City Council
Report
City Council Meeting: February 24, 2026
Agenda Item: 4.D
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To: Mayor and City Council
From: Oscar Santiago, Director, Finance Department
Subject: Approval of the City's Updated Investment Policy and Extension of the Delegation Investment Authority
Recommended Action
Staff recommends that the City Council:
1. Adopt a finding of no possibility of significant effect pursuant to Section 15061(b)(3) (Common Sense Exemption) of the California Environmental Quality Act (CEQA) Guidelines.
2. Review and approve the City’s Investment Policy.
3. Extend the delegation of investment authority to the Director of Finance, as City Treasurer, from March 1, 2026 through February 28, 2027.
Summary
Per State law, the treasurer or chief fiscal officer of a local agency may annually render an investment policy to its governing body for consideration at a public meeting. While not required, staff believes that it is important to follow best practices and provide transparency by submitting the City’s Investment Policy (Attachments A and B) to Council annually for consideration and approval at a public meeting. The Santa Monica City Charter designates the Director of Finance (as the City Treasurer) as the custodian of all public funds. Additionally, State law requires that the Council delegate investment authority to the City Treasurer for a one-year period, renewable annually.
The current delegation of authority carries through February 28, 2026.
Discussion
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City investments are made only in those instruments specifically authorized by California State laws, primarily Sections 53601, 16429.1, and 53684 et seq. of the Government Code. Within these legal guidelines, the three primary objectives of the City’s Investment Policy and investment practices, in priority order are:
• Safety – Safety of principal is the foremost objective of the City’s investment program. City investments shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio by diversifying its investments among a variety of securities offering independent returns. • Liquidity – City investments are kept sufficiently liquid to enable the City to meet all operating requirements which might be reasonably anticipated by structuring the portfolio so that securities mature concurrently with anticipated cash needs to the extent possible. Investments are primarily made in securities with active secondary or resale markets. Additionally, an adequate liquidity buffer is maintained for extraordinary circumstances.
• Rate of Return – The City’s investment portfolio is designed with the objective of attaining a market rate of return throughout budgetary and economic cycles taking into account safety and liquidity requirements. The benchmark may vary from time to time depending on the economic and budgetary conditions present.
The City continues to abide by the highest professional standards in the management of public funds. While the investment strategy is flexible and can change based on market and economic conditions, the legal and policy guidelines governing these investment decisions remain relatively static. The City’s Investment Policy also includes socially responsible investment principles. In addition to following the guidelines previously set by Council, the City considers Economic, Social, and Governance (ESG) ratings and performance as well as certain social impact factors when making investment decisions.
Additionally, the policy also reflects March 8, 2022, Council direction to divest City funds from Russian assets. The City’s general investment portfolio has no direct investments in Russian companies and holds no sovereign Russian debt. As of December 31, 2025, the portfolio does include approximately $117.2 million (book value) in bonds from corporations that had business relationships in Russia or may have investment holdings 3 of 4
in Russia. Most have announced a termination, suspension, or limitation of business activity in Russia. Additional detail is included in the April 6, 2022 Information Item included as Attachment B to this report. The City’s Russian divestment actions as outlined in the April 6, 2022 Information Item remain in place.
An ongoing basis, staff conducts reviews of public agency investment best practices, as well as relevant statutory and regulatory updates, to ensure the City’s Investment Policy remains compliant with State law and aligned with industry standards. Minor revisions to the California Government Code became effective January 1, 2026. While these statutory updates do not materially affect the City’s current investment practices, the attached Investment Policy has been updated to incorporate the applicable changes.
In addition to conforming to recent Government Code amendments, the revised Policy includes several clarifications and technical updates. These refinements:
• Clarify the administration and oversight of pooled investments • Standardize and update technical investment and banking terminology • Update the delegation of investment authority to reflect current staff position titles
• Further clarify guidelines, parameters, terms, and allocation limits for authorized investments, consistent with California law
These updates are intended to improve clarity, ensure continued compliance, and support effective administration of the City’s investment program.
Environmental Review
The updated investment policy is exempt from CEQA pursuant to Section 15061(b)(3) of the CEQA Guidelines, which states that CEQA does not apply, “where it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment. The policy is administrative in nature. Therefore, it can be seen with certainty that the policy would not result in adverse physical impacts on the environment, and as such, is exempt from CEQA. 4 of 4
Financial Impacts and Budget Actions
There is no immediate financial impact or budget action necessary as a result of the recommended actions. Staff provides monthly reports to the City Council and the City Manager describing the present status of City investments and monies held by the City, as well as summarizing all investment transactions for the month. Projected investment earnings are included in the FY 2025-26 Adopted Budget.
Prepared By: Cynthia Caiman, Senior Treasury Analyst
Approved Forwarded to Council
Attachments:
A. Attachment A - Annual Update on City Investment Policy (2026) B. Attachment B - Information Item Russian Divestment (April 6, 2022)