Yorba Linda revises policy on investing funds

Significant actions related to Yorba Linda's policy on investing city funds – investments which now total close to $67 million, according to a recent report from City Treasurer Scott Catlett – have been taken by City Council members.

Added to this city's invested funds are nearly $26 million in investments held by trustees and about $6 million in checking accounts for a cash and investments total exceeding $98 million.

Late last year, the council approved a contract with PFM Asset Management “to provide discretionary management of the city's investment portfolio,” and PFM began repositioning the city's invested assets.

Catlett, who also serves as Finance Director, reported to the council that “the bulk” of city investments are being moved from the state's Local Agency Investment Fund “to other investments that will provide the city with improved interest earnings.”

Also, based on PFM's “comprehensive review” of the city's investment policy, the policy has expanded from a six-page version adopted in 2016 to a 17-page document approved by the council last month.

The revisions “clarify, modernize and enhance the policy,” Catlett stated, and “are consistent with industry best practices and the California laws governing the investment of public funds.”

Some changes “impact the permitted composition of the city's investment portfolio,” while others “do not alter the types of investments that the city treasurer may purchase,” Catlett noted.

Among additions to the types of investments that may be purchased for the city's portfolio and the percentages of the various investment types that may be held in the portfolio:

--Investments with a single issuer can make up no more than 5 percent of the portfolio, and up to 10 percent can be in asset-back securities with an AA rating from a diverse pool of receivables such as credit card balances, auto and mortgage loans, among other assets.

--Investments in certificates of deposit, commercial paper and medium-term corporate notes are each limited to 30 percent of the portfolio, and money-market funds limited to 20 percent.

--Investment potential expands from California state debt to all 49 states and local gover-nment agencies in California, if rated at least A for long-term and A-1 for short-term debt, limited to 30 percent of portfolio assets.

--Added to investment possibilities are supranational securities issued by Washington, D.C.-based multi-national organizations for economic development purposes that are rated AA or higher, limited to 15 percent of portfolio assets.

Also, a section dealing with performance standards has been added requiring an evaluation against a benchmark that is representative of the city's objectives and liquidity requirements.

The revised policy applies to the remainder of the current and the 2017-18 fiscal year. The council must adopt an investment policy each year, even if no changes are recommended.