The Pension Trust provides for rate stabilization since Pension Trust assets can be used to offset unanticipated increases in CalPERS pension costs. Pension Trust assets are managed in a customized investment strategy that balances risk and return and provides for diversification. Under a five-year funding plan, the City had made annual contributions of $2 million to the PARS Pension Trust while also continuing to make additional discretionary payments of $2 million to CalPERS through the 2025-26 fiscal year, which is in addition to the amount required to be paid annually to CalPERS. In February of 2026, the City Council reviewed the results of a new pension funding study and approved a “baseline” approach to fund annual required pension obligations only moving forward. Staff has been directed to review pension obligation status regularly for savings opportunities. This approach retains funding flexibility and allows adjustments as needed. The “baseline” approach also projects that the City will be able to transition pension payments to the pension Trust by 2032 providing CalPERS earning 6.8% on investments going forward. INVESTMENT POLICY This investment policy applies to the City of Tustin’s pooled investment portfolio, which encompasses all monies under the direct oversight of the Treasurer. The funds covered by this policy are accounted for and incorporated in the City of Tustin’s Annual Comprehensive Financial Report (ACFR) and include: General Fund
Special Revenue Funds Capital Project Funds Proprietary Funds Successor Agency to the Dissolved Tustin Community Redevelopment Agency Other funds that may be created
Investment of bond proceeds will be made in accordance with applicable bond indentures. The scope of this policy excludes funds invested in the PARS pension and OPEB trusts, as these funds are subject to the IRS rules, the trust agreement, and PARS investment guidelines. The standard of prudence, according to California Code section 53600.3, to be used by the Treasurer and designated representative(s), shall be the “prudent investor” standard and shall be applied in the context of managing the overall portfolio. Persons authorized to make investment decisions on behalf of the City are trustees and therefore fiduciaries subject to the prudent investor standard which states, “When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a trustee shall act with care, skill, prudence, and diligence under the circumstances then prevailing, including, but not limited to, the general economic conditions and the anticipated needs of the City, that a prudent person acting in the like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the City.” Within the limitations of this section and considering individual investments as part of an overall strategy, investments may be acquired as authorized by law. The primary objectives of the City of Tustin’s cash management and investment program, in priority order, shall be: Safety: It is the primary duty and responsibility of the City, City Council, City Treasurer (Treasurer), City Manager, and City Staff to diligently protect, preserve, and maintain intact the principal placed in trust with the City on behalf of the citizens of the community. Investments by the City Treasurer and/or designated representative(s) shall be undertaken in a manner that seeks to ensure the preservation of principal in the overall portfolio. To attain this objective, the City Treasurer will diversify investments by investing funds among a variety of security types, credit counterparties, and individual financial institutions. This will be done while continually assessing risks inherent in fixed income investing, including but not limited to: interest rate risk, default risk, reinvestment risk and inflation risk. Liquidity: The City’s investment portfolio will remain sufficiently liquid to enable the City to meet all operating requirements which might be reasonably anticipated. The City will keep enough cash and cash equivalents on hand to ensure a minimum of six months of expenditures can be met.
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