TO: Honorable Mayor and Members of the City Council
THRU: Tom Kisela, City Manager
FROM: Trang Nguyen, Finance Director
1. Subject
title
Annual review and approval of the Statement of Investment Policy for Fiscal Year 2024-25. Resolution No. 11563.
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2. Summary
Staff and Chandler Asset Management, the City’s investment management firm, conducted a review of the City’s Investment Policy and updated it with current trends and laws governing public sector investments. Chandler provided recommendations to further the best interest of the City’s investment strategy.
3. Recommended Action
recommendation
Adopt Resolution No. 11563. A Resolution of the City Council of the City of Orange rescinding Resolution No. 11469 and approving and adopting a Statement of Investment Policy for Fiscal Year 2024-25.
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4. Fiscal Impact
None.
5. Strategic Plan Goals
Goal 2: Be a fiscally healthy community
b: Analyze future fiscal needs and potential revenue opportunities.
6. Discussion and Background
The California Government Code Section 53646 requires that the Statement of Investment Policy (SIP) be reviewed and approved by the legislative body on an annual basis. The City’s Investment Policy is one of the most conservative policies in the State and it is proposed that the very conservative features of the policy be maintained.
In prior years, the SIP underwent review and approval by the Investment and Audit Committee prior to City Council approval. However, the committee was dissolved and subsequently reconstituted as two separate committees in March 2024. The newly established Investment Advisory Committee (IAC) remains unfilled. As a result, the SIP has not yet undergone review or approval by the IAC. In collaboration with Chandler Asset Management (Chandler), staff reviewed the City’s Investment Policy to capture changes to the California Government Code (Code). The SIP is up to date with the Code. The following proposed changes are to refine and update descriptions and language in the policy. Staff also reviewed the City’s Policy to ensure the inclusion of the latest best practices from recognized industry groups such as Government Finance Offices Association (GFOA), California Society of Municipal Finance Officers (CSMFO), California Municipal Treasurers Association (CMTA), and the Association of Public Treasurers of the United States and Canada (APTUSC).
Staff and Chandler reviewed the SIP and recommends the following updates:
• Section 2.3 Investment Oversight Committee - recommendation updates language to reflect the established Investment Advisory Committee.
• Section 3.1 Investments Authorized - recommendation refines the description of Federal Agency securities and differentiates between Negotiable Certificates of Deposit and Federally Insured Time Deposits.
• Section 3.2(c) Prohibited Investment Vehicles and Practices - recommendation removes U.S. Treasury zero coupon bonds from Prohibited Investments. The language prohibiting U.S. Treasury zero coupon bonds could be unintentionally interpreted as prohibiting United States Treasury Bills, as United States Treasury Bills do not have coupons.
• Section 3.3(a.3) Mitigating Risk in the Portfolio - recommendation refines the guideline language to monitor credit risk of the portfolio resulting from credit downgrades of securities.
7. ATTACHMENTS
• Resolution No. 11563
• FY 24-25 Statement of Investment Policy
• FY 23-24 Statement of Investment Policy - Redline