HomeMy WebLinkAbout2025-019 - Statement of Investment Policy RESOLUTION NO. 2025-019
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
SANTA ANA APPROVING THE CITY'S STATEMENT OF
INVESTMENT POLICY 2025-2026
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY
OF SANTA ANA AS FOLLOWS:
Section 1. The City Council of Santa Ana hereby finds, determines and declares
as follows:
A. California Government Code §53646, provides that each city may have a
written statement of investment policy to govern investment of the City's
monies.
B. Pursuant to §53646, the City Treasurer shall annually submit a Statement of
Investment Policy for City Council consideration.
C. The City Treasurer has submitted the attached Statement of Investment Policy
to this Council at its regular meeting of June 3, 2025, for its consideration.
Section 2. The City Council of the City of Santa Ana has duly considered and
approves the City's Statement of Investment Policy submitted by the City Treasurer.
Section 3. The City Treasurer shall submit quarterly reports to the City Council
stating all investments made in the preceding quarter and that such investments have
been made in conformance with the City's investment policy.
Section 4. This Resolution shall take effect immediately upon its adoption by
the City Council, and the City Clerk shall attest to and certify the vote adopting,. this
Resolution.
ADOPTED this 3rd day of June, 2025.
Val c a
May r
Resolution No. 2025-019
Page 1 of 24
APPROVED AS TO FORM:
Sonia Carvalho, City Attorney
By: GEC Gtc C1 - Z�
Andrea Garcia -or
Assistant City Attorney
AYES: Councilmembers Amezcua, Bacerra, Lopez, Penaloza, Phan,
Vazquez (6)
NOES: Councilmembers None(Q)
ABSTAIN: Councilmembers None(0)
ABSENT: Councilmembers Hernandez (1)
CERTIFICATION OF ATTESTATION AND ORIGINALITY
I, JENNIFER L. HALL, City Clerk, do hereby attest to and certify the attached Resolution
No. 2025-019 to be the original resolution adopted by the City Council of the City of Santa
Ana on June 3, 2025.
Date:
ennifer . H II
Cit
City of Santa Ana
Resolution No. 2025-019
Page 2 of 24
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TABLE OF CONTENTS
Page
Introduction.................................................................................................................................1
1.0 Policy ...............................................................................................................................1
2.0 Scope...............................................................................................................................1
3.0 Prudence..........................................................................................................................2
4.0 Objectives ........................................................................................................................3
5.0 Delegation of Authority .....................................................................................................6
6.0 Ethics and Conflicts of Interest .........................................................................................7
7.0 Authorized Financial Institutions and Qualified Broker-Dealers............................................8
8.0 Authorized and Suitable Investments..............................................................................8
9.0 Prohibited Investments and Investment Practices...........................................................13
10.0 Investment Pools/Mutual Funds......................................................................................14
11.0 Collateralization/Security for Deposit of Public Funds.....................................................A 5
12.0 Safekeeping and Custody...............................................................................................15
13.0 Diversification.................................................................................................................16
14.0 Internal Controls.............................................................................................................16
15.0 Reporting....................................................................................................................—.17
16.0 Policy Considerations.....................................................................................................18
17.0 Policy Review, Certification, and Adoption ......................................................................19
...........................................................................................................................................
Resolution No.2026-019
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CITY OF SANTA ANA
ANNUAL STATEMENT OF INVESTMENT POLICY
JULY 1, 2026—JUNE 30, 2026
INTRODUCTION: The purpose of this Statement of Investment Policy is intended to provide
specific criteria for the prudent investment of City of Santa Ana (City)funds and to set investment
objectives, policies, establish guidelines, and define responsibilities for the investment of idle or
unexpended funds for the City. The ultimate investment goal is to enhance the economic status of
the City while protecting funds under management and meeting the daily cash flow demands of the
City.
1.0 POLICY
The policy of the City of Santa Ana is to invest idle or unexpended funds within the scope of
this investment policy in a prudent and suitable manner that will provide, within the
parameters of this investment policy, the highest reasonable investment return relative to
the risk being assumed while maintaining maximum security and meeting all cash flow
demands.This policy is intended to complywith Federal law and the Code of California for
investment of public funds. In instances in which this policy is more restrictive than Federal
or State law, this policy shall be controlling.
This policy is fixed and general in nature; it defines authorized investments and guides the
investment decisions and security selection process. The City's Investment Policy will be
regularly reviewed and adjusted to create an investment portfolio that is suitable for the City
given current conditions.
2.0 SCOPE
2.1 Applicability of Investment Policy
This investment policy applies to all funds and investment transactions of the City.
These funds are accounted for in the Annual Comprehensive Financial Report
(ACFR), which includes the following:
• General Fund
• Special Revenue Funds
• Capital Projects Funds(includes restricted bond proceeds)
• Enterprise Funds (includes restricted bond proceeds)
• Trust and Agency Funds
• Internal Service Funds
• Any new fund created by the City of Santa Ana, unless specifically
exempted
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The restricted bond proceeds are invested in compliance with this investment
policy and applicable bond resolutions. Individual employee retirement contribution
funds and deferred compensation are excluded from this policy.
2.2 Poolinq of Funds
Except for cash in certain restricted and special funds, the City of Santa Ana will
consolidate cash balances from all funds to maximize investment earnings and to
increase efficiencies with regard to investment pricing, safekeeping and
administration. Investment income will be allocated to the various funds based on
their respective participation and in accordance with generally accepted
accounting principles.
3.0 PRUDENCE
3.1 Standard of Care— Prudent Investor
The City investment program shall be managed in a professional and prudent manner
worthy of the public trust and review. The standard of prudence to be used by City
Investment Officials shall be the "prudent investor rule" standard and shall be applied in
the context of managing the overall investment portfolio.
The "prudent investor rule" provides, pursuant to California Government Code Section
53600.3, that investments shall be made with judgment and care. When investing,
reinvesting or managing public funds a trustee shall act with care, skill, prudence and
diligence under circumstances then prevailing. 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 exceptions 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.
The City is governed by the California Government Code, Sections 16429.1 and Title 5,
Division 2, Part 1, Chapter 4, entitled Financial Affairs, commencing with section 53630.
Each investment transaction and the entire portfolio must comply with California
Government Code, Sections 53600 and 53635 et seq. and this policy.
3.2 Written Investment Procedures
City Investment Officials shall establish written procedures consistent with this investment
policy for the operation of the investment program, Procedures should include but not be
limited to: authorized personnel, segregation of duties, internal controls, wire transfer
agreements, daily cash flow review, basis for awarding bids, portfolio inventory, and
reporting. The procedures document is intended to provide guidance for staff and to provide
continuity in the event of an interruption of services of the Treasury and Customer Services
Manager and/or Assistant Finance Director.
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4.0 OBJECTIVES
The primary objectives, in priority order, for the City of Santa Ana's investment activities
shall be Safety, Liquidity, and Yield:
4.1 Safety of Principal
Safety of principal is the foremost objective of the City of Santa Ana, care must
be taken to ensure the preservation of capital and the protection of principal.
Each investment transaction shall be undertaken in a manner that seeks to
ensure preservation of capital in the overall portfolio. The objective will be to
mitigate credit risk and interest rate risk by following guideline listed below.
A. Credit Risk
Credit Risk is the risk of loss due to the failure of the security issuer or
backer to redeem the outstanding debt at the stated maturity date. Credit
risk also applies to the overall market perception of the financial strength
and capacity of the issuer. The City of Santa Ana will minimize credit risk
by:
i. Limiting investments to authorized investments as set forth in
Section 10.0 of this investment policy;
ii. Pre-qualifying the financial institutions, broker-dealers,
intermediaries, and advisors with which the City will do business;
iii. Diversifying the investment portfolio so that potential losses on
individual securities will be minimized.
iv. Holding a minimum percentage of the total portfolio in highly
marketable short-term treasuries, checking with interest,
government pooled account, or a combination of all three. The
minimum percentage shall be set monthly by the FMSA Investment
Advisory Committee based on a rolling twenty-four month analysis
of the City's minimum cash position requirements adjusted for any
exceptional anticipated cash out flows.
B. Market or Interest Rafe Risk
Market or interest rate risk is the risk that the market value of securities
in the portfolio may fall due to changes in general interest rates. The
City of Santa Ana will minimize interest market interest rates, by:
i. Structuring the investment portfolio so that securities mature
to meet cash requirements for ongoing operations, thereby
avoiding the need to sell securities on the open market prior to
maturity, and
ii. Purchasing investments with the intent to hold until maturity;
and
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iii. By investing operating funds primarily in shorter-term securities,
money market mutual funds, or similar investment pools and
limiting the average maturity of the portfolio to 3 years using the
securities' stated final maturities.
4.2 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). The
City's cash flow shall be updated on a daily basis and will be considered prior
to the investment of securities, which will reduce the necessity to sell
investments for liquidity purposes.
4.3. Yield (Return on Investment)
The City's investment portfolio shall be designed with the objective of attaining
a market-average rate of return throughout budgetary and economic cycles
taking into account the investment risk constraints and liquidity needs. The
return on investments is to be accorded secondary importance compared to
the safety and liquidity objectives described above. The core of investments
will focus on relatively low risk securities with an expectation of earning a
reasonable return relative to the risk being assumed. It is the general policy
of the City to hold investments until market value equals or exceeds amortized
cost or book value of the security. Securities shall not be sold prior to maturity
with the following exceptions:
A. a declining credit security could be sold early to minimize loss of
principal;
B. a simultaneous purchase of a security and the sale of another (security
swap) to enhance the quality, yield, or target duration in the portfolio;
or
C. a sale of a specific security prior to its maturity and a capital gain or
loss recorded in order to improve the credit quality, liquidity, or rate of
return of the portfolio in response to market conditions and/or City risk
preferences;
D. general liquidity needs of the investment portfolio require that a security
be sold;
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Resolution No. 2025-019
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E. Pre-payment of City debt or contribution servicing obligation. In the
event the City is presented with an option for prepayment of a City debt
or contribution servicing obligation, the following analysis will be
conducted by with regards to a comparison between the amortized
savings, which may be realized by exercising such prepayment option
and:
i. the current portfolio yield;
ii. the trend of the debt or contribution servicing obligation;
iii. whether variances in the trend are substantial;
iv. the City's net cash position; and
v. the market value of investment instrument(s) recommended by
staff to be liquidated to fulfill a prepayment election.
When selling a security prior to maturity, City Investment Officials and/or
officers (see generally subsection 5.1 et seq. - Investment Authority and
Responsibility) must be prepared to justify the reasons and explain any gains
or losses.
Compliance with the investment policy does not measure return, but rather
manages risk. Policy compliance does not provide a benchmark to meet or
exceed, but is a model to follow. The City will benchmark its investment to
an agreed upon treasury index.
The City shall strive to maintain one hundred percent (100%) investment of
idle funds after consideration for a compensating balance to cover the cost of
services provided by the City's depository bank. The funds available for
investment are determined by cash flow projections updated daily.
Investments are monitored so that legal limits on types of investments are not
exceeded.
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5.0 DELGATION OF AUTHORITY
5.1 Investment Authority and Responsibility
The authority for conducting investment transactions resides with the Executive
Director of Finance and Management Services Agency (FMSA) as chief fiscal
officer and ex off icio City Treasurer. The Executive Director for (FMSA) under the
general direction of the City Council, shall be responsible for all investment
transactions undertaken and shall establish a system of controls to regulate the
investment activities of subordinate officials.
5.2 Delegation of Authority
The Executive Director for FMSA or her/his designees (Investment Officials) shall
invest all funds for the City in accordance with the City adopted investment policy.
The Executive Director for FMSA hereby delegates day-to-day responsibility for
the investment of City funds to the FMSA Financial Analyst. Managerial and
supervisory responsibility for the investment of City funds may be held by either
the Assistant Director of Finance and Management Services (Assistant Director)
or the Treasury and Customer Services Manager (Treasury Manager). Each
designee shall act in accordance with the established policies and internal controls
set forth in the investment policy.
5.3 The Executive Director may engage the services of external investment management
advisors to assist in the management of the City's investment portfolio in a manner
consistent with the City's objectives. Such advisors may be granted discretion to
purchase and sell investment securities in accordance with the Policy. Such advisors
must be registered with the Security and Exchange Commission, and possess
experience in public funds investment management. Such engagement and/or
delegation by the Executive Director shall not remove or diminish her/his investment
responsibility.
5.4 Assignment of Activities
Supporting and ancillary activities, including but not limited to: cash flow analysis,
municipal or corporate bond credit worthiness evaluation, investment risk
assessment, portfolio analysis, purchase and sale recommendation, safekeeping,
policy and investment procedures review recommendation, and monthly and
quarterly reporting, may be assigned to qualified persons within Treasury or within
the FMSA Accounting or Administrative Services divisions as deemed appropriate
by either the Director and/or Assistant Finance Director.
5.5 Qualified Persons
Qualified Persons shall refer to: (1) persons holding either a California Municipal
Treasurers Association, California Treasury Certificate and/or Certified California
Municipal Treasurer Certificate; or an Association of Public Treasurers of the United
States and Canada, Certified Public Finance Administrator Certificate, or a National
Association of State Treasurers Certificate in Public Treasury Management; or (2)
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Resolution No. 2025-019
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persons who are performing investment related duties under the guidance and
direction of certificate holders. Working together, Investment Officials and Qualified
Persons comprise the FMSA investment staff.
5.6 FMSA investment Advisory Committee
To provide a regular departmental forum and consultive body for evaluating
investment portfolio performance and strategy, internal procedures and controls,
and for making recommendations to the Executive Director for FMSA in her/his
capacity as chief fiscal officer and City Treasurer, a FMSA Investment Advisory
Committee is established. All authorized Investment Officials are de facto standing
members of the FMSA Investment Advisory Committee. At the discretion of the
Executive Director for FMSA, other FMSA investment staff may be authorized
membership on the committee. Meetings shall be held regularly on a basis
determined by the Executive Director for FMSA. The FMSA Investment Advisory
Committee's evaluations and recommendations are subject to the approval of the
Executive Director for FMSA, who services as committee chair.
6.0 ETHICS AND CONFLICTS OF INTEREST
6.1 Investment Officials and Officers
Investment Officials, officers, and employees involved in the investment process
shall refrain from personal business activity that could conflipt with the proper
execution and management of the investment program, or that could impair their
ability to make impartial decisions. Investment Officials, officers and employees
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. Investment
Officials, officers and employees shall refrain from undertaking personal
investment transactions with the same individual with whom business is conducted
on behalf of the City of Santa Ana.
6.2 Statement of Economic Interests
Investment Officials and officers authorized to approve investment decisions shall be
required to submit an annual Statement of Economic Interests, also known as a Form
700 in accordance with California Government Code, Section 1090 et seq. The Form
700 provides transparency and ensures accountability in two ways:
1) It provides necessary information to the public about official's and officer's
personal financial interests to ensure that officials and officers are making
decisions in the best interest of the public and not enhancing their personal
finances.
2) It serves as a reminder to the public official of potential conflicts of interest so the
official or officer can abstain from making or participating in governmental
decisions that are deemed conflicts of interest.
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7.0 AUTHORIZED FINANCIAL INSTITUTIONS AND QUALIFIED BROKER-DEALERS
7.1 if the City utilizes a SEC registered external investment advisor, the advisor shall
maintain a list of authorized broker-dealers and complete the appropriate due diligence
required by the SEC. The external investment advisor may use its own list of approved
brokerldealers and financial institutions for investment purposes on behalf of the City.
The investment advisor shall submit the list of approved broker/dealers to the City's
FMSA investment staff on an annual basis.The Executive Finance Director may restrict
the use of a broker/dealer which may be deemed unsuitable.
8.0 AUTHORIZED AND SUITABLE INVESTMENTS
8.1 Allowable Investment Instruments—State Law
California Government Code Section 53601 establishes allowable investment
instruments applicable to all local agencies along with maximum maturities,
maximum specified percentages of total portfolio, and minimum quality requirements.
Section 53601 .1 authorizes local agencies to invest in financial futures or financial
option contracts in any of the allowable investment categories enumerated in section
53601.
8.2 Authorized Investments
City of Santa Ana further restricts permitted investments to those listed below and
where applicable, the Investment Advisory Committee may reduce maximum
maturities, or maximum specified percentages of total portfolio (concentration limits),
and may increase minimum quality requirements. Within this scope, the City
diversifies its investments by types of investments, maturity dates, concentration
limits, and quality requirements.
A. United States Treasury Bills Notes and Bonds for which the full faith and credit
of the United States are pledged forpayment of principal and interest. Purchases
of this category shall not exceed five years to maturity. There is no percentage
limit in this category.
B. Obligations issued by a Federal Agency or a United States Government
Sponsored Enterprise. Federal Agency Issues include, but are not limited to
GNMA (Government National Mortgage Association), FFCB (Federal Farm
Credit Bank), FHLB (Federal Home Loan Bank), FHLMC (Federal Home Loan
Mortgage Corporation), FNMA (Federal National Mortgage Association), FHA
(Federal Housing Administration), and TVA (Tennessee Valley Authority).
Although there is no percentage limitation on these issues, purchases of this
category shall not exceed five years to maturity and the "prudent investor" rule
shall apply for a single agency name as U.S. Government backing is implied
rather than guaranteed.
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C. Supranational Obligations in United States 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, with a maximum remaining
maturity of five years_orless, and eligible forpurchase or sale within the United
States. Investments under this subdivision shall be rated "AA" or better by an
NRSRO and shall not exceed thirty (30%) percent of the cost value of the
investment portfolio.
D. Bills of exchange or time drafts drawn on and accepted by a commercial bank,
otherwise known as banker's acceptances, which are eligible forpurchase by the
Federal Reserve System. Purchases of banker's acceptances may not exceed
one hundred eighty (180) days or forty percent (40%) of the cost value of the
Fund which may be invested pursuant to this section. However, no more than
thirty percent (30%) of the City's cost value of the investment portfolio may be
invested in the banker's acceptances of any one commercial bank pursuant to
this section.
E. Commercial paper of"prime"quality of the highest ranking or of the highest letter
and number rating as provided for by a Nationally Recognized Statistical Rating
Organization (NRSRO). The entity that issues the commercial paper shall be
organized and operating within the United States, as a general corporation, shall
have total assets in excess of five-hundred, million dollars ($500,000,000), and
has debt other than commercial paper, if any, that is rated "A" or higher by
NRSRO. The entity is organized within the United States as a special purpose
corporation, trust, or limited liability company; has program wide credit
enhancements including, but not limited to: over-col late ralization, letters of credit,
or a surety bond; has commercial paper that is rated "A-1" or higher, or the
equivalent, by an NRSRO Eligible commercial paper shall have a maximum
maturity of two hundred seventy (270) days or less. The City may purchase no
more than ten percent (10%) of the outstanding commercial paper of any single
corporate issue. Purchases of commercial paper may not exceed twenty-five
percent (25%) of the investment portfolio.
F. Repurchase Agreements. For purposes of this section, the term "repurchase
agreement" means a purchase of securities by the local agency pursuant to an
agreement by which the seller will repurchase the securities on or before a
specified date and for a specified amount and will deliver the underlying securities
to a third-party custodian. The City may invest in repurchase agreements with
primary dealers of the Federal Reserve with which the City has entered into a
Securities Industry and Financial Markets Association (SIFMA) Master
Repurchase Agreement (MRA) which specifies terms and conditions of
repurchase agreements. The market value of securities used as collateral for
repurchase agreements shall not be allowed to fall below one hundred two
percent(102%)of the value of the repurchase agreement and shall be adjusted
no less than quarterly by the tri-party custodial agent. The investments in
repurchase agreements shall be in compliance if the underlying securities are
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brought back up to one hundred two percent (102%) no later than the next
business day. The underlying collateral shall be limited to United States
Government Treasury Bills, Notes, and Bonds, or obligations issued by a Federal
Agency or United States Government Sponsored Enterprises obligations. Upon
the written approval of the Executive Director for FMSA, substituted securities
may be pledged for collateral but shall consist only of investments permitted
within this investment policy with a maximum maturity of five (5)years. If there is
a default of the broker, the collateral securities can be sold. Since the securities
are valued daily, it is likely that the sale proceeds will equal or exceed the value
of the repurchase agreement amount. Purchases in this category shall not
exceed one (1) year or twenty percent (20%) of the cost value of the investment
portfolio. Retail repurchase agreements and reverse agreements shall not be
authorized for purchase.
G. Negotiable certificates of deposit issued by a nationally or state-chartered bank,
a savings association or a federal association (as defined by Section 5102 of the
Financial Code), a state or federal credit union or by a state-licensed branch of a
foreign bank. However, the City shall not invest in negotiable certificates of
deposit issued by a state or federal credit union if a member of the City Council
or any City personnel with investment decision making authority also serves on
the board of directors, or any committee appointed by the board of directors, or
the credit committee or the supervisory committee of the state or federal credit
union issuing the negotiable certificates of deposit. Effective January 1, 2020 no
more than fifty percent (50%) of the cost value of the City's investment portfolio
may be invested in deposits, including certificates of deposit, through a placement
service as authorized under Government Code 53601.8 (excludes negotiable
certificates of deposit authorized under Section 53601(i)). On January 1, 2026,
the maximum percentage of the portfolio shall revert back to thirty percent (30%)
percent. Investments made pursuant to Government Code Section 53635.8
remain subject to a maximum of thirty percent (30%) of the cost value of the
investment portfolio. The amounts so invested shall be subject to the limitations
of Government Code Section 53638 which generally provides that the deposit
shall not exceed the shareholder's equity of any depository bank, or the total net
worth of any depository savings association or federal association, or the total of
the unimpaired capital and surplus of an insured industrial loan company.
Purchases of this category shall not exceed five years to maturity.
H. Local Agency Investment Fund - State Pool. The City may invest in the Local
Agency Investment Fund (LAIF) established by the State Treasurer under
California Government Code Section 16429.1 for the benefit of local agencies.
LAIF provides daily liquidity; therefore, there is no final stated maturity for this
investment category.Although there is no percentage limitation on this fund, the
"prudent investor" rule shall apply for a single agency name. In keeping with LAIF
deposit limit investments, City LAIF investments shall not exceed $75 million
per active account, unless a greater deposit limit for regular accounts is
authorized by the State Treasurer during the term of this Statement of
Investment Policy, in which case City LAIF investments may increase up to that
limit.
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I. California Cooperative Liquid Assets Securities System (CLASS)„Prime Fund--
Joint Powers of Authority Pool. The City may invest in the California CLASS
Prime Fund established by a joint exercise of powers entity authorized under
California Government Code Section 6509.7 for the benefit of all public agencies
in the State of California that have authority to invest their treasury funds. The
California CLASS Prime Fund provides daily liquidity; therefore, there is no final
staffed maturity for this investment category. Although there is no percentage
limitation on this fund, the"prudent investor" rule shall apply for a single agency
name. The California CLASS Prime Fund does not limit a maximum or minimum
investment balance, in which case City California CLASS Prime Fund
investments may increase or decrease based on pool performance, daily cash
flow needs, etc.
J. City of Santa Ana Bonds. The City may invest in bonds issued by the City or
agency of the City including bonds payable solely out of the revenues from a
revenue-producing property owned, controlled, or operated by the City or agency
of the City. The City shall at all times adhere to restrictions and limitations of the
bond indenture. Purchases of this category shall not exceed five years to
maturity. There is no percentage limit in this category.
K. Other State of California Local Agency Bonds. The City may invest in other State
of California Local Agency Bonds. Notes, warrants or other evidence of
indebtedness of any local agency within this state, including bonds payable solely
out of the revenues from a revenue-producing property owned, controlled, or
operated by the local agency, or by a department, board, agency, or authority of
the local agency. Investments in this category shall be restricted to instruments
that have a ranking ofA-1 or higher, or the equivalent by not less than two of the
following nationally recognized statistical rating organizations: Moody's, Standard
& Poor's or Fitch. Purchases of this category shall not exceed five years to
maturity. There is no percentage limit in this category.
L. Medium Term Corporate Notes (MTN)__defined as all corporate and depository
institution debt securities with a maximum remaining maturity of five nears or less,
issued by corporations organized and_operating within the United States orby
depository institutions licensed by the United States or any state and operating
within the United States. Notes eligible for investment shall be rated in a rating
category of"A" or its equivalent or better by a nationally recognized rating service.
Purchases in this category shall not exceed five (5) years to maturity or thirty
percent(30%)of the cost value of the investment portfolio. Purchases in a single
issuer in this category shall not exceed five percent(5%) of the cost value of the
investment portfolio.
M. A mortgage pass-through security, collateralized mortgage obligation, mortgage-
backed or other pay-through bond, equipment lease-backed certificate, consumer
receivable pass-through certificate, or consumer receivable-backed bond. Securities
eligible for investment under this subdivision shall be rated in a rating category of"AAA"
or its equivalent or better by an NRSRO and have a maximum remaining maturity of
Resolution No. 2025-019
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five years or less. Purchase of securities authorized by this subdivision shall not
exceed 10 percent of the agency's surplus moneys that may be invested pursuant to
this section.
N. Shares of beneficial interest otherwise known as money market shares issued by
diversified management companies that are money market funds registered with
the Securities and Exchange Commission under the Investment Companz Act of
1940. The company shall have met either of the following criteria:
1. Attain the highest ranking or the highest letter and numerical rating provided
by not less than two NRSROs, and
2. Retained an investment adviser registered or exempt from registration with
the Securities and Exchange Commission with not less than five (5) years'
experience investing in the securities and obligations authorized by
subsection (a) to (k), inclusive, and subdivisions (m) to (o), inclusive, of
Section 53601 of the Government Code and with assets under management
in excess of five-hundred, million dollars($500,000,000). The purchase price of
shares of beneficial interest, (mutual funds) purchased pursuant to this
subdivision shall not include any commission that these companies may
charge.
Investments in this category shall be restricted to money market mutual funds
that seek to maintain a Net Asset Value of $1. Money market mutual funds
provide daily liquidity; therefore, there is no final stated maturity for this
investment category. Investments in mutual funds shall be restricted to funds
that have the highest ranking or the highest letter and numerical rating
provided by not less than two of the following nationally recognized statistical
rating organizations: Moody's, Standard & Poor's or Fitch. Purchases in this
category shall not exceed 20% of the book value of the investment portfolio.
Purchases in a single mutual fund shall not exceed 10% of the book value of
the Portfolio.
8.3 Suitability of Investments
Suitability, not simply return, is the standard for selecting investments for the portfolio.
The Executive Director for FMSA, and all authorized Investment Officials and other
supporting FMSA investment staff shall review the following when selecting or
recommending investments for the City:
Sufficient liquidity to meet current obligations
• Appropriate level of market risk
• Diversified portfolio
• Legal investments
• Market rate of return
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The Executive Director for FMSA and his/her designees are not required to invest in
all the investment options authorized in this Statement of Investment Policy.
Selection will be based on cash flow characteristics, exposure to market risk, rate of
return, the technical ability of the staff responsible for administering the program, and
the availability of time and tools for staff to engage in conservative, but effective,
management of the City's investment portfolio.
9.0 PROHIBITED INVESTMENTS AND INVESTMENT PRACTICES
9.1 Ineligible Investments- State Law
Certain investments, however, are prohibited by California Government Code
Section 53601.6. Accordingly, the City shall not invest in any inverse floaters, range
notes, mortgage derived, or interest-only strips or other securities which could result
in zero-interest accrual if held to maturity. However, prohibited securities that were
purchased and are currently held in the City's portfolio, as of the date of this policy
adoption,which were previously allowed under the California Government Code, yet
are now prohibited due to changes in the Code may be held until their maturity dates.
9.2 Disallowed Investments- Higher Perceived Risk
Besides investments prohibited by statute, this policy disallows investments in the
following due to a higher perceived risk:
• Investment agreements--contracts regarding funds deposited by an investor
often separated into those offered by banks and those offered by insurance
companies commonly known as Guaranteed Investment Contracts (GICs) or
Guaranteed Investment Agreements (GIAs);
• Securities lending agreements—agreements allowing local agencies to earn
incremental income on their investment portfolio by loaning securities in their
portfolio to financial services companies for a limited time;
• Unregistered securities — purchases of private resales of unregistered
securities to institutions, such as Securities Act of 1933, Section 5, Rule 144A
securities.
9.3 Prohibited Investment Practices
Assets of the City shall not be invested pursuant to the following investment
practices:
• Trading of securities strictly for speculation or solely for the realization of
short-term trading gains.
• A contract providing for the compensation of an agent or fiduciary solely
based upon the performance of the invested assets.
• If a fiduciary or other third party with custody of public investment
transaction records of the City fails to produce records within a reasonable
Resolution No. 2025-019
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time, when requested by the City, the City shall make no new investments
with or through the fiduciary or third party and shall not renew maturing
investments with or through the fiduciary or third party.
9.4 Prohibited Investment Practices
Assets of the City shall not be invested pursuant to the following investment
practices:
• Trading of securities strictly for speculation or solely for the realization of
short-term trading gains.
• A contract providing for the compensation of an agent or fiduciary solely
based upon the performance of the invested assets.
• If a fiduciary or other third party with custody of public investment
transaction records of the City fails to produce records within a reasonable
time, when requested by the City, the City shall make no new investments
with or through the fiduciary or third party and shall not renew maturing
investments with or through the fiduciary or third party.
10.0 INVESTMENT POOLS/MUTUAL FUNDS
Government sponsored investment pools (Local Agency Investment Fund (LAIF), County
Pools, Joint Powers Authority Pools, and the State Treasury Voluntary Investment
Program Fund), are sources for short-term cash management.
Before seeking City Council approval for participation in one or more additional
investment pools/money market mutual funds, the Executive Director for FMSA or his/her
designees will conduct a thorough investigation the prospective pool prior to
recommending City investment.
Before recommending investing in a prospective pool, the following issues must be
reviewed and considered:
The pool must meet the requirements of state statue 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.
i. A description of how the securities are safeguarded (including the
settlement processes), and how often the securities are priced and the
program audited.
ii. A description of who may invest in the program, size and frequency of
minimum and maximum deposits, how many withdrawal transactions
are allowed (daily, monthly, quarter, annually, etc.), and whether
advance notice is required for withdrawal transactions.
iii. A description of how and who in the governing body of the program is
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authorized to make program changes, including frequency. The
description must include how program participants are informed of
program changes and impacts.
iv. A schedule for receiving statements and portfolio listings.
v. A description of how reserves, retained earnings, etc. are utilized by
the pool.
vi. A model of the fee schedule, and when and how it is assessed.
vii. A description of eligibility and/or acceptance of bond proceeds.
viii. The pool must contain only the types of investment allowed by
California Code.
Upon approval for participation in one or more additional investment pools the FMSA
investment staff shall thereafter on an annual basis investigate and reconfirm the
pool's compliance with items listed above and shall monitor the pool's performance
reports.
11.0 COLLATERALIZATIONISECURITY FOR DEPOSIT OF PUBLIC FUNDS
Money must be deposited in state or national banks, state or federal savings associations
or state or federal credit unions in the State of California. It may be in inactive deposits,
active deposits or interest-bearing active deposits. The deposits cannot exceed the amount
of the bank's or savings and loan's paid up capital and surplus.
The bank or savings and loan must secure the active and inactive deposits with eligible
securities having a market value of one-hundred, ten percent (110%)of the total amount of
the deposits. State law also allows as an eligible security, first trust deeds having a value of
one-hundred, fifty percent (150%) of the total amount of the deposits. A third class of
collateral is letters of credit drawn on the Federal Home Loan Bank (FHLB).
The Treasurer may waive, at his/her discretion, security for that portion of a deposit which
is insured pursuant to federal law. Currently, the first two-hundred, fifty-thousand dollars
($250,000) of a deposit is federally insured.
12.0 SAFEKEEPING AND CUSTODY
12.1 Perfected Interest and Delive[y versus Payment
In accordance with California Government Code Section 53601, to protect against potential
losses caused by collapse of individual securities dealers, all securities owned by the City,
except securities used as collateral for repurchase agreements, shall be kept in safekeeping
with "perfected interest"by the City's custodial bank or a third party bank trust department,
acting as agent for the City under the terms of a custody agreement executed by the bank
and by the City. Perfected interest refers to establishment of a superior ownership right in
and legal control over the securities assets held by the bank custodian on the City's behalf
and is intended to protect the City from the custodial bank's own creditors in the event of
Resolution No. 2025-019
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a bank default and filing for bankruptcy. All securities, excepting investments which are
not deliverable (such as LAIF, California CLASS Prime Fund, direct time certificates of
deposit, and money market mutual funds), will be received and delivered using standard
"delivery versus payment". Delivery versus payment refers to delivery of securities
with an exchange of money for the securities at the time of delivery, rather than delivery
of securities with an exchange of a signed receipt for the securities.
13.0 DIVERSIFICATION
The purpose of diversification is to reduce overall portfolio risk while attaining market rates
of return and to enable the City to meet all anticipated cash requirements. The investment
portfolio shall consist of various types of securities approved by state statute and this
Statement of Investments Policy. Investments shall vary in issuers, asset classes, industries
and maturities to meet City's financial obligations. Diversifying the investment portfolio will
help mitigate the loss of funds as a result of failure of any one issuer. Investments shall
further be diversified between structures and imbedded options within the security.
The investments shall be diversified by:
• Limiting investments to avoid over-concentration in securities of a specific
issuer (excluding treasury bills).
• Limiting investment in securities that have higher credit risks.
• Limiting certificates of deposit to the maximum federally insured amount.
• Investing in securities with varying maturities.
• Investing a minimum percentage of the total portfolio as established by the
FMSA Investment Advisory Committee in highly marketable short-term
treasuries, checking accounts with interest, government pooled account, or a
combination of all three (See Section 4.1 (A)(iv)).
14.0 INTERNAL CONTROLS
The Executive Director for FMSA is responsible for establishing and maintaining an internal
control structure designed to ensure that the assets of the entity are protected from loss,
theft or misuse. The Finance Department, with oversight and approval of the Executive
Director for FMSA, has developed a system of internal investment controls and a
segregation of responsibilities of investment functions in order to assure an adequate
system of internal control over the investment function. No investment personnel may
engage in an investment transaction except as provided for under the terms of this policy
and the procedure established by the Executive Director for FMSA.
Internal control procedures address:
• Control of collusion
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• Control of fraud
• Control of misrepresentation by third parties
• Control of employee error
• Separation of transaction authority from accounting and record keeping
• Custodial safekeeping
• Delivery versus payment
• Clear delegation of authority
• Conformation of transactions for investment and wire transfers
• Written procedures for placing of investment transactions
• FMSA Investment Advisory Committee
In addition, cash balances are reconciled daily by non-investment employees and
reconfirmed by the City's accounting staff. Accounting staff also verifies investment activities
and holdings on a regular basis which are reviewed by the FMSA Investment Advisory
Committee. The Executive Director for FMSA, at his/her discretion, shall establish a process
for annual independent reviews by an external auditor to the extent contemplated by
generally accepted auditing standards, during the course of the City's annual audit.
15.0 REPORTING
Government Code Section 53646(b)(1) previously mandated that annual investment
policies and quarterly reports be rendered to the legislative body(for the City of Santa Ana
- the City Council). AB 2853 amended Government Code Section 53646 making these
requirements permissive rather than mandatory. Although the Annual Statement of
Investment Policy and Quarterly Reports to City Council are no longer required, we believe
it to be both prudent and in keeping with the spirit of the City's Sunshine Policy that these
documents continue to provided. The Executive Director for FMSA shall therefore continue
to render to the City Council an annual Statement of Investment Policy and regular reports
to the City Manager and the City Council containing detailed information on all securities,
investments, and moneys of the City. Pursuant to Government Code 53607 the reports
shall include monthly transactions for the reporting period. The reports will be submitted
to the City Manager and City Council on a monthly basis and will be rendered formally
to the City Council on a quarterly basis as part of a scheduled open City Council Meeting
agenda within forty-five
(45)days following the end of each quarter.
The report will contain the following information on the funds that are subject to this
investment policy:
1) Type of investment and name of issuer;
2) Date of maturity;
3) Paramount;
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4) Dollar amount invested in all securities, and investments and monies held by
the City (amortized cost or book value);
5) Weighted average maturity of the investments;
6) Current market value as of the date of report of all funds held by the City and
under the management of any outside party that is not also a local agency or
LAIF and the source of the valuation;
7) Source of the market value information;
8) A list of the any funds, investments or programs, including loans, under the
management of contracted parties such as LAIF, investment. pools, outside
money managers, and securities lending agents);
9) A statement of compliance with the investment policy or an explanation for
non-compliance; and
10) A statement of the local agency's ability to meet its pool's expenditure
requirements for the next six months, as well as an explanation of why
sufficient money will not be available if that is the case.
16.0 POLICY CONSIDERATIONS
18.0 Exemptions
Any investment currently held that does not meet the guidelines of this policy shall
be exempted from the requirements of this policy as long as it was in compliance
with State of California law and the City's investment policy in effect at the time of
purchase. At maturity or liquidation, such monies shall be reinvested only as
provided by this policy.
18.1 Stabilization Fund
Except for cash in certain restricted and special funds, the consolidation of cash
balances from all funds and the maintenance of portfolio liquidity (both static and
dynamic) as provided for in this policy taken together with the monthly affirmation
to the City Manager and City Councilmembers of the City's ability to meet its pool's
expenditure requirements for the next six months shall be deemed to functionally
meet and exceed the requirements of Article VI., Sec. 610, of the City of Santa Ana
Charter as relates to the maintenance of a stabilization fund.
18.2 Amendments
In the event this policy is amended prior to the end of its twelve month fiscal year
term the amended Statement of Investment Policy shall be resubmitted to City
Council for review and adoption by City Council Resolution.
18.3 Approval
This Statement of Investment Policy is approved by City Council on this 03ih day of
June, 2025 pursuant to City Council Resolution # 2025-2
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Resolution No. 2025-019
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17.0 POLICY REVIEW, CERTIFICATION,AND ADOPTION
15.1 Policy Review
This Statement of Investment Policy shall be reviewed at least annually to ensure its
consistency with the overall objectives of preservation of PRINCIPAL, LIQUIDITY,
AND YIELD, and to: 1) reflect changes in applicable California state codes, 2)
maintain its relevance to current financial and economic trends, and 3) meet the
needs of the City of Santa Ana.
15.2 Policy Certification
This certified Statement of Investment Policy will be resubmitted to the Association
of Public Treasurers of the United States and Canada (APTUS&C) and the
California Municipal Treasurers Association (CMTA) for review and re-certification
every five (5)years, or more often in the event of significant legislative changes, or
changes in industry standards, or substantive non-administrative modifications to the
body of the policy statement, exclusive of revisions or additions to appendices or
glossaries. In FY 2019-20, the City of Santa Ana received Investment Policy
Certifications from both the APTUS&C at the international North American level and
the CMTA at the state level, and in FY 2021-22, the City of Santa Ana received
Investment Policy Certification from CMTA at the state level.
15.3 Adoption
The Executive Director for FMSA shall annually render this Statement of Investment
Policy to the City Council and City Manager. The City Council shall annually review
and adopt this Statement of Investment Policy by resolution at a public meeting.
Submitted to the Santa Ana City Council for approval,this 3rdth day of June 2025.
Alex Trinidad, CPA
Acting. Executive Director& City
Treasurer Finance & Management
Services Agency
RP
Resolution No. 2025-019
Page 23 of 24
ALLOWABLE INVESTMENT INSTRUMENTS PER STATE GOVERNMENT
CODE(AS OF JANUARY I,2025)^APPLICABLE TO ALL LOCAL AGENCIES"
See"Table of Notes for figure I"on the next page for footnotes related to this figure.
OF t •
• t
Local Agency Bonds 5 years None None 53601(a)
U.S.Treasury Obligations 5 years None None 53601(b)
State Obligations— 53601(c)
CA And Others 5 years None None 53601(d)
CA Local Agency Obligations 5 years None None S3601(e)
U.S Agency Obligations 5 years None None 53601(f)
Bankers'Acceptances 180 days 40%E None 53601(g)
Highest letter and
Commercial Paper—Non-Pooled Funds' 270 days 25%of the number sung by an 5360I(h)(2)(c)
(under$100,000,000 of investments) or less agency's money' NRSRO"
Highest letter and
Commercial Paper—Non-Pooled Funds' 270 days 40%of the number rating by an 53601(h)(2)(c)
(min.$100,000,000 of investments) or less agency's money° NRSRO"
Highest letter and
Commercial Paper— 270 days 40%of the number rating by an 53635(a)(1)
Pooled Fundsl or less agency's money' NR5ROH
Negotiable Certificates of Deposit 5 years 30%K None 53601(i)
Non-negotiable Certificates of Deposit 5 years None None 53630 et seq.
Placement Service 5 years 505/.r None 53601.8 and 53635.8
Deposits
Placement Service 5 years 50%, None 53601.8 and 53635.8
Certificates of Deposit
Repurchase Agreements I year None None 53601(j)
Reverse Repurchase Agreements and 92 da s" 20%of the base None" 53601(j)
Securities Lending Agreements y value ofthe portfolio
Medium-Term Notes° 5 years 30% "A"rating category or 53601(k)
or less its equivalent or better
Mutual Funds And Money NIA 240/oP Multi pleO,a 53601(1)and
Market Mutual Funds 53601.6(b)
53630 et seq.
Collateralized Bank Deposits 5 years Nona None and 53601(n)
Mortgage Pass—Through and 5 years 20% "AA"rating category or 53601(o)
Asset—Backed SecuritiesT or less' its equivalent or better'
County Pooled N/A None None 27133
Investment Funds
Joint Powers Authority Pool NIA None Multiples 53601(p)
Local Agency Investment Fund(LAIF) NIA None None 16429.1
Voluntary Investment Program Fund" NIA None None 16340
w 5 years 309' "AA"racing category or 53601(q)
Supranational Obligations or less its equivalent or better
53601(r),53635(c)
Public Bank Obligations 5 years None None and 57603
City30
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