring a sale of securities. Since all possible cash demands cannot be anticipated, the portfolio should consist largely of securities with active secondary or resale markets. A portion of the portfolio also may be placed in money market mutual funds or LAIF, which offers same-day liquidity for short-term funds.
C. Yield (Return on Investment)
The City’s investment portfolio shall be designed with the objective of attaining a benchmark rate of return throughout budgetary and economic cycles, commensurate with the City’s investment risk constraints and the liquidity characteristics of the portfolio. Return on investment is of secondary importance compared to the safety and liquidity objectives described above. The core of investments is limited to relatively low risk securities in anticipation of earning a fair return relative to the risk being assumed.
III. STANDARDS OF CARE
A. Prudence
The standard of prudence to be used by City investment officials shall be the “Prudent Investor Standard” in that 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 City, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of an enterprise of a like character and with like aims. This standard shall be applied in the context of managing the overall portfolio. City 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 deviations from expectations are reported in a timely fashion and appropriate action is taken to control adverse developments.
B. Ethics and Conflicts of Interest
Officers and employees involved in the City investment process shall refrain from personal business activity that could conflict with proper execution of the investment program, or that could impair their ability to make impartial investment decisions. City employees and investment officials shall disclose any material financial interests in financial institutions that conduct business within their jurisdiction, and they shall further disclose any personal financial/investment positions that could be related to the performance of the City immediately to the City of Santa Barbara Treasurer or designee and annually to the Fair Political Practices Commission. City employees and officers shall refrain from undertaking personal investment transactions with the same individual with whom business is conducted on behalf of the City. - 4 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
C. Delegation of Authority
Authority to manage the City’s investment program is derived from the Charter of the City of Santa Barbara. City Council shall delegate to the Treasurer, for a 1-year period, the authority to invest or to reinvest funds, or to sell or exchange securities. The Treasurer and/or designees shall thereafter assume full responsibility for those transactions until the delegation of authority is revoked or expires.
Management responsibility for the investment program is delegated to the Finance Director who shall establish a separate written investment procedures manual. The operation of the investment program shall be consistent with this policy and the investment procedures manual. Such procedures shall include explicit delegation of authority to persons responsible for investment transactions. No person may engage in an investment transaction except as provided under the terms of this policy and the procedures established by the Finance Director. The Assistant Finance Director is authorized to conduct investment-related activities, under the supervision of the Finance Director, on behalf of the City. The City may engage the services of one or more external investment advisers, who are registered under the Investment Advisers Act of 1940, to assist in the management of the City’s investment portfolio in a manner consistent with the City’s objectives. External investment advisers may be granted discretion to purchase and sell investment securities in accordance with this investment policy.
Apart from investment purchases and sales conducted by the City’s investment adviser, investment purchases and sales require signature approval from the Treasurer and Finance Director or their designee, by the close of business on the next business day following the purchase or sale.
The following documents are by reference incorporated in the investment procedures manual:
1. Listing of authorized personnel
2. Relevant investment statutes and ordinances
3. Repurchase agreements and tri-party agreements
4. Listing of authorized broker/dealers and financial institutions
5. Credit ratings and/or reports for securities purchased and financial institutions used
6. Safekeeping agreements
7. Sample investment reports
8. Investment accounting documents
9. Methodology for calculating rate of return
10. Banking services contracts
11. Cash flow forecasting
12. Collateral/depository agreements
- 5 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
D. Internal Controls
The Finance Director is responsible for establishing and maintaining a system of written internal controls. These controls shall be reviewed annually with an independent external auditor who will notify the City Council if there is a material noncompliance with its policies and procedures. The internal controls shall be designed to prevent losses of public funds arising from fraud, employee error, and misrepresentation by third parties, unanticipated changes in financial markets, or imprudent action by City employees and officers. The internal structure shall be designed to provide reasonable assurance that these objectives are met. The concept of reasonable assurance recognizes that (1) the cost of a control should not exceed the benefits likely to be derived, and (2) the valuation of costs and benefits requires estimates and judgments by management.
The internal controls shall address the following points:
1. Control of collusion
2. Separation of transaction authority from accounting and record-keeping
3. Custodial safekeeping
4. Delivery versus payment (DVP)
5. Clear delegation of authority to subordinate staff members
6. Written confirmation of transactions for investments and wire transfers
7. Wire transfer agreements
IV. AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS
The Finance Director shall establish selection criteria for pre-approval of financial institutions and security broker/dealers to do business with the City of Santa Barbara. The Finance Director shall maintain a list of City approved financial institutions and security broker/dealers who are authorized to provide investment services to the City. These may include primary dealers, or regional dealers that qualify under Securities & Exchange Commission Rule 15C3-1 (uniform net capital rule). In accordance with Section 53601.5, institutions eligible to transact investment business with the City include:
▪ Institutions licensed by the state as a broker-dealer. ▪ Institutions that are members of a federally regulated securities exchange. ▪ Primary government dealers as designated by the Federal Reserve Bank and nonprimary government dealers. ▪ Nationally or state-chartered banks.
▪ The Federal Reserve Bank.
▪ Direct issuers of securities eligible for purchase.
To qualify for consideration, a financial institution or a security broker/dealer must also have an office in California and that office must perform the transactions with the City. - 6 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
All financial institutions and broker/dealers who desire to become qualified for investment transactions must supply the following to the Finance Director as appropriate:
▪ Current audited financial statements
▪ Proof of Financial Industry Regulatory Authority (FINRA), formerly National Association of Security Dealers (NASD), certification
▪ Trading resolution
▪ Complete broker/dealer questionnaire
▪ Proof of State of California registration
▪ For banking institutions, a statement of compliance with the Federal Reserve Bank of New York’s capital guideline
▪ Statement of having read, understood and agreeing to comply with the City’s investment policy and depository contracts
The Finance Director shall annually review each of the approved financial institutions and security broker/dealers selected for current State of California registrations and financial condition.
Public deposits will be made only in qualified public depositories as established by State law.
Deposits will be insured by the Federal Deposit Insurance Corporation, or, to the extent the amount exceeds the insured maximum, will be collateralized in accordance with State law.
Selection of broker/dealers used by an external investment adviser retained by the City will be at the sole discretion of the adviser. Where possible, transactions with broker/dealers shall be selected on a competitive basis and their bid or offering prices shall be recorded. If there is no other readily available competitive offering, best efforts will be made to document quotations for comparable or alternative securities. When purchasing original issue instrumentality securities, no competitive offerings will be required as all dealers in the selling group offer those securities at the same original issue price.
V. SAFEKEEPING AND CUSTODY
All security transactions, including collateral for repurchase agreements, entered into by the City shall be conducted on a delivery-versus-payment (DVP) basis which will ensure that securities are deposited in an eligible financial institution prior to the release of funds. Securities shall be held by a third-party custodian designated by the Finance Director and evidenced by safekeeping receipts with a written custodial agreement. The only exception to the foregoing shall be depository accounts and securities purchases made with: LAIF, time certificates of deposit, and money market mutual funds, since the purchased securities are not deliverable.
Settlement instructions sent to the safekeeping agent shall require dual authorization unless the trade is executed by the City’s investment adviser. The Treasurer and the Finance Director, and if applicable, their designee, shall be bonded to protect the public against possible embezzlement and malfeasance. Safekeeping procedures shall be reviewed annually by an independent external auditor and any irregularities noted should be reported promptly to the Treasurer or designee and City Council.
- 7 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
VI. SUITABLE AND AUTHORIZED INVESTMENTS
The City shall be governed by the California Government Code, Sections 53600 et seq. Within the investments permitted by the Code, the City seeks to further restrict eligible investments to the guidelines listed below. In the event a discrepancy is found between this policy and the Code, the more restrictive parameters will take precedence. The City shall be required to present any changes to Code in the annual review of the. Surplus funds are defined as funds not required for the immediate necessities of the City and include investments in individually managed portfolio(s), money market fund(s) and/or State LAIF, and all portfolio limitations and restrictions shall apply to this aggregate amount. For purposes of compliance with the California Government Code and the City’s Investment Policy, the credit rating requirement for mediumterm notes, deposit notes, bank notes and commercial paper shall be based on the quality ratings at the time of purchase. Percentage limitations of surplus funds invested are noted for the various investment instruments. Where there is a specified percentage limitation for a particular category of investments, that percentage is applicable only at the date of purchase.
A later increase or decrease in a percentage resulting from a change in values or assets shall not constitute a violation of that restriction.
The City is empowered by statute to invest in the following types of securities and those that the investment managers are trained and competent to handle.
A. Investment Types
1. Bonds, notes, or other forms of indebtedness issued by the City, including bonds payable solely out of the revenues from a revenue producing property owned, controlled, or operated by the City or by a department, board, agency, or authority of the local agency.
2. United States Treasury notes, bonds, bills, or certificates of indebtedness, or any other government obligation for which the full faith and credit of the United States are pledged for the payment of principal and interest. There are no limits on the dollar amount or percentage that the City may invest in U.S. Treasuries, provided that the maximum maturity is five (5) years.
3. Federal Agency or United States government-sponsored enterprise obligations (GSE), participations, or other instruments, including those issued by or fully guaranteed as to principal and interest by federal agencies or United States government-sponsored enterprises. There are no limits on the dollar amount or percentage that the City may invest in Federal Agency or Government-Sponsored Enterprises (GSEs), provided that:
▪ No more than 30% of surplus funds may be invested in any single Agency/GSE issuer.
▪ The maximum maturity does not exceed five (5) years.
▪ The maximum percent of Agency callable securities in the portfolio will be 20%.
4. State of California and Local Agency Obligations. Registered state warrants or treasury notes or bonds of this state, including bonds payable solely out of the revenues from revenue-producing property owned, controlled, or operated by the state or by a department, board, agency, or authority of the state; and bonds, notes, warrants, or other evidence of indebtedness of any local agency within this - 8 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
state including bonds payable solely out of the revenues from revenue-producing property owned, controlled, or operated by the local agency, or by a department, board, agency, or authority of the local agency. Notes eligible for investment, other than those issued by the City or operated by a department, board, agency, or authority of the local agency, shall be rated in a rating category of "A" or its equivalent or better by at least one Nationally Recognized Statistical-Rating Organization (NRSRO). Moreover:
▪ No more than 5% of surplus funds may be invested in any single issuer. ▪ No more than 30% of surplus funds may be in municipal securities issued by the City, the state of California, its political subdivisions, or the registered treasury notes or bonds of the other 49 states in addition to California combined.
▪ The maximum maturity does not exceed five (5) years.
5. 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. ▪ The securities must be rated in a rating category of “A” or its equivalent or better by at least one NRSRO.
▪ No more than 5% of surplus funds may be invested in any single issuer. ▪ No more than 30% of surplus funds may be in municipal securities issued by the City, the state of California, its political subdivisions, or the registered treasury notes or bonds of the other 49 states in addition to California combined.
▪ The maximum maturity does not exceed five (5) years.
6. Medium-Term Notes, defined as all corporate and depository institution debt securities with a maximum remaining maturity of 5 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. Purchases of medium-term notes may not exceed 30 percent of the City's surplus funds. Notes eligible for investment shall be rated in a rating category of "A" or its equivalent or better by at least one NRSRO. Investments in medium-term notes shall be limited to no more than 5 percent of surplus funds per issuer.
7. Bankers Acceptances, otherwise known as bills of exchange or time drafts, drawn on and accepted by a commercial bank, which are eligible for purchase by the Federal Reserve System. Purchased bankers acceptances may not exceed 180 days maturity or 40 percent of the City's surplus funds, and no more than 5 percent of the City's surplus funds may be invested in the bankers’ acceptances of any single commercial bank. Issuers must be institutions which have short-term debt obligations rated “A-1” or its equivalent or better by at least one NRSRO, or long-term debt obligations which are rated in a rating category of “A” or its equivalent, or better by at least one NRSRO.
- 9 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
8. Commercial Paper of “prime” quality of the highest ranking or the highest letter and number rating as provided for by a Nationally Recognized Statistical-Rating Organization. The entity that issues the commercial paper shall meet all of the following conditions in either paragraph (a) or paragraph (b):
a. The entity is organized and operating in the United States as a general corporation and has total assets in excess of $500,000,000. In addition, its debt other than commercial paper, if any, must be rated in a rating category of “A” or higher by a Nationally Recognized Statistical-Rating Organization. b. The entity is organized within the United States as a special purpose corporation, trust, or limited liability company and has a program wide credit enhancement including, but not limited to, over collateralization, letters of credit, or surety bond. In addition, the entity has commercial paper that is rated “A-1” or higher, or the equivalent, by a Nationally Recognized Statistical-Rating Organization.
Eligible commercial paper shall have a maximum maturity of 270 days or less.
Under a provision sunsetting on January 1, 2026,the City may not invest more than 40 percent of its surplus funds in commercial paper, and the City may invest no more than 5% in any single issuer, and no more than 10% of its total investment assets in the commercial paper and the medium-term notes of any single issuer.
9. Negotiable Certificates of Deposit issued by a nationally or state-chartered bank or savings association or federal association or 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 City's surplus money invested and shall be limited to no more than 5 percent of any single issuer. Deposit notes and banknotes purchased through a broker or dealer shall be included with negotiable certificates of deposit in calculating allowable maximum percentages. Purchases of negotiable certificates of deposit, deposit notes and bank notes of up to $250,000 are allowable in any institution that insures its deposits with the Federal Deposit Insurance Corporation, while purchases greater than $250,000 shall be rated in a category of "A" or its equivalent or better by at least one NRSRO. Maturities for negotiable certificates of deposit shall not exceed five years.
10. Time Deposits. The City may invest in non-negotiable Certificates of Deposit at commercial banks and savings and loan associations that are collateralized in accordance with the California Government Code. To be eligible to receive City funds, the depository institution shall have received an overall rating of not less than “satisfactory” in its most recent evaluation of its record of meeting the credit needs of California’s communities, including low and moderate-income neighborhoods. In selecting depositories, the credit worthiness of institutions shall be considered. Banks and Savings and Loan Associations seeking to establish an investment relationship with the City shall submit an audited financial report that shall be reviewed for compliance with the City's investment standards. Any institution not providing an audited annual financial report shall be removed from the approved list and all funds maturing will be withdrawn. A list of eligible institutions shall be maintained in the investment procedures manual. - 10 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
11. Collateralized Bank Deposits. Savings accounts when used in conjunction with the City's checking accounts at a qualified bank where funds are collateralized in accordance with the California Government Code 53651. There are no limits on the dollar amount or percentage that the City may invest in collateralized bank deposits.
12. U.S. Government money market funds registered with the Securities and Exchange Commission and which comply with rule 2a7 of the Investment Company Act of 1940. The fund must be comprised of only U.S. Treasury bills, notes and bonds, repurchase agreements, and obligations issued or guaranteed as to principal and interest by the U.S. Government or its agencies or instrumentalities. The percentage of repurchase agreements in the fund shall be reviewed and approved based on the fund's policy limits. The dollar weighted average maturity of the portfolio shall be less than 90 days and the portfolio is managed to maintain a $1.00 share price. Also, the fund shall meet either of the following criteria: (a) attained the highest ranking or the highest letter and numerical rating provided by not less than two Nationally Recognized StatisticalRating Organizations; (b) retained an investment adviser registered or exempt from registration with the Securities and Exchange Commission with not less than 5 years' experience managing money market mutual funds with assets under management in excess of $500,000,000. Purchase of securities authorized by this section shall not exceed 20 percent of the City’s surplus money invested and no more than 10 percent may be invested in any single money market fund.
13. Repurchase Agreements. Investments in repurchase agreements, so long as the proceeds of the repurchase agreement are invested solely to supplement the income normally received from these securities. The City shall adopt as a standard the Bond Market Association Master Repurchase Agreement and shall maintain a list of approved counterparts and limit counter parties to primary dealers rated "A" or better by two Nationally Recognized Statistical-Rating Organizations. Reverse repurchase agreements shall require City Council authorization separate from City Council approval of this policy. a. Investments in repurchase agreements may be made on any authorized investment, when the term of the agreement does not exceed 1 year.
14. Local Agency Investment Fund (LAIF). The City may invest in LAIF up to the amount permitted by LAIF; At least quarterly, the Finance Director shall report to the Finance Committee on the composition of the LAIF portfolio. The California Government Code states that moneys placed for deposit in LAIF are in trust in the custody of the State Treasurer and cannot be borrowed or be withheld from the City. Further, the right of the City to withdraw its deposited money from the LAIF upon demand may not be altered, impaired, or denied in any way by any state official or agency based upon the State’s failure to adopt a budget by July 1 of each new fiscal year.
15. 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 and sale within the United States. Investments under this subdivision shall be rated in a rating category of “AA” or its equivalent or better by - 11 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
at least one NRSRO and shall not exceed 30 percent of the City’s moneys that may be invested pursuant to this section. No more than 10% of surplus funds may be invested in any single issuer.
16. 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).
17. Placement service deposits and placement service certificates of deposit 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, as defined in Section 53601.8. No more than 30 percent of the City's surplus funds may be invested in time deposits, including certificates of deposit, through a placement service as authorized under Section 53601.8.
18. Local Government Investment Pools. Shares of beneficial interest issued by a joint-powers authority organized pursuant to Section 6509.7
19. Asset-backed, mortgage-backed, mortgage passthrough securities, and collateralized mortgage obligations from issuers not defined in paragraphs 2 and 3 of this section, provided that:
▪ The securities are rated in a rating category of “AA” or its equivalent or better by a NRSRO.
▪ No more than 20% of the total surplus funds may be invested in these securities.
▪ No more than 5% of the total surplus funds may be invested in any single Asset-Backed or Commercial Mortgage security issuer.
▪ The maximum legal final maturity does not exceed five (5) years.
B. Investment Pools and Mutual Funds
The City shall conduct a thorough investigation of any pool or mutual fund prior to making an investment, and on a continual basis thereafter. The Treasurer or designee shall develop a questionnaire which will answer the following general questions:
▪ A description of eligible investment securities, and a written statement of investment policy and objectives.
▪ A description of interest calculations and how it is distributed, and how gains and losses are treated.
▪ A description of how the securities are safeguarded (including the settlement processes), and how often the securities are priced and the program audited. ▪ A description of who may invest in the program, how often, and what size deposit and withdrawal are allowed.
▪ A schedule for receiving statements and portfolio listings. ▪ Are reserves, retained earnings, etc. utilized by the pool/fund? ▪ A fee schedule, and when and how is it assessed?
- 12 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
▪ Is the pool/fund eligible for bond proceeds and/or will it accept such proceeds?
C. Collateralization
Collateralization shall be required on two types of investments: certificates of deposit and repurchase (and reverse) agreements. A collateral agreement must be current and on file before any funds can be transferred for collateralized certificates of deposit.
Collateral shall be held by an independent third party with whom the City has a current written custodial agreement. A clearly marked evidence of ownership (safekeeping receipt) must be supplied to the City and retained. The right of collateral substitution is granted.
1. Certificates of Deposit
a. Government Securities used as collateral require 102 percent of market value to the face amount of the deposit
b. Promissory Notes secured by first trust deeds used as collateral require 150 percent of market value to the face amount of the deposit c. Irrevocable Letters of Credit issued by the Federal Home Loan Bank of San Francisco require 105 percent of market value to the face amount of the deposit
2. Repurchase Agreements
a. Only U.S. Treasury securities or Federal Agency securities are acceptable collateral. All securities underlying repurchase agreements must be delivered to the City’s custodian bank versus payment or be handled under a properly executed tri-party repurchase agreement. The total market value of all collateral for each repurchase agreement must equal or exceed 102 percent of the total dollar value of the money invested by the City for the term of the investment. For any repurchase agreement with a term of more than 1 day, the value of the underlying securities must be reviewed on an ongoing basis according to market conditions. Market value must be calculated each time there is a substitution of collateral.
b. The City or its trustee shall have a perfected first security interest under the Uniform Commercial Code in all securities subject to the repurchase agreement.
D. Social Responsibility
In addition to and subordinate to the objectives set forth in Section III herein, investment of funds should be guided by the following socially responsible investment goals when investing in corporate securities and depository institutions. Investments shall be made in compliance with the socially responsible goals to the extent that such investments achieve substantially equivalent safety, liquidity and yield compared to investments permitted by state law.
- 13 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
Investments are encouraged in entities that support community well-being through safe, environmentally-sound, practices and fair labor practices. Investments are encouraged in entities that support equality of rights regardless of race, sex, religion, age, national or ethnic origin, sexual orientation, or disability. Investments are encouraged in entities that promote community economic development. Investments are discouraged in entities that manufacture, distribute or for tobacco products, weapons and military systems not used for our national defense, nuclear power and fossil fuels. Investments are discouraged in entities that exhibit corrupt corporate ethics and governance.
E. Investments Not Approved
Any security type or structure not specifically approved by this policy is hereby prohibited. Security types, which are thereby prohibited include, but are not limited to:
shares of beneficial interest issued by diversified management companies (except U.S. Government money market funds), reverse repurchase agreements used as a leveraging vehicle, "exotic" derivatives structures such as range notes, dual index notes, inverse floating-rate notes, leveraged or de-leveraged floating-rate notes, interest-only strips that are derived from a pool of mortgages and any security that could result in zero interest accrual if held to maturity, or any other complex variable or structured note with an unusually high degree of volatility or risk. Local governments that are not Qualified Institutional Buyers (QIB) as defined by the Securities and Exchange Commission are prohibited from purchasing Private Placement Securities.
The SEC defines a QIB as having at least $100,000,000 in securities owned and invested.
F. Exceptions to Prohibited and Restricted Investments
1. The City shall not be required to sell securities prohibited or restricted in this policy, or any future policies, or prohibited or restricted by new State regulations, if purchased prior to their prohibition and/or restriction. Insofar as these securities provide no notable credit risk to the City, holding of these securities until maturity is approved. At maturity or liquidation, such monies shall be reinvested only as provided by this policy.
2. The City 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. The City may hold these instruments until their maturity dates. (This section shall remain in effect starting January 1, 2021, and only until January 1, 2026).
VII. INVESTING PARAMETERS
A. Diversification
The City shall diversify its investments by security type, issuer, maturity, and financial institutions. No percentage limitations are established for United States government, United States government agencies and United States government sponsored enterprises; however, percentage limitations are established for other permitted - 14 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
investments, as noted in Section VII of this policy. The investments shall be diversified by limiting investments to avoid overconcentration in securities from a specific issuer or business sector (excluding U.S. Treasury securities), limiting investment in securities that have higher credit risks, and investing in securities with varying maturities.
The City recognizes that investment risks can result from issuer defaults, market price changes or various technical complications leading to temporary illiquidity. Portfolio diversification is employed as a way to control risk. Investment managers are expected to display prudence in the selection of securities as a way to minimize default risk. No individual investment transaction shall be undertaken which jeopardizes the total capital position of the overall portfolio. To control market price risks, volatile investment instruments shall be avoided. To control risks of illiquidity, a minimum of 10 percent of the total portfolio shall be held in highly marketable U.S. Treasury Bills and Notes and/or the State of California Local Agency Investment Fund and/or Money Market Funds and/or securities maturing within 90 days.
B. Maximum Maturities
To the extent possible, the City will attempt to match its investments with anticipated cash flow requirements. Where there is no specified maturity limitation on an investment, no investment shall be made in any security which, at the time of the investment, has a term remaining to maturity in excess of 5 years (measured from the settlement date to final maturity, with a forward settlement date not to exceed 45 days from the time of investment), unless the City Council has granted express authority to make that investment no less than 3 months prior to the investment.
C. Risk Management
1.Mitigating Credit Risk in the Portfolio—Credit risk is the risk that a security or a portfolio will lose some or all its value due to a real or perceived change in the ability of the issuer to repay its debt. The City will mitigate credit risk by adopting the following strategies:
▪ The diversification requirements included in the “Authorized Investments” section of this policy are designed to mitigate credit risk in the portfolio. ▪ No more than 5% of the total portfolio may be deposited with or invested in securities issued by any single issuer unless otherwise specified in this policy. ▪ The City may elect to sell a security prior to its maturity and record a capital gain or loss in order to manage the quality, liquidity or yield of the portfolio in response to market conditions or City’s risk preferences. ▪ If a security owned by the City is downgraded to a level below the requirements of this policy, making the security ineligible for additional purchases, 1) it shall be reported to the City Council with a recommendation, and ongoing information shall be provided if the bond is not sold, and 2) any actions taken related to the downgrade by the investment adviser will be communicated to the Treasurer or designee in a timely manner.
2.Mitigating Market Risk in the Portfolio— Market risk is the risk that the portfolio value will fluctuate due to changes in the general level of interest rates. The City - 15 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
recognizes that, over time, longer-term portfolios have the potential to achieve higher returns. On the other hand, longer-term portfolios have higher volatility of return. The City will mitigate market risk by providing adequate liquidity for shortterm cash needs, and by making longer-term investments only with funds that are not needed for current cash flow purposes. The City further recognizes that certain types of securities, including variable rate securities, securities with principal paydowns prior to maturity, and securities with embedded options, will affect the market risk profile of the portfolio differently in different interest rate environments.
The City, therefore, adopts the following strategies to control and mitigate its exposure to market risk:
▪ The City will maintain a minimum of six months of budgeted operating expenditures in short-term investments to provide sufficient liquidity for expected disbursements.
▪ The maximum stated final maturity of individual securities in the portfolio will be five (5) years, except as otherwise stated in this policy. ▪ The duration of the portfolio will generally be approximately equal to the duration (typically, plus or minus 20%) of a Market Benchmark, an index selected by the City, based on the City’s investment objectives, constraints, and risk tolerances.
VIII. REPORTING
The Treasurer or designee shall submit investment reports to the City Council that provide a clear picture of the status of the current investment portfolio and shall contain sufficient information to permit an independent organization to evaluate the performance of the investment program.
Based on the discretion of Finance Committee, an independent advisor may be contracted, from time to time to perform one or more of the following functions: confirm that the portfolio is in compliance with the Government Code of the State of California and with the Statement of Investment Policy of the City of Santa Barbara; present an evaluation of the portfolio and investment strategy recommendations; and, provide any other information that may be helpful to Finance Committee in their review of the portfolio.
A. Monthly Reporting to City Council
The Treasurer or designee shall submit to City Council, within 30 days following the end of the month, an investment report that summarizes all securities in the portfolio and a separate listing of investment transactions occurring during the month. The report shall include:
1. Investment type
2. Purchase date
3. Maturity date
4. Credit quality
5. Coupon and yield
6. Book value
- 16 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
7. Market value
8. Book gain/loss
9. Market gain/loss
10. Source of valuation
11. Average days to maturity
12. Variable rate(s) or call features
B. Quarterly Reporting to City Council
In addition to the components required in the monthly investment report, within 45 days following the end of the quarter, a narrative shall accompany the portfolio report addressing noteworthy items, deviations from the investment policy, comments on the fixed income markets and economic conditions, possible changes in the portfolio going forward, and thoughts on investment strategies. The quarterly report shall also include a statement of compliance with the investment policy and a statement of the ability to meet expenditures for the next 6 months (or an explanation as to why sufficient money shall, or may, not be available).
C. Performance Standards
The investment portfolio shall be managed in accordance with the parameters specified within this policy and always with consistently safe and prudent treasury management. Securities shall not be sold prior to maturity with the following exceptions:
• A security with declining credit sold early to minimize loss of principal • A security swap that would improve the quality, yield, or target duration in the portfolio
• Unforeseen liquidity needs of the portfolio require that the security be sold • A security that, subsequent to purchase, fails to meet the City’s socially responsible goals
Market Yield (Benchmark): The Treasurer or designee shall monitor and evaluate the portfolio’s performance relative to the chosen market benchmark(s), which will be included in the Treasurer’s quarterly report. The Treasurer or designee shall select an appropriate, readily available index to use as a market benchmark..
Marking to Market: The market value of the portfolio shall be calculated at least monthly and a statement of the market value of the portfolio shall be issued at least quarterly. This will ensure that review of the investment portfolio, in terms of value and price volatility, has been performed. In defining market value, consideration shall been given to pronouncements from the Government Accounting Standards Board (GASB) that address the reporting of investment assets and investment income for all investment portfolios held by governmental entities. The fair value of all securities reported in the City’s portfolio is based on currently quoted market prices. - 17 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
IX. INVESTMENT POLICY COMPLIANCE AND ADOPTION
A. Policy Compliance and Changes
Any deviation from the policy shall be reported to Finance Committee at the next scheduled meeting and to City Council as part of the monthly review of the portfolio The Treasurer or designee shall promptly notify Finance Committee and City Council of any material change in the policy and any modifications to the policy must be approved by Finance Committee and City Council.
B. Annual Statement of Investment Policy
The Treasurer or designee shall render a written Statement of Investment Policy that shall be reviewed at least annually by Finance Committee and City Council to ensure its consistency with the overall objectives of preservation of principal, liquidity and return, and its relevance to current law and financial and economic trends. City Council shall consider the annual Statement of Investment Policy and any changes therein at a public meeting. The Statement of Investment Policy shall be adopted by resolution of City Council.
- 18 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
X. GLOSSARY OF TERMS
AGENCY: A debt security issued by a federal or federally sponsored agency. Federal agencies are backed by the full faith and credit of the U.S. Government (i.e. Government National Mortgage Association). Federally sponsored agencies (FSA's) are backed by each particular agency with a market perception that there is an implicit government guarantee (i.e. Federal National Mortgage Association).
ASK: The price at which securities are offered for sale; also known as offering price.
BENCHMARK: A comparative base for measuring the performance or risk tolerance of the investment portfolio. A benchmark should represent a close correlation to the level of risk and the average duration of the portfolio’s investments.
BID: The price offered by a buyer of securities. (When you are selling securities, you ask for a bid.) BOND PROCEEDS: The money paid to the issuer by the purchaser or underwriter of a new issue of municipal securities. These moneys are used to finance the project or purpose for which the securities were issued and to pay certain costs of issuance as may be provided in the bond contract.
BOOK VALUE: The value at which a debt security is shown on the holder's balance sheet. Book value is often acquisition cost plus/minus amortization and accretion, which may differ significantly from the security’s current value in the market.
BROKER: Someone who brings buyers and sellers together and is compensated for his/her service.
CD PLACEMENT SERVICE: A service that allows local agencies to purchase more than $250,000 in CDs from a single financial institution while still maintaining FDIC insurance coverage. See “CDARS”.
CDARS (CERTIFICATE OF DEPOSIT ACCOUNT REGISTRY SYSTEM): A private CD placement service that allows local agencies to purchase more than $250,000 in CDs from a single financial institution (must be a participating institution of CDARS) while still maintaining FDIC insurance coverage.
CDARS is currently the only entity providing this service. CDARS facilitates the trading of deposits between the California institution and other participating institutions in amounts that are less than $250,000 each, so that FDIC coverage is maintained.
CERTIFICATE OF DEPOSIT (CD): A time deposit with a specific maturity evidenced by a certificate.
Large denomination CDs are typically negotiable.
COLLATERAL: Securities, evidence of deposit or other property which a borrower pledges to secure repayment of a loan. Also refers to securities pledged by a bank to secure deposits of public monies.
ANNUAL COMPREHENSIVE FINANCIAL REPORT (ACFR): The official annual financial report for a public agency. It includes combined statements for each individual fund and account group prepared in conformity with GAAP. It also includes supporting schedules necessary to demonstrate compliance with finance-related legal and contractual provisions, extensive introductory material, and detailed statistical section.
CREDIT QUALITY: The measurement of the financial strength of a bond issuer. This measurement helps an investor to understand an issuer's ability to make timely interest payments and repay the loan principal upon maturity. Generally, the higher the credit quality of a bond issuer, the lower the interest rate paid by the issuer because the risk of default is lower. Credit quality ratings are provided by a Nationally Recognized Statistical-RatingOrganization.
CREDIT RISK: The risk to an investor that an issuer will default in the payment of interest and/or principal on a security.
CUSTODIAN: A bank or other financial institution that keeps custody of stock certificates and other assets.
- 19 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
CURRENT YIELD (CURRENT RETURN): A yield calculation determined by dividing the annual interest received on a security by the current market price of that security.
DEALER: A dealer, as opposed to a broker, acts as a principal in all transactions, by buying and selling for his/her own account.
DELIVERY VERSUS PAYMENT: There are 2 methods of delivery of securities: delivery versus payment and delivery versus receipt. Delivery versus payment, also referred to as “cash on delivery”, is delivery of securities with an exchange of money for the securities. Delivery versus receipt is delivery of securities with an exchange of a signed receipt for the securities.
DERIVATIVES: (1) financial instruments whose return profile is linked to, or derived from, the movement of one or more underlying index or security, and may include a leveraging factor, or (2) financial contracts based upon notional amounts whose value is derived from an underlying index or security (interest rates, foreign exchange rates, equities, or commodities).
DIVERSIFICATION: Dividing investment funds among a variety of security types by sector, maturity and quality ratings offering independentreturns.
DURATION: A measure of the timing of the cash flows, such as the interest payments and the principal repayment, to be received from a given fixed-income security. This calculation is based on three variables: term to maturity, coupon rate, and yield to maturity. The duration of a security is a useful indicator of its price volatility for given changes in interest rates.
FAIR VALUE: The amount at which an investment could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.
FEDERAL CREDIT AGENCIES: Agencies of the Federal Government set up to supply credit to various classes of institutions and individuals, e.g., savings and loan associations, small-business firms, students, farmers, farm co-operatives, andexporters.
FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC): The federal agency that insures bank deposits up to $250,000 per deposit at participating banking institutions. In an effort to increase consumer confidence in the banking system, the previous $100,000 insurance limit was temporarily increased to $250,000 in 2008, extended to 2013, and then permanently increased on July 21, 2010, with the passage of the Wall Street Reform and Consumer ProtectionAct.
FEDERAL HOME LOAN BANKS (FHLB): Government sponsored wholesale banks (currently 12 regional banks) that lend funds and provide correspondent banks services to member commercial banks, thrift institutions, credit unions and insurancecompanies.
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA): FNMA is a federal corporation working under the auspices of the Department of Housing and Urban Development (HUD). It is the largest single provider of residential mortgage funds in the United States. Fannie Mae, as the corporation is called, is a private stockholder-owned corporation. The corporation’s purchases include a variety of adjustable mortgages and second loans, in addition to fixed-rate mortgages.
FEDERAL OPEN MARKET COMMITTEE (FOMC): Consists of 7 members of the Federal Reserve Board and 5 of the 12 Federal Reserve Bank Presidents. The President of the New York Federal Reserve Bank is a permanent member, while the other Presidents serve on a rotating basis. The Committee periodically meets to set Federal Reserve guidelines regarding purchases and sales of Government Securities in the open market as a means of influencing the volume of bank credit and money.
FEDERAL RESERVE SYSTEM: The central bank of the United States created by Congress and consisting of a 7-member Board of Governors in Washington, D.C., 12 Regional Banks and approximately 3,000 commercial banks that are members of thesystem.
FINANCIAL INDUSTRY REGULATORY AUTHORITY (FINRA): A private corporation that acts as a selfregulatory organization (SRO) of all stock market operations in the United States, including brokerage - 20 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
firms and exchange markets. Its regulatory mandate includes authority over firms that distribute mutual fund shares as well as other securities.
GOVERNMENT ACCOUNTING STANDARDS BOARD (GASB): A standard-setting body, associated with the Financial Accounting Foundation, which prescribes standard accounting practices for governmental units.
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA or Ginnie Mae): Securities influencing the volume of bank credit guaranteed by GNMA and issued by mortgage bankers, commercial banks, savings and loan associations, and other institutions. Security holder is protected by full faith and credit of the U.S. Government. Ginnie Mae securities are backed by the FHA, VA, or FMHA mortgages. The term “pass-throughs” is often used to describe Ginnie Maes.
GOVERNMENT SECURITIES: An obligation of the U.S. government, backed by the full faith and credit of the government. These securities are regarded as the highest quality of investment securities available in the U.S. securities market. See "Treasury Bills, Notes, and Bonds." INTEREST RATE RISK: The risk associated with declines or rises in interest rates which cause an investment in a fixed-income security to increase or decrease in value.
INTERNAL CONTROLS: An internal control structure designed to ensure that the assets of the entity are protected from loss, theft, or misuse. The internal control structure is designed to provide reasonable assurance that these objectives are met. The concept of reasonable assurance recognizes that 1) the cost of a control should not exceed the benefits likely to be derived and 2) the valuation of costs and benefits requires estimates and judgments by management. Internal controls should address the following points:
▪ Control of collusion - Collusion is a situation where 2 or more employees are working in conjunction to defraud their employer.
▪ Separation of transaction authority from accounting and record keeping - By separating the person who authorizes or performs the transaction from the people who record or otherwise account for the transaction, a separationof duties is achieved. ▪ Custodial safekeeping - Securities purchased from any bank or dealer including appropriate collateral (as defined by state law) shall be placed with an independent third party for custodial safekeeping.
▪ Avoidance of physical delivery securities - Book-entry securities are much easier to transfer and account for since actual delivery of a document never takes place. Delivered securities must be properly safeguarded against loss or destruction. The potential for fraud and loss increases with physically delivered securities.
▪ Clear delegation of authority to subordinate staff members - Subordinate staff members must have a clear understanding of their authority and responsibilities to avoid improper actions.
Clear delegation of authority also preserves the internal control structure that is contingent on the various staff positions and their respective responsibilities. ▪ Written confirmation of transactions for investments and wire transfers - Due to the potential for error and improprieties arising from telephone and electronic transactions, all transactions should be supported by written communications and approved by the appropriate person. Written communications may be via fax if on letterhead and if the safekeeping institution has a list of authorized signatures.
▪ Development of a wire transfer agreement with the lead bank and third-party custodian - The designated official should ensure that an agreement will be entered into and will address the following points: controls, security provisions, and responsibilities of each party making and receiving wire transfers.
- 21 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
LIQUIDITY: A liquid asset is one that can be converted easily and rapidly into cash without a substantial loss of value. In the money market, a security is said to be liquid if the spread between bid and asked prices is narrow and reasonable size can be done at those quotes.
LOCAL AGENCY INVESTMENT FUND (LAIF): Chapter 730, Statutes of 1976 of the State of California, established the Local Agency Investment Fund. This fund enables local governmental agencies to remit money not required for immediate needs to the State Treasurer for the purpose of investment. In order to derive the maximum rate of return possible, the State Treasurer has elected to invest these monies with State monies as a part of the Pooled Money Investment Account. Each local governmental unit has the exclusive determination of the length of time its money will be on deposit with the State Treasurer. At the end of each calendar quarter, all earnings derived from investments are distributed by the State Controller to the participating government agencies in proportion to each agency's respective amounts deposited in the Fund and the length of time such amounts remained therein. Prior to the distribution, the State's costs of administering the program are deducted from the earnings.
MARK-TO-MARKET: The process whereby the book value or collateral value of a security is adjusted to reflect its current market value.
MARKET RISK: The risk that the value of a security will increase or decrease as a result of changes in market conditions.
MARKET VALUE: The current price at which a security is trading and could presumably be purchased or sold at that particular point in time.
MASTER REPURCHASE AGREEMENT: A written contract covering all future transactions between the parties to repurchase-reverse repurchase agreements that establish each party’s rights in the transactions. A master agreement will often specify, among other things, the right of the buyer-lender to liquidate the underlying securities in the event of default by the seller-borrower.
MATURITY: The date upon which the principal or stated value of a financial obligation is due and payable.
MONEY MARKET MUTUAL FUND: Mutual funds that invest solely in money market instruments (shortterm debt instruments, such as Treasury bills, commercial paper, bankers' acceptances, repos, and federal funds).
MUTUAL FUND: An investment company that pools money and can invest in a variety of securities, including fixed-income securities and money market instruments. Mutual funds are regulated by the Investment Company Act of 1940 and must abide by Securities and Exchange Commission (SEC) disclosure guidelines.
NATIONALLY RECOGNIZED STATISTICAL-RATING ORGANIZATION (NRSRO): Standard and Poor’s, Moody’s, and Fitch Financial Services are examples of such organizations.
OFFER: An indicated price at which market participants are willing to sell a security or commodity. Also referred to as the "Ask” or “Ask Price”.
PLACEMENT SERVICE CERTIFICATES OF DEPOSIT: Certificates of deposit placed with a private sector entity that assists in the placement of certificates of deposit with eligible financial institutions located in the United States.
PLACEMENT SERVICE DEPOSIT: Deposits at depository institutions placed by a private sector placement service entity.
PAR VALUE: The amount of principal that must be paid at maturity. Also referred to as the face amount of a bond, normally quoted in $1,000 increments perbond.
PORTFOLIO: Combined holding of more than one stock, bond, commodity, real estate investment, cash equivalent, or other asset. The purpose of a portfolio is to reduce risk by diversification. - 22 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
PRINCIPAL: The face value or par value of a debt instrument, or the amount of capital invested in a given security.
PRIMARY DEALER: A group of government securities dealers who submit daily reports of market activity and monthly financial statements to the Federal Reserve Bank of New York and are subject to its informal oversight. Primary dealers include Securities and Exchange Commission (SEC) registered securities broker/dealers, banks, and a few unregulated firms.
PRINCIPAL: (1) The face amount or par value of a debt instrument. (2) One who acts as a dealer buying and selling for his own account.
PUBLIC BANK: A corporation, organized as either a nonprofit mutual benefit corporation or a nonprofit public benefit corporation for the purpose of engaging in the commercial banking business or industrial banking business that is wholly owned by a local agency, as specified, local agencies, or a joint powers authority.
RATE OF RETURN: The yield obtainable on a security based on its purchase price or its current market price. This may be the amortized yield to maturity on a bond or the current income return.
REINVESTMENT RISK: The risk that a fixed-income investor will be unable to reinvest income proceeds from a security holding at the same rate of return currently generated by that holding.
REPURCHASE AGREEMENT (RP OR REPO): A holder of securities sells these securities to an investor with an agreement to repurchase them at a fixed price on a fixed date. The security "buyer" in effect lends the "seller" money for the period of the agreement, and the terms of the agreement are structured to compensate the buyer for this. Dealers use RP extensively to finance their positions. Exception: When the Fed is said to be doing RP, it is lending money that is increasing bank reserves.
REVERSE REPURCHASE AGREEMENT: An agreement of one party (for example, a financial institution) to purchase securities at a specified price from a second party (such as a public agency) and a simultaneous agreement by the first party to resell the securities at a specified price to the second party on demand or at a specific date.
RISK: Degree of uncertainty of return on an asset.
RULE 2A-7 OF THE INVESTMENT COMPANY ACT: Applies to all money market mutual funds and mandates such funds to maintain certain standards, including a 13-month maturity limit and a 90-day average maturity on investments, to help maintain a constant net asset value of $1.00.
SAFEKEEPING SERVICE: A service to customers rendered by banks for a fee whereby securities and valuables of all types and descriptions are held in the bank's vault for protection and security.
SECONDARY MARKET: A market is made for the purchase and sale of outstanding issues following the initial distribution.
SECURITIES LENDING: 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.
STRUCTURED NOTES: Notes issued by Government Sponsored Enterprises, (FHLB, FNMA, FHLMC, etc.), and Corporations that have imbedded options, (e.g., call features, step-up coupons, floating rate coupons, derivative-based returns), into their debt structure. Their market performance is impacted by the fluctuation of interest rates, the volatility of the imbedded options and shifts in the shape of the yield curve.
SUPRANATIONAL INSTITUTIONS: International institutions formed by two or more governments that transcend boundaries to pursue mutually beneficial economic or social goals. There are three supranational institutions that issue obligations that are eligible investments for California local agencies:
- 23 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
the International Bank for Reconstruction and Development (IBRD), International Finance Corporation (IFC), and Inter-American Development Bank (IADB).
SWAP: Trading one asset for another.
TOTAL RETURN: The sum of all investment income plus changes in the capital value of the portfolio.
TREASURY BILLS: Short-term U.S. government non-interest-bearing discounted debt securities with maturities of no longer than 1 year and issued in minimum denominations of $10,000. Auctions of 3- and 6-month bills are weekly, while auctions of 1-year bills are monthly. The yields on these bills are monitored closely in the money markets for signs of interest rate trends.
TREASURY BOND: A long-term coupon-bearing U.S. Treasury security issued as a direct obligation of the U.S. Government and having an initial maturity of more than 10 years and issued in minimum denominations of $1,000.
TREASURY NOTE: A medium-term coupon-bearing U.S. Treasury security issued as a direct obligation of the U.S. Government and having an initial maturity of from 1 to 10 years and issued in denominations ranging from $1,000 to $1 million or more.
UNIFORM NET CAPITAL RULE: Securities and Exchange Commission (SEC) Rule 15C3-1 outlining requirements that member firms as well as nonmember broker-dealers in securities maintain a maximum ratio of indebtedness to liquid capital of 15 to 1; also called net capital rule and net capital ratio.
Indebtedness covers all money owed to a firm, including margin and commitments to purchase securities, one reason new public issues are spread among members of underwriting syndicates. Liquid capital includes cash and assets easily converted into cash.
VOLATILITY: A degree of fluctuation in the price and valuation of securities.
YIELD: The current rate of return on an investment security generally expressed as a percentage of the security’s current price. (a) INCOME YIELD is obtained by dividing the current dollar income by the current market price for the security. (b) NET YIELD or YIELD TO MATURITY is the current income yield minus any premium above par or plus any discount from par in purchase price, with the adjustment spread over the period from the date of purchase to the date of maturity of the bond.
RESOLUTION NO. _________
A RESOLUTION OF THE COUNCIL OF THE ClTY OF
SANTA BARBARA ADOPTING THE INVESTMENT
POLICY FOR THE ClTY AND RESCINDING
RESOLUTION NO. 23-138
WHEREAS, the City Council adopted Resolution Nos. 85-065 and 85-121, establishing a policy regarding the investment of City funds; and
WHEREAS, the Council last reaffirmed the policy by adopting Resolution No. 23-138; and WHEREAS, the City of Santa Barbara has consistently maintained a policy of due diligence and the minimizing of risk in the investment of City funds.
NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE ClTY OF SANTA BARBARA AS FOLLOWS:
SECTION 1. The attached Exhibit, City of Santa Barbara Statement of Investment Policy, is hereby adopted and made a part of this resolution.
SECTION 2. Resolution No. 23-138 is hereby rescinded.
City of Santa Barbara
Finance Department
Statement of InvestmentPolicy
Fiscal Year 2025
Effective July 1, 2024
- 1 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
TABLE OF CONTENTS
I. MISSION STATEMENT .................................................................................................................................. 2 A. POOLING OF FUNDS................................................................................................................................................2 B. FUNDS INCLUDED BY THIS POLICY ..............................................................................................................................2 C. FUNDS EXCLUDED FROM THIS POLICY.........................................................................................................................2 II. GENERAL OBJECTIVES .................................................................................................................................... 2 A. SAFETY.................................................................................................................................................................2 B. LIQUIDITY .............................................................................................................................................................3 C. YIELD (RETURN ON INVESTMENT)..............................................................................................................................3 III. STANDARDS OF CARE................................................................................................................................. 3 A. PRUDENCE............................................................................................................................................................3 B. ETHICS AND CONFLICTS OF INTEREST..........................................................................................................................3 C. DELEGATION OF AUTHORITY ....................................................................................................................................4 D. INTERNAL CONTROLS ..............................................................................................................................................5 IV. AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS.............................................................................. 5 V. SAFEKEEPING AND CUSTODY ......................................................................................................................... 6 VI. SUITABLE AND AUTHORIZED INVESTMENTS .............................................................................................. 7 A. INVESTMENT TYPES ................................................................................................................................................7 B. INVESTMENT POOLS AND MUTUAL FUNDS................................................................................................................11 C. COLLATERALIZATION.............................................................................................................................................12 D. SOCIAL RESPONSIBILITY .........................................................................................................................................12 E. INVESTMENTS NOT APPROVED ...............................................................................................................................13 F. EXCEPTIONS TO PROHIBITED AND RESTRICTED INVESTMENTS........................................................................................13 VII. INVESTING PARAMETERS......................................................................................................................... 13 A. DIVERSIFICATION .................................................................................................................................................13 B. MAXIMUM MATURITIES........................................................................................................................................14 C. RISK MANAGEMENT .............................................................................................................................................14 VIII. REPORTING.............................................................................................................................................. 15 A. MONTHLY REPORTING TO CITY COUNCIL ..................................................................................................................15 B. QUARTERLY REPORTING TO CITY COUNCIL ................................................................................................................16 C. PERFORMANCE STANDARDS ...................................................................................................................................16 IX. INVESTMENT POLICY COMPLIANCE AND ADOPTION ............................................................................... 17 A. POLICY COMPLIANCE AND CHANGES ........................................................................................................................17 B. ANNUAL STATEMENT OF INVESTMENT POLICY ...........................................................................................................17 X. GLOSSARY OF TERMS................................................................................................................................... 18 - 2 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
I. MISSION STATEMENT
It is the policy of the City to invest public funds in a manner that will provide maximumsecurity, adequate liquidity and sufficient yield, while meeting the daily cash flow demands of the City and conforming to all statutes and regulations governing the investment of public funds.
SCOPE
This investment policy applies to all the financial assets of City of Santa Barbara. These funds are accounted for in the City’s audited Annual Comprehensive Financial Report. If the City invests funds on behalf of another agency and, if that agency does not have its own policy, the City's investment policy shall govern the agency's investments.
A. Pooling of Funds
Except for cash in certain restricted and special funds, the City shall consolidate cash balances from all funds to maximize investment earnings. Investment income shall be allocated to various funds as identified in the investment procedures manual in accordance with generally accepted accounting principles.
B. Funds Included by this Policy
General Fund
Special Revenue Funds
Capital Project Funds
Enterprise Funds
Internal Service Funds
Trust and Agency Funds
Any new fund created by City Council unless specifically exempted C. Funds Excluded from this Policy
Bond Proceeds. Investment of bond proceeds shall be subject to the conditions and restrictions of bond documents and are not governed by this policy. Bond investment conditions and restrictions shall be reviewed by the Finance Committee and forwarded to City Council for approval. Other funds excluded include post-retirement medical funds and pension rate mitigation funds.
II. GENERAL OBJECTIVES
The primary objectives, in priority order, of the City’s investment activities are safety, liquidity and yield.
A. Safety
Preservation 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. The objective shall be to mitigate credit - 3 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
risk and interest rate risk. To attain this objective, the City shall diversify its investments by investing funds among several financial institutions and a variety of securities offering independent returns.
B. Liquidity
The City’s investment portfolio shall remain sufficiently liquid to enable the City to meet all operating requirements which might be reasonably anticipated without requiring a sale of securities. Since all possible cash demands cannot be anticipated, the portfolio should consist largely of securities with active secondary or resale markets. A portion of the portfolio also may be placed in money market mutual funds or LAIF, which offers same-day liquidity for short-term funds.
C. Yield (Return on Investment)
The City’s investment portfolio shall be designed with the objective of attaining a benchmark rate of return throughout budgetary and economic cycles, commensurate with the City’s investment risk constraints and the liquidity characteristics of the portfolio. Return on investment is of secondary importance compared to the safety and liquidity objectives described above. The core of investments is limited to relatively low risk securities in anticipation of earning a fair return relative to the risk being assumed.
III. STANDARDS OF CARE
A. Prudence
The standard of prudence to be used by City investment officials shall be the “Prudent Investor Standard” in that 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 City, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of an enterprise of a like character and with like aims. This standard shall be applied in the context of managing the overall portfolio. City 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 deviations from expectations are reported in a timely fashion and appropriate action is taken to control adverse developments.
B. Ethics and Conflicts of Interest
Officers and employees involved in the City investment process shall refrain from personal business activity that could conflict with proper execution of the investment program, or that could impair their ability to make impartial investment decisions. City employees and investment officials shall disclose any material financial interests in financial institutions that conduct business within their jurisdiction, and they shall further disclose any personal financial/investment positions that could be related to the performance of the City immediately to the City of Santa Barbara Treasurer or designee and annually to the Fair Political Practices Commission. City employees and officers shall refrain from undertaking personal investment transactions with the same individual with whom business is conducted on behalf of the City. - 4 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
C. Delegation of Authority
Authority to manage the City’s investment program is derived from the Charter of the City of Santa Barbara. City Council shall delegate to the Treasurer, for a 1-year period, the authority to invest or to reinvest funds, or to sell or exchange securities. The Treasurer and/or designees shall thereafter assume full responsibility for those transactions until the delegation of authority is revoked or expires.
Management responsibility for the investment program is delegated to the Finance Director who shall establish a separate written investment procedures manual. The operation of the investment program shall be consistent with this policy and the investment procedures manual. Such procedures shall include explicit delegation of authority to persons responsible for investment transactions. No person may engage in an investment transaction except as provided under the terms of this policy and the procedures established by the Finance Director. The Assistant Finance Director is authorized to conduct investment-related activities, under the supervision of the Finance Director, on behalf of the City. The City may engage the services of one or more external investment advisers, who are registered under the Investment Advisers Act of 1940, to assist in the management of the City’s investment portfolio in a manner consistent with the City’s objectives. External investment advisers may be granted discretion to purchase and sell investment securities in accordance with this investment policy.
Apart from investment purchases and sales conducted by the City’s investment adviser, investment purchases and sales require signature approval from the Treasurer and Finance Director or their designee, by the close of business on the next business day following the purchase or sale.
The following documents are by reference incorporated in the investment procedures manual:
1. Listing of authorized personnel
2. Relevant investment statutes and ordinances
3. Repurchase agreements and tri-party agreements
4. Listing of authorized broker/dealers and financial institutions
5. Credit ratings and/or reports for securities purchased and financial institutions used
6. Safekeeping agreements
7. Sample investment reports
8. Investment accounting documents
9. Methodology for calculating rate of return
10. Banking services contracts
11. Cash flow forecasting
12. Collateral/depository agreements
- 5 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
D. Internal Controls
The Finance Director is responsible for establishing and maintaining a system of written internal controls. These controls shall be reviewed annually with an independent external auditor who will notify the City Council if there is a material noncompliance with its policies and procedures. The internal controls shall be designed to prevent losses of public funds arising from fraud, employee error, and misrepresentation by third parties, unanticipated changes in financial markets, or imprudent action by City employees and officers. The internal structure shall be designed to provide reasonable assurance that these objectives are met. The concept of reasonable assurance recognizes that (1) the cost of a control should not exceed the benefits likely to be derived, and (2) the valuation of costs and benefits requires estimates and judgments by management.
The internal controls shall address the following points:
1. Control of collusion
2. Separation of transaction authority from accounting and record-keeping
3. Custodial safekeeping
4. Delivery versus payment (DVP)
5. Clear delegation of authority to subordinate staff members
6. Written confirmation of transactions for investments and wire transfers
7. Wire transfer agreements
IV. AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS
The Finance Director shall establish selection criteria for pre-approval of financial institutions and security broker/dealers to do business with the City of Santa Barbara. The Finance Director shall maintain a list of City approved financial institutions and security broker/dealers who are authorized to provide investment services to the City. These may include primary dealers, or regional dealers that qualify under Securities & Exchange Commission Rule 15C3-1 (uniform net capital rule). In accordance with Section 53601.5, institutions eligible to transact investment business with the City include:
▪ Institutions licensed by the state as a broker-dealer. ▪ Institutions that are members of a federally regulated securities exchange. ▪ Primary government dealers as designated by the Federal Reserve Bank and nonprimary government dealers. ▪ Nationally or state-chartered banks.
▪ The Federal Reserve Bank.
▪ Direct issuers of securities eligible for purchase.
To qualify for consideration, a financial institution or a security broker/dealer must also have an office in California and that office must perform the transactions with the City. - 6 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
All financial institutions and broker/dealers who desire to become qualified for investment transactions must supply the following to the Finance Director as appropriate:
▪ Current audited financial statements
▪ Proof of Financial Industry Regulatory Authority (FINRA), formerly National Association of Security Dealers (NASD), certification
▪ Trading resolution
▪ Complete broker/dealer questionnaire
▪ Proof of State of California registration
▪ For banking institutions, a statement of compliance with the Federal Reserve Bank of New York’s capital guideline
▪ Statement of having read, understood and agreeing to comply with the City’s investment policy and depository contracts
The Finance Director shall annually review each of the approved financial institutions and security broker/dealers selected for current State of California registrations and financial condition.
Public deposits will be made only in qualified public depositories as established by State law.
Deposits will be insured by the Federal Deposit Insurance Corporation, or, to the extent the amount exceeds the insured maximum, will be collateralized in accordance with State law.
Selection of broker/dealers used by an external investment adviser retained by the City will be at the sole discretion of the adviser. Where possible, transactions with broker/dealers shall be selected on a competitive basis and their bid or offering prices shall be recorded. If there is no other readily available competitive offering, best efforts will be made to document quotations for comparable or alternative securities. When purchasing original issue instrumentality securities, no competitive offerings will be required as all dealers in the selling group offer those securities at the same original issue price.
V. SAFEKEEPING AND CUSTODY
All security transactions, including collateral for repurchase agreements, entered into by the City shall be conducted on a delivery-versus-payment (DVP) basis which will ensure that securities are deposited in an eligible financial institution prior to the release of funds. Securities shall be held by a third-party custodian designated by the Finance Director and evidenced by safekeeping receipts with a written custodial agreement. The only exception to the foregoing shall be depository accounts and securities purchases made with: LAIF, time certificates of deposit, and money market mutual funds, since the purchased securities are not deliverable.
Settlement instructions sent to the safekeeping agent shall require dual authorization unless the trade is executed by the City’s investment adviser. The Treasurer and the Finance Director, and if applicable, their designee, shall be bonded to protect the public against possible embezzlement and malfeasance. Safekeeping procedures shall be reviewed annually by an independent external auditor and any irregularities noted should be reported promptly to the Treasurer or designee and City Council.
- 7 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
VI. SUITABLE AND AUTHORIZED INVESTMENTS
The City shall be governed by the California Government Code, Sections 53600 et seq. Within the investments permitted by the Code, the City seeks to further restrict eligible investments to the guidelines listed below. In the event a discrepancy is found between this policy and the Code, the more restrictive parameters will take precedence. The City shall be required to present any changes to Code in the annual review of the. Surplus funds are defined as funds not required for the immediate necessities of the City and include investments in individually managed portfolio(s), money market fund(s) and/or State LAIF, and all portfolio limitations and restrictions shall apply to this aggregate amount. For purposes of compliance with the California Government Code and the City’s Investment Policy, the credit rating requirement for mediumterm notes, deposit notes, bank notes and commercial paper shall be based on the quality ratings at the time of purchase. Percentage limitations of surplus funds invested are noted for the various investment instruments. Where there is a specified percentage limitation for a particular category of investments, that percentage is applicable only at the date of purchase.
A later increase or decrease in a percentage resulting from a change in values or assets shall not constitute a violation of that restriction.
The City is empowered by statute to invest in the following types of securities and those that the investment managers are trained and competent to handle.
A. Investment Types
1. Bonds, notes, or other forms of indebtedness issued by the City, including bonds payable solely out of the revenues from a revenue producing property owned, controlled, or operated by the City or by a department, board, agency, or authority of the local agency.
2. United States Treasury notes, bonds, bills, or certificates of indebtedness, or any other government obligation for which the full faith and credit of the United States are pledged for the payment of principal and interest. There are no limits on the dollar amount or percentage that the City may invest in U.S. Treasuries, provided that the maximum maturity is five (5) years.
3. Federal Agency or United States government-sponsored enterprise obligations (GSE), participations, or other instruments, including those issued by or fully guaranteed as to principal and interest by federal agencies or United States government-sponsored enterprises. There are no limits on the dollar amount or percentage that the City may invest in Federal Agency or Government-Sponsored Enterprises (GSEs), provided that:
▪ No more than 30% of surplus funds may be invested in any single Agency/GSE issuer.
▪ The maximum maturity does not exceed five (5) years.
▪ The maximum percent of Agency callable securities in the portfolio will be 20%.
4. State of California and Local Agency Obligations. Registered state warrants or treasury notes or bonds of this state, including bonds payable solely out of the revenues from revenue-producing property owned, controlled, or operated by the state or by a department, board, agency, or authority of the state; and bonds, notes, warrants, or other evidence of indebtedness of any local agency within this - 8 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
state including bonds payable solely out of the revenues from revenue-producing property owned, controlled, or operated by the local agency, or by a department, board, agency, or authority of the local agency. Notes eligible for investment, other than those issued by the City or operated by a department, board, agency, or authority of the local agency, shall be rated in a rating category of "A" or its equivalent or better by at least one Nationally Recognized Statistical-Rating Organization (NRSRO). Moreover:
▪ No more than 5% of surplus funds may be invested in any single issuer. ▪ No more than 30% of surplus funds may be in municipal securities issued by the City, the state of California, its political subdivisions, or the registered treasury notes or bonds of the other 49 states in addition to California combined.
▪ The maximum maturity does not exceed five (5) years.
5. 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. ▪ The securities must be rated in a rating category of “A” or its equivalent or better by at least one NRSRO.
▪ No more than 5% of surplus funds may be invested in any single issuer. ▪ No more than 30% of surplus funds may be in municipal securities issued by the City, the state of California, its political subdivisions, or the registered treasury notes or bonds of the other 49 states in addition to California combined.
▪ The maximum maturity does not exceed five (5) years.
6. Medium-Term Notes, defined as all corporate and depository institution debt securities with a maximum remaining maturity of 5 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. Purchases of medium-term notes may not exceed 30 percent of the City's surplus funds. Notes eligible for investment shall be rated in a rating category of "A" or its equivalent or better by at least one NRSRO. Investments in medium-term notes shall be limited to no more than 5 percent of surplus funds per issuer.
7. Bankers Acceptances, otherwise known as bills of exchange or time drafts, drawn on and accepted by a commercial bank, which are eligible for purchase by the Federal Reserve System. Purchased bankers acceptances may not exceed 180 days maturity or 40 percent of the City's surplus funds, and no more than 5 percent of the City's surplus funds may be invested in the bankers’ acceptances of any single commercial bank. Issuers must be institutions which have short-term debt obligations rated “A-1” or its equivalent or better by at least one NRSRO, or long-term debt obligations which are rated in a rating category of “A” or its equivalent, or better by at least one NRSRO.
- 9 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
8. Commercial Paper of “prime” quality of the highest ranking or the highest letter and number rating as provided for by a Nationally Recognized Statistical-Rating Organization. The entity that issues the commercial paper shall meet all of the following conditions in either paragraph (a) or paragraph (b):
a. The entity is organized and operating in the United States as a general corporation and has total assets in excess of $500,000,000. In addition, its debt other than commercial paper, if any, must be rated in a rating category of “A” or higher by a Nationally Recognized Statistical-Rating Organization. b. The entity is organized within the United States as a special purpose corporation, trust, or limited liability company and has a program wide credit enhancement including, but not limited to, over collateralization, letters of credit, or surety bond. In addition, the entity has commercial paper that is rated “A-1” or higher, or the equivalent, by a Nationally Recognized Statistical-Rating Organization.
Eligible commercial paper shall have a maximum maturity of 270 days or less.
Under a provision sunsetting on January 1, 2026,the City may not invest more than 40 percent of its surplus funds in commercial paper, and the City may invest no more than 5% in any single issuer, and no more than 10% of its total investment assets in the commercial paper and the medium-term notes of any single issuer.
9. Negotiable Certificates of Deposit issued by a nationally or state-chartered bank or savings association or federal association or 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 City's surplus money invested and shall be limited to no more than 5 percent of any single issuer. Deposit notes and banknotes purchased through a broker or dealer shall be included with negotiable certificates of deposit in calculating allowable maximum percentages. Purchases of negotiable certificates of deposit, deposit notes and bank notes of up to $250,000 are allowable in any institution that insures its deposits with the Federal Deposit Insurance Corporation, while purchases greater than $250,000 shall be rated in a category of "A" or its equivalent or better by at least one NRSRO. Maturities for negotiable certificates of deposit shall not exceed five years.
10. Time Deposits. The City may invest in non-negotiable Certificates of Deposit at commercial banks and savings and loan associations that are collateralized in accordance with the California Government Code. To be eligible to receive City funds, the depository institution shall have received an overall rating of not less than “satisfactory” in its most recent evaluation of its record of meeting the credit needs of California’s communities, including low and moderate-income neighborhoods. In selecting depositories, the credit worthiness of institutions shall be considered. Banks and Savings and Loan Associations seeking to establish an investment relationship with the City shall submit an audited financial report that shall be reviewed for compliance with the City's investment standards. Any institution not providing an audited annual financial report shall be removed from the approved list and all funds maturing will be withdrawn. A list of eligible institutions shall be maintained in the investment procedures manual. - 10 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
11. Collateralized Bank Deposits. Savings accounts when used in conjunction with the City's checking accounts at a qualified bank where funds are collateralized in accordance with the California Government Code 53651. There are no limits on the dollar amount or percentage that the City may invest in collateralized bank deposits.
12. U.S. Government money market funds registered with the Securities and Exchange Commission and which comply with rule 2a7 of the Investment Company Act of 1940. The fund must be comprised of only U.S. Treasury bills, notes and bonds, repurchase agreements, and obligations issued or guaranteed as to principal and interest by the U.S. Government or its agencies or instrumentalities. The percentage of repurchase agreements in the fund shall be reviewed and approved based on the fund's policy limits. The dollar weighted average maturity of the portfolio shall be less than 90 days and the portfolio is managed to maintain a $1.00 share price. Also, the fund shall meet either of the following criteria: (a) attained the highest ranking or the highest letter and numerical rating provided by not less than two Nationally Recognized StatisticalRating Organizations; (b) retained an investment adviser registered or exempt from registration with the Securities and Exchange Commission with not less than 5 years' experience managing money market mutual funds with assets under management in excess of $500,000,000. Purchase of securities authorized by this section shall not exceed 20 percent of the City’s surplus money invested and no more than 10 percent may be invested in any single money market fund.
13. Repurchase Agreements. Investments in repurchase agreements, so long as the proceeds of the repurchase agreement are invested solely to supplement the income normally received from these securities. The City shall adopt as a standard the Bond Market Association Master Repurchase Agreement and shall maintain a list of approved counterparts and limit counter parties to primary dealers rated "A" or better by two Nationally Recognized Statistical-Rating Organizations. Reverse repurchase agreements shall require City Council authorization separate from City Council approval of this policy. a. Investments in repurchase agreements may be made on any authorized investment, when the term of the agreement does not exceed 1 year.
14. Local Agency Investment Fund (LAIF). The City may invest in LAIF up to the amount permitted by LAIF; At least quarterly, the Finance Director shall report to the Finance Committee on the composition of the LAIF portfolio. The California Government Code states that moneys placed for deposit in LAIF are in trust in the custody of the State Treasurer and cannot be borrowed or be withheld from the City. Further, the right of the City to withdraw its deposited money from the LAIF upon demand may not be altered, impaired, or denied in any way by any state official or agency based upon the State’s failure to adopt a budget by July 1 of each new fiscal year.
15. 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 and sale within the United States. Investments under this subdivision shall be rated in a rating category of “AA” or its equivalent or better by - 11 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
at least one NRSRO and shall not exceed 30 percent of the City’s moneys that may be invested pursuant to this section. No more than 10% of surplus funds may be invested in any single issuer.
16. 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).
17. Placement service deposits and placement service certificates of deposit 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, as defined in Section 53601.8. No more than 30 percent of the City's surplus funds may be invested in time deposits, including certificates of deposit, through a placement service as authorized under Section 53601.8.
18. Local Government Investment Pools. Shares of beneficial interest issued by a joint-powers authority organized pursuant to Section 6509.7
19. Asset-backed, mortgage-backed, mortgage passthrough securities, and collateralized mortgage obligations from issuers not defined in paragraphs 2 and 3 of this section, provided that:
▪ The securities are rated in a rating category of “AA” or its equivalent or better by a NRSRO.
▪ No more than 20% of the total surplus funds may be invested in these securities.
▪ No more than 5% of the total surplus funds may be invested in any single Asset-Backed or Commercial Mortgage security issuer.
▪ The maximum legal final maturity does not exceed five (5) years.
B. Investment Pools and Mutual Funds
The City shall conduct a thorough investigation of any pool or mutual fund prior to making an investment, and on a continual basis thereafter. The Treasurer or designee shall develop a questionnaire which will answer the following general questions:
▪ A description of eligible investment securities, and a written statement of investment policy and objectives.
▪ A description of interest calculations and how it is distributed, and how gains and losses are treated.
▪ A description of how the securities are safeguarded (including the settlement processes), and how often the securities are priced and the program audited. ▪ A description of who may invest in the program, how often, and what size deposit and withdrawal are allowed.
▪ A schedule for receiving statements and portfolio listings. ▪ Are reserves, retained earnings, etc. utilized by the pool/fund? ▪ A fee schedule, and when and how is it assessed?
- 12 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
▪ Is the pool/fund eligible for bond proceeds and/or will it accept such proceeds?
C. Collateralization
Collateralization shall be required on two types of investments: certificates of deposit and repurchase (and reverse) agreements. A collateral agreement must be current and on file before any funds can be transferred for collateralized certificates of deposit.
Collateral shall be held by an independent third party with whom the City has a current written custodial agreement. A clearly marked evidence of ownership (safekeeping receipt) must be supplied to the City and retained. The right of collateral substitution is granted.
1. Certificates of Deposit
a. Government Securities used as collateral require 102 percent of market value to the face amount of the deposit
b. Promissory Notes secured by first trust deeds used as collateral require 150 percent of market value to the face amount of the deposit c. Irrevocable Letters of Credit issued by the Federal Home Loan Bank of San Francisco require 105 percent of market value to the face amount of the deposit
2. Repurchase Agreements
a. Only U.S. Treasury securities or Federal Agency securities are acceptable collateral. All securities underlying repurchase agreements must be delivered to the City’s custodian bank versus payment or be handled under a properly executed tri-party repurchase agreement. The total market value of all collateral for each repurchase agreement must equal or exceed 102 percent of the total dollar value of the money invested by the City for the term of the investment. For any repurchase agreement with a term of more than 1 day, the value of the underlying securities must be reviewed on an ongoing basis according to market conditions. Market value must be calculated each time there is a substitution of collateral.
b. The City or its trustee shall have a perfected first security interest under the Uniform Commercial Code in all securities subject to the repurchase agreement.
D. Social Responsibility
In addition to and subordinate to the objectives set forth in Section III herein, investment of funds should be guided by the following socially responsible investment goals when investing in corporate securities and depository institutions. Investments shall be made in compliance with the socially responsible goals to the extent that such investments achieve substantially equivalent safety, liquidity and yield compared to investments permitted by state law.
- 13 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
Investments are encouraged in entities that support community well-being through safe, environmentally-sound, practices and fair labor practices. Investments are encouraged in entities that support equality of rights regardless of race, sex, religion, age, national or ethnic origin, sexual orientation, or disability. Investments are encouraged in entities that promote community economic development. Investments are discouraged in entities that manufacture, distribute or for tobacco products, weapons and military systems not used for our national defense, nuclear power and fossil fuels. Investments are discouraged in entities that exhibit corrupt corporate ethics and governance.
E. Investments Not Approved
Any security type or structure not specifically approved by this policy is hereby prohibited. Security types, which are thereby prohibited include, but are not limited to:
shares of beneficial interest issued by diversified management companies (except U.S. Government money market funds), reverse repurchase agreements used as a leveraging vehicle, "exotic" derivatives structures such as range notes, dual index notes, inverse floating-rate notes, leveraged or de-leveraged floating-rate notes, interest-only strips that are derived from a pool of mortgages and any security that could result in zero interest accrual if held to maturity, or any other complex variable or structured note with an unusually high degree of volatility or risk. Local governments that are not Qualified Institutional Buyers (QIB) as defined by the Securities and Exchange Commission are prohibited from purchasing Private Placement Securities.
The SEC defines a QIB as having at least $100,000,000 in securities owned and invested.
F. Exceptions to Prohibited and Restricted Investments
1. The City shall not be required to sell securities prohibited or restricted in this policy, or any future policies, or prohibited or restricted by new State regulations, if purchased prior to their prohibition and/or restriction. Insofar as these securities provide no notable credit risk to the City, holding of these securities until maturity is approved. At maturity or liquidation, such monies shall be reinvested only as provided by this policy.
2. The City 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. The City may hold these instruments until their maturity dates. (This section shall remain in effect starting January 1, 2021, and only until January 1, 2026).
VII. INVESTING PARAMETERS
A. Diversification
The City shall diversify its investments by security type, issuer, maturity, and financial institutions. No percentage limitations are established for United States government, United States government agencies and United States government sponsored enterprises; however, percentage limitations are established for other permitted - 14 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
investments, as noted in Section VII of this policy. The investments shall be diversified by limiting investments to avoid overconcentration in securities from a specific issuer or business sector (excluding U.S. Treasury securities), limiting investment in securities that have higher credit risks, and investing in securities with varying maturities.
The City recognizes that investment risks can result from issuer defaults, market price changes or various technical complications leading to temporary illiquidity. Portfolio diversification is employed as a way to control risk. Investment managers are expected to display prudence in the selection of securities as a way to minimize default risk. No individual investment transaction shall be undertaken which jeopardizes the total capital position of the overall portfolio. To control market price risks, volatile investment instruments shall be avoided. To control risks of illiquidity, a minimum of 10 percent of the total portfolio shall be held in highly marketable U.S. Treasury Bills and Notes and/or the State of California Local Agency Investment Fund and/or Money Market Funds and/or securities maturing within 90 days.
B. Maximum Maturities
To the extent possible, the City will attempt to match its investments with anticipated cash flow requirements. Where there is no specified maturity limitation on an investment, no investment shall be made in any security which, at the time of the investment, has a term remaining to maturity in excess of 5 years (measured from the settlement date to final maturity, with a forward settlement date not to exceed 45 days from the time of investment), unless the City Council has granted express authority to make that investment no less than 3 months prior to the investment.
C. Risk Management
1.Mitigating Credit Risk in the Portfolio—Credit risk is the risk that a security or a portfolio will lose some or all its value due to a real or perceived change in the ability of the issuer to repay its debt. The City will mitigate credit risk by adopting the following strategies:
▪ The diversification requirements included in the “Authorized Investments” section of this policy are designed to mitigate credit risk in the portfolio. ▪ No more than 5% of the total portfolio may be deposited with or invested in securities issued by any single issuer unless otherwise specified in this policy. ▪ The City may elect to sell a security prior to its maturity and record a capital gain or loss in order to manage the quality, liquidity or yield of the portfolio in response to market conditions or City’s risk preferences. ▪ If a security owned by the City is downgraded to a level below the requirements of this policy, making the security ineligible for additional purchases, 1) it shall be reported to the City Council with a recommendation, and ongoing information shall be provided if the bond is not sold, and 2) any actions taken related to the downgrade by the investment adviser will be communicated to the Treasurer or designee in a timely manner.
2.Mitigating Market Risk in the Portfolio— Market risk is the risk that the portfolio value will fluctuate due to changes in the general level of interest rates. The City - 15 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
recognizes that, over time, longer-term portfolios have the potential to achieve higher returns. On the other hand, longer-term portfolios have higher volatility of return. The City will mitigate market risk by providing adequate liquidity for shortterm cash needs, and by making longer-term investments only with funds that are not needed for current cash flow purposes. The City further recognizes that certain types of securities, including variable rate securities, securities with principal paydowns prior to maturity, and securities with embedded options, will affect the market risk profile of the portfolio differently in different interest rate environments.
The City, therefore, adopts the following strategies to control and mitigate its exposure to market risk:
▪ The City will maintain a minimum of six months of budgeted operating expenditures in short-term investments to provide sufficient liquidity for expected disbursements.
▪ The maximum stated final maturity of individual securities in the portfolio will be five (5) years, except as otherwise stated in this policy. ▪ The duration of the portfolio will generally be approximately equal to the duration (typically, plus or minus 20%) of a Market Benchmark, an index selected by the City, based on the City’s investment objectives, constraints, and risk tolerances.
VIII. REPORTING
The Treasurer or designee shall submit investment reports to the City Council that provide a clear picture of the status of the current investment portfolio and shall contain sufficient information to permit an independent organization to evaluate the performance of the investment program.
Based on the discretion of Finance Committee, an independent advisor may be contracted, from time to time to perform one or more of the following functions: confirm that the portfolio is in compliance with the Government Code of the State of California and with the Statement of Investment Policy of the City of Santa Barbara; present an evaluation of the portfolio and investment strategy recommendations; and, provide any other information that may be helpful to Finance Committee in their review of the portfolio.
A. Monthly Reporting to City Council
The Treasurer or designee shall submit to City Council, within 30 days following the end of the month, an investment report that summarizes all securities in the portfolio and a separate listing of investment transactions occurring during the month. The report shall include:
1. Investment type
2. Purchase date
3. Maturity date
4. Credit quality
5. Coupon and yield
6. Book value
- 16 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
7. Market value
8. Book gain/loss
9. Market gain/loss
10. Source of valuation
11. Average days to maturity
12. Variable rate(s) or call features
B. Quarterly Reporting to City Council
In addition to the components required in the monthly investment report, within 45 days following the end of the quarter, a narrative shall accompany the portfolio report addressing noteworthy items, deviations from the investment policy, comments on the fixed income markets and economic conditions, possible changes in the portfolio going forward, and thoughts on investment strategies. The quarterly report shall also include a statement of compliance with the investment policy and a statement of the ability to meet expenditures for the next 6 months (or an explanation as to why sufficient money shall, or may, not be available).
C. Performance Standards
The investment portfolio shall be managed in accordance with the parameters specified within this policy and always with consistently safe and prudent treasury management. Securities shall not be sold prior to maturity with the following exceptions:
• A security with declining credit sold early to minimize loss of principal • A security swap that would improve the quality, yield, or target duration in the portfolio
• Unforeseen liquidity needs of the portfolio require that the security be sold • A security that, subsequent to purchase, fails to meet the City’s socially responsible goals
Market Yield (Benchmark): The Treasurer or designee shall monitor and evaluate the portfolio’s performance relative to the chosen market benchmark(s), which will be included in the Treasurer’s quarterly report. The Treasurer or designee shall select an appropriate, readily available index to use as a market benchmark..
Marking to Market: The market value of the portfolio shall be calculated at least monthly and a statement of the market value of the portfolio shall be issued at least quarterly. This will ensure that review of the investment portfolio, in terms of value and price volatility, has been performed. In defining market value, consideration shall been given to pronouncements from the Government Accounting Standards Board (GASB) that address the reporting of investment assets and investment income for all investment portfolios held by governmental entities. The fair value of all securities reported in the City’s portfolio is based on currently quoted market prices. - 17 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
IX. INVESTMENT POLICY COMPLIANCE AND ADOPTION
A. Policy Compliance and Changes
Any deviation from the policy shall be reported to Finance Committee at the next scheduled meeting and to City Council as part of the monthly review of the portfolio The Treasurer or designee shall promptly notify Finance Committee and City Council of any material change in the policy and any modifications to the policy must be approved by Finance Committee and City Council.
B. Annual Statement of Investment Policy
The Treasurer or designee shall render a written Statement of Investment Policy that shall be reviewed at least annually by Finance Committee and City Council to ensure its consistency with the overall objectives of preservation of principal, liquidity and return, and its relevance to current law and financial and economic trends. City Council shall consider the annual Statement of Investment Policy and any changes therein at a public meeting. The Statement of Investment Policy shall be adopted by resolution of City Council.
- 18 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
X. GLOSSARY OF TERMS
AGENCY: A debt security issued by a federal or federally sponsored agency. Federal agencies are backed by the full faith and credit of the U.S. Government (i.e. Government National Mortgage Association). Federally sponsored agencies (FSA's) are backed by each particular agency with a market perception that there is an implicit government guarantee (i.e. Federal National Mortgage Association).
ASK: The price at which securities are offered for sale; also known as offering price.
BENCHMARK: A comparative base for measuring the performance or risk tolerance of the investment portfolio. A benchmark should represent a close correlation to the level of risk and the average duration of the portfolio’s investments.
BID: The price offered by a buyer of securities. (When you are selling securities, you ask for a bid.) BOND PROCEEDS: The money paid to the issuer by the purchaser or underwriter of a new issue of municipal securities. These moneys are used to finance the project or purpose for which the securities were issued and to pay certain costs of issuance as may be provided in the bond contract.
BOOK VALUE: The value at which a debt security is shown on the holder's balance sheet. Book value is often acquisition cost plus/minus amortization and accretion, which may differ significantly from the security’s current value in the market.
BROKER: Someone who brings buyers and sellers together and is compensated for his/her service.
CD PLACEMENT SERVICE: A service that allows local agencies to purchase more than $250,000 in CDs from a single financial institution while still maintaining FDIC insurance coverage. See “CDARS”.
CDARS (CERTIFICATE OF DEPOSIT ACCOUNT REGISTRY SYSTEM): A private CD placement service that allows local agencies to purchase more than $250,000 in CDs from a single financial institution (must be a participating institution of CDARS) while still maintaining FDIC insurance coverage.
CDARS is currently the only entity providing this service. CDARS facilitates the trading of deposits between the California institution and other participating institutions in amounts that are less than $250,000 each, so that FDIC coverage is maintained.
CERTIFICATE OF DEPOSIT (CD): A time deposit with a specific maturity evidenced by a certificate.
Large denomination CDs are typically negotiable.
COLLATERAL: Securities, evidence of deposit or other property which a borrower pledges to secure repayment of a loan. Also refers to securities pledged by a bank to secure deposits of public monies.
ANNUAL COMPREHENSIVE FINANCIAL REPORT (ACFR): The official annual financial report for a public agency. It includes combined statements for each individual fund and account group prepared in conformity with GAAP. It also includes supporting schedules necessary to demonstrate compliance with finance-related legal and contractual provisions, extensive introductory material, and detailed statistical section.
CREDIT QUALITY: The measurement of the financial strength of a bond issuer. This measurement helps an investor to understand an issuer's ability to make timely interest payments and repay the loan principal upon maturity. Generally, the higher the credit quality of a bond issuer, the lower the interest rate paid by the issuer because the risk of default is lower. Credit quality ratings are provided by a Nationally Recognized Statistical-RatingOrganization.
CREDIT RISK: The risk to an investor that an issuer will default in the payment of interest and/or principal on a security.
CUSTODIAN: A bank or other financial institution that keeps custody of stock certificates and other assets.
- 19 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
CURRENT YIELD (CURRENT RETURN): A yield calculation determined by dividing the annual interest received on a security by the current market price of that security.
DEALER: A dealer, as opposed to a broker, acts as a principal in all transactions, by buying and selling for his/her own account.
DELIVERY VERSUS PAYMENT: There are 2 methods of delivery of securities: delivery versus payment and delivery versus receipt. Delivery versus payment, also referred to as “cash on delivery”, is delivery of securities with an exchange of money for the securities. Delivery versus receipt is delivery of securities with an exchange of a signed receipt for the securities.
DERIVATIVES: (1) financial instruments whose return profile is linked to, or derived from, the movement of one or more underlying index or security, and may include a leveraging factor, or (2) financial contracts based upon notional amounts whose value is derived from an underlying index or security (interest rates, foreign exchange rates, equities, or commodities).
DIVERSIFICATION: Dividing investment funds among a variety of security types by sector, maturity and quality ratings offering independentreturns.
DURATION: A measure of the timing of the cash flows, such as the interest payments and the principal repayment, to be received from a given fixed-income security. This calculation is based on three variables: term to maturity, coupon rate, and yield to maturity. The duration of a security is a useful indicator of its price volatility for given changes in interest rates.
FAIR VALUE: The amount at which an investment could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.
FEDERAL CREDIT AGENCIES: Agencies of the Federal Government set up to supply credit to various classes of institutions and individuals, e.g., savings and loan associations, small-business firms, students, farmers, farm co-operatives, andexporters.
FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC): The federal agency that insures bank deposits up to $250,000 per deposit at participating banking institutions. In an effort to increase consumer confidence in the banking system, the previous $100,000 insurance limit was temporarily increased to $250,000 in 2008, extended to 2013, and then permanently increased on July 21, 2010, with the passage of the Wall Street Reform and Consumer ProtectionAct.
FEDERAL HOME LOAN BANKS (FHLB): Government sponsored wholesale banks (currently 12 regional banks) that lend funds and provide correspondent banks services to member commercial banks, thrift institutions, credit unions and insurancecompanies.
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA): FNMA is a federal corporation working under the auspices of the Department of Housing and Urban Development (HUD). It is the largest single provider of residential mortgage funds in the United States. Fannie Mae, as the corporation is called, is a private stockholder-owned corporation. The corporation’s purchases include a variety of adjustable mortgages and second loans, in addition to fixed-rate mortgages.
FEDERAL OPEN MARKET COMMITTEE (FOMC): Consists of 7 members of the Federal Reserve Board and 5 of the 12 Federal Reserve Bank Presidents. The President of the New York Federal Reserve Bank is a permanent member, while the other Presidents serve on a rotating basis. The Committee periodically meets to set Federal Reserve guidelines regarding purchases and sales of Government Securities in the open market as a means of influencing the volume of bank credit and money.
FEDERAL RESERVE SYSTEM: The central bank of the United States created by Congress and consisting of a 7-member Board of Governors in Washington, D.C., 12 Regional Banks and approximately 3,000 commercial banks that are members of thesystem.
FINANCIAL INDUSTRY REGULATORY AUTHORITY (FINRA): A private corporation that acts as a selfregulatory organization (SRO) of all stock market operations in the United States, including brokerage - 20 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
firms and exchange markets. Its regulatory mandate includes authority over firms that distribute mutual fund shares as well as other securities.
GOVERNMENT ACCOUNTING STANDARDS BOARD (GASB): A standard-setting body, associated with the Financial Accounting Foundation, which prescribes standard accounting practices for governmental units.
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA or Ginnie Mae): Securities influencing the volume of bank credit guaranteed by GNMA and issued by mortgage bankers, commercial banks, savings and loan associations, and other institutions. Security holder is protected by full faith and credit of the U.S. Government. Ginnie Mae securities are backed by the FHA, VA, or FMHA mortgages. The term “pass-throughs” is often used to describe Ginnie Maes.
GOVERNMENT SECURITIES: An obligation of the U.S. government, backed by the full faith and credit of the government. These securities are regarded as the highest quality of investment securities available in the U.S. securities market. See "Treasury Bills, Notes, and Bonds." INTEREST RATE RISK: The risk associated with declines or rises in interest rates which cause an investment in a fixed-income security to increase or decrease in value.
INTERNAL CONTROLS: An internal control structure designed to ensure that the assets of the entity are protected from loss, theft, or misuse. The internal control structure is designed to provide reasonable assurance that these objectives are met. The concept of reasonable assurance recognizes that 1) the cost of a control should not exceed the benefits likely to be derived and 2) the valuation of costs and benefits requires estimates and judgments by management. Internal controls should address the following points:
▪ Control of collusion - Collusion is a situation where 2 or more employees are working in conjunction to defraud their employer.
▪ Separation of transaction authority from accounting and record keeping - By separating the person who authorizes or performs the transaction from the people who record or otherwise account for the transaction, a separationof duties is achieved. ▪ Custodial safekeeping - Securities purchased from any bank or dealer including appropriate collateral (as defined by state law) shall be placed with an independent third party for custodial safekeeping.
▪ Avoidance of physical delivery securities - Book-entry securities are much easier to transfer and account for since actual delivery of a document never takes place. Delivered securities must be properly safeguarded against loss or destruction. The potential for fraud and loss increases with physically delivered securities.
▪ Clear delegation of authority to subordinate staff members - Subordinate staff members must have a clear understanding of their authority and responsibilities to avoid improper actions.
Clear delegation of authority also preserves the internal control structure that is contingent on the various staff positions and their respective responsibilities. ▪ Written confirmation of transactions for investments and wire transfers - Due to the potential for error and improprieties arising from telephone and electronic transactions, all transactions should be supported by written communications and approved by the appropriate person. Written communications may be via fax if on letterhead and if the safekeeping institution has a list of authorized signatures.
▪ Development of a wire transfer agreement with the lead bank and third-party custodian - The designated official should ensure that an agreement will be entered into and will address the following points: controls, security provisions, and responsibilities of each party making and receiving wire transfers.
- 21 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
LIQUIDITY: A liquid asset is one that can be converted easily and rapidly into cash without a substantial loss of value. In the money market, a security is said to be liquid if the spread between bid and asked prices is narrow and reasonable size can be done at those quotes.
LOCAL AGENCY INVESTMENT FUND (LAIF): Chapter 730, Statutes of 1976 of the State of California, established the Local Agency Investment Fund. This fund enables local governmental agencies to remit money not required for immediate needs to the State Treasurer for the purpose of investment. In order to derive the maximum rate of return possible, the State Treasurer has elected to invest these monies with State monies as a part of the Pooled Money Investment Account. Each local governmental unit has the exclusive determination of the length of time its money will be on deposit with the State Treasurer. At the end of each calendar quarter, all earnings derived from investments are distributed by the State Controller to the participating government agencies in proportion to each agency's respective amounts deposited in the Fund and the length of time such amounts remained therein. Prior to the distribution, the State's costs of administering the program are deducted from the earnings.
MARK-TO-MARKET: The process whereby the book value or collateral value of a security is adjusted to reflect its current market value.
MARKET RISK: The risk that the value of a security will increase or decrease as a result of changes in market conditions.
MARKET VALUE: The current price at which a security is trading and could presumably be purchased or sold at that particular point in time.
MASTER REPURCHASE AGREEMENT: A written contract covering all future transactions between the parties to repurchase-reverse repurchase agreements that establish each party’s rights in the transactions. A master agreement will often specify, among other things, the right of the buyer-lender to liquidate the underlying securities in the event of default by the seller-borrower.
MATURITY: The date upon which the principal or stated value of a financial obligation is due and payable.
MONEY MARKET MUTUAL FUND: Mutual funds that invest solely in money market instruments (shortterm debt instruments, such as Treasury bills, commercial paper, bankers' acceptances, repos, and federal funds).
MUTUAL FUND: An investment company that pools money and can invest in a variety of securities, including fixed-income securities and money market instruments. Mutual funds are regulated by the Investment Company Act of 1940 and must abide by Securities and Exchange Commission (SEC) disclosure guidelines.
NATIONALLY RECOGNIZED STATISTICAL-RATING ORGANIZATION (NRSRO): Standard and Poor’s, Moody’s, and Fitch Financial Services are examples of such organizations.
OFFER: An indicated price at which market participants are willing to sell a security or commodity. Also referred to as the "Ask” or “Ask Price”.
PLACEMENT SERVICE CERTIFICATES OF DEPOSIT: Certificates of deposit placed with a private sector entity that assists in the placement of certificates of deposit with eligible financial institutions located in the United States.
PLACEMENT SERVICE DEPOSIT: Deposits at depository institutions placed by a private sector placement service entity.
PAR VALUE: The amount of principal that must be paid at maturity. Also referred to as the face amount of a bond, normally quoted in $1,000 increments perbond.
PORTFOLIO: Combined holding of more than one stock, bond, commodity, real estate investment, cash equivalent, or other asset. The purpose of a portfolio is to reduce risk by diversification. - 22 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
PRINCIPAL: The face value or par value of a debt instrument, or the amount of capital invested in a given security.
PRIMARY DEALER: A group of government securities dealers who submit daily reports of market activity and monthly financial statements to the Federal Reserve Bank of New York and are subject to its informal oversight. Primary dealers include Securities and Exchange Commission (SEC) registered securities broker/dealers, banks, and a few unregulated firms.
PRINCIPAL: (1) The face amount or par value of a debt instrument. (2) One who acts as a dealer buying and selling for his own account.
PUBLIC BANK: A corporation, organized as either a nonprofit mutual benefit corporation or a nonprofit public benefit corporation for the purpose of engaging in the commercial banking business or industrial banking business that is wholly owned by a local agency, as specified, local agencies, or a joint powers authority.
RATE OF RETURN: The yield obtainable on a security based on its purchase price or its current market price. This may be the amortized yield to maturity on a bond or the current income return.
REINVESTMENT RISK: The risk that a fixed-income investor will be unable to reinvest income proceeds from a security holding at the same rate of return currently generated by that holding.
REPURCHASE AGREEMENT (RP OR REPO): A holder of securities sells these securities to an investor with an agreement to repurchase them at a fixed price on a fixed date. The security "buyer" in effect lends the "seller" money for the period of the agreement, and the terms of the agreement are structured to compensate the buyer for this. Dealers use RP extensively to finance their positions. Exception: When the Fed is said to be doing RP, it is lending money that is increasing bank reserves.
REVERSE REPURCHASE AGREEMENT: An agreement of one party (for example, a financial institution) to purchase securities at a specified price from a second party (such as a public agency) and a simultaneous agreement by the first party to resell the securities at a specified price to the second party on demand or at a specific date.
RISK: Degree of uncertainty of return on an asset.
RULE 2A-7 OF THE INVESTMENT COMPANY ACT: Applies to all money market mutual funds and mandates such funds to maintain certain standards, including a 13-month maturity limit and a 90-day average maturity on investments, to help maintain a constant net asset value of $1.00.
SAFEKEEPING SERVICE: A service to customers rendered by banks for a fee whereby securities and valuables of all types and descriptions are held in the bank's vault for protection and security.
SECONDARY MARKET: A market is made for the purchase and sale of outstanding issues following the initial distribution.
SECURITIES LENDING: 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.
STRUCTURED NOTES: Notes issued by Government Sponsored Enterprises, (FHLB, FNMA, FHLMC, etc.), and Corporations that have imbedded options, (e.g., call features, step-up coupons, floating rate coupons, derivative-based returns), into their debt structure. Their market performance is impacted by the fluctuation of interest rates, the volatility of the imbedded options and shifts in the shape of the yield curve.
SUPRANATIONAL INSTITUTIONS: International institutions formed by two or more governments that transcend boundaries to pursue mutually beneficial economic or social goals. There are three supranational institutions that issue obligations that are eligible investments for California local agencies:
- 23 -
City of Santa Barbara
ANNUAL STATEMENT OF INVESTMENT POLICY
Fiscal Year 2025
the International Bank for Reconstruction and Development (IBRD), International Finance Corporation (IFC), and Inter-American Development Bank (IADB).
SWAP: Trading one asset for another.
TOTAL RETURN: The sum of all investment income plus changes in the capital value of the portfolio.
TREASURY BILLS: Short-term U.S. government non-interest-bearing discounted debt securities with maturities of no longer than 1 year and issued in minimum denominations of $10,000. Auctions of 3- and 6-month bills are weekly, while auctions of 1-year bills are monthly. The yields on these bills are monitored closely in the money markets for signs of interest rate trends.
TREASURY BOND: A long-term coupon-bearing U.S. Treasury security issued as a direct obligation of the U.S. Government and having an initial maturity of more than 10 years and issued in minimum denominations of $1,000.
TREASURY NOTE: A medium-term coupon-bearing U.S. Treasury security issued as a direct obligation of the U.S. Government and having an initial maturity of from 1 to 10 years and issued in denominations ranging from $1,000 to $1 million or more.
UNIFORM NET CAPITAL RULE: Securities and Exchange Commission (SEC) Rule 15C3-1 outlining requirements that member firms as well as nonmember broker-dealers in securities maintain a maximum ratio of indebtedness to liquid capital of 15 to 1; also called net capital rule and net capital ratio.
Indebtedness covers all money owed to a firm, including margin and commitments to purchase securities, one reason new public issues are spread among members of underwriting syndicates. Liquid capital includes cash and assets easily converted into cash.
VOLATILITY: A degree of fluctuation in the price and valuation of securities.
YIELD: The current rate of return on an investment security generally expressed as a percentage of the security’s current price. (a) INCOME YIELD is obtained by dividing the current dollar income by the current market price for the security. (b) NET YIELD or YIELD TO MATURITY is the current income yield minus any premium above par or plus any discount from par in purchase price, with the adjustment spread over the period from the date of purchase to the date of maturity of the bond.
CITY OF SANTA BARBARA
COUNCIL AGENDA REPORT
AGENDA DATE: June 25, 2024
TO: Mayor and Councilmembers
FROM: Budget Division, Finance Department
SUBJECT: Resolution Amending the Schedule of Penalties, Fees, and Service Charges to Correct Clerical Error [Resolution]
RECOMMENDATION:
That Council adopt, by reading of title only, a Resolution of the Council of the City of Santa Barbara Directing the City Clerk to Correct Clerical Error by Inserting Omitted Pages into Resolution 24-068 Adopted on June 11, 2024, Which Shall Become Effective on July 1, 2024, and Amend the City of Santa Barbara Schedule of Penalties, Fees, and Service Charges.
DISCUSSION:
City staff wishes to correct variances between the published Adopted version of the City of Santa Barbara Schedule of Penalties, Fees, and Service Charges, and posted “RedLine” version presented to Council. Specifically, certain pages were inadvertently omitted from Resolution 24-068 adopted on June 11, 2024. These included the latter part of certain Waterfront Harbor Slip, Mooring, and User Fees section. The omitted pages will now be incorporated into the full Schedule of Penalties, Fees, and Service Charges and are noted on pages 140 through 144.
SUSTAINABILITY IMPACT:
This Resolution is not subject to environmental review pursuant to the State Guidelines for Implementation of the California Environmental Quality Act Sections 15060(c)(2) and 15060(c)(3) pertaining to activities that will not result in a direct or reasonably foreseeable indirect change to the environment and that are not defined as a project under Section 15378. This Resolution has no potential for resulting in physical change to the environment directly or indirectly in that it corrects clerical errors.
Agenda Item No. 7
File Code No. 230.05
Council Agenda Report
Resolution Amending the Schedule of Penalties, Fees, and Service Charges to Correct Clerical Error [Resolution]
June 25, 2024