HomeMy WebLinkAbout8.1 Annual Review of the City’s Statement of Investment Policy
STAFF REPORT
CITY COUNCIL
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Agenda Item 8.1
DATE: September 16, 2025
TO: Honorable Mayor and City Councilmembers
FROM: Colleen Tribby, City Manager
SUBJECT:
Annual Review of the City’s Statement of Investment Policy
Prepared by: Jay Baksa, Finance Director
EXECUTIVE SUMMARY:
The City Council will consider a resolution completing the annual review of the Statement of
Investment Policy. The Policy has been updated to align with the City’s Mission, Vision, and
Values, as identified in the City’s Strategic Plan by adding three new categories to the
prohibited investment list. Additionally, City Staff relocated existing prohibitions into the
designated “Prohibited Investments” section for consistency and clarity.
While not required by statute, annual review of a local agency’s investment policy is
recommended by the California Debt and Investment Advisory Commission and is included as
a requirement in the City Policy.
STAFF RECOMMENDATION:
Adopt the Resolution Approving the Annual Review of the Statement of Investment Policy and
Delegation of Authority to Complete Investment Transactions.
FINANCIAL IMPACT:
None.
DESCRIPTION:
The current Statement of Investment Policy, adopted on August 21, 2007, states that it is
subject to annual review by the City Council and that the review shall be conducted by the
second meeting in September (Section XVIII). The Policy was last revised on September 17,
2024 to reflect the current organizational structure of the Finance Department. That revision
also added language to provide more flexibility in the City’s investment strategy. Specifically, it
authorized the City to invest in any Joint Powers Authority investment pool that meets the
criteria of the California Government Code Section 6509.7.
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Finance and Investment Subcommittee
During the 2024 review of the Policy, the City Council directed Staff to create a Finance and
Investment Committee (FIC) that have the responsibility of reviewing and making
recommendations on financial matters, including the city's investment policy and strategy. The
FIC was formally established on October 15, 2024, with Vice Mayor Kashef Qaadri and
Councilmember Michael McCorriston appointed as the inaugural members.
In response to community feedback about the types of companies in which the City invests,
the FIC conducted a comprehensive review of the Policy. The FIC explored the incorporation
of additional Socially Responsible Investing (SRI) practices and Environmental, Social, and
Governance (ESG) standards. SRI is an investment strategy that aims to generate financial
returns while excluding companies or industries that conflict with specific social, environmental,
or ethical values. ESG investing integrates environmental, social, and governance criteria into
investment analysis and decision-making. The objective is to identify risks and opportunities
that may not be captured through traditional financial analysis alone.
At its June 2, 2025 meeting, the FIC received a report outlining potential approaches for
integrating SRI and ESG standards into the Policy. The report also summarized the Boycott,
Divestment, Sanctions (BDS) and American Friends Service Committee (AFS C) movements
and related actions taken by other agencies (Attachment #4).
Following the discussion, the FIC directed Staff to:
Request a sample ESG report from the City’s investment management consultant,
Chandler Asset Management.
Draft an updated Policy that clarifies investments should reflect the City’s Mission,
Vision, and Values.
Add three new business sectors to the Policy’s prohibited investments list:
o Companies that develop or manufacture commodities that facilitate violence or
war.
o Companies engaged in border or mass surveillance industries.
o Companies involved in mass incarceration or detention industries.
Relocate all existing prohibited investment types into a dedicated section of the Policy
for clarity.
On August 8, 2025, the FIC reviewed the requested sample ESG report and the draft updated
Policy. At that meeting, the FIC approved the updated Policy, with additional clarifying
language, and recommended that:
The City’s portfolio be reviewed annually to ensure alignment with the City’s Mission,
Vision, and Values.
The City’s investment advisor provide an annual ESG report as part of this review
process.
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Proposed Changes
Based on the recommendations of the FIC and Staff’s review in consultation with Chandler,
Staff has revised the Policy to include the following updates:
Section XI: Prohibited Investment Practices and Instruments
Added language stating that all City investments will be guided by the City’s Mission,
Vision, and Values, and that the portfolio will be reviewed annually, wit h prohibited
investments updated as needed.
Clarified that the Intercontinental Exchange Bank of America Index Family’s
classification system will be used to identify business sectors for the purpose of
excluding prohibited investment types. This system is an industry standard and ensures
consistency in evaluating potential exclusions.
Added three new business sectors to the list of prohibited investments:
o Companies that develop or manufacture commodities that facilitate violence or
war.
o Companies engaged in border or mass surveillance industries.
o Companies involved in mass incarceration or detention industries.
XIV. Investment Risk
The Policy previously excluded three business sectors—fossil fuel companies, tobacco and
tobacco-related companies, and companies supporting firearm production—within Section XIV
(Investment Risk). For clarity and consistency, these exclusions have been relocated to
Section XI (Prohibited Investment Practices and Instruments).
The attached Resolution documents the annual review and confirms the delegation of authority
to Staff to complete investment transactions. The Policy is provided as Exhibit A to the
Resolution.
STRATEGIC PLAN INITIATIVE:
None.
NOTICING REQUIREMENTS/PUBLIC OUTREACH:
The City Council Agenda was posted.
ATTACHMENTS:
1) Resolution Approving the Annual Review of the Statement of Investment Policy and
Delegation of Authority to Complete Investment Transactions
2) Exhibit A to the Resolution - Statement of Investment Policy for the City of Dublin
3) Statement of Investment Policy for the City of Dublin (Redline)
4) June 2, 2025 Finance and Investment Committee Agenda Item #2.2 Staff Report (without
attachments)
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Attachment 1
Reso. No. XX-25, Item X.X, Adopted XX/XX/2025 Page 1 of 2
RESOLUTION NO. XX – 25
A RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF DUBLIN
APPROVING THE ANNUAL REVIEW OF THE STATEMENT OF INVESTMENT POLICY AND
DELEGATION OF AUTHORITY TO COMPLETE INVESTMENT TRANSACTIONS
WHEREAS, on August 21, 2007 the City Council adopted Resolution 152 -07 approving a
City Investment Policy (Policy); and
WHEREAS, Section XVIII of the Policy requires an annual review by the City Council no
later than the second meeting in September; and
WHEREAS, the last modification to the policy was approved by the Council at the City
Council meeting of September 17, 2024; and
WHEREAS, the focus of the annual review is to allow for any adjustments as a result of
changes in State laws or other recommended modifications; and
WHEREAS, consistent with the provisions of Government Code Section 53607, the Policy
provides for the City Council to delegate for a one-year period the authority to invest City funds to
the City Treasurer and any duly appointed Deputy City Treasurer; and
WHEREAS, Staff recommends changes to the Investment Policy to align with the City’s
Mission, Vision, and Values, and relocating language for clarity and consistency; and
WHEREAS, the City Council reviewed the Investment Policy at the September 1 6, 2025
meeting.
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Dublin does
hereby in accordance with California Government Code 53646(a)(2) complete the annual review
of the Statement of Investment Policy, as attached hereto as Exhibit A.
BE IT FURTHER RESOLVED that the City Council action explicitly renews the delegation
of authority to complete investment transactions by City Staff (Finance Director designated as th e
City Treasurer and the City Manager designated as the Deputy City Treasurer), as described in
Section IV of the Policy.
{Signatures on the following page}
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Reso. No. XX-25, Item X.X, Adopted XX/XX/2025 Page 2 of 2
PASSED, APPROVED AND ADOPTED this 16th day of September 2025, by the following
vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
______________________________
Mayor
ATTEST:
_________________________________
City Clerk
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Attachment 2
Exhibit A to the Resolution
STATEMENT OF INVESTMENT POLICY FOR THE CITY OF DUBLIN
I. INTRODUCTION
This Statement of Investment Policy is intended to identify various policies and
procedures that will foster a prudent and systematic investment program designed to
seek the City's objectives of safety, liquidity and return through a diversified investment
portfolio. This policy also serves to organize and formalize the City's investment -
related activities, while complying with all applicable status governing the investment
of public funds.
II. SCOPE
This policy covers all funds and investment activities under the direct authority of the
City of Dublin, as set forth in the State Government Code, sections 53600 et seq.,
excluding any bond-related proceeds or reserves, which are governed by their bond
indentures. Cash held by the City shall be pooled in order to more effectively manage
City cash resources. All pooled funds are accounted for in the City's Comprehensive
Annual Financial Report and include:
Funds
General Fund
Special Revenue Funds
Capital Project Funds
Internal Service Funds
Enterprise Funds
Agency Funds
This original investment policy was adopted by the City of Dublin (the "City"), on
August 21, 2007. This update to the Policy is effective on September 16, 2025 and
replaces any previous versions.
III. OBJECTIVES
The overall program shall be designed and managed with a degree of professionalism
worthy of the public trust. The primary objectives, in order of priority, of the City's
investment activities shall be:
1) Safety: Safety of principal is the foremost objective of the investment program. The
City's investments shall be undertaken in a manner that seeks to safeguard the
principal of the funds under its control by maintaining an appropriate risk level.
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2) Liquidity: The City's investment portfolio will remain sufficiently liquid to enable the
City to meet its reasonably anticipated cash flow requirements.
3) Return: Return should become a consideration only after the basic requirements
of safety and liquidity have been met. The City seeks to attain market average rate
of return on its investments throughout economic cycles, consistent with
constraints imposed by its safety objectives and cash flow considerations .
4) Diversification: The investment portfolio will be diversif ied to avoid incurring
unreasonable and avoidable risks regarding specific security types or individual
financial institutions. This shall also conform with applicable sections of the
Government Code.
IV. DELEGATION OF AUTHORITY
As authorized in Government Code Section 53607, the City Council delegates the
authority to invest funds of the City to the City Treasurer and/or any duly appointed
Deputy City Treasurer. The City Treasurer and any duly appointed Deputy City
Treasurer shall make all investment decisions and transactions in strict accordance
with State law and this investment policy. The Finance Director shall be designated as
the City Treasurer and the City Manager shall be designated as the Deputy City
Treasurer. This delegation shall be for a one-year period until the delegation of
authority is revoked or expires. The City Council may renew the authority each year
as part of an annual review of this policy.
The City Treasurer shall establish procedures for the operation of the investment
program. The City Treasurer shall be also responsible for all transactions undertaken
and establishing a system of controls to regulate the activities of subordinates.
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. Authorized individuals acting in accordance
with written procedures and the 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 appropriate action is taken to control adverse developments.
The City may engage the services of one or more external investment managers to
assist in the management of the City's investment portfolio in a manner consistent with
the City's objectives. Such external managers may be granted discretion to purchase
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and sell investment securities in accordance with this investment policy. Such
managers must be registered under the Investment Advisors Act of 1940.
V. PRUDENCE
Pursuant to California Government Code Section 53600.3, all persons authorized to
make investment decisions on behalf of the City 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."
VI. ETHICS AND CONFLICTS OF INTEREST
All participants in the investment process shall act as custodians of the public trust.
Investment officials shall recognize that the investment portfolio is subject to public
review and evaluation. The overall program shall be designed and managed with a
degree of professionalism that is worthy of the public trust. Thus , employees and
officials involved in the investment process shall refrain from personal business
activity that conflicts with proper execution of the investment program or impairs their
ability to make impartial investment decisions. Additionally, the City Treasurer and the
Deputy Treasurer shall file applicable financial disclosures as required by the Fair
Political Practices Commission (FPPC).
VII. INTERNAL CONTROLS
The Treasurer 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 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 City management. Periodically, as deemed appropriate by City management and/or
the City Council, an independent analysis by an external auditor shall be conducted
to review internal controls, account activity and compliance with policies and
procedures.
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VIII. AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS
To the extent practical the Treasurer shall endeavor to complete investment
transactions using a competitive bid process whenever possible. It shall be the City's
policy to purchase securities only from authorized institutions and firms. No deposit of
public funds shall be made except in a qualified public depository as established by
state laws.
Institutions eligible to transact investment business with the City include:
1) Primary government dealers as designated by the Federal Reserve Bank and non -
primary government dealers
2) Nationally or state-chartered banks
3) The Federal Reserve Bank
4) Direct issuers of securities eligible for purchase
The Treasurer shall maintain procedures for establishing a list of authorized
broker/dealers and financial institutions which are approved for investment purposes.
These may include primary or regional dealers that qualify under Securities &
Exchange Commission Rule 15C3-l (uniform net capital rule). The City requires each
firm that will be used for the purchase or sale of securities to be evaluated by the
Treasurer prior to any investments. The firms shall submit current financial statements,
and annual audited financial statements each year thereafter, which are to be
evaluated by the Treasurer. At a minimum, the firm must be financially sound and have
been in business a minimum of three years. In addition, the firms must provide: proof
of National Association of Security Dealers membership, proof of state registration or
exemption, and certificate of having read the City's investment policy.
If an investment adviser is retained by the City, then that adviser will be permitted to
use their own list of approved broker/dealers and financial institu tions for investment
purposes.
IX. AUTHORIZED AND SUITABLE INVESTMENTS
The City's investments are governed by Government Code, Sections 53600 et seq.
Within the investments permitted by the Government Code, the City seeks to further
restrict eligible investments to the guidelines listed below. In the event an apparent
discrepancy is found between this Policy and the Government Code, the more
restrictive parameters will take precedence. Percentage holding limits listed in this
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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 most 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 financial institutions.
1) United States Treasury Issues. United States Treasury notes, bonds, bills, or
certificates of indebtedness, or those for which the faith and credit of the United
States are pledged for the payment of principal and interest. There is no limitation
as to the percentage of the portfolio that may be invested in this category. The
maximum maturity of these securities is ten years. The City Council authorized
investments in United States Treasury Issues beyond five years on September 6,
2022.
2) Federal Agency Obligations. Federal agency 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 is no limitation as to
the percentage of the portfolio that may be invested in this category. However, the
portfolio's exposure to any one federal agency issuer is limited to 35 percent of the
overall portfolio. The limit of the overall portfolio's exposure to callable federal
agency securities is 25 percent. The maximum maturity for agency securities is ten
years. The City Council authorized investments in Federal Agency Obligations
beyond five years on September 6, 2022.
3) Bankers' Acceptances. Bankers' acceptances, otherwise known as bills of
exchange or time drafts, that are drawn on and accepted by a commercial bank.
Bankers' acceptances must be secured by the irrevocable primary obligation of the
accepting domestic bank. Purchasers are limited to issuers whose short -term debt
is rated "A- 1" or higher, or the equivalent, by a Nationally Recognized Statistical -
Rating Organization (NRSRO). Bankers' acceptances cannot exceed a maturity of
180 days. A maximum of 40 percent of the portfolio may be invested in this
category. The amount invested in bankers' acceptances with any one financial
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institution in combination with any other debt from that financial in stitution shall not
exceed 20 percent of the portfolio.
4) Commercial Paper. Commercial paper of "prime" quality rated "A-1" or higher, or
the equivalent, by a NRSRO. The entity that issues the commercial paper shall
meet all of the following conditions in either paragraph (a) or paragraph (b):
a. The entity meets the following criteria: (i) Is organized and operating in the
United States as a general corporation. (ii) Has total assets in excess of five
hundred million dollars ($500,000,000). (iii) Has debt oth er than commercial
paper, if any, that is rated "A" or higher by a nationally recognized statistical-
rating organization.
b. The entity meets the following criteria: (i) Is organized within the United
States as a special purpose corporation, trust, or limited liability company.
(ii) Has program wide credit enhancements including, but not limited to,
overcollateralization, letters of credit, or surety bond. (iii) Has commercial
paper that is rated "A-1" or higher, or the equivalent, by a nationally
recognized statistical-rating organization.
Eligible commercial paper shall have a maximum maturity of 270 days or less and
not represent more than 10 percent of the outstanding paper of an issuing
corporation. A maximum of 25 percent of the portfolio may be inve sted in this
category. Under a provision of the California Government Code sunsetting on
January 1, 2026, no more than 40 percent of the portfolio may be invested in
Commercial Paper if the Agency’s investment assets under management are
greater than $100,000,000. The amount invested in commercial paper of any one
issuer in combination with any other debt from that issuer shall not exceed 20
percent of the portfolio.
5) Negotiable Certificates of Deposit. 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 state-licensed branch of a
foreign bank. Purchases are limited to institutions which have long-term debt rated
"A" or better and/or have short-term debt rated at least "A-1" or higher, or the
equivalent by a NRSRO. A maximum of 30 percent of the portfolio may be invested
in this category. The amount invested in NCDs with any one financial institution in
combination with any other debt from that financial institution shall not exceed 20
percent of the portfolio. The maximum maturity of these securities is five years.
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6) Time Certificates of Deposit. Time Certificates of Deposit (TCDs) placed with
commercial banks and savings and loans. The purchase of TCDs from out-of-state
banks or savings and loans is prohibited. The amount on deposit shall not exceed
the shareholder's equity in the financial institution. To be eligible for purchase, the
financial institution must have received a minimum overall satisfactory rating for
meeting the credit needs of California Communities in its most recent evaluation,
as provided Government Code Section 53635.2. TCDs are required to be
collateralized as specified under Government Code Section 53630 et. seq. The
Treasurer, at his discretion, may waive the collateralization requirements for any
portion that is covered by federal (FDIC) insurance. The City shall have a signed
agreement with the depository per Government Code Section 53649. The
maximum maturity of these securities may not exceed one (1) year in maturity. A
maximum of 10 percent of the portfolio may be invested in this category.
7) Mutual Funds and Money Market Mutual Funds that are registered with the
Securities and Exchange Commission under the In vestment 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.
iii. 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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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.
iii. No more than 20% of the total portfolio may be invested in Money
Market Mutual Funds.
c. No more than 20% of the total portfolio may be invested in these securities.
8) State of California Local Agency Investment Fund (LAIF). The City may invest up
to the maximum as permitted by LAIF. For due diligence, the Treasurer shall
maintain on file a copy of LAIF's current Answer Book.
9) Joint Powers Authority (JPA) Pools, provided that: The JPA is organized pursuant
to California Government Code Section 6509.7 and invests in the securities and
obligations authorized in subdivisions (a) to (r), inclusive. Each share shall
represent an equal proportional interest in the underlying pool of securities owned
by the JPA. The JPA has retained an investment advisor who is registered with the
SEC (or exempt from registration), has assets under management in excess of
$500 million, and has at least five years’ experience investing in instruments
authorized by Section 53601, subdivisions (a) to (q).
10) Medium Term Notes. Medium-term notes, defined as all corporate and depository
institution debt securities with a maximum remaining maturity of five years or less,
issued by corporations 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. Purchases are limited to securities rated "A" or higher, or
the equivalent, by a NRSRO. A maximum of 30 percent of the City's portfolio may
be invested in this category and a maximum of 5 percent with any one issuer. The
maximum maturity of these securities is five years.
11) Asset-Backed, Mortgage-Backed, Mortgage Pass-Through Securities, and
Collateralized Mortgage Obligations, from issuers not defined in the Federal
Agency Obligations Subdivision. The City may purchase such securities provided
that they are rated "AA" or higher, or the equivalent, by a NRSRO. Purchase of
securities authorized by this subdivision may not exceed 20 percent of the portfolio,
and a maximum of 5 percent per issue. The maximum maturity of these securities
is five years.
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12) Municipal Securities. Obligations of the State of California, any of the other 49
states, or any local agency within the State of California, may be purchased by the
City provided that long-term obligations are rated "A" or higher, or the equivalent,
by at least one NRSRO. There are no limits on the dollar amount or percentage
that the city may invest in municipal securities; however, investments in these
securities are limited to a maximum of 5 percent with any single issuer. The
maximum maturity of these securities is ten years. The City Council authorized
investments in Municipal Securities beyond five years on September 6, 2022.
13) 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 must be rated
in a rating category of “AA” or its equivalent by a NRSRO. No more than 30% of
the portfolio may be invested in these securities, and no more than 10% of the
portfolio may be invested in any single issuer. The maximum maturity does not
exceed five (5) years.
X. AUTHORIZED INVESTMENTS FOR BOND PROCEEDS
Bond proceeds shall be invested in securities permitted by the applicable bond
documents. If the bond documents are silent as to the permitted investment s, bond
proceeds will be invested in securities permitted by this Policy. Notwithstanding the
provisions of the Policy, the percentage or dollar portfolio limitations listed elsewhere
in this Policy do not apply to bond proceeds. In addition to the securit ies listed in
Section IX above, bond proceeds may be invested in structured investment products
if approved by the Treasurer.
XI. PROHIBITED INVESTMENT PRACTICES AND INSTRUMENTS
City Investments will be guided by the City’s Mission, Vision, and Values and during
the annual review of the Investment Policy, the City shall review the portfolio and
identify and update prohibited investments as needed.
The Intercontinental Exchange Bank of America Index Family’s classification system
will be used to identify business sectors for the purpose of excluding prohibited
investment types.
The City will not invest in fossil fuel companies, tobacco or tobacco-related companies
and companies that support the production of firearms.
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The City will not invest in companies that develop or manufacture commodities that
facilitate violence or war.
The City will not invest in companies that engage in border or mass surveillance
industries.
The City will not invest in companies that are involved in mass incarceration or
detention industries.
The City shall not make investments for the purpose of trading or speculation as the
dominate criterion such as anticipation of appreciation of capital value through
changes in market rates.
Any investment in a security not specifically listed as an Authorized and Suitable
Investment above, but otherwise permitted by the Government Code, is prohibited
without the prior approval of the City Council. Section 53601.6 of the Government
Code specifically disallows investments in invoice floaters, range notes, or interest-
only strips that are derived from a pool of mortgages. Under a provision of the
California Government Code sunsetting on January 1, 2026, securities backed by the
United States Government that could result in a zero or negative interest accrual if
held to maturity are permitted.
XII. REVIEW OF INVESTMENT PORTFOLIO
The City Treasurer shall periodically, but no less than quarterly, review the portfolio to
identify investments that do not comply with this investment policy and es tablish
protocols for reporting major and critical incidences of noncompliance to the City
Council.
XIII. TERM OF INVESTMENTS
Funds of the City will be invested in accordance with sound treasury management
principles. It is the objective of this Policy to provide a system which will accurately
monitor and forecast revenues and expenditures so that the City can invest funds to
the fullest extent possible.
The maximum maturity of individual investments shall not exceed the limits set forth
in under Authorized and Suitable Investments. No investment shall exceed a maturity
of five years from the date of purchase unless the City Coun cil has granted express
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authority to make that investment either specifically or as a part of an investment
program approved by the City Council no less than three months prior to the
investment.
XIV. INVESTMENT RISK
a. MARKET RISK
Market risk is the risk that the portfolio will decline in value (or will not optimize
its value) due to changes in the general level of interest rates. The City
recognizes that, over time, longer-term portfolios achieve higher returns. On
the other hand, longer-term portfolios have higher volatility of return. The City
shall mitigate market risk by providing adequate liquidity for short-term cash
needs, and by making some 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 pay-downs 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:
i. The maximum stated final maturity of individual securities in the portfolio
shall be five years, unless otherwise stated in this policy;
ii. The City shall maintain a minimum of three months of budgeted
operating expenditures in cash, cash equivalents and short-term
investments; and
iii. The duration of the portfolio will typically be approximately equal to the
duration of a market index, selected by the City as its performance
benchmark, which meets the City's needs for cash flow and level of risk
tolerance plus or minus 20%.
b. CREDIT RISK
In general, the City's portfolio will be diversified to avoid incurring unreasonable
and avoidable risks regarding specific security types or individual financial
institutions, such as credit risk. Credit risk is the risk that a security or a portfolio
will lose some or all of its value due to a real or perceived change in the ability of
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the issuer to repay its debt. The City shall mitigate credit risk by adopting the
following strategies:
i. The diversification requirements included in Section IX are designed to
mitigate credit risk in the portfolio;
ii. 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.
iii. The City may elect to sell a security prior to its maturity and record a
capital gain or loss in order to improve the quality, liquidity or return of
the portfolio in response to market conditions or the City's risk
preferences; and
iv. If a security owned by the City is downgraded to a level below the
requirements of this policy, making the security ineligible for additional
purchases, the following steps will be taken:
1. Any actions taken related to the downgrade by the investment
manager will be communicated to the City in a timely manner.
2. If a decision is made to retain the security, the credit situation will
be monitored and reported back to the City.
XV. SAFEKEEPING AND CUSTODY
Investment securities are to be purchased when possible in book-entry form in the
City's name. All security transactions entered into by the City shall be conducted on a
delivery-versus-payment (DVP) basis. All cash and securities in the City's portfolio
shall be held in safekeeping in the City's name by a third-party bank trust department,
acting as agent for the City under the terms of a custody agreement executed by the
bank and the City. All investment transactions will require a safekeeping receipt or
acknowledgment generated from the trade. A monthly report will be received by the
City from the safekeeping institution listing all securities held in safekeeping with
current market data and other information. The only exception to the foregoing shall
be depository accounts and securities purchases made with: (i) local government
investment pools; (ii) time certificates of deposit, and , (iii) money mutual funds, since
the purchased securities are not deliverable. Term and non-negotiable instruments,
such as certificates of deposit, can be held by the Treasurer, or in safekeeping as the
Treasurer deems appropriate.
XVI. PERFORMANCE BENCHMARK
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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 Treasurer shall monitor and
evaluate the portfolio's performance relative to the market benchmark, which will be
included in the Treasurer's quarterly report. The Treasurer shall select an appropriate,
readily available index to use as a benchmark.
XVII. REPORT INFORMATION
The Treasurer shall prepare a report to the City Council not less than semi -annually
which is available each year within 60 days following December 31st and June 30th.
The semi-annual report shall be presented at a subsequent regularly scheduled City
Council Meeting. The report shall be inclusive of a monthly listing of investment
transactions. At a minimum the report shall include the following (Revised 9-18-2012):
a. Type of Investment
b. Issuer
c. Date of Maturity
d. Par and dollar amount invested
e. Current Market Value as of the date of the report
f. Source of the market value information
g. A list of investment transactions.
h. A statement of compliance with the investment policy
i. A statement as to the ability of the City to meet its expenditure requirements for
the next six months
In addition, the City Treasurer will submit a monthly transaction report to the City
Council.
XVIII. REVIEW OF INVESTMENT POLICY
This policy shall be subject to review by the City Council on an annual basis, by the
second Council meeting in September. Any recommended modifications or
amendments shall be presented by Staff to the City Council for their consideration and
adoption.
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GLOSSARY OF TERMS
ACCRUED INTEREST: Interest earned but not yet received.
AGENCIES: Federal agency securities and/or Government-sponsored enterprises.
Examples of well-known agencies that issue bonds are Federal Home Loan Mortgage
Corporation (FHLMC or "Freddie Mac"), Federal National Mortgage Association (FNMA
or "Fannie Mae"), and the Federal Home Loan Bank.
AMORTIZATION: An accounting practice of gradually decreasing (increasing) an asset's
book value by spreading its depreciation (accretion) over a period of time.
ASKED: The price at which securities are offered.
ASSET BACKED SECURITIES: Securities supported by pools of installment loans or
leases or by pools of revolving lines of credit.
BANKERS' ACCEPTANCE (BA): A draft or bill or exchange accepted by a bank or trust
company. The accepting institution guarantees payment of the bill, as well as the issuer.
BASIS POINT: One basis point is one hundredth of one percent (.0 I ).
BENCHMARK: A comparative base for measuring the performance or risk tolerance of
the investment portfolio. A benchmark should represent a close correlation to the level of
risk and the average duration of the portfolio's investments.
BID PRICE: The price offered by a buyer of securities. (When you are selling securities,
you ask for a bid.) See Offer.
BOND: A financial obligation for which the issuer promises to pay the bondholder a
specified stream of future cash flows, including periodic interest payments and a principal
repayment.
BOOK ENTRY: The system maintained by the Federal Reserve, by which most money
market securities are delivered to an investor's custodial bank. The Federal Reserve
maintains a computerized record of the ownership of these securities and records any
changes in ownership corresponding to payments made over the Federal Reserve wire
(delivery versus payment.)
BOOK VALUE: The value at which a debt security is shown on the holder's balance
sheet. Book value is acquisition cost less amortization of premium or accretion of
discount.
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BROKER: A broker brings buyers and sellers together for a commission.
CALLABLE BOND: A bond issue in which all or part of its outstanding principal amount
may be redeemed before maturity by the issuer under specified conditions.
CALL PRICE: The price at which an issuer may redeem a bond prior to maturity. The
price is usually at a slight premium to the bond's original issue price to compensate the
holder for loss of income and ownership.
CALL RISK: The risk to a bondholder that a bond may be redeemed prior to maturity.
CERTIFICATE OF DEPOSIT (CD): A deposit insured up to $100,000 by the FDIC at a
set rate for a specified period of time.
COLLATERAL: Securities, evidence of deposit or other property which a borrower
pledges to secure repayment of a loan. Also refers to securities pledged by a bank to
secure deposits of public monies.
COLLATERALIZED MORTGAGE OBLIGATION (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.
COMMERCIAL PAPER: An unsecured promissory note of industrial corporations, utilities
and bank holding companies having assets in excess of $500 million and an "A" or higher
rating for the issuer's debentures. Interest is discounted from par and calculated using
the actual number of days on a 360-day year. The notes are in bearer form, mature from
one to 270 days and generally start at $100,000. There is a secondary market for
commercial paper and an investor may sell them prior to maturity. Unused lines of credit
back commercial paper from major banks.
COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR): The official annual
financial report for the City. It includes combined statements and basic financial
statements for each individual fund and account group prepared in conformity with
Generally Accepted Accounting Principles (GAAP). Supplemental information is also
included including a detailed multi-year comparative statistics.
COST YIELD: The annual income from an investment divided by the purchase cost.
Because it does not give effect to premiums and discounts which may have been in cluded
in the purchase cost, it is an incomplete measure of return.
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COUPON: (a) The annual rate of interest that a bond's issuer promises to pay the
bondholder on the bond's face value. (b) A certificate attached to a bond evidencing
interest due on a payment date.
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.
CURRENT YIELD: The interest paid on an investment expressed as a percentage of the
current price of the security.
CUSTODY: A banking service that provides safekeeping for the individual securities in a
customer's investment portfolio under a written agreement which also calls for the bank
to collect and pay out income, and to buy, sell, receive an d deliver securities when ordered
to do so by the account holder.
DEALER: A dealer, as opposed to a broker, acts as a principal in all transactions, buying
and selling for his own account.
DEBENTURE: A bond secured only by the general credit of the issuer.
DELIVERY VERSUS PAYMENT (DVP): Delivery versus payment is delivery of securities
with an exchange of money for the securities.
DERIVATIVES: (1) Financial instruments whose return profile is linked to, or derived from,
the movement of one or more underlying index or security, and may include a leveraging
factor, or (2) financial contracts based upon notional amounts whose value is derived from
an underlying index or security (interest rates, foreign exchange rates, equities or
commodities).
DISCOUNT: The difference between the cost price of a security and its value at maturity
when quoted at lower than face value.
DISCOUNT SECURITIES: Non-interest-bearing money market instruments that are
issued a discount and redeemed at maturity for full face value, e.g., U.S. Treasury Bills.
DIVERSIFICATION: Dividing investment funds among a variety of securities offering
independent returns.
DURATION: A measure of the timing of the cash flows, such as the interest payments
and the principal repayment, to be received from a given fixed -income security. This
calculation is based on three variables: term to maturity, coupon rate, and yield to maturity.
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The duration of a security is a useful indicator of its price volatility for given changes in
interest rates.
FEDERAL CREDIT AGENCIES: Agencies of the Federal government set up to supply
credit to various classes of institutions and individuals, e.g., S&L's, small business firms,
students, farmers, farm cooperatives, and exporters.
FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC): A federal agency that
insures bank deposits, currently up to $100,000 per deposit.
FEDERAL FUNDS RATE: The rate of interest at which Fed funds are traded. This rate is
currently pegged by the Federal Reserve through open-market operations.
FEDERAL HOME LOAN BANKS (FHLB): Government sponsored wholesale banks
(currently 12 regional banks) which lend funds and provide correspondent banking
services to member commercial banks, thrift institutions, credit unions and insurance
companies.
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA or Fannie Mae): FNMA,
like GNMA was chartered under the Federal National Mortgage Association Act in 1938.
FNMA is a federal corporation working under the auspices of the Department of Housing
and Urban Development (HUD). The corporation is called, is a private stockholder-owned
corporation. The corporation's purchases include a variety of adjustable mortgages and
second loans, in addition to fixed-rate mortgages.
FEDERAL OPEN MARKET COMMITTEE (FOMC): Consists of seven members of the
Federal Reserve Board and five of the twelve Federal Reserve Bank Presidents. The
President of the New York Federal Reserve Bank is a permanent m ember, while the other
Presidents serve on a rotating basis. The Committee periodically meets to set Federal
Reserve guidelines regarding purchases and sales of Government Securities in the open
market as a means of influencing the volume of bank credit and money.
FEDERAL RESERVE SYSTEM: The central bank of the United States created by
Congress and consisting of a seven-member Board of Governors in Washington, D.C.,
12 regional banks and about 5,700 commercial banks that are members of the system.
FED WIRE: A wire transmission service established by the Federal Reserve Bank to
facilitate the transfer of funds through debits and credits of funds between participants
within the Fed system.
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC or Freddie Mac): A
United States government sponsored corporation.
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GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA or Ginnie Mae):
Securities influencing the volume of bank credit guaranteed by GNMA and issued by
mortgage bankers, commercial banks, savings and loan associations, an d other
institutions. Security holder is protected by full faith and credit of the U.S. Government.
Ginnie Mae securities are backed by the FHA, VA or FmHA mortgages. The term "pass -
throughs" is often used to describe Ginnie Maes.
HAIRCUT: The margin or difference between the actual market value of a security and
the value assessed by the lending side of a transaction (i.e. a repo).
INTEREST RATE: The annual yield earned on an investment, expressed as a
percentage.
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: Refers to the ability to easily and rapidly convert a security into cash.
LOCAL AGENCY INVESTMENT FUND (LAIF): The local Agency Investment Fund
(LAIF) is a special fund in the California State Treasury created and governed pursuant
to Government Code Sections 16429.1 et seq. There are limits on the maximum dollars
deposited by a city as well as the number of transactions allowed each month.
LOCAL GOVERNMENT INVESTMENT POOL (LGIP): The aggregate of all funds from
political subdivisions that are placed in custody of the State Treasurer for investment and
reinvestment.
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 is trading and could presumably be
purchased or sold on a specific date.
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MARKING TO MARKET: The process of posting current market values for securities in
a portfolio.
MATURITY: The date upon which the principal or stated value of an investment becomes
due and payable.
MEDIUM TERM NOTES (MTNs): 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: Mutual funds that invest solely in money market
instruments (short- term debt instruments, such as Treasury bills, commercial paper,
bankers' acceptances, and federal funds).
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 internationa l stocks, bonds, and money
market instruments, as set forth in the individual fund's prospectus. For most large,
institutional investors, the costs associated with investing in mutual funds are higher than
the investor can obtain through an individually managed portfolio.
NATIONAL ASSOCIATION OF SECURITIES DEALERS (NASD): A self-regulatory
organization (SRO) of brokers and dealers in the over-the-counter securities business. Its
regulatory mandate includes authority over firms that distribute mutual fund sh ares as
well as other securities.
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NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATIONS (NSROs);
Credit rating agencies whose ratings are permitted to be used for regulatory purposes
such as those imposed by the Securities and Exchange Commission.
NEGOTIABLE CERTIFICATE OF DEPOSIT: A large denomination certificate of deposit
which can be sold in the open market prior to maturity.
NEW ISSUE: Term used when a security is originally "brought" to market.
OFFER: The price asked by a seller of securities. (When you are buying securities, you
ask for an offer.) See Asked and Bid.
OPEN MARKET OPERATIONS: Purchases and sales of government and certain other
securities in the open market by the New York Federal Reserve Bank as directed by the
FOMC in order to influence the volume of money and credit in the economy. Purchases
inject reserves into the bank system and stimulate growth of money and credit; sales have
the opposite effect. Open market operations are the Federal Reserve' s most important
and most flexible monetary policy tool.
PORTFOLIO: Collection of securities held by an investor.
PREMIUM: The amount by which the price paid for a security exceeds the security's par
value.
PREPAYMENT SPEED: A measure of how quickly principal is repaid to investors in
mortgage securities.
PREPAYMENT WINDOW: The time period over which principal repayments will be
received on mortgage securities at a specified prepayment speed.
PRIMARY DEALER: A group of government securities dealers who submit daily reports
of market activity and positions and monthly financial statements to the Federal Reserve
Bank of New York and are subject to its informal oversight. Primary dealers include
Securities and Exchange Commission (SEC)-registered securities broker-dealers, banks,
and a few unregulated firms.
PRINCIPAL: The face value or par value of a debt instrument, or the amount of capital
invested in a given security.
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
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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."
PURCHASE DATE: The date on which a security is purchased for settlement on that or
a later date.
RATE OF RETURN: The yield obtainable on a security based on its purchase price or its
current market price. This may be the amortized yield to maturity on a bond or the current
income return.
REALIZED YIELD: The change in value of the portfolio due to interest received and
interest earned and realized gains and losses. It does not give effect to change s in market
value on securities, which have not been sold from the portfolio.
REGIONAL DEALER: A financial intermediary that buys and sells securities for the
benefit of its customers without maintaining substantial inventories of securities and that
is not a primary dealer.
REPURCHASE AGREEMENT (RP OR REPO): A holder of securities sells these
securities to an investor with an agreement to repurchase them at a fixed price on a fixed
date. The security "buyer" in effect lends the "seller" money for the period of the
agreement, and the terms of the agreement are structured to compensate him for this.
RULE 2a-7 OF THE INVESTMENT COMPANY ACT: Applies to all money market mutual
funds and mandates such funds to maintain certain standards, including a 13 - month
maturity limit and a 90-day average maturity on investments, to help maintain a constant
net asset value of one dollar ($1.00).
SAFEKEEPING: See CUSTODY.
SECONDARY MARKET: A market made for the purchase and sale of outstanding issues
following the initial distribution.
SECURITIES & EXCHANGE COMMISSION: Agency created by Congress to protect
investors m securities transactions by administering securities legislation.
SETTLEMENT DATE: The date on which a trade is cleared by delivery of securities
against funds.
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
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floating rate notes which have coupons that increase when other interest rates are f alling,
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.
TENNESSEE VALLEY AUTHORITY (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.
TIME CERTIFICATE OF DEPOSIT: A non-negotiable certificate of deposit which cannot
be sold prior to maturity.
TOTAL RATE OF RETURN: A measure of a portfolio's performance over time. It i s 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: A non-interest-bearing discount security issued by the U.S. Treasury
to finance the national debt. Most bills are issued to mature in three months, six months,
or one year and are sold on a discount basis.
TREASURY BONDS: Long-term coupon-bearing U.S. Treasury securities issued
as direct obligations of the U.S. Government and having initial maturities of more than 10
years.
TREASURY NOTES: Medium-term coupon-bearing U.S. Treasury securities issued as
direct obligations of the U.S. Government and having initial maturities of I to 10 years.
U.S. GOVERNMENT AGENCIES: Instruments issued by various US Government
Agencies most of which are secured only by the credit worthiness of the particular agency.
VOLATILITY: The rate at which security prices change with changes in general economic
conditions or the general level of interest rates.
WEIGHTED AVERAGE MATURITY (WAM): The average maturity of all the securities
that comprise a portfolio that is typically expressed in days or years.
YIELD: The rate of annual income return on an investment, expressed as a percentage.
It is obtained by dividing the current dollar income by the current market price of the
security.
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YIELD TO MATURITY: The rate of income return on an investment, minus any premium
or plus any discount, with the adjustment spread over the period from the date of purchase
to the date of maturity of the bond, expressed as a percentage.
YIELD CURVE: The yield on bonds, notes or bills of the same type and credit risk at a
specific date for maturities up to thirty years.
ZERO-COUPON SECURITY: Security that is issued at a discount and makes no periodic
interest payments. The rate of return consists of a gradual accretion of the principal of the
security and is payable at par upon maturity.
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Attachment 3
STATEMENT OF INVESTMENT POLICY FOR THE CITY OF DUBLIN
I. INTRODUCTION
This Statement of Investment Policy is intended to identify various policies and
procedures that will foster a prudent and systematic investment program designed to
seek the City's objectives of safety, liquidity and return through a diversified investment
portfolio. This policy also serves to organize and formalize the City's investment-
related activities, while complying with all applicable status governing the investment
of public funds.
II. SCOPE
This policy covers all funds and investment activities under the direct authority of the
City of Dublin, as set forth in the State Government Code, sections 53600 et seq.,
excluding any bond-related proceeds or reserves, which are governed by their bond
indentures. Cash held by the City shall be pooled in order to more effectively manage
City cash resources. All pooled funds are accounted for in the City's Comprehensive
Annual Financial Report and include:
Funds
General Fund
Special Revenue Funds
Capital Project Funds
Internal Service Funds
Enterprise Funds
Agency Funds
This original investment policy was adopted by the City of Dublin (the "City"), on
August 21, 2007. This update to the Policy is effective on September 1 67, 20254 and
replaces any previous versions.
III. OBJECTIVES
The overall program shall be designed and managed with a degree of professionalism
worthy of the public trust. The primary objectives, in order of priority, of the City's
investment activities shall be:
1) Safety: Safety of principal is the foremost objective of the investment program. The
City's investments shall be undertaken in a manner that seeks to safeguard the
principal of the funds under its control by maintaining an appropriate risk level.
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2) Liquidity: The City's investment portfolio will remain sufficiently liquid to enable the
City to meet its reasonably anticipated cash flow requirements.
3) Return: Return should become a consideration only after the basic requirements
of safety and liquidity have been met. The City seeks to attain market average rate
of return on its investments throughout economic cycles, consistent with
constraints imposed by its safety objectives and cash flow considerations.
4) Diversification: The investment portfolio will be diversified to avoid incurring
unreasonable and avoidable risks regarding specific security types or individual
financial institutions. This shall also conform with applicable sections of the
Government Code.
IV. DELEGATION OF AUTHORITY
As authorized in Government Code Section 53607, the City Council delegates the
authority to invest funds of the City to the City Treasurer and/or any duly appointed
Deputy City Treasurer. The City Treasurer and any duly appointed Deputy City
Treasurer shall make all investment decisions and transactions in strict accordance
with State law and this investment policy. The Finance Director shall be designated as
the City Treasurer and the City Manager shall be designated as the Deputy City
Treasurer. This delegation shall be for a one-year period until the delegation of
authority is revoked or expires. The City Council may renew the authority each year
as part of an annual review of this policy.
The City Treasurer shall establish procedures for the operation of the investment
program. The City Treasurer shall be also responsible for all transactions undertaken
and establishing a system of controls to regulate the activities of subordinates.
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. Authorized individuals acting in accordance
with written procedures and the 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 appropriate action is taken to control adverse developments.
The City may engage the services of one or more external investment managers to
assist in the management of the City's investment portfolio in a manner consistent with
the City's objectives. Such external managers may be granted discretion to purchase
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and sell investment securities in accordance with this investment policy. Such
managers must be registered under the Investment Advisors Act of 1940.
V. PRUDENCE
Pursuant to California Government Code Section 53600.3, all persons authorized to
make investment decisions on behalf of the City 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."
VI. ETHICS AND CONFLICTS OF INTEREST
All participants in the investment process shall act as custodians of the public trust.
Investment officials shall recognize that the investment portfolio is subject to public
review and evaluation. The overall program shall be designed and managed with a
degree of professionalism that is worthy of the public trust. Thus, employees and
officials involved in the investment process shall refrain from personal business
activity that conflicts with proper execution of the investment program or impairs their
ability to make impartial investment decisions. Additionally, the City Treasurer and the
Deputy Treasurer shall file applicable financial disclosures as required by the Fair
Political Practices Commission (FPPC).
VII. INTERNAL CONTROLS
The Treasurer 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 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 City management. Periodically, as deemed appropriate by City management and/or
the City Council, an independent analysis by an external auditor shall be conducted
to review internal controls, account activity and compliance with policies and
procedures.
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VIII. AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS
To the extent practical the Treasurer shall endeavor to complete investment
transactions using a competitive bid process whenever possible. It shall be the City's
policy to purchase securities only from authorized institutions and firms. No deposit of
public funds shall be made except in a qualified public depository as established by
state laws.
Institutions eligible to transact investment business with the City include:
1) Primary government dealers as designated by the Federal Reserve Bank and non-
primary government dealers
2) Nationally or state-chartered banks
3) The Federal Reserve Bank
4) Direct issuers of securities eligible for purchase
The Treasurer shall maintain procedures for establishing a list of authorized
broker/dealers and financial institutions which are approved for investment purposes.
These may include primary or regional dealers that qualify under Securities &
Exchange Commission Rule 15C3-l (uniform net capital rule). The City requires each
firm that will be used for the purchase or sale of securities to be evaluated by the
Treasurer prior to any investments. The firms shall submit current financial statements,
and annual audited financial statements each year thereafter, which are to be
evaluated by the Treasurer. At a minimum, the firm must be financially sound and have
been in business a minimum of three years. In addition, the firms must provide: proof
of National Association of Security Dealers membership, proof of state registration or
exemption, and certificate of having read the City's investment policy.
If an investment adviser is retained by the City, then that adviser will be permitted to
use their own list of approved broker/dealers and financial institutions for investment
purposes.
IX. AUTHORIZED AND SUITABLE INVESTMENTS
The City's investments are governed by Government Code, Sections 53600 et seq.
Within the investments permitted by the Government Code, the City seeks to further
restrict eligible investments to the guidelines listed below. In the event an apparent
discrepancy is found between this Policy and the Government Code, the more
restrictive parameters will take precedence. Percentage holding limits listed in this
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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 most 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 financial institutions.
1) United States Treasury Issues. United States Treasury notes, bonds, bills, or
certificates of indebtedness, or those for which the faith and credit of the United
States are pledged for the payment of principal and interest. There is no limitation
as to the percentage of the portfolio that may be invested in this category. The
maximum maturity of these securities is ten years. The City Council authorized
investments in United States Treasury Issues beyond five years on September 6,
2022.
2) Federal Agency Obligations. Federal agency 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 is no limitation as to
the percentage of the portfolio that may be invested in this category. However, the
portfolio's exposure to any one federal agency issuer is limited to 35 percent of the
overall portfolio. The limit of the overall portfolio's exposure to callable federal
agency securities is 25 percent. The maximum maturity for agency securities is ten
years. The City Council authorized investments in Federal Agency Obligations
beyond five years on September 6, 2022.
3) Bankers' Acceptances. Bankers' acceptances, otherwise known as bills of
exchange or time drafts, that are drawn on and accepted by a commercial bank.
Bankers' acceptances must be secured by the irrevocable primary obligation of the
accepting domestic bank. Purchasers are limited to issuers whose short-term debt
is rated "A- 1" or higher, or the equivalent, by a Nationally Recognized Statistical-
Rating Organization (NRSRO). Bankers' acceptances cannot exceed a maturity of
180 days. A maximum of 40 percent of the portfolio may be invested in this
category. The amount invested in bankers' acceptances with any one financial
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institution in combination with any other debt from that financial institution shall not
exceed 20 percent of the portfolio.
4) Commercial Paper. Commercial paper of "prime" quality rated "A-1" or higher, or
the equivalent, by a NRSRO. The entity that issues the commercial paper shall
meet all of the following conditions in either paragraph (a) or paragraph (b):
a. The entity meets the following criteria: (i) Is organized and operating in the
United States as a general corporation. (ii) Has total assets in excess of five
hundred million dollars ($500,000,000). (iii) Has debt other than commercial
paper, if any, that is rated "A" or higher by a nationally recognized statistical-
rating organization.
b. The entity meets the following criteria: (i) Is organized within the United
States as a special purpose corporation, trust, or limited liability company.
(ii) Has program wide credit enhancements including, but not limited to,
overcollateralization, letters of credit, or surety bond. (iii) Has commercial
paper that is rated "A-1" or higher, or the equivalent, by a nationally
recognized statistical-rating organization.
Eligible commercial paper shall have a maximum maturity of 270 days or less and
not represent more than 10 percent of the outstanding paper of an issuing
corporation. A maximum of 25 percent of the portfolio may be invested in this
category. Under a provision of the California Government Code sunsetting on
January 1, 2026, no more than 40 percent of the portfolio may be invested in
Commercial Paper if the Agency’s investment assets under management are
greater than $100,000,000. The amount invested in commercial paper of any one
issuer in combination with any other debt from that issuer shall not exceed 20
percent of the portfolio.
5) Negotiable Certificates of Deposit. 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 state-licensed branch of a
foreign bank. Purchases are limited to institutions which have long-term debt rated
"A" or better and/or have short-term debt rated at least "A-1" or higher, or the
equivalent by a NRSRO. A maximum of 30 percent of the portfolio may be invested
in this category. The amount invested in NCDs with any one financial institution in
combination with any other debt from that financial institution shall not exceed 20
percent of the portfolio. The maximum maturity of these securities is five years.
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6) Time Certificates of Deposit. Time Certificates of Deposit (TCDs) placed with
commercial banks and savings and loans. The purchase of TCDs from out-of-state
banks or savings and loans is prohibited. The amount on deposit shall not exceed
the shareholder's equity in the financial institution. To be eligible for purchase, the
financial institution must have received a minimum overall satisfactory rating for
meeting the credit needs of California Communities in its most recent evaluation,
as provided Government Code Section 53635.2. TCDs are required to be
collateralized as specified under Government Code Section 53630 et. seq. The
Treasurer, at his discretion, may waive the collateralization requirements for any
portion that is covered by federal (FDIC) insurance. The City shall have a signed
agreement with the depository per Government Code Section 53649. The
maximum maturity of these securities may not exceed one (1) year in maturity. A
maximum of 10 percent of the portfolio may be invested in this category.
7) 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.
iii. 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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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.
iii. No more than 20% of the total portfolio may be invested in Money
Market Mutual Funds.
c. No more than 20% of the total portfolio may be invested in these securities.
8) State of California Local Agency Investment Fund (LAIF). The City may invest up
to the maximum as permitted by LAIF. For due diligence, the Treasurer shall
maintain on file a copy of LAIF's current Answer Book.
9) Joint Powers Authority (JPA) Pools, provided that: The JPA is organized pursuant
to California Government Code Section 6509.7 and invests in the securities and
obligations authorized in subdivisions (a) to (r), inclusive. Each share shall
represent an equal proportional interest in the underlying pool of securities owned
by the JPA. The JPA has retained an investment advisor who is registered with the
SEC (or exempt from registration), has assets under management in excess of
$500 million, and has at least five years’ experience investing in instruments
authorized by Section 53601, subdivisions (a) to (q).
10) Medium Term Notes. Medium-term notes, defined as all corporate and depository
institution debt securities with a maximum remaining maturity of five years or less,
issued by corporations 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. Purchases are limited to securities rated "A" or higher, or
the equivalent, by a NRSRO. A maximum of 30 percent of the City's portfolio may
be invested in this category and a maximum of 5 percent with any one issuer. The
maximum maturity of these securities is five years.
11) Asset-Backed, Mortgage-Backed, Mortgage Pass-Through Securities, and
Collateralized Mortgage Obligations, from issuers not defined in the Federal
Agency Obligations Subdivision. The City may purchase such securities provided
that they are rated "AA" or higher, or the equivalent, by a NRSRO. Purchase of
securities authorized by this subdivision may not exceed 20 percent of the portfolio,
and a maximum of 5 percent per issue. The maximum maturity of these securities
is five years.
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12) Municipal Securities. Obligations of the State of California, any of the other 49
states, or any local agency within the State of California, may be purchased by the
City provided that long-term obligations are rated "A" or higher, or the equivalent,
by at least one NRSRO. There are no limits on the dollar amount or percentage
that the city may invest in municipal securities; however, investments in these
securities are limited to a maximum of 5 percent with any single issuer. The
maximum maturity of these securities is ten years. The City Council authorized
investments in Municipal Securities beyond five years on September 6, 2022.
13) 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 must be rated
in a rating category of “AA” or its equivalent by a NRSRO. No more than 30% of
the portfolio may be invested in these securities, and no more than 10% of the
portfolio may be invested in any single issuer. The maximum maturity does not
exceed five (5) years.
X. AUTHORIZED INVESTMENTS FOR BOND PROCEEDS
Bond proceeds shall be invested in securities permitted by the applicable bond
documents. If the bond documents are silent as to the permitted investments, bond
proceeds will be invested in securities permitted by this Policy. Notwithstanding the
provisions of the Policy, the percentage or dollar portfolio limitations listed elsewhere
in this Policy do not apply to bond proceeds. In addition to the securities listed in
Section IX above, bond proceeds may be invested in structured investment products
if approved by the Treasurer.
XI. PROHIBITED INVESTMENT PRACTICES AND INSTRUMENTS
City Investments will be guided by the City’s Mission, Vision, and Values and during
the annual review of the Investment Policy, the City shall review the portfolio and
identify and update prohibited investments as needed.
The Intercontinental Exchange Bank of America Index Family’s classification system
will be used to identify business sectors for the purpose of excluding prohibited
investment types.
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The City will not invest in fossil fuel companies, tobacco or tobacco-related companies
and companies that support the production of firearms.
The City will not invest in companies that develop or manufacture commodities that
facilitate violence or war.
The City will not invest in companies that engage in border or mass surveillance
industries.
The City will not invest in companies that are involved in mass incarceration or
detention industries.
The City shall not make investments for the purpose of trading or speculation as the
dominate criterion such as anticipation of appreciation of capital value through
changes in market rates.
Any investment in a security not specifically listed as an Authorized and Suitable
Investment above, but otherwise permitted by the Government Code, is prohibited
without the prior approval of the City Council. Section 53601.6 of the Government
Code specifically disallows investments in invoice floaters, range notes, or interest-
only strips that are derived from a pool of mortgages. Under a provision of the
California Government Code sunsetting on January 1, 2026, securities backed by the
United States Government that could result in a zero or negative interest accrual if
held to maturity are permitted.
XII. REVIEW OF INVESTMENT PORTFOLIO
The City Treasurer 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.
XIII. TERM OF INVESTMENTS
Funds of the City will be invested in accordance with sound treasury management
principles. It is the objective of this Policy to provide a system which will accurately
monitor and forecast revenues and expenditures so that the City can invest funds to
the fullest extent possible.
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The maximum maturity of individual investments shall not exceed the limits set forth
in under Authorized and Suitable Investments. No investment shall exceed a maturity
of five years from the date of purchase unless the City Council has granted express
authority to make that investment either specifically or as a part of an investment
program approved by the City Council no less than three months prior to the
investment.
XIV. INVESTMENT RISK
a. MARKET RISK
Market risk is the risk that the portfolio will decline in value (or will not optimize
its value) due to changes in the general level of interest rates. The City
recognizes that, over time, longer-term portfolios achieve higher returns. On
the other hand, longer-term portfolios have higher volatility of return. The City
shall mitigate market risk by providing adequate liquidity for short-term cash
needs, and by making some longer-term investments only with funds that are
not needed for current cash flow purposes.
The City also prohibits investments in any fossil fuel companies, tobacco or
tobacco-related companies, and companies in support of the production of
firearms. The City further recognizes that certain types of securities, including
variable rate securities, securities with principal pay-downs 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:
i. The maximum stated final maturity of individual securities in the portfolio
shall be five years, unless otherwise stated in this policy;
ii. The City shall maintain a minimum of three months of budgeted
operating expenditures in cash, cash equivalents and short-term
investments; and
iii. The duration of the portfolio will typically be approximately equal to the
duration of a market index, selected by the City as its performance
benchmark, which meets the City's needs for cash flow and level of risk
tolerance plus or minus 20%.
b. CREDIT RISK
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In general, the City's portfolio will be diversified to avoid incurring unreasonable
and avoidable risks regarding specific security types or individual financial
institutions, such as credit risk. Credit risk is the risk that a security or a portfolio
will lose some or all of its value due to a real or perceived change in the ability of
the issuer to repay its debt. The City shall mitigate credit risk by adopting the
following strategies:
i. The diversification requirements included in Section IX are designed to
mitigate credit risk in the portfolio;
ii. 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.
iii. The City may elect to sell a security prior to its maturity and record a
capital gain or loss in order to improve the quality, liquidity or return of
the portfolio in response to market conditions or the City's risk
preferences; and
iv. If a security owned by the City is downgraded to a level below the
requirements of this policy, making the security ineligible for additional
purchases, the following steps will be taken:
1. Any actions taken related to the downgrade by the investment
manager will be communicated to the City in a timely manner.
2. If a decision is made to retain the security, the credit situation will
be monitored and reported back to the City.
XV. SAFEKEEPING AND CUSTODY
Investment securities are to be purchased when possible in book-entry form in the
City's name. All security transactions entered into by the City shall be conducted on a
delivery-versus-payment (DVP) basis. All cash and securities in the City's portfolio
shall be held in safekeeping in the City's name by a third-party bank trust department,
acting as agent for the City under the terms of a custody agreement executed by the
bank and the City. All investment transactions will require a safekeeping receipt or
acknowledgment generated from the trade. A monthly report will be received by the
City from the safekeeping institution listing all securities held in safekeeping with
current market data and other information. The only exception to the foregoing shall
be depository accounts and securities purchases made with: (i) local government
investment pools; (ii) time certificates of deposit, and, (iii) money mutual funds, since
the purchased securities are not deliverable. Term and non-negotiable instruments,
such as certificates of deposit, can be held by the Treasurer, or in safekeeping as the
Treasurer deems appropriate.
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XVI. PERFORMANCE BENCHMARK
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 Treasurer shall monitor and
evaluate the portfolio's performance relative to the market benchmark, which will be
included in the Treasurer's quarterly report. The Treasurer shall select an appropriate,
readily available index to use as a benchmark.
XVII. REPORT INFORMATION
The Treasurer shall prepare a report to the City Council not less than semi-annually
which is available each year within 60 days following December 31st and June 30th.
The semi-annual report shall be presented at a subsequent regularly scheduled City
Council Meeting. The report shall be inclusive of a monthly listing of investment
transactions. At a minimum the report shall include the following (Revised 9-18-2012):
a. Type of Investment
b. Issuer
c. Date of Maturity
d. Par and dollar amount invested
e. Current Market Value as of the date of the report
f. Source of the market value information
g. A list of investment transactions.
h. A statement of compliance with the investment policy
i. A statement as to the ability of the City to meet its expenditure requirements for
the next six months
In addition, the City Treasurer will submit a monthly transaction report to the City
Council.
XVIII. REVIEW OF INVESTMENT POLICY
This policy shall be subject to review by the City Council on an annual basis, by the
second Council meeting in September. Any recommended modifications or
amendments shall be presented by Staff to the City Council for their consideration and
adoption.
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GLOSSARY OF TERMS
ACCRUED INTEREST: Interest earned but not yet received.
AGENCIES: Federal agency securities and/or Government-sponsored enterprises.
Examples of well-known agencies that issue bonds are Federal Home Loan Mortgage
Corporation (FHLMC or "Freddie Mac"), Federal National Mortgage Association (FNMA
or "Fannie Mae"), and the Federal Home Loan Bank.
AMORTIZATION: An accounting practice of gradually decreasing (increasing) an asset's
book value by spreading its depreciation (accretion) over a period of time.
ASKED: The price at which securities are offered.
ASSET BACKED SECURITIES: Securities supported by pools of installment loans or
leases or by pools of revolving lines of credit.
BANKERS' ACCEPTANCE (BA): A draft or bill or exchange accepted by a bank or trust
company. The accepting institution guarantees payment of the bill, as well as the issuer.
BASIS POINT: One basis point is one hundredth of one percent (.0 I ).
BENCHMARK: A comparative base for measuring the performance or risk tolerance of
the investment portfolio. A benchmark should represent a close correlation to the level of
risk and the average duration of the portfolio's investments.
BID PRICE: The price offered by a buyer of securities. (When you are selling securities,
you ask for a bid.) See Offer.
BOND: A financial obligation for which the issuer promises to pay the bondholder a
specified stream of future cash flows, including periodic interest payments and a principal
repayment.
BOOK ENTRY: The system maintained by the Federal Reserve, by which most money
market securities are delivered to an investor's custodial bank. The Federal Reserve
maintains a computerized record of the ownership of these securities and records any
changes in ownership corresponding to payments made over the Federal Reserve wire
(delivery versus payment.)
BOOK VALUE: The value at which a debt security is shown on the holder's balance
sheet. Book value is acquisition cost less amortization of premium or accretion of
discount.
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BROKER: A broker brings buyers and sellers together for a commission.
CALLABLE BOND: A bond issue in which all or part of its outstanding principal amount
may be redeemed before maturity by the issuer under specified conditions.
CALL PRICE: The price at which an issuer may redeem a bond prior to maturity. The
price is usually at a slight premium to the bond's original issue price to compensate the
holder for loss of income and ownership.
CALL RISK: The risk to a bondholder that a bond may be redeemed prior to maturity.
CERTIFICATE OF DEPOSIT (CD): A deposit insured up to $100,000 by the FDIC at a
set rate for a specified period of time.
COLLATERAL: Securities, evidence of deposit or other property which a borrower
pledges to secure repayment of a loan. Also refers to securities pledged by a bank to
secure deposits of public monies.
COLLATERALIZED MORTGAGE OBLIGATION (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.
COMMERCIAL PAPER: An unsecured promissory note of industrial corporations, utilities
and bank holding companies having assets in excess of $500 million and an "A" or higher
rating for the issuer's debentures. Interest is discounted from par and calculated using
the actual number of days on a 360-day year. The notes are in bearer form, mature from
one to 270 days and generally start at $100,000. There is a secondary market for
commercial paper and an investor may sell them prior to maturity. Unused lines of credit
back commercial paper from major banks.
COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR): The official annual
financial report for the City. It includes combined statements and basic financial
statements for each individual fund and account group prepared in conformity with
Generally Accepted Accounting Principles (GAAP). Supplemental information is also
included including a detailed multi-year comparative statistics.
COST YIELD: The annual income from an investment divided by the purchase cost.
Because it does not give effect to premiums and discounts which may have been included
in the purchase cost, it is an incomplete measure of return.
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COUPON: (a) The annual rate of interest that a bond's issuer promises to pay the
bondholder on the bond's face value. (b) A certificate attached to a bond evidencing
interest due on a payment date.
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.
CURRENT YIELD: The interest paid on an investment expressed as a percentage of the
current price of the security.
CUSTODY: A banking service that provides safekeeping for the individual securities in a
customer's investment portfolio under a written agreement which also calls for the bank
to collect and pay out income, and to buy, sell, receive and deliver securities when ordered
to do so by the account holder.
DEALER: A dealer, as opposed to a broker, acts as a principal in all transactions, buying
and selling for his own account.
DEBENTURE: A bond secured only by the general credit of the issuer.
DELIVERY VERSUS PAYMENT (DVP): Delivery versus payment is delivery of securities
with an exchange of money for the securities.
DERIVATIVES: (1) Financial instruments whose return profile is linked to, or derived from,
the movement of one or more underlying index or security, and may include a leveraging
factor, or (2) financial contracts based upon notional amounts whose value is derived from
an underlying index or security (interest rates, foreign exchange rates, equities or
commodities).
DISCOUNT: The difference between the cost price of a security and its value at maturity
when quoted at lower than face value.
DISCOUNT SECURITIES: Non-interest-bearing money market instruments that are
issued a discount and redeemed at maturity for full face value, e.g., U.S. Treasury Bills.
DIVERSIFICATION: Dividing investment funds among a variety of securities offering
independent returns.
DURATION: A measure of the timing of the cash flows, such as the interest payments
and the principal repayment, to be received from a given fixed-income security. This
calculation is based on three variables: term to maturity, coupon rate, and yield to maturity.
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The duration of a security is a useful indicator of its price volatility for given changes in
interest rates.
FEDERAL CREDIT AGENCIES: Agencies of the Federal government set up to supply
credit to various classes of institutions and individuals, e.g., S&L's, small business firms,
students, farmers, farm cooperatives, and exporters.
FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC): A federal agency that
insures bank deposits, currently up to $100,000 per deposit.
FEDERAL FUNDS RATE: The rate of interest at which Fed funds are traded. This rate is
currently pegged by the Federal Reserve through open-market operations.
FEDERAL HOME LOAN BANKS (FHLB): Government sponsored wholesale banks
(currently 12 regional banks) which lend funds and provide correspondent banking
services to member commercial banks, thrift institutions, credit unions and insurance
companies.
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA or Fannie Mae): FNMA,
like GNMA was chartered under the Federal National Mortgage Association Act in 1938.
FNMA is a federal corporation working under the auspices of the Department of Housing
and Urban Development (HUD). The corporation is called, is a private stockholder-owned
corporation. The corporation's purchases include a variety of adjustable mortgages and
second loans, in addition to fixed-rate mortgages.
FEDERAL OPEN MARKET COMMITTEE (FOMC): Consists of seven members of the
Federal Reserve Board and five of the twelve Federal Reserve Bank Presidents. The
President of the New York Federal Reserve Bank is a permanent member, while the other
Presidents serve on a rotating basis. The Committee periodically meets to set Federal
Reserve guidelines regarding purchases and sales of Government Securities in the open
market as a means of influencing the volume of bank credit and money.
FEDERAL RESERVE SYSTEM: The central bank of the United States created by
Congress and consisting of a seven-member Board of Governors in Washington, D.C.,
12 regional banks and about 5,700 commercial banks that are members of the system.
FED WIRE: A wire transmission service established by the Federal Reserve Bank to
facilitate the transfer of funds through debits and credits of funds between participants
within the Fed system.
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC or Freddie Mac): A
United States government sponsored corporation.
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GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA or Ginnie Mae):
Securities influencing the volume of bank credit guaranteed by GNMA and issued by
mortgage bankers, commercial banks, savings and loan associations, and other
institutions. Security holder is protected by full faith and credit of the U.S. Government.
Ginnie Mae securities are backed by the FHA, VA or FmHA mortgages. The term "pass-
throughs" is often used to describe Ginnie Maes.
HAIRCUT: The margin or difference between the actual market value of a security and
the value assessed by the lending side of a transaction (i.e. a repo).
INTEREST RATE: The annual yield earned on an investment, expressed as a
percentage.
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: Refers to the ability to easily and rapidly convert a security into cash.
LOCAL AGENCY INVESTMENT FUND (LAIF): The local Agency Investment Fund
(LAIF) is a special fund in the California State Treasury created and governed pursuant
to Government Code Sections 16429.1 et seq. There are limits on the maximum dollars
deposited by a city as well as the number of transactions allowed each month.
LOCAL GOVERNMENT INVESTMENT POOL (LGIP): The aggregate of all funds from
political subdivisions that are placed in custody of the State Treasurer for investment and
reinvestment.
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 is trading and could presumably be
purchased or sold on a specific date.
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MARKING TO MARKET: The process of posting current market values for securities in
a portfolio.
MATURITY: The date upon which the principal or stated value of an investment becomes
due and payable.
MEDIUM TERM NOTES (MTNs): 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: Mutual funds that invest solely in money market
instruments (short- term debt instruments, such as Treasury bills, commercial paper,
bankers' acceptances, and federal funds).
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 associated with investing in mutual funds are higher than
the investor can obtain through an individually managed portfolio.
NATIONAL ASSOCIATION OF SECURITIES DEALERS (NASD): A self-regulatory
organization (SRO) of brokers and dealers in the over-the-counter securities business. Its
regulatory mandate includes authority over firms that distribute mutual fund shares as
well as other securities.
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NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATIONS (NSROs );
Credit rating agencies whose ratings are permitted to be used for regulatory purposes
such as those imposed by the Securities and Exchange Commission.
NEGOTIABLE CERTIFICATE OF DEPOSIT: A large denomination certificate of deposit
which can be sold in the open market prior to maturity.
NEW ISSUE: Term used when a security is originally "brought" to market.
OFFER: The price asked by a seller of securities. (When you are buying securities, you
ask for an offer.) See Asked and Bid.
OPEN MARKET OPERATIONS: Purchases and sales of government and certain other
securities in the open market by the New York Federal Reserve Bank as directed by the
FOMC in order to influence the volume of money and credit in the economy. Purchases
inject reserves into the bank system and stimulate growth of money and credit; sales have
the opposite effect. Open market operations are the Federal Reserve' s most important
and most flexible monetary policy tool.
PORTFOLIO: Collection of securities held by an investor.
PREMIUM: The amount by which the price paid for a security exceeds the security's par
value.
PREPAYMENT SPEED: A measure of how quickly principal is repaid to investors in
mortgage securities.
PREPAYMENT WINDOW: The time period over which principal repayments will be
received on mortgage securities at a specified prepayment speed.
PRIMARY DEALER: A group of government securities dealers who submit daily reports
of market activity and positions and monthly financial statements to the Federal Reserve
Bank of New York and are subject to its informal oversight. Primary dealers include
Securities and Exchange Commission (SEC)-registered securities broker-dealers, banks,
and a few unregulated firms.
PRINCIPAL: The face value or par value of a debt instrument, or the amount of capital
invested in a given security.
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
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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."
PURCHASE DATE: The date on which a security is purchased for settlement on that or
a later date.
RATE OF RETURN: The yield obtainable on a security based on its purchase price or its
current market price. This may be the amortized yield to maturity on a bond or the current
income return.
REALIZED YIELD: The change in value of the portfolio due to interest received and
interest earned and realized gains and losses. It does not give effect to changes in market
value on securities, which have not been sold from the portfolio.
REGIONAL DEALER: A financial intermediary that buys and sells securities for the
benefit of its customers without maintaining substantial inventories of securities and that
is not a primary dealer.
REPURCHASE AGREEMENT (RP OR REPO): A holder of securities sells these
securities to an investor with an agreement to repurchase them at a fixed price on a fixed
date. The security "buyer" in effect lends the "seller" money for the period of the
agreement, and the terms of the agreement are structured to compensate him for this.
RULE 2a-7 OF THE INVESTMENT COMPANY ACT: Applies to all money market mutual
funds and mandates such funds to maintain certain standards, including a 13- month
maturity limit and a 90-day average maturity on investments, to help maintain a constant
net asset value of one dollar ($1.00).
SAFEKEEPING: See CUSTODY.
SECONDARY MARKET: A market made for the purchase and sale of outstanding issues
following the initial distribution.
SECURITIES & EXCHANGE COMMISSION: Agency created by Congress to protect
investors m securities transactions by administering securities legislation.
SETTLEMENT DATE: The date on which a trade is cleared by delivery of securities
against funds.
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
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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.
TENNESSEE VALLEY AUTHORITY (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.
TIME CERTIFICATE OF DEPOSIT: A non-negotiable certificate of deposit which cannot
be sold prior to maturity.
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: A non-interest-bearing discount security issued by the U.S. Treasury
to finance the national debt. Most bills are issued to mature in three months, six months,
or one year and are sold on a discount basis.
TREASURY BONDS: Long-term coupon-bearing U.S. Treasury securities issued
as direct obligations of the U.S. Government and having initial maturities of more than 10
years.
TREASURY NOTES: Medium-term coupon-bearing U.S. Treasury securities issued as
direct obligations of the U.S. Government and having initial maturities of I to 10 years.
U.S. GOVERNMENT AGENCIES: Instruments issued by various US Government
Agencies most of which are secured only by the credit worthiness of the particular agency.
VOLATILITY: The rate at which security prices change with changes in general economic
conditions or the general level of interest rates.
WEIGHTED AVERAGE MATURITY (WAM): The average maturity of all the securities
that comprise a portfolio that is typically expressed in days or years.
YIELD: The rate of annual income return on an investment, expressed as a percentage.
It is obtained by dividing the current dollar income by the current market price of the
security.
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YIELD TO MATURITY: The rate of income return on an investment, minus any premium
or plus any discount, with the adjustment spread over the period from the date of purchase
to the date of maturity of the bond, expressed as a percentage.
YIELD CURVE: The yield on bonds, notes or bills of the same type and credit risk at a
specific date for maturities up to thirty years.
ZERO-COUPON SECURITY: Security that is issued at a discount and makes no periodic
interest payments. The rate of return consists of a gradual accretion of the principal of the
security and is payable at par upon maturity.
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STAFF REPORT
Finance and Investment Committee
Page 1 of 9
Agenda Item 2.2
DATE: June 2, 2025
TO: Honorable Committee Members
FROM: Colleen Tribby, City Manager
SUBJECT: Proposed Updates to the City’s Investment Policy
Prepared by: Jay Baksa, Finance Director
EXECUTIVE SUMMARY:
The Finance and Investment Committee (FIC) will receive a report on the City’s Investment
Policy, including a recommendation on how socially responsible investing (SRI) and
environmental, social, and governance (ESG) principles may be incorporated therein. The FIC
will also receive information on the Boycott, Divestment, Sanctions (BDS) movement and
related actions taken by other agencies in their investment policies.
STAFF RECOMMENDATION:
Receive the report and provide direction on proposed amendments to the City’s Investment
Policy and practice, including: expanding the list of prohibited investments; citing the City’s
Mission, Vision, and Values; and implementing ESG integration; or, provide alternative
direction. The final Investment Policy will be brought to the City Council for approval.
FINANCIAL IMPACT:
Should the City add ESG integration into its asset management service, the estimated cost
would be one basis point (0.01%) of the portfolio’s market value, or approximately $31,000
annually.
DESCRIPTION:
At the February 10, 2025 meeting, the Finance and Investment Committee (FIC) received a
presentation from the City’s investment manager, Chandler Asset Management Inc., on
socially responsible investing (SRI) and environmental, social, and governance (ESG)
principles. The FIC asked Staff to provide more research on ESG scoring and to research the
Boycott, Divestment, Sanctions (BDS) movement and how it compares to SRI and ESG
principles.
At the April 14, 2025 meeting, the FIC received a presentation from Chandler that provided a
Attachment 4
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more in-depth review of how ESG scoring is currently used. Staff also described the
challenges in using BDS as an investment filter. Following the discussion, the FIC requested
Staff bring back proposed language to be added to the Investment Policy that addresses
socially responsible aspects of investing and reflects the prohibition of certain investments that
do not align with the community’s core values.
This report presents Staff’s additional research into SRI, ESG, and BDS, along with
recommendations for the FIC that balance the desire to align the City’s investing practices with
ethical and moral principles, while maintaining sound stewardship of the City’s portfolio.
Socially Responsible Investing (SRI)
SRI is an investment strategy that seeks to generate financial returns while also considering
social, environmental, and ethical factors. The two key components of SRI as an investment
tool are:
1.Negative Screening – Excluding companies or industries that conflict with certain
values.
As an example, the City’s Investment Policy currently includes prohibitions on
investing in fossil fuel companies, tobacco or tobacco-related companies, and
companies in support of the production of firearms.
2.Positive Screening – Actively investing in companies with strong socially responsible
performance (e.g., clean energy, fair labor practices).
The City currently does not have a positive screening policy or practice in place.
Environmental, Social, and Governance (ESG)
ESG investing is a more nuanced investment approach that incorporates non-financial factors,
specifically environmental, social, and governance criteria , into the analysis and selection of
investments. The goal is to better understand risks and opportunities that may not be visible
through traditional financial analysis alone. Broadly speaking, ESG components are as follows:
Environmental (E): Climate change, carbon emissions, resource use, pollution, and
sustainability practices.
Social (S): Labor practices, diversity and inclusion, community impact, data privacy,
and customer treatment.
Governance (G): Board structure, executive pay, shareholder rights, transparency, and
ethical investments.
The most important part of ESG investing is establishing how to utilize an ESG score.
Chandler currently employs an ESG screening tool internally on all portfolios they manage,
including Dublin’s, as part of its investment process.1 Through this tool, Chandler evaluates the
1 Three major providers dominate the ESG scoring landscape: S&P Global, MSCI, and
Sustainalytics (Morningstar). While their methodologies often overlap in broad themes, the
specific criteria, weighting, and scoring mechanisms vary and are largely proprietary. Chandler
currently uses S&P Global for its ESG scoring. A discussion of all three providers, as well as
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ESG scores of all potential investments relative to their peer groups. These scores are one of
several factors incorporated into a broader matrix used to assess overall investment suitability.
For example, right now, a company like Berkshire Hathaway—despite having a relatively low
ESG score—may still be deemed suitable for investment if, from Chandler’s perspective, other
financial and risk-based factors support the decision.
The City does not currently have access to the ESG scores of individual investments, nor does
it place primary weight on ESG scores or set any score thresholds that would trigger a
restriction. There are, however, two other ways to incorporate ESG criteria into a portfolio that
would provide an enhanced level of scrutiny:
1.Establish Investment-Level ESG Thresholds. One approach is to set a minimum
ESG threshold for individual investments. For example, an investment may only be
considered eligible if it ranks in the top 50% of ESG scores, either overall or within its
specific sector. This approach recognizes the sector-specific nature of ESG scoring—
where, for instance, a company with a score of 44 out of 100 may appear low in an
absolute sense but still rank highest among peers within its sector (e.g., industrial
materials). Thresholds can be customized to reflect either cross -sector benchmarks or
sector-relative performance.
2.Evaluate ESG at the Portfolio Level. Alternatively, the City may choose to assess
ESG performance at the portfolio level, rather than at the level of individual investments.
This method focuses on the aggregate ESG characteristics of the entire investment
portfolio, allowing for a more balanced approach that accommodates variation among
individual holdings while still maintaining an overall commitment to ESG principles.
If the City were to engage Chandler in an enhanced level of ESG scoring and reporting (herein
referred to as ESG integration), then Berkshire Hathaway from the example above could
potentially no longer be an eligible investment. The FIC could recommend a threshold and a
methodology for reviewing investment scores to determine their suitability.
Divestment Movements and Considerations
At the City Council meeting on September 17, 2024, and on several other occasions
throughout the past year including the April 14, 2025 meeting of the FIC, some members of the
public have advocated for the incorporation of boycott and divestment language into the City’s
Investment Policy. Specifically, requests have been made to divest from certai n holdings
identified on a divestment list created by the BDS movement. Other community members have
reached out in opposition to using BDS as an investment filter.
In addition, Staff was made aware of a similar divestment list published by the American
Friends Service Committee (AFSC). This list also calls for the divestment of companies that
supply weapons and military equipment to Israel and is aligned in intent with the BDS
movement’s objectives.
ESG criteria for three representative sectors, is included in Attachment 1.
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The following is a summary of the BDS and AFSC efforts, along with a report on local and
state actions related to BDS, and finally a discussion of Assembly Bill 2844 (2016), which has
some legal implications for agencies engaged in boycott or divestment activities.
Boycott, Divestment, Sanctions (BDS)
The BDS movement is a Palestinian-led movement started in 2005 and aims to pressure Israel
to comply with international law and uphold Palestinian rights through economic, cultural, and
political means. Currently, the BDS movement is continuing its campaign to ap ply economic
and political pressure on Israel to comply with international law and uphold Palestinian rights.
The movement's divestment strategy has evolved to focus on targeting corporations,
institutions, and governments that are perceived to be complicit in Israel's actions in the
occupied Palestinian territories.
Recently, BDS has intensified efforts to pressure companies that provide services or products
to the Israeli military or operate in the occupied territories. Recent targets include:
Microsoft: Added to the boycott list in April 2025 due to its Azure cloud and AI services
allegedly supporting Israeli military operations in Gaza.
Disney: Criticized for alleged support of Israeli actions against Palestinians, leading to
calls for boycotts.
Additionally, the movement has seen increased support from academic institutions and unions:
City University of New York (CUNY): The professors' union approved a resolution
supporting divestment from Israeli companies and government bonds by January 2026.
University Protests: Students at various universities, including Columbia, have
demanded that their institutions sever financial ties with companies involved in the
conflict, such as Microsoft, Google, and Amazon.
As of the date of this report, the City of Dublin’s investment portfolio contains one investment
that is listed by BDS as a boycott/divestment target, which is Caterpillar.
American Friends Service Committee (AFSC)
AFSC is a Quaker-founded organization established in 1917, with a longstanding mission to
promote peace, justice, and human rights globally. In recent years, AFSC has become an
active advocate for Palestinian rights and has engaged in various initiatives, including
investment screening and divestment campaigns.
AFSC maintains a formal divestment list as part of its broader Investigate project. This initiative
highlights publicly traded companies that, in AFSC’s assessment, are complicit in human rights
violations—particularly those associated with the Israeli occupation of Palestinian territories.
Companies included on the divestment list are identified based on their direct involvement in
activities that allegedly support or sustain such violations.
In addition to concerns related to Israel and Palestine, AFSC’s divestment list is developed
using a broader human rights screening process. This process includes companies involved in
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mass incarceration, border militarization, immigrant surveillance, and deportation systems. The
Investigate project is intended to help individuals and institutions align investment decisions
with ethical and human rights considerations.
AFSC has also released a separate report titled “Companies Profiting from the Gaza
Genocide,” which lists entities alleged to have provided Israel with weapons and militar y
equipment. However, AFSC has stated that this report is not intended to serve as a boycott or
divestment list. The organization’s official divestment recommendations remain limited to those
companies screened through its formal human rights criteria.
As of the date of this report, the City of Dublin’s investment portfolio contains two investments
that are listed by AFSC as boycott/divestment target s – Honeywell International and
Caterpillar.
Bay Area Jurisdiction Actions Related to BDS-Aligned Investment Decisions
As discussed during the April 14, 2025 Committee meeting, three Bay Area jurisdictions—
Alameda County, the City of Hayward, and the City of Richmond—have taken actions that
have been described as aligning with the objectives of the BDS movement. These actions vary
in scope and implementation, and in some cases, jurisdictions have clarified that their
decisions are independent of any formal alignment with BDS.
Alameda County. In April 2025 Alameda County Treasurer-Tax Collector Henry Levy,
an independently elected official, announced that the County had sold off most of its
holdings in Caterpillar Inc., with plans to finalize full divestment. In parallel, the Alameda
County Board of Supervisors unanimously voted to develop an Ethical Investment
Policy intended to incorporate human rights and environmental criteria into investment
decision-making. As of the date of this report, it could not be confirmed whether the
Alameda County Investment Policy had been formally amended to reflect this new
framework.
City of Hayward. On January 23, 2024 the Hayward City Council approved a resolution
to initiate divestment from four companies—Caterpillar, Chevron, Hyundai, and Intel—
representing approximately $1.6 million in holdings. This action was taken during a
review of the City’s Investment Policy. Additionally, the Council directed the City’s
Budget and Finance Committee to evaluate and potentially revise the policy to reflect
broader ethical considerations.
However, on January 25, 2024 the City issued a public statement clarifying its position:
“The Hayward City Council voted 4-3 on Tuesday to remove four companies from the
City’s investment portfolio. The action was neither an endorsement of the Boycott,
Divestment, and Sanctions (BDS) movement, nor did it direct staff to align City
investment policy with BDS guidance.”
As of the date of this report, the City of Hayward’s investment policy has not been
formally revised.
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City of Richmond. On April 30, 2024, the Richmond City Council directed staff to
revise the City's investment policy to include new ethical restrictions. During the drafting
process, the proposed restrictions were revised twice to ensure compliance with State
law and best practices established by the California Municipal Treasurers Association.
On April 15, 2025 the Richmond City Council adopted a revised investment policy,
which includes the following prohibitions:
1.Investments in companies that develop or manufacture commodities that facilitate
violence, war, oppression, or apartheid.
2.Investments in companies involved in the development or manufacturing of arms
and weapons.
3.Investments in companies engaged in border control or mass surveillance industries.
4.Investments in companies involved in mass incarceration or detention industries,
including those that utilize prison labor for product manufacturing.
A previously proposed provision—which would have prohibited investments in a
predetermined list of companies alleged to be involved in Israel’s violations of
Palestinian rights—was ultimately removed from the policy due to concerns related to
compliance with State law and professional investment standards.
Opposing Perspectives: Local and State Government Actions Against BDS
In contrast to jurisdictions that have taken actions aligned with the BDS movement, several
local and state governments have explicitly opposed BDS efforts. These actions often
emphasize support for Israel, condemnation of antisemitism, and the reinforcement of anti -
discrimination standards in government contracting and investment.
City of Beverly Hills. The Beverly Hills City Council has taken a strong position against
the BDS movement. It has passed multiple resolutions affirming support for the State of
Israel and denouncing efforts to boycott Israeli businesses and institutions. In response
to an antisemitic attack in the region, the City Council issued a public statement
condemning antisemitism and labeling the BDS movement as “unjustifiable.” The City
Council further emphasized its commitment to opposing all forms of discrimination and
maintaining support for Israel.
State-Level Actions. As of 2025, 38 U.S. states have enacted laws, executive orders,
or resolutions designed to discourage or penalize participation in boycotts against
Israel. These measures often apply to state contracts or public investments and typically
require certification that contractors or vendors are not engaged in such boycotts. Some
states also maintain public lists of entities deemed to be participating in boycott
activities. Examples include:
Texas – In 2017, Texas enacted House Bill 89, which prohibits the state from
entering into contracts with companies that boycott Israel.
Arkansas – Also in 2017, Arkansas implemented Act 710, requiring public entities to
refrain from contracting with or investing in companies that boycott Israel.
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These state-level actions reflect a broader national trend of legislating against economic
discrimination based on national origin, particularly in relation to Israel.
Assembly Bill 2844 (AB 2844) – State Contracting and Anti-Discrimination Compliance
In September 2016, the State of California enacted AB 2844, which imposes specific
requirements on individuals and entities entering into or renewing contracts with the State
valued at $100,000 or more. Under AB 2844, prospective contractors must certify, u nder
penalty of perjury, that:
1.They are in compliance with the Unruh Civil Rights Act and the Fair Employment and
Housing Act (FEHA), which prohibit discrimination in employment, housing, and public
accommodations based on protected characteristics, including race, religion, and
national origin; and
2.Any policy they maintain regarding a sovereign nation or its people recognized by the
U.S. government—including, but not limited to, Israel—is not used to unlawfully
discriminate in violation of the Unruh Act or FEHA.
It is important to note that divestment from Israel is not, in itself, a violation of AB 2844. The
law does not prohibit divestment activities; rather, it requires that such activities result in
unlawful discrimination, and that entities certify compliance with California’s anti-discrimination
laws. However, AB 2844’s certification requirement —made under penalty of perjury—may
subject organizations engaged in boycott or divestment activities (such as those aligned with
BDS or AFSC campaigns) to increased legal scrutiny.
Conclusion and Staff Recommendation
There has been a significant amount of community interest in the topics presented in this Staff
Report, particularly from individuals and groups who have strong positions on the Israeli-
Palestine conflict and BDS. While some of the principles promoted by the BDS movement
include elements consistent with more general ESG filters, Staff does not recommend aligning
the City’s Investment Policy with the platform of any specific advocacy group . Instead, policy
updates should be guided by the City’s core values, which align more with the guidelines of
SRI and ESG.
Therefore, Staff recommends a three-pronged approach to revising the City’s Investment
Policy and practice: 1) Expand the list of prohibited investments via SRI Negative Screening;
2) Add language in the Policy that ties investments to the City’s Mission, Vision, and Values;
and 3) Implement ESG integration. This approach balances ethical investment restrictions with
enhanced portfolio evaluation tools to support long-term sustainability and alignment with City
values. Recommended actions are detailed as follows:
1. SRI Enhancements
Staff recommends expanding the list of prohibited investment categories in “Section XI:
Prohibited Investment Practices and Instruments” of the City’s Investment Policy. Rather than
identifying individual companies, restrictions will focus on entire sectors deemed inconsistent
with the City’s social and ethical priorities.
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Recommended language to add to Section XI:
The City also prohibits investments in any of the following:
Fossil fuel companies.
Tobacco and tobacco-related companies.
Companies supporting the production of firearms.
(New) Companies that develop or manufacture commodities that facilitate violence or
war.
(New) Companies engaged in border or mass surveillance industries.
(New) Companies involved in mass incarceration or detention industries.
If the City adopts the proposed expansion of prohibited investment categories, the only
company currently held in the City’s investment portfolio that could potentially no longer be
eligible for future investment is Honeywell International Inc.
Staff, in collaboration with Chandler, would further review the portfolio to identify any additional
companies affected by the updated policy. Importantly, there would be no cost or loss of
revenue associated with this action, provided the City adheres to the transition provisions
outlined in the Investment Policy. These provisions allow existing non-compliant holdings to be
held until maturity but prohibit reinvestment in those entities thereafter.
2. Incorporation of Mission, Vision, and Values
Staff also recommends citing the City’s Mission, Vision, and Values statements (Attachment
2), either explicitly or by reference, in the Investment Policy. This will not only provide
additional guidance through which investment vehicles could be evaluated but will make a
formal statement tying investment activities to the ethos of the community.
3. ESG Integration and Portfolio Scoring
Finally, Staff recommends that the City formally engage Chandler to implement ESG
integration into its investment management services for Dublin. While Chandler already utilizes
ESG screening tools, using the enhanced scoring integration would require amending the
City’s agreement with the firm.
Estimated Cost. The addition of ESG portfolio scoring and integration services is
estimated at 1 basis point (0.01%) of the portfolio’s market value, or approximately
$31,000 annually.
Implementation Recommendation. Before establishing ESG benchmarks or
exclusions, Staff recommends conducting an initial assessment of the City’s current
portfolio. This would provide a baseline ESG score to help inform future decisions on
how best to incorporate ESG standards into the City’s investment strategy. A
presentation of the ESG scoring results and potential benchmarks could be scheduled
for a future FIC meeting once all relevant data has been received.
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ATTACHMENTS:
1)ESG Rating Providers and Sector-Specific ESG Assessment Criteria
2)City of Dublin Mission, Vision, and Values
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Annual Review of City’s
Investment Policy
September 16, 2025
149
Tonight
•Background
•Update on Finance and Investment Committee
•Review of Investment Policy
•Delegation of Authority to complete investment
transactions
150
Background
•Investment Policy originally adopted in 2007.
•Reviewed annually.
•2nd meeting in September.
•Policy is derived from California Governmental Code,
Sections 53600 et seq.
•Policy can be more restrictive not less.
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Finance and Investment Committee
•Finance and Investment Committee (FIC) established
October 15, 2024.
•Responsible for reviewing and making recommendations
on financial matters.
•Based on community feedback, the FIC conducted a
comprehensive review of the City’s investment policy.
152
Finance and Investment Committee, 2
Investment Policy Review:
•Explored incorporation of adding additional Socially
Responsible Investing (SRI) practices.
•Explored Environmental, Social, and Governance (ESG)
standards.
•Analyzed Boycott, Divestment, Sanctions (BDS) and American
Friends Service Committee (AFSC) movements and related
actions taken by other agencies.
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Finance and Investment Committee, 3
Based on the information presented at meetings the FIC
directed Staff to:
•Draft an updated Investment Policy that clarifies investments
should reflect the City’s Mission, Vision, and Values, and not be
based on other organizations/movements.
•To engage, Chandler Asset Management, to provide an ESG
report annually.
•Review the portfolio annually.
154
Finance and Investment Committee, 4
•Add three business sectors to the Policy’s prohibited
investments list.
•Relocate all existing prohibited investment types into a
dedicated section of the Policy for clarity.
155
Review of Investment,1
Proposed Changes:
Section XI: Prohibited Investment Practices and Instruments
•Added language stating City investments will be guided by
the City’s Mission, Vision, and Values.
•Portfolio will be reviewed annually.
•Prohibited investments updated as needed.
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Review of Investment, 2
Section XI (Con’t)
•Added three new business sectors to list of prohibited
investments to include companies:
•That develop or manufacture commodities that
facilitate violence or war.
•Engaged in border or mass surveillance industries.
•Involved in mass incarceration or detention
industries.
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Review of Investment, 3
Section XI (Con’t)
•Added language that the City’s investment management
consultant will use an industry standard classification system
to identify business sectors to ensures consistency in
evaluating potential exclusions.
Section XIV: Investment Risk
•For clarity and consistency, move three business sectors
previously excluded –from Section XIV (Investment Risk) to
Section XI Prohibited Investment Practices and Instruments.
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Delegation of Authority
•Section IV –Delegation of Authority
•City Council delegates the authority to invest funds for one year
to the Treasurer (Finance Director)/Deputy Treasurer (City
Manager).
•Authority is renewed each year as part of the annual review.
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Staff Recommendation
•Adopt the Approving the Annual Review of the
Statement of Investment Policy and Delegation of Authority
to Complete Investment Transactions.
•Questions?
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