Agenda packet — West Sacramento City Council, August 19, 2026 (part 2 of 5)

1. The City Manager or designee is authorized to execute all documents necessary to commit the City of West Sacramento to federal, state, and regional funding and project delivery requirements including, but not limited to, abiding by Funding Program guidelines.

2. The City acknowledges that, in the event of receiving an award of Funding Program dollars, the City will be required to abide by multiple timely use of funding requirements described in the Funding Program guidelines and SACOG’s Regional Delivery Policies including, but not limited to, obligating federal funding no later than the end of federal fiscal year 2028-2029 for construction activities, committing to securing required local match dollars, acknowledging that SACOG does not cover cost overruns, and committing staff to attend delivery meetings until project closeout.

3. The City Manager or designee is directed to submit the following applications for 2026 Federal Funding Cycle Programs:
a. Southport to Harbor Roadway Project for the System Performance Program: This project will include road rehabilitation for Harbor Boulevard from the US 50 on/off ramp to Industrial Boulevard; Industrial Boulevard from Harbor Boulevard to the Palamidessi Bridge; Lake Washington Boulevard from the Palamidessi Bridge to Southport Parkway from Lake Washington to Promenade Street. In addition, this project will incorporate Complete Streets elements, including filling sidewalk gaps, adding bicycle lanes, upgrading utilities to enhance safety and meet the needs of pedestrians, bicyclists, motorists, and public transportation users. This project may be segmented into multiple applications.
b. Clarksburg Branch Line Trail (CBLT) for the Next Generation Solutions & Clean Air Program: This project is a multi-use path that will run north to south from the Barge Canal to Clarksburg. The CBLT is a segment of SACOG’s regional trail system and the Great California Delta Trail regional trail system while also being an important segment of the City’s walking and bicycling network. It has been included in the City’s active transportation plans since it was acquired from the Sierra Northern Railway. This project will provide West Sacramentans with a safe and quiet way to walk and bicycle between their homes and their schools, jobs, stores, parks, and neighbors. The proposed application will be for the portion of CBLT within City limits.

City staff may make non-substantive changes or modifications to the Federal Funding Cycle Program application priorities, with approval from City Manager.

4. The City Council hereby finds that the facts set forth in the recitals to this Resolution are true and correct and establish the factual basis for the City Council’s adoption of this Resolution.

5. This Resolution shall take effect immediately upon its adoption.

PASSED AND ADOPTED by the City Council of the City of West Sacramento this 19th day of August, 2026 by the following vote:

AYES:

NOES:

ABSENT:

Martha Guerrero, Mayor
ATTEST:

Jennifer Cusmir, City Clerk
124

CITY COUNCIL AGENDA REPORT
MEETING DATE: August 19, 2026 ITEM # 10
SUBJECT:

CONSIDERATION OF RESOLUTION 26-72 ESTABLISHING APPROPRIATIONS LIMIT FOR FISCAL YEAR 2026/27
INITIATED OR REQUESTED BY: REPORT COORDINATED OR PREPARED BY:
[ ] Council [X] Staff
[ ] Other
Becky Robertson, Finance Manager
Finance Department
ATTACHMENT [X] Yes [ ] No [ ] Information [ ] Direction [X] Action

OBJECTIVE
The purpose of this report is to comply with state law which requires adoption of an Appropriations Limit annually.

RECOMMENDED ACTION
Staff respectfully recommends that the City Council adopt Resolution 26-72 establishing an Appropriations Limit for Fiscal Year 2026/27.

BACKGROUND
In November 1979, the voters of the State of California approved Proposition 4, commonly known as the (Paul) Gann Initiative. The Proposition created Article XIIIB of the State Constitution, placing limits (the Limit) on the amount of revenue which can be appropriated in any fiscal year. Not all revenues are restricted by the Limit; only those which are referred to as "proceeds of taxes."
For the City of West Sacramento (City), the Limit is based on revenues estimated by LAFCO for the 1978/79 fiscal year and is increased each year by a factor using the growth in population and inflation.

Proposition 4 had little impact in the early years due to the high growth of inflation increasing Limits faster than actual revenues grew. In addition, because the language of the initiative was extremely vague and confusing, and because the State Legislature adopted a "hands off" approach, many cities were creative in finding solutions to any Limit problems. The Limit became a front-page issue in 1987 when the State of California refunded $1.1 billion to taxpayers as a result of reaching this Limit. The Limit became an even bigger issue when it surfaced as the major barrier to solving transportation problems in the late 1980s. Locally, the City was in danger of reaching its Limit. In 1990, the City’s capacity was reduced from 19% to 12%.

In order to deal with an increasing number of complaints about the restrictions of Proposition 4 and to increase the accountability of local government in adopting their Limits, California voters approved Proposition 111 in June 1990. Among other things, Proposition 111 provided new adjustment formulas and required an annual review of Limit calculations by an independent auditor.

Beginning with the 1990/91 Appropriations Limit, the annual adjustment factors became more flexible. Instead of using the lesser of California Per Capita Personal Income or U.S. Consumer Price Index to measure inflation, the City was able to use its growth in the nonresidential assessed valuation due to new construction within the City. Also, instead of using only the population growth of Yolo County, the City was able to choose to use the population growth within the City. Moreover, the City was able to choose to amend the previous years' Limits in order to produce a consistent result. By choosing both options and recalculating the Limit, the City’s 1990/91 Limit increased to the point where the City’s capacity became 96%, rather than the 12%.

Staff changed the approach to estimating the Gann Limit when growth slowed and property valuation due to new construction declined beginning in 2008. Currently, staff utilizes the growth in inflation combined with the growth in population for the City. The State of California Department of Finance provides both the price inflation and population growth information used by the City to calculate the appropriation limit, and a copy of the State’s transmittal letter is included as an attachment to this report.

In September 2022, the State of California revised the appropriations limit calculation retroactively with Fiscal Year 2021/22 and each subsequent fiscal year thereafter to include an expanded definition of “State Subvention” with regards to local government agencies in Government Code Section 7903. 125
Resolution 26-72 Appropriations Limit
August 19, 2026

Page 2 ends

ANALYSIS
Staff utilizes the combined growth factors, which are: 1) growth in the California per capita personal income; and 2) growth in population for the City. Each year the State Department of Finance provides the data used to calculate the population factor and the inflation factor used in deriving the annual appropriation limit.

For Fiscal Year 2026/27, the combined population and inflation percentage used to compute the Appropriations Limit is 1.0588; therefore, the City’s Gann Limit has increased from the prior fiscal year to $2,113,297,614. The City’s FY 2026/27 estimate of appropriations subject to the Limit is $128,673,542, which represents 6% of the total Gann Limit.

Environmental Considerations
The actions recommended in the attached resolution are not subject to the California Environmental Quality Act (CEQA), pursuant to Public Resources Code Section 21080 (b)(8), since the activities proposed involve administrative and financial activities that do not constitute a project pursuant to CEQA.

Commission Recommendation
Not applicable
Strategic Plan Integration
Not applicable
Alternatives
State law requires that the City adopt the appropriation limit on an annual basis and that the calculation of the limit be reviewed by the City’s auditor on an annual basis. While the staff recommendation is to adopt Resolution 26-72, alternatively, the City Council could delay the action in order to allow for clarification or review the attached analysis.

Coordination and Review
Not applicable
Budget/Cost Impact
As the City is currently well under the Limit, there is no budgetary or cost impact associated with adopting the new Limit for FY 2026/27.

ATTACHMENTS

1. Resolution 26-72

2. Recent History of Appropriations Limit

3. Tax Appropriations Limit Calculation for FY 2026/27

4. Department of Finance – Price Factor and Population Information 126
Attachment 1
RESOLUTION 26-72

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF WEST SACRAMENTO ESTABLISHING AN APPROPRIATIONS LIMIT FOR FISCAL YEAR 2026/27

BASED ON POPULATION AND INCOME FACTORS
WHEREAS, Article XIIIB of the California Constitution and Government Code Section 7910 require a city to establish its appropriations limit for each fiscal year; and WHEREAS, the base appropriations limit for the City of West Sacramento for fiscal year 1989/90 was established by Resolution 89-167, with annual increases calculated since that time; and
WHEREAS, Article XIIIB of the California Constitution specifies that appropriations limits may increase annually by a factor comprised of the change in population within the city and the change in the California Per Capita Personal Income; and WHEREAS, the State Department of Finance has provided the necessary documentation to enable the City to calculate and adopt such a factor for the fiscal year 2026/27.

NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of West Sacramento as follows:

1. The factors to be used to determine the fiscal year 2026/27 appropriations limit shall be the change in population within the City of West Sacramento and the percentage change in California Per Capita Personal Income.

2. The City's appropriation limit as required by Article XIIIB of the California Constitution for fiscal year 2026/27 shall be $2,113,297,614.

PASSED AND ADOPTED by the West Sacramento City Council this 19th day of August 2026, by the following vote:

AYES:

NOES:

ABSENT:

Martha Guerrero, Mayor
ATTEST:
_______________________________
Jennifer Cusmir, City Clerk
127
Attachment 2
Combined
Factor Gann Limit
Appropriations
Subject to Limit
% of Gann
Limit Used
City Resolution 00-43 for 2000/01 1.0856 218,005,913 17,685,000 8% City Resolution 01-70 for 2001/02 1.1203 310,447,952 19,415,000 6% City Resolution 02-42 for 2002/03 1.1069 366,736,840 19,147,000 5% City Resolution 03-52 for 2003/04 1.0834 460,703,619 30,415,100 7% City Resolution 04-43 for 2004/05 1.0772 566,920,025 30,415,100 5% City Resolution 05-46 for 2005/06 1.1122 629,814,576 33,502,100 5% City Resolution 06-50 for 2006/07 1.1430 719,894,675 39,631,100 6% City Resolution 07-41 for 2007/08 1.0854 814,717,323 41,560,000 5% City Resolution 08-43 for 2008/09 1.0846 959,700,078 44,077,000 5% City Resolution 09-36 for 2009/10 1.0254 984,076,460 43,046,000 4% City Resolution 10-48 for 2010/11 0.9866 970,889,835 39,533,000 4% City Resolution 11-33 for 2011/12 1.0369 1,006,715,670 39,022,100 4% City Resolution 12-23 for 2012/13 1.0405 1,047,487,655 39,694,900 4% City Resolution 13-43 for 2013/14 1.0761 1,127,215,543 41,005,250 4% City Resolution 14-19 for 2012/13 1.0429 1,049,993,448 39,694,900 4% City Resolution 14-19 for 2013/14 1.0639 1,117,108,525 43,505,250 4% City Resolution 14-19 for 2014/15 1.0105 1,128,805,277 44,268,721 4% City Resolution 15-29 for 2015/16 1.0457 1,180,363,503 50,397,925 4% City Resolution 16-40 for 2016/17 1.0764 1,270,489,627 52,300,201 4% City Resolution 17-21 for 2017/18 1.0441 1,326,460,552 56,284,090 4% City Resolution 18-3 for 2018/19 1.0474 1,389,305,613 58,821,574 4% City Resolution 19-35 for 2019/20 1.0428 1,448,709,334 70,603,927 5% City Resolution 20-?? For 2020/21 1.0437 1,512,083,219 69,573,632 5% City Resolution 21-65 for 2021/22 1.0526 1,591,670,142 77,679,657 5% City Resolution 22-108 for 2022/23 1.0567 1,681,884,016 87,559,253 5% City Resolution 23-61 for 2023/24 1.0663 1,793,447,419 93,270,466 5% City Resolution 24-102 for 2024/25 1.0367 1,859,299,401 97,712,854 5% City Resolution 25-93 for 2025/26 1.0734 1,995,860,108 120,953,971 6% City Resolution 26-72 for 2026/27 1.0588 2,113,297,614 128,673,542 6% Recent History of Tax Appropriations Limit
128
Attachment 3
Appropriations Subject to the Tax Appropriations Limit
FY 2026/27
Adopted Budget
Property Tax 41,174,124
Sales Tax (excluding Prop 172) 66,097,212
Transient Occupancy Tax 2,700,000
Document Transfer Tax 300,000
Motor Vehicle In-Lieu Tax 85,000
Trailer Coach In-Lieu Tax -
Homeowners Prop Tax Relief 215,000
Off Hwy Motor Vehicle In-Lieu Tax -
State Mandated Cost Reimbursement 35,000
Other Taxes 18,067,206
State Subvention Pursuant to Government Code Section 7903 - Total Unadjusted Appropriations subject to the Limit [A] 128,673,542 Adjustments for appropriations not subject to the Tax Appropriations Limit Annual Debt Service for Voter Approved Debt -
Total Annual Debt Service [B] -
Qualified Capital Outlays
Total Qualified Capital Outlays [C] -
Total Adjustments [D = B + C] [D] -
Total Adjusted Appropriations subject to the Limit [E = A - D] [E] 128,673,542 Calculation of the Adjustment Factor
Population Change - City 1.0089
Per Capita Personal Income 1.0495
Combined Adjustment Factor [F] 1.0588
Prior Year (FY 2025/26) Tax Appropriations Limit [G] 1,995,860,108 Adjustment Factor [H] 1.0588
Tax Appropriations Limit for FY 2026/27 [I = G x H] [I] 2,113,297,614 Projected appropriations are below the limit by [J = I - E] [J] 1,984,624,073 Fiscal Year 2026/27 Tax Appropriations Limit
FY 2026/27 Tax Appropriations Subject to the Tax Appropriations Limit Calculation of the Tax Appropriations Limit and Difference between the Limit and Appropriations Subject to the Limit
129
May 1, 2026
Dear Fiscal Officer:

Price Factor and Population Information
Appropriations Limit
California Revenue and Taxation Code section 2227 requires the Department of Finance to transmit an estimate of the percentage change in population to local governments.

Each local jurisdiction must use their percentage change in population factor for January 1, 2026, in conjunction with a change in the cost of living, or price factor, to calculate their appropriations limit for fiscal year 2026–27. Attachment A provides the change in California’s per capita personal income and an example for utilizing the factors to calculate the 2026–27 appropriations limit. Attachment B provides the city and unincorporated county population percentage change. Attachment C provides the population percentage change for counties and their summed incorporated areas. The population percentage change data excludes federal and state institutionalized populations and military populations.

Population Percent Change for Special Districts
Some special districts must establish an annual appropriations limit. California Revenue and Taxation Code section 2228 provides additional information regarding the appropriations limit. Article XIII B, section 9(C) of the California Constitution exempts certain special districts from the appropriations limit calculation mandate. Special districts required by law to calculate their appropriations limit must present the calculation as part of their annual audit. Any questions special districts have on this requirement should be directed to their county, district legal counsel, or the law itself. No state agency reviews the local appropriations limits.

Population Certification
The population certification program applies only to cities and counties. California Revenue and Taxation Code section 11005.6 mandates Finance to automatically certify any population estimate that exceeds the current certified population with the State Controller’s Office. Finance will certify the higher estimate to the State Controller by June 1, 2026. Please note: The prior year’s city population estimates may be revised.

The per capita personal income change is based on historical data.

If you have any questions regarding this data, please contact the Demographic Research Unit at (916) 323-4086.
/s Erika Li
Attachment
130
May 2026
Attachment A
A. Price Factor: Article XIII B specifies that local jurisdictions select their cost of living factor to compute their appropriation limit by a vote of their governing body. The cost of living factor provided here is per capita personal income. If the percentage change in per capita personal income is selected, the percentage change to be used in setting the fiscal year 2026–27 appropriation limit is:

Per Capita Personal Income
Fiscal Year Percentage change
(FY) over prior year
2026-27 4.95
B. Following is an example using sample population change and the change in California per capita personal income as growth factors in computing a 2026–27 appropriation limit.
2026–27:

Per Capita Cost of Living Change = 4.95 percent
Population Change = -0.14 percent
Per Capita Cost of Living converted to a ratio: 4.95 + 100 = 1.0495 100
Population converted to a ratio: -0.14 + 100 = 0.9986
100
Calculation of factor for FY 2026–27: 1.0495 x 0.9986 = 1.0480 131
About the Data
FISCAL YEAR 2026-27
Attachment B
Annual Percent Change in Population Minus Exclusions*
January 1, 2025 to January 1, 2026, and Total Population January 1, 2026 City County Percent Change 25-26 Population Minus Exclusions 1-1-25 Population Minus Exclusions 1-1-26 Total Population 1-1-26 Davis Yolo 0.44 65,712 66,002 66,002
West Sacramento Yolo 0.89 55,376 55,871 55,871
Winters Yolo 0.26 8,007 8,028 8,028
Woodland Yolo -0.60 61,693 61,324 61,324
Unincorporated Yolo -0.25 34,766 34,679 34,679
Incorporated Yolo 0.23 190,788 191,225 191,225
County Total Yolo 0.16 225,554 225,904 225,904
*Exclusions include residents on federal military installations and group quarters residents in state mental institutions, state and federal correctional institutions and veteran homes. 132

CITY COUNCIL AGENDA REPORT
MEETING DATE: August 19, 2026 ITEM # 11
SUBJECT:

CONSIDERATION AND ADOPTION OF RESOLUTION 26-73 APPROVING THE FINANCING OF CERTAIN FIRE APPARATUS AND DECLARING THE CITY’S INTENT TO

REIMBURSE ITSELF FROM THE PROCEEDS OF DEBT FOR CERTAIN EXPENDITURES INITIATED OR REQUESTED BY: REPORT COORDINATED OR PREPARED BY:
[ ] Council [X] Staff
[ ] Other
Rebecca Robertson, Finance Manager
Finance Department
ATTACHMENT [X] Yes [ ] No [X] Information [ ] Direction [X] Action

OBJECTIVE
This report requests approval of a contract with Golden State Fire Apparatus, Inc., to acquire one Type 1 Fire Pumper and approval of City Council Resolution 26-73, which authorizes the lease-purchase financing through a loan from JP Morgan Chase Bank and declares the City’s intent to reimburse itself for certain expenditures made or to be made prior to issuance of the debt in compliance with Internal Revenue Service guidelines for taxexempt debt.

RECOMMENDED ACTION
Staff respectfully recommends that the City Council:

1. Authorize the Finance Director or designee to accept a proposed equipment lease, and to enter into a leasepurchase agreement with JP Morgan Chase Bank to finance the purchase of the fire apparatus and equipment in the amount of $2,482,875.04; and

2. Adopt Resolution 26-73 approving the financing of the Type 1 Fire Pumper and declaring the City’s intent to reimburse itself from the proceeds of debt for certain expenditures.

BACKGROUND
The Fire Department maintains a fleet of 15 fire engines and trucks to meet the service needs of the community.

The department maintains a fleet of eleven front-line vehicles and three reserve vehicles that are recommended to be replaced on a regular basis. On June 17, 2026, the City Council authorized the budget for the financing of two (2) Type 1 pumpers, included as part of the budget amendments for fiscal year 2026-27. The proposed purchase includes two (2) Type 1 Engine (Pumper), which will replace one eleven (11) year old and one eighteen (18) year old frontline Type 1 Pumpers. Due to current manufacturing backlogs, extended build times, delivery, upfitting, and radio installation, the estimated timeline from order to placement into service is approximately 60 months. If ordered, the apparatus won't go into service until Fall 2031. This purchase is intended to address the industry standards for vehicle replacement.

Procurement of Fire Apparatus
The City’s administrative policy for the procurement of City vehicles encourages the use of “cooperative purchasing agents” rather than use of a Request for Proposals process to acquire vehicles. Cooperative arrangements can significantly expedite procurement by utilizing another governmental entity’s competitive solicitation process. The procurement would be through HGACBuy, a large cooperative purchasing agent serving numerous cities in California as well as throughout the nation.

Financing for Fire Apparatus
Approval of the lease-purchase financing is conditioned upon the Council’s approval of the terms that are attached to this report. Staff has obtained a letter of intent from JP Morgan Chase Bank to finance the purchase in the amount of $2,482,875 over a 12-year period at a maximum interest rate of 4.75%. This financing will spread the costs of the apparatus purchase over several years and minimize the budget impact in the current fiscal year. Lease payments will be approximately $275,000 annually. The term of the loan will more closely align with the expected life cycle of the apparatus.

Resolution 26-73 is necessary to allow reimbursements of City costs prior to the execution of lease purchase documents with JP Morgan Chase Bank. To finance that payment (and any other expenditures made before the financing agreement is executed) on a tax-exempt basis, federal income tax regulations require that the City 133
Golden State Fire Pumper Financing
August 19, 2026

Page 2 ends

declare its official intent to reimburse those expenditures from the proceeds of the debt. The City may only reimburse expenditures made not more than 60 days prior to the declaration of intent made in Resolution 26-73.

ANALYSIS
The City has procured its Pierce vehicles to serve as fire apparatus since 1999. It should be noted that maintenance of the Fire Department vehicles is currently contracted through West Sacramento-based firms who maintain the department’s existing Pierce vehicles, and maintenance of the new vehicles would also be with West Sacramento-based vendors. The manufacturing and delivery of the vehicles is estimated to take approximately 60 months.

The City has an existing banking relationship with JP Morgan Chase Bank and this will be the second leasepurchase financing the City has entered into with them. The business terms provided by JP Morgan Chase Bank include a 4.75% interest rate and a 12-year term. Payments will be made semi-annually. At the end of the lease term the City will take ownership of the financed equipment.

Resolution 26-73 is required to meet Internal Revenue Service requirements for tax-exempt financings. For example, this “Intent to Reimburse” resolution would allow staff to pay invoices prior to the lease financing becoming available. The City Council has approved similar resolutions with the three previous equipment leases with U.S. Bank.

Environmental Considerations
Not applicable
Commission Recommendation
Not applicable
Strategic Plan Integration
The City has a Strategic Plan goal to achieve a Financially Sound City Government. Managing existing debt to achieve savings is a critical tool available to the Administrative Services Department to achieve that goal.

Financing the fire apparatus over multiple years will allow flexibility in budgeting rather than incurring the capital costs in one fiscal year.

Alternatives
As an alternative to the recommended action, the Council could: 1) reject the award of contract under purchasing alliances with other governmental jurisdictions under the City’s adopted Administrative Policy and instead recommend that staff issue its own Request for Proposals obtain multiple quotes from various lenders and return for approval of financing once competitive bids have been received; or 2) not approve staff’s recommendation to lease-finance the purchase of the vehicle, though this authorization was provided by Council with adoption of the budget, so neither of the alternatives are recommended.

Coordination and Review
This staff report was coordinated with the City’s Fire Department.

Budget/Cost Impact
The total cost for the two (2) type 1 pumpers and associated equipment is $2,482,875.04. Financing the capital investment is proposed to be funded through a lease-purchase agreement with JP Morgan Chase Bank over a 12-year period and will involve debt service payments of approximately $275,000 annually. The JP Morgan Chase Bank loan will be secured at the current day’s favorable rates for municipal debt at a maximum interest rate of 4.75%.

ATTACHMENTS

1. Resolution 26-73

2. Type 1 Fire Pumper Bid Proposal
134
Attachment 1
RESOLUTION 26-73

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF WEST SACRAMENTO APPROVING THE FINANCING OF CERTAIN TYPE 1 FIRE PUMPERS
WHEREAS, the City Council adopted the Operations and Maintenance (O&M) budget for Fiscal Year 2026-27 on June 17, 2026 via Resolution 26-66; and WHEREAS, the adopted budget includes an annual appropriation of $275,000 from the General Fund to cover annual debt payments related to the purchase of two (2) Pierce Type 1 Pumper for the Fire Department; and
WHEREAS, the City anticipates that it will issue debt obligations in the form of a lease agreement, the payments under which would contain a separately stated interest component for the purpose of financing the Project costs on a long-term basis; and WHEREAS, the City’s obligations under the lease agreement will be considered debt for federal income tax purposes; and
WHEREAS, the maximum principal amount of such debt expected to be issued to finance the Project costs is $2,482,875.04; and
WHEREAS, the City expects to pay on and after the date hereof certain Project costs (“the Expenditures”); and
WHEREAS, in order to obtain favorable treatment of expenditures of proceeds of the debt obligations used to reimburse the Expenditures, Treasury Regulations section 1.150-2 requires the City to declare its official intent to reimburse the Expenditures with proceeds of debt.

NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of West Sacramento that:

1. Findings. The City Council hereby finds and determines that the foregoing recitals are true and correct.

2. Approval of Financing. The City Manager is authorized to execute a lease agreement with JP Morgan Chase Bank in the amount of $2,482,875.04 for a term not to exceed 12 years and an interest rate not to exceed 4.75%.

3. Official Intent. The City hereby states that it reasonably expects to reimburse the Expenditures with proceeds of debt to be incurred by the City. The foregoing statement is a declaration of official intent that is made under and only for the purpose of establishing compliance with the requirements of Treasury Regulations section 1.150-2. This resolution does not bind the City to make any expenditure of Project costs or to incur any debt for the Project.

4. Capital Expenditures. Each Expenditure will be: (a) of a type properly chargeable to capital account under general federal income tax principles (determined in each case as of the date of the Expenditure), and (b) complies with all applicable Treasury regulations.

5. Reimbursement Allocations. The City will make a reimbursement allocation, which is a written allocation by the City that evidences the City’s use of proceeds of debt to reimburse an Expenditure, no later than 18 months after the later of the date on which the Expenditure is paid or the Project is placed in service or abandoned, but in no event more than three years after the date on which the Expenditure is paid.

6. Effective Date. This resolution shall take effect immediately upon its passage. 135
Resolution 26-73

Page 2 ends

APPROVED, PASSED, AND ADOPTED this 19th day of August 2026, by the City Council of the City of West Sacramento by the following vote:

AYES:

NOES:

ABSENT:
___________________________________
Martha Guerrero, Mayor
ATTEST:
________________________________
Jennifer Cusmir, City Clerk
136
PREPARED ESPECIALLY FOR:

CITY OF

WEST SACRAMENTO
Two (2) Pierce Manufacturing, Inc.

Enforcer 1500 GPM Type 1 Fire Engines

Docusign Envelope ID: 137F6AB9-76E9-87E9-8123-24777CA6BC8A 137
Product Proposal
Standard Terms and Conditions (Exhibit A)
Product Specifications (Exhibit B)
▪ Supporting Documents (If Applicable)
◦ Electrical Analysis
◦ Turning Radius Report
Product Warranties (Exhibit C)
Dealer Supplied Products and/or Services (Exhibit D)

TABLE OF CONTENTS
1 2
3 4
5 goldenstatefire.com
Docusign Envelope ID: 137F6AB9-76E9-87E9-8123-24777CA6BC8A 138
JROGHQVWDWHĆUHFRP
PRODUCT 1 PROPOSAL
Docusign Envelope ID: 137F6AB9-76E9-87E9-8123-24777CA6BC8A 139

OPTION A
100% PRE-PAYMENT
This will be the price of the Product(s)
contingent upon the Customer paying the
Grand Total Purchase Price to GSFA within
thirty (30) calendar days of the Executed Date
pursuant to the Payment Terms
Please note this discount is also available contingent upon a Third Party (Leasing Company) paying 100% of the Grand Total Purchase Price on behalf of the Customer to GSFA within thirty (30) calendar days of the Executed Date pursuant to the Payment Terms

IF YOU ELECT THIS OPTION,

IT RESULTS IN A SAVINGS OF
($367,600.82) OFF

OF THE GRAND TOTAL OF OPTION B
Docusign Envelope ID: 137F6AB9-76E9-87E9-8123-24777CA6BC8A 140
goldenstatefire.com
7400 Reese Road, Sacramento, CA 95828 | 916.330.1638
PRODUCT PROPOSAL FOR:

City of West Sacramento
2040 Lake Washington Blvd.

West Sacramento, CA 95691
Sales Consultant
Mike Martinez
[email protected]
Mobile: (916) 704-7755
Golden State Fire Apparatus, Inc. (“GSFA”) is pleased to provide this proposal for the fire apparatus(es) and equipment identified below (the "Product”) to CITY OF WEST SACRAMENTO (“Customer”) for consideration. This proposal (this “Product Proposal”) includes the following exhibits attached hereto: the Standard Terms and Conditions attached as Exhibit A (the “Terms and Conditions”); the Product Specifications attached as Exhibit B (the “Specifications”); the Product Warranties attached as Exhibit C; and the Dealer Supplied Products and/or Services attached as Exhibit D (the “Dealer Supplied Products/Services List”) (all of the foregoing, collectively, the “Agreement”). Through its signature below or other Acceptance (as defined on page 2), Customer acknowledges having received and read, and agrees to be bound by, the Agreement. The Agreement shall be effective as of the latest date appearing in the signature blocks below (the “Executed Date”).

PAYMENT TERMS – Customer shall pay the total purchase price set forth directly above (the “Grand Total Purchase Price”) to GSFA within thirty (30) calendar days of the Executed Date. If payment of the Grand Total Purchase Price is late, a late fee as specified in section 6 of the Terms and Conditions may be applied, and the Prepayment Discount may be adjusted, and the Grand Total Purchase Price increased in accordance with section 2.c of the Terms and Conditions. Customer shall pay any balance due as a result of Change Orders as described in the Terms and Conditions.

MANUFACTURER – Customer acknowledges that GSFA is not an agent of the Product manufacturer identified above (“Manufacturer”) and is not capable of binding Manufacturer. Within five (5) business days of the Executed Date, GSFA shall submit SUBMITTED DATE EXPIRATION DATE GSFA PROPOSAL # MANUFACTURER BID # MANUFACTURER CONSORTIUM 07/21/2026 08/31/2026 40721-26A 1020 Pierce
Manufacturing Inc.

HGAC contract FS12-
23, Model 23P-105

ITEM PRODUCT DESCRIPTION EXTENDED PRICE
A Two (2) Pierce Manufacturing, Inc. Enforcer 1500 GPM Type 1 Fire Engines 2,365,554.00 B Fire Fighting Equipment 300,000.00
C Fire Fighting Equipment Mounting Fund 50,000.00
D Electronic Equipment Mounting Fund 5,000.00
E Discount for HGAC contract FS12-23, Model 23P-105 (118,277.70) F Discount for 100% Payment at Time of Order (the “Prepayment Discount”) (335,598.00) G SUBTOTAL 2,266,678.30
H 9.25% State Sales Tax 209,667.74
I California Tire Fee 21.00
J 100% Payment and Performance Bond 6,508.00
K GRAND TOTAL PURCHASE PRICE 2,482,875.04
Docusign Envelope ID: 137F6AB9-76E9-87E9-8123-24777CA6BC8A 141
goldenstatefire.com
7400 Reese Road, Sacramento, CA 95828 | 916.330.1638
an order form to the Manufacturer for the Product. GSFA’s further performance under the Agreement is contingent upon Manufacturer’s acceptance of such order form at the price and on the terms GSFA believed to be available when submitting this Product Proposal to Customer. If Manufacturer rejects such order as submitted or fails to respond to GSFA within a reasonable amount of time, GSFA shall notify Customer in writing, and unless GSFA and Customer otherwise agree in writing, the Agreement shall then terminate and have no further force or effect.

PRODUCT COMPLETION – The Product shall be ready for final inspection by Customer at the manufacturing facility within approximately 46.5 to 49.5 MONTHS after the Executed Date. The foregoing estimate is provided as a good faith approximation as of the date of submission of this Product Proposal and is subject to the Terms and Conditions.

PREDELIVERY SERVICE – If applicable, after transportation from the manufacturing facility and prior to final delivery or pick up, the Product shall receive those additional Products and/or services identified on the Dealer Supplied Products/Services List. It is estimated that such a service will add approximately 0.5 to 1 MONTH(S) to the above Product completion estimate. The foregoing estimate is provided as a good faith approximation as of the date of submission of this Product Proposal and is subject to the Terms and Conditions.

PROPOSAL EXPIRATION – This Product Proposal supersedes any previous proposal(s) presented to Customer by GSFA and its employees and may be accepted by Customer on or before the Expiration Date identified above. Unless accepted by the Expiration Date, GSFA reserves the right to withdraw this Product Proposal or to alter its terms (including by providing updated Product pricing) prior to an order being accepted.

PURCHASE ORDER – Any PO shall be made out to: Golden State Fire Apparatus, Inc. – 7400 Reese Road – Sacramento, CA 95828.

ACCEPTANCE – ACCEPTANCE OF THIS PROPOSAL CREATES AN ENFORCEABLE BINDING AGREEMENT BETWEEN GSFA AND CUSTOMER. “ACCEPTANCE” MEANS THAT THE CUSTOMER DELIVERS TO GSFA: (A) A SIGNED COPY OF THIS PRODUCT PROPOSAL, OR (B) A SIGNED COPY OF A PURCHASE ORDER INCORPORATING THE AGREEMENT IN ITS ENTIRETY. ANY ADDITIONAL OR DIFFERENT TERMS, WHETHER CONTAINED IN CUSTOMER’S FORMS OR OTHERWISE PRESENTED BY CUSTOMER AT ANY TIME, ARE HEREBY REJECTED AND OF NO EFFECT UNLESS APPROVED IN WRITING SIGNED BY GSFA.

COUNTERPARTS - This Product Proposal may be executed in multiple counterparts, each of which shall be deemed an original (including copies sent to a party by electronic transmission) as against the party signing such counterpart, but which together shall constitute one and the same instrument. A signed copy of this Product Proposal delivered by facsimile, email or other means of electronic transmission will be deemed to have the same legal effect as delivery of an original signed copy of this Product Proposal.

If this Product Proposal is returned to GSFA with the signature of Customer’s authorized representative but without an attestation or co-signers signature, then absent Customer’s written notice to the contrary, GSFA shall be entitled to rely on such single signature as sufficient evidence of the signatory’s authority to execute the Agreement and bind Customer thereby.

INTENDING TO CREATE A BINDING AGREEMENT, Customer and GSFA have each caused this Product Proposal dated 07/21/2026, GSFA Proposal Number 40721-26A to be executed by their duly authorized representatives effective as of the Executed Date.

ACCEPTED AND AGREED TO BY CUSTOMER ACCEPTED AND AGREED TO BY GSFA __________________________________________________ _________________________________________________ Signature of Authorized Customer Representative Signature of Authorized GSFA Representative

__________________________________________________ _________________________________________________ Print Name Print Name
__________________________________________________ _________________________________________________ Title Title
__________________________________________________ _________________________________________________ Date Date
Docusign Envelope ID: 137F6AB9-76E9-87E9-8123-24777CA6BC8A 142

OPTION B

PAYMENT AT TIME OF DELIVERY OR PICKUP
This will be the price of the Product(s) contingent
upon the Customer paying the Grand Total
Purchase Price to GSFA at time of delivery or pickup
pursuant to the Payment Terms

Docusign Envelope ID: 137F6AB9-76E9-87E9-8123-24777CA6BC8A 143
goldenstatefire.com
7400 Reese Road, Sacramento, CA 95828 | 916.330.1638
PRODUCT PROPOSAL FOR:

City of West Sacramento
2040 Lake Washington Blvd.

PAYMENT TERMS – Customer shall pay the total purchase price set forth directly above (the “Grand Total Purchase Price”) to GSFA no later than the time of GSFA’s delivery of the applicable Product to Customer’s address listed above (or Customer’s pick up of such Product at GSFA’s facilities, if approved by GSFA). GSFA shall have no obligation to deliver, or permit pick up of the Product if the Customer does not have full payment ready when the Product is complete and ready to deliver or pick up, as applicable. Customer shall pay any balance due as a result of Change Orders as described in the Terms and Conditions.

MANUFACTURER – Customer acknowledges that GSFA is not an agent of the Product manufacturer identified above (“Manufacturer”) and is not capable of binding Manufacturer. Within five (5) business days of the Executed Date, GSFA shall submit an order form to the Manufacturer for the Product. GSFA’s further performance under the Agreement is contingent upon Manufacturer’s acceptance of such order form at the price and on the terms GSFA believed to be available when submitting this SUBMITTED DATE EXPIRATION DATE GSFA PROPOSAL # MANUFACTURER BID # MANUFACTURER CONSORTIUM 07/21/2026 08/31/2026 40721-26B 1020 Pierce
Manufacturing Inc.

HGAC contract FS12-
23, Model 23P-105

ITEM PRODUCT DESCRIPTION EXTENDED PRICE
A Two (2) Pierce Manufacturing, Inc. Enforcer 1500 GPM Type 1 Fire Engines 2,365,554.00 B Fire Fighting Equipment 300,000.00
C Fire Fighting Equipment Mounting Fund 50,000.00
D Electronic Equipment Mounting Fund 5,000.00
E Discount for HGAC contract FS12-23, Model 23P-105 (118,277.70) F SUBTOTAL 2,602,276.30
G 9.25% State Sales Tax 240,710.56
H California Tire Fee 21.00
I 100% Payment and Performance Bond 7,468.00
J GRAND TOTAL PURCHASE PRICE 2,850,475.86
Docusign Envelope ID: 137F6AB9-76E9-87E9-8123-24777CA6BC8A 144
goldenstatefire.com
7400 Reese Road, Sacramento, CA 95828 | 916.330.1638
Product Proposal to Customer. If Manufacturer rejects such order as submitted or fails to respond to GSFA within a reasonable amount of time, GSFA shall notify Customer in writing, and unless GSFA and Customer otherwise agree in writing, the Agreement shall then terminate and have no further force or effect.

PURCHASE ORDER – Any PO shall be made out to: Golden State Fire Apparatus, Inc. – 7400 Reese Road – Sacramento, CA 95828.

INTENDING TO CREATE A BINDING AGREEMENT, Customer and GSFA have each caused this Product Proposal dated 07/21/2026, GSFA Proposal Number 40721-26B to be executed by their duly authorized representatives effective as of the Executed Date.

__________________________________________________ _________________________________________________ Print Name Print Name

__________________________________________________ _________________________________________________ Title Title

__________________________________________________ _________________________________________________ Date Date
Docusign Envelope ID: 137F6AB9-76E9-87E9-8123-24777CA6BC8A 145

CITY COUNCIL AGENDA REPORT
MEETING DATE: August 19, 2026 ITEM # 12
SUBJECT:

CONSIDERATION OF THE TREASURER’S QUARTERLY FINANCIAL REPORT ON THE CITY’S INVESTMENT PORTFOLIO FOR THE PERIOD ENDING MARCH 31, 2026 AND ANNUAL UPDATES TO THE CITY’S INVESTMENT POLICY
INITIATED OR REQUESTED BY: REPORT COORDINATED OR PREPARED BY:
[ ] Council [X] Staff
[ ] Other
Becky Robertson, Finance Manager
Finance Department
ATTACHMENT [X] Yes [ ] No [X] Information [ ] Direction [ ] Action

OBJECTIVE
The purpose of this report is to provide the City Council with the treasurer’s quarterly report on the City’s investment portfolio for the quarter ending March 31, 2026 as outlined by the Government Code 53646(b)(1) and to propose updates to the City’s Investment Policy consistent with applicable Government Code.

RECOMMENDED ACTION
Staff respectfully recommends that the City Council receive and file the Treasurer’s Quarterly Financial Report on the City’s investment portfolio for the period ending March 31, 2026 and approve the recommended updates to the City’s investment policy.

BACKGROUND
City’s Investment Program
All local agencies are required to file regular financial reports with their legislative body on the status of their investment portfolio. One of the roles of the City’s Finance Department, is to manage investments of the City to ensure that cash flow needs are met while maximizing the investment portfolio.

The funds invested in the City’s treasury comprise pooled cash from all Funds in the City’s General Ledger, including funds held in Trust for other agencies (i.e., the Yolo-Sacramento Port District and West Sacramento Flood Control Agency (WSAFCA JPA). City staff structure investment maturities in such a way to optimize return while ensuring enough liquid funds are available to meet the operating and capital needs of the City and agencies for which the City acts as Treasurer. The pooled cash also includes impact fee revenues collected from developers and set aside until sufficient funds are available to implement the capital projects for which they were collected, and reserve funds for budget stabilization to ensure fiscal stability of the City and its various services to the community.

It should be noted that the majority of the funds held in the City’s treasury are legally restricted and may only be used for the purposes for which they are collected. Moreover, the funds may only be invested in investments permitted by California Government Code 53600 (Code) et. al, and the City’s investment policy.

Under section 53646(b)(1) of the Government Code, the City Treasurer may prepare and transmit a quarterly financial report to the City Council on the City’s investment portfolio. This report includes:

1. The type of investment, issuer, date of maturity, and par and dollar amount invested on all securities, investments and funds held by the City;

2. A current market value as of the date of the report;

3. A stated compliance of the portfolio to the statement of the City’s adopted investment policy, or manner in which the portfolio is not in compliance; and

4. A statement denoting the ability of the local agency to meet its pool’s expenditure requirements for the next six months, or provide an explanation as to why sufficient money shall or may not be available. Once a year, the statement of investment policy is included in the report.

This quarterly report is produced in a format designed to provide stakeholders a broad profile of the City’s Investment Portfolio. While staff is only transmitting portions of the report with key investment results, a full report with additional detail is available upon request.
146
Quarterly Treasurer’s Report Ending March 31, 2026
August 19, 2026

Page 2 ends

Analysis
This quarterly financial update gives a snapshot of how the City’s pooled investment funds were doing as of March 31, 2026. At the end of the quarter, the City’s investments had a book value of approximately $344.8 million in invested funds and the market value of those investments was about $345.8 million. This difference means that if the City were to sell those investments on the open market as of March 31, City would receive $1.0 million more than the book value for these funds. On top of that, the City has earned around $1.9 million in interest that hasn’t yet been paid out. Book Value is what was paid for the investments, adjusted over time.

Market Value is what the funds are worth today based on current interest rates and market demand. When interest rates go up, the market value of existing investments usually goes down, and vice versa.

Importantly, the City has cash available to pay its bills for the next six months and beyond. Two of the most flexible investment accounts in the City’s portfolio are LAIF (a State-run pool) and CAMP (another local government pool). These two accounts make up approximately 16.1% of the investment portfolio and can be accessed in just one day if needed. The City also had approximately $49.3 million in cash in its regular bank account as of March 31, which fluctuates based on day-to-day expenses.

The rest of the funds is invested in a mix of safe, longer-term investments that follow strict rules set by state law and the City’s own policies. City staff and consultant keep a close eye on how these investments are spread out (by type, maturity date, and issuer), and make adjustments regularly to respond to changes in the market. On average, investments are set to mature in about 649 days which is slightly over two years.

The overall goal of the City’s investment approach is to keep tax dollars safe, accessible, and earning a reasonable return. City staff, together with the City’s investment adviser, keep a close watch on market trends and risks to make sure the portfolio stays strong.

City of West Sacramento Consolidated Sector Allocation
March 31, 2026 December 31, 2025
Agency

1.0%
Agency CMBS

8.8%
Asset Backed
Security

6.9%
Cash

6.3%
Corporate

20.5%
LAIF

15.5%
Local Gov
Investment
Pool

1.9%
Money Market
Fund

0.2%
Municipal
Bonds

0.8%
Supranational

2.7%
US Treasury

35.3%
Agency

0.9%
Agency CMBS

8.0%
Asset Backed
Security

6.3%
Cash

16.0%
Corporate
LAIF 18.5%

14.0%
Local Gov
Investment Pool

1.7%
Money Market
Fund

0.5%
Municipal Bonds

0.7%
Supranational

2.4%
US Treasury

31.0%

32.7%

5.3%

9.4%

14.3%

38.3%

25.8%

5.6%

8.3%

14.4%

45.9%
0%
10%
20%
30%
40%
50%
60%
70%
0-0.50 0.50-1 1-2 2-3 3-5
3/31/2026 12/31/2026
City of West Sacramento Consolidated Maturity Distribution 147
Quarterly Treasurer’s Report Ending March 31, 2026
August 19, 2026

Page 3 ends

As of March 31, 2026, the City’s main investment portfolio (not including cash, LAIF, or CAMP) had a duration of 2.50 years which is a measure of how sensitive the portfolio is to interest rate changes. This is right in line with the City’s performance and risk-measuring benchmark. The City has also continued to maintain a healthy balance by diversifying across different sectors, issuers, and timelines.

Discussion of Performance
The following is a summary of the City’s holdings by investment type, including each sector’s yield to maturity.

Yield to maturity measures the interest income the City is expected to earn for the coming 12 months, assuming nothing in the portfolio changes. As of March 31, 2026, the weighted average yield to maturity of the City’s consolidated investments (including cash, LAIF, and CAMP) was 3.63%:

Investment Type Par Value Market Value Book Value % of
Portfolio
Days to
Maturity
Yield to
Maturity
Agency $3,200,000.00 $3,204,355.60 $3,197,986.02 0.93% 767 3.90% Agency CMBS $28,704,809.47 $27,707,500.95 $27,518,936.88 8.01% 1,051 4.41% Asset Backed Security $22,248,975.35 $22,340,129.01 $22,241,515.14 6.46% 1,121 4.69% Cash $49,337,391.28 $49,337,391.28 $49,337,391.28 14.27% 1 0.64% Corporate $65,101,000.00 $65,225,553.64 $65,014,553.06 18.86% 1,219 4.43% LAIF $49,516,916.94 $49,516,916.94 $49,516,916.90 14.32% 1 3.82% Local Gov Investment Pool $6,099,467.97 $6,099,467.97 $6,095,467.97 1.76% 1 3.80% Money Market Fund $1,865,655.74 $1,865,655.74 $1,865,655.74 0.54% 1 3.54% Municipal Bonds $2,400,000.00 $2,442,304.80 $2,406,883.98 0.71% 1,219 4.41% Supranational $8,625,000.00 $8,621,741.25 $8,543,139.81 2.49% 880 3.50% US Treasury $109,530,000.00 $109,391,561.79 $109,096,043.51 31.64% 752 3.97% Grand Total $346,629,216.75 $345,752,578.97 $344,834,490.29 100% 649 3.63% The portfolio’s return comprises interest income as well as fair value appreciation, both of which are a function of movements in interest rates available in the capital markets. Interest income continues to be robust (the investment portfolio of securities is expected to earn was also 4.23% (purchase yield) for the next year (up from

4.17% last quarter; when LAIF, CAMP and cash are included the expected earnings are 3.63%). The City’s reinvestment yield (market yield) has been hovering in the 3.53%. Staff continues to work closely with the City’s investment adviser to diversify the portfolio in order to improve safety, liquidity, and return. In the current quarter, staff will continue to evaluate liquidity needs and, where possible, continue the investment in longer-duration securities.

Economic Outlook
The conflict in Iran continues to influence global markets, with Brent crude reaching a four-year high in late April before easing in May amid speculation of a truce. Headline inflation has accelerated, diverging from more stable core measures, while consumer sentiment has weakened due to ongoing uncertainty. Meanwhile, the labor market remains stable. Taken together, the Iran-driven energy shock and steady employment conditions have further narrowed the window for near-term policy easing.

The Federal Open Market Committee (FOMC) held the federal funds rate at 3.50% to 3.75% at the April meeting on an 8-4 vote, the most dissents at any meeting since October 1992. Governor Stephen Miran sought a quarterpoint cut, while Beth Hammack, Neel Kashkari, and Lorie Logan opposed maintaining an easing bias. The session concluded Jerome Powell's tenure as Chairman of the Federal Reserve, with Kevin Warsh sworn in as Chair on May 22nd. Powell will remain on the Board of Governors. April meeting minutes revealed a shift away from prior dovish guidance, with members debating whether rate hikes may be required if inflation pressures persist.

City’s Investment Policy
The City’s investment program is governed by the City’s investment policy which is subject to California Government Code § 53600 et. al. (Code). Periodic updates to Code from California lawmakers provide the City an opportunity to update the provisions that govern the City’s investments. Staff, working with the City’s investment advisor, reviews the City’s investment policy annually for compliance with Code, as well as inclusion of best practices. There were changes to Code for this year. Staff recommends the changes to Code be adopted, along with other changes considered best practices:
148
Quarterly Treasurer’s Report Ending March 31, 2026
August 19, 2026

Page 4 ends

• Final Maturity: Staff recommends extending final maturity from five to seven years for municipal securities, federal agencies, and U.S. Treasury obligations. Code allows investments in these sectors to be purchased in maturities longer than five years, and doing so will provide the City additional opportunities to diversify maturities while maintaining its target duration of approximately 2.5 years. • Concentration Limit and New Maturity Limit for Commercial Paper: In 2020, SB 998 allowed local governments that are not a county or city and county and had at least $100 million in investible assets to purchase up to 40% in commercial paper this provision was due to expire January 1, 2026. Pursuant to SB 595, this sunset date has been extended to January 1, 2031. SB 595 also extends the maximum permitted maturity for commercial paper to 397 days from 270 days. Staff recommend adoption of both provisions as both provide the City more flexibility with its investment program. • Zero-Interest Rate Accrual Provision Extension: In 2020, SB 998 allowed local governments in hold securities that could result in a zero-interest rate accrual in the case that the Federal Reserve opted to implement a zero-interest rate policy in the United States. The provision limited this investment exposure to governmental securities only. This provision was due to expire on January 1, 2026, but has now been extended to January 1, 2031.

Environmental Considerations
Not Applicable
Commission Recommendation
Not applicable
Strategic Plan Integration
The City’s mission includes a City Government that is Financially Sound, and the Council’s goal for achieving a Financially Sound City Government is furthered by investing the City treasury in a manner that ensures safety and liquidity first, and where possible a yield on “excess cash”. The preparation of regular quarterly reports on the City’s investments supports the mission and this goal.

Alternatives
Since this agenda report transmits a quarterly financial report pursuant to Government Code section 53646(b) (1), alternatives have not been presented.

Coordination and Review
Not applicable
Budget/Cost Impact
The investment portfolio, as a whole, earned returns at least consistent with the revenue estimates contained in the budget.

ATTACHMENTS

1. Excerpts from Chandler Asset Management Investment Report (March 31, 2026)

2. Proposed Investment Policy (IV-C-2) – Redline

3. Proposed Investment Policy (IV-C-2) - Clean
149

PORTFOLIO SUMMARY
End Values as of
02/28/2026
End Values as of
03/31/2026
Total Market Value 356,462,964.07 347,676,800.94
Par
ATTACHMENT 1
150

STATEMENT OF COMPLIANCE
Rules Name Limit Actual Compliance
Status Notes

AGENCY MORTGAGE SECURITIES

COMMERCIAL PAPER

CORPORATE MEDIUM TERM NOTES
ATTACHMENT 1
151

STATEMENT OF COMPLIANCE
Rules Name Limit Actual Compliance
Status Notes

FEDERAL AGENCIES

MUTUAL FUNDS
ATTACHMENT 1
152

STATEMENT OF COMPLIANCE
Rules Name Limit Actual Compliance
Status Notes
U.S. TREASURIES
ATTACHMENT 1
153

PORTFOLIO CHARACTERISTICS
City of West Sacramento Operating Portfolio | Account #10675 | As of March 31, 2026 Benchmark* 3/31/2026
Portfolio
12/31/2025
Portfolio
Average Maturity (yrs) 2.65 2.96 3.08
Average Modified Duration 2.47 2.50 2.62
Average Purchase Yield 4.19% 4.17%
Average Market Yield 3.84% 4.05% 3.78%
Average Quality** AA+ AA+ AA+
Total Market Value 242,726,781 242,052,816
*Benchmark: ICE BofA 1-5 Year Unsubordinated US Treasury & Agency Index **The credit quality is a weighted average calculation of the highest of S&P, and Fitch. 20 ATTACHMENT 1
154

PORTFOLIO CHARACTERISTICS
City of West Sacramento Reporting Portfolio | Account #10676 | As of March 31, 2026 3/31/2026
Portfolio
12/31/2025
Portfolio
Average Maturity (yrs) 0.00 0.00
Average Modified Duration 0.00 0.00
Average Purchase Yield 2.33% 3.11%
Average Market Yield 2.33% 3.11%
Average Quality** AAA AAA
Total Market Value 104,950,020 74,734,302
*Benchmark: NO BENCHMARK REQUIRED
**The credit quality is a weighted average calculation of the highest of S&P, and Fitch. 27 ATTACHMENT 1
155

PORTFOLIO CHARACTERISTICS
City of West Sacramento Cons Portfolio | Account #10677 | As of March 31, 2026 3/31/2026
Portfolio
12/31/2025
Portfolio
Average Maturity (yrs) 2.06 2.35
Average Modified Duration 1.74 2.00
Average Purchase Yield 3.63% 3.92%
Average Market Yield 3.53% 3.62%
Average Quality** AA+ AA+
Total Market Value 347,676,801 316,787,117
*Benchmark: NO BENCHMARK REQUIRED
**The credit quality is a weighted average calculation of the highest of S&P, and Fitch. 30 ATTACHMENT 1
156

HOLDINGS REPORT
Cusip Par Value/
Units
Purchase Date
Purchase Yield
Cost Value
Book Value
Mkt Price
Mkt YTM
Market Value
Accrued Int.
% of Port.

Gain/Loss
Moody's/
S&P/
Fitch
Maturity
ABS
ATTACHMENT 1
157

HOLDINGS REPORT
Cusip Par Value/
Units
Purchase Date
Purchase Yield
Cost Value
Book Value
Mkt Price
Mkt YTM
Market Value
Accrued Int.
% of Port.

Gain/Loss
Moody's/
S&P/
Fitch
Maturity
Total ABS 22,248,975.35 4.69%
22,239,296.67
22,241,515.16
100.41

4.13%
22,340,129.01
41,440.77

9.28%
98,613.85

3.07 1.15
AGENCY
Total Agency 3,200,000.00 3.90%
3,195,692.00
3,197,986.03
100.14

3.81%
3,204,355.60
26,393.06

1.33%
6,369.57

2.10 1.98

AGENCY CMBS
ATTACHMENT 1
158

HOLDINGS REPORT
Cusip Par Value/
Units
Purchase Date
Purchase Yield
Cost Value
Book Value
Mkt Price
Mkt YTM
Market Value
Accrued Int.
% of Port.

Gain/Loss
Moody's/
S&P/
Fitch
Maturity
Total Agency CMBS 28,704,809.47 4.41%
27,033,484.59
27,518,936.88

96.62 4.09%
27,707,500.95
71,302.77

11.51%
188,564.06

2.88 2.61
CASH
ATTACHMENT 1
159

HOLDINGS REPORT
Cusip Par Value/
Units
Purchase Date
Purchase Yield
Cost Value
Book Value
Mkt Price
Mkt YTM
Market Value
Accrued Int.
% of Port.

Gain/Loss
Moody's/
S&P/
Fitch
Maturity
Total Cash 3,756.20
3,756.20
3,756.20

1.00 3,756.20

0.00 0.00%

0.00 0.00

0.00 CORPORATE
ATTACHMENT 1
160

HOLDINGS REPORT
Cusip Par Value/
Units
Purchase Date
Purchase Yield
Cost Value
Book Value
Mkt Price
Mkt YTM
Market Value
Accrued Int.
% of Port.

Gain/Loss
Moody's/
S&P/
Fitch
Maturity
ATTACHMENT 1
161

HOLDINGS REPORT
Cusip Par Value/
Units
Purchase Date
Purchase Yield
Cost Value
Book Value
Mkt Price
Mkt YTM
Market Value
Accrued Int.
% of Port.

Gain/Loss
Moody's/
S&P/
Fitch
Maturity
ATTACHMENT 1
162

HOLDINGS REPORT
Cusip Par Value/
Units
Purchase Date
Purchase Yield
Cost Value
Book Value
Mkt Price
Mkt YTM
Market Value
Accrued Int.
% of Port.

Gain/Loss
Moody's/
S&P/
Fitch
Maturity
Total Corporate 65,101,000.00 4.43%
64,876,542.40
65,014,553.07
100.21

4.40%
65,225,553.64
699,504.02

27.09%
211,000.57

3.34 2.86

MONEY MARKET
FUND
Total Money
Market Fund 1,865,655.74 3.54%
1,865,655.74
1,865,655.74

1.00 3.54%
1,865,655.74

0.00 0.77%

0.00 0.00

0.00 MUNICIPAL
BONDS
Total Municipal
Bonds 2,400,000.00 4.41%
2,409,753.35
2,406,883.98
101.76

3.93%
2,442,304.80
18,000.00

1.01%
35,420.82

3.34 3.05

SUPRANATIONAL
ATTACHMENT 1
163

HOLDINGS REPORT
Cusip Par Value/
Units
Purchase Date
Purchase Yield
Cost Value
Book Value
Mkt Price
Mkt YTM
Market Value
Accrued Int.
% of Port.

Gain/Loss
Moody's/
S&P/
Fitch
Maturity
Total
8,625,000.00 3.50%
8,463,493.00
8,543,139.81

99.97 3.85%
8,621,741.25
65,369.39

3.58%
78,601.44

2.41 2.22

US TREASURY
ATTACHMENT 1
164

HOLDINGS REPORT
Cusip Par Value/
Units
Purchase Date
Purchase Yield
Cost Value
Book Value
Mkt Price
Mkt YTM
Market Value
Accrued Int.
% of Port.

Gain/Loss
Moody's/
S&P/
Fitch
Maturity
ATTACHMENT 1
165

HOLDINGS REPORT
Cusip Par Value/
Units
Purchase Date
Purchase Yield
Cost Value
Book Value
Mkt Price
Mkt YTM
Market Value
Accrued Int.
% of Port.

Gain/Loss
Moody's/
S&P/
Fitch
Maturity
Total US Treasury 109,530,000.00 3.97%
108,660,349.70
109,096,043.47

99.88 3.86%
109,391,561.79
1,002,211.96

45.43%
295,518.32

2.84 2.61
241,679,196.76 4.19%
238,748,023.64
239,888,470.34

98.90 4.05%
240,802,558.98
1,924,221.97
100.00%
914,088.64

2.96 2.50
Total Market Value
+ Accrued 242,726,780.95
ATTACHMENT 1
166
Attachment 32
1 CITY OF WEST SACRAMENTO
ADMINISTRATIVE POLICY NUMBER: IV-C-2
DATE: September 8, 1992
Revised: February 1, 1999
Revised: October 15, 2014
Revised: November 1, 2017
Revised: August 21, 2019
Revised: June 16, 2021
Revised: May 17, 2023
Revised: June 5, 2024
Revised: August 19, 2026
SUBJECT: INVESTMENT POLICY AUTHORITY: City Council

PURPOSE
This policy sets forth the procedural regulations for investing surplus funds. The intent of the Investment Policy of the City of West Sacramento is to define the parameters within which funds are to be managed.

POLICY
In methods, procedures, and practices, the policy formalizes the framework for the City’s investment activities that must be exercised to ensure effective and judicious fiscal and investment management of the City’s funds. The guidelines are intended to be broad enough to allow the investment officer to function properly within the parameters of responsibility and authority, yet specific enough to safeguard the investment assets.

PROCEDURE
A. SCOPE
This policy applies to the investment of surplus operating and capital funds and proceeds from certain bond issues. It conforms to best practices as outlined by Government Finance Officers Association, Association of Public Treasurers of the United States and Canada, and California Municipal Treasurers’ Association.

1. Pooling of Funds: Except for cash in certain restricted and special funds, the City will consolidate cash balances from all funds to maximize investment earnings. Investment income will be allocated to the various funds based on their respective participation and in accordance with generally accepted accounting principles.

B. GENERAL OBJECTIVES
The primary objectives, in priority order, of investment activities shall be safety, liquidity, and return.

1. Safety: Safety of principal is the foremost objective of the investment program.

Investments shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. To attain this objective, the City will diversify its investments by investing funds among a variety of securities with independent returns. The objective will be to mitigate credit risk and market risk, further explained below. 167
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2 2. Liquidity: The investment portfolio shall remain sufficiently liquid to meet all operating requirements that may be reasonably anticipated. This is accomplished by structuring the portfolio so that securities mature concurrent with cash needs to meet anticipated demands (static liquidity). Furthermore, since all possible cash demands cannot be anticipated, the portfolio should consist largely of securities with active secondary or resale markets (dynamic liquidity). A portion of the portfolio also may be placed in money market mutual funds or local government investment pools which offer same-day liquidity for short-term funds.

3. Return: The investment portfolio shall be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account the investment risk constraints and liquidity needs. Return on investment is of secondary importance compared to the safety and liquidity objectives described above. The core of investments are limited to relatively low risk securities in anticipation of earning a fair return relative to the risk being assumed.

C. STANDARDS OF CARE

1. Prudence: The standard of prudence to be used by investment officials shall be the “prudent investor” standard (California Government Code section 53600.3) and shall be applied in the context of managing an overall portfolio. Pursuant to this section of Code, all persons authorized to make investment decisions on behalf of the City are trustees and therefore fiduciaries subject to the Prudent Investor Standard:
“…all governing bodies of local agencies or persons authorized 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. 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 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. Within the limitations of this section and considering individual investments as part of an overall strategy, investments may be acquired as authorized by law.” Investment officers acting in accordance with written procedures and this investment policy and exercising due diligence shall be relieved of personal responsibility for an individual security’s credit risk or market price changes, provided deviations from expectations are reported in a timely fashion and the liquidity and the sale of securities are carried out in accordance with the terms of this policy.

2. Ethics and Conflicts of Interest: Officers and employees involved in the investment process shall refrain from personal business activity that could conflict with the proper execution and management of the investment program, or that could impair their ability to make impartial decisions. Employees and investment officials shall disclose any material interests in financial institutions with which they conduct business. They shall further disclose any personal financial/ investment positions that could be related to the performance of the investment portfolio. Employees and officers shall refrain from undertaking personal investment transactions with the same individual with whom business is conducted on behalf of the City.

3. Delegation of Authority: Authority to manage the investment program is granted to the Director of Finance/City Treasurer, hereinafter referred to as investment officer, and derived from California Government Code, Sections 41006 and 53600 et seq as well as 168
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3 Ordinance 87-12. Responsibility for the operation of the investment program is hereby delegated to the investment officer, who shall act in accordance with established written procedures and internal controls for the operation of the investment program consistent with this investment policy. Procedures should include references to: safekeeping, delivery vs. payment, investment accounting, repurchase agreements, wire transfer agreements, and collateral/depository agreements. No person may engage in an investment transaction except as provided under the terms of this policy and the procedures established by the investment officer. The investment officer shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinate officials. 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’s overall investment program shall be designed and managed with a degree of professionalism that is worthy of the public trust. The City recognizes that in a diversified portfolio, occasional measured losses may be inevitable and must be considered within the context of the overall portfolio’s return and the cash flow requirements of the City.

D. SAFEKEEPING AND CUSTODY

1. Authorized Financial Dealers and Institutions: To the extent practicable, the investment officer shall endeavor to complete investment transactions using a competitive bid process whenever possible. The investment officer will determine which financial institutions are authorized to provide investment services to the City. It shall be the City’s policy to purchase securities only from authorized institutions and firms. A list will be maintained of financial institutions authorized to provide investment services. In addition, a list also will be maintained of approved security broker/dealers selected by creditworthiness (e.g., a minimum capital requirement of $10,000,000 and at least five years of operation). These may include “primary” dealers or regional dealers that qualify under Securities and Exchange Commission (SEC) Rule 15C3-1 (uniform net capital rule).

In accordance with Section 53601.5, institutions eligible to transact investment business with the City include:
• Primary government dealers as designated by the Federal Reserve Bank and nonprimary government dealers. • Nationally or state-chartered banks.
• The Federal Reserve Bank.
• Direct issuers of securities eligible for purchase.

Selection of financial institutions and broker/dealers authorized to engage in transactions will be at the sole discretion of the City, except where the City utilizes an external investment adviser in which case the City may rely on the adviser for selection.

All financial institutions and broker/dealers who desire to become qualified for investment transactions must supply the following as appropriate:
• Audited financial statements.
• Proof of National Association of Securities Dealers (NASD) certification. • Proof of state registration.
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4 • Completed broker/dealer questionnaire.
• Certification of having read and understood and agreeing to comply with the City’s investment policy.
• Evidence of adequate insurance coverage.

An annual review of the financial condition and registration of qualified financial institutions and broker/dealers will be conducted by the investment officer.

From time to time, the investment officer may choose to invest in instruments offered by minority and community financial institutions. In such instances, a waiver to the criteria under Paragraph 1 may be granted. All terms and relationships will be fully disclosed prior to purchase and will be reported to the appropriate entity on a consistent basis and should be consistent with state or local law. These types of investment purchases should be approved by the appropriate legislative or governing body in advance.

Public deposits will be made only in qualified public depositories as established by State law. Deposits will be insured by the Federal Deposit Insurance Corporation, or, to the extent the amount exceeds the insured maximum, will be collateralized in accordance with State law.

Selection of broker/dealers used by an external investment adviser retained by the City will be at the sole discretion of the adviser. Where possible, transactions with broker/dealers shall be selected on a competitive basis and their bid or offering prices shall be recorded. If there is no other readily available competitive offering, best efforts will be made to document quotations for comparable or alternative securities. When purchasing original issue instrumentality securities, no competitive offerings will be required as all dealers in the selling group offer those securities at the same original issue price.

2. Internal Controls: The investment officer is responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the City are protected from loss, theft or misuse. Specifics for the internal controls shall be documented in an investment procedures manual that shall be reviewed and updated periodically by the Investment Officer. An example of such a procedure would include the requirement that the Director of Finance approve trades transacted by other authorized personnel. The internal control structure shall be designed to provide reasonable assurance that these objectives are met. The concept of reasonable assurance recognizes that (1) the cost of a control should not exceed the benefits likely to be derived and (2) the valuation of costs and benefits requires estimates and judgments by management.

Accordingly, the investment officer shall establish a process for an annual independent review by an external auditor to assure compliance with policies and procedures. The internal controls shall address the following points:
• Control of collusion.
• Separation of transaction authority from accounting and recordkeeping. • Custodial safekeeping.
• Avoidance of physical delivery securities.
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5 • Clear designation of authority to subordinate staff members. • Written confirmation of transactions for investments and wire transfers. • Dual authorizations of wire transfers.
• Staff training.
• Development of a wire transfer agreement with the lead bank and third-party custodian.

3. Delivery vs. Payment: All trades where applicable will be executed by delivery vs. payment (DVP) to ensure that securities are deposited in an eligible financial institution prior to the release of funds. Securities will be held by a third-party custodian as evidenced by safekeeping receipts. The only exception to the foregoing shall be depository accounts and securities purchase made with: Local Agency Investment Fund (LAIF), California Asset Management Program, time certificates of deposit and money market mutual funds, since the purchased securities are not deliverable.

4. Third-Party Safekeeping: Securities will be held by an independent third-party safekeeping institution selected by the City. All securities will be evidenced by safekeeping receipts in the City’s name. The safekeeping institution shall annually provide a copy of its most recent report on internal controls – Service Organization Control Reports (formerly 70, or SAS 70) prepared in accordance with the Statements of Standards for Attestation Engagements (SSAE) No. 16 (effective June 15, 2011).

E. SUITABLE AND AUTHORIZED INVESTMENTS

1. Investment Types: Investments shall be placed to conform to those allowable under the State of California Government Code section 53600 et seq. Within the investments permitted by the Code, the City seeks to further restrict eligible investments to the guidelines listed below. Consistent with the GFOA Policy Statement and Local Laws Concerning Investment Practices, the following investments will be permitted by this policy and are those defined by state and local law where applicable. If additional types of securities are approved for investment by public funds by state statute, they will not be eligible for investment by the City until this Policy has been amended and the amended version adopted by the City Council. In the event a discrepancy is found between this policy and the Code, the more restrictive parameters will take precedence. Percentage holding limits and minimum credit quality requirements listed in this section apply at the time the security is purchased.

Any investment currently held at the time the policy is adopted which does not meet the new policy guidelines can be held until maturity and shall be exempt from the current policy. At the time of the investment’s maturity or liquidation, such funds shall be reinvested only as provided in the current policy.

An appropriate risk level shall be maintained by primarily purchasing securities that are of high quality, liquid, and marketable. The portfolio shall be diversified by security type and institution to avoid incurring unreasonable and avoidable risks regarding specific security types or individual issuers.

Authorized securities include:
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6 A. Municipal Securities include obligations of the City, the State of California and any local agency within the State of California, provided that:
• The securities are rated in a rating category of “A” or its equivalent or better by at least one nationally recognized statistical rating organization (“NRSRO”). • No more than 5% of the portfolio may be invested in any single issuer. • No more than 30% of the portfolio may be in Municipal Securities. • The maximum maturity does not exceed five seven (57) years.

B. Municipal Securities (Registered Treasury Notes or Bonds) of any of the other 49 states in addition to California, 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 of the other 49 states, in addition to California.
• The securities are rated in a rating category of “A” or its equivalent or better by at least one nationally recognized statistical rating organization (“NRSRO”). • No more than 5% of the portfolio may be invested in any single issuer. • No more than 30% of the portfolio may be in Municipal Securities. • The maximum maturity does not exceed five seven (57) years.

C. U.S. Treasuries and other government obligations for which the full faith and credit of the United States are pledged for the payment of principal and interest. There are no limits on the dollar amount or percentage that the City may invest in U.S. Treasuries, provided that:
• The maximum maturity is five seven (57) years.

D. Federal Agencies or United States Government-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. There are no limits on the dollar amount or percentage that the City may invest in Federal Agency or Government-Sponsored Enterprises (GSEs), provided that:
• No more than 30% of the portfolio may be invested in any single Agency/GSE issuer.
• The maximum maturity does not exceed five seven (57) years. • The maximum percent of agency callable securities in the portfolio will be 20%.

E. Banker’s Acceptances, provided that:
• They are issued by institutions which have short-term debt obligations rated “A-1” or its equivalent or better by at least one NRSRO; or long-term debt obligations which are rated in a rating category of “A” or its equivalent or better by at least one NRSRO.
• No more than 40% of the portfolio may be invested in Banker’s Acceptances. • No more than 5% of the portfolio may be invested in any single issuer. • The maximum maturity does not exceed 180 days.
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7 F. Commercial Paper, provided that the securities are issued by an entity that meets all of the following conditions in either paragraph (a) or (b) and other requirements specified below:
i. SECURITIES issued by corporations:

1. A corporation organized and operating in the United States with assets more than $500 million.

2. The securities are rated “A-1” or its equivalent or better by at least one NRSRO.

3. If the issuer has other debt obligations, they must be rated in a rating category of “A” or its equivalent or better by at least one NRSRO. ii. SECURITIES issued by other entities:

1. The issuer is organized within the United States as a special purpose corporation, trust, or limited liability company.

2. The securities must have program-wide credit enhancements including, but not limited to, overcollateralization, letters of credit, or a surety bond.

3. The securities are rated “A-1” or its equivalent or better by at least one NRSRO. • City may purchase no more than 10% of the outstanding commercial paper of any single issuer.
• No more than 25% of the portfolio may be invested in Commercial Paper. Under a provision sunsetting on January 1, 20262031, no more than 40% of the portfolio may be invested in Commercial Paper if the Agency’s investment assets under management are greater than $100,000,000.
• No more than 5% of the portfolio may be invested in any single issuer. • The maximum maturity does not exceed 270 397 days.

G. Negotiable Certificates of Deposit (NCDs), issued by a nationally or state-chartered bank, a savings association or a federal association, a state or federal credit union, or by a federally licensed or state-licensed branch of a foreign bank, provided that:
• The amount of the NCD insured up to the FDIC limit does not require any credit ratings.
• Any amount above the FDIC insured limit must be issued by institutions which have short-term debt obligations rated “A-1” or its equivalent or better by at least one NRSRO; or long-term obligations rated in a rating category of “A” or its equivalent or better by at least one NRSRO.
• No more than 30% of the total portfolio may be invested in NCDs (combined with CDARS).
• No more than 5% of the portfolio may be invested in any single issuer. • The maximum maturity does not exceed five (5) years.

H. Federally Insured Time Deposits (Non-Negotiable Certificates of Deposit) in state or federally chartered banks, savings and loans, or credit unions, provided that:
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8 • The amount per institution is limited to the maximum covered under federal insurance.
• No more than 20% of the portfolio will be invested in a combination of federally insured and collateralized time deposits.
• The maximum maturity does not exceed five (5) years.

I. Collateralized Time Deposits (Non-Negotiable Certificates of Deposit) in state or federally chartered banks, savings and loans, or credit unions in excess of insured amounts which are fully collateralized with securities in accordance with California law, provided that:
• No more than 20% of the portfolio will be invested in a combination of federally insured and collateralized time deposits.
• The maximum maturity does not exceed five (5) years.

J. Certificate of Deposit Placement Service (CDARS), provided that:
• No more than 30% of the total portfolio may be invested in a combination of Certificates of Deposit, including CDARS.
• The maximum maturity does not exceed five (5) years.

K. Collateralized Bank Deposits. City’s deposits with financial institutions will be collateralized with pledged securities per California Government Code, Section 53651.

There are no limits on the dollar amount or percentage that the City may invest in collateralized bank deposits.

L. Repurchase Agreements collateralized with securities authorized under California Government Code, maintained at a level of at least 102% of the market value of the Repurchase Agreement. There are no limits on the dollar amount or percentage that the City may invest, provided that:
• Securities used as collateral for Repurchase Agreements will be delivered to an acceptable third-party custodian.
• Repurchase Agreements are subject to a Master Repurchase Agreement between the City and the provider of the repurchase agreement. The Master Repurchase Agreement will be substantially in the form developed by the Securities Industry and Financial Markets Association (SIFMA).
• The maximum maturity does not exceed one (1) year.

M. State of California Local Agency Investment Fund (LAIF), provided that:
• The City may invest up to the maximum amount permitted by LAIF. • LAIF’s investments in instruments prohibited by or not specified in the City’s policy do not exclude the investment in LAIF itself from the City’s list of allowable investments, provided LAIF’s reports allow the investment officer to adequately judge the risk inherent in LAIF’s portfolio.

N. Local Government Investment Pools
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9 • Other LGIPs permitted by client.
• There is no issuer limitation for Local Government Investment Pools O. Corporate Medium-Term Notes (MTNs), provided that:
• The issuer is a corporation 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.
• The securities are rated in a rating category of “A” or its equivalent or better by at least one NRSRO.
• No more than 30% of the total portfolio may be invested in MTNs. • No more than 5% of the portfolio may be invested in any single issuer. • The maximum maturity does not exceed five (5) years.

P. Asset-Backed, Mortgage-Backed, Mortgage Pass-Through Securities, and Collateralized Mortgage Obligations from issuers not defined in sections C and D of the Authorized Investments section of this policy, provided that:
• The securities are rated in a rating category of “AA” or its equivalent or better by a NRSRO.
• No more than 20% of the total portfolio may be invested in these securities. • No more than 5% of the portfolio may be invested in any single Asset-Backed or Commercial Mortgage security issuer.
• The maximum legal final maturity does not exceed five (5) years.

Q. Mutual Funds and Money Market Mutual Funds that are registered with the Securities and Exchange Commission under the Investment Company Act of 1940, provided that:
a. Mutual Funds that invest in the securities and obligations as authorized under California Government Code, Section 53601 (a) to (k) and (m) to (q) inclusive and that meet either of the following criteria:
(i) Attained the highest ranking or the highest letter and numerical rating provided by not less than two (2) NRSROs; or
(ii) Have retained an investment adviser registered or exempt from registration with the Securities and Exchange Commission with not less than five years’ experience investing in the securities and obligations authorized by California Government Code, Section 53601 and with assets under management in excess of $500 million.
• No more than 10% of the total portfolio may be invested in shares of any one mutual fund.
b. Money Market Mutual Funds registered with the Securities and Exchange Commission under the Investment Company Act of 1940 and issued by diversified management companies and meet either of the following criteria:
(i) Have attained the highest ranking or the highest letter and numerical rating provided by not less than two (2) NRSROs; or
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10 (ii) Have retained an investment adviser registered or exempt from registration with the Securities and Exchange Commission with not less than five years’ experience managing money market mutual funds with assets under management in excess of $500 million.
• No more than 20% of the total portfolio may be invested in the shares of any one Money Market Mutual Fund.
c. No more than 20% of the total portfolio may be invested in these securities.

R. Supranationals, provided that:
• Issues are US dollar denominated senior unsecured unsubordinated obligations issued or unconditionally guaranteed by the International Bank for Reconstruction and Development, International Finance Corporation, or Inter-American 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. • The maximum maturity does not exceed five (5) years.

2. Prohibited Investment Vehicles and Practices:
• State law notwithstanding, any investments not specifically described herein are prohibited, including, but not limited to futures and options. • In accordance with Government Code, Section 53601.6, investment in inverse floaters, range notes, or mortgage derived interest-only strips is prohibited. • Investment in any security that could result in a zero-interest accrual if held to maturity is prohibited. 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, 20262031, securities backed by the U.S. Government that could result in a zero- or negativeinterest accrual if held to maturity are permitted. • Trading securities for the sole purpose of speculating on the future direction of interest rates is prohibited.
• Purchasing or selling securities on margin is prohibited. • The use of reverse repurchase agreements, securities lending or any other form of borrowing or leverage is prohibited.
• The purchase of foreign currency denominated securities is prohibited. • The purchase of securities with trade settlement periods longer than 45 days is prohibited.

3. Investment Pools/Mutual Funds:

The City shall conduct a thorough investigation of any pool or mutual fund prior to making an investment, and on a continual basis thereafter. The investment officer shall develop a questionnaire which will answer the following general questions:
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11 • A description of eligible investment securities, and a written statement of investment policy and objectives.
• A description of interest calculations and how it is distributed, and how gains and losses are treated.
• A description of how the securities are safeguarded (including the settlement processes), and how often the securities are priced and the program audited. • A description of who may invest in the program, how often, what size deposit and withdrawal are allowed.
• A schedule for receiving statements and portfolio listings. • Are reserves, retained earnings, etc. utilized by the pool/fund? • A fee schedule, and when and how is it assessed.
• Is the pool/fund eligible for bond proceeds and/or will it accept such proceeds?

4. Collateralization: Acceptable collateral shall be as follows:

Certificates of Deposit (CDs). The City shall require any commercial bank or savings and loan association to deposit eligible securities with an agency of a depository approved by the State Banking Department to secure any uninsured portion of a Non-Negotiable Certificate of Deposit. The value of eligible securities as defined pursuant to California Government Code, Section 53651, pledged against a Certificate of Deposit shall be equal to 150% of the face value of the CD if the securities are classified as mortgages and 110% of the face value of the CD for all other classes of security.

Collateralization of Bank Deposits. This is the process by which a bank or financial institution pledges securities, or other deposits for the purpose of securing repayment of deposited funds. The City shall require any bank or financial institution to comply with the collateralization criteria defined in California Government Code, Section 53651.

Repurchase Agreements. The City requires that Repurchase Agreements be collateralized only by securities authorized in accordance with California Government Code:
• The securities which collateralize the repurchase agreement shall be priced at Market Value, including any Accrued Interest plus a margin. The Market Value of the securities that underlie a repurchase agreement shall be valued at 102% or greater of the funds borrowed against those securities.
• Financial institutions shall mark the value of the collateral to market at least monthly and increase or decrease the collateral to satisfy the ratio requirement described above.
• The City shall receive monthly statements of collateral.

F. INVESTMENT PARAMETERS

1. Mitigating Credit Risk in the Portfolio: Credit risk is the risk that a security or a portfolio will lose some or all its value due to a real or perceived change in the ability of the issuer to repay its debt. The City will mitigate credit risk by adopting the following strategies:
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12 • The diversification requirements included in the “Suitable and Authorized Investments” section of this policy are designed to mitigate credit risk in the portfolio. • No more than 5% of the total portfolio may be deposited with or invested in securities issued by any single issuer unless otherwise specified in this policy. • 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 the credit ratings of any security owned by the City are downgraded to a level below the quality required by this investment policy, making the security ineligible for additional purchases, the following steps will be taken:
• If a security is downgraded, the investment officer will use discretion in determining whether to sell or hold the security based on its current maturity, the economic outlook for the issuer, and other relevant factors. If employing an investment manager, any actions taken related to the downgrade by the investment manager will be communicated to the investment officer in a timely manner. • If a decision is made to retain a downgraded security in the portfolio, its presence in the portfolio will be monitored and reported monthly to the City Council.

2. Mitigating Market Risk in the Portfolio: Market risk is the risk that the portfolio value will fluctuate due to changes in the general level of interest rates. The City recognizes that, over time, longer-term portfolios have the potential to achieve higher returns. Likewise, longer-term portfolios have higher volatility of return. The City will mitigate market risk by providing adequate liquidity for short-term cash needs, and by making longer-term investments only with funds that are not needed for current cash flow purposes.

The City further recognizes that certain types of securities, including variable rate securities, securities with principal paydowns prior to maturity, and securities with embedded options, will affect the market risk profile of the portfolio differently in different interest rate environments. The City, therefore, adopts the following strategies to control and mitigate its exposure to market risk:
• The City will maintain a minimum of six months of budgeted operating expenditures in short term investments to provide sufficient liquidity for expected disbursements. • The maximum stated final maturity of individual securities in the portfolio will be five (5) years as measured from the date of trade settlement, except as otherwise stated in this policy.
• 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.

3. Maximum Maturities: To the extent possible, the City shall attempt to match its investments with anticipated cash flow requirements. The City will not directly invest in securities maturing more than five years from the date of trade settlement or in accordance 178
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13 with state and local statutes and ordinances, unless the City Council has by resolution granted authority to make such an investment either specifically or as part of an investment program approved by the City Council no less than three months prior to the investment.

The City investment officer shall adopt weighted average maturity limitations, consistent with the investment objectives.

Because of inherent difficulties in accurately forecasting cash flow requirements, a portion of the portfolio should be continuously invested in readily available funds such as LGIPs, money market funds, or overnight repurchase agreements to ensure that appropriate liquidity is maintained to meet ongoing obligations.

G. INVESTMENT STRATEGIES:

The investment program shall seek to augment returns consistent with the intent of this policy, identified risk limitations and prudent investment principles. These objectives will be achieved by use of the following strategies:

The source of and purpose for surplus funds determines the goal to be accomplished by the strategy. Bond proceeds, for example, typically have three purposes: reserve funds, project funds, and debt service funds. The goal and corresponding investment strategy is different for each, as follows:
• Reserve Funds. The goal is to have these funds available in case of default while minimizing negative arbitrage. The strategy is to call for competitive bids for long-term investment agreements with a call provision for default or redemption from AAA-rated limitations.
• Project Funds. The goal is to maintain purchasing power. The strategy, assuming a normal yield curve, is to match investment agreement maturities with construction draw schedules. Funds needed within 12 months are currently placed in an AAA-rated mutual fund of U.S. Treasury Securities.
• Debt Service Funds. The goal is to maintain liquidity. Generally, funds are placed in a money market mutual fund related investment category.

Surplus funds in the City pool come from a mixed bag of services for a wide variety of purposes. This blend of funds leads to the general investment goal of earning an appropriate yield consistent with the City’s high standards for safety and liquidity.

H. INVESTMENT PERFORMANCE
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 investment officer shall monitor and evaluate the portfolio’s performance relative to the chosen market benchmark(s), which will be included in the investment officer’s quarterly report. The investment officer shall select an appropriate, readily available index to use as a market benchmark.

I. REPORTING
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14 1. Methods: The investment officer shall prepare an investment report at least quarterly, including a management summary that provides an analysis of the status of the current investment portfolio and the individual transactions executed over the last quarter. This report shall include the type of investment, issuer, date of maturity, and par and dollar amount invested on all securities, investments and moneys held by the City. The report shall also include a current market value as of the date of the report. It shall state compliance of the portfolio to the statement of investment policy or manner in which the portfolio is not in compliance. Finally, the report shall include a statement denoting the ability of the local agency to meet its pool’s expenditure requirements for the next six months or provide an explanation as to why sufficient money shall, or may, not be available. The report shall be provided within 45 days after the end of the quarter. Once a year, the statement of investment policy shall be included in the report.

2. Performance Standards: The investment portfolio will be managed in accordance with the parameters specified within this policy. The portfolio should obtain a market average rate of return during a market/economic environment of stable interest rates. A series of appropriate benchmarks shall be established against which portfolio performance shall be compared on a regular basis.

3. Marking to Market: The market value of the portfolio shall be calculated at least monthly and a statement of the market value of the portfolio shall be issued at least monthly. This will ensure that review of the investment portfolio, in terms of value and price volatility, has been performed consistent with the GFOA Recommended Practice on “Mark-to-Market Practices for State and Local Government Investment Portfolios and Investment Pools.” In defining market value, considerations should be given to the GASB Statement 31 pronouncement.

4. Annual Reports: The investment policy shall be reviewed at least annually within 120 days of the end of the fiscal year to ensure its consistency with the overall objectives of preservation of principal, liquidity and return, and its relevance to current law and financial and economic trends. A comprehensive annual report shall be presented in conjunction with the investment policy review. This report shall include comparisons of City’s return to the City’s benchmark return, shall suggest policies and improvements that might enhance the investment program, and shall include an investment plan for the coming year.

5. Annual Audit: Management shall establish an annual process of independent review by the external auditor to assure compliance with internal controls. Such audit will include tests deemed appropriate by the auditor.

J. PORTFOLIO AND POLICY CONSIDERATIONS

1. Portfolio Review: The investment officer 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.

2. Policy Amendments: This policy shall be reviewed on an annual basis within 120 days of the end of the fiscal year to ensure its consistency with the overall objectives of preservation of principal, liquidity and return, and its relevance to current law and financial and economic trends. Any recommended modifications or changes shall be presented by the investment officer to the City Council for their consideration and adoption. 180
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15 K. GLOSSARY OF TERMS
Agencies: Shorthand market terminology for any obligation issued by a government-sponsored entity (GSE), or a federally related institution. Most obligations of GSEs are not guaranteed by the full faith and credit of the US government. Examples are:

FFCB: The Federal Farm Credit Bank System provides credit and liquidity in the agricultural industry. FFCB issues discount notes and bonds.

FHLB: The Federal Home Loan Bank provides credit and liquidity in the housing market.

FHLB issues discount notes and bonds.

FHLMC: Like FHLB, the Federal Home Loan Mortgage Corporation provides credit and liquidity in the housing market. FHLMC, also called “FreddieMac” issues discount notes, bonds and mortgage pass-through securities.

FNMA: Like FHLB and FreddieMac, the Federal National Mortgage Association was established to provide credit and liquidity in the housing market. FNMA, also known as “FannieMae,” issues discount notes, bonds and mortgage pass-through securities.

GNMA: The Government National Mortgage Association, known as “GinnieMae,” issues mortgage pass-through securities, which are guaranteed by the full faith and credit of the US Government.

PEFCO: The Private Export Funding Corporation assists exporters. Obligations of PEFCO are not guaranteed by the full faith and credit of the US government.

TVA: The Tennessee Valley Authority provides flood control and power and promotes development in portions of the Tennessee, Ohio, and Mississippi River valleys. TVA currently issues discount notes and bonds.

Asset Backed Securities: Securities supported by pools of installment loans or leases or by pools of revolving lines of credit.

Average Life: In mortgage-related investments, including CMOs, the average time to expected receipt of principal payments, weighted by the amount of principal expected.

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 comparison security or portfolio. A performance benchmark is a partial market index, which reflects the mix of securities allowed under a specific investment policy.

Broker: A broker brings buyers and sellers together for a transaction for which the broker receives a commission. A broker does not sell securities from his own position.

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.

Certificate of Deposit (CD): A time deposit with a specific maturity evidenced by a certificate.

Certificate of Deposit Account Registry SYSTEM (CDARS): A private placement service that allows local agencies to purchase more than $250,000 in CDs from a single financial institution (must be a participating institution of CDARS) while still maintaining FDIC insurance coverage. 181
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16 CDARS is currently the only entity providing this service. CDARS facilitates the trading of deposits between the California institution and other participating institutions in amounts that are less than $250,000 each, so that FDIC coverage is maintained.

Collateral: Securities or cash pledged by a borrower to secure repayment of a loan or repurchase agreement. Also, securities pledged by a financial institution to secure deposits of public monies.

Collateralized Bank Deposit: A bank deposit that is collateralized at least 100% (principal plus interest to maturity). The deposit is collateralized using assets set aside by the issuer such as Treasury securities or other qualified collateral to secure the deposit in excess of the limit covered by the Federal Deposit Insurance Corporation.

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.

Collateralized Time Deposit: Time deposits that are collateralized at least 100% (principal plus interest to maturity). These instruments are collateralized using assets set aside by the issuer such as Treasury securities or other qualified collateral to secure the deposit in excess of the limit covered by the Federal Deposit Insurance Corporation.

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.

Dealer: A dealer acts as a principal in security transactions, selling securities from and buying securities for his own position.

Debenture: A bond secured only by the general credit of the issuer.

Delivery vs. Payment (DVP): A securities industry procedure whereby payment for a security must be made at the time the security is delivered to the purchaser’s agent.

Derivative: Any security that has principal and/or interest payments which are subject to uncertainty (but not for reasons of default or credit risk) as to timing and/or amount, or any security which represents a component of another security which has been separated from other components (“Stripped” coupons and principal). A derivative is also defined as a financial instrument the value of which is totally or partially derived from the value of another instrument, interest rate, or index.

Discount: The difference between the par value of a bond and the cost of the bond, when the cost is below par. Some short-term securities, such as T-bills and banker’s acceptances, are known as discount securities. They sell at a discount from par and return the par value to the investor at maturity without additional interest. Other securities, which have fixed coupons, trade at a discount when the coupon rate is lower than the current market rate for securities of that maturity and/or quality.

Diversification: Dividing investment funds among a variety of investments to avoid excessive exposure to any one source of risk.

Duration: The weighted average time to maturity of a bond where the weights are the present values of the future cash flows. Duration measures the price sensitivity of a security to changes interest rates.

Federal Deposit Insurance Corporation (FDIC): The Federal Deposit Insurance Corporation (FDIC) is an independent federal agency insuring deposits in U.S. banks and thrifts in the event 182
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17 of bank failures. The FDIC was created in 1933 to maintain public confidence and encourage stability in the financial system through the promotion of sound banking practices.

Federally Insured Time Deposit: A time deposit is an interest-bearing bank deposit account that has a specified date of maturity, such as a certificate of deposit (CD). These deposits are limited to funds insured in accordance with FDIC insurance deposit limits.

Leverage: Borrowing funds in order to invest in securities that have the potential to pay earnings at a rate higher than the cost of borrowing.

Liquidity: The speed and ease with which an asset can be converted to cash.

Local Agency Investment Fund (LAIF): A voluntary investment fund open to government entities and certain non-profit organizations in California that is managed by the State Treasurer’s Office.

Local Government Investment Pool: Investment pools that range from the State Treasurer’s Office Local Agency Investment Fund (LAIF) to county pools, to Joint Powers Authorities (JPAs).

These funds are not subject to the same SEC rules applicable to money market mutual funds.

Make Whole Call: A type of call provision on a bond that allows the issuer to pay off the remaining debt early. Unlike a call option, with a make whole call provision, the issuer makes a lump sum payment that equals the net present value (NPV) of future coupon payments that will not be paid because of the call. With this type of call, an investor is compensated, or "made whole." Margin: The difference between the market value of a security and the loan a broker makes using that security as collateral.

Market Risk: The risk that the value of securities will fluctuate with changes in overall market conditions or interest rates.

Market Value: The price at which a security can be traded.

Maturity: The final date upon which the principal of a security becomes due and payable.

Medium Term Notes: Unsecured, investment-grade senior debt securities of major corporations which are sold in relatively small amounts on either a continuous or an intermittent basis. MTNs are highly flexible debt instruments that can be structured to respond to market opportunities or to investor preferences.

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: The market in which short-term debt instruments (T-bills, discount notes, commercial paper, and banker’s acceptances) are issued and traded.

Money Market Mutual Fund: A mutual fund that invests exclusively in short-term securities.

Examples of investments in money market funds are certificates of deposit and U.S. Treasury securities. Money market funds attempt to keep their net asset values at $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 183
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18 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.

Negotiable Certificate of Deposit (CD): A short-term debt instrument that pays interest and is issued by a bank, savings or federal association, state or federal credit union, or state-licensed branch of a foreign bank. Negotiable CDs are traded in a secondary market and are payable upon order to the bearer or initial depositor (investor).

Primary Dealer: A financial institution (1) that is a trading counterparty with the Federal Reserve in its execution of market operations to carry out U.S. monetary policy, and (2) that participates for statistical reporting purposes in compiling data on activity in the U.S. Government securities market.

Prudent Person (Prudent Investor) Rule: A standard of responsibility which applies to fiduciaries.

In California, the rule is stated as “Investments shall be managed with the care, skill, prudence and diligence, under the circumstances then prevailing, that a prudent person, acting in a like capacity and familiar with such matters, would use in the conduct of an enterprise of like character and with like aims to accomplish similar purposes.”
Repurchase Agreement: Short-term purchases of securities with a simultaneous agreement to sell the securities back at a higher price. From the seller’s point of view, the same transaction is a reverse repurchase agreement.

Safekeeping: A service to bank customers whereby securities are held by the bank in the customer’s name.

Securities and Exchange Commission (SEC): The U.S. Securities and Exchange Commission (SEC) is an independent federal government agency responsible for protecting investors, maintaining fair and orderly functioning of securities markets and facilitating capital formation. It was created by Congress in 1934 as the first federal regulator of securities markets. The SEC promotes full public disclosure, protects investors against fraudulent and manipulative practices in the market, and monitors corporate takeover actions in the United States.

Securities and Exchange Commission (SEC) Rule 15c3-1: An SEC rule setting capital requirements for brokers and dealers. Under Rule 15c3-1, a broker or dealer must have sufficient liquidity in order to cover the most pressing obligations. This is defined as having a certain amount of liquidity as a percentage of the broker/dealer's total obligations. If the percentage falls below a certain point, the broker or dealer may not be allowed to take on new clients and may have restrictions placed on dealings with current client.

Structured Note: A complex, fixed income instrument, which pays interest, based on a formula tied to other interest rates, commodities or indices. Examples include inverse floating rate notes which have coupons that increase when other interest rates are falling, and which fall when other interest rates are rising, and "dual index floaters," which pay interest based on the relationship between two other interest rates - for example, the yield on the ten-year Treasury note minus the Libor rate. Issuers of such notes lock in a reduced cost of borrowing by purchasing interest rate swap agreements.
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19 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.

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.

Treasury Bills: All securities issued with initial maturities of one year or less are issued as discounted instruments and are called Treasury bills. The Treasury currently issues three- and six-month T-bills at regular weekly auctions. It also issues “cash management” bills as needed to smooth out cash flows.

Treasury Bonds: All securities issued with initial maturities greater than ten years are called Treasury bonds. Like Treasury notes, they pay interest semi-annually.

Treasury Notes: All securities issued with initial maturities of two to ten years are called Treasury notes and pay interest semi-annually.

U.S. Treasury Obligations: Securities issued by the U.S. Treasury and backed by the full faith and credit of the United States. Treasuries are considered to have no credit risk and are the benchmark for interest rates on all other securities in the US and overseas. The Treasury issues both discounted securities and fixed coupon notes and bonds.

Yield to Maturity: The annualized internal rate of return on an investment which equates the expected cash flows from the investment to its cost.
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Attachment 3
1 CITY OF WEST SACRAMENTO
ADMINISTRATIVE POLICY NUMBER: IV-C-2
DATE: September 8, 1992
Revised: February 1, 1999
Revised: October 15, 2014
Revised: November 1, 2017
Revised: August 21, 2019
Revised: June 16, 2021
Revised: May 17, 2023
Revised: June 5, 2024
Revised: August 19, 2026
SUBJECT: INVESTMENT POLICY AUTHORITY: City Council

B. GENERAL OBJECTIVES
The primary objectives, in priority order, of investment activities shall be safety, liquidity, and return.

1. Safety: Safety of principal is the foremost objective of the investment program.

Investments shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. To attain this objective, the City will diversify its investments by investing funds among a variety of securities with independent returns. The objective will be to mitigate credit risk and market risk, further explained below. 186
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2 2. Liquidity: The investment portfolio shall remain sufficiently liquid to meet all operating requirements that may be reasonably anticipated. This is accomplished by structuring the portfolio so that securities mature concurrent with cash needs to meet anticipated demands (static liquidity). Furthermore, since all possible cash demands cannot be anticipated, the portfolio should consist largely of securities with active secondary or resale markets (dynamic liquidity). A portion of the portfolio also may be placed in money market mutual funds or local government investment pools which offer same-day liquidity for short-term funds.

C. STANDARDS OF CARE

3. Delegation of Authority: Authority to manage the investment program is granted to the Director of Finance/City Treasurer, hereinafter referred to as investment officer, and derived from California Government Code, Sections 41006 and 53600 et seq as well as 187
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3 Ordinance 87-12. Responsibility for the operation of the investment program is hereby delegated to the investment officer, who shall act in accordance with established written procedures and internal controls for the operation of the investment program consistent with this investment policy. Procedures should include references to: safekeeping, delivery vs. payment, investment accounting, repurchase agreements, wire transfer agreements, and collateral/depository agreements. No person may engage in an investment transaction except as provided under the terms of this policy and the procedures established by the investment officer. The investment officer shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinate officials. 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.

D. SAFEKEEPING AND CUSTODY

All financial institutions and broker/dealers who desire to become qualified for investment transactions must supply the following as appropriate:
• Audited financial statements.
• Proof of National Association of Securities Dealers (NASD) certification. • Proof of state registration.
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4 • Completed broker/dealer questionnaire.
• Certification of having read and understood and agreeing to comply with the City’s investment policy.
• Evidence of adequate insurance coverage.

An annual review of the financial condition and registration of qualified financial institutions and broker/dealers will be conducted by the investment officer.

Accordingly, the investment officer shall establish a process for an annual independent review by an external auditor to assure compliance with policies and procedures. The internal controls shall address the following points:
• Control of collusion.
• Separation of transaction authority from accounting and recordkeeping. • Custodial safekeeping.
• Avoidance of physical delivery securities.
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5 • Clear designation of authority to subordinate staff members. • Written confirmation of transactions for investments and wire transfers. • Dual authorizations of wire transfers.
• Staff training.
• Development of a wire transfer agreement with the lead bank and third-party custodian.

E. SUITABLE AND AUTHORIZED INVESTMENTS

Authorized securities include:
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6 A. Municipal Securities include obligations of the City, the State of California and any local agency within the State of California, provided that:
• The securities are rated in a rating category of “A” or its equivalent or better by at least one nationally recognized statistical rating organization (“NRSRO”). • No more than 5% of the portfolio may be invested in any single issuer. • No more than 30% of the portfolio may be in Municipal Securities. • The maximum maturity does not exceed seven (7) years.

D. Federal Agencies or United States Government-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. There are no limits on the dollar amount or percentage that the City may invest in Federal Agency or Government-Sponsored Enterprises (GSEs), provided that:
• No more than 30% of the portfolio may be invested in any single Agency/GSE issuer.
• The maximum maturity does not exceed seven (7) years. • The maximum percent of agency callable securities in the portfolio will be 20%.

E. Banker’s Acceptances, provided that:
• They are issued by institutions which have short-term debt obligations rated “A-1” or its equivalent or better by at least one NRSRO; or long-term debt obligations which are rated in a rating category of “A” or its equivalent or better by at least one NRSRO.
• No more than 40% of the portfolio may be invested in Banker’s Acceptances. • No more than 5% of the portfolio may be invested in any single issuer. • The maximum maturity does not exceed 180 days.
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7 F. Commercial Paper, provided that the securities are issued by an entity that meets all of the following conditions in either paragraph (a) or (b) and other requirements specified below:
i. SECURITIES issued by corporations:

1. A corporation organized and operating in the United States with assets more than $500 million.

2. The securities are rated “A-1” or its equivalent or better by at least one NRSRO.

3. If the issuer has other debt obligations, they must be rated in a rating category of “A” or its equivalent or better by at least one NRSRO. ii. SECURITIES issued by other entities:

1. The issuer is organized within the United States as a special purpose corporation, trust, or limited liability company.

2. The securities must have program-wide credit enhancements including, but not limited to, overcollateralization, letters of credit, or a surety bond.

3. The securities are rated “A-1” or its equivalent or better by at least one NRSRO. • City may purchase no more than 10% of the outstanding commercial paper of any single issuer.
• No more than 25% of the portfolio may be invested in Commercial Paper. Under a provision sunsetting on January 1, 2031, no more than 40% of the portfolio may be invested in Commercial Paper if the Agency’s investment assets under management are greater than $100,000,000.
• No more than 5% of the portfolio may be invested in any single issuer. • The maximum maturity does not exceed 397 days.

H. Federally Insured Time Deposits (Non-Negotiable Certificates of Deposit) in state or federally chartered banks, savings and loans, or credit unions, provided that:
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8 • The amount per institution is limited to the maximum covered under federal insurance.
• No more than 20% of the portfolio will be invested in a combination of federally insured and collateralized time deposits.
• The maximum maturity does not exceed five (5) years.

K. Collateralized Bank Deposits. City’s deposits with financial institutions will be collateralized with pledged securities per California Government Code, Section 53651.

There are no limits on the dollar amount or percentage that the City may invest in collateralized bank deposits.

N. Local Government Investment Pools
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9 • There is no issuer limitation for Local Government Investment Pools O. Corporate Medium-Term Notes (MTNs), provided that:
• The issuer is a corporation 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.
• The securities are rated in a rating category of “A” or its equivalent or better by at least one NRSRO.
• No more than 30% of the total portfolio may be invested in MTNs. • No more than 5% of the portfolio may be invested in any single issuer. • The maximum maturity does not exceed five (5) years.

Q. Mutual Funds and Money Market Mutual Funds that are registered with the Securities and Exchange Commission under the Investment Company Act of 1940, provided that:
a. Mutual Funds that invest in the securities and obligations as authorized under California Government Code, Section 53601 (a) to (k) and (m) to (q) inclusive and that meet either of the following criteria:
(i) Attained the highest ranking or the highest letter and numerical rating provided by not less than two (2) NRSROs; or
(ii) Have retained an investment adviser registered or exempt from registration with the Securities and Exchange Commission with not less than five years’ experience investing in the securities and obligations authorized by California Government Code, Section 53601 and with assets under management in excess of $500 million.
• No more than 10% of the total portfolio may be invested in shares of any one mutual fund.
b. Money Market Mutual Funds registered with the Securities and Exchange Commission under the Investment Company Act of 1940 and issued by diversified management companies and meet either of the following criteria:
(i) Have attained the highest ranking or the highest letter and numerical rating provided by not less than two (2) NRSROs; or
(ii) Have retained an investment adviser registered or exempt from registration with the Securities and Exchange Commission with not less than five years’ 194
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10 experience managing money market mutual funds with assets under management in excess of $500 million.
• No more than 20% of the total portfolio may be invested in the shares of any one Money Market Mutual Fund.
c. No more than 20% of the total portfolio may be invested in these securities.

2. Prohibited Investment Vehicles and Practices:
• State law notwithstanding, any investments not specifically described herein are prohibited, including, but not limited to futures and options. • In accordance with Government Code, Section 53601.6, investment in inverse floaters, range notes, or mortgage derived interest-only strips is prohibited. • Investment in any security that could result in a zero-interest accrual if held to maturity is prohibited. 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, 2031, securities backed by the U.S. Government that could result in a zero- or negativeinterest accrual if held to maturity are permitted. • Trading securities for the sole purpose of speculating on the future direction of interest rates is prohibited.
• Purchasing or selling securities on margin is prohibited. • The use of reverse repurchase agreements, securities lending or any other form of borrowing or leverage is prohibited.
• The purchase of foreign currency denominated securities is prohibited. • The purchase of securities with trade settlement periods longer than 45 days is prohibited.

3. Investment Pools/Mutual Funds:

The City shall conduct a thorough investigation of any pool or mutual fund prior to making an investment, and on a continual basis thereafter. The investment officer shall develop a questionnaire which will answer the following general questions:
• A description of eligible investment securities, and a written statement of investment policy and objectives.
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11 • A description of interest calculations and how it is distributed, and how gains and losses are treated.
• A description of how the securities are safeguarded (including the settlement processes), and how often the securities are priced and the program audited. • A description of who may invest in the program, how often, what size deposit and withdrawal are allowed.
• A schedule for receiving statements and portfolio listings. • Are reserves, retained earnings, etc. utilized by the pool/fund? • A fee schedule, and when and how is it assessed.
• Is the pool/fund eligible for bond proceeds and/or will it accept such proceeds?

4. Collateralization: Acceptable collateral shall be as follows:

F. INVESTMENT PARAMETERS

1. Mitigating Credit Risk in the Portfolio: Credit risk is the risk that a security or a portfolio will lose some or all its value due to a real or perceived change in the ability of the issuer to repay its debt. The City will mitigate credit risk by adopting the following strategies:
• The diversification requirements included in the “Suitable and Authorized Investments” section of this policy are designed to mitigate credit risk in the portfolio. 196
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12 • No more than 5% of the total portfolio may be deposited with or invested in securities issued by any single issuer unless otherwise specified in this policy. • 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 the credit ratings of any security owned by the City are downgraded to a level below the quality required by this investment policy, making the security ineligible for additional purchases, the following steps will be taken:
• If a security is downgraded, the investment officer will use discretion in determining whether to sell or hold the security based on its current maturity, the economic outlook for the issuer, and other relevant factors. If employing an investment manager, any actions taken related to the downgrade by the investment manager will be communicated to the investment officer in a timely manner. • If a decision is made to retain a downgraded security in the portfolio, its presence in the portfolio will be monitored and reported monthly to the City Council.

3. Maximum Maturities: To the extent possible, the City shall attempt to match its investments with anticipated cash flow requirements. The City will not directly invest in securities maturing more than five years from the date of trade settlement or in accordance with state and local statutes and ordinances, unless the City Council has by resolution granted authority to make such an investment either specifically or as part of an investment program approved by the City Council no less than three months prior to the investment. 197
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13 The City investment officer shall adopt weighted average maturity limitations, consistent with the investment objectives.

G. INVESTMENT STRATEGIES:

I. REPORTING

1. Methods: The investment officer shall prepare an investment report at least quarterly, including a management summary that provides an analysis of the status of the current 198
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14 investment portfolio and the individual transactions executed over the last quarter. This report shall include the type of investment, issuer, date of maturity, and par and dollar amount invested on all securities, investments and moneys held by the City. The report shall also include a current market value as of the date of the report. It shall state compliance of the portfolio to the statement of investment policy or manner in which the portfolio is not in compliance. Finally, the report shall include a statement denoting the ability of the local agency to meet its pool’s expenditure requirements for the next six months or provide an explanation as to why sufficient money shall, or may, not be available. The report shall be provided within 45 days after the end of the quarter. Once a year, the statement of investment policy shall be included in the report.

J. PORTFOLIO AND POLICY CONSIDERATIONS

K. GLOSSARY OF TERMS
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15 Agencies: Shorthand market terminology for any obligation issued by a government-sponsored entity (GSE), or a federally related institution. Most obligations of GSEs are not guaranteed by the full faith and credit of the US government. Examples are:

FFCB: The Federal Farm Credit Bank System provides credit and liquidity in the agricultural industry. FFCB issues discount notes and bonds.

FHLB: The Federal Home Loan Bank provides credit and liquidity in the housing market.

FHLB issues discount notes and bonds.

GNMA: The Government National Mortgage Association, known as “GinnieMae,” issues mortgage pass-through securities, which are guaranteed by the full faith and credit of the US Government.

PEFCO: The Private Export Funding Corporation assists exporters. Obligations of PEFCO are not guaranteed by the full faith and credit of the US government.

Asset Backed Securities: Securities supported by pools of installment loans or leases or by pools of revolving lines of credit.

Average Life: In mortgage-related investments, including CMOs, the average time to expected receipt of principal payments, weighted by the amount of principal expected.

Benchmark: A comparison security or portfolio. A performance benchmark is a partial market index, which reflects the mix of securities allowed under a specific investment policy.

Broker: A broker brings buyers and sellers together for a transaction for which the broker receives a commission. A broker does not sell securities from his own position.

Certificate of Deposit (CD): A time deposit with a specific maturity evidenced by a certificate.

CDARS is currently the only entity providing this service. CDARS facilitates the trading of deposits 200
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Investment Policy
(continued)
16 between the California institution and other participating institutions in amounts that are less than $250,000 each, so that FDIC coverage is maintained.