COUNCIL AGENDA REPORT
TO: Mayor and City Council
FROM: Rebecca Campbell, Director of Finance
DATE: July 1, 2025
SUBJECT: Adoption of a Resolution Approving the 2025 Investment Policy Update
Description:
The City Council will consider approving the annual Investment Policy for which the primary objectives are for the safety, liquidity, and yield of the City’s investment activities.
Environmental Notice: The activity is not a “Project” as defined under Section 15378 of the California Environmental Quality Act State Guidelines; therefore, pursuant to State Guidelines Section 15060(c)(3) no environmental review is required.
RECOMMENDATION:
Adopt a Resolution approving the City of Santa Maria’s 2025 Investment Policy.
BACKGROUND:
California Government Code Section 53646 requires the Treasurer or Chief Fiscal Officer to annually submit a written Investment Policy to the City Council at a public meeting.
Typically, the investment policy is updated for changes in regulations and pres ented to the City Council every June.
PFM Asset Management LLC (PFM), a division of U.S. Bancorp Asset Management, Inc. serves as the City’s investment advisor, providing comprehensive portfolio management and advisory services. PFM has reviewed and is r ecommending modifications to the City’s Investment Policy.
DISCUSSION:
The Investment Policy incorporates objectives and policies from a variety of notable sources such as the California Municipal Treasurers' Association, the California Association of County Treasurers and Tax Collectors, the California Society of Municipal Finance Officers, the State of California Local Agency Investment Fund (LAIF), and Joint Powers Authority (Local Government Investment Pools).
The City’s Investment Policy:
1. Appoints the Director of Finance as the Investment Officer of the City;
2. Assigns responsibility for investments to the Investment Officer; 2 3. Establishes an Investment Oversight Committee consisting of the City Manager, Director of Finance, City Attorney, and a City Councilmember; and
4. Defines the investment objectives as:
a. Safety: Safety of principal is the foremost objective of the investment program;
b. Liquidity: The funds of the City shall be maintained liquid enough to meet all anticipated requirements;
c. Yield and Average Market Rate of Return: After considering safety and liquidity, the investment program shall seek a market -average rate of return;
d. Prudence: Sets standards to be used by the Investment Officer as "prudent investor" (Government Code Section 53600.3); and e. Public Trust: All participants in the investment process are custodians of public funds and trust.
5. Requires that the City Treasurer submit a quarterly investment report to the City Council; and
6. Authorizes and defines the suitable investments for City funds; and
7. Requires that a written system of internal controls be designed to prevent losses from fraud, employee error, misrepresentation of third parties, unanticipated changes in financial markets, or imprudent actions by investment officers of the City; and
8. Requires that the Investment Policy be annually reviewed by the City’s Investment Oversight Committee and submitted to the City Council for adoption.
The Investment Policy indicates that the types of authorized investments are those types of investments allowed in Government Code Section 53600.3, and limited to:
1. Local Agency Investment Fund (LAIF);
2. Obligations of the Federal or State government,
3. Certificates of Deposit/Deposit Placement Services,
4. Bankers' Acceptances/Commercial Paper,
5. Money Market Mutual Funds,
6. Medium-term Corporate Notes,
7. California and California Local Agency Municipal Obligations,
8. Supranationals; and
9. Joint Powers Authority (Local Government Investment Pools).
In addition to the investments listed above, government statutes authorize the use of other investment instruments, such as reverse repurchase agreements and derivatives; however, the Investment Officer is not authorized to purchase or use reverse repurchase agreements or derivatives in any form. Reverse repurchase agreements constitute short- term borrowing using securities as collateral. Derivatives are contracts whose value is tied to the price of some other asset, such as stocks, bonds, commodities, or currencies.
PFM has completed our review of the City of Santa Maria’s 2024 Investment Policy. PFM is recommending modifications to the City’s Investment Policy that would align with recent 3 Code changes introduced by Assembly Bill (AB) 2618 (Chapter 239, 2024), that went into effect on January 1, 2025. A summary of the Code change is provided below:
AB 2618 made amendments to Code Section 53601.8, which governs the placement of surplus funds by local agencies in depository institutions. This amendment extended the portfolio concentration limit from 30% to 50% of a local agency’s surplus funds; this limit is expected to revert to 30% on January 1, 2031. The California Debt and Investment Advisory Commission (CDIAC) is also required to submit a report to the Legislature by January 1, 2030, who will evaluate the use and impact of these deposits. This new Code language will provide local agencies with extended flexibility in managing surplus funds while ensuring legislative oversight through the required report.
In Policy section, VIII. Author ized Investment Instruments for the City, PFM recommends extending the current policy limit of Deposit Placement Services to 50%, providing the City with greater latitude in managing surplus funds, and meeting the requirements of the newly amended Code.
Attached to the report is a marked -up version of the existing Policy to illustrate the recommend changes, and the final version for review.
Investment Oversight Committee
The members of the Investment Oversight Committee have reviewed the policy and recommend that the City Council approve the changes to the 2024 Investment Policy as presented.
Fiscal Considerations:
There are no direct costs associated with the Investment Policy. Investments are earning a fair market rate of return. Issues of safety and liquidity of funds comply with the Investment Policy.
Impact to Community:
Adherence to the provisions of the Investment Policy will continue to provide for the safe investment of public funds. The policy authorizes conservative investments and provides a framework for a "buy and hold" philosophy, as opposed to that of a "market trader."
ATTACHMENT(S):
A. Resolution
B. Marked-Up Version of Investment Policy Update
C. Final Version of Investment Policy Update
D. PFM Letter of Recommended Changes to Policy