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HomeMy WebLinkAbout06.13.2023 Finance Committee Agenda PacketCity Council Finance Committee Agenda June 13, 2023 Page 1 of 3 SARATOGA CITY COUNCIL FINANCE COMMITTEE June 13, 2023 4:00 P.M. REGULAR MEETING Public Participation Information In accordance with Saratoga City Council’s Remote Public Participation Policy, members of the public may participate in this meeting in person at the location listed below or via remote attendance using the Zoom information below. Members of the public can view and participate in the meeting by: 1. Attending the meeting in person in the Linda Callon Conference Room located at 13777 Fruitvale Avenue, Saratoga CA 95070; OR 2. Accessing the meeting through Zoom * Webinar URL https://us02web.zoom.us/j/81909763546 * Webinar ID: 819 0976 3546 * Calling 1.669.900.6833 or 1.408.638.0968 Written Communication Comments can be submitted in writing at www.saratoga.ca.us/fc. Written communications will be provided to the members of the City Council and included in the Agenda Packet and/or in supplemental meeting materials. Public Comment Members of the public may comment on any item for up to three (3) minutes. The amount of time for public comment may be reduced by the Mayor. Meeting Recording Information In accordance with the Saratoga City Council’s Meeting Recording Policy, the City Council Finance Committee Meetings are recorded and made available following the meeting on the City website. City Council Finance Committee Agenda June 13, 2023 Page 2 of 3 CALL TO ORDER ROLL CALL Public Comment AGENDA ITEMS 1. Finance Committee Minutes Recommended Action: Review and approve the minutes for the May 9, 2023 Finance Committee Regular Meeting. Finance Committee Minutes 2. 2023-24 Enabling Budget Resolutions Recommended Action: No action. Receive draft staff reports and provide requests for clarification. A. Appropriations Limit B. GO Bond C. Arrowhead Memo - Enabling Resolutions Fiscal Year 2023-24 Appropriations Limit Attachment A - Resolution Attachment B - California Department of Finance Price Factor and Population, May 2023 Fiscal Year 2023-24 GO Bond Tax Levy Attachment A - Resolution Attachment B - Debt Service Schedule Fiscal Year 2023-24 Arrowhead Property Tax Levy Attachment A - Arrowhead Tax Levy Resolution 3. 2023-24 Investment Policy Recommended Action: Approve amended policy and recommend City Council approval. Fiscal Year 2023-24 Investment Policy Attachment A - Resolution Attachment B - Proposed Investment Policy Edits 4. California CLASS Presentation Recommended Action: No Action. Receive presentation on alternative investment option and provide feedback. Memo - Presentation from California CLASS for Investment Services California CLASS-Liquidity Management for California Public Agencies 5. Committee Meeting Schedule and Tentative Agenda Topics City Council Finance Committee Agenda June 13, 2023 Page 3 of 3 Memo - Summer Recess Schedule Recommended Action: Reconfirm meeting schedule and tentative agenda topics ADJOURNMENT CERTIFICATE OF POSTING OF THE AGENDA, DISTRIBUTION OF THE AGENDA PACKET, COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT I, Gina Scott, Administrative Analyst for the City of Saratoga, declare that the foregoing agenda for the meeting of the City Council Finance Committee was posted and available for public review on June 8, 2023, at the City of Saratoga, 13777 Fruitvale Ave., Saratoga, CA 95070, and on the City’s website at www.saratoga.ca.us. Signed this 8th day of June 2023 at Saratoga, California. Gina Scott, Administrative Analyst In accordance with the Ralph M. Brown Act, copies of the staff reports and other materials provided to the Committee by City staff in connection with this agenda, copies of materials distributed to the Committee concurrently with the posting of the agenda, and materials distributed to the Committee by staff after the posting of the agenda are available on the City website at www.saratoga.ca.us and are available for review in the office of the City Clerk at 13777 Fruitvale Avenue, Saratoga, California. In compliance with the Americans with Disabilities Act and the Governor’s Executive Order, if you need assistance to participate in this meeting, please contact the City Clerk at bavrit@saratoga.ca.us or call 408.868.1216 as soon as possible before the meeting. The City will use its best efforts to provide reasonable accommodations to provide as much accessibility as possible while also maintaining public safety. [28 CFR 35.102-35.104 ADA title II] City Council Finance Committee Minutes – May 9, 2023 Page 1 MINUTES SARATOGA CITY COUNCIL FINANCE COMMITTEE MEETING MAY 9, 2023 CALL TO ORDER The meeting was called to order at 4:05 p.m. ROLL CALL Present: Mayor Kookie Fitzsimmons, Council Member Page Also Present: James Lindsay, City Manager Nick Pegueros, Administrative Services Director Ann Xu, Accountant II Gina Scott, Administrative Analyst REPORT ON POSTING OF THE AGENDA The Administrative Analyst reported the agenda for this meeting was properly posted on May 4, 2023. The meeting started without audio at 4:05 but was restarted and officially called to order at 4:15 with audio. AGENDA ITEMS 1. Finance Committee Minutes Recommended Action: Approve the minutes for the April 11, 2023 Finance Committee Regular Meeting. PAGE/FITZSIMMONS MOVED TO APPROVE THE MINUTES FOR THE APRIL 11, 2023 FINANCE COMMITTEE REGULAR MEETING. MOTION PASSED BY VERBAL ROLL CALL. AYES: PAGE/FITZSIMMONS NOES: NONE. ABSTAIN: NONE. 2. Financial Policies Review Recommended Action: Receive and recommend City Council action on the 2023-24 Financial Policies. Nick Pegueros, Administrative Services Director, gave an overview of the Financial Policies and identified significant recommended changes. 3 City Council Finance Committee Minutes – May 9, 2023 Page 2 PAGE/FITZSIMMONS MOVED TO APPROVE THE PROSOSED CHANGES TO THE 2023-24 FINANCIAL POLICIES AND PRESENT THEM TO THE COUNCIL. MOTION PASSED BY VERBAL ROLL CALL. AYES: PAGE/FITZSIMMONS NOES: NONE. ABSTAIN: NONE. 3. 2023-24 Budget Overview Recommended Action: Review a 2023-24 budget overview and provide input to City staff for their presentation to City Council on May 17th. Nick Pegueros, Administrative Services Director, provided an overview of the 2023-24 budget and asked for input for the presentation to the City Council on May 17th. The Committee discussed how best to present the budget information. A request was made to provide the detail of expenses that the City must pay as mandated by state with no recoup including the clean water activities, Sheriff’s Contract, and San Jose Animal Control. Staff will show those expenses as separate line items in the May 17th presentation to Council. NO ACTION NECESSARY. ADJOURNMENT PAGE/FITZSIMMONS MOVED TO ADJOURN THE MEETING AT 4:56 PM. MOTION PASSED BY VERBAL ROLL CALL. AYES: PAGE/FITZSIMMONS. NOES: NONE. ABSTAIN: NONE. Minutes respectfully submitted: Gina Scott, Administrative Analyst City of Saratoga 4 Memorandum DATE: June 13, 2023 TO: Finance Committee FROM: Gina Scott, Administrative Analyst II SUBJECT: Fiscal Year 2024 Enabling Resolutions Attached are three draft staff reports required by State law or the Santa Clara County Assessor for financial operations in the upcoming fiscal year. These items are presented to the Finance Committee for informational purposes before the resolutions appear on the City Council agenda of June 21, as consent items for consideration and approval. No Finance Committee action is required. Attachments Attachment A – 2023-24 Appropriations Limit, draft staff report Attachment B – 2023-24 General Obligation Bond Tax Levy, draft staff report Attachment C – 2023-24 Arrowhead Community Facility District Tax Levy, draft staff report 5 SARATOGA CITY COUNCIL MEETING DATE: June 21, 2023 DEPARTMENT: Administrative Services PREPARED BY: Nick Pegueros, Administrative Services Director SUBJECT: Resolution Establishing the Appropriations Limit for Fiscal Year 2023-24 RECOMMENDED ACTION: Adopt Resolution establishing the City’s appropriations limit for Fiscal Year 2023-24 BACKGROUND: California voters approved Proposition 4 in 1979 to establish Article XIIIB of the California State Constitution, commonly referred to as the Gann Limit or Appropriations Limit (Limit.) Two additional voter-approved initiatives, Proposition 98 in 1988 and Proposition 111 in 1990, modified the 1979 voter- approved propositions. This report fulfills the annual requirements of the Limit as provided in State law. The Limit establishes the maximum tax collections by every agency in California. The Limit adjusts annually, with 1981 as the baseline year, using inflation and population factors provided by the State of California's Department of Finance (Attachment B.) If an agency collects more taxes than authorized, State law mandates the return of taxes above the Limit. For example, if a taxing agency with a Limit of $98 million collects $100 million in taxes, the taxing agency is required to return the $2 million collected in excess unless the excess collection is authorized by voters in the agency. In the example and absent a voter approved appropriations limit override, State law requires that the agency refunds the $2 million in taxes collected above the Limit. With the change in population and per capita income published by the California Department of Finance in May 2023, the City’s adjusted appropriations limit for 2023-24 is $56.59 million (Exhibit A to Attachment A.), and the proposed budget includes proceeds from taxes subject to the Limit of $21.1 million. The City's appropriations are below the Limit and will continue to be under the Limit for the foreseeable future, given the City's revenue profile which is predominately property taxes. ATTACHMENT: Attachment A – Resolution Attachment B - California Department of Finance Price Factor and Population, May 2023 6 Resolution No. 23-XXXX Page 1 RESOLUTION NO. 23-_____ A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SARATOGA ESTABLISHING THE APPROPRIATIONS LIMIT FOR FISCAL YEAR 2023-24 WHEREAS, the City of Saratoga established its base year Appropriations Limit as $5,961,747 in Fiscal Year 1979; and WHEREAS, the cumulative impact of changes to population and to the California per capita personal income since the base established a fiscal year 2022-23 Appropriations Limit of $54,320,026; and WHEREAS, the California Department of Finance’s May 2023 memorandum specifies a 4.44 percent increase in per capita personal income for the twelve month period ended December 31, 2022; and WHEREAS, the California Department of Finance’s May 2022 memorandum specifies a 0.25 percent decrease in the City of Saratoga’s population and a 0.62 percent decrease in the County of Santa Clara’s population for the twelve month period ended December 31, 2022; and WHEREAS, State law provides an adjustment to the prior year Appropriation Limit by combining the change in per capita personal income, and either the city or county’s change in population, at the discretion of the city or county’s governing board; NOW, THEREFORE BE IT RESOLVED, the City of Saratoga’s 2023-24 Appropriations Limit is $56,590,005 as calculated in conformity with Article XIIIB of the Constitution of the State of California and detailed in Exhibit A. The above and foregoing resolution was passed and adopted at a regular meeting of the Saratoga City Council held on the 21 day of June 2023 by the following vote: AYES: NOES: ABSENT: ABSTAIN: Kookie Fitzsimmons, Mayor ATTEST: Britt Avrit, MMC, City Clerk 7 Resolution No. 23-XXXX Page 2 Exhibit A Fiscal year Prior Year Limit County City Fiscal Year Limit 2012-13 31,907,666$ 1.0124 1.0070 1.0377 1.0506 33,521,156$ 2013-14 33,521,156 1.0157 1.0129 1.0512 1.0677 35,790,667 2014-15 35,790,667 1.0150 1.0066 0.9977 1.0127 36,243,974 2015-16 36,243,974 1.0113 1.0000 1.0382 1.0499 38,053,696 2016-17 38,053,696 1.0126 1.0053 1.0537 1.0670 40,602,404 2017-18 40,602,404 1.0081 1.0023 1.0369 1.0453 42,441,648 2018-19 42,441,648 1.0099 1.0052 1.0367 1.0470 44,434,849 2019-20 44,434,849 1.0033 1.0003 1.0385 1.0419 46,297,871 2020-21 46,297,871 1.0037 1.0009 1.0373 1.0411 48,202,473 2021-22 48,202,473 0.9944 0.9901 1.0573 1.0514 50,679,074 2022-23 50,679,074 0.9931 0.9966 1.0755 1.0718 54,320,026 2023-24 54,320,026 0.9975 0.9938 1.0444 1.0418 56,590,005 Data Source: Annual percentage change in population and per capita income provided by California Department of Finance per California Revenue and Taxation Code section 2227. *Greater of County or City population change used for "Appropriation Factor" calculation. Population Change California Per Capita Income Change City of Saratoga Appropriations Limit Calculation Fiscal Year Appropriation Limit Adjustment Factor* 8 May 2023 Dear Fiscal Officer: Subject: Price Factor and Population Information Appropriations Limit California Revenue and Taxation Code section 2227 requires the Department of Finance (Finance) to transmit an estimate of the percentage change in population to local governments. Each local jurisdiction must use their percentage change in population factor for January 1, 2023, in conjunction with a change in the cost of living, or price factor, to calculate their appropriations limit for fiscal year 2023-24. Attachment A provides the change in California’s per capita personal income and an example for utilizing the price factor and population percentage change factor to calculate the 2023-24 appropriations limit. Attachment B provides the city and unincorporated county population percentage change. Attachment C provides the population percentage change for counties and their summed incorporated areas. The population percentage change data excludes federal and state institutionalized populations and military populations. Population Percent Change for Special Districts Some special districts must establish an annual appropriations limit. California Revenue and Taxation Code section 2228 provides additional information regarding the appropriations limit. Article XIII B, section 9(C) of the California Constitution exempts certain special districts from the appropriations limit calculation mandate. The code section and the California Constitution can be accessed at the following website: http://leginfo.legislature.ca.gov/faces/codes.xhtml. Special districts required by law to calculate their appropriations limit must present the calculation as part of their annual audit. Any questions special districts have on this requirement should be directed to their county, district legal counsel, or the law itself. No state agency reviews the local appropriations limits. Population Certification The population certification program applies only to cities and counties. California Revenue and Taxation Code section 11005.6 mandates Finance to automatically certify any population estimate that exceeds the current certified population with the State Controller’s Office. Finance will certify the higher estimate to the State Controller by June 1, 2023. Please Note: The prior year’s city population estimates may be revised. The per capita personal income change is based on historical data. If you have any questions regarding this data, please contact the Demographic Research Unit at (916) 323-4086. JOE SPEPHENSHAW Director By: Erika Li Chief Deputy Director Attachment 9 May 2023 Attachment A A. Price Factor: Article XIII B specifies that local jurisdictions select their cost of living factor to compute their appropriation limit by a vote of their governing body. The cost of living factor provided here is per capita personal income. If the percentage change in per capita personal income is selected, the percentage change to be used in setting the fiscal year 2023-24 appropriation limit is: Per Capita Personal Income Fiscal Year Percentage change (FY) over prior year 2023-24 4.44 B. Following is an example using sample population change and the change in California per capita personal income as growth factors in computing a 2023-24 appropriation limit. 2023-24: Per Capita Cost of Living Change = 4.44 percent Population Change = -0.35 percent Per Capita Cost of Living converted to a ratio: 4.44 + 100 = 1.0444 100 Population converted to a ratio: -0.35 + 100 = 0.9965 100 Calculation of factor for FY 2023-24: 1.0444 x 0.9965 = 1.0407 10 Fiscal Year 2023-24 Attachment B Annual Percent Change in Population Minus Exclusions* January 1, 2022 to January 1, 2023 and Total Population, January 1, 2023 County City Percent Change 2022-2023 ---Population Minus Exclusions --- 1-1-22 1-1-23 Total Population 1-1-2023 Santa Clara Campbell Cupertino Gilroy Los Altos Los Altos Hills Los Gatos Milpitas Monte Sereno Morgan Hill Mountain View Palo Alto San Jose Santa Clara Saratoga Sunnyvale Unincorporated -0.88 -0.87 0.62 -0.76 -0.40 -0.20 0.25 1.09 -0.67 -0.30 -0.60 -0.47 1.54 -0.62 -0.03 -0.52 43,092 59,673 59,709 31,257 8,414 33,167 80,862 3,481 46,201 83,856 67,674 963,745 130,462 30,758 156,364 91,239 42,713 59,154 60,078 31,021 8,380 33,102 81,067 3,519 45,892 83,601 67,268 959,256 132,476 30,567 156,317 90,766 42,713 59,154 60,078 31,021 8,380 33,102 81,067 3,519 45,892 83,601 67,287 959,256 132,476 30,567 156,317 91,649 County Total -0.25 1,889,954 1,885,177 1,886,079 *Exclusions include residents on federal military installations and group quarters residents in state mental institutions, state and federal correctional institutions and veteran homes. 11 SARATOGA CITY COUNCIL MEETING DATE: June 21, 2023 DEPARTMENT: Administrative Services PREPARED BY: Nick Pegueros, Administrative Services Director SUBJECT: Resolution Establishing the Fiscal Year 2023-24 Tax Levy Rate for the Library Series 2011 General Obligation Bonds Debt Service RECOMMENDED ACTION: Adopt resolution establishing the Fiscal Year 2023-24 Tax Levy Rate for the Library Series 2011 General Obligation Bonds Debt Service at $0.0042 per $100 of Secured Assessed Value. BACKGROUND: The recommended action maintains the current property tax levy rate approved by Saratoga voters and collected by the County of Santa Clara. All funds collected under the voter-approved General Obligation (GO) Bonds are exclusively used for debt service payments and administrative costs, with the final payments due in Fiscal Year 2032. FY24 GO bond expenditures total $846,385 requiring a tax levy rate on taxable secured property in Saratoga of $0.0042 per $100, or $42.00 per $1.0 million of assessed value. The County of Santa Clara requires City Council to adopt a yearly resolution establishing the upcoming fiscal year’s tax levy rate. In May 2001, the City issued the Library Series 2001 GO Bonds with debt service payments beginning in February 2002. At the time of issuance, competitive interest rates ranged between 5 and 6 percent. With interest rates falling to historic lows in 2011, the City refunded (refinanced) the 2001 Series General Obligation Bonds saving the City’s residents $2,677,041 in interest over the remaining bond term. ATTACHMENT: Attachment A – Resolution Attachment B – Series 2011 General Obligation Bonds Debt Service Schedule 12 Resolution No. 23-XXXX Page 1 RESOLUTION NO. 23-______ A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SARATOGA ESTABLISHING THE FISCAL YEAR 2023-24 TAX LEVY RATE FOR THE LIBRARY SERIES 2011 GENERAL OBLIGATION BONDS DEBT SERVICE WHEREAS, in March 2000, the citizens of Saratoga approved an increase in their property tax rate to pay for the debt service and other expenses of the general obligation bonds for the re- construction of the library; and WHEREAS, the general obligation bonds were originally sold on April 24, 2001; and WHEREAS, the original general obligation bonds were refunded on August 1, 2011; and WHEREAS, it is necessary for the City Council of the City of Saratoga to establish an annual property tax levy rate to provide funds for the debt service payments and related expenditures during the fiscal year; NOW, THEREFORE BE IT RESOLVED, by the City Council of the City of Saratoga that the General Obligation 2011 Library Bonds property tax levy rate be established at $0.0042 per $100 of assessed valuation for Fiscal Year 2023-24 as calculated in Exhibit A. The above and foregoing resolution was passed and adopted at a regular meeting of the Saratoga City Council held on the 21st day of June 2023 by the following vote: AYES: NOES: ABSENT: ABSTAIN: Kookie Fitzsimmons, Mayor ATTEST: Britt Avrit, MMC, City Clerk 13 Resolution No. 23-XXXX Page 2 A.Series 2011 General Obligation (GO) Bonds FY23 debt service requirements: Principal 610,000$ Interest 234,385$ Paying Agent fees 1,000$ Other costs 1,000$ Total Requirements 846,385$ B.City of Saratoga Total Secured Assessed Value 20,079,882,039 C.Total Secured Assessed Value per $100 of valuation 200,798,820$ D.Library Series 2011 General Obligation Bonds Per $100 of secured assessed value City of Saratoga Library Series 2011 General Obligation Bonds Fiscal Year 2023-24 Property Tax Levy 0.0042$ Exhibit A 14 August August February Fiscal Year Bond Fiscal Interest Annual Interest Interest Annual Debt Principal Year Rate Principal Payment Payment Interest Service Balance @ YE Bond Refunding Date - August 1, 2011 - - 2011/12 2.000%- - 228,211 228,211 228,211 11,995,000 2012/13 2.000%455,000 208,518 203,968 412,485 867,485 11,540,000 2013/14 2.000%485,000 203,968 199,118 403,085 888,085 11,055,000 2014/15 2.000%495,000 199,118 194,168 393,285 888,285 10,560,000 2015/16 2.000%500,000 194,168 189,168 383,335 883,335 10,060,000 2016/17 3.000%475,000 189,168 182,043 371,210 846,210 9,585,000 2017/18 3.000%485,000 182,043 174,768 356,810 841,810 9,100,000 2018/19 4.000%500,000 174,768 164,768 339,535 839,535 8,600,000 2019/20 4.000%525,000 164,768 154,268 319,035 844,035 8,075,000 2020/21 4.000%545,000 154,268 143,368 297,635 842,635 7,530,000 2021/22 3.000%565,000 143,368 134,893 278,260 843,260 6,965,000 2022/23 4.000%580,000 134,893 123,293 258,185 838,185 6,385,000 2023/24 4.000%610,000 123,293 111,093 234,385 844,385 5,775,000 2024/25 4.000%630,000 111,093 98,493 209,585 839,585 5,145,000 2025/26 3.500%655,000 98,493 87,030 185,523 840,523 4,490,000 2026/27 3.500%685,000 87,030 75,043 162,073 847,073 3,805,000 2027/28 3.700%705,000 75,043 62,000 137,043 842,043 3,100,000 2028/29 4.000%730,000 62,000 47,400 109,400 839,400 2,370,000 2029/30 4.000%760,000 47,400 32,200 79,600 839,600 1,610,000 2030/31 4.000%790,000 32,200 16,400 48,600 838,600 820,000 2031/32 4.000%820,000 16,400 - 16,400 836,400 - TOTALS 11,995,000 2,601,993 2,621,686 5,223,678 17,218,678 Total Bond Principal 11,995,000$ Total Bond Interest 5,223,678 Total Cost of Bond 17,218,678$ City of Saratoga 2011 Series General Obligation Bonds Debt Schedule 11,995,000$ 15 SARATOGA CITY COUNCIL MEETING DATE: June 21, 2023 DEPARTMENT: Administrative Services Department PREPARED BY: Ann Xu, Accountant II Gina Scott, Administrative Analyst SUBJECT: Resolution Establishing the Fiscal Year 2023-24 Property Tax Levy for Debt Service Payments on the Arrowhead Community Facility District 2018 Bond RECOMMENDED ACTION: Adopt the attached resolution that sets the Fiscal Year 2023-24 property tax levy rate for the Arrowhead Community Facility District’s 2018 Bond's debt service payment at $6,000 per parcel for the remaining eighteen (18) participating property owners. BACKGROUND: The Arrowhead Community Facilities District encompasses 39 homes located along the hillside between Rolling Hills Road and Blue Hills Lane, off of Prospect Road. Since 1951, this neighborhood operated its own private water company, known as Arrowhead Cooperative Company Inc. Over the years the number of Arrowhead Cooperative residences and water service meters increased, to the extent that the water system infrastructure was no longer sufficient for water and fire protection needs. Because the potential fire danger situation was very alarming to the residents, the Arrowhead Board attempted to improve their water infrastructure system. Tying into San Jose Water Company lines system was their preferred option, but the private water cooperative was required to upgrade their water system with a new pump house, water line connections, and water supply lines before they would be allowed to link into San Jose Water’s system. As not all residents had funds immediately available for this construction expense, the Arrowhead Cooperative Board asked the City to assist them with the issuance of a bond to finance the improvements. To issue the bond as a collective group, the 39 homeowners were required to establish their Water Cooperative as a Community Facility District. This allowed for a special tax to be assessed for debt service. The homeowners voted to move forward with this action, and at the December 21, 2016 City Council Meeting, the City Council adopted a resolution to form Community Facilities District 2016-1 (Arrowhead) and called for a special election within the district to consider allowing the City to incur bond indebtedness on the Arrowhead CFD’s behalf, and to levy a Special Tax Lien to pay principal and interest on bonds issued to finance water infrastructure improvements. On May 2, 2017, a total of 50 registered landowner votes were cast, with 100% of the votes in support of this measure. On June 21, 2017, City Council adopted an ordinance authorizing the levying of Special Taxes on properties in the Arrowhead CFD for bonded debt service. 16 After several delays, the Community Facility District’s bond was finally issued on December 12, 2018. Fifteen of the 39 property owners prepaid their share of the water infrastructure improvements, leaving only 24 property owners who participated in the bond issuance. The total bond amount of $2,498,848 was issued at an interest rate of 6.05% on December 12, 2018, with a 30-year maturity date on September 1, 2048. Attachment A, Exhibit A, includes the current Debt Service payment schedule (after bond debt adjustments discussed below). Bond participants may choose to pay the parcel assessment as an added charge on their property tax payments over the 30-year term, or they may buy out their share of the bond liability. If a participant buys out of the debt, the debt payment schedule will be adjusted, and the remaining bond participants continue to pay their debt service amount each year. A buy-out does not change the remaining participant’s share of the debt obligation, however, the annual debt monitoring service costs do increase as the number of participants who pay the shared annual service costs is reduced. In early FY 2019/20, one bond participant chose to pay off their share of the bond, resulting in the advanced maturity of a portion of the bonds on September 1, 2019 debt service payment date. A second participant paid off their share of the bond in late FY 2019/20, so this payment went to reduce the outstanding debt on the September 1, 2020 payment date. Three more property owners submitted payoff payments and those funds were used to reduce debt for the September 1, 2021 payment date, and in November of 2022, one more property owner paid off their portion of the bond leaving18 active property owners. Payoffs must be received no later than July 15th for the September 1st payoff schedule, to allow the bond administrator time to prepare the upcoming year’s bond roll for submittal to the Santa Clara County Assessor’s Office. To date, no other participants have submitted a request for an early payoff. Arrowhead Project Fund Closeout Almost $2.5 Million of Arrowhead Bond Issuance funds was added to the $1.5 Million from fifteen Arrowhead property owners who chose to pay their share of the infrastructure improvement cost in cash. This brought the total funding package to almost $4 Million. Of the $4 Million, approximately $340,000 was for Bond Issuance Costs, $90,000 was held as a reserve to ensure funding in case of payment default, and the remaining amount of $3,569,000 was put into the construction account. The water infrastructure construction project was completed under-estimate, bringing a refund from San Jose Water of $340,886. In addition, a total of $356,800 in excess funds remained in the Project Improvement and Cost of Issuance funds. After final payments, cash participants were refunded their share of excess funds, leaving almost $411,700 to buy down bond debt on September 1, 2020. Under the terms of the bond issuance agreement, Prepaid Participants received their share of excess funds back in cash. Bond Issuance Participants’ share of the excess could only be utilized to pay down bond debt. The closeout of the improvement fund and the subsequent reduction of debt via surplus funds occurred in 2020. REPORT DISCUSSION: Bond Payments There are two debt service payments each year: principal and interest in September, and interest only in March. As the September payment is made prior to receiving the current year’s tax levy revenues, the prior year-end Arrowhead Bond Fund Balance Reserve should provide enough funding to pay the September debt service payment and the debt service monitoring service costs. The assessed property tax levy amount received from the following January and June tax receipts is to provide funding for the March interest-only payment, and then again leave a sufficient balance to pay the following September’s debt service payment. 17 The Arrowhead Community Facility District’s estimated ending fund balance for Fiscal Year 2023 is $83,551.15 which includes the $1,000 administrative expense. The following schedule shows the Arrowhead Bond’s estimated annual debt service and administrative fees for next fiscal year: FY 2023/24 Debt Service Debt Service – Principal $ 24,787 Debt Service – Interest 84,149 Administrative Fees 6,757 Total Annual Debt Service $ 115,693 Tax Levy Process In order to assess a tax levy on the property owners, the County of Santa Clara requires local jurisdictions to adopt a resolution each year to establish the annual tax levy. Attachment A is the annual resolution establishing the 2023-24 tax levy of $6,000 per parcel. This levy will charge a total of $108,000 from the 18 participants. Santa Clara County will assess an administration fee and then forward the remainder of the levy to the City for the bond’s debt service expenditures. This total levied amount, together with excess reserve funds, will be sufficient for FY24 debt service payments and leave sufficient funds for the following year’s payment. We anticipate being able to continue the reserve fund credit in the following fiscal year as well. This will allow us to maintain a $6,000 special tax per property. Once the credit is no longer available, the projected special tax per property will escalate to $6,500. A certified copy of the adopted resolution setting the property tax levy for the Arrowhead CFD Bond will be sent to the Santa Clara County Assessor’s Office no later than August 1st. ATTACHMENT: A - Resolution 18 RESOLUTION NO. 23-___ A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SARATOGA ESTABLISHING THE FISCAL YEAR 2023-24 PROPERTY TAX LEVY FOR THE ARROWHEAD COMMUNITY FACILITY DISTRICT BOND DEBT SERVICE WHEREAS, the City Council conducted proceedings to form the City of Saratoga Community Facilities District No. 2016-1 (the “Arrowhead District”), to authorize the levy of special taxes upon the land within the Arrowhead District, and to issue bonds secured by the special taxes to finance water infrastructure improvements; and WHEREAS, an election was held within the District on May 2, 2017, and the qualified electors approved the incurrence of the bonded debt, the establishment of the appropriations limit for the District, and the levy of the special tax by unanimous vote; and WHEREAS, On November 21, 2018, the City Council adopted a resolution authorizing issuance of Special Tax Bonds for Arrowhead Community Facility District through a private placement sale; and WHEREAS, a Private Placement Bond Sale was conducted on December 12, 2018, on behalf of twenty-four participating property owners within the Arrowhead Community Facilities District; and WHEREAS, five of the property parcel owners have paid off their share of the bond liability, leaving nineteen properties participating in the bond liability, and; WHEREAS, it is necessary for the City Council of the City of Saratoga to establish an annual Property Tax Levy on the participating property owners to provide sufficient funds for the debt service payments and administrative expenditures during the fiscal year; NOW, THEREFORE, be it resolved by the City Council of the City of Saratoga hereby establishes the 2023-24 Property Tax Levy for debt service on the Arrowhead Community Facility District Bonds at $6,000 per parcel. The above and foregoing resolution was passed and adopted at a regular meeting of the Saratoga City Council held on the 21st day of June 2023 by the following vote: AYES: NOES: ABSENT: ABSTAIN: ______________________________ Kookie Fitzsimmons, Mayor ATTEST: DATE: Britt Avrit, MMC, City Clerk 19 Resolution No. 23-XXXX Page 2 Exhibit A 20 SARATOGA CITY COUNCIL MEETING DATE: June 21, 2023 DEPARTMENT: Administrative Services PREPARED BY: Nick Pegueros, Administrative Services Director SUBJECT: Fiscal Year 2023-24 Investment Policy RECOMMENDED ACTION: Adopt the City of Saratoga’s Fiscal Year 2023-24 Investment Policy. BACKGROUND: Under California Government Code Section 53600 et seq. and City of Saratoga Municipal Code Section 2-20.035, the City of Saratoga is required to adopt an investment policy to guide the investment of its funds. In accordance with these regulations, City staff has prepared proposed amendments to the Investment Policy, Attachment B. The proposed changes were presented to the Finance Committee during their meeting on June 13th with discussion of the following substantive changes: Update to "Guarantee" column: The guarantee column for authorized investments has been updated to provide clarity. The revised policy now specifies that only certain investments have a true guarantee against loss. Increase in LAIF limit: Currently, the City invests 100% of its surplus cash, not required for day- to-day operations, in the Local Agency Investment Fund (LAIF). The City's deposits with LAIF are approaching the investment policy limit of $40 million. To ensure compliance with the policy, staff recommends increasing the limit to match LAIF's authorized limit of $65 million. Update to Certificates of Deposit (CD) authority: The recommended edits to the investment policy clarify that Certificates of Deposit (CDs) must be insured by the FDIC. This requirement ensures that City deposits invested in CDs are protected against bank default, with coverage of up to $250,000. The inclusion of this provision aims to minimize the risk associated with CD investments. Addition of Joint Powers Authority Investment Pools: The proposed amendments include authorization for the City to invest funds through Joint Powers Authority Investment Pools (JPA), as permitted by Government Code 53601(p). JPA Investment Pools offer a potential cost-effective 21 alternative to for-profit investment advisors, providing additional options for the City's investment strategy. ATTACHMENT: Attachment A – Resolution Attachment B – Redline Changes to the City Council Adopted Investment Policy for Fiscal Year 2022-23 22 Resolution No. 23-XXXX Page 1 RESOLUTION NO. 23-_____ A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SARATOGA ADOPTING THE CITY’S INVESTMENT POLICY FOR FISCAL YEAR 2023-24 WHEREAS, investment policies guide staff for all investment activities on behalf of cities; and WHEREAS, those investment activities are primarily governed by the individual city’s adopted investment policies and by California state law (Government Code sections 53600- 53610); and WHEREAS, the Investment Policy for the City of Saratoga is consistent with state law and, for the purpose of added safety and liquidity, is more restrictive than state law; and WHEREAS, Government Code section 53646 requires annual review and approval of a city’s investment policy only if there are changes, however it encourages cities to conduct an annual review and approval process even if there are no proposed changes; and WHEREAS, recognizing the importance of the City’s Investment Policy, staff proposes to continue the annual Council review and approval process even if there are no proposed changes; and WHEREAS, the Finance Committee concurs with staff’s recommendation to adopt the 2023-24 Investment Policy. NOW, THEREFORE BE IT RESOLVED, the City Council of the City of Saratoga adopts the 2023-24 Investment Policy as provided in Exhibit A. The above and foregoing resolution was passed and adopted at a regular meeting of the Saratoga City Council held on the 21 day of June 2023 by the following vote: AYES: NOES: ABSENT: ABSTAIN: Kookie Fitzsimmons, Mayor ATTEST: 23 Resolution No. 23-XXXX Page 2 Britt Avrit, MMC, City Clerk 24 POLICY TITLE: INVESTMENT POLICY – for Fiscal Year 20232023-24 REGULATORY COMPLIANCE: California Government Code Section - 53600 et seq., City of Saratoga Municipal Code Section - 2-20.035, City of Saratoga Investment Policy - Section XVI POLICY EFFECTIVE DATE: July 1, 20222023 AMENDMENTS: Annual adoption CITY COUNCIL APPROVAL: June 15, 202221, 2023 I. POLICY: It is the policy of the City of Saratoga to invest public funds in a manner which will provide the maximum security with the highest investment return, while meeting the daily cash flow demands of the City and conforming to all state and local statutes governing the investment of public funds. II. SCOPE: This investment policy applies to all financial assets of the City of Saratoga. These funds are accounted for in the City of Saratoga's Comprehensive Annual Financial Report and include: A. Funds 1. General Fund 2. Special Revenue Funds 3. Internal Service Funds 4. Capital Project Funds 5. Debt Service Funds 6. Trust and Agency Funds 7. Any new fund, unless specifically exempted B. Exceptions 1. Deferred Compensation Plans – Investments are directed by the individual plan participants. 2. Debt Service Funds held by trustees – Investments are placed in accordance with bond indenture provisions. 3. Notes and Loans – Investments are authorized by separate agreements approved by City Council. III. PRUDENCE Investments shall be made with judgment and care, under circumstances then prevailing, with prudence, discretion and intelligence not for speculation, but for investments, considering the probable safety of capital as well as the probable income to be derived. A. The standard of prudence to be used by investment officials shall be applied in the context of managing an overall portfolio. Investment officers acting in accordance with written procedures and this investment policy and exercising 25 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. IV. OBJECTIVES The primary objectives, in priority order, of the City of Saratoga's investment activities shall be: A. Safety Safety of principal is the foremost objective of the investment program. Investments of the City of Saratoga shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. The objectives will be to mitigate credit risk and market risk. 1. Credit risk, defined as the risk of loss due to failure of the issuer of a security, shall be mitigated by investing only in investment grade securities and by diversifying the investment portfolio so that potential losses on individual securities will have a minimal impact on the portfolio. 2. Market risk, defined as market value fluctuations due to overall changes in the general level of interest rates, shall be mitigated by limiting the average maturity of the City’s investment portfolio to two years and the maximum maturity of any one security to five years, and by structuring the portfolio based on cash flow analysis so as to avoid the need to sell securities prior to maturity. B. Liquidity The City of Saratoga's investment portfolio will remain sufficiently liquid to enable the City of Saratoga to meet all operating requirements, which might be reasonably anticipated. C. Return on Investments The City of Saratoga's investment portfolio shall be designed with the objective of attaining a rate of return throughout budgetary and economic cycles, commensurate with the City of Saratoga's investment risk constraints and the cash flow characteristics of the portfolio. V. DELEGATION OF AUTHORITY Authority to manage the City of Saratoga's investment program is derived from the following: California Government Code Section 53600 et seq. and Saratoga Municipal Code Section 2-20.035. Management responsibility for the investment program is hereby delegated to the City Manager who shall be responsible for supervising all treasury activities of the Administrative Services Director and who shall establish written procedures for the operation of the investment program consistent with this investment policy. Procedures should include reference to: safekeeping, delivery vs. payment, investment accounting, wire transfer agreements, banking service contracts and collateral/depository agreements. Such procedures shall include explicit delegations of authority to persons responsible for investment transactions. No person may engage in investment 26 transactions except as provided under the terms of this policy and the procedures established by the City Manager. The City Manager shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinate officials. VI. ETHICS AND CONFLICTS OF INTEREST Officers and 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. These officers and employees involved in the investment process shall disclose to the City Manager any material financial interests in financial institutions that conduct business with the City. Employees and investment officials shall refrain from undertaking personal investment transactions with individuals who conduct business on behalf of the City of Saratoga. VII. AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS The City Manager will maintain a list of financial institutions authorized to provide investment services to the City. In addition, a list will also be maintained of approved security broker/dealers selected by credit worthiness and who are authorized to provide investment services in the State of California. These may include "primary" dealers or regional dealers that qualify under Securities & Exchange Commission Rule 15C3-1 (uniform net capital rule). No public deposit shall be made except in a qualified public depository as established by state laws. All financial institutions and broker/dealers who desire to become qualified bidders for investment transactions must supply the City Manager with the following: personal interview, firm description and audited financial statements, proof of National Association of Securities Dealers (NASD) certification, proof of State of California registration, completed broker/dealer questionnaire and certification of having read the City of Saratoga's investment policy and applicable depository contracts. An annual review of the financial condition and registrations of qualified bidders will be conducted by the City Manager. A current audited financial statement is required to be on file for each financial institution and broker/dealer with which the City of Saratoga invests prior to any transaction. 27 VIII. AUTHORIZED AND SUITABLE INVESTMENTS The City of Saratoga is empowered by Government Code Section 53601, and further limited by this investment policy, to invest in the following types of securities: Type Guarantee Limits Term to Maturity Limit State of California Local Agency Investment Fund (LAIF) State Fund None $40,000,000 65,000,000 On Demand U.S. Treasury Bills U.S. Treasury Guaranteed by the US Treasury No Limit 1 Year U.S. Treasury Notes U.S. Treasury Guaranteed by US Treasurt No Limit 5 Years U.S. Govt. Agency Issues (e.g. FNMA, GNMA) Federal Agencies Implied Guarantee by US Government No Limit 5 Years FDIC Insured Certificates of Deposit (California Bank or Savings & Loan Companies) FDIC/FSLIC and Collateral FDIC 20% portfolio $250,000 per institution; 30% total portfolio 3 5 Years FDIC Insured Negotiable Certificates of Deposit Issuing Institution FDIC 20% portfolio $250,000 per institution; 30% total portfolio 5 Years Investment Grade Obligations of California, or Local Governments, or Public Agencies Public Entity None 20% portfolio per institution; 30% total portfolio 5 Years Money Market Mutual Funds Fund None 10% portfolio per institution; 20% total portfolio On Demand Passbook Savings Account and Demand Deposit Issuing Bank 110% Collateral Minimum necessary for current cash flow On Demand Joint Powers Authority Investment Pools as authorized by Government Code 53601(p) None 20% portfolio per pool; 20% total portfolio 3 years Formatted Table 28 The City shall not engage in leveraged investing, such as margin accounts, or any form of borrowing for the purpose of investing. The City shall not invest in instruments whose principal and interest could be at risk contrary to Section IV.A of this policy. Examples of these instruments are options and future contracts. Additionally, the City shall not invest in "derivatives". See Glossary for description of above securities. IX. COLLATERALIZATION Collateralization will be required on certificates of deposit and other deposit-type securities balances in excess of the FDIC insured limits. In order to anticipate market changes and provide a level of security for all funds, the collateralization level will be 110% of market value of principal and accrued interest, in accordance with California Government Code Section 53651 and 53652. The City of Saratoga chooses to limit collateral to those listed in Section VIII. Collateral will always be held by an independent third party with whom the entity has a current custodial agreement. A clearly marked evidence of ownership (safekeeping receipt) must be supplied to the City of Saratoga and retained. The right of collateral substitution may be granted. X. SAFEKEEPING AND CUSTODY All security transactions entered into by the City of Saratoga shall be conducted on a delivery-versus-payment (DVP) basis. Securities will be held by a third - party custodian, in the City of Saratoga's name and control, designated by the City Manager and evidenced by safekeeping receipts. XI. DIVERSIFICATION The City of Saratoga will diversify its investments by security type and institution. Limits are provided for in Section VIII. With the exception of U.S. Treasury securities and authorized pools, no more than 30% of the City of Saratoga's total investment portfolio will be invested in a single security type or 20% with a single financial institution. XII. MAXIMUM MATURITIES To the extent possible, the City of Saratoga will attempt to match its investments with anticipated cash flow requirements. Unless matched to a specific cash flow, the City of Saratoga will not directly invest in securities maturing more than five (5) years from the date of purchase. However, the City of Saratoga may collateralize its certificates of deposits using longer-dated investments not to exceed ten (10) years to maturity. 29 Debt reserve funds may be invested in securities exceeding five (5) years if the maturities of such investments coincide as nearly as practicable with the expected use of the funds. The City of Saratoga will retain a general operating reserve adopted annually by the City Council. The amount of active deposits and inactive investments with maturity of one year or less shall always be equal to or greater than the required general operating reserve. The report discussed in Section XV shall demonstrate this policy is in effect. XIII. INTERNAL CONTROL The City of Saratoga is responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the City 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 the City Manager and staff. Accordingly, the City shall establish an annual process of independent review by an external auditor. This review will provide internal control by assuring compliance with policies and procedures. The internal controls shall address the following points: • Control of collusion. • Separation of transaction authority from accounting and recordkeeping. • Custodial safekeeping. • Avoidance of physical delivery of securities. • Clear delegation of authority to subordinate staff members. • Written confirmation of transactions for investments and wire transfers. • Development of a wire transfer agreement with the lead bank and third- party custodian. XIV. PERFORMANCE STANDARDS The investment portfolio shall be designed with the objective of obtaining a reasonable rate of return throughout budgetary and economic cycles, commensurate with investment risk constraints and cash flow needs. A. Market Yield (Benchmark) The City’s investment strategy is passive. Given this strategy, the benchmark used by the City of Saratoga to determine whether market yields are being achieved shall be the one-year U.S. Treasury Bill. XV. REPORTING The City Manager is charged with the responsibility of including a market report on investment activity and returns in the City of Saratoga's Cash and Investment 30 Report. The report will be in compliance with California Government Code Section 53646. XVI. INVESTMENT POLICY ADOPTION The City of Saratoga's Investment Policy shall be reviewed and adopted by the City Council annually. 31 GLOSSARY Asset Allocation Refers to the division of holdings in a portfolio by asset class. A common strategy is to hold assets that perform or react differently with the objective to limit or reduce risk. Benchmark A point of reference that serves as a standard for performance to be measured against. Broker A person or entity registered with the National Association of Security Dealers and provides investment services and/or execution of services in exchange for compensation. Annual Comprehensive Financial Report (ACFR) The City’s annual financial statements and footnotes, along with an executive summary, financial outlook, statistical information, and other financial information. Certificates of Deposit Commonly called time deposit certificates or time deposit open accounts. These are nonnegotiable. Collateralization Process by which a borrower pledges securities, property or other deposits for the purpose of securing the repayment of a loan and/or security. Also refers to securities pledged by a bank to secure deposits of public monies. Custodian A bank or other financial institution that keeps custody of stock certificates and other assets. Dealer Someone who acts as a principal in all transactions, including buying and selling from his/her own account. Delivery vs. Payment The preferred method of delivering securities, with an exchange of money for the securities. Demand Deposits A deposit of monies which are payable by the bank upon demand of the depositor. Derivative Securities that are based on, or derived from, some underlying asset, reference date, or index. 32 Dividend A share of the income divided up amongst shareholders of a company. FDIC Federal Depository Insurance Corporation FSLIC Federal Savings and Loans Insurance Corporation Index A tool used to statistically measure the progress of a group of assets that share characteristics. This can include a group of stocks, a group of bonds, or a group of other assets. Internal Rate of Return (IRR) The discount rate at which the present value of future cash flows of an investment equals the cost of the investment. It is determined when the net present value of the cash outflows (the cost of the investment) and the cash inflows (returns on the investment) equal zero, the rate of discount being used is the IRR Liquidity An asset that can easily and rapidly be converted into cash without significant loss of value. Local Agency Investment Fund (LAIF) The LAIF was established by the State of California to enable treasurers to place funds in a pool for investments. There is a limitation of $30 million per agency subject to a maximum of ten (10) total transactions per month. The City uses this fund when market interest rates are declining as well as for short-term investments and liquidity. Money market mutual funds Mutual funds that invest in short term securities and strive to maintain a share price of $1. Negotiable certificates of deposit A bank deposit issued in negotiable form (i.e., one that can be bought or sold in the open market). Passive Investment Strategy An approach to managing the investment portfolio, which entails a “buy and hold” strategy in which investments are generally held until they mature. Portfolio Combined holding of more than one stock, bond, commodity, cash equivalent or other asset. The purpose of a portfolio is to reduce risk through diversification. Primary Dealer A group of government securities dealers that submit daily reports of market activity and security positions held to the Federal Reserve Bank of New York and are subject to its oversight. 33 Rate of Return The total income received over a period of time, including interest income, accretion of discount, amortization of premium, and change of market value; usually expressed as a percentage or in decimal format. Regional Dealer A dealer who is not a primary dealer, and therefore not monitored by the Federal Reserve, but is registered with the Securities and Exchange Commission. Safekeeping Offers storage and protection of assets provided by an institution serving as an agent U.S. Treasury Bills Commonly referred to as T-Bills these are short-term marketable securities sold as obligations of the U.S. Government. They are offered in three-month, six-month and one-year maturities. T-Bills do not accrue interest but are sold at a discount to pay face value at maturity. U.S. Treasury Notes These are marketable, interest-bearing securities sold as obligations of the U.S. Government with original maturities of one to ten years. Interest is paid semi-annually. U.S. Government Agency Issues Include securities, which fall into this category. Issues, which are unconditionally, backed by the full faith and credit of the United States, e.g. Small Business Administration Loans. Yield The yield refers to the interest on a bond or the dividends paid on a stock or mutual fund. Yield also includes expected capital gain or loss. 34 Memorandum DATE: June 13, 2023 TO: Finance Committee FROM: Nick Pegueros, Administrative Services Director SUBJECT: Presentation from California CLASS for Investment Services City staff recommends Finance Committee receive a presentation from California CLASS, a Joint Powers Authority that contracts with Public Trust Advisors Investment Advisors to invest public funds on behalf of JPA in compliance with California law regulating investment of public funds and the City’s adopted investment policy. California CLASS is an option available for consideration should the City desire to diversify its investment portfolio. Other investment options are available to the City that achieve desired investment objectives within the City’s existing investment policy. No Action Requested. Attachments 1. California CLASS Liquidity Management for California Public Agencies 35 Memorandum 36 LIQUIDITY MANAGEMENT FOR CALIFORNIA PUBLIC AGENCIES June 13, 2023 37 LEGAL DISCLOSURE California CLASS 2023 ©2 The information provided in this presentation does not,and is not intended to,constitute legal advice;instead,all information,content,and materials discussed herein are for general informational purposes only.Information in this presentation may not constitute the most up-to-date legal or other information.Viewers of this presentation should contact their attorney to obtain advice with respect to any particular legal matter.No reader,user,or audience member should act or refrain from acting on the basis of information in this presentation without first seeking legal advice from counsel in the relevant jurisdiction.Only your individual attorney can provide assurances that the information contained herein –and your interpretation of it –is applicable or appropriate to your particular situation. The views expressed at,or through,this presentation are those of the presenter(s)in their individual capacities only –not those of their respective employers,Public Trust Advisors,LLC or California CLASS.All liability with respect to actions taken or not taken based on the contents of this presentation are hereby expressly disclaimed.The content in this presentation is provided "as is;"no representations are made that the content is error-free. The information presented should not be used in making any investment decisions.This material is not a recommendation to buy,sell,implement,or change any securities or investment strategy, function,or process.The foregoing is for informational purposes only and should not be considered a solicitation of investment advisory services. 38 STATUTORY FRAMEWORK California CLASS 2023 ©3 53601.This section shall apply to a local agency that is a city, a district, or other local agency that does not pool money in deposits or investments with other local agencies, other than local agencies that have the same governing body… (p)Shares of beneficial interest issued by a joint powers authority organized pursuant to Section 6509.7 that 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 joint powers authority. To be eligible under this section, the joint powers authority issuing the shares shall have retained an investment adviser that meets all of the following criteria: (1)The adviser is registered or exempt from registration with the Securities and Exchange Commission. (2)The adviser has not less than five years of experience investing in the securities and obligations authorized in subdivisions (a) to (q), inclusive. (3)The adviser has assets under management in excess of five hundred million dollars ($500,000,000). 53600.As used in this article, “local agency” means county, city, city and county, including a chartered city or county, school district, community college district, public district, county board of education, county superintendent of schools, or any public or municipal corporation. (Amended by Stats. 1987, Ch. 887, Sec. 2.) Source: https://leginfo.legislature.ca.gov/ Please refer to the disclosure slide for additional information. Governance California Government Code Your Investment Policy 39 CALIFORNIA CLASS GOVERNANCE California CLASS 2023 ©4 Please refer to the disclosure slide for additional information. Board of Trustees Investment Advisor Oversees Sales & Marketing Client Services Credit Research Portfolio Management Prudent investor standard informs all aspects of program governance 40 DIRECTED BY YOUR PEERS California CLASS 2023 ©5 Please refer to the disclosure slide for additional information. California CLASS is supervised by a Board of Trustees comprised of eligible participants of the program.The Board administers the affairs of the program, entering into contracts and agreements with the best interest of its participants in mind. Founding Participants & Board of Trustees Christina Turner, CPA Chairperson City Manager City of Morgan Hill Ryan Clausnitzer Vice Chairperson General Manager Alameda County Mosquito Abatement District Margaret Moggia Secretary Executive Manager, Finance West Basin Municipal Water District George Harris Treasurer Director of Finance City of Lancaster Parker Hunt Treasurer/Tax Collector Tehama County 41 PROGRAM PARTNERS California CLASS 2023 ©6 Please refer to the disclosure slide for additional information. 42 PRUDENT INVESTOR STANDARD California CLASS 2023 ©7Please refer to the disclosure slide for additional information. Safety & Liquidity Yield Diversification and risk management are the important elements to incorporate when seeking to optimize primary goals of safety, liquidity, and yield Local agency officials are subject to the Prudent Investor Standard (CGC 53600.3) 43 Portfolio Type Prime-Style Enhanced Cash Purpose Operating Funds Strategic Reserves Rating ‘AAAm’‘AAAf/S1’ Liquidity Offered Daily Next-Day Min/Max Investment None None Withdrawals Unlimited Unlimited Accounts Unlimited Unlimited Investment Horizon Day-to-Day 12-18 Months WAM 60 Days 90-200 Days Net Asset Value (NAV) Stable $1.00 per share Variable $10.00 per share Investment Option California CLASS Prime California CLASS Enhanced Cash CALIFORNIA CLASS OFFERS A COMPREHENSIVE APPROACH TO MANAGING YOUR AGENCY’S CASH California CLASS 2023 ©9Source: Public Trust Advisors, LLC. Please refer to the disclosure slide for additional information. 44 USER-FRIENDLY TRANSACTION PORTAL California CLASS 2023 ©10Please refer to the disclosure slide for additional information. 10 45 DIVERSIFY AND COMPLEMENT: CLASS VS. LAIF California CLASS 2023 ©11Please refer to the disclosure slide for additional information. 11 *Offers Daily Liquidity. **Currently 270 days. Source: LAIF Information Statement -please refer to the disclosure slide of this presentation for more information. LAIF Portfolio Type Prime-Style MMF Enhanced Cash Enhanced Cash* Purpose Short term liquidity Core reserve strategy Short term liquidity Rating ‘AAAm’ ‘AAAf/S1’Not Rated Liquidity Offered Daily Next Day Daily Investment Authorization 53601 53601 16430 and 16480.4 Weighted Average Maturity 60-day max 9mos –1.25yr Unlimited** Interest Paid Monthly Monthly Quarterly Governance Board of Trustees Local Investment Advisory Board 46 PORTAL BENEFITS Transparent Reporting 24/7 Online Access Built for Ease-of-Use •Deposits (contributions) •Withdrawals (redemptions) •Future-dated (up to 1 year) •Monthly statements •Transaction confirmations •On-demand reports •Balances & contacts •Banking information •Multi-factor authentication California CLASS 2023 ©12Please refer to the disclosure slide for additional information. 47 BUILT EXCLUSIVELY FOR MANAGERS OF PUBLIC FUNDS California CLASS 2023 ©13Please refer to the disclosure slide for additional information. 13 Unlimited Subaccounts Create as many dedicated subaccounts as your agency requires within the Transaction Portal as needs dictate. Unlimited Transactions Convenient and user- friendly transaction capabilities. Allows your entity to require the approval of two authorized individuals for online transactions. Dual Authorization 48 PORTFOLIO COMPOSITION California CLASS 2023 ©14Source: Public Trust Advisors, LLC. Please refer to the disclosure slide for additional information. Agency Fixed 4.58%Agency Floating 8.30% Asset Backed Comm. Paper 19.29% Collateralized Deposits 0.32% Comm. Paper 3.11% Fixed CDs 8.10% Floating CDs 17.19% Interest Bearing Comm. Paper 12.54% Money Market Fund 9.14% Treasury Bill, 2.35% CALIFORNIA CLASS PRIME ASSET ALLOCATION AS OF 5/23/2023 49 FEE STRUCTURE California CLASS 2023 ©15Please refer to the disclosure slide for additional information. 15 Lower fees could mean more investment income for your community Maximum of 15bps charged (annual rate) No wire fees unless from your bank* *You may incur fees associated with wires and/or ACH transactions by your bank, but there will be no transaction fees charged from California CLASS for such transactions. Never receive an invoice; yields are net of fees 50 California CLASS 2023 ©16 We are here as a dedicated fiduciary to our clients and an investment resource for you and your public agency. Robert Shull Senior Director, Investment Services (213) 378-2070 bob.shull@californiaclass.com Brent Turner, CTP Regional Director of Strategy brent.turner@californiaclass.com Let’s Connect Please refer to the disclosure slide for additional information. 51 June 13, 2023 INTRODUCTION TO PUBLIC TRUST ADVISORS 52 California CLASS 2023 ©1818 Introduction to Public Trust Advisors o Public Trust Advisors, LLC (Public Trust) is an SEC registered independent investment advisor headquartered in Denver, Colorado, with offices in Los Angeles, Florida, New York, Texas, and Georgia. o Public Trust was founded on the fundamental principle of maintaining a single business focus of providing investment management and advisory services to government and institutional investors. o Public Trust seeks to be a national leader in providing customized investment advisory solutions based on the clients’ unique cash flows, risk tolerances, and investment policies. o Safety-first investment philosophy that seeks to deliver consistent risk adjusted returns consistently o The Public Trust Executive Team includes managing partners with 100+ years of combined experience and a team of professionals that are dedicated to the safety of public funds. o Investment Advisor and/ or Administrator for 18 local government investment pools (LGIP’s) in 11 different states. The management of investment pools is Public Trust’s core business focus . Public Trust professional investment experience includes clients that were served by Public Trust employees currently and during their tenure with prior firms.Those entities may currently remain clients of the employees’previous employer.Please refer to the disclosure slide for more information. 53 What We Do SMA LGIP Assets $64.94 Currently manage nearly $65 billion in public sector assets nationwide. Source:Public Trust Advisors.Data as of December 31,2023.All information is assumed to be correct,but the accuracy has not been confirmed and therefore is not guaranteed to be correct. The data in this presentation is unaudited.Please refer to the disclosure slide of this presentation for more information. We strive to build a program that will meet your goals. California CLASS 2023 ©19 54 Public Trust Investment Team 80% Local Government Investment Pools 20% Separately Managed Accounts Government, Prime, and Fluctuating NAV Seasoned, Dedicated Professionals Customized Investment Solutions Risk-Adjusted Returns . Source: Public Trust Advisors. Data unaudited. Public Trust Advisors, LLC took over the management and advisory services as n oted in the disclosures page. Many factors affect performance including changes in market conditions and interest rates and in response to other economic, political, or financial developments. Investment involves risk including the possible loss of principal. No assurance can be given that the performance objectives of a given strategy will be achieved. All calculations and results presented are for discussion purposes only and should not be used for making calculations and/or decisions. Asset growth is p rimarily the result of capital inflows, and to a lesser extent, other factors such as the reinvestment of interest and returns. Past performance is no guarantee of future results. Any financial and/or investment decision may incur losses.Please refer to the disclosure slide of this presentation for additional information. California CLASS is not a bank.An investment in California CLASS is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.Although California CLASS seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. $3.30 $6.72 $7.90 $11.98 $19.67 $25.48 $32.77 $42.42 $48.93 $51.50 $64.98 $- $10 $20 $30 $40 $50 $60 Q4'12 Q4'13 Q4'14 Q4'15 Q4'16 Q4'17 Q4'18 Q4'19 Q4'20 Q4'21 Q4' 22 Bi l l i o n s Growth in Assets Under Management California CLASS 2023 ©20 55 Data unaudited.All information is assumed to be correct,but the accuracy has not been confirmed and therefore is not guaranteed to be correct.Source:Public Trust Advisors®.Data as of 12/31/2023. Please refer to the disclosures slide at the end of this presentation for more information. LGIP Start Date Assets Growth % Since Public Trust Transition Number of Participants Services Provided Investment Style 2023 $279m N/A 30 Administrator & IA Prime 2012 $12.15b 272%1801 Administrator & IA Government, Prime, & Enhanced Cash 2015 $6.19b N/A 143 Administrator & IA Prime & Enhanced Cash 2015 $3.69b 169%784 Administrator Prime 2014 $3.43b 1441%640 Administrator & IA Prime & Enhanced Cash 2013 $8.39b 4291%958 Administrator & IA Prime & Government 2013 $18.08b 744%938 Administrator & IA Prime & Government 2015 $2.51b 499%472 Administrator & IA Prime 2016 $2.03b N/A 150 Co-Administrator & IA Enhanced Cash 2020 $404m N/A 54 Administrator & IA Prime California CLASS 2023 ©21 56 •Professional management of public funds •Access to markets not always available to smaller entities •Daily liquidity •Institutional knowledge Liquidity Safety Yield California CLASS was created for California public agencies. Purpose The purpose of California CLASS is to provide California public agencies with a convenient,short-term investment opportunity carefully selected seeking to optimize interest earnings while maximizing safety and liquidity. LGIP Advantages 22Pleaserefertothedisclosureslideformoreinformation.57 California CLASS 2023 ©23 Why California CLASS? Why Now? o LAIF caps investment at $75 million per entity o Some banks are turning away deposits due to regulatory requirements and market conditions o SEC money market reform of 2018 potentially forced many localities into Government MMF’s and/or bank deposits o Prime style MMF funds have outperformed Government style MMF funds 27 of the last 27 years by an average of 14 .4 basis points through multiple economic and interest rate cycles (gross of fees)* o ARPA funds,stimulus funding,and rising ad valorem revenues are a factor in driving locality cash balances significantly higher o Greater diversification in the California LGIP and investment marketplace. o California CLASS is ‘AAAm’rated by S&P Global Ratings and is subject to weekly rating agency oversight. o Oversight from a Board of Trustees of their peers who participate in the fund o By leveraging technology and creating efficiencies,California CLASS has the potential to operate at a lower fee structure than competing investment options available to California entities. *Source:Crane’s money fund intelligence as of July 31,2022,Bloomberg,bea.gov,www.treasurer.ca.gov.Please refer to the disclosure slide of this presentation for more information.California CLASS Prime are rated ‘AAAm’by S&P Global Ratings.A 'AAAm'rating by S&P Global Ratings is obtained after S&P evaluates a number of factors including credit quality,market price exposure,and management.For a full description on rating methodology,please visit www.spglobal.com.Ratings are subject to change and do not remove credit risk. 58 California CLASS 2023 ©24 Custodian Administrator/ Investment Advisor Distribution Agent Legal Counsel Board of Trustees Independent Auditor California CLASS Oversight Please refer to the disclosure slide for more information. 59 California CLASS is built to allow public agencies to conveniently manage their investments and access reporting in a user-friendly and easy to understand manner. No Fees*, No Minimum Balance Unlimited Transactions Unlimited Subaccounts Participant-to-Participant TransfersFuture Dated Transactions *You may incur fees associated with wires and/or ACH transactions by your bank, but there will be no fees charged from California CLASS for such transactions.California CLASS is not a bank. An investment in California CLASS is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.Although California CLASS seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. Please review the California CLASS Information Statement before investing. Built to serve California public agencies! Key Features 25California CLASS 2023 ©60 DISCLOSURES Client Services This presentation is for informational purposes only.All information is assumed to be correct,but the accuracy has not been confirmed and therefore is not guaranteed to be correct.Information is obtained from third party sources that may or may not be verified.The information presented should not be used in making any investment decisions and is not a recommendation to buy,sell,implement,or change any securities or investment strategy,function,or process.Any financial and/or investment decision should be made only after considerable research,consideration,and involvement with an experienced professional engaged for the specific purpose.All comments and discussion presented are purely based on opinion and assumptions,not fact.These assumptions may or may not be correct based on foreseen and unforeseen events.All calculations and results presented are for discussion purposes only and should not be used for making calculations and/or decisions.The data in this presentation is unaudited. California CLASS Prime are rated ‘AAAm’by S&P Global Ratings.A 'AAAm'rating by S&P Global Ratings is obtained after S&P evaluates a number of factors including credit quality,market price exposure,and management.For a full description on rating methodology,please visit www.spglobal.com.Ratings are subject to change and do not remove credit risk. California CLASS Enhanced Cash is rated ‘AAAf/S1’by FitchRatings.The ‘AAAf’rating is Fitch’s opinion on the overall credit profile within a fixed- income fund/portfolio and indicates the highest underlying credit quality of the pool’s investments.The ‘S1’volatility rating is Fitch’s opinion on the relative sensitivity of a portfolio’s total return and/or net asset value to assumed changes in credit spreads and interest rates.The ‘S1’ volatility rating indicates that the fund possesses a low sensitivity to market risks.For a full description on rating methodology,please visit www.fitchratings.com. Performance results for California CLASS are shown net of all fees and expenses and reflect the reinvestment of interest and other earnings.Many factors affect performance including changes in market conditions and interest rates and in response to other economic, political,or financial developments.Investment involves risk including the possible loss of principal.No assurance can be given that the performance objectives of a given strategy will be achieved.California CLASS is not a bank.An investment in California CLASS is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.Although California CLASS seeks to preserve the value of your investment at $1.00 per share,it cannot guarantee it will do so.Past performance is not an indicator of future performance or results.Any financial and/or investment decision may incur losses,including loss of principal.Data unaudited.The ICE BofA ML 3-Month T-Bill Index is an unmanaged index that measures the returns of three-month U.S.Treasury Bills. Investors cannot purchase the index directly.Fees will reduce returns. Public Trust is required to maintain a written disclosure brochure of our background and business experience.If you would like to receive a copy of our current disclosure brochure,privacy policy,or code of ethics,please contact us. 2661 Memorandum DATE: June 13, 2023 TO: Finance Committee FROM: Nick Pegueros, Administrative Services Director SUBJECT: Finance Committee Meeting Schedule The City Council Finance Committee holds regular meetings one time each month on the 2nd Tuesday with a break in the summer months. In 2022, the Committee cancelled its June, July, and August meetings. City staff does not have any identified agenda items for July or August. In September, City staff will present a review of City contract and professional services as discussed at the City Council retreat in February. 62