STAFF REPORT - CITY COUNCIL/SUCCESSOR AGENCY/PUBLIC FINANCE AUTHORITY

The total cash and investment portfolio book value (cost) held by the City as of December 31, 2025 was $30,589,742.

The cash and investments held by the City include the following components: Managed Investment Portfolio ($20,266,635), State of CA Local Agency Investment Fund ($6,843,837), Cash/Time Deposits ($3,325,092), and accrued interest on investments ($150,964).  (Earned interest is the interest earned on investments over a specific time period, accrued interest is the interest that an investment has earned, but hasn’t yet been received, and paid interest is the interest that has already been received as payment).

Cash and investments held by the City and the trustees continue to be invested in accordance with the Government Code and the Council Investment Policy.

During the quarter, one U.S. Treasury Note in the amount of $1,296,300 matured. An investment was purchased on 9/30/25 that wasn’t reflected in statements until this quarter: Medium-term corporate bond in the amount of $752,963.

Two-year Treasuries were yielding 3.60% at the beginning of the quarter and at 3.47% at the end of the quarter, which was a decrease of 13 basis points for the quarter.

As of December 31, 2025, the Weighted Yield to Maturity on the Managed Investment Portfolio was 3.81%.

At the end of this quarter, the Weighted Average Maturity of the Managed Investment Portfolio was 2.30 years.

The Federal Open Market Committee (FOMC) meets approximately every six weeks and determines the level of the Federal Funds Rate. At the December 10th meeting, the Committee decided to lower the target range for the federal funds rate by 1/4 percentage point to 3-1/2 to 3-3/4 percent.

Summary from the December 10th meeting:

"Available indicators suggest that economic activity has been expanding at a moderate pace. Job gains have slowed this year, and the unemployment rate has edged up through September. More recent indicators are consistent with these developments. Inflation has moved up since earlier in the year and remains somewhat elevated.

The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment rose in recent months.

In support of its goals and in light of the shift in the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/4 percentage point to 3-1/2 to 3-3/4 percent. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective.

In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments."