FINANCE AND ADMINISTRATION COMMITTEE
ITEM:		ACTION ITEM
5.	CONSIDER INCLUSION OF CALIFORNIA LIQUID ASSETS SECURITIES SYSTEM AND CALIFORNIA ASSETS MANAGEMENT PROGRAM IN DISTRICT’S INVESTMENT PORTFOLIO
Meeting Date:			August 12, 2024	Budgeted:	N/A
From:			David J. Stoldt,	Program/	N/A
			General Manager	Line Item No.:
Prepared By:			Nishil Bali	Cost Estimate:	N/A
General Counsel Review: N/A
Committee Recommendation: The Finance and Administration Committee reviewed this item on August 12, 2024 and recommended ______________.
CEQA Compliance: This action does not constitute a project as defined by the California Environmental Quality Act Guidelines Section 15378.

SUMMARY: On April 08, 2024, the Finance and Administration committee recommended a review of the California Cooperative Liquid Assets Securities System (California CLASS) program for the District’s investment portfolio. This report provides a review of the California CLASS program as well as the California Asset Management (CAMP) Program. If recommended, CLASS and CAMP will be included as eligible investments in the District’s Investment Policy that was last adopted by the Board on January 22, 2024.

RECOMMENDATION: District staff proposes that the Finance and Administration Committee (FAC) review this staff report and the accompanying presentation and provide direction for the inclusion of the CLASS and CAMP programs in the District’s investment portfolio. If the FAC recommends inclusion of both programs, the District’s investment policy will be amended to reflect these additions after Board approval.

BACKGROUND:

The District holds most of its investment funds in the Local Agency Investment Fund (LAIF), a voluntary program created by State statute that began in 1977 as an investment alternative for California's local governments and special districts. LAIF offers local agencies the opportunity to participate in a major portfolio using the investment expertise of the State Treasurer's Office professional investment staff at no additional cost to the taxpayer. LAIF includes 2,341 participants and has about $22.0 billion invested at the end of June 2024. All securities are purchased under the authority of Government Code Section 16430 and 16480.4.  

The Local Investment Advisory Board (LIAB) provides oversight for LAIF. The Board consists of five members as designated by statute. The State Treasurer's Office is audited by the Bureau of State Audits on an annual basis and the resulting opinion is posted to the State Treasurer’s Office website following its publication. The Bureau of State Audits also has a continuing audit process throughout the year. All investments and LAIF claims are audited on a daily basis by the State Controller's Office as well as through an internal audit process. Monies placed with the State Treasurer for deposit in LAIF are offered by the State of California, which cannot declare bankruptcy under Federal law.

District staff is providing review of two additional programs that can be included in the District’s investment portfolio. CLASS and CAMP programs offer public agencies another method to diversify the District’s investment portfolio by investing in highly liquid, investment-grade securities that have been selected with the goal of optimizing yields while prioritizing safety and liquidity. Both programs offer higher yields (around 100 basis points annually) currently compared to LAIF.

CLASS Overview:

California Cooperative Liquid Assets Securities System (CLASS) is a Joint Powers Authority investment pool authorized under Section 6509.7 of the California Investment Code (Joint Powers Act). California CLASS offers public agencies a convenient method for investing in highly liquid, investment-grade securities that are selected in accordance with the safety, liquidity, and yield hierarchy that governs the investment of public funds.

CLASS offers two investment pools – Prime and Enhanced Cash. Both pools are triple AAA-rated and offer public agencies the opportunity to strengthen and diversify their cash management programs. The Prime fund is a stable $1.00 net asset value (NAV) local government investment pool that offers daily liquidity. Investments include U.S. Agencies and Treasuries, commercial paper, collateralized bank deposits, money market funds, and more in accordance with California State Code. Enhanced Cash is a variable NAV fund that is managed to approximate $10.00 per share and offers next-day liquidity. Enhanced Cash is best suited for non-operating dollars and strategic reserves that a public agency would not anticipate withdrawing for 12-18 months. Prime offers same day liquidity with a weight average maturity (WAM) of less than 60 days. A comparison of the two CLASS products is shown in Exhibit 5-B.

California CLASS is overseen and governed by a Board of Trustees made up of public agency finance professionals who participate in California CLASS and are members of the Joint Powers Authority (JPA). The Board of Trustees has entered into an Investment Advisor and Administrator Agreement with Public Trust Advisors, LLC. Public Trust Advisors is responsible to the JPA Board for all program investment and administrative activities as well as services provided on behalf of the participants.

CAMP Overview:

California Asset Management Program (CAMP) is a California Joint Powers Authority established in 1989 to provide California public agencies with professional investment services. Investments are offered to local agencies through the Cash Reserve Portfolio (Pool) and CAMP Term under California Government Code Section 53601(p).

The CAMP Pool is managed to maintain a dollar-weighted average portfolio maturity of 60 days or less and seeks to maintain a constant NAV per share of $1.00. The Pool invests in obligations of the United States Government and its agencies, high-quality, short-term debt obligations of U.S. companies and financial institutions. The Pool investment option stresses daily liquidity and safety of principal as the two primary objectives and has a AAAm rating from Standard & Poor’s. Earning a competitive yield is a third goal after safety and liquidity. As a short-term cash reserve portfolio and cash management vehicle, the CAMP Pool (as with CLASS Prime) provides public agencies with same-day liquidity, an opportunity to earn a competitive yield, unlimited transactions via wire, ACH, or check, online account management, and sub-accounting and sweep capability.

The CAMP Term is a fixed-rate, fixed-term investment that allows CAMP shareholders to maximize interest earnings on excess funds. This fixed-rate, fixed-term investment option offers securities with maturities ranging from 60 days to one year and is rated AAAf by Fitch. Benefits of CAMP Term include the opportunity to secure more competitive interest rates, laddering maturities to meet known cash flow needs, planning around interest income streams, and diversifying an agency’s portfolio’s maturity structure. Term investments are designed to match a Shareholder’s specific cash flow requirements. Investment principal and interest are paid at maturity, with an automatic sweep into the CAMP Pool.

CAMP also offers public agencies the option to have an individually managed portfolio to meet the agency’s specific investment objectives through the investment advisory resources of PFMAM, an investment advisory firm serving the public sector. CAMP is directed by a Board of Trustees made up of local government finance directors and treasurers.

It needs to be noted that investment portfolios including CAMP/CLASS are exposed to risks related to interest rates, credit, and market risk among others, and that these portfolios are not insured or offer bank guarantees and may lose value. Refer to Exhibits 5-B and 5-C for additional information on CLASS and CAMP programs.

EXHIBITS

5-A Monterey Peninsula Water Management District Investment Policy (amended)

5-B CLASS Profile

5-C CAMP Profile

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