SR 02-13-2024 5H
City Council
Redevelopment Successor
Agency Report
City Council Meeting: February 13, 2024
Agenda Item: 5.H
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To: Redevelopment Successor Agency, Mayor and City Council
From: Oscar Santiago, Director, Finance Department, Revenue
Subject: Annual Investment Policy Update
Recommended Action
Staff recommends that the City Council:
1. Adopt a finding of no possibility of significant effect pursuant to Section
15061(b)(3) (Common Sense Exemption) of the California Environmental Quality
Act (CEQA) Guidelines.
2. Review and approve the City’s revised Investment Policy.
3. Extend the delegation of investment authority to the Director of Finance, as City
Treasurer, from March 1, 2024 through February 28, 2025.
Staff also recommends that the Redevelopment Successor Agency Governing Board:
1. Adopt a finding of no possibility of significant effect pursuant to Section
15061(b)(3) (Common Sense Exception) of the California Environmental Quality
Act (CEQA) Guidelines.
2. Review and approve the City Investment Policy for Redevelopment Successor
Agency Investments.
3. Extend investment authority to the Treasurer of the Redevelopment Successor
Agency, from March 1, 2024 through February 28, 2025.
Summary
Per State law, the treasurer or chief fiscal officer of a local agency may annually render
an investment policy to its governing body for consideration at a public meeting. While
not required, staff believes that it is important to follow best practices and provide
transparency by submitting the City’s Investment Policy (Attachments 1 and 2) to
Council annually for consideration and approval at a public meeting. The Santa Monica
City Charter designates the Director of Finance (as the City Treasurer) as the custodian
of all public funds. Additionally, State law requires that the Council delegate investment
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authority to the City Treasurer for a one-year period, renewable annually. The current
delegation of authority carries through February 28, 2024.
Discussion
City investments are made only in those instruments specifically authorized by
California State laws, primarily Sections 53601, 16429.1, and 53684 et seq. of the
Government Code. Within these legal guidelines, the three primary objectives of the
City’s Investment Policy and investment practices, in priority order are:
• Safety – Safety of principal is the foremost objective of the City’s investment
program. City investments shall be undertaken in a manner that seeks to ensure
the preservation of capital in the overall portfolio by diversifying its investments
among a variety of securities offering independent returns.
• Liquidity – City investments are kept sufficiently liquid to enable the City to meet
all operating requirements which might be reasonably anticipated by structuring
the portfolio so that securities mature concurrently with anticipated cash needs to
the extent possible. Investments are primarily made in securities with active
secondary or resale markets. Additionally, an adequate liquidity buffer is
maintained for extraordinary circumstances.
• Rate of Return – The City’s investment portfolio is designed with the objective of
attaining a benchmark rate of return throughout budgetary and economic cycles
taking into account safety and liquidity requirements. The benchmark may vary
from time to time depending on the economic and budgetary conditions present.
The City continues to abide by the highest professional standards in the management of
public funds. While the investment strategy is flexible and can change based on market
and economic conditions, the legal and policy guidelines governing these investment
decisions remain relatively static. The City’s Investment Policy also includes socially
responsible investment principles. In addition to following the guidelines previously set
by Council, the City considers Economic, Social, and Governance (ESG) ratings and
performance as well as certain social impact factors when making investment decisions.
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On March 8, 2022, Council directed staff to divest City funds from Russian assets.
The City’s general investment portfolio has no direct investments in Russian
companies and holds no sovereign Russian debt. As of November 30, 2023, the
portfolio does include approximately $58.3 million (book value) in bonds from
corporations that had business relationships in Russia or may have investment
holdings in Russia. Most have announced a termination, suspension, or limitation of
business activity in Russia. Additional detail is included in the April 6, 2022 Information
Item included as an attachment to this report. Sale of all bonds of companies that had
been doing business in Russia would result in a loss of approximately $3.4 million
(based on 11/30/2023 market values), which would cause fiscal harm to the City. The
City’s Russian divestment actions as outlined in the April 6, 2022 Information Item will
remain in place.
On an on-going basis, staff reviews public agency investment best practices and
regulatory or legal changes to ensure City compliance. Effective January 1, 2024, there
were minor changes to the investment policy rules in the Government Code, but these
changes will not have a material impact on City investment practices. Specifically, the
Local Government Omnibus Act of 2023 (SB 882), amended Government Code section
53601 to clarify limitations imposed on public investment in a privately issued mortgage
passthrough security, collateralized mortgage obligation, mortgage-backed or other pay-
through bond, equipment lease-backed certificate, consumer receivable passthrough
certificate, or consumer receivable-backed bond. Santa Monica does not invest in these
securities so there is no impact to current investment procedures.
SB 882 also amended Government Code Section 27000.7 to eliminate one of the
options for a person to demonstrate eligibility to be elected or appointed to the office of
county treasurer, county tax collector, and county treasurer-tax collector. As this
provision relates to counties there is no impact to Santa Monica.
The City can invest up to $75 million per account in the Local Agency Investment
Fund (LAIF), a pooled state fund managed by the Office of the California State
Treasurer. Previously, LAIF accounts were established for both the City and the
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Successor Agency (SA), formerly the Redevelopment Agency (RDA). However, due
to a low balance, the SA LAIF account will be closed in spring 2024 and remaining
funds will be transferred to the SA bank account maintained at Union Bank.
Revisions to City’s Investment Policy
Staff recommends two revisions. The first improves the City’s opportunities with
investments and the second updates the list to include only active Funds:
• Increase the maximum maturity for local agency bonds from 5 years to up to 15
years. This change provides the City with more investment flexibility, the
opportunity for increased yields particularly on longer term investments, and little
to no additional risk.
• Update to Attachment 1-A City of Santa Monica Funds for Cash Pooling to
account for new and closed Funds.
Both revisions have been incorporated into Investment Policy attached to this report.
Environmental Review
The updated investment policy is exempt from CEQA pursuant to Section 15061(b)(3)
of the CEQA Guidelines, which states that CEQA does not apply, “where it can be
seen with certainty that there is no possibility that the activity in question may have a
significant effect on the environment. The policy is administrative in nature. Therefore,
it can be seen with certainty that the agreement would not result in adverse physical
impacts on the environment, and as such, is exempt from CEQA.
Financial Impacts and Budget Actions
There is no immediate financial impact or budget action necessary as a result of the
recommended actions. Staff provides monthly reports to the City Council and the City
Manager describing the present status of City investments and monies held by the City,
as well as summarizing all investment transactions for the month. Interest earnings
from the City’s pooled investment portfolio are allocated to the various City funds based
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upon each fund’s share of total City cash and investments. Projected investment
earnings for each fund are included in the FY 2023-24 Revised Budget.
Prepared By: Stephanie Manglaras, Assistant City Treasurer
Approved
Forwarded to Council
Attachments:
A. Attachment 1 - Annual Update on City Investment Policy-REVISED 2024
B. Attachment 2 - Information Item Russian Divestment
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Revised 2/2024
ATTACHMENT 1
INVESTMENT POLICY FOR THE CITY OF SANTA MONICA
1. POLICY
It is the policy of the City of Santa Monica (City) to invest public funds in a manner
which will safely preserve portfolio principal, provide adequate liquidity to meet the
City’s cash flow needs, and optimize returns while conforming to all federal, state,
and local statutes governing the investment of public funds. Should any applicable
provisions of these statutes change from those included herein, such provision shall
be considered incorporated in the policy. The policy should be submitted to the City
Council annually for review and approval.
2. SCOPE
This investment policy applies to all cash and financial investments of the various
funds of the City of Santa Monica as identified in the City's Annual Financial Report,
with the exception of those financial assets explicitly excluded from coverage by the
Investment Policy for legal or operational reasons. Cemetery and Mausoleum
Perpetual Care Funds are private funds held in trust and managed by the City. These
funds do not fall under the guidelines of the Government Code sections noted in
Section 8.0 of this Policy but are invested by an outside investment manager under
guidelines established by the City Council.
All City funds are listed in Attachment 1-A. The Investment Policy will also apply to
all new funds created unless specifically exempted.
Except as otherwise noted, City funds are pooled for investment purposes.
Investment income will be allocated to the various funds based on their respective
participation and in accordance with generally accepted accounting principles.
Interest is allocated on a quarterly basis.
3. PRUDENCE
All investments and evaluation of investments shall be made with the Prudent
Investor Standard as set forth in California Government Code Section 53600.3.
Investments shall be made with judgment and care, under 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.
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The standard of prudence shall be applied in the context of managing an overall
portfolio. Investment officers 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.
4. INVESTMENT OBJECTIVES
The primary objective of all City investments, in priority order, shall be:
4.1 SAFETY
Safety of principal is the foremost objective of the investment program. City
investments shall be undertaken in a manner that seeks to ensure the
preservation of capital in the overall portfolio. To attain this, the City will diversify
its investments by investing funds in securities of various types and maturity
dates, and from various issuers offering independent returns.
4.2 LIQUIDITY
Liquidity is the ability to change an investment into its cash equivalent on short
notice at its prevailing market value. The City’s investment portfolio shall remain
sufficiently liquid to enable the City to meet all operating requirements which
might be reasonably anticipated. This is accomplished by structuring the
portfolio so that securities mature concurrently with anticipated cash needs.
Since all possible cash demands cannot be anticipated, the portfolio will
maintain a liquidity “buffer” and invest primarily in securities with active
secondary or resale markets.
4.3 RATE OF RETURN
The City’s investment portfolio shall be designed with the objective of attaining
a benchmark rate of return throughout budgetary and economic cycles, taking
into account safety and liquidity requirements. The benchmark may vary from
time to time depending on the economic and budgetary conditions present. At
no time shall funds be invested in any security that could result in zero interest
accrual if held to maturity except as specified in Section 8.2 of this policy.
5. INVESTMENT AUTHORITY DELEGATION
In accordance with the Santa Monica City Charter, Section 711, the City Council
delegates to the City Treasurer the authority to invest City funds. The Director of
Finance, as City Treasurer, delegates this authority to the Assistant City Treasurer.
In the absence of the Director of Finance and the Assistant City Treasurer, the
Treasury Administrator or the Senior Treasury Analyst may execute investment
transactions per instructions from the Director of Finance and/or Assistant City
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Treasurer or per prior written authorization. Section 53607 of the State of California
Government Code limits the authorization of the legislative body to delegate
investment authority to a one- year period, renewable annually.
5.1 INVESTMENT PROCEDURES
The Director of Finance is responsible for conducting and reporting on all City
investments. To facilitate this function, the Director of Finance or their designee
will prepare and maintain an Investment Procedures Manual detailing
procedure for the operation of the investment program consistent with this
policy. The manual should include reference to safekeeping, banking services
contracts, collateral/depository agreements, and repurchase agreements. The
manual shall also include explicit delegation of authority to persons responsible
for investment transactions. No person may engage in investment transactions
except as provided under the terms of this policy and the procedures
established by the Director of Finance. Additionally, the manual will explicitly
include a current listing of all City of Santa Monica financial institution deposit
and investment accounts, a current copy of or link to State laws pertinent to City
investments, a description of specific controls to ensure the proper execution of
the City Investment Policy, and copies, with instructions, of all investment
reports required by law or by City Investment Policy.
5.2 INVESTMENT COMMITTEE
An Investment Committee (the Committee) shall be established consisting of
the City Manager, the Assistant City Manager, the Director of Finance, the
Assistant City Treasurer, one other department head serving one-year terms on
a rotating basis, and one qualified citizen representative, appointed by the City
Manager for a one-year term, who possesses strong skills and knowledge in the
areas of finance and economics. The one-year terms for the citizen
representative and the department head may be extended at the discretion of
the City Manager. The purpose of the Committee is to provide general oversight
and act in an advisory capacity. The Committee will attempt to meet once each
calendar quarter to review and evaluate previous investment activity, to review
the current status of all funds held by the City, to discuss anticipated cash
requirements and investment activity for the next quarter, and to discuss
investment strategy.
6. ETHICS AND CONFLICTS OF INTEREST
The Director of Finance and other employees involved in the investment process
shall refrain from personal business activity that could conflict with proper execution
of the investment program, or which could impair their ability to make impartial
investment decisions. The Director of Finance and other employees involved in the
investment process shall disclose any material interests in financial institutions with
which they conduct business within their jurisdiction, and they shall further disclose
any material personal financial/investment positions that could be related to the
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performance of the City’s investment portfolio and shall refrain from personal
investment transactions with the same individual or firm with whom business is
conducted on behalf of the City.
The Director of Finance and other employees involved in the investment process are
required to file annual disclosure statements as required by the Fair Political
Practices Commission. During the course of the year, if there is an event subject to
disclosure that could impair the ability of the Director of Finance or investment
employees to make impartial decisions, the City Council will be notified in writing
within ten (10) days of the event.
7. AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS
The City shall transact business only with issuers, banks, savings and loans, and
registered securities dealers. The purchase of any investment, other than those
purchased directly from the issuer, shall be purchased from either an institution
licensed by the State as a broker/dealer as defined in Section 25004 of the
Corporation Code, who is a member of FINRA (Financial Industry Regulatory
Authority), or a member of a federally regulated securities exchange, a national or
state chartered bank, a federal or state association (as defined by Section 5102 of
the Financial Code), or a brokerage firm designated as a primary dealer by the
Federal Reserve Bank.
The Director of Finance’s staff shall periodically conduct a “Request for
Qualifications” process to investigate broker/dealers that wish to do business with
the City. All institutions that desire to become a broker/dealer for the City must
complete the City’s “Broker/Dealer Request for Information” and “Broker/Dealer
Certification”. Staff will evaluate broker dealers based on the qualifications of the firm
and the individual broker(s) assigned to the City. The evaluation will be based on
experience of the broker in servicing public fund investment portfolios, market
capitalization of the firm, the brokers’ ability to access markets in securities
appropriate to the City’s needs, and the brokers’ agreement to abide by the City’s
Investment Policy. Selection as an approved broker/dealer does not guarantee that
the firm will conduct any investment transactions with the City
The Director of Finance shall conduct periodic reviews of the financial condition and
other qualifications of all approved financial institutions and broker/dealers to
determine if they continue to meet the City’s guidelines for qualification as defined in
this section. Additionally, the City shall keep the current audited financial statements
on file for each approved financial institution and broker/dealer with which the City
conducts investment transactions. A listing of websites where these financial
statements may be viewed may substitute for physical hard copies of the statements.
8. AUTHORIZED AND SUITABLE INVESTMENTS
Investments shall be made only in those instruments specifically authorized by
California State laws, primarily Sections 53601, 53601.6, 53601.8, 16429.1, and
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53684 et seq. of the Government Code and to no greater an extent than
authorized by those laws. These laws are summarized in Attachment 1-B.
Additional City guidelines are as follows:
Instruments Additional City Guidelines
U.S. Federal Agencies No more than 50% of portfolio, per agency
Banker's Acceptances (BA) Maximum of 10% of portfolio per issuer
Negotiable Certificates of Deposit Maximum of 10% of portfolio per issuer
(NCD)
Commercial Paper (CP) Maximum of 25% of portfolio
It is recognized that legal or other events may occur that could require exceptions
to certain guidelines. The percentages listed in the above guidelines are based on
book value of the portfolio at the time of purchase.
In addition to following all legal guidelines, the portfolio will preserve principal,
maintain adequate liquidity to meet all City obligations, contain an appropriate level
of interest rate risk, and be diversified across types of investments, maturities, and
institutions to minimize credit risk and maintain an appropriate return.
8.1 REPURCHASE AGREEMENTS
Investments in repurchase agreements are allowable and shall be made only
with financial institutions with which the City has an executed master
repurchase agreement. The financial institution must be a primary dealer of
the Federal Reserve Bank of New York.
8.2 PROHIBITED INVESTMENTS AND TRANSACTIONS
a) Prohibited investments include inverse floaters, range notes, interest only
strips derived from a pool of mortgages (collateralized mortgage
obligations), and any security that could result in zero interest accrual if
held to maturity, as specified in Section 53601.6.
b) Notwithstanding the prohibition in paragraph (a), the City may invest in
securities issued by, or backed by, the United States government that
could result in zero- or negative-interest accrual if held to maturity, in the
event of, and for the duration of, a period of negative market interest rates.
This shall remain in effect only until January 1, 2026.
8.3 INVESTMENTS H EL D AND/OR MANAGED BY FISCAL AGENTS
A N D TRUSTEES
In addition, the main pooled portfolio, the City may hold and invest certain
other funds that are restricted as to use. One example is bond proceeds held
by fiscal agents. Investments of bond or loan proceeds will be made in
accordance with Government Code Section 53601 (m), which states that
money from bond proceeds should be invested as specified by bond
documents, and in accordance with specific bond covenants. In most cases
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these investments will be made under the same guidelines as other City
investments. Another example is funds received from legal settlements that
are restricted for a certain purpose, which will be invested in accordance with
legal or escrow agreements that may be more restrictive than the City’s
Investment Policy.
As noted previously in this Policy, Cemetery and Mausoleum Perpetual Care
Funds are private funds held in trust by the City. These funds are invested
by an outside investment manager under guidelines adopted by the City
Council and do not fall under the guidelines of the Government Code sections
noted in Section 8.0 of this Policy. The Director of Finance’s staff monitors
all investment activity of these funds to ensure guidelines are followed.
9. INVESTMENT POOLS/MUTUAL FUNDS
A thorough investigation of any pooled investment funds, including mutual funds, is
required prior to investing, and on a continual basis. To accomplish this, a
questionnaire will be used to evaluate the suitability of the pooled fund. The
questionnaire will answer the following general questions:
• A description of eligible investment securities, and a written statement of
investment policies and objectives.
• A description of interest calculations and how it is distributed, and how gains and
losses are treated.
• A description of how the securities are safeguarded (including the settlement
processes), and how often the securities are priced and the program audited.
• A description of who may invest in the program, how often, and what size deposit
and withdrawal are allowed.
• A schedule for receiving statements and portfolio listings.
• Are reserves, retained earnings, etc., utilized by the pool/fund?
• A fee schedule, and when and how fees are assessed.
• Is the pool/fund eligible for bond proceeds and/or will it accept such proceeds?
For mutual funds, a fund prospectus can substitute for the questionnaire.
10. COLLATERALIZATION
California Government Code Sections 53652, et seq. requires depositories to post
certain types of collateral for public funds above the Federal Deposit Insurance
Corporation (FDIC) insurance amounts. The collateral requirements apply to bank
deposits, both active (checking and savings accounts) and inactive (non-negotiable
certificates of deposit).
Collateralization is also required for repurchase agreements. In order to anticipate
market changes and provide a level of security for all funds, the collateralization level
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will be 102% of the market value of principal and accrued interest, and the value shall
be adjusted no less than quarterly. Collateral will be in the form of U.S. Treasury
Obligations or U.S. Agency Securities.
Collateral will always be held by an independent third party with whom the entity has
a current custodial arrangement. A clearly marked evidence of ownership
(safekeeping receipt) must be available to be supplied to the City, if requested, and
retained. The right of collateral substitution is granted.
11. SAFEKEEPING AND CUSTODY
In accordance with California Government Code Section 53601, all securities owned
by the City shall be held in safekeeping by the City’s custodial bank or a third-party
bank trust department, acting as an agent for the City under terms of the custody
agreement. Collateral for repurchase agreements will be held by a third-party
custodian under terms of the Master Repurchase Agreement.
All securities will be received and delivered using a delivery vs. payment (DVP) basis,
which ensures that securities are deposited with the third-party custodian prior to the
release of funds. Securities held by the third-party custodian will be evidenced by
safekeeping receipts and/or bank statements. Investments in the State Local Agency
Investment Fund (LAIF) or money market mutual funds are undeliverable and are not
subject to delivery or third-party safekeeping.
Investment trades shall be verified against bank transactions and broker confirmation
tickets. On a monthly basis, the custodial asset statement shall be reconciled
with the month-end portfolio holdings.
12. DIVERSIFICATION
The City will diversify its investments by security type, institution, and maturity date.
Concentration limits are set by the State Government Code (see Attachment B) and
Section 8.0 (Authorized and Suitable Investments) of this policy.
13. MAXIMUM MATURITIES
To the extent possible, the City will attempt to match its investments with anticipated
cash flow requirements. Most investments will be made in securities with a term
remaining to maturity of five years or less. However, on February 22, 2022, the City
Council granted authority to invest in securities with a remaining term in excess of
five years as part of the City’s overall investment program. Per that authorization, up
to 15% of the portfolio value may be invested in U.S. government, Federal Agency,
or local agency securities with remaining maturities at the time of purchase between
five and fifteen years. Per State law, the settlement date of the investment purchase
is considered the start date of the remaining term to maturity.Further maturity limitations
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per State Code are shown in Attachment B. The weighted average maturity of the
investment portfolio should be three years or less.
In order to minimize the impact of market risk, most investments will be purchased
with the intent to hold to maturity. Investments may be sold prior to maturity for cash
flow needs, portfolio rebalancing and/or appreciation purposes, or in order to mitigate
portfolio risk by limiting potential losses. However, no investment shall be made
based solely on earnings anticipated from capital gains. Due to the uncertain nature
of cash flow requirements, a portion of the portfolio should be continually invested in
readily available funds.
14. INTERNAL CONTROLS
The Director of Finance shall be responsible for ensuring that all investment
transactions comply with the City’s Investment Policy and for establishing internal
controls that are designed to prevent losses due to fraud, negligence, and third-party
misrepresentation.
The Director of Finance will also establish internal control procedures addressing
wire transfer controls, separation of duties and administrative controls, avoidance of
collusion, separation of transaction authority from accounting procedures,
documentation of investment transactions, and monitoring of results.
As part of its annual audit of the City, the City’s external auditor will review
compliance with statutes, policies, and procedures.
15. PERFORMANCE STANDARDS
The portfolio shall be designed with the objective of obtaining a rate of return
throughout budgetary and economic cycles, commensurate with investment risk
constraints and cash flow needs.
15.1 MARKET YIELD (Benchmark)
The City’s overall investment strategy is passive. Given this strategy, the
basis used by the Director of Finance to determine whether appropriate and
suitable market yields are being achieved shall be to identify a comparable
benchmark to the portfolio’s investment duration, e.g., the Constant Maturing
Two Year Treasury bill index. Benchmarks may change over time depending
on the portfolio’s duration.
16. REPORTING
In accordance with State law and the City Charter, monthly reports will be made to
the City Council and the City Manager describing the present status of City
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investments and monies held by the City, as well as summarizing all investment
transactions for the month. Schedules in the monthly report should include the
following:
• A complete list of investments including the type of the investment, name of the
issuer, maturity date, par value, book value, and market value
• The source of market value data
• The weighted average maturity and yield to maturity of the portfolio
• Coupon, discount, or earnings rate for each security
• Percentage of portfolio represented by each investment category
• A certification of compliance with the Investment Policy
• A statement denoting the City’s ability to meet its anticipated expenditures
requirements for the next six months
• Benchmark comparison
Records of all investment transactions will be kept and filed in the Finance
Department in accordance with legal guidelines and records retention policies.
17. SOCIALLY RESPONSIBLE INVESTING
RESTRICTIONS – The direct investment of City funds are restricted as follows:
a. Investments should be made in entities that support clean and healthy
environment, including following safe and environmentally sound practices.
b. No investments will be made in fossil fuel companies as defined by “The Carbon
Underground 200” list maintained and published by the organization FFI Solutions
or in banking institutions that provide financing to said companies.
c. No investments are to be made in tobacco or tobacco-related products.
d. No investments are to be made to support the production of weapons, military
systems, or nuclear power.
e. Investments should be made in entities that support equality of rights regardless
of sex, race, age, disability or sexual orientation.
f. Investments should be made in entities that promote community economic
development.
Funds invested with a trustee and/or outside investment managers such as the
Cemetery and Mausoleum Perpetual Care Funds will comply with this section of the
policy.
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18. COMMUNITY REINVESTMENT ACT (CRA)
The City will deposit funds only in those financial institutions, which have a CRA
rating (as determined by the appropriate regulatory body) of "Outstanding" or
"Satisfactory".
19. INVESTMENT POLICY ADOPTION
The City’s investment policy shall be reviewed and adopted by the City Council
annually. The Investment Committee will review the policy periodically to ensure its
consistency with the overall objectives of preservation of principal, liquidity, and
return, and its conformance with current law, financial and economic trends, and cash
flow needs of the City.
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ATTACHMENT 1-A
City of Santa Monica Funds for Cash Pooling
The following listed City of Santa Monica funds shall have their cash balances
pooled for investment purposes.
FUND
NUMBER
FUND NAME
1 GENERAL FUND
10 SPECIAL REVENUE SOURCE FUND
11 BEACH RECREATION FUND
12 HOUSING AUTHORITY FUND
14 TENANT OWNERSHIP RIGHTS CHARTER AMENDMENT
16 CLEAN BEACHES AND OCEAN PARK PARCEL TAX FUND
17 TRAFFIC SAFETY FUND
18 SCAQMD AB2766 FUND
19 COMMUNITY DEVELOPMENT BLOCK GRANT (CBDG) FUND
20 MISCELLANEOUS GRANTS FUND
21 ASSET SEIZURE FUND
22 CITIZENS OPTION FOR PUBLIC SAFETY FUND
25 RENT CONTROL FUND
26 GAS TAX FUND
27 LOCAL RETURN FUND
28 PARKS AND RECREATION FACILITIES FUND
29 MEASURE GS FUND
41 LOW/MODERATE INCOME HOUSING ASSET FUND
50 WATER FUND
51 WASTEWATER FUND
52 STORMWATER MANAGEMENT FUND
53 PIER FUND
54 RESOURCE RECOVERY & RECYCLING FUND
57 AIRPORT FUND
59 CEMETERY FUND
60 BIG BLUE BUS FUND
61 PARKING AUTHORITY FUND
70 VEHICLE MANAGEMENT FUND
71 INFORMATION TECHNOLOGY REPLACEMENT & SERVICES FUND
72 SELF INSURANCE-GENERAL LIAB/AUTO FUND
73 SELF INSURANCE-BUS FUND
74 SELF INSURANCE WORKERS-COMPENSATION FUND
75 SELF INSURANCE-ADMIN FUND
80 GENERAL TRUST FUND
81 CEMETERY PERPETUAL CARE FUND
82 MAUSOLEUM ENDOWMENT FUND
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ATTACHMENT 1-B
Summary of State of California Statutes Applicable to Municipal Investments
The following investments are authorized by California State Code, Title 5, Division 2,
and Sections 53600, 53601, 53631.5 and 53635. See code sections for complete
descriptions.
Authorized Investment Legal Limit
(%) Other Constraints
Local Agency Bonds No limit Maximum maturity 5 years.****
U.S. Treasury Obligations No limit Maximum maturity 5 years except as
noted below.****
State Obligations -
California and Others No limit Maximum maturity 5 years.
California Local Agency
Obligations
No limit Maximum maturity 5 years.
U.S. Agency Obligations No limit Maximum maturity 5 years except as
noted below.****
Bankers’ Acceptance 40% Eligible for purchase by the Federal
Reserve System and not to exceed 180
days to maturity. No more than 30% may
be in bankers' acceptances of any one
commercial bank.
Commercial Paper – Non
Pooled Funds
40% "A -1 /P - 1/F - 1" rating; if the issuer has
long-term debt, it must rated “A”; U.S.
corporate assets over $500,000,000;
purchases may not represent more than
10% of outstanding commercial paper
and medium-term notes. Commercial
paper may not exceed 270 days to
maturity.***
Commercial Paper –
Pooled Fund
40% "A -1 /P - 1/F - 1" rating; if the issuer has
long-term debt, it must rated “A”; U.S.
corporate assets over $500,000,000;
purchases may not represent more than
10% of outstanding paper and may not
exceed 270 days to maturity.
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Authorized Investment Legal Limit
(%) Other Constraints
Negotiable Certificates of
Deposit
30% Maximum maturity 5 years. State and
Federally chartered banks and savings
institutions, including U.S. branches of
foreign banks regulated by State
regulatory authorities (“Yankee CD”).
Deposit/CD Placement
Services
50%** Maximum maturity 5 years. Deposits with
any one private sector placement service
are limited to 50% of the portfolio. This
limit does not apply to placement service-
assisted CD’s.
Repurchase Agreement No limit Maximum maturity 1 year. Securities
used as collateral for repo's must be
investments allowable under Govt. Code
(i.e., T-bills, Agencies, BAs, CDs, etc.);
must be collateralized at 102% of market
value or greater; securities must be safe
kept by third party.
Reverse Repurchase
Agreements/Securities
Lending Agreements
20% Must be made with primary dealers of the
Federal Reserve Bank of New York and
the securities used for the agreement
must have been held by the local agency
for at least 30 days. The maximum
maturity is 92 days.
Medium-Term Corporate
Notes
30% Maximum maturity 5 years; bonds must
be rated minimum of “A” by a nationally
recognized rating service.
Mutual Funds and Money
Market Mutual Funds
20% No more than 10% may be invested in
any one mutual fund. Funds are
invested in securities and obligations
authorized by sub- divisions (a) through
(m) of Section 53601 and
53635, (any of the authorized
investments for local agencies) the
investment company must be in highest
ranking provided by not less than two of
the three largest nationally recognized
rating services OR must have the
investment advisor registered with the
SEC with no less than 5 yrs. experience
and have assets under mgmt. in excess
of $500 million.
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Authorized Investment Legal Limit
(%) Other Constraints
Supra Nationals
(International Bank for
Reconstruction and
Development.
International Finance
Corporation, Inter-
American Development
Bank
30% Maximum maturity 5 years. Must be
rated AA or better by a nationally
recognized rating service. Must be
senior unsubordinated obligations
denominated in U.S. Dollars.
Money Market Funds 20% The money market funds must have an
average weighted maturity of 90 days or
less and abide by SEC regulations;
funds must receive the highest ranking
by 2 of the 3 largest nationally
recognized rating agencies OR retain an
investment advisor who is registered, or
exempt from registration, with the SEC
and has at least 5 years’ experience
managing money market funds in
excess of $500 million.
Collateralized Certificate
of Deposit
No limit Maximum maturity 5 years. Banks:
deposit not to exceed the total of paid-in
capital surplus. S&Ls: deposit not to
exceed the greater of total net worth or
$500,000. State and Federal credit
unions: deposit shall not exceed the
greater of the total of unpaired capital and
surplus or $500,000. Must be
collateralized to 110% of the CD value by
other eligible securities. Investments in
certificates of deposits of state or federal
credit unions if any member of the city’s
governing or managing officers (council,
city manager, fiscal officers) serves on
the credit union board or key committee
positions is prohibited.
Mortgage Pass-Through 20% Maximum remaining maturity of 5 years;
bonds must be rated in top two rating
categories by a nationally recognized
rating service. Shall not exceed 95% of
the mortgage security's fair market value.
Bank/Time Deposits No limit Maximum maturity of 5 years.
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Authorized Investment Legal Limit
(%) Other Constraints
Local Agency Investment
Fund (LAIF)
$ 75 million*
Monies are invested in pooled state fund
managed by State Treasurer. Maximum
15 transactions per month.
Joint Powers Authority
Pool
No limit
County Pooled
Investment Funds
No limit
Public Bank No limit Commercial paper, debt securities, or
other obligations of a public bank, as
defined in Section 57600.
* Per LAIF account. Separate accounts can be established for different legal entities.
** Per AB 945, limit increased from 30% to 50% effective January 1, 2020 until January
1, 2026, at which time limit will return to 30%.
*** In effect until January 1, 2026.
**** Per Council authorization, up to 15% of the portfolio may be invested in remaining
term to maturity of over five and up to fifteen years.
Bond Proceeds
Bond proceeds may be invested in accordance with the State Code and bond indenture
provisions.
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ATTACHMENT 1-C
GLOSSARY
AGENCIES: Federal agency securities and/or Government Sponsored Enterprises
(GSE’s).
ANNUAL COMPREHENSIVE FINANCIAL REPORT (ACFR): The official annual report
for the City of Santa Monica. It includes basic financial statements for each individual fund
and account group prepared in conformity with GAAP. It also includes supporting
schedules necessary to demonstrate compliance with finance-related legal and
contractual provisions, extensive introductory material, and a detailed Statistical Section.
ASKED: The price at which securities are offered for sale.
BANKERS’ ACCEPTANCE (BA): A draft or bill of exchange accepted by a bank or trust
company. The accepting institution guarantees payment of the bill, as well as the issuer.
BASIS POINT: A basis point equals one one-hundredth of 1% (.01%).
BENCHMARK: A comparative base for measuring the performance or risk tolerance of
an investment portfolio. The benchmark should represent a close correlation to the level
of risk and the average duration of the portfolio.
BID: The price offered for securities.
BROKER: A broker brings buyers and sellers together for a commission.
CALLABLE SECURITY: A security that can be redeemed by the issuer before the
scheduled maturity date.
CERTIFICATE OF DEPOSIT (CD): A time deposit with a specific maturity evidenced by
a certificate. Large denomination CD’s are typically negotiable.
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.
COMMERCIAL PAPER (CP): An unsecured promissory note with a fixed maturity no
longer than 270 days. Usually sold in discount form.
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.
DEALER: A dealer, as opposed to a broker, acts as a principal in all transactions, buying
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and selling for his own account.
DELIVERY VERSUS PAYMENT (DVP): There are two methods of delivery of securities:
delivery versus payment and delivery versus receipt (also called free). Delivery versus
payment is delivery of securities with an exchange of money for the securities. Delivery
versus receipt is delivery of securities with an exchange of a signed receipt for the
securities.
DEBENTURE: A bond secured only by the general credit of the issuer.
DERIVATIVES: (1) Financial instruments whose return profile is linked to, or derived from,
the movement of one or more underlying indices or securities, and may include a
leveraging factor, or (2) financial contracts based on 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. A security selling below original offering price
shortly after sale also is considered to be at a discount.
DISCOUNT SECURITIES: Non-interest-bearing money market instruments that are
issued at a discount and redeemed at maturity for full face value (e.g., U.S. Treasury bills,
commercial paper, Agency discount notes).
DIVERSIFICATION: Dividing investment funds among a variety of securities, issuers, and
maturity dates 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.
The duration of a security is a useful indicator of its price volatility for given changes in
interest rates.
FEDERAL AGRICULTURAL MORTGAGE CORPORATION (FARMER MAC): Farmer
Mac was created to increase access to and reduce the cost of capital for the benefit of
American agriculture and rural communities. Farmer Mac provides financial solutions to a
broad spectrum of the agricultural community, including agricultural lenders,
agribusinesses, and other institutions.
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 $250,000 per deposit.
FEDERAL FARM CREDIT BANKS FUNDING CORPORATION (FFCB): The Federal
Farm Credit Banks Funding Corporation is a leading provider of loans, leases and services
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to rural communities and U.S. agriculture.
FEDERAL FUNDS: Non-interest-bearing deposits held by member banks at the Federal
Reserve. Also used to denote "immediately available" funds in the clearing sense. "Fed
Funds" also used to refer to these funds.
FEDERAL FUNDS RATE: The rate of interest at which private banks lend funds to other
private banks. The Federal Open Market Committee (FOMC) sets a target rate. This
actual 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. The mission of the FHLB’s is to liquefy the housing related assets of members
who must purchase stock in their district Bank.
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC): A Government
Sponsored Enterprise that provides liquidity to the mortgage markets, much like FNMA
and FHLB. Also referred to as “Freddie Mac”.
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA): 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 & Urban
Development, H.U.D. It is the largest single provider of residential mortgage funds in the
United States. Fannie Mae, as 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. FNMA's securities are also highly liquid
and are widely accepted. FNMA assumes and guarantees that all security holders will
receive timely payment of principal and interest.
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.
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GOVERNMENTAL 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 FHA, VA or FMHM mortgages. The term pass-
throughs is often used to describe Ginnie Maes.
GREEN BONDS: Green bonds are used to finance projects that promote environmental
and/or climate benefits. Green bonds eligible for inclusion in the City’s investment portfolio
are issued by government agencies, private corporations, and institutions such as the
World Bank.
INVERSE FLOATERS: A structured note in which the coupon increase as interest rates
decline and decrease as rates rise.
LIQUIDITY: Liquidity is the ability to change an investment into its cash equivalent on
short notice at its prevailing market value. In the money market, a security is said to be
liquid if the spread between bid and asked prices is narrow and reasonable size can be
done at those quotes.
LOCAL AGENCY INVESTMENT FUND (LAIF): The aggregate of all funds from political
subdivisions that are placed in the custody of the State Treasurer for investment and
reinvestment.
MARKET VALUE: The price at which a security is trading and could presumably be
purchased or sold.
MASTER REPURCHASE AGREEMENT: A written contract covering all future
transactions between the parties to repurchase-reverse repurchase agreements that
establishes each party's rights in the transactions. A master agreement will often specify,
among other things, the right of the buyer-lender to liquidate the underlying securities in
the event of default by the seller-borrower.
MATURITY: The date upon which the principal or stated value of an investment becomes
due and payable.
MONEY MARKET: The market in which short-term debt instruments (bills, commercial
paper, bankers' acceptances, etc.) are issued and traded.
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.
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PORTFOLIO: Collection of securities held by an investor.
PRIMARY DEALERS: A group of government securities dealers that 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.
PRIME RATE: The rate at which banks lend to their best or "prime" customers.
PRINCIPAL: 1) the dollar cost of an issue excluding accrued interest. 2) The one who
takes ownership in a transaction, as opposed to brokering or acting as agent.
PRUDENT PERSON RULE: An investment standard. In some states the law requires that
a fiduciary, such as a trustee, may invest money only in a list of securities selected by the
state (the so-called legal list). In other states, the trustee may invest in a security if it is
one, which would be brought by a prudent person of discretion and intelligence who is
seeking a reasonable income and preservation of capital.
QUALIFIED PUBLIC DEPOSITORIES: A financial institution which does not claim
exemption from the payment of any sales or compensating use or ad valorem taxes under
the laws of this state, which has segregated for the benefit of the commission eligible
collateral having a value of not less than its maximum liability and which has been
approved by the Public Deposit Protection Commission to hold public deposits.
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.
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.
Dealers use RP extensively to finance their positions. Exception: When the Fed is said to
be doing RP, it is lending money that is increasing bank reserves.
REVERSE REPO: An agreement whereby the dealer agrees to buy securities and the
investor agrees to repurchase them at a later date.
SAFEKEEPING: A service to customers rendered by banks for a fee whereby securities
and valuables of all types and descriptions are held in the bank's vaults for protection.
SECONDARY MARKET: A market made for the purchase and sale of outstanding issues
following the initial distribution.
SEC RULE 15C3-1: See uniform net capital rule.
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SECURITIES AND EXCHANGE COMMISSION: Agency created by Congress to protect
investors in securities transaction by administering securities legislation.
SOCIAL IMPACT BONDS: Social impact bonds are used to finance programs such as
affordable housing, poverty reduction, or other positive sustainable and social outcomes.
Social impact bonds eligible for inclusion in the City’s investment portfolio are typically
issued by government agencies, and institutions such as the World Bank.
STRUCTURED NOTES: Notes issued by Government Sponsored Enterprises (FHLB,
FNMA, etc.) and Corporations which have embedded options (e.g. call features, step-up
coupons, floating rate coupons, derivative based returns) into their debt structure. Their
market performance is impacted by the fluctuation of interest rates, the volatility of the
imbedded options, and shifts in the shape of the yield curve.
SETTLEMENT DATE: The date on which a trade is cleared by delivery of securities
against funds. This date may be the same as the trade date or later.
SUPRA NATIONALS: For purposes of this investment policy - obligations issued by the
International Bank for Reconstruction and Development, International Finance
Corporation, or Inter-American Development Bank.
TRADE DATE: The date on which the buyer and seller agree to a transaction. The trade
date may or may not be the date on which the securities and money changes hands
(settlement date).
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.
TREASURY BOND: Long-term coupon-bearing securities U.S. Treasury securities issued
as direct obligations of the U.S. Government and having initial maturities of more than ten
years.
TREASURY NOTES: Intermediate term coupon-bearing U.S. Treasury securities issued
as direct obligations of the U.S. Government and having initial maturities of from one to
ten years.
UNIFORM CAPITAL RULE: Securities and Exchange Commission requirement that
member firms as well as non-member broker-dealers in securities maintain a maximum
ratio of indebtedness to liquid capital of 15 to 1; also called net capital rule and net capital
ratio. Indebtedness covers all money owed to a firm including margin loans and
commitments to purchase securities, one reason new public issues are spread among
members of underwriting syndicates. Liquid capital includes cash and assets easily
converted into cash.
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YIELD: The rate of annual income return on an investment, expressed as a percentage.
(a) INCOME YIELD is obtained by dividing the current dollar income by the current market
price for the security. (b) NET YIELD or YIELD TO MATURITY is the current income yield
minus any premium above par or plus any discount from par in purchase price with the
adjustment spread over the period from the date of purchase to the date of maturity of the
bond.
YIELD TO MATURITY: The rate of return yielded by a debt security held to maturity when
both interest payments and the investor's capital gain or loss on the security are taken into
account.
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Information Item
1
Date: April 6, 2022
To: Mayor and City Council
From: Gigi Decavalles-Hughes
Subject: Report on the City of Santa Monica’s Direct and Indirect
Investments in and Divestment from Russian Assets
Introduction
On March 8, 2022, the Council approved Agenda Item 13-A condemning the invasion
of Ukraine by Russia. As part of the approved action, Council directed the City
Manager to research any sanctions or steps the City of Santa Monica might take to
deplete the power of the Russian leader, Vladimir Putin, and any Russian Oligarchs,
including divesting any city fund possessing Russian assets, and lobbying CalPERS in
favor of divesting any state funds possessing Russian assets and the termination of state
contracts with Russian firms.
Background
The City’s investment policy has historically included socially responsible guidelines.
Examples of this include the prohibition of investments in fossil fuel-related companies
and banks that lend to those companies, in tobacco or tobacco-related products, and
in weapons systems or nuclear power. Also, the environmental, social, and governance
(ESG) profile of corporations is a component of credit analysis when considering
investments in corporate medium-term notes. Additionally, Council has at times
directed divestments based on certain geopolitical and/or humanitarian reasons.
Examples of these are South Africa during apartheid and Myanmar following a military
coup and subsequent human rights violations.
Attachment 25.H.b
Packet Pg. 454 Attachment: Attachment 2 - Information Item Russian Divestment [Revision 1] (6187 : Annual Investment Policy Update)
Information Item: City of Santa Monica’s Direct and Indirect Investments in and
Divestment from Russian Assets
2
The City’s general investment portfolio has no direct investments in Russian companies
and holds no sovereign Russian debt. The City also oversees the Cemetery and
Mausoleum Perpetual Care funds through the use of an outside investment manager.
This portfolio also has no direct investment in Russian companies or Russian debt.
Discussion
As of February 28, 2022, the book value of the City’s investment portfolio (exclusive of
cash in bank accounts) was $572.8 million. The City of Santa Monica holds no
investments in any Russian companies or Russian sovereign debt. The City does own
bonds in companies that had business operations in Russia at the time of the Ukraine
invasion.
Corporate Debt
As of February 28, 2022, the City’s portfolio included approximately $124.8 million in
corporate debt. Of this amount approximately $17.8 million was in bonds from United
States based non-profit entities that do not have business in Russia. The remaining $107
million was bonds issued by 23 private corporations and the endowment funds of two
universities. One of the corporate bonds ($2 million) matured in March 2022 reducing
the outstanding amount to $105 million issued by 22 corporations. Staff has attempted
to ascertain the level of divestment from Russia of the entities from which it holds
investments. It can be difficult to get the complete picture since many companies’
operations in Russia are through third party arrangements with other corporations.
The two business sectors with the most exposure to and business relationship with Russia
are the oil and banking sectors. Since the City has already divested from fossil fuel
companies and banks lending to such companies, the current investment portfolio has
no investments related to Russia from these sectors. Two of the companies that have
bonds included in the portfolio do not appear to do business in Russia. The two
university endowment funds mentioned, Yale University and Texas A&M University, have
announced plans to pull all investments in Russian entities.
Attachment 25.H.b
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Information Item: City of Santa Monica’s Direct and Indirect Investments in and
Divestment from Russian Assets
3
Of the remaining 18 companies for which the City holds bonds in its investment
portfolio, 12 have publicly announced either a termination, suspension, or limiting of
business activities in Russia. The other four are insurance companies. Since insurance
companies maintain large investment portfolios, the exposure to Russia could be to
Russian businesses or the holding of investments in Russia. Staff has not been able to
determine the extent of Russian involvement of these companies in Russia and have
seen no public statements regarding divestment.
Supranationals
The portfolio also includes approximately $25.6 million in bonds issued by World Bank
related institutions such as the International Bank for Reconstruction and Development
and the International Finance Corporation. These bonds, also known as Supranationals,
provide funding for projects related to clean water, climate change, and infrastructure
enhancement. Russia is a member of the World Bank. On March 2, 2022, the World
Bank halted all programs in Russia due to their war on Ukraine.
Local Agency Investment Fund (LAIF)
LAIF is a short-term investment pool managed by the California State Treasurers Office
used by over 400 local agencies in California, including Santa Monica, for short-term
cash and liquidity needs. LAIF has announced that it has no investments in Russian
entities.
Cemetery and Mausoleum Perpetual Care Funds
The City oversees the Cemetery and Mausoleum Perpetual Care funds through use of
an outside investment manager. This portfolio follows the same socially responsible
investment guidelines included in the City’s Investment Policy. This portfolio has no
direct investment in Russian companies or Russian debt and is also divested from the
Russia-heavy sectors of fossil fuels and banking.
Attachment 25.H.b
Packet Pg. 456 Attachment: Attachment 2 - Information Item Russian Divestment [Revision 1] (6187 : Annual Investment Policy Update)
Information Item: City of Santa Monica’s Direct and Indirect Investments in and
Divestment from Russian Assets
4
CalPERS
The California Public Employees Retirement System (CalPERS) is the United States' largest
public fund. CalPERS has reported that it has over three quarters of a billion dollars in
Russian investments, consisting of $420 million in public stocks and $345 million in illiquid
real estate assets. None of CalPERS holdings include Russian government debt.
Although these are sizable amounts, CalPERS claims that combined they represent only
0.17% of its total investment portfolio.
In response to Russia's attack on Ukraine, CalPERS has announced the following actions:
•CalPERS has ceased all transactions in Russian publicly traded equity and has
stopped the flow of any new investments into the country.
•CalPERS is actively assessing its real estate investments and determining a path
forward.
•CalPERS is reviewing all its investments in emerging markets, including Russia, due
to the impacts the crisis has had on all financial markets.
•CalPERS is following all regulatory requirements promulgated by U.S. Office of
Foreign Assets Control and the sanctions that are in place.
SB 1328, recently introduced in the State legislature, would require CalPERS to divest
from Russian and Belarusian assets and companies. SB 1328 would prohibit CalPERS
(and other public retirement systems) from investing public employee retirement funds
in a company with business operations in Russia or Belarus or a company that supplies
military equipment to Russia or Belarus. It would also prohibit future State investments in
Russia or Belarus until the invasion is over and sanctions removed.
Summary and Recommendations
Santa Monica has no direct investments in Russian companies or the Russian
government. The City does own bonds issued by a number of companies that have
historically done business in Russia, but not from the most heavily invested sectors of
fossil fuels and banking. For the most part, entities in which the City does hold
Attachment 25.H.b
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Information Item: City of Santa Monica’s Direct and Indirect Investments in and
Divestment from Russian Assets
5
investments have announced plans to either terminate, suspend, or limit business in
Russia.
Based on staff’s review, the following actions are recommended:
1.No current investments will be sold based on the Russian invasion. Sale of all the
bonds of companies that were doing business with Russia would result in a loss of
approximately $2.7 million which would cause fiscal harm to the City. Sale of the
Supranationals would add another $0.7 million to the loss. Attachment A includes
a listing of the bonds, their involvement in Russia, and includes the estimated loss
the City would realize if the investments were sold.
2.Until such time either (1) Russia halts the invasion and occupation of Ukraine as
determined by the U.S. Department of State; or (2) The United States revokes all
sanctions against Russia imposed because of its participation in the February 24,
2022, invasion of Ukraine, no new investments should be made in companies that
have not announced a termination, suspension, or limitation of business in Russia.
3.Staff will continue to monitor the status of entities and their Russian business
activity and may restrict future new investments in companies that resume
business operations in Russia or do not adequately reduce their business
operations in Russia before 1) Russia halts the invasion and occupation of
Ukraine as determined by the U.S. Department of State; or (2) The United States
revokes all sanctions against Russia imposed because of its participation in the
February 24, 2022, invasion of Ukraine.
4.The City supports SB 1328 calling for the CalPERS divestment of all Russian assets.
On March 21, 2022, Mayor Sue Himmelrich sent a letter of support for SB 1328 on
behalf of the City. The letter is attached as Attachment B.
Prepared By: Gigi Decavalles-Hughes, Director of Finance
Attachments: A. SB 1328 Letter to Senator McGuire
B.City of Santa Monica Corporate Investments with Status of
Russian Exposure
Attachment 25.H.b
Packet Pg. 458 Attachment: Attachment 2 - Information Item Russian Divestment [Revision 1] (6187 : Annual Investment Policy Update)
Information Item: City of Santa Monica’s Direct and Indirect Investments in and
Divestment from Russian Assets
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ATTACHMENT A
SB 1328 LETTER TO SENATOR MCGUIRE
5.H.b
Packet Pg. 459 Attachment: Attachment 2 - Information Item Russian Divestment [Revision 1] (6187 : Annual Investment Policy Update)
Information Item: City of Santa Monica’s Direct and Indirect Investments in and
Divestment from Russian Assets
7
5.H.b
Packet Pg. 460 Attachment: Attachment 2 - Information Item Russian Divestment [Revision 1] (6187 : Annual Investment Policy Update)
Information Item: City of Santa Monica’s Direct and Indirect Investments in and
Divestment from Russian Assets
8
ATTACHMENT B
CITY OF SANTA MONICA CORPORATE INVESTMENTS WITH STATUS OF RUSSIAN EXPOSURE
5.H.b
Packet Pg. 461 Attachment: Attachment 2 - Information Item Russian Divestment [Revision 1] (6187 : Annual Investment Policy Update)
Information Item: City of Santa Monica’s Direct and Indirect Investments in and
Divestment from Russian Assets
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5.H.b
Packet Pg. 462 Attachment: Attachment 2 - Information Item Russian Divestment [Revision 1] (6187 : Annual Investment Policy Update)