Report Prepared by: Venus Rodriguez, Finance Officer
Title
SUBJECT: Adoption of Resolution Approving an Update to the City’s Investment Policy Which Includes Modifications to Several Areas of the Policy
REPORT IN BRIEF
Considers approving an update to the City’s Investment Policy.
RECOMMENDATION
City Council - Adopt a motion adopting Resolution 2026-55, a Resolution of the City Council of the City of Merced, California, adopting Investment Policy.
Body
ALTERNATIVES
1. Adopt as recommended by staff; or
2. Refer back to staff with specific direction.
AUTHORITY
California Government Code Section 53646, subdivision (a)(2).
CITY COUNCIL PRIORITIES
As provided for in the 2026-27 Adopted Budget.
DISCUSSION
California Government Code Section 53646 states that the Finance Officer may annually render to the legislative body a statement of investment policy, which the legislative body shall consider at a public meeting.
A good investment policy drives the cash, treasury, and investment management functions of an agency. It serves as a guide for setting and achieving program objectives, defines rules and establishes benchmarks, and reduces the exposure to liability of the investment staff and the governing board.
The Investment Policy is reviewed annually per the policy to determine if there should be any necessary or recommended changes that would benefit the City. The last time revisions to the Investment policy were adopted by City Council was in 2021 due to changes per SB998. Every year since there have been no recommended changes to the policy until now. The current revisions being proposed are to incorporate California best practices and to ensure it appropriately embodies the City’s investment objectives, risk profile, and expected outcomes.
Staff are recommending the following revisions to the Investment Policy which includes a brief summary of the change below with the redlined version attached for reference:
• Section 7-Expands institutions eligible to transact investments with the City pursuant to California Government Code Section 53601.5 which provides more flexibility and helps diversify investments.
• Section 8-Language explicitly states that minimum concentration limits apply at the time of purchase which will add another layer of restriction.
• Section 8D-Increases issuer limit for Federal Agencies from 25% to 30% which allows additional investments into a low risk yet high yielding category.
• Section 8I-Adds a section to include local government investment pools organized as joint powers authorities for additional flexibility to diversify the portfolio and is allowed by Government Code Section 6509.7.
• Section 8J-Adds a section to include placement service deposits with some restrictions to reduce risk.
• Section 8M-Extends the provision that 40% commercial paper concentration limits for local governments with $100 million or more from 2026 through 2031 and extends the provision that a maximum maturity does not exceed 397 days from 270 days pursuant to SB595
• Section 9-Extends the provision for zero interest rate securities from 2026 to 2031 pursuant to SB595
• Section 9-Prohibits securities with trade settlement dates longer than 45 days, making this specific helps with reconciliation issues.
• Section 15-Clarifies that maturity is measured from trade settlement date. This specification will also help with reconciliation issues.
IMPACT ON CITY RESOURCES
No appropriation of funds is needed. Allowing flexibility to diversify while including parameters will help City maximize their investment portfolio which could increase investment revenues in the long term.
ATTACHMENTS
1. Current Adopted Investment Policy-Redlined
2. Resolution 2026-55
3. Revised Investment Policy