BOARD AGENDA MEMORANDUM
Government Code § 84308 Applies: Yes ☐ No ☒
(If “YES” Complete Attachment A - Gov. Code § 84308)
SUBJECT: Title
Adopt a Resolution Delegating Authority to Deposit and Invest Funds to the Treasurer or Their Designees and Approve the Board Investment Policy.
End
RECOMMENDATION: Recommendation
A. Adopt the Resolution DELEGATING AUTHORITY TO DEPOSIT AND INVEST FUNDS TO THE TREASURER OR THEIR DESIGNEES; and
B. Approve the Board Investment Policy.
Body
SUMMARY:
In accordance with Executive Limitation 4.9 regarding treasury and investment management, and pursuant to California Government Code (Government Code) Sections 53607 and 53608, staff recommends that the Board:
A. Adopt the resolution delegating authority to deposit and invest funds to the Treasurer or their designees (Attachment 1); and
B. Approve the Investment Policy (Attachment 2).
Delegation of Authority to Deposit and Invest Public Funds
Per Government Code Sections 53607 and 53608, the delegation of authority to invest must be renewed annually by the Board. The Board’s current delegation of authority to invest Santa Clara Valley Water District (Valley Water) funds expire on June 30, 2025. If the Board chooses not to delegate the authority to invest funds in Fiscal Year 2025-26, the Treasurer (Chief Financial Officer) or their designees (Treasury and Debt Officer) will be limited to making deposits only, and the Board will be responsible for the investment of Valley Water’s funds. Furthermore, Government Code Section 53608 requires the Board to delegate the authority to deposit funds for safekeeping with a federal or state association (as defined by Section 5102 of the California Financial Code), a trust company or state or national bank located within this state or with the Federal Reserve Bank of San Francisco or any branch thereof within this state, or with any Federal Reserve bank or with any state or national bank located in any city designated as a reserve city by the Board of Governors of the Federal Reserve System. Through the Board’s adoption of the resolution attached to this memorandum as Attachment 1, the Board, pursuant to Government Code Sections 53607 and 53608, will delegate to the Treasurer or their designees, the authority to invest or deposit such funds during Fiscal Year 2025-26 in accordance with the provisions set forth in the Government Code.
Investment Policy
The Valley Water Investment Policy is in compliance with the Government Code and follows the priorities of safety, liquidity, and yield. The Investment Policy applies to Valley Water’s pooled investment fund which encompasses all monies under the direct oversight of the Treasurer or their designees. Included in the investment pool are Valley Water’s General Fund, the Safe, Clean Water Fund, the Watershed Funds, the Water Utility Enterprise Fund, the Equipment Service Fund, the Risk Insurance Fund, and debt proceeds with special consideration given to specific provisions contained in the indentures for each debt obligation.
The Investment Policy in Attachment 2 reflects minor editorial changes as well as the following updates to conform to the current Government Code requirements:
• Added Appendix 2 to provide a summary of the eligible investments per the Government Code guidelines as published by the California Debt and Investment Advisory Commission (CDIAC) effective as of January 1, 2025.
• Added Section 7.13 to include Joint Powers Authority Pool, which would allow Valley Water to invest in shares of beneficial interest issued by a Joint Powers Authority organized pursuant to Section 6509.7 of the Government Code.
• Updated Section 8.3 Placement Service Certificates of Deposit to reflect that effective January 1, 2031, the maximum percentage of the portfolio that may be invested in a placement service as authorized under 53601.8 of the Government Code shall be reduced to 30%.
• Updated Exhibit A - Glossary of Key Terms to include additional definition of commonly used terms
California Municipal Treasurers Association (CMTA) Certification
The CMTA Investment Policy Certification Program was developed with support from the California Debt and Investment Advisory Commission (CDIAC) to provide professional guidance and assistance in developing and/or improving investment policies that meets industry best practices for California’s public sector agencies and districts.
On February 27, 2025, Valley Water received the CMTA Investment Policy Certification (Attachment 3) with an average score of 99 out of 100. The Valley Water Investment Policy was reviewed by three CMTA members and received excellent feedback from the review panel. One panel member stated, “This is one of the best, if not THE best Investment Policies I have ever seen”. Valley Water’s Investment Policy stood out as one of the best that addresses all the components such as reporting features, applicable government codes, selling securities, glossary, etc. The reviewers provided a few suggested changes which have been incorporated into the Investment Policy as appropriate.
The benefits of receiving the CMTA Certification are summarized below:
• Instill trust, confidence and verification that the policy has been reviewed and certified by a professional organization within California and complies with the Government Code
• Show transparency and due diligence of the Investment Policy to the public
• Assist auditors’ review of the Investment Policy
• Ensure that the CMTA’s best practice recommendations of Investment Policies are addressed: Scope, Prudence, Objective, Delegation of Authority, Ethics and Conflicts of Interest, Authorized Financial Dealers and Institutions, Authorized and Suitable Investments, Review of Investment Portfolio, Investment Pools/Mutual Funds, Collateralization, Safekeeping and Custody, Diversification, Maximum Maturities, Internal Controls, Performance Standards, Reporting, Investment Policy Adoption and Glossary.
Climate Divestment Policy
On August 27, 2013, the Board adopted a new Executive Limitation, EL-4.9.3. No investments will be made in fossil fuel companies with significant carbon emissions potential. As a result of this action, Valley Water has divested from fossil fuel companies based on the list published by the non-profit organization, 350.org. The list published by 350.org is included in Exhibit C of Attachment 2-Investment Policy.
ESG Policy
At its August 11, 2020, meeting, the Board approved an update to Executive Limitation 4.7.7 to stipulate that Valley Water can only do business with banks that have an Environmental, Social and Governance (ESG) risk rating of average/medium or better from at least one professional ESG research company. Small and local banks/credit unions located within the nine Bay Area counties with total assets at or below $10 billion are exempt from this provision.
Valley Water currently conducts commercial banking and trustee banking services with US Bank, with an ESG rating of ‘A’ from MSCI (Attachment 4), thus meeting the Board Executive Limitation requirement.
Community Bank Investments
Valley Water Board has implemented an innovative financing approach which promotes small, local banks participation in Valley Water’s financing business. The following banking arrangements have been established with Bay area small local banks:
• $58 million in investments in various small, local banks’ various deposits that are secured by either the Federal Depository Insurance Corporation or collateralized by Letters of Credit from the Federal Home Loan Bank of San Francisco or other eligible securities.
• Three separate letters of credit issued by Technology Credit Union, based in San Jose, totaling $841,000 to Valley Water to meet the U.S. Army Corp’s financial assurance requirements for the operations of Upper Penitencia, Coyote Ridge, and Rancho Cañada de Pala Preserve watershed projects.
• Valley Water underwriting pool is limited to US investment banks with ESG ratings of medium or better with preference for small, local California banks.
ENVIRONMENTAL JUSTICE AND EQUITY IMPACT:
There are no Environmental Justice impacts associated with this item.
FINANCIAL IMPACT:
Adoption of the resolution will ensure that Valley Water funds continue to be invested under the Investment Policy for Fiscal Year 2025-26. Estimated investment earnings of $13.5 million have been included in the Fiscal Year 2025-26 budget.
CEQA:
The recommended action does not constitute a project under CEQA because it does not have a potential for resulting in direct or reasonably foreseeable indirect physical change in the environment.
ATTACHMENTS:
Attachment 1: Resolution
Attachment 2: FY 2025-26 Board Investment Policy
Attachment 3: CMTA Certificate
Attachment 4: ESG Report
UNCLASSIFIED MANAGER: Manager
Darin Taylor, 408-630-3068