To: MAYOR AND CITY COUNCIL
From: EUGENE SOLOMON, CITY TREASURER
TITLE
title
DISCUSSION AND POSSIBLE ACTION REGARDING THE CITY’S INVESTMENT POLICY
APPROVE THE CITY’S STATEMENT OF INVESTMENT POLICY 2026, AS AMENDED, AND THE ANNUAL RENEWAL OF THE DELEGATION OF INVESTMENT AUTHORITY TO THE CITY TREASURER
end
EXECUTIVE SUMMARY
The City Treasurer strives to maintain a well-balanced and diversified investment portfolio that meets the investment criteria and performance objectives of the City's Statement of Investment Policy.
The City Council reviews and approves the City’s Statement of Investment Policy annually. Additionally, California Government Code Section 53646(a)(2) states that the treasurer or chief fiscal officer of a local agency may annually render to his/her legislative body and any oversight committee an investment policy, that the legislative body shall consider at a public meeting. While establishing an investment policy is not required, it is a best practice common in public funds investing to maintain an investment policy and complete an annual review and update.
This item provides the City Council the opportunity to approve the City’s Statement of Investment Policy, as amended, and also provide the annual renewal of the delegation of investment authority to the City Treasurer.
BACKGROUND
The 2026 updates to the City’s Investment Policy at a high level are intended to achieve:
• Updates that allow the Investment Policy to define Permitted Investments to manage proceeds of the Measure FP Bond Issue
• Incorporation of updates to the California Government Code in force as of January 1, 2026
• Modernization and updates to authorized investment language to better align with the California Government Code
These edits should bring additional clarity and improve understanding of the document for readers and City practitioners. The following revisions are organized by section and subsection and are included in the attached Statement of Investment Policy Fiscal Year 2026:
1. Introduction and Objective. The marked-up language was moved from another section for organizational purposes.
5. Policy Statement. The revision to (c) middle bullet is intended to better describe
the reasons and situations in which the City would conduct a security swap.
6. Scope of the Investment Policy. Edits here are to clarify the applicability of the
Investment Policy to the management of bond proceeds and retirement funds held in a trust.
7. Objectives. Generally, edits in this section clean up language and limit big
picture objectives to those prescribed by California Government Code Section 53600.5.
A. Safety of Principal. 2. Market Risk. We changed the method of measuring the length of the portfolio to duration. Duration is a more technically accurate representation of the time when the City will recoup its investment dollars.
B. Liquidity. Incorporated references to additional liquidity vehicles and merged the maturity subsection with liquidity as they are related issues.
C. Yield/Return. Changed the title of subsection to align with Code objectives. Removed benchmark language to increase flexibility to meet the City’s needs while still prioritizing safety and liquidity.
F. Timing of Maturities and Maximum Maturities. Removed as this topic is better addressed elsewhere in the Policy.
14. Authorized Investments. The opening of this section provides general guidance
that applies broadly to all or multiple of the authorized investment types including the City’s ability to:
• Take special City Council action to approve investments longer than 5 years
• Apply percentage limits and credit minimums at the time of purchase
• Describe how the City Treasurer will address subsequent changes of allocation percentages or credit rating that have fallen below the minimum subsequent to purchase
o Removed language requiring a sale and provides the City Treasurer discretion to avoid unnecessarily selling at a loss
• Moved all 5% issuer limitations on credit sector investments to the opening section to limit corporate issuer exposure regardless of investment type
B. United States Agency Obligations. Aligned language with Code and added a 20% limitation on callable agencies.
C. Banker’s Acceptances. Updated the credit requirements to refer to an nationally registered statistical rating organization (NRSRO).
E. Negotiable Certificates of Deposit. Updated language to align with Code and changed the credit quality focus from FDIC insurance to credit ratings as Negotiable CDs should be treated like corporate notes in institutional investment portfolios whereas FDIC insured CDs, while commonly used by public funds investors, are generally considered a retail investment product.
F. Commercial Paper. Updated language to align with Code’s description and credit requirements and the new longer maximum maturity of 397 days.
G. Local Agency Investment Fund. Clarified the $75 million limit is set by the Treasurer’s office rather than state law.
H. Medium-Term Notes. Updated credit requirement language. Language regarding the handling of declining credit now a general statement applying to all credit types in the opening paragraphs of this Authorized Investments section.
I. Money Market Funds. Aligned the language and limitations on this category with Code.
J. Deposit Placement Services. Aligned the language with Code. Removed reference to CDs as Code now allows other types of deposits to be places with these services. The requirements are fairly in depth so the Policy references the City will comply with the governing section of Code, 53601.8, rather than including all requirements.
K. Supranationals. Updated the rating criteria to align with Code.
L. Authorized yet Currently Unutilized Investments. Clarified that the City will not purchase private label mortgage pass through securities and added Obligations of a Public Bank as that is another investment authorized by Code Section 53601, but not intended to be used by the City at this time.
O. Asset-Backed Securities. Added this permitted investment sector, which are high credit quality while offering additional yield over government securities.
P. Summary of Maximum Percentage Limitations of Investments, by Investment Type. Updates to the table are to reflect the edits to the subsections for each investment category and to remove unnecessary text for easier reading.
Q. Investment of Bond Proceeds. In anticipation of the upcoming Measure FP bond issuance, the City Treasurer needs to include permissions in the Policy so the proceeds of the debt issuance may be appropriately invested to match the draw schedule. This section relieves the City of limitations on liquidity vehicles since as spending ramps up the City may find it needs to have more than 20% of the proceeds in a local government investment pool (LGIP) or money market fund to make cash appropriately available. There is also permission to utilize investment contracts, which are commonly used for investing bond proceeds, but are not permitted for operating funds under Code. Lastly and solely for the investment of Debt Reserve Funds, which may have longer time horizons, we have allowed for longer maturity investments so that we may again invest assets in line with the liability.
15. Unauthorized Investments. Added the exception for U.S. government
securities for securities resulting in zero interest accrual if held to maturity permitted by Code. This protects the City’s ability to invest in high-quality securities in zero and negative rate environments, during which times leaving funds in cash may not be a better alternative to staying invested.
16. Portfolio Management Activity. Removed A. Active Portfolio Management
as the City allows for security swaps, but generally takes a buy and hold approach.
C. Competitive Bidding. Edited to limit language directly to competitive bidding and either removed unnecessary or repetitive language or moves it to more appropriate sections other concepts such as broker/dealer due diligence, reporting, using an investment advisor, and other general information. We have increased the number of required bids from two to three to promote best execution.
17. Collateralization. Updated to be flexible in the event the amount of FDIC
insurance changes again in the future.
18. Registered Investment Advisor. Edited to focus language on the City’s requirements for investment advisors rather than providing general background information on investment advisors.
19. Authorized Financial Dealers and Institutions. Updated to emphasize the City’s maintenance of an Approved Broker/Dealer List and Other Financial Institutions given the City’s upcoming need to invest the Measure FP bond proceeds. Also, clarifying that for funds managed by an advisor, the advisors list of broker/dealers should be the one considered as it is a part of the scope of work they do for the City.
20. Reporting. Added that monthly reporting will include a compliance statement. Reports already include this, but we are adding the requirement to the Policy. Cleaned up and removed repetitive language from the last paragraph.
22. Annual Policy Review and Adoption. Clarified the language regarding certification so the City remains in compliance regardless of which organization the City chooses to complete the certification.
EXHIBIT B. GLOSSARY OF TERMS. Various formatting corrections, removed old or unnecessary terms, updated CAFR to ACFR, and clarifying edits.
Delegation of Investment Authority
California Government Code Section 53607 requires annual renewal of the Treasurer’s investment authority.
Staff recommends the approval of the updates to the City’s Statement of Investment Policy, as amended, and also provide the annual renewal of the delegation of investment authority to the City Treasurer.
COORDINATION
The City's Statement of Investment Policy, as amended, was reviewed by the City Attorney’s Office.
FISCAL IMPACT
There is no direct fiscal impact as a result of the review and approval of this amended Investment Policy. The work required to update the policy I included in the FY 2026-27 Adopted Budget for the City Treasurer’s Department.
APPROVED BY:
Mike Witzansky, City Manager
ATTACHMENTS
• Statement of Investment Policy Fiscal Year 2026
o Exhibit A - Draft City of Redondo Beach Statement of Investment Policy 2026
o Exhibit B - Registered investment advisor and list of qualified brokers from which the City may purchase investments
o Exhibit C - Investment Procedures Manual
• Annual Update: Investment Policy Presentation