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Agenda Item 34.

City Council Meeting

Meeting Date:	08/16/2022
FROM:	Bill Gallardo

Subject:

Annual Review of Statement of Investment Policy for the City of Brea/Successor Agency to the Brea Redevelopment Agency

RECOMMENDATION

Review and approve the City of Brea/Successor Agency to the Brea Redevelopment Agency Statement of Investment Policy.

BACKGROUND/DISCUSSION

State law allows the City Council to annually adopt the Statement of Investment Policy. Thus, per the City's fiscal policies, "The City Council will review and adopt annually an investment policy as recommended by the Investment Advisory Committee." The Investment Policy serves as a guideline for the investment of City and Successor Agency funds. The Brea Investment Advisory Committee annually reviews the Statement of Investment Policy for the City of Brea and the Successor Agency to the Brea Redevelopment Agency.

At the quarterly meeting on July 25, 2022, Chandler Asset Management, the City's Portfolio Manager, recommended to the Investment Advisory Committee (IAC) the following changes to the City's current Investment Policy:

Clarify the minimum “A” rating category requirement for Medium Term Corporate Notes on Page 3 of the Investment Policy.
Exclude Pass-through Securities which are issued by the U.S. Treasury, U.S. Government Agency and Instrumentality’s of Government Sponsored Corporations on Page 3 of the Investment Policy. These types of securities are captured in the US Government Agency limitation of 25% per entity as noted on Page 5 of the Investment Policy.
Increase the allowance for Asset-Backed Securities from 10% to 20%.

After extensive review and discussion, the IAC recommends to City Council the following changes to the Investment Policy:

Clarify the minimum “A” rating category requirement for Medium Term Corporate Notes on Page 3 of the Investment Policy.

Change the wording from “Pass-through securities including…” to “Pass-through securities specifically….”
Add Mortgage-Backed Securities alongside Asset-Backed Securities and Collateralized Mortgage Obligations in line with Code language.
Change the maximum Pass-through allowance to 15%.

For ease of reference, the current Investment Policy is attached along with the red-lined version with recommended changes. In addition, a clean version with the recommended changes is also attached.

COMMISSION/COMMITTEE RECOMMENDATION

The Investment Advisory Committee reviewed this item at their July 25, 2022 meeting and it was recommended for City Council approval.

FISCAL IMPACT/SUMMARY

There is no fiscal impact from the adoption of the Statement of Investment Policy.

RESPECTFULLY SUBMITTED:

William Gallardo, City Manager
Prepared by: Faith Madrazo, Financial Services Manager
Concurrence: Kristin Griffith, Administrative Services Director

Attachments
Current Investment Policy - Adopted 8/17/21
Recommended Investment Policy - Redlined
Recommended Investment Policy - Clean Version