The Finance Department invests City funds in compliance with the California Government Code, Section 53600 et seq., and the City’s Investment Policy. As of March 31, 2026, these funds had a market value of $89,222,521, with $40,996,827 (45.95 percent of the portfolio) maturing within 180 days, ensuring that sufficient funds are available to meet the City's budgeted expenditure requirements for the next six months.

Compliance: All investment transactions have been executed in conformance with the City's 2026 Investment Policy and the California Government Code. The term of maturity for all investments is limited to a maximum of five years unless the City Council gives prior approval to exceed this limitation. The average weighted maturity of the City’s portfolio did not exceed three years.

Investment Performance: The City’s portfolio is generally invested in four types of fixed-income investments: U.S. Agency obligations, U.S. Treasury obligations, highly rated corporate bonds, and the State of California Local Agency Investment Fund (LAIF). In general, Treasury, Agency, and corporate securities held by the City have maturities ranging from one month to five years, as authorized by the City’s Investment Policy and the State of California Government Code. City funds invested in LAIF are considered to be available overnight and, therefore, are assigned a one-day maturity.

The following table summarizes the performance of the City’s general government investment portfolio as of March 31, 2026:

March payrolls rebounded by 178,000 after February’s revised 133,000 decline, but the war in Iran and its disruption of the Strait of Hormuz have pushed crude oil above $112, injecting a potential inflationary shock into an economy contending with sticky core prices above 3%. The Federal Reserve has held the funds rate at 3.50–3.75% and is signaling a cautionary stance, keeping open the option of delaying cuts if oil related inflation proves persistent rather than transitory. As the data flow normalizes, the Chandler team anticipates additional yield curve steepening as the Federal Reserve gradually guides the policy rate toward a more neutral range. The Federal Reserve’s March dot plot still projects one cut this year, yet the Iran-driven energy shock has narrowed the path toward easing.

The Federal Reserve’s March 2026 FOMC meeting ended with policymakers again holding the target range at 3.50%–3.75%, as the Committee maintained its pause following three late 2025 rate cuts. Governor Stephen Miran dissented in favor of an additional quarter point reduction, while Christopher Waller joined the majority, tipping the vote 11–1 to leave the benchmark rate unchanged. Meanwhile, President Trump’s nomination of Kevin Warsh to succeed Jerome Powell as chair has hit a roadblock after a Republican senator vowed to block Warsh’s confirmation amid the Justice Department’s ongoing probe of the central bank.

Treasury yields exhibited considerable first-quarter volatility as the Iran conflict injected energy-driven inflation fears into a market grappling with sticky core prices. At March month-end, the 2-year yield stood at 3.79%, up 32 basis points year-to-date, the 10-year at 4.32%, and the 30-year at 4.86%. The 2-year to 10-year spread narrowed to 52 basis points, reflecting pronounced flattening as short rates rose faster than longer maturities. One year ago, that spread stood near 32 basis points, providing context on normalization since the 2022 through 2024 yield curve inversion. The 3-month to 10-year spread was approximately 64 basis points at March month-end.

Cash Management Goals:

The City's general government portfolio investment goals are to maintain and preserve the safety of funds in custody and provide liquidity for anticipated expenditure needs.

Trust Funds:

The City also has investments in irrevocable Section 115 Trusts for the purpose of prefunding retiree health care costs, also known as other post-employment benefits (OPEB), as well as retiree pension obligations. In March 2016, the City Council approved the establishment of Section 115 OPEB Trust with CalPERS California Employers’ Retiree Benefit Trust (CERBT). Subsequently, in June 2018, the City Council approved the establishment of a Pension Rate Stabilization Trust Fund administered by the Public Agency Retirement Services (PARS). The goal of investing funds in the Section 115 Trusts is to provide a reasonable level of return and growth that can create additional resources to help partially offset future OPEB and pension obligation payments. Some of the benefits of Section 115 Trust are:

The following table summarizes the performance of the City’s CalPERS Retiree Medical Trust (OPEB) as of March 31, 2026:

The amount of funds information in the tables above represents quarter end balances which may include any contributions, earnings, expenses, distributions during the quarter. It should be noted that trust fund gains or losses are not “realized” until such time that investments are sold and funds are withdrawn for eligible uses, which has not happened since the inception of either trust.