PREPARED BY: ARTURO CASTILLO DATE OF MEETING: 07/21/2025
SUBJECT:
TITLE
CONSIDER ADOPTING RESOLUTIONS OF THE CITY COUNCIL OF THE CITY OF SAN PABLO AND THE SAN PABLO LOCAL SUCCESSOR AGENCY BOARD APPROVING AND ADOPTING A REVISED INVESTMENT POLICY FOR FY 2025-26
CEQA: This proposed action is not a project as defined by CEQA.
Label
CITY MANAGER RECOMMENDATION
Recommendation
Adopt Resolution
Body
Compliance statements
Continue Best Management Practices, Fiscal Excellence, and Fiscal Transparency is an adopted City Council Priority contained in the adopted Fiscal Year 2025-2027 City Council Priority Workplan, effective April 7, 2025.
RECOMMENDATION:
It is recommended that the City Council and the Local Successor Agency (LSA) each adopt a resolution approving a revised version of the City’s and LSA’s Investment Policy (Policy) for the City’s for FY 2025-26.
BACKGROUND
California Government Code Section 53646 allows the Treasurer or Chief Financial Officer to render annually to the City Council and the LSA Board of Directors a statement of investment policy and requires that any change in the policy be considered at a public meeting. The Policy is reviewed annually to ensure it comports with current City and LSA objectives. Further, Government Code Section 53607 requires that a legislative body delegate investment authority to the CFO annually.
The City’s and LSA Board of Directors’ Investment Policy sets forth the City’s and LSA investment objectives, risk preferences, authorized investments, and other investment-related priorities. A thoughtful and comprehensive investment policy not only provides a level of accountability for investment officials, but it also promotes public trust in investment decisions. Developing, reviewing, and monitoring the City’s and LSA Board of Directors’ Investment Policy serves as an important tool of communication between the investment official, City management, and the City Council and LSA Board of Directors.
Prior to January 1, 2005, State law required the City Treasurer to render to the City Council and LSA Board of Directors an annual Investment Policy. Although the law changed to eliminate this requirement, an annual review of the Policy for legal compliance and subsequent submittal to the City Council and LSA Board of Directors is good fiscal practice.
Mr. Mark Shuster, Managing Partner with Shuster Advisory Group, LLC (“Shuster”), and Shuster team members, have regularly met with staff to review the City’s investment portfolio, including discussion on updating the City’s and LSA Policy and any recommended changes to the Policy. The last update to the City’s Investment Policy Statement occurred on June 17, 2024.
Shuster Advisory Group, LLC (Shuster) is an independent investment advisory firm and fiduciary. They provide governmental and institutional retirement plan consulting services as well as private wealth management. Shuster is a SEC-Registered Investment Advisor with over $9 billion in assets under management focusing on serving the unique needs of governmental agencies and special districts serving over 100 cities, agencies and public entities. Shuster serves as a fiduciary to plan investments and provides investment selection, monitoring, and management.
ANALYSIS
The current Investment Policy complies with the requirements of California Government Code Section 53601 (“the Code”), though updates to the Code over the years have allowed for increased investment flexibility without sacrificing core principles of safety and liquidity. Shuster recommends updating the City’s and LSA’s Investment Policy to utilize the opportunities available with the current version of the Code.
To that end, Shuster recommends the following updates:
1. Allowing Municipal Bond securities with final maturities not to exceed 5 years, pursuant to Government Code Section 53601(c-e);
2. Allowing Joint Powers Authority Pool investments, pursuant to Government Code Section 53601(p);
3. Measuring Mortgage-Backed and Asset-Backed securities’ maturities by Weighted-Average-Life (WAL), not to exceed 5 years or a portfolio limit of 20%, pursuant to Government Code Section 53601(o);
4. Removing the 20% portfolio limit for Agency Mortgage-Backed Securities, pursuant to CA Code Section 53601(f); and
5. Allowing Portfolio Benchmark selection to be determined by the Investment Advisor as within a City’s powers pursuant to Government Code Section 53601.
Budget, Fiscal & Legislative Standing Committee (BFLSC) Review
On June 23, 2025, the BFLSC (Pabon-Alvarado; Ponce) reviewed the Shuster Advisory, LLC. Investment Policy Statement to be formally considered and approved by the City Council and LSA Board of Directors on July 21, 2025.
FISCAL IMPACT
There is no explicit financial impact to updating the City’s and LSA Investment Policy. However, there is an implicit impact given the broader opportunity to invest in Government Code Section 53601 eligible securities.
ATTACHMENTS:
Att: A Resolution 2025-### City Investment Policy
Att: B Resolution 2025-### LSA Investment Policy
Att: C Revised Investment Policy