Agenda packet, special meeting — Santa Paula City Council, March 16, 2022

City of Santa Paula
City Council

MAYOR JENNY CROSSWHITE

VICE MAYOR ANDY SOBEL

COUNCILMEMBER RICHARD ARAIZA

COUNCILMEMBER CARLOS JUAREZ

COUNCILMEMBER LESLIE CORNEJO

CITY COUNCIL SPECIAL MEETING OF THE

SANTA PAULA CITY COUNCIL
WEDNESDAY, MARCH 16, 2022
4:30 PM - City Council Special Meeting

SANTA PAULA CITY HALL
970 VENTURA STREET
SANTA PAULA, CA 93060

JULIE LATSHAW, CITY CLERK

DAN SINGER, CITY MANAGER
JOHN C. COTTI, CITY ATTORNEY
Spare Copies of staff reports or other written documentation relating to each item of business referred to on this agenda are on file in the Office of the City Clerk and are available for public inspection. If you have any questions regarding any agenda item, contact the City Clerk at (805) 933-4208.

City of Santa Paula - City Council - City Council Special Meeting 1

1. ROLL CALL

2. PUBLIC COMMENT
At this time, members of the public may comment on any item not appearing on the agenda that is within the subject-matter jurisdiction of the City Council. A Public Comment Form must be submitted to the City Clerk prior to the beginning of the Public Comment period in order to be recognized to speak. Individuals submitting Public Comment Forms after the beginning of the Public Comment period will not be allowed to speak at this time, but may be recognized to speak by the Mayor at the conclusion of the meeting. Individual Councilmembers may briefly respond to Public Comments or ask questions for clarification. The City Council may direct staff to report to the City Council on the item at a later meeting. For items appearing on the Agenda, the public will be invited to make comments at the time the item comes up for City Council consideration. If a member of the public wishes to address a Consent Calendar item, please submit a Public Comment Form for that item. It may then be discussed separately by the Council, and the public will be invited to make comments at that time. At all times, please use the microphone and write your name and address on the Public Comment Form provided.

3. ACTION ITEMS

3.A Investment Policy and Portfolio Strategy Discussion RECOMMENDATION:

Staff recommends Council:

1. Receive staff report on proposed changes to the Investment Policy.

2. Receive presentation from Chandler Asset Management, the City's

BRINGING ITEMS BEFORE THE CITY COUNCIL
You are invited to participate in all Regular City Council meetings. Agendas are posted in the front of Santa Paula City Hall, 970 Ventura Street, Santa Paula, 72 hours in advance of the scheduled meetings. The City Council's regular meetings start at 6:30 p.m. the first and third Wednesday of each month in the City Hall Council Chambers located at 970 Ventura Street in Santa Paula. Special and Closed Sessions vary by date and time.

HOW TO PARTICIPATE IN PERSON DURING THE MEETING: If you wish to speak at a City Council meeting, please fill out a Public Comment Form noting your name and address and submit the form to the City Clerk. Include the Agenda item number you wish to speak on. Members of the public may address the Council on items on this agenda only. Public Comments are limited to 3 minutes.

HOW TO PARTICIPATE BEFORE THE MEETING: Members of the public are encouraged to submit email correspondence on any agenda item by sending an email to [email protected]. All public correspondence received by three hours before the meeting date will be provided to the legislative body before the meeting.

Public Comments received after, will be provided to the legislative body the next day.

Your Participation in this meeting is in the public domain; meetings are cablecast; minutes of this meeting will reflect your participation in this meeting and are posted on the city’s website.

PLEASE NOTE: Be advised that if you bring a legal challenge to an action, you may be limited to raising only those issues you or someone else raised at the meeting described in this Agenda, or in written correspondence delivered to the City Council at or before the meeting. Any action is subject to the ninety-day time period set forth in Code of Civil Procedure § 1094.6.

In compliance with the Americans with Disabilities Act, if you need special assistance to participate in this meeting, please contact the City Clerk at (805) 933-4208. Notification 48 hours before the meeting will enable the City to make reasonable arrangements to ensure accessibility to this meeting. (28 CFR 35, 102-35.104 ADA Title II). Written materials distributed to the City Council within 72 hours of the City Council meeting are available for public inspection immediately upon distribution in the City Clerk’s office.

SPECIAL MEETING - COUNCIL CHAMBERS
City of Santa Paula - City Council - City Council Special Meeting 2 Investment Advisors and,

3. Discuss proposed management directives on the City's investment portfolio.

Presented By: Christy Ramirez

4. CLOSED SESSION
The City Council may move into a closed session pursuant to applicable law, including the Brown Act (Government Code §54950, et seq.) for the following purpose:

4.A CONFERENCE WITH LEGAL COUNSEL - ANTICIPATED LITIGATION RECOMMENDATION:

Pursuant to Government Code section 54956.9(d)(2) - February 11, 2022, Letter from attorney Jason Dominguez concerning the California Voting Rights Act.

Presented By: John Cotti

4.B CONFERENCE WITH LEGAL COUNSEL - EXISTING LITIGATION RECOMMENDATION:

Pursuant to Government Code section 54956.9(d)(1) - Ventura County fire Protection District, et al, v. Santa Clara Waste Water Company, et al, Ventura County Superior Court Case No. 56-2016-00484523-CU-PO-VTA Presented By: John Cotti

4.C CONFERENCE WITH LABOR NEGOTIATOR
RECOMMENDATION:

Pursuant to Government Code section 54957.6 - City Representative: City Manager Dan Singer, City Attorney John C. Cotti; Unrepresented Employees:

Executive Management Group
Presented By: John Cotti

5. ADJOURNMENT
State of California )-
County of Ventura )- ss
City of Santa Paula )-
I declare under penalty of perjury that I posted this City Council Agenda on the bulletin board near the front door of City Hall, 970 Ventura Street, Santa Paula, California.

City of Santa Paula - City Council - City Council Special Meeting 3 On_________________ at______________Signed:_________________________ Julie Latshaw
City Clerk
City of Santa Paula - City Council - City Council Special Meeting 4 For One‐on‐One Presentation Only.

City of Santa Paula
Establishing an Investment Plan
March 16, 2022
5 Chandler Asset Management | 1
Engagement Team for the City of Santa Paula
Your Assigned Team
Supported by a Deep Bench of Investment Professionals:

Investment Management, Compliance, Operations, Client Service and Administration City Council City of Santa Paula Finance Staff
Jayson Schmitt, CFA
Deputy Chief Investment Officer
27 Years Industry Experience
Portfolio Management,
Research & Credit Analysis
Christopher McCarry, AIF
Senior Portfolio Strategist
20 Years Industry Experience
Client Strategy & Research
Ryan Tauber
Mng. Dir., Business Dev.
22 Years Industry Experience
Relationship Management
Kara Raynor‐Sanchez
Client Service Director
9 Years Industry Experience
Client Service & Reporting
6 Chandler Asset Management |  2
Observations on the City of Santa Paula’s Investment Policy The policy is thorough and robust and takes into consideration best practices from CMTA,CDIAC and GFOA.Chandler recommends the following:
 Include language to engage the services of an external investment managers to assist in the management of the City’s investment portfolio
 Include language limiting the amount of callable bonds Update language in pass through securities to be in line with AB 1770 removing ratings requirement for issuer
 Included Supranationals as permitted investment Update language of Unauthorized investments allowing zero or negative yielding securities issued by the US government to be in line with SB 998
 Update issuer limitation to 5% expect for Treasuries, Agencies and Supranationals Review the language under section Performance Standards regarding benchmark and investment strategy
Sources: City of Santa Paula
7 Chandler Asset Management |  3
Annual Benchmark Study
Period Ending December 31, 2021
ICE BofA 1‐3 Yr
US Treasury
ICE BofA 1‐5 Yr
US Treasury & Agency
0‐6 months6‐12 months1‐3 years 100.00% 62.17%3‐5 years 37.84%5‐10 yearsTreasury 100.00% 96.58%Agency 3.42%CorporateModified Duration 12/31/2021 1.82 2.5710 Year Annualized Total Return 1.09% 1.35%10 Year Standard Deviation 1.29% 1.68%Sharpe Ratio 0.21 0.32Qualitative Risk Objective 12/31/2001 – 12/31/2021 12/31/2001 – 12/31/2021Negative Quarterly Return Occurrences 15 192 Consecutive Negative Quarterly Return Occurrences 3 2Negative Return For Year Occurrences 1 2Worst Year Total Return ‐0.55% ‐1.09% Understanding Risk and Return for Select Strategies
Source: ICE BofA Indices. Index returns assume reinvestment of all distributions. Historical performance results for investment indexes generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment management fee, the incurrence of which would have the effect of decreasing historical performance results. It is not possible to invest directly in an index. Please see disclosures at the end of thispresentation. 8 Chandler Asset Management |  4
 Consistent, stable, risk‐adjusted returns over a market cycle across a wide range of possible investing conditions
 Tightly controlled duration, sector allocation, term structure and security selection differentiates our performance
 Strategies have historically outperformed client benchmarks in rising, falling and stable rate environments One
Year
Three
Years
Five
Years
Ten
Years
Since
Inception
Chandler Limited Maturity (gross) (inception: 10/31/88) ‐0.48% 2.20% 1.83% 1.33% 4.39% Chandler Limited Maturity (net) ‐0.73% 1.94% 1.57% 1.08% 4.13%ICE BofA 1‐3 Year US Treasury Index ‐0.55% 2.02% 1.61% 1.09% 4.10%Chandler Short Term Bond (gross) (inception: 9/30/95) ‐0.93% 2.65% 2.11% 1.62% 3.89%Chandler Short Term Bond (net) ‐1.17% 2.39% 1.86% 1.37% 3.63%ICE BofA 1‐5 Year US Treasury & Agency Index ‐1.09% 2.41% 1.89% 1.35% 3.62% Based on Chandler’s Limited Maturity and Short Term Bond composites as of 12/31/2021. Please see the GIPS Disclosures at the end of this presentation. Past performance isnot indicative of future results. Performance is presented gross and net of investment management fees. *Net returns are for sample 10 basis points (0.10 of 1%) proposedfor a $25 million account. Gross performance does not reflect payment of advisory fees and other expenses which will reduce performance. All investment strategies have thepotential for profit or loss. Market conditions or economic factors may alter the performance and results of a portfolio. Investment advisory fees are disclosed in the firm’s Form ADV, Part 2A. Performance for periods greater than one year is annualized. For one‐on‐one presentation only.

Composite Performance – Gross and Net of Fees
as of December 31, 2021
Investment Strategies Provided for Three Decades
9 Chandler Asset Management | 5
Chandler Investment Styles
10‐Year Net of Fee Hypothetical Performance*
December 2011 – December 2021
Investment Style Portfolio Duration Annualized Total Return 10 Year Period (Net of 10 bps fee) 10‐Year Growth of $20 Million Portfolio (Net of fee) Chandler Added Value Over LAIF (Net of fee) LAIF 0.88 0.84% $21.7 million N/A
Chandler’s Limited
Maturity (1‐3 Year) 1.83 1.23% $22.6 million $0.9 million Chandler’s Short
Term Bond (1‐5 Year) 2.51 1.52% $23.3 million $1.6 million *Net performance for Chandler investment styles based on sample fee of 10 basis points (0.10 of 1%) relative to LAIF. LAIF returns include an administrative fee charged to investors by the CaliforniaState Treasurer. LAIF duration estimated based on average maturity in days, as of 12/31/2021, divided by 365 days. Performance shown is hypothetical for a $20 million portfolio and not based on anactual client's account. Performance for Chandler's Limited Maturity and Short Term Bond has been calculated using historical composite performance. Past performance is not a guarantee of future results. Please see the GIPS Composite Reports and disclosures at the end of this presentation for further details. For one‐on‐one presentation only.

Solutions Designed to Meet Your Goals
10 Chandler Asset Management | 6
Chandler’s Composite Strategies as of December 31, 2021 Sector Allocation Sector Allocation
Average Final Maturity 1.96Average Duration 1.83Average Market Yield 0.71% Average Quality (S&P) AA+Average Coupon 1.20% Limited Maturity (1‐3 Year)
Based on Chandler’s Limited Maturity and Short Term Bond composite characteristics as of 12/31/2021.*The Short Term Bond composite includes clients whose investment policy permits securities with maturitiesbeyond five years. Credit Quality equivalent of composite/average of S&P, Moody’s and Fitch ratings; “A” category includes “A‐1” rated money market securities. The composite characteristic information presented above is supplemental information pursuant to GIPS®. There is no guarantee that investment in any of these styles will result in characteristics similar to those that appear in this presentation due tochanges in economic conditions and other market factors. Past characteristic is not indicative of future results. Please see the GIPS Composite Reports at the end of this presentation for complete details.

Average Final Maturity 2.71 Average Duration 2.51 Average Market Yield 0.92%Average Quality (S&P) AAAverage Coupon 1.51% Short Term Bond (1‐5 Year)

18.2%

70.7%

11.1%
0%
20%40%60%80%
0‐1 Years 1‐3 Years 3‐5 Years
Maturity Distribution

11.0%

48.4%

40.3%

0.3%
0%
50%
0‐1 Years 1‐3 Years 3‐5 Years 5+ Years*
Maturity Distribution
Agency

34.9%
CMO

1.5%
US Corporate

16.6%
Other*

1.0%
Negotiable CD

1.3%
Supranational

3.4%
US Treasury

37.10%
ABS

4.30%
*Other includes Municipal Bonds, Cash, MBS and Commercial Paper US Treasury

30.3%
Agency

29.1%
US Corporate

22.4%
ABS

6.2%
Supranational

5.9%
CMO

3.1%
Negotiable CD

1.5%
Other*

1.3%
*Other includes Municipal Bonds and Cash
11 Chandler Asset Management | 7
Next Steps
 Complete and Return Chandler’s Onboarding Documents
 Select Strategy and complete management directive  Review custodial relationship and gain access for Operation’s Team Initiate Transfer of Assets  Begin investment operations  Provide training on reporting package and Client Portal training 12 Chandler Asset Management | 8
Federal Reserve
2,000,0003,000,0004,000,0005,000,0006,000,0007,000,0008,000,0009,000,000 Federal Reserve Balance Sheet Assets
In $ millions

0.00%0.50%1.00%1.50%2.00%2.50%
Effective Federal Funds Rate
Yield (%)
Source: Federal Reserve Source: Bloomberg
In 2020, the Fed took a wide range of aggressive actions to help stabilize and provide liquidity to the financial markets. The Fed lowered thefed funds target rate to a range of 0.0%‐0.25% and started purchasing Treasury and agency mortgage‐backed securities (MBS) to supportsmooth market functioning. Policymakers reinstated the Commercial Paper Funding Facility and Money Market Mutual Fund Liquidity Facility,and established the Primary Market Corporate Credit Facility, Secondary Market Corporate Credit Facility, Term Asset‐Backed Securities LoanFacility, Paycheck Protection Program Liquidity Facility, Main Street Lending Facility, and Municipal Liquidity Facility. The Fed also providedshort‐term funding through large‐scale repo operations and lowered the reserve requirement for depository institutions. Many of the Fed'slending facilities expired at the end of 2020. In June 2021, the Fed announced plans to unwind its corporate credit facility. The Fed started totaper their Treasury and agency MBS purchases in November 2021, and the Fed's bond‐buying program is now on track to end by early March2022. The Fed has also signaled that they are likely to start hiking the fed funds target rate this year. 13 Chandler Asset Management | 9
Bond Yields
Source: Bloomberg Source: Bloomberg

0.0%0.5%1.0%1.5%2.0%2.5%
US Treasury Note Yields
2‐Year 5‐Year 10‐Year
Yield (%)

0.0%0.5%1.0%1.5%2.0%2.5%
US Treasury Yield Curve
Feb‐22Nov‐21Feb‐21
Yield (%)
At the end of February, the 2‐year Treasury yield was about 130 basis points higher, and the 10‐Year Treasury yield was about 43 basis pointshigher, year‐over‐year. The spread between the 2‐year Treasury yield and 10‐year Treasury yield was 40 basis points at February month‐endcompared to the average historical spread (since 2003) of about 130 basis points. 14 Chandler Asset Management | 10
Disclosures
The information herein is provided for informational purposes only and should not be construed as a recommendation of any security, strategy, or investment product, nor an offer or solicitation for the purchase or sale of any financial instrument. No investment decision should be made based solely on the information provided herein. All investments involve risk,including loss of principal invested. The strategies referenced may not be suitable for all investors. Economic factors, market conditions, and investment strategies will affect the performance of any portfolio and there are no assurances that it will match or outperform any particular benchmark. The data contained in this presentation is the property of those providers, which was obtained from sources believed to be reliable, but are subject to change at any time at the provider's discretion. Unless otherwise noted, Chandler is the source ofdata contained in this presentation.Any forecasts, forward‐looking statements and assumptions are inherently limited and should not be relied upon as an indicator of future results. Any opinions or views constitutejudgments made by the author at the date of this presentation and may become outdated or superseded at any time without notice. Any statements concerning financial market trends are based on current market conditions, which will fluctuate. Past performance is no guarantee of future results. There is a possibility of loss on all investments and investor principal is not guaranteed. Performance information provided should not be used in making investment decisions.Index returns assume reinvestment of all distributions. Historical performance results for investment indexes generally do not reflect the deduction of transaction and/or custodialcharges or the deduction of an investment management fee, the incurrence of which would have the effect of decreasing historical performance results. It is not possible to invest directly in an index.Where listed, certain performance shown is hypothetical and does not represent actual trading in a client's account. HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. NO REPRESENTATION IS BEING MADE THAT ANYACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN. THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS ISTHAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK AND DOES NOT TAKE INTO ACCOUNT THAT MATERIAL AND MARKET FACTORS MAY HAVE IMPACTED THE ADVISER'S DECISION MAKING IF THE ADVISER WERE ACTUALLY MANAGING CLIENT'S MONEY. NOHYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES ORADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE

NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS. It should not be assumed that investors whoinvest in Chandler Asset Management's Portfolios will be profitable or achieve the hypothetical performance results reflected or any corresponding index presented. Actualperformance of and holdings and investment implementation in Chandler Asset Management's client accounts can materially differ from that of the hypothetical models presentedherein and performance can be higher or lower than the results shown. Investors may have experienced investment results during the corresponding time periods that were materiallydifferent from those portrayed. Back‐tested performance does not represent actual performance and should not be interpreted as an indication of such performance. The opinions referenced are as of the date of publication and are subject to change. Chandler Asset Management has discretion in the timing of trade execution and selection of securities traded and utilized in any client account, which can and will materially differ from the hypothetical simulated performance based upon a variety of factors, including the adviser's discretion to not follow any trading signal generated and to determine the timing and implementation of a trade (which can include securities other than those listed).Fixed income investments are subject to interest, credit and market risk. Interest rate risk: the value of fixed income investments will decline as interest rates rise. Credit risk: the possibility that the borrower may not be able to repay interest and principal. Low rated bonds generally have to pay higher interest rates to attract investors willing to take on greaterrisk. Market risk: the bond market in general could decline due to economic conditions, especially during periods of rising interest rates. 15 Chandler Asset Management | 11
Disclosures
LAIFThe California State Local Agency Investment Fund (LAIF) is an investment portfolio managed by the State Treasurer. All securities are purchased under the authorityof Government Code Section 16430 and 16480.4 and include securities issued by entities of the US Government, including the US Treasury and Agencies, Corporatedebt, Certificates of Deposit, Mortgage Backed Securities and certain loans to the State and state agencies. The average maturity of the Fund will be between 120 daysand 18 months.ICE BofA 1‐3 Year US Treasury IndexThe ICE BofA 1‐3 Year US Treasury Index tracks the performance of US dollar‐denominated sovereign debt publicly issued by the US government in its domesticmarket. Qualifying securities must have at least one year remaining term to final maturity and less than three years remaining term to final maturity, a fixed couponschedule, and a minimum amount outstanding of $1 billion. Qualifying securities must have at least 18 months to final maturity at the time of issuance.

ICE BofA 1‐5 Year US Treasury & Agency IndexThe ICE BofA US Treasury & Agency Index tracks the performance of US dollar denominated US Treasury and nonsubordinated US agency debt issued in the USdomestic market. Qualifying securities must have an investment grade rating (based on an average of Moody’s, S&P and Fitch). Qualifying securities must have at leastone‐year remaining term to final maturity and less than five years remaining term to final maturity, at least 18 months to maturity at time of issuance, a fixed coupon schedule and a minimum amount outstanding of $1 billion for sovereigns and $250 million for agencies. (Index: GVA0. Please visit www.mlindex.ml.com for more information).Source ICE Data Indices, LLC ("ICE"), used with permission. ICE permits the use of ICE Indices and related data on an “as is” basis; ICE, its affiliates and their respectivethird party suppliers disclaim any and all warranties and representation, express and/or implied, including any warranties of merchantability or fitness for a particularpurpose or use, including the indices, index data and any data included in, related to, or derived therefrom. Neither ICE data, its affiliates or their respective third‐ party providers guarantee the quality, adequacy, accuracy, timeliness or completeness of the indices or the index data or any component thereof, and the indices andindex data and all components thereof are provided on an “as is” basis and licensee’s use is at licensee’s own risk. ICE data, its affiliates and their respective thirdparty do not sponsor, endorse, or recommend Chandler, or any of its products or services. 16 Chandler Asset Management | 12
GIPS® Compliant Verification Statement
17 Chandler Asset Management | 13
GIPS® Composite Report: Limited Maturity

1. Chandler Asset Management is an independent investment adviser registered as such with the Securities and Exchange Commission under the Investment Adviser’s Act of 1940. Registration with the SEC does not imply a certain level of skill or training. Since 1988, Chandler Asset Management has provided fixed income investment management services to the public sector, as well as to foundations, endowments, individuals and corporations. A complete list and description of all of the firm’s composites is available upon request.

2. The Limited Maturity Composite is a composite of individually managed accounts with an average modified duration approximately equal to the modified duration of the ICE BofA 1‐3 Year US Treasury Index and a final stated maturity of individual securities of five years. The minimum account size required to be included in this composite is $2 million. This composite was created September 1988. The name of this composite was changed fromShort‐Term Fixed Income effective June 30, 2009.

3. The ICE BofA 1‐3 Year US Treasury Index tracks the performance of US dollar‐denominated sovereign debt publicly issued by the US government in its domestic market. Qualifying securities must have at least one year remaining term to final maturity and less than three years remaining term to final maturity, a fixed coupon schedule, and a minimum amount outstanding of $1 billion. Qualifying securities must have at least 18 months tofinal maturity at the time of issuance. Indexes are referred to for comparative purposes only and are not intended to parallel the risk or investment style of the portfolios in the Composite. Indexes do not utilize leverage.Index calculations do not reflect fees, brokerage commissions or other expenses of investing. Investors may not make direct investments into any index. Index data contained herein (and all trademarks related thereto) are owned by the indicated index provider, and may not be redistributed. The information herein has not been approved by the index provider.

4. Valuations are computed and performance reported in U.S. Dollars.5. Performance is calculated using a time‐weighted total rate of return, which links performance monthly, and is reported gross of investment management fees and custodial fees, but after all trading expenses. Results reflect the reinvestment of income, dividends and other earnings, and include realized and unrealized gains and losses and interest accrued through the last day of each month. Results do not reflect the potential impact of taxes.Past performance is not indicative of future results. Fees charged by Chandler Asset Management will reduce performance.

6. Net‐of‐fees performance returns are calculated by reducing the monthly gross performance by one‐twelfth (1/12) of the actual maximum applicable fee of 0.25%, which is representative of our current fee schedule for this composite. These monthly returns are then geometrically linked to produce annual returns which are presented before custodial fees but after management fees and all trading expenses. Fees are negotiable and additional information regarding Chandler's fees is included in our Part 2A of Form ADV.

7. Dispersion is calculated using the asset weighted standard deviation of annual gross returns of those portfolios that were included in the composite for the entire year. For years when less than six portfolios were included in the composite for the full year, no dispersion measure is presented. The three‐year annualized standard deviation measures the variability of the composite gross returns and the benchmark returns over the preceding 36‐month period. Policies for valuing investments, calculating performance, and preparing GIPS reports are available upon request.

8. GIPS® is a registered trademark of CFA Institute. CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein.

Source ice Data Indices, LLC ("ICE"), used with permission. ICE permits the use of ICE Indices and related data on an “as is” basis; ICE, its affiliates and their respective third party suppliers disclaim any and all warranties and representation, express and/or implied, including any warranties of merchantability or fitness for a particular purpose or use, including the indices, index data and any data included in, related to, or derived therefrom. NeitherICE data, its affiliates or their respective third‐party providers guarantee the quality, adequacy, accuracy, timeliness or completeness of the indices or the index data or any component thereof, and the indices and index data and all components thereof are provided on an “as is” basis and licensee’s use is at licensee’s own risk. ICE data, its affiliates and their respective third party do not sponsor, endorse, or recommend Chandler, or any of its products or services.

Annual Rates of Return 2011 through 2021
Returns 3 Year Annualized Dispersion Assets
Year Total Total Standard Deviation Asset Wtd Number of Composite % of Firm Firm End Gross Net Index Composite Index Std. Dev. Portfolios (MM) Assets (MM) 2011 1.88% 1.62% 1.55% 1.02% 1.02% 0.31% 9 222 3.74% 5,9292012 1.16% 0.91% 0.43% 0.78% 0.73% 0.06% 15 474 7.37% 6,4312013 0.30% 0.05% 0.36% 0.59% 0.50% 0.08% 18 797 11.12% 7,1652014 0.87% 0.61% 0.62% 0.54% 0.43% 0.09% 21 879 9.88% 8,8942015 0.74% 0.49% 0.54% 0.63% 0.56% 0.07% 27 1,328 11.31% 11,7472016 1.11% 0.86% 0.88% 0.74% 0.76% 0.06% 31 1,081 8.39% 12,8822017 0.85% 0.60% 0.43% 0.71% 0.74% 0.08% 32 1,178 8.60% 13,6982018 1.69% 1.44% 1.59% 0.77% 0.85% 0.03% 31 1,905 11.51% 16,5512019 3.87% 3.61% 3.55% 0.84% 0.94% 0.08% 39 2,653 13.57% 19,5522020 3.25% 3.00% 3.12% 0.92% 1.21% 0.12% 39 2,713 12.21% 22,2272021 ‐0.48% ‐0.73% ‐0.55% 0.96% 1.19% 0.07% 44 3,189 12.37% 25,785 Chandler Asset Management claims compliance with theGlobal Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance withthe GIPS standards.Chandler Asset Management has been independentlyverified by ACA Performance Services for the period of July1, 1997 through March 31, 2021. The verification report isavailable upon request. A firm that claims compliance withthe GIPS standards must establish policies and proceduresfor complying with all the applicable requirements of theGIPS standards. Verification provides assurance onwhether the firm's policies and procedures related tocomposite maintenance, as well as the calculation,presentation, and distribution of performance, have beendesigned in compliance with the GIPS standards and havebeen implemented on a firm‐wide basis. Verification doesnot provide assurance on the accuracy of any specificperformance report. 18 Chandler Asset Management | 14
GIPS® Composite Report: Short Term Bond

2. The Short Term Bond Composite is a composite of individually managed accounts with an average modified duration approximately equal to the modified duration of the ICE BofA 1‐5 Year US Treasury & Agency Index and a maximum final stated maturity of individual securities of five years. The minimum account size required to be included in this composite is $2 million. This composite was created in September 1995. The name of this composite was changed from 1‐5 Year Government Fixed Income effective June 30, 2009.

3. The ICE BofA 1‐5 Year US Treasury & Agency Index tracks the performance of US dollar denominated US Treasury and nonsubordinated US agency debt issued in the US domestic market. Qualifying securities must have an investment grade rating (based on an average of Moody’s, S&P and Fitch). Qualifying securities must have at least one year remaining term to final maturity and less than five years remaining term to final maturity, at least 18 months to maturity at time of issuance, a fixed coupon schedule, and a minimum amount outstanding of $1 billion for sovereigns and $250 million for agencies. Indexes are referred to for comparative purposes only and are not intended to parallel the risk or investment style of the portfolios in the Composite. Indexes do not utilize leverage. Index calculations do not reflect fees, brokerage commissions or other expenses of investing.Investors may not make direct investments into any index. Index data contained herein (and all trademarks related thereto) are owned by the indicated index provider, and may not be redistributed. The information hereinhas not been approved by the index provider.

6. Net‐of‐fees performance returns are calculated by reducing the monthly gross performance by one‐twelfth (1/12) of the actual maximum applicable fee of 0.25%, which is reflective of our current fee schedule for this composite. These monthly returns are then geometrically linked to produce annual returns which are presented before custodial fees but after management fees and all trading expenses. Fees are negotiable and additional information regarding Chandler's fees is included in our Part 2A of Form ADV.

7. Dispersion is calculated using the asset weighted standard deviation of annual gross returns of those portfolios that were included in the composite for the entire year. For years when less than six portfolios were included in the composite for the full year, no dispersion measure is presented. The three‐year annualized standard deviation measures the variability of the composite gross returns and the benchmark returns over the preceding 36‐ month period. Policies for valuing investments, calculating performance, and preparing GIPS reports are available upon request.

8. GIPS® is a registered trademark of CFA Institute. CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein.

Annual Rates of Return 2011 through 2021
Returns 3 Year Annualized Dispersion Assets
Year Total Total Standard Deviation Asset Wtd Number of Composite % of Firm Firm End Gross Net Index Composite Index Std. Dev. Portfolios (MM) Assets (MM) 2011 2.90% 2.64% 3.19% 1.47% 1.65% 0.07% 32 1,866 31.48% 5,9292012 1.80% 1.54% 0.98% 1.18% 1.27% 0.26% 38 2,133 33.17% 6,4312013 0.04% ‐0.21% ‐0.16% 1.02% 1.10% 0.08% 39 2,168 30.26% 7,1652014 1.42% 1.17% 1.24% 0.96% 0.99% 0.07% 40 2,325 26.14% 8,8942015 1.15% 0.90% 0.96% 1.11% 1.18% 0.07% 44 3,403 28.97% 11,7472016 1.30% 1.04% 1.08% 1.24% 1.39% 0.05% 49 4,131 32.07% 12,8822017 1.08% 0.83% 0.67% 1.19% 1.34% 0.11% 48 3,783 27.62% 13,6982018 1.53% 1.27% 1.55% 1.22% 1.40% 0.05% 48 3,485 21.06% 16,5512019 4.55% 4.29% 4.19% 1.22% 1.39% 0.19% 55 5,199 26.59% 19,5522020 4.43% 4.17% 4.22% 1.32% 1.70% 0.11% 59 6,234 28.05% 22,2272021 ‐0.93% ‐1.17% ‐1.09% 1.33% 1.65% 0.04% 72 7,294 28.29% 25,785 Chandler Asset Management claims compliance with theGlobal Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance withthe GIPS standards.Chandler Asset Management has been independentlyverified by ACA Performance Services for the period of July1, 1997 through March 31, 2021. The verification report isavailable upon request. A firm that claims compliance withthe GIPS standards must establish policies and proceduresfor complying with all the applicable requirements of theGIPS standards. Verification provides assurance onwhether the firm's policies and procedures related tocomposite maintenance, as well as the calculation,presentation, and distribution of performance, have beendesigned in compliance with the GIPS standards and havebeen implemented on a firm‐wide basis. Verification doesnot provide assurance on the accuracy of any specificperformance report. 19 CHANDLER ASSET MANAGEMENT | 800.317.4747 | chandlerasset.com | [email protected] 20 Investment Policy
Approved XX/XX/XXXX
For Fiscal Year 2021/2022 or Calendar Year 2022 Commented [CM1]: CAM recommends adding date of approval and delineate for what year the IP is for, fiscal or calendar year.
21 City of Santa Paula
Investment Policy
Table of Contents

1.0 Purpose .................................................................................................................... 3

2.0 Policy ........................................................................................................................ 3

3.0 Scope ....................................................................................................................... 3

3.1 Funds Included by this Policy............................................................................. 3

3.2 Pooling of Funds ................................................................................................ 4

3.3 Investments Held Separately ............................................................................. 4

4.0 Prudence .................................................................................................................. 4

5.0 Objectives................................................................................................................. 4

5.1 Safety................................................................................................................. 4

5.2 Liquidity.............................................................................................................. 5

5.3 Yield (Return on Investment).............................................................................. 5

6.0 Delegation of Authority ............................................................................................. 5

7.0 Ethics and Conflicts of Interest ................................................................................. 6

8.0 Authorized Financial Institutions and Broker/Dealers ............................................... 6

8.1 Authorized Financial Institutions......................................................................... 6

8.2 Authorized Broker/Dealers ................................................................................. 7

9.0 Authorized and Suitable Investments ....................................................................... 7

9.1 Authorized Investment Types............................................................................. 7

9.2 Unauthorized Investments ............................................................................... 12

10.0 Collateralization................................................................................................ 12

11.0 Safekeeping and Custody ................................................................................ 12

12.0 Diversification................................................................................................... 13

13.0 Maximum Maturities ......................................................................................... 13

14.0 Internal Control................................................................................................. 14

15.0 Performance Standards ................................................................................... 14

16.0 Investment Reporting ....................................................................................... 15

17.0 Investment Policy Adoption.............................................................................. 15

18.0 Exceptions........................................................................................................ 15

19.0 Glossary........................................................................................................... 17 Deleted: 12
Deleted: 13
Deleted: 13
22 City of Santa Paula
Investment Policy
3 1.0 Purpose
It is the purpose of the City’s investment policy to establish strategies, practices and procedures to be used in investing public funds in a prudent manner, which will provide the maximum security while meeting daily cash flow needs and conforming to all statutes governing the investment of public funds.

Secondly, this document will identify policies that enhance opportunities for a prudent and systematic investment of public funds. This policy is intended to guide the investment of City funds toward the goals of safety, liquidity and yield.

2.0 Policy
It is the policy of the City of Santa Paula, hereafter referred to as the “City”, to invest public funds not required for immediate day-to-day operations, also referred to as idle funds, in safe and liquid investments having acceptable rates of return while conforming to all state statutes and this City's Investment Policy.

California Government Code Section 53646 (a)(2) states that the City Treasurer may annually submit an investment policy to the City Council for consideration at a public meeting. This investment policy conforms to all pertinent existing laws of the State of California, including California Government Code Sections 53600 et seq. Any conflict between this City Investment Policy and California Government Code Section 53600 et. seq., shall be interpreted in favor of the California Government Code.

3.0 Scope
This investment policy applies to all financial assets and investment activities of the City. These funds are reflected in the City’s audited Comprehensive Annual Financial Report (CAFR). 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. Any additional funds that may be created from time to time shall also be administered within the provisions of this policy and comply with the California State Government Code. This policy covers the investment activities of idle funds under the direct authority of the City.

3.1 Funds Included by this Policy
 General Fund
 Enterprise Funds
 Special Revenue Funds
 Debt Service Funds
 Capital Project Funds
 Fiduciary Funds
23 City of Santa Paula
Investment Policy
4 3.2 Pooling of Funds
Except for cash in funds prohibited from pooling as described in Section

3.3, the City shall consolidate cash balances from all funds to maximize investment earnings. Investment income shall be allocated to various funds in accordance with generally accepted accounting principles.

3.3 Investments Held Separately
In some instances, investments cannot be included in the City's investment pool. These may include investments of bond proceeds. In such cases the funds will be held separately when required by law, contract or other authority.

4.0 Prudence
The City Treasurer is authorized to make investment decisions on behalf of the City investing public funds subject to the prudent investment standard. The Prudent Investor Standard of the California Government Code Section 53600.3 states, “when investing, reinvesting, purchasing, acquiring, exchanging, selling or managing public funds, a trustee shall act with care, skill, prudence and diligence under the circumstances then prevailing, including, but not limited to, the general economic conditions and the anticipated need of the [City], that a prudent person in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the [City]”. The standard of prudence to be used by investment officials shall be applied in the context of managing the overall portfolio.

Trustees are those persons authorized to make investment decisions on behalf of a local agency. Trustees or City investment officials, acting in accordance with written procedures, the investment policy and exercising due diligence, shall be relieved of personal responsibility for an individual security's credit risk changes or market price changes, provided deviations from expectations are reported in a timely manner and appropriate action is taken to control adverse developments.

5.0 Objectives
Section 53600.5 of the California Government Code outlines the primary objectives of a trustee investing public money. The primary objectives, in order of priority, of the City’s investment activities shall be:

5.1 Safety
Safety of principal is the foremost objective of the investment program.

Investments by the City shall be undertaken in a manner that seeks to ensure preservation of capital in the overall portfolio and reduce both 24 City of Santa Paula
Investment Policy
5 credit and market risk. The type of investment instruments and diversification of investments are critical components to ensuring investment portfolio safety.

5.2 Liquidity
The City's investment portfolio will remain sufficiently liquid to enable the City to meet all operating requirements which might be reasonably anticipated. Liquidity also refers to the ability to convert an investment to cash without loss of principal and minimal loss of interest.

5.3 Yield (Return on Investment)
The City’s investment portfolio shall have the objective of attaining a comparative performance measurement or an acceptable rate of return throughout budgetary and economic cycles. These measurements should be commensurate with the City’s investment risk constraints identified in the Investment Policy and the cash flow characteristics of the portfolio.

Return on investment becomes a consideration only after the basic requirements of safety and liquidity have been met.

The City Treasurer shall strive to maintain the level of investment of all idle funds as close to 100% as possible. While the objectives of safety and liquidity must first be met, it is recognized that investment assets represent a potential source of significant revenues. It is to the benefit of the City that these assets be managed to produce optimum revenues consistent with State statutes and local policies.

6.0 Delegation of Authority
Authority to manage the City’s investment program is derived from the California Government Code Sections 53600 through 53609. The management of idle cash and the investment of funds identified in paragraph 3.1 is the responsibility of the City Treasurer (Treasurer). The Treasurer may be elected or appointed by the City Council. Management responsibility for the investment program is hereby delegated to the Treasurer as directed by the City Council. Under this authority granted by the City Council, no person may engage in an investment transaction covered by the terms of this policy unless directed by the Treasurer.

In the execution of this delegated authority, the Treasurer may establish accounts with qualified financial institutions and brokers/dealers for the purpose of effecting investment transactions in accordance with this policy. 25 City of Santa Paula
Investment Policy
6 Transactions, including wiring instructions, must be identified in advance and approved in writing by the Treasurer or designee. All investment transactions in excess of $250,000 (except for deposits or withdrawals from the Local Agency Investment Fund, Ventura County Investment Pool or Other Pools) shall also require the signature of the City Manager or his/her designee.

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. The City Council may renew the authority annually and may revoke the authority at any time.

7.0 Ethics and Conflicts of Interest
All participants in the City's investment process shall act responsibly as custodians of the public trust. Elected officials and employees involved in the investment process shall refrain from personal business activity that could conflict with proper execution of the investment program or which could impair or create the appearance of an impairment of their ability to make impartial investment recommendations and decisions. Investment officials and employees shall make all disclosures appropriate under the Fair Political Practices Act and shall seek and follow the advice of the City Attorney and the Fair Political Practices Commission whenever there is a question of personal, financial or investment positions that could represent potential conflicts of interest.

8.0 Authorized Financial Institutions and Broker/Dealers Investments shall be purchased only through well-established, financially sound institutions. All financial institutions and broker/dealers who desire to become qualified vendors for investment transactions will be given a copy of the City's investment policy and certification form. The completion and submission of the certification form by a broker-dealer or financial institution shall constitute proof that it has received the City’s Statement of Investment Policy, read it, and intends to comply with it. Qualified financial institutions and Broker/dealers must provide current audited financial statements and meet the applicable criteria established in Sections 8.1 or 8.2 of this policy.

8.1 Authorized Financial Institutions
The City shall only deposit public monies in financial institutions that have:
(1) at least $500 million in total assets; (2) a core capital-to-total assets Commented [CM2]: CAM recommends adding language
permitting the engagement with external investment advisors 26 City of Santa Paula
Investment Policy
7 ratio of at least five percent; (3) favorable ratings from a recognized financial institution rating service, as determined by the City Treasurer; (4) a federal or a state charter; or are eligible institutions per the California Government Code and (5) a branch office within Ventura County, and/or a 50 mile radius of the City.

Under no circumstances shall the City’s deposits in a financial institution exceed the total shareholders’ equity of that institution.

8.2 Authorized Broker/Dealers
The City will only utilize investment services of financial institutions and security broker/dealers selected by credit worthiness who are authorized to provide investment services in the State of California. These may include primary dealers or regional dealers that qualify under Securities and Exchange Commission Rule 15C3-1 (uniform new capital rule).

All financial institutions and broker-dealers for investment transactions must supply the following to the City as appropriate:
 Current audited financial statements
 Proof of Financial Industry Regulatory Authority (FINRA) certification,  Proof of State of California registration
 Trading resolution
 Completed City of Santa Paula broker-dealer questionnaire, which contains a certification of having read, understood and agreeing to comply with the City’s Investment Policy and depository contracts

9.0 Authorized and Suitable Investments
All investments and deposits of the City shall be made in accordance with California Government Code, Sections 16429.1, 53600-53609, and 53630-53686 et seq., and as further limited in this policy.

The City is empowered by statute to invest in the following types of securities:

9.1 Authorized Investment Types

9.1.1 California State Treasurer's Local Agency Investment Fund (LAIF) as authorized by Gov. Code Section 16429.1(b).

9.1.2 Ventura County Investment Pool — Ventura County Treasurer's Investment Pool as authorized by Gov. Code Section 53684. 27 City of Santa Paula
Investment Policy
8 9.1.3 Other Pools — Shares of beneficial interest issued by a joint powers authority organized in the State of California pursuant to Gov. Code Section 6509.7 that invests in the securities and obligations authorized in Gov. Code Section 53601 subdivisions (a) to (q), inclusive. Each share shall represent an equal proportional interest in the underlying pool of securities owned by the joint powers authority. Purchases are limited to those pools that seek to maintain a constant net asset value and are rated in the highest category by a nationally recognized statistical-rating organization (NRSRO). To be eligible under this section, the joint powers authority issuing the shares shall have retained an investment adviser that meets all of the following criteria: (1) The adviser is registered or exempt from registration with the Securities and Exchange Commission; (2) the adviser has not less than five years of experience investing in the securities and obligations authorized in subdivisions (a) to (q), inclusive, of [Gov.

Code] section 53601; and (3) the adviser has assets under management in excess of five hundred million dollars
($500,000,000). Gov. Code § 6509.7(a).

9.1.4 U.S. Government — United States Treasury bills, notes, & bonds, or certificates of indebtedness, or those for which the full faith and credit of the United States Government are pledged for the payment of principal and interest.

9.1.5 U.S. Agencies — Federal agency or United States government senior debt- sponsored enterprise obligations, participations, or other instruments, including those issued by or fully guaranteed as to principal and interest by federal agencies or United States government-sponsored enterprises. No more than 30% of the portfolio may be invested in any single Agency/GSE issuer. The maximum percent of agency callable securities in the portfolio will be 20%..

9.1.6 State Municipal Securities — Registered treasury notes or bonds issued by any of the 50 United States, including bonds payable solely out of the revenues from a revenue producing property owned, controlled, or operated by a state or by a department, board, agency, or authority of any state. Securities eligible for investment under this paragraph shall be rated in the rating category of at least “AA” or “A-1” (for short-term securities), their respective equivalents, or higher by a NRSRO. A maximum of 30 percent of the City’s portfolio may be invested in State and local municipal securities.

Commented [CM3]: CAM recommends adding max issuer
and callable language to be in line with industry best practices 28 City of Santa Paula
Investment Policy
9 9.1.7 California Local Agency Municipal Securities — Bonds, notes, warrants or other evidence of debt issued by a local agency or municipality located within the State of California, including debt securities issued by the City. Securities eligible for investment under this paragraph shall be rated in a rating categories at least “AA” or “A-1”, their respective equivalents, or higher by a NRSRO.

A maximum of 30 percent of the City’s portfolio may be invested in State and local municipal securities.

9.1.8 Non-Negotiable Certificates of Deposit (CDs) — Non-negotiable deposits in a state or national bank, savings association or federal association, federal or state credit union in the State of California as authorized by CGC Section 53652. In accordance with CGC Section 53635.2, to be eligible to receive City deposits, a financial institution shall have received an overall rating of not less than “satisfactory” in its most recent evaluation by the appropriate federal financial supervisory agency of its record of meeting the credit needs of California’s communities. CDs are required to be collateralized as specified under Gov. Code Section 53630 et seq.

The Treasurer, at his/her discretion, may waive the
collateralization requirements for any portion that is covered by federal deposit insurance. Deposits in excess of the Federal Deposit Insurance Corporation (FDIC) or National Credit Union Administration (NCUA) insured shall be secured pursuant to California Government Code Section 53651 and 53652. The City shall have a signed agreement with any depository accepting City funds per Gov. Code Section 53649. In accordance with CGC Section 53638, any deposit shall not exceed that total
shareholder’s equity of any depository bank, nor shall the deposit exceed the total net worth of any institution. A maximum of 20 percent of the City’s portfolio may be invested in CDs.

9.1.9 Negotiable Certificates of Deposit – Negotiable CDs issued by a nationally or state chartered bank or a state or federal savings and loan association, a state or federal credit union, or by a federally- or state-licensed branch of a foreign bank. Negotiable CDs issued with maturities in excess of one year must be rated in a rating category of “A”, the equivalent or higher by a NRSRO.

Negotiable CDs with maturities under one year must be rated in a rating category of “A-1,” the equivalent, or higher by a NRSRO.

Purchases of negotiable CDs may not exceed 30 percent (in combination with CDs purchased through a deposit placement service) of the City's portfolio.

Deleted: .

Commented [CM4]: CAM recommends adding max percent
for Muni's to be in line with industry best practices
29 City of Santa Paula
Investment Policy
10 9.1.10 Placement Service Deposits — The City may deposit a portion of its funds with commercial bank, savings bank, savings and loan association, or credit union that uses a private sector entity that assists in the placement of federally insured deposits. The selected depository for placement services must be: a nationally or state chartered commercial bank, savings bank, savings and loan association, or credit union in California. Further, the selected depository institution may submit the funds to a private sector entity that assists in the placement of certificates of deposit with one or more commercial banks, savings banks, savings and loan associations, or credit unions that are located in the United States, for the City’s account. The full amount of the principal and the interest that may be accrued during the maximum term of each certificate of deposit shall at all times be insured by the FDIC or the NCUA. The selected depository institution shall serve as a custodian for each certificate of deposit that is issued with the placement service for the City’s account. Purchases of placement service deposits may not exceed 30 percent (in combination with negotiable CDs) of the City’s portfolio.

9.1.11 Medium-Term Corporate Notes — Medium term notes 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 that are rated in a rating category of “AA”, the equivalent or higher by a NRSRO and issued by an issuer rated at least “A” or the equivalent by an NRSRO. Purchases of medium term notes may not exceed 30 percent of the City's portfolio.

9.1.12 Asset-Backed Security – Any mortgage pass-through security, collateralized mortgage obligation, mortgage-backed or other paythrough bond, equipment leaseback certificate, consumer receivable pass-through certificate, or consumer receivablebacked bond. Eligible securities must be rated in a rating category, by a NRSRO, of “AA”, the equivalent or higher. No more than 20 percent of the City's portfolio may be invested in this type of security.

9.1.13 Commercial Paper — Commercial paper of "prime" quality of the highest ranking or of the highest letter and number rating as provided for by a NRSRO. The entity that issues the commercial paper shall meet all of the following conditions in either paragraph (1) or paragraph (2) below:

Deleted: , and the issuer of the security must be rated in a rating category of “A”, the equivalent or higher rating for its debt as provided by a NRSRO
Commented [CM5]: CAM recommends removing the issuer
rating requirement to be in line with AB 1770
30 City of Santa Paula
Investment Policy
11 1. The entity meets the following criteria: (A) is organized and operating in the United States as a general corporation. (B) has total assets in excess of five hundred million dollars
($500,000,000). (C) has debt other than commercial paper, if any, that is rated in a rating category of “A”, the equivalent or higher by a NRSRO.

2. The entity meets the following criteria: (a) is organized within the United States as a special purpose corporation, trust, or limited liability company. (b) Has program wide credit
enhancements including, but not limited to, over collateralization, letters of credit, or surety bond. (c) Has commercial paper that is rated in a rating category of “A-1” or the equivalent or higher by a NRSRO.

Eligible commercial paper shall have a maximum maturity of 270 days or less. No more than 25 percent of the City’s portfolio may be invested in eligible commercial paper, and the City may purchase no more than 10 percent of the outstanding commercial paper of any single issuer.

9.1.14 Bankers’ Acceptances — Bills of exchange or time drafts drawn on and accepted by a commercial bank, otherwise known as bankers' acceptances. Eligible bankers' acceptances are restricted to issuing financial institutions with short-term paper rated in the highest category by a NRSRO. Purchases of bankers' acceptances shall have a maximum maturity of 180 days or less, and no more than 40 percent of the City's portfolio.

9.1.15 Money Market and Mutual Funds — Shares of beneficial interest issued by diversified management companies that are money market funds registered with the Securities and Exchange Commission under the Investment Company Act of 1940 (15 U.S.C. Sec. 80a-1 et seq.). Such funds must carry the highest rating of at least two of the three largest national rating agencies.

All such investments shall be placed only in money market or mutual funds intended to maintain constant net asset value and that invest solely in U.S. Treasuries and Federal Agency obligations and repurchase agreements invested in such
obligations. Investment in Money Market or Mutual Funds shall not exceed 20% of the portfolio or more than 20 percent in any one fund.

Deleted: 10
Commented [CM6]: CAM recommends updating language
to be in line with best practices
31 City of Santa Paula
Investment Policy
12 9.1.16 Sweep account for the investment of overnight funds when the funds are swept into investments authorized by this policy.

9.1.17 Passbook accounts maintained solely to provide for ongoing operational needs shall be subject to the requirements of this policy.

9.1.18 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.

9.1.19 Supranationals: Issues are that are US 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. The securities are rated in a rating category of “AA” or its equivalent or better by a NRSRO. No more than 30% of the total portfolio may be invested in these securities.

No more than 10% of the portfolio may be invested in any single issuer.

9.2 Unauthorized Investments
Investments not specifically authorized herein are disallowed. Additionally, Section 53601.6 of the California Government Code disallows the following: inverse floaters, range notes, or interest-only strips that are derived from a pool of mortgages. Futures, options, all leveraged purchases, reverse repurchases, and speculations on interest rates are specifically not allowed by this policy. Investment in any security that could result in a zero interest accrual if held to maturity is prohibited. Under a provision sunsetting on January 1, 2026, securities backed by the U.S.

Government that could result in a zero- or negative-interest accrual if held to maturity are permitted. .

10.0 Collateralization
Investments in certificates of deposit, sweep accounts and passport accounts shall be fully insured up to the limit set by the Federal Deposit Insurance Corporation or National Credit Union Administration. Investments in certificates of deposit, sweep accounts and passport accounts in excess of the FDIC or NCUA limit shall be properly collateralized as required by law.

11.0 Safekeeping and Custody
Commented [CM7]: CAM recommends including
Supranational securities in the Authorized investments section Commented [CM8]: CAM recommends including language
on negative or zero interest bonds backed by the US
government to be in line with SB 998
32 City of Santa Paula
Investment Policy
13 All security transactions entered by the City shall be conducted on a delivery-vs.- payment (DVP) basis. Securities owned by the City, (except the collateral for certificates of deposit in banks and/or savings and loans) shall be held by a thirdparty custodian/safekeeping account designated by the City Treasurer and evidenced by safekeeping receipts. Said securities shall be held in a manner that establishes the City’s right of ownership. The only exception to the foregoing shall be depository accounts and security purchases made with: LAIF, time certificates of deposit and money market mutual funds held directly with issuing institution, since the purchased securities are not deliverable.

The third-party custodian/safekeeping account shall annually provide a copy of their most recent report of internal controls and provide periodic statements of the securities owned by the City listing the specific instrument, rate, maturity and other pertinent information.

12.0 Diversification
The City recognizes that investment risks can result from the issuer defaults, market price changes, or various technical complications leading to temporary liquidity. To minimize the City’s exposure to these types of risk, the portfolio should be diversified among several types of institutions, instruments, and maturities. The Treasurer shall minimize default risk by prudently selecting only instruments and institutions, which at the time of placement have been evaluated for their financial viability and compliance with this policy. No individual transaction shall be undertaken that jeopardizes the total capital position of the overall portfolio.

The portfolio instrument composition shall be diversified to the extent feasible to avoid incurring unreasonable and avoidable risks regarding specific security types indicated in Section 9 of this investment policy. No more than five percent (5%) of the value of the City's portfolio will be placed with any single issuer, except for the U.S. Treasury/Federal agency securities, authorized pools, mutual funds, Supranationals and collateralized investments.

13.0 Maximum Maturities
To the extent possible, the Treasurer will attempt to match investments with anticipated cash flow requirements and investments shall have a maturity no more than five (5) years from the date of purchase.

For the purpose of these investments, the compliance with the investment percentage(s), in regards to the total investment portfolio, shall be calculated on Deleted: ten
Deleted: 10
Commented [CM9]: CAM recommends updating the issuer
limitation to 5% with the noted expections
33 City of Santa Paula
Investment Policy
14 the date the investment is acquired. If the percentage is legally compliant on the date of purchase, then compliance with the law shall have been met.

14.0 Internal Control
The City Treasurer shall establish and maintain a system of appropriate internal controls to ensure compliance with policies and procedures. The controls should be designed to prevent losses of public funds arising from fraud, error, or imprudent actions by employees and officers of the City. The following procedures shall generally be followed:
 Proper documentation obtained from confirmation and cash disbursement wire transfers is required for each investment transaction.  Timely bank reconciliation is conducted to ensure proper handling of all transactions
 The investment portfolio and all related transactions are reviewed and balanced to appropriate general ledger accounts by the Finance Department at a minimum on a quarterly basis.

15.0 Performance Standards

15.1 Investment Strategy
The investment portfolio shall be designed to attain a market-average rate of return throughout budgetary and economic cycles, taking into account the City’s risk constraints, the cash flow characteristics of the portfolio, and state and local laws, ordinances or resolutions that restrict investments.

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, the following steps will be taken:
• Any actions taken related to the downgrade by the investment manager will be communicated to the Treasurer in a timely manner. • If a decision is made to retain the security, the credit situation will be monitored and reported to the City Council.

The Treasurer shall periodically, but no less than quarterly, review the portfolio to identify investments that do not comply with this investment policy and establish protocols for reporting major and critical incidences of noncompliance to the City Council.

15.2 Benchmark
Deleted: The City’s overall
Commented [CM10]: CAM recommends updating language
on Investment Strategy to be in line with industry best practices and including downgrade language
Deleted: investment strategy is passive. The City intends to hold its investments to maturity and will therefore generally follow buy and hold strategy. A buy and hold strategy requires that the portfolio be kept sufficiently liquid to preclude the undesirable sale of investments prior to maturity.

Occasionally, the City Treasurer may find it advantageous to sell an investment prior to maturity, such as when the return for an alternative investment would significantly exceed the loss on the current investment. The sale of investments prior to maturity should be only on an exception basis and only when it is clearly favorable to do so. To further provide for liquidity, investments will be made only in readily marketable securities actively traded in the secondary market.¶
34 City of Santa Paula
Investment Policy
15 The Treasurer 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 shall select an appropriate, readily available index to use as a market benchmark. 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. . The benchmarks and investment performance will be reviewed by the Treasurer and City Manager as market conditions warrant or when the benchmarks are not met for a consecutive one-year period.

16.0 Investment Reporting
As suggested in California Government Code Section 53607, the investment report shall be submitted to the City Council on a quarterly basis by the Treasurer. The Treasurer shall review and render monthly and quarterly investment reports and include the following:
 The monthly report shall include an accounting of all receipts, disbursements and fund balances.
 The quarterly report shall include an itemized listing of portfolio investments by type, date of maturity, yield to maturity, issuer, par value, dollar amount invested, book value and current market value if applicable. The source of the market values will be cited.
 The quarterly report will include a statement of compliance of the portfolio with the City's investment policy or an explanation as to why the portfolio is not in compliance per California Government Code Section 53646(b)(2).  The quarterly report shall include a statement of compliance that the investment portfolio has the ability to meet the City's expenditure requirements for the next six months, or provide an explanation as to why sufficient money shall, or may, not be available, per California Government Code Section 53646 (b)(3).

17.0 Investment Policy Adoption
The City's investment policy shall be adopted by resolution by the City Council.

The policy may be reviewed annually by the City Council and any modifications to the investment policy must be approved by the City Council.

18.0 Exceptions
Occasionally, exceptions to some of the requirements specified in this investment policy may occur for pooled investments because of events subsequent to the purchase of investment instruments. State law is silent as to how exceptions Deleted: The City
Commented [CM11]: CAM recommends including language
on benchmark evaluation and duration
Deleted: shall use the LAIF apportionment rate and the 2- year U.S. Treasury Note as useful benchmarks to measure whether or not the City’s portfolio net yields are matching or surpassing the market yields
35 City of Santa Paula
Investment Policy
16 should be corrected. Exceptions may be temporary or more lasting; they may be self-correcting or require specific action. If specific action is required, the Treasurer should determine the course of action that would correct exceptions to move the portfolio into compliance with State law and City policy. Disclosure of exceptions lasting more than 183 days shall be done in the quarterly investment report immediately following the 183 days. Decisions to correct exceptions should not expose the assets of the portfolio to undue risk and should not impair the meeting of financial obligations as they fall due. Any subsequent investments should not extend existing exceptions.
36 City of Santa Paula
Investment Policy
17 19.0 Glossary
Asset-Backed Securities (ABS): Securities whose income payments and hence value is derived from and collateralized (or "backed") by a specified pool of underlying assets which are receivables. Pooling the assets into financial instruments allows them to be sold to general investors, a process called securitization, and allows the risk of investing in the underlying assets to be diversified because each security will represent a fraction of the total value of the diverse pool of underlying assets. The pools of underlying assets can comprise common payments credit cards, auto loans, mortgage loans, and other types of assets. Interest and principal is paid to investors from borrowers who are paying down their debt.

Banker’s Acceptance: A money market instrument created to facilitate international trade transactions. It is highly liquid and safe because the risk of the trade transaction is transferred to the bank which “accepts” the obligation to pay the investor.

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.

Bond Indenture (or Trust Indenture): Written agreement specifying the terms and conditions for issuing bonds, stating the form of the bond being offered for sale, interest to be paid, the maturity date, call provisions and protective covenants, if any, collateral pledged, the repayment schedule, and other terms. It describes the legal obligations of a bond issuer and the powers of the bond trustee, who has the responsibility for ensuring that interest payments are made to registered bondholders.

Broker-Dealer: A person or a firm who can act as a broker or a dealer depending on the transaction. A broker brings buyers and sellers together for a commission. They do not take a position. A dealer acts as a principal in all transactions, buying and selling for his own account.

Buy and Hold Strategy: Investments in which management has the positive intent and ability to hold each issue until maturity.

CALLABLE: A callable security gives the issuer the option to call it from the investor prior to its maturity. The main cause of a call is a decline in interest rates. If interest rates decline, the issuer will likely call its current securities and reissue them at a lower rate of interest.

Commented [CM12]: CAM recommends updating language
including additional terminology in the glossary
37 City of Santa Paula
Investment Policy
18 Certificate of Deposit (CD): A time deposit with a specific maturity evidenced by a Certificate. Large-denomination CDs are typically negotiable.

City Treasurer: The City Treasurer is elected through 2020 and appointed by the City Manager beginning in 2021.

Collateralization: To secure a debt in part or in full by pledge of collateral, asset pledged as security to ensure payment or performance of an obligation. Also refers to securities pledged by a bank to secure deposits of public monies.

Collateralized Mortgage Obligations (CMO: Classes of bonds that redistribute the cash flows of mortgage securities (and whole loans) to create securities that have different levels of prepayment risk, as compared to the underlying mortgage securities.

Commercial Paper: The short-term unsecured debt of corporations.

Coupon: The rate of return at which interest is paid on a bond.

Credit Risk: The risk that principal and/or interest on an investment will not be paid in a timely manner due to changes in the condition of the issuer.

Current Yield: The interest paid on an investment expressed as a percentage of the current price of the security.

Custody: Safekeeping services offered by a bank, financial institution or trust company, referred to as the “custodian.” Service normally includes the holding and reporting of the customer’s securities, the collection and disbursement of income, securities settlement and market values.

Delivery versus Payment: A type of securities transaction in which the purchaser pays for the securities when they are delivered either to the purchaser or custodian. It ensures that securities are deposited in an eligible financial institution prior to the release of funds.

Disallowed Investments: Prohibited investments include any investments not specifically authorized within this policy, inverse floaters, range notes, interestonly strips that are derived from a pool of mortgages; futures, option, all leveraged purchases, reverse repurchases, and speculations on interest rates.

Diversification: Dividing investment funds among a variety of securities offering independent returns.

Duration: A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. Duration is expressed as a 38 City of Santa Paula
Investment Policy
19 number of years. Rising interest rates means falling bond prices, while declining interest rates mean rising bond prices.

Federal Agency Obligation: A debt instrument issued by one of the federal agencies. Federal agencies are considered second in credit quality and liquidity only to U.S. Treasuries.

Federal Deposit Insurance Corporation (FDIC): The federal agency that insures bank deposits up to $250,000 per deposit at participating banking institutions. 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 Protection Act.

Federal Reserve System: The central bank of the United States which consists of a seven-member Board of Governors, 12 regional banks, and 5,700 commercial banks that are members.

Fiduciary Funds: Funds held in a trustee or agency capacity for outside parties.

Interest Rate: The annual yield earned on an investment, expressed as a percentage.

Liquidity: Refers to the ability to rapidly convert an investment into cash without a substantial loss of value.

Laddered Portfolio: Bond investment portfolio with securities in each maturity range (e.g. monthly) over a specified period (e.g. five years).

Leverage: Investing with borrowed money with the exception that the interest earned on the investment will exceed the interest paid on the borrowed money.

Local Agency Investment Fund (LAIF): A voluntary investment program offering participating agencies the opportunity to participate in a major portfolio which daily invests hundreds of millions of dollars, using the investment expertise of the State Treasurer's Office investment staff at no additional cost to the taxpayer. Investment in LAIF, considered a short-term investment, is readily available for cash withdrawal daily.

Market Risk: Defined as market value fluctuations due to overall changes in the general level of interest rates. Adverse fluctuation possibilities shall be mitigated by limiting the maximum maturity of any one security to five years, structuring the portfolio based on historic and current cash flow analysis, and eliminating the need to sell securities prior to maturity. Also, avoiding the purchase of long-term securities for the sole purpose of short-term speculation mitigates market risk. 39 City of Santa Paula
Investment Policy
20 Market Value: The price at which a security is trading and could presumably be purchased or sold on a specific date.

Maturity: The date the principal or stated value of an investment becomes due and payable.

Modified Duration: The percent change in price for a 100-basis point change in yields. Modified duration is the best single measure of a portfolio’s or security’s exposure to market risk.

Money Market Fund: A type of safe investment comprising a variety of shortterm securities with high quality and high liquidity. The fund provides interest to shareholders and must maintain a stable net asset value (NAV) of $1 per share.

Mortgage Pass-Through Securities: A securitized participation in the interest and principal cash flows from a specified pool of mortgages. Principal and interest payments made on the mortgages are passed through to the holder of the security.

Municipal Securities: Securities issued by state and local agencies to finance capital and operating expenses.

Mutual Fund: An entity which pools the funds of investors and invests those funds in a set of securities which is specifically defined in the fund’s prospectus.

Mutual funds can be invested in various types of domestic and/or international stocks, bonds, and money market instruments, as set forth in the individual fund’s prospectus. For most large, institutional investors, the costs associated with investing in mutual funds are higher than the investor can obtain through an individually managed portfolio.

Nationally Recognized Statistical Rating Organization (NRSRO).

A credit rating agency that the Securities and Exchange Commission in the United States uses for regulatory purposes. Credit rating agencies provide assessments of an investment's risk. The issuers of investments, especially debt securities, pay credit rating agencies to provide them with ratings. The three most prominent NRSROs are Fitch, S&P, and Moody's.

National Credit Union Administration (NCUA): An independent federal agency that insures deposits at federally insured credit unions, currently up to $250,000.

Negotiable Certificates of Deposit: Typically large-denomination Certificates of Deposit that can be transferred, bought, sold, or exchanged. 40 City of Santa Paula
Investment Policy
21 Nominee: Registered owner of a stock or bond if difference from the beneficial owner, who acts as holder of record for securities and other assets. Typically, this arrangement is done to facilitate the transfer of securities when it is inconvenient to obtain the signature of the real owner, or the actual owner may not wish to be identified. Nominee ownership simplifies the registration and transfer of securities.

Non-Negotiable Certificates of Deposit: Certificates of Deposit that cannot be transferred, bought, sold, or exchanged.

Pooled Investments: Grouping of resources for the advantage of the participants.

Principal: The original cost of a security. It represents the amount of capital or money that the investor pays for the investment.

Portfolio: Collection of securities held by an investor.

Primary Dealer: A group of government securities dealers who submit daily reports of market activity and positions and monthly financial statements to the Federal Reserve Bank of New York and subject to its informal oversight. Primary dealers include Securities and Exchange Commission (SEC) registered securities broker-dealers, banks and a few unregulated firms.

Prime Commercial Paper: Short-term IOU, or unsecured money market obligation, issued by prime rated commercial firms and financial companies, with maturities from 2 days up to 270 days. A promissory note of the issuer used to finance current obligations and is a negotiable instrument.

Principal: (1) The face amount of par value of a debt instrument. (2) One who acts as a dealer buying or selling for his own account.

Prudent Investor Standard: An investment standard that all investments should be made with care, skill, prudence and diligence under the circumstances then prevailing, including, but not limited to, the general economic conditions and the anticipated needs of the agency, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the agency.

Safekeeping: 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.
41 City of Santa Paula
Investment Policy
22 Secondary Market: A market is made for the purchase and sale of outstanding issues following the initial distribution.

Sweep Account: Short-term income fund into which all un-invested cash balances from the non-interest-bearing checking account are automatically transferred daily.

Supranational: A Supranational is a multi-national organization whereby member states transcend national boundaries or interests to share in the decision making to promote economic development in the member countries.

Third-Party Custodian: Corporate agent, usually a commercial bank, who, acting as trustee, holds securities under a written agreement for a corporate client and buys and sells securities when instructed. Custody service includes securities safekeeping, and collection of dividends and interest. The bank acts only as a transfer agent and makes no buy-sell recommendations.

Treasury Bills: A non-interest bearing discount security issued by the U.S.

Treasury to finance the national debt. Most bills are issued to mature in three months, six months, or one year.

Treasury Bonds: Long-term coupon-bearing U.S. Treasury securities issued as direct obligations of the U.S. Government and having initial maturities of more than 10 years.

Treasury Notes: Medium-term coupon-bearing U.S. Treasury securities issued as direct obligations of the U.S. Government and having initial maturities of from two to 10 years.

Trustee: (1) All governing bodies of local agencies or persons authorized (city investment officials) to make investment decisions on behalf of those local agencies investing public funds pursuant to this chapter are trustees and therefore fiduciaries subject to the prudent investor standard. (2) A financial institution with trust powers that acts in a fiduciary capacity for the benefit of the bondholders in enforcing the terms of the bond contract.

Total Rate of Return: A measure of a portfolio’s performance over time. It is the internal rate of return, which equates the beginning value of the portfolio with the ending value; it includes interest earnings, realized and unrealized gains, and losses in the portfolio.

U.S. Agencies: Federal agency securities and/or Government-sponsored enterprises.
42 City of Santa Paula
Investment Policy
23 U.S. Government Securities: Securities issued by the U.S. Government and its agencies which are either directly or indirectly backed by the full faith and credit of the United States. U.S. Government securities include Treasury Bills, Notes and Bonds. Agency securities include those issued by the Federal National Mortgage Association, Federal Home Loan Bank, and similar agencies.

Yield to Maturity: The rate of annual income return on an investment expressed as a percentage, adjusted for any discounts, and spread over the period from the date of purchase to the date of maturity.
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Santa Paula City CouncilMarch 16, 2022

Santa Paula City Council
March 16, 2022