Agenda-Item-Number-7-Section-115-Trust-Update-FINAL — Sebastopol City Council, June 2, 2026

CITY OF SEBASTOPOL CITY COUNCIL
AGENDA ITEM REPORT FOR MEETING OF: June 2, 2026
============================================================================================== To: Honorable Mayor and City Councilmembers
From: Ana Kwong – Administrative Services Director
Responsible Department: Administrative Services
Subject: Year-to-Date Update for City Investments, including the Section 115 Trust and NonTrust Discretionary Account ============================================================================================== RECOMMENDATION:

It is recommended that the City Council receive and file this informational report providing an annual update on City investments, including the Section 115 Pension Trust and the non-trust pension account.

While this item is informational, any consideration of additional funding to the Section 115 Trust is recommended to be discussed and acted upon as part of the FY 2026–27 budget hearings, where full budget context and funding priorities can be evaluated. Policy direction or other related actions may also be brought forward as future agenda item.

PROCESS OF AGENDA ITEM:
a. Presentation of the agenda item by the Administrative Services Director b. Introduction of Consultant
c. Questions and Discussion from Councilmembers
d. Public Comment Period
e. Council Deliberation and Motion
EXECUTIVE SUMMARY:

This report provides a year-to-date update on the City’s Section 115 Pension Trust and internal (non-trust) pension reserves. The purpose of this report is to support transparency and provide context for upcoming budget deliberations related to long-term pension funding.

BACKGROUND:

The City established a Section 115 Pension Trust in October 2023 to prefund a portion of its CalPERS pension obligations. Authorized under federal tax law, a Section 115 trust allows public agencies to set aside assets in an irrevocable trust that may be used exclusively for pension-related costs. Assets held in the trust are invested under a long-term strategy with the goal of achieving returns that help reduce volatility in future pension costs.

In addition to the Section 115 Pension Trust, the City retained a portion of its pension reserves outside the trust as a non-trust discretionary pension reserve. Unlike the Section 115 Trust, these funds are not subject to the same legal restrictions and remain fully under City Council discretion.

Given renewed Council interest in pension funding strategy and the role of prefunding in managing long-term obligations, this report provides an annual overview of both funding mechanisms. This report is informational in nature and does not recommend a change in policy at this time.

DISCUSSION:

Section 115 Pension Trust
The Section 115 Pension Trust is held in an irrevocable trust and invested in accordance with an adopted investment policy designed to balance risk mitigation with long-term return objectives.

Key characteristics of the Section 115 Trust include:

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• Funds are legally restricted for pension-related expenditures. • Assets are invested separately from the City’s operating funds. • Earnings, whether gains or losses, accrue to the trust over time. • Use of trust funds generally requires City Council direction and coordination with the City’s pension advisors.

The Trust serves as a long-term financial management tool intended to reduce contribution volatility and provide flexibility in addressing future pension cost increases, particularly during periods of market or actuarial stress.

Statements for the most recent fiscal year-end and current fiscal year-to-date are provided for informational purposes.

Non-Trust Pension Account and City Investment Portfolio In addition to the Section 115 Trust, the City maintains non-trust pension account. These funds are not subject to the legal restrictions of a Section 115 Trust and therefore provide greater short-term fiscal flexibility. While historically associated with pension planning, these reserves remain available for broader General Fund purposes at the discretion of the City Council.

Key distinctions between non-trust pension reserves and the Section 115 Trust include:
• Funds are not legally restricted to pension-only use. • Assets are generally held within the City’s pooled investment structure. • Council may redirect these funds during budget adoption or mid-year adjustments, subject to fiscal policy considerations.

The coexistence of trust and non-trust pension resources allows the City to balance long-term pension prefunding objectives with near-term budgetary pressures, including structural deficit considerations.

City Investment Portfolio Investment Policy Update
The City’s Investment Policy sets forth the City’s investment objectives, risk preferences, authorized investments, and other investment-related priorities. A thoughtful and comprehensive investment policy not only provides accountability for investment officials but also promotes public trust in investment decisions. Developing, reviewing, and monitoring the City’s Investment Policy serves as an important tool of communication between the investment official, City management, and the City Council.

Prior to January 1, 2005, State statute required the City Treasurer to render to the City Council an annual Investment Policy. Although this statutory requirement has been removed, conducting an annual review for legal compliance and submitting the Policy to the City Council remains a sound fiscal practice.

The current Investment Policy Statement remains compliant with California Government Code Section 53601 (“the Code”). However, updates to the Code in recent years have expanded investment flexibility for local agencies while preserving the core principles of safety, liquidity, and return.

Shuster has recommended targeted updates to the City’s IPS to align with current statutory allowances and incorporate best practices in public fund management. These changes are designed to enhance yield potential, streamline portfolio structure, and ensure the City remains well-positioned in a dynamic interest rate environment.

STAFF ANALYSIS:

The City has retained Shuster Advisory Group, LLC to manage City investments to prefund pension liabilities (Trust and non-Trust). The firm is an SEC-registered investment advisor managing over $11 billion in public assets and serves as fiduciary and investment advisor to the City. Charles Schwab Trust Bank acts as custodian, and Alta Trust Company serves as directed trustee.

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The Section 115 Pension Trust is currently invested with an allocation of approximately 40 percent equities and 60 percent fixed income. This allocation emphasizes capital preservation while allowing for moderate long-term growth.

Since inception, the Trust has demonstrated positive performance. The annualized returns over the past two years ending May 6, 2026 were 11.28%, exceeding the benchmark return of 9.73% for the same period and the CalPERS Public Employees’ Retirement Fund (PERF) pension plan discount rate of 6.80%. As of May 6, 2026, the inception-to-date return was 10.45%, compared to a benchmark return of 8.86%.

The CalPERS PERF pension plan maintains an asset allocation of approximately 70 percent equities and 30 percent fixed income. In contrast, the City adopted a more balanced approach for the Section 115 Pension Trust in recognition of its size and capacity for risk.

As the Trust enters its second year and continues to demonstrate positive performance, staff will periodically reassess the asset allocation to determine whether a gradual increase in equity exposure would better support long-term return objectives while maintaining a risk profile appropriate to the City’s overall financial position.

Balances for both the Section 115 Pension Trust and the non-trust pension reserves are as follows:

Account Balance as of 3/31/26 Balance as of 4/30/26 Balance as of 5/6/26 Section 115 Pension Trust $2,144,104 $2,232,147 $2,261,476 Non-Trust Pension Account $1,080,663 $1,083,582 $1,083,582 Pension prefunding decisions must be evaluated alongside competing fiscal priorities, including infrastructure investment, service level sustainability, and long-term revenue capacity.

Any future changes in funding strategy or use of pension reserves would be presented separately for City Council consideration as part of the budget process or a dedicated policy discussion.

In order to maximize non-Trust investment earnings, staff has discussed the option to engage Shuster Advisory Group to also actively manage the City’s Cash Investment Portfolio.

Following a comprehensive review of the City’s investment assets, as reflected in the March 2026 Investment Report data, Shuster identified opportunities to reallocate a portion of shorter-maturity holdings into high-quality fixed income investments. These reallocations are designed to enhance portfolio yield without sacrificing core principles of safety and liquidity.

Recognizing the complexity of the fixed income market, Shuster partners with leading institutional bond managers to construct investment-grade, resilient portfolios. These portfolios include only investments permissible under California Government Code Section 53601, such as U.S. Treasuries, U.S. Agency bonds, A-rated or better corporate bonds, and AA-rated or better mortgage- and asset-backed securities.

In today’s dynamic interest rate environment, professional bond management provides access to institutional pricing, credit analysis, and market research, allowing the City to capture opportunities arising from market dislocations.

Shuster will continue to assist the City in allocating assets between JPA pools and institutional bond managers to optimize yield and ensure compliance with safety and liquidity objectives.

The recommendation to approve an updated Investment Policy Statement and to approve Shuster as the Investment Fiduciary for the City’s Cash Investment Portfolio will be presented separately for Council consideration.

BUDGET COMMITTEE REVIEW
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The Budget Committee reviewed this item at its May 11, 2026 meeting and provided advisory input intended to inform City Council deliberations during the FY 2026–27 budget process. Consistent with these recommendations, no action is requested at this time, as any related policy considerations will return to the City Council at a future meeing and any related funding to 115 trust should be addressed as part of the upcoming budget hearings:

1. Transfer of Funds to Section 115 Trust
Transfer 50%, or $500,000, from the non-trust pension account into the Section 115 Trust to move assets from money market investments into a diversified, long-term growth strategy.

Action: To be considered by the City Council as part of the FY 2026–27 budget hearings.

2. Section 115 Trust Asset Allocation Adjustment
Adjust the asset allocation from 40/60 to 50/50 (Equity/Fixed Income) to improve long-term return potential while maintaining a moderate and prudent risk profile.

Action: No City Council approval required; this is an administrative/investment management action.

3. Investment Policy Statement (IPS) Update
Revise the City’s Investment Policy Statement to allow greater investment flexibility consistent with California Government Code.

Action: Will be brought back to the City Council for formal review and approval at a future meeting.

4. Alignment of Investment Strategy with Long-Term Liabilities Align the City’s investment strategy with long-term pension liabilities rather than short-term liquidity-only objectives.

Action: Policy approach will be further developed and returned to the City Council for future consideration and direction.

5. Future Investment of Excess Funds
Work with staff to identify and invest future excess funds, once liquidity needs are met, under the revised IPS using a professionally managed approach designed to maximize return within prudent risk limits.

Action: Implementation will be guided by Council-approved policies; No City Council approval required; this is an administrative/investment management action.

Outcome:

These advisory recommendations are intended to position the City to better manage pension cost volatility, improve long-term returns, and align investment practices with the City’s long-term financial obligations while preserving flexibility and local control.

CITY COUNCIL GOALS/PRIORITIES/ AND OR GENERAL PLAN CONSISTENCY:

This agenda item represents the City Council goals/priorities as follows:

Goal 5: Achieving Greater Fiscal Resilience and Long Term Fiscal Sustainability This agenda item represents the City Council General Plan Consistency (if applicable): Not Applicable FISCAL IMPACT:

There is no fiscal impact associated with receiving and filing this informational report. Future fiscal impacts would depend on City Council policy direction and would be evaluated through the budget process or a separate policy action.

COMMUNITY OUTREACH:

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This item has been noticed in accordance with the Ralph M. Brown Act and was available for public viewing and review at least 72 hours prior to schedule meeting date. The City has also used social media to promote and advertise the City Council Meeting Agenda Items.

As of the writing of this agenda item report, the City has not received any public comment. If staff receives public comment from interested parties following the publication and distribution of this agenda item report, such comments will be provided to the City Council as supplemental materials before or at the meeting and will be posted to the city website.

RESTATED RECOMMENDATION(S):

OPTIONS:

None
ATTACHMENTS:

Section 115 Trust and Cash Investment Updates
APPROVALS:

Department Head Approval: Approval Date: 5/1/26
CEQA Determination (Planning): Approval Date: N/A
The proposed action is not a project under the California Environmental Quality Act (CEQA) Administrative Services (Financial) Approval Date: 5/18/26 Costs authorized in City Approved Budget: ☐ Yes ☐ No  N/A Account Code (f applicable) __N/A__________
City Attorney Approval: Approval Date: _5/22/26_____
City Manager Approval: Approval Date: __5/22/26___
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Section 115 Trust
and Cash
Investment Updates
City of Sebastopol
June 2, 2026
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Section 115 Trust & Cash Account Summary
Section 115 Trust Adoption: 10/17/2023
Asset Balance
Investment Policy
• Section 115 Pension Trust: 40% Equity / 60% Fixed Income • Non-Trust Pension Account: 100% Money Market
Cash Flows
• Contributions: Section 115 Pension Trust: $1,800,000 (1/19/2024) Non-Trust Pension: $1,000,000 (5/1/2024)
• Distributions: Section 115 Pension Trust: $0
Non-Trust Pension: $0
Account 3/31/2026 Balance 4/30/2026 Balance 5/6/2026 Balance Section 115 Pension Trust $2,144,104 $2,232,147 $2,261,476 Non-Trust Pension $1,080,663 $1,083,582 $1,083,582
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Why Use a Section 115 Trust?
Uses of the Trust
• Prefund pension contribution liabilities
• Prefund OPEB benefit liabilities
• Used as a budget stabilization tool
Benefits
• Non-taxable: Investment earnings are non-taxable
• Flexible: Investment restrictions applicable to the general fund do not apply - Allows for use of relatively higher discount rate • Investment Growth: Allows for investment growth under the Agency’s chosen strategy • Liquidity & Budget Stability: Assets can be accessed in years of budgetary stress to smooth contributions • Demonstrated Fiscal Discipline: Considered a best practice by the Government Finance Officers Association (GFOA). IRS approval not required and no annual IRS filings.
• Offset OPEB Liability: For GASB 75 reporting, the OPEB liability is reported net of Trust assets. Pension 115 Trusts are reported as a fiduciary fund.

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CalPERS Public Employees’ Retirement Fund
(PERF) Performance
* Fiscal Year Ending 2025
Note: Shuster Advisory Group (“Shuster”), is a Securities & Exchange Commission Registered Investment Advisor. This material has been prepared for informational and summary purposes only and is not intended to provide, and should not be relied on for accounting, legal or tax advice, or investment recommendations. Past performance is not a guarantee of future results. All data is as of 6/30 of each calendar year. CalPERS PERF returns shown are as reported on the FY 2024-25 CalPERS Facts at a Glance available online at https://www.calpers.ca.gov/documents/facts-investments/download?inline. Returns are time-weighted and reflect private equity and real assets valuations as of March 31, 2025, and are cash adjusted through June 30, 2025. The 70/30% index shown is the Morningstar Balanced 70/30 GR USD which is a blended benchmark of 70% Morningstar DM GR USD and 40% Morningstar Gbl Trsy Bd TR USD rebalanced to target weights of 70% equity and 30% fixed income on a quarterly basis. The index does not incorporate Environmental, Social, or Governance (ESG) criteria. Any discrepancy is purely accidental.

Fiscal Year
Ending 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 5-Year Annualized*
10-Year
Annualized*
CalPERS 0.61% 11.20% 8.60% 6.70% 4.70% 21.30% -6.10% 5.80% 9.30% 11.60% 8.01% 7.15% 70/30 Index 1.69% 11.21% 8.99% 6.60% 3.70% 26.98% -15.87% 11.10% 12.97% 14.31% 8.92% 7.64% Agenda Item Number 7
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Shuster Composite Model Performance
(Net 4/30/2026)
Note: All portfolio allocation options are available with Shuster. Shuster’s performance is calculated by Morningstar, is net of all Trust program fees (weighted at 14.6 basis points as of 9/30/25), and is believed to be accurate but is not guaranteed. Any discrepancy is purely accidental. This summary is for simplification purposes only and is not guaranteed. Past performance is not a guarantee of future performance.

Model YTD Rolling 1-Year Rolling 3-Year Rolling 5-Year Inception Inception Date 0 100 Taxable 0.29% 5.57% 4.75% N/A 4.12% 6/1/2022
Benchmark: 100% Taxable Bond 0.06% 3.98% 3.73% N/A 2.65% 10 90 Taxable 1.25% 8.57% N/A N/A 5.88% 10/1/2024
Benchmark: 10% Equity 90% Taxable Bond 0.86% 6.57% N/A N/A 4.15% 20 80 Taxable 2.22% 11.63% 8.22% 3.46% 5.50% 5/1/2020
Benchmark: 20% Equity 80% Taxable Bond 1.66% 9.21% 6.45% 2.36% 3.47% 30 70 Taxable 3.12% 14.44% 10.13% 5.10% 5.98% 6/1/2019
Benchmark: 30% Equity 70% Taxable Bond 2.45% 11.91% 7.76% 3.28% 5.03% 40 60 Taxable 3.72% 16.13% 11.35% 5.74% 7.52% 9/1/2019
Benchmark: 40% Equity 60% Taxable Bond 3.25% 14.65% 9.20% 4.25% 5.85% 50 50 Taxable 4.56% 19.12% 12.59% 7.18% 9.03% 4/1/2019
Benchmark: 50% Equity 50% Taxable Bond 4.05% 17.45% 10.64% 5.23% 7.13% 60 40 Taxable 5.32% 21.71% 14.18% 7.93% 12.38% 4/1/2019 Benchmark: 60% Equity 40% Taxable Bond 4.85% 20.31% 12.11% 6.12% 10.36% 70 30 Taxable 6.14% 23.99% 15.54% 8.25% 10.27% 2/1/2020 Benchmark: 70% Equity 30% Taxable Bond 5.65% 23.21% 13.63% 7.12% 8.98% 80 20 Taxable 7.00% 27.19% 16.87% 9.11% 10.69% 1/1/2020 Benchmark: 80% Equity 20% Taxable Bond 6.45% 26.17% 15.05% 8.06% 9.77% 90 10 Taxable 7.04% 29.44% 18.03% 9.89% 13.06% 6/1/2019 Benchmark: 90% Equity 10% Taxable Bond 7.25% 29.19% 16.52% 8.91% 11.95% 100 Equity Taxable 8.38% 31.81% 19.36% 10.73% 13.86% 6/1/2019 Benchmark: 100% Equity Benchmark 7.89% 31.64% 18.09% 9.90% 13.07% Agenda Item Number 7
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Shuster Composite Model Performance
(Gross 4/30/2026)
Note: All portfolio allocation options are available with Shuster. Shuster’s performance is calculated by Morningstar, is gross of all Trust program fees, is believed to be accurate but is not guaranteed. Any discrepancy is purely accidental. This summary is for simplification purposes only and is not guaranteed. Past performance is not a guarantee of future performance.

Model YTD Rolling 1-Year Rolling 3-Year Rolling 5-Year Inception Inception Date 0 100 Taxable 0.34% 5.71% 4.89% N/A 4.26% 6/1/2022
Benchmark: 100% Taxable Bond 0.06% 3.98% 3.73% N/A 2.65% 10 90 Taxable 1.30% 8.71% N/A N/A 6.02% 10/1/2024
Benchmark: 10% Equity 90% Taxable Bond 0.86% 6.57% N/A N/A 4.15% 20 80 Taxable 2.27% 11.77% 8.36% 3.60% 5.64% 5/1/2020
Benchmark: 20% Equity 80% Taxable Bond 1.66% 9.21% 6.45% 2.36% 3.47% 30 70 Taxable 3.17% 14.58% 10.27% 5.24% 6.12% 6/1/2019
Benchmark: 30% Equity 70% Taxable Bond 2.45% 11.91% 7.76% 3.28% 5.03% 40 60 Taxable 3.77% 16.27% 11.49% 5.88% 7.66% 9/1/2019
Benchmark: 40% Equity 60% Taxable Bond 3.25% 14.65% 9.20% 4.25% 5.85% 50 50 Taxable 4.61% 19.26% 12.73% 7.32% 9.17% 4/1/2019
Benchmark: 50% Equity 50% Taxable Bond 4.05% 17.45% 10.64% 5.23% 7.13% 60 40 Taxable 5.37% 21.85% 14.32% 8.07% 12.52% 4/1/2020 Benchmark: 60% Equity 40% Taxable Bond 4.85% 20.31% 12.11% 6.12% 10.36% 70 30 Taxable 6.19% 24.13% 15.68% 8.39% 10.41% 2/1/2020 Benchmark: 70% Equity 30% Taxable Bond 5.65% 23.21% 13.63% 7.12% 8.98% 80 20 Taxable 7.05% 27.33% 17.01% 9.25% 10.83% 1/1/2020 Benchmark: 80% Equity 20% Taxable Bond 6.45% 26.17% 15.05% 8.06% 9.77% 90 10 Taxable 7.09% 29.58% 18.17% 10.03% 13.20% 6/1/2019 Benchmark: 90% Equity 10% Taxable Bond 7.25% 29.19% 16.52% 8.91% 11.95% 100 Equity Taxable 8.43% 31.95% 19.50% 10.87% 14.00% 6/1/2019 Benchmark: 100% Equity Benchmark 7.89% 31.64% 18.09% 9.90% 13.07% Agenda Item Number 7
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City of Sebastopol Performance
Section 115 Trust
Note: All portfolio allocation options are available with Shuster. Shuster’s performance is calculated by Morningstar, is net of all Trust program fees and net of embedded fund expense, and is believed to be accurate but is not guaranteed. Any discrepancy is purely accidental. This summary is for simplification purposes only and is not guaranteed.

Past performance is not a guarantee of future performance.

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Cash Account Program Services
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Investment Policy Analysis
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Sebastopol CA Code 53601 Limits
* 1 US Treasury Obligations 5yr max maturity, limit unstated 5yr max maturity, no limit * 2 US Agency Obligations 5yr max maturity, limit unstated 5yr max maturity, no limit * 3 Mortgage Pass-Through and Asset-Backed Securities Not explicitly stated 5yr max maturity, 20% limit, AA rated or better, No portfolio limit on Agency MBS
* 4 Medium-Term Notes (i.e. corporates) 5yr max maturity, limit and credit rating unstated 5yr max maturity, 30% limit, A rated or better 10% single-issuer limit
5 Negotiable CDs 5yr max maturity, limit unstated 5yr max maturity, 30% limit 6 Non-negotiable CDs 5yr max maturity, limit unstated 5yr max maturity, no limit * 7 Mutual Funds and MMMFs Limit unstated 20% limit
8 Bankers' Acceptances Limit unstated 180 day max maturity, 40% limit 9 Repurchase Agreements Limit unstated 1yr max maturity, no limit 10 CP (non-pooled, city with >=100mn of investments) Limit unstated, A-1 rated or better 397 day max maturity, 40% limit, A-1 rated or better 11 CP (non-pooled, city with <100mn of investments) Limit unstated, A-1 rated or better 397 day max maturity, 25% limit, A-1 rated or better * 12 Supranational Obligations (IBRD, IFC, IADB) Not explicitly stated 5yr max maturity, 30% limit, AA rated or better * 13 Local Agency Bonds 5yr max maturity, limit unstated 5yr max maturity, no limit * 14 CA Local Agency Obligations 5yr max maturity, limit unstated 5yr max maturity, no limit * 15 State Obligations (CA and others) 5yr max maturity, limit unstated 5yr max maturity, no limit 16 Reverse Repurchase Agreements & Sec Lending
Agreements Not explicitly stated 92 day max maturity, 20% limit * 17 Joint Powers Authority Pool Limit unstated No Limit * 18 Local Agency Investment Fund (LAIF) Limit unstated No Limit in Aggregate / $75M per LAIF account 19 CP (pooled funds) Not explicitly stated 270 day max maturity, 40% limit 20 Placement Service Deposits Not explicitly stated 5yr max maturity, 50% limit 21 Placement Service Certificates of Deposit Not explicitly stated 5yr max maturity, 50% limit 22 Collateralized Bank Deposits Not explicitly stated 5yr max maturity, no limit 23 County Pooled Investment Funds Limit unstated No Limit 24 Voluntary Investment Program Fund Not explicitly stated No Limit 25 Public Bank Obligations Not explicitly stated 5yr max maturity, no limit *Updates to the IPS for these investmenttypes would have the greatestimpact on increased investment flexibility. **Investment Policy last updated in Septebmer 2017
Investment Type
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Current and Proposed Portfolios
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Cash
22%
Money
Market
10%
LAIF
50%
Bonds and
Notes
7%
CD's
11% City of Sebastopol* - Current Holdings
Type Market Value Weighted Yields Yield Contribution
Cash $3,080,497 0.250% 0.055%
Money Market $1,358,030 3.459% 0.333%
LAIF $7,015,745 3.810% 1.897%
Bonds and Notes $1,055,952 3.765% 0.282%
CD's $1,580,511 3.261% 0.366%
Totals $14,090,735 2.933%
*Investment Values as of 3/31/2026
City of Sebastopol* - Proposed Holdings
Type Value Weighted Yields Yield Contribution
Cash $2,000,000 0.250% 0.035%
Money Market $0 3.459% 0.000%
LAIF $3,000,000 3.810% 0.811%
Bonds - BlackRock/Western Asset/TCW $7,510,224 4.000% 2.132% CD's $1,580,511 3.261% 0.366%
Totals $14,090,735 3.344%
Cash
14%
LAIF
21%
Bonds - BlackRock/Western
Asset/TCW
54%
CD's
11%
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City of Sebastopol* - Current Holdings
Type Market Value Weighted Yields Yield Contribution Return Fees % Fees $ Cash $3,080,497 0.25% 0.055% $7,701 TBD TBD
Money Market $1,358,030 3.46% 0.333% $46,972 0.20%** $2,716 LAIF $7,015,745 3.81% 1.897% $267,300 0.26% $18,241
Bonds and Notes $1,055,952 3.77% 0.282% $39,757 0.10%** $1,056 CD's $1,580,511 3.26% 0.366% $51,540 TBD TBD
Custody Fees N/A N/A N/A N/A TBD TBD
Totals $14,090,735 2.933% $413,270 $22,013
City of Sebastopol* - Proposed Holdings
Type Value Weighted Yields Yield Contribution Return Fees % Fees $ Cash $2,000,000 0.25% 0.035% $5,000 TBD TBD
Money Market $0 3.46% 0.000% $0 0.20%** $0
LAIF $3,000,000 3.81% 0.811% $114,300 0.26% $7,800
Bonds - BlackRock/Western Asset/TCW $7,510,224 4.00% 2.132% $300,409 0.07% $5,257 CD's $1,580,511 3.26% 0.366% $51,540 TBD TBD
Shuster Fiduciary Fee N/A N/A N/A N/A Flat $5,000
Totals $14,090,735 3.344% $471,249 $18,057
Net Difference $ - 0.411% $57,979 ($3,956)
**The Current Holdings Bond and Notes fee is an estimate for comparable bond mana gers. Implicit fees may also apply given non-institutional brokera ge rela tionships. *Due to the higher alloca tion of funds to a professional bond mana ger, such as Western Asset Management or BlackRock, higher fees will be incurred. However, when incorporating implicit expense ratio fees and explicit custody/fiduciary fees, savings do occur with a Shuster managed cash investment portfolio. LAIF Net Expense Ratio / Fee not disclosed but calculated from most recent Annual Report. Money Market fees are an estimated Net Expense Ratio comparable to other institutional Money Market funds.

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Unless otherwise stated, all information, including fees and interest rates, is gathered from the Agency or publicly available sources.

Past performance is no guarantee of future results.

HUB Retirement and Private Wealth employees are affiliated with and offer Securities and Advisory services through various Broker Dealers and Registered Investment Advisers, some of whom may or may not be affiliated with HUB International. HUB International owns the following Registered Investment Advisers: HUB Investment Partners; HUB Investment Advisors; Global Retirement Partners, LLC; RPA Financial; and Taylor Advisors.

Additional information for each individual HUB International Registered Investment Advisor may be found in the respective Form ADV available on the SEC’s IAPD website at https://adviserinfo.sec.gov. Insurance services are offered through HUB International.

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Shuster Advisory Group
• SEC-Registered Investment Advisor with $11B+ in
assets under management/advisement
• Focuses on serving the unique needs of governmental
agencies and special districts
• Fiduciary to plan investments
• Must act in the best interest of our clients
• Provides investment selection and ongoing monitoring
and management
• Provides transparent services and fees
13 © 2026 HUB International Limited.

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Background
• For over 30 years, Shuster, and its prior affiliates have provided retirement plan consulting to both corporate and public sector plans.
• Recognizing a gap in quality and independent advisory services in the public sector over a decade ago, Shuster entered the sector in 2013.
• Since our first public sector client engagement in 2015, we have onboarded over 100 new agency clients, encompassing over 225 public agency plans. Currently, we serve as the adviser for more than 250 qualified retirement plans. • Our comprehensive plan audit, RFP process and investment advisory services have resulted in significant cost reductions and improved safety of principal options for plan participants.
• Unwavering focus on delivering state-of-the-art, low cost and compliant retirement plans to our plan sponsor customers and their employees.

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Plan Consulting Services
Defined Contribution
• 457(b)
• 457(f)
• 401(a)
• 401(k)
• 403(b)
• 415(m)
• PT-OBRA/ Social Security
Alternative
Retiree Medical Reimbursement
Pension
• Defined Benefit
• Cash Balance
• Supplemental Defined Benefit
Future Liability Prefunding (115 Trust)
• Pension
• OPEB
Operating Reserves/Cash Accounts
• Cash Management
• Bonds
• Pooled Cash
• CD’s
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Platform Administration
Consultant & Fiduciary
Custodian
• Safekeeping ofAssets
• Trade Processing
• Reporting
• Paying Agent
• $38.3M Brokerage Accounts**
• $11.8T in Total Client Assets**
16 © 2026 HUB International Limited.
• Independent and Non-Proprietary
• Fee Negotiations
• $11B+ inAssets Under Management /Advisement*
• Platform Coordination
• Investment Policy Assistance
• Regulatory Compliance Support
• White Glove Client Support
*As of 12/31/25, ** As of 9/30/25
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Cities and Towns We Proudly Serve
The cities and agencies listed above do not expressly recommend Shuster Advisory Group, a HUB International Company.

American Canyon Commerce Jurupa Valley Montebello Pismo Beach Sausalito Arcadia Covina Laguna Hills Monterey Park Placentia Sebastopol Artesia Downey La Mirada Moraga Pleasant Hill Scotts Valley Azusa Eastvale La Palma Moreno Valley Rancho Cordova Signal Hill Baldwin Park El Segundo La Quinta Morgan Hill Rancho Mirage South Gate Bell Emeryville La Verne Norwalk Rancho Palos Verdes South Pasadena Bell Gardens Fontana Lafayette Oakley Redlands Stanton
Bellflower Fullerton Lakeport Ontario Rialto Stockton
Beverly Hills Gardena Lakewood Orange Riverside Temecula Canyon Lake Glendora Lancaster Oxnard San Bernardino Union City Carson Hemet Lomita Palmdale San Dimas Upland
Cathedral City Hermosa Beach Lompoc Palm Desert San Fernando Vernon Chino Hesperia Los Altos Palo Alto San Juan Capistrano Walnut Claremont Huntington Park Los Gatos Paramount San Luis Obispo Whittier Clovis Indian Wells Lynwood Perris San Pablo Wildomar
Colton Inglewood Manhattan Beach Pico Rivera Santa Fe Springs Yucaipa Agenda Item Number 7
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Public Agencies We Proudly Serve
Antelope Valley Medical Center Midway City Sanitation District Buena Vista Water Storage District Mountains Recreation & Conservation Authority (MRCA) Chino Valley Fire District Ohio County Employees Retirement Plan (OCERP) Conejo Recreation & Park District (CRPD) Ontario International Airport Authority County Commissioners’ Association of Ohio (CCAO) Orange County Fire Authority (OCFA) County of Modoc Regional Center of the East Bay
First Public Hydrogen Authority San Bernardino Water District Greater Los Angeles County Vector Control District (GLACVCD) South Bay Regional Public Communications Authority Hesperia Fire Protection District Three Valleys Municipal Water District Hesperia Water District Trinity County Waterworks
Little Lake Fire Protection District Valley-Wide Recreation & Park District Madera Irrigation District West Valley Water District
The cities and agencies listed above do not expressly recommend Shuster Advisory Group, a HUB International Company.

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Corporate Clients We Proudly Serve
The cities and agencies listed above do not expressly recommend Shuster Advisory Group, a HUB International Company.

Jenny Craig
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Our Investment Process
We start by learning all about your needs and objectives.

We base asset class weightings in each strategy on the interplay between credit risk, interest rate risk, and equity risk.

Credit spreads are analyzed against historic levels and we make allocations formulated on relative valuations.

We evaluate monetary policy and interest rate projections to optimally allocate amongst fixed income investments.

Interest rate risk is factored in to provide a cushion in case of extreme economic deterioration and equity market declines.

We use relative values of each equity asset class (domestic, small cap, large cap, international, specialty) to determine equity allocations.

Based on your portfolio construction strategy, we analyze qualitative and quantitative factors to select individual investments.

Each quarter we repeat the portfolio construction and investment selection process taking current economic indicators into account.

We meet with you to review economic forecasts, investment results, and your goals to decide if portfolio changes are required.

Client Financial Analysis
Efficient Portfolio Construction
Investment Selection
Portfolio Rebalancing
Regular Reviews
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Base Portfolios*
* Custom portfolios available at no additional cost
Asset allocation shown is as of February 20, 2026. Risk Scores, Historical Ranges and Distribution Rates are calculated by Nitrogen Wealth, Inc. (previously Riskalyze, Inc.) using a long-term average for the S&P 500, average change in the Ten Year US Treasury Rate, and correlation and volatility data from 2008 to present. Nitrogen uses actual historical data to calculate the statistical probabilities shown. For securities calculated using Average Annual Return, the Average Return will be calculated using actual price history from June 2004-present or inception. We calculate the annualized return number as ( final price / initial price ) ^ ( 1 / number of years ) - 1. Riskalyze does not provide investment analysis on investments with less than 6 months of historical performance. In instances where an investment’s inception is more recent than January 1, 2008 and greater than 6 months Nitrogen will use correlation statistics from the investments actual trading history to extrapolate missing volatility data. In most cases the extrapolation calculation increases the risk presented in the investment analysis as a means of protecting the investor. The Six Month Historical Range is calculated from the standard deviation of the portfolio (via covariance matrix), and represents a hypothetical statistical probability, but there is no guarantee any investments would perform within the range. There is a 5% probability of greater losses. Nitrogen does not use any Monte Carlo or any other type of simulations. The underlying data is updated as of the previous day’s market close price, and the results may vary with each use and over time. The investments considered were determined by the financial representative. IMPORTANT: The projections or other information generated by Nitrogen regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. These figures may exclude commissions, sales charges or advisory fees which, if included, would have had a negative effect on the annual returns. In instances where a security is unrecognized by the Nitrogen system or a security does not yet contain more than six (6) months of historical return data, Nitrogen may assign a benchmark/proxy to more accurately display risk and return analytics. In these instances Nitrogen will use the historical data associated with the benchmark/proxy indicated. Please see additional disclosures (included towards the end of this report) for any exchange traded funds and/or mutual funds referenced herein. * The distribution rate is derived by summing the trailing 12-months’ distributions (dividends, distributions from borrowing, return of capital, etc) and dividing the sum by the last month’s ending NAV. It does not include capital gains distributed over the same period. ** The percentage of fund assets used to pay for operating expenses and management fees, including 12b-1 fees, administrative fees, and all other asset-based costs incurred annually by the underlying funds, except brokerage costs.

Model #1 Model #2 Model #3 Model #4 Model #5 Model #6 Model #7 Model #8 Model #9 Model #10 Model #11 All Fixed
0/100%
Ultra Conservative
10/90%
Conservative
20/80%
Mod Conservative
30/70%
Moderate
40/60%
Balanced
50/50%
Moderate Growth
60/40%
Moderate Aggresive
70/30%
Growth
80/20%
Aggressive
90/10%
All Equity
100/0%
0 30 34 39 44 48 53 58 64 69 72
-3.4% +8.2% -4.3% +9.7% -5.3% +11.3% -6.5% +12.9% -7.8% +14.6% -9.1% +16.4% -10.5% +18.2% -11.9% +20.1% -13.3% +22.0% -14.7% +23.9% -15.7% +25.2%

5.39% 4.94% 4.57% 4.20% 3.82% 3.45% 3.07% 2.74% 2.33% 1.96% 1.70%

0.45% 0.42% 0.39% 0.36% 0.33% 0.30% 0.27% 0.24% 0.21% 0.18% 0.16% iShares Core S&P 500 ETF 0.00% 3.06% 5.61% 8.16% 10.71% 13.26% 15.81% 18.35% 20.90% 23.45% 25.24% iShares MSCI USA Quality Factor ETF 0.00% 1.08% 1.98% 2.88% 3.78% 4.68% 5.58% 6.48% 7.38% 8.28% 8.91% SPDR S&P 500 Growth ETF 0.00% 0.48% 0.88% 1.28% 1.68% 2.08% 2.48% 2.88% 3.28% 3.68% 3.96% Avantis US Large Cap Value ETF 0.00% 1.02% 1.87% 2.72% 3.57% 4.42% 5.27% 6.13% 6.98% 7.83% 8.42% iShares US Infrastructure ETF 0.00% 0.84% 1.54% 2.24% 2.94% 3.64% 4.34% 5.04% 5.74% 6.44% 6.93% BlackRock US Equity Factor Rotation ETF 0.00% 0.72% 1.32% 1.92% 2.52% 3.12% 3.72% 4.32% 4.92% 5.52% 5.94% Vanguard Information Technology ETF 0.00% 0.48% 0.88% 1.28% 1.68% 2.08% 2.48% 2.88% 3.28% 3.68% 3.96% Total 0.00% 7.68% 14.08% 20.48% 26.88% 33.28% 39.68% 46.08% 52.48% 58.88% 63.36% iShares MSCI EAFE Value ETF 0.00% 1.44% 2.64% 3.84% 5.04% 6.24% 7.44% 8.64% 9.84% 11.04% 11.88% Avantis International Equity ETF 0.00% 1.92% 3.52% 5.12% 6.72% 8.32% 9.92% 11.52% 13.12% 14.72% 15.84% Total 0.00% 3.36% 6.16% 8.96% 11.76% 14.56% 17.36% 20.16% 22.96% 25.76% 27.72% iShares Core MSCI Emerging Markets ETF 0.00% 0.96% 1.76% 2.56% 3.36% 4.16% 4.96% 5.76% 6.56% 7.36% 7.92% Total 0.00% 0.96% 1.76% 2.56% 3.36% 4.16% 4.96% 5.76% 6.56% 7.36% 7.92%

0.00% 12.00% 22.00% 32.00% 42.00% 52.00% 62.00% 72.00% 82.00% 92.00% 99.00% PIMCO Income Instl Fund 34.65% 30.45% 26.95% 23.45% 19.95% 16.45% 12.95% 9.45% 5.95% 2.45% 0.00% Fidelity Total Bond ETF 32.67% 28.71% 25.41% 22.11% 18.81% 15.51% 12.21% 8.91% 5.61% 2.31% 0.00% TCW Flexible Income ETF 10.89% 9.57% 8.47% 7.37% 6.27% 5.17% 4.07% 2.97% 1.87% 0.77% 0.00% PIMCO Multisector Bond ETF 10.89% 9.57% 8.47% 7.37% 6.27% 5.17% 4.07% 2.97% 1.87% 0.77% 0.00% JPMorgan International Bond Opportunities ETF 9.90% 8.70% 7.70% 6.70% 5.70% 4.70% 3.70% 2.70% 1.70% 0.70% 0.00% Total 99.00% 87.00% 77.00% 67.00% 57.00% 47.00% 37.00% 27.00% 17.00% 7.00% 0.00%

99.00% 87.00% 77.00% 67.00% 57.00% 47.00% 37.00% 27.00% 17.00% 7.00% 0.00% Cash/Cash Alternatives Cash/Cash Alternatives 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% Equity
Domestic Equity
Int'l Developed Equity
Emerging Market Equity
Total Equities
Fixed Income
Core Fixed Income
Total Fixed Income
Allocation Options
(Equity/Fixed)
Risk Range: 0 to 100 (100 is Riskiest)
Investment Return Range: 95% prob after 6 months
Distribution Rate
Expense Ratio
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Sebastopol City CouncilJune 2, 2026

Sebastopol City Council
June 2, 2026