REPORT TO COUNCIL
SUBJECT
Title
Approval of the Annual Investment Policy for the City of Santa Clara, its Agencies and Corporations
Report
COUNCIL PILLAR
Enhance Community Engagement and Transparency
BACKGROUND
Section 904 of the City Charter states that the Director of Finance is required to “have custody of all investments and invested funds of the City government, or in possession of such government in a fiduciary capacity, and have the safe-keeping of all bonds and notes of the City and the receipt and delivery of City bonds and notes for transfer, registration or exchange.” In accordance with Government Code §53646, the City Council adopted an investment policy (“Investment Policy”), and the Director of Finance brings that policy to City Council on an annual basis, particularly highlighting any changes to the policy for consideration and approval by the City Council. In addition, the Investment Policy itself (Section R) requires annual approval by the City Council.
Council Policy 017 (Investment Policy: Annual Statement) provides the framework and guidance for managing investment portfolio of the City of Santa Clara, its agencies and corporations (collectively referred to as “City”). The Investment Policy expands on this Council Policy by providing further guidance and processes.
The Investment Policy is a written document that governs the selection of investments and provides staff with guidance for consistent, informed investment decision making, which applies to all investable assets of the City of Santa Clara, its subsidiaries, the Successor Agency for the Redevelopment Agency of the City of Santa Clara, the Sports and Open Space Authority, the Stadium Authority, and the Housing Authority, except if otherwise specified. As required by Government Code §53600.5, the Investment Policy also makes clear its investment objectives, which are, in order of priority, 1) safety of principal, 2) liquidity, and 3) return on investment. The Investment Policy is reviewed and updated annually in order to promote prudent investment decisions and to remain compliant with State and Federal laws.
DISCUSSION
The City’s Investment Policy is regularly reviewed to determine if periodic updates are necessary and prudent. As part of this review, staff recommends the following key updates to the 2025 Investment Policy:
1. Increase Maximum per Issuer allowable portfolio percentage holdings in Mortgage-Backed Securities (MBS) and Collateralized Mortgage Obligations (CMO) issued or guaranteed by the U.S. government or any agency or instrumentality thereof from 5% to 10% of portfolio dollars. The increase provides opportunities to further diversify the portfolio when this class of security presents relative value.
Section H. Authorized and Suitable Investments (page 4)
2. Add new Section I - Investment Pools. This new Section details an extensive due diligence review process prior to investing in Investment Pools. This conforms to best practices in accordance with California Municipal Treasurers Investment (CMTA) guidelines.
Section I. Investment Pools (page 8)
3. Retitle section previously named “Security Downgrades” to “Review of Investment Portfolio and Security Downgrades” which formalizes the practice of reviewing the portfolio quarterly. This also conforms to CMTA guidelines.
Section J. Review of Investment Portfolio and Security Downgrades (page 8)
The approved Investment Policy will be included in the City of Santa Clara Council Policy Manual as Council Policy 017 (Attachment 1) and published on the City’s website.
The Investment Policy (Attachment 2 - redline and Attachment 3) as submitted is in compliance with the City Charter and applicable state law.
ENVIRONMENTAL REVIEW
The action being considered does not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to section 15378(b)(5) of Title 14 of the California Code of Regulations in that it is an administrative activity that will not result in direct or indirect changes in the environment.
FISCAL IMPACT
There is no cost to the City other than administrative staff time and expense.
COORDINATION
This report has been coordinated with the City Attorney’s Office.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, email clerk@santaclaraca.gov <mailto:clerk@santaclaraca.gov> or at the public information desk at any City of Santa Clara public library.
RECOMMENDATION
Recommendation
Approve in the form presented the updated Annual Investment Policy for the City of Santa Clara, its Agencies and Corporations.
Staff
Reviewed by: Kenn Lee, Director of Finance
Approved by: Jovan D. Grogan, City Manager
ATTACHMENTS
1. Council Policy 017 Investment Policy: Annual Statement
2. Investment Policy 2025 (redline)
3. Investment Policy 2025