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Date: December 11, 2025
To: Chair and Members of the Finance and Governmental Operations Committee From: Tim Goodrich, City Treasurer
By: Jasmine Allen, Deputy City Treasurer | [email protected] Subject: City Treasurer – Accept and File Fiscal Year 2025-26 First Quarter Investment Portfolio Report. Expenditure: None.
RECOMMENDATION
Recommendation of the City Treasurer that the Finance and Governmental Operations Committee accept and file the Fiscal Year 2025-26 First Quarter Investment Portfolio Report.
FUNDING
None required.
DISCUSSION
Each year, the City Treasurer provides an Investment Portfolio Report update as part of the First Quarter Budget Review Report.
Investment Summary
As of June 30, 2025, the ending balance of total funds was $386,137,282, which included investments of $374,867,920 and cash of $11,269,362. City’s portfolio yielded 4.311%. The fiscal year-to-date earnings were $14,233,464. The 1-year, 2-year, and 5-year United States (“US”) Constant Maturing Treasury (CMT) yielded at 3.96%, 3.72%, and 3.79% respectively.
As of September 30, 2025, the ending balance of total funds was $332,617,268, which included investments of $324,827,022 and cash of $7,790,246. City’s portfolio yielded 4.278%. For the first quarter earnings were $3,773,177. The 1-year, 2-year, and 5-year US CMT yielded at 3.68%,
3.60%, and 3.74%, respectively.
1 Finance and Governmental Operations Committee
December 11, 2025
Market Portfolio Snapshot
Market Conditions/Investment Forecast
Inflation (Consumer Price Index), which peaked at 8.6% in June 2022, gradually fell to 3.2% by September 2023 and further to 2.4% by September 2024, then rising slightly to 3.0% by September 2025. Following the aggressive rate-hiking cycle launched in March 2022, the Federal Reserve began easing policy in 2024 and 2025. After holding the federal funds rate at 4.50%–
4.75% at the end of 2024, the Fed implemented two additional cuts: a 25-basis-point reduction in September, lowering the target range to 4.00%–4.25%, followed by another 25-basis-point cut in October, bringing the range to 3.75%–4.00%. The Fed’s goal in reducing rates was to support economic activity amid slower growth while inflation remained above its 2% target.
Early indicators suggest that the economy continued to expand at a moderate pace following the
3.8% growth recorded during April - June 2025. The projected GDP growth for Q1 is 3.9%.
Personal income grew, supported in part by higher wages, and consumer spending likely remained an important driver of economic activity.
During the quarter, the 2-year and 5-year Treasury yields were 3.60% and 3.74%, respectively.
The Local Agency Investment Fund (LAIF) daily rate slightly declined to 4.212%, while the California Asset Management Program (CAMP) rate also fell to 4.360%. The 10-year Treasury 2 Finance and Governmental Operations Committee
December 11, 2025
yield is 4.16% as of September 30, 2025, compared to 3.81% a year ago, with investment strategists forecasting a modest increase by the end of 2025.
As of September 2025, the unemployment rate was 4.4%, up from 4.1% in September 2024, indicating a modest softening in labor market conditions. Despite this increase, unemployment remains low by historical standards. With inflation still running above the Fed’s long-run target and economic growth uncertain, the outlook for further rate cuts is cautious. The Federal Reserve's target interest rate is projected at 3.0% in 2026. The Fed is watching both of their mandates (employment and inflation) closely to determine the path of Fed Funds. They say the risk is more tilted to slower job growth.
Compliance
The City is in compliance with California Government Code Section 53646 which requires local agencies to report on its ability to meet pooled expenditure requirements for the next six (6) months. Throughout fiscal year 2024-25 and through the first quarter of fiscal year 2025-26, cash, cash equivalents (including LAIF, CAMP, and Sweep Money Market), and projected inflows – including maturities - exceeded projected cash outflows. Over the next six months, the City anticipates large cash inflows consisting mainly of property taxes, which are typically received December through January and April through May.
Investment Strategy
To be consistent with the City's objectives, the City’s funds are invested in high-quality money market instruments and government securities, with a maximum maturity of five years. As of the first quarter, the City holds investments totaling $325 million in a diversified portfolio, which includes Treasuries, Agencies, Medium-Term Notes, Municipal Bonds, Certificates of Deposit, and shorter-duration liquid funds, such as CAMP. As the inverted yield curve has reversed, with 5-year yields have surpassed shorter-term yields, the City will lock in these longer-duration securities, aligning maturities with anticipated cash flow needs to meet operating cost obligations.
As interest rates for LAIF and CAMP continue to fluctuate, the City will adjust its allocation between the two funds based on their respective yields, maximizing returns while maintaining liquidity. Currently, the City has its liquid investments in CAMP, as it offers the highest yield and maintains liquidity. While the City anticipates large cash inflows from December through January, and again from April through May, staff will continue to monitor interest rates of both fixed income investments and liquid funds and will invest all idle funds while continuing to meet the City’s cash flow needs. As the City continues to lock in longer-term rates, its portfolio is positioned to generate strong returns over the coming quarters.
It is the recommendation of the City Treasurer that the Finance and Governmental Operations Committee accept and file Fiscal Year 2025-26 First Quarter Investment Portfolio Report and recommend that City Council take the same action at a subsequent City Council meeting.
ATTACHMENT
1. Fiscal Year 2025-26 First Quarter Investment Portfolio Report 3 INVESTMENT
PORTFOLIO REPORT
December 11, 2025
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ATTACHMENT 1
2 Investment Portfolio Report
Portfolio Objective
Portfolio Performance
Compliance
Market Summary
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Portfolio Objective
The City’s investment objectives are the following:
First, to provide safety of principal to ensure preservation of capital in the overall portfolio;
Second, to provide sufficient liquidity to meet all
operating requirements;
Third, to earn a commensurate rate of return consistent with the constraints imposed by the safety and liquidity objectives.
6 Portfolio Performance
Quarter -Over -Quarter Analysis
Q1 2024 Q1 2025
Total Funds $328.1M $332.7M
Cash in Bank $20.2M $7.8M
Investments per Portfolio $308M $324.8M
Yield 4.489% 4.278%
Interest Earnings (YTD) $3.5M $3.8M
Days to Maturity 1.19 Years 1.76 Years
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Investment Policy Compliance
September 30, 2025
5 Securities: % Portfolio % Permitted
Treasuries 23.5 100
Agencies 13.8 75
Medium Term Notes 27.1 30
Muni Bonds 0.1 10
Negotiable CDs 1.1 30
LAIF 0 $75M
CAMP 23.6 30
Money Market 10.8 20
8 Investment Liquidity Compliance
September 30, 2025
6 The City is in compliance with California Government Code Section 53646 which requires local agency to report its ability to meet pooled expenditure requirements for the next six (6) months. Over the next six months, projected cash, cash equivalents (LAIF, CAMP, Sweep Money Market), and projected inflows - including maturities - exceeded cash outflows by $107.3 million. $ 7.8
$ 76.5
Money Market Account as of September 30, 2025 $ 35.2
Cash Inflows $ 225.7
Cash Outflows $ 237.9
Projected Cash/Liquidity Balance $ 107.3
Cash Activity/Balances projected over the next 6 months (millions):
Cash Balance as of September 30, 2025
CAMP/LAIF Balance as of September 30, 2025
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City’s Yield Comparison
10 Market Summary
Inflation (Consumer Price Index), which peaked at 8.6% in June 2022, gradually fell to 3.2% by September 2023 and further to 2.4% by September 2024, then rising slightly to 3.0% by September 2025.
Following the aggressive rate-hiking cycle launched in March 2022, the Federal Reserve began easing policy in 2024 and 2025. After holding the federal funds rate at 4.50%–4.75% at the end of 2024, the Fed implemented two additional cuts: a 25-basis-point reduction in September, followed by another 25-basis-point cut in October, bringing the range to 3.75%–4.00%. Interest earnings are projected to remain strong through FY 2025-26 (approximately $15 million) due to strategic allocation across various asset types, maximization of investment funds, and locking in of high-yield securities for longer durations.
11 INVESTMENT QUESTIONS
&
DISCUSSION
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