AgdaPkt 2021.02.22 Joint SA PFA - Laserfiche WebLink

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6.A. - Page 2 of 40 bond documents and other unique financing transactions, and authorizing any deviations from the City's investment policies. The City has engaged the services of PFM Asset Management (PFM), an external investment manager/advisor, to assist in the management of the City's investment portfolio in a manner consistent with the City's objectives; PMF has reviewed the Policy and provided their feedback as to the changes recommended. ANALYSIS The City Council Finance and Audit Sub -Committee provides oversight to the investment function through the periodic review of the investment report and policy. The recommended changes in the Policy were discussed at the Sub -Committee meeting on February 8th, where the proposed Policy was approved by Sub -Committee members and recommended for adoption by the full Council. This year, staff is proposing changes to the Policy to address recent Code changes that went into effect on January 1, 2021. These proposed modifications are described in more detail below and in the attached redlined copy of the Policy (Attachment A). On September 28, 2020, Governor Gavin Newsom signed into law Senate Bill 998 (Moorlach) — Local Government Investments ("SB 998"). SB 998, which took effect on January 1, 2021 and is in effect until January 1, 2026, made a number of amendments to certain sections of the Code which govern the investment of public funds, including: 1. Allowing investment in securities issued or backed by the U.S. 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; 2. Allowing local agencies that have more than $100 million of investment assets under management to invest up to 40% in commercial paper (existing limit is 25% for all agencies, other than a county or a city and county); 3. Establishing a 10% issuer limit on commercial paper and corporate notes for all agencies, other than a county or a city and county; and 4. Adding permission for federally recognized Indian tribes to invest and participate in investment Joint Power Authorities (JPAs). PFM has recommend the City edit its Policy to address the first two items listed above. While both staff and PFM hope the market will not put us in a position to have to buy a security that results in zero or negative interest accrual, PFM recommended and thought it was appropriate to have the option in case it is necessary. In accordance with Code, the City currently limits investment in commercial paper to 25% of its portfolio, and PFM has recommended an increase to the allocation to the new limit of 40%, to have the maximum flexibility to utilize commercial paper. Regarding the final two changes resulting from SB 998, the City currently places a 5% issuer limit on corporate notes and commercial paper, and PFM has recommend the City keep the more restrictive limit Page 2 of 4 City of Redwood City 1017 Middlefield Road, Redwood City, CA. 94063 Tel: 650-780-7000 www.redwoodcity.ore