On to the Council of Finance Committee and Investment Review Committee meeting of October 22, 2025.

It's 8.33 a.m. I'll call the meeting to order.

So note that all committee members are present.

This is a hybrid meeting, allowing the public to comment in person and virtually,

and instructions for addressing the committee virtually can be found on the agenda.

We've already done a roll call.

I noted that all the committee members are present.

um uh including our uh including the uh of the investment review committee which includes

non-councils thank you everyone for being here um item three we have minutes to approve from

the December 2024 meeting item 3.1 um that's the minutes of the CFC IRC meeting um December 6

2024 would any member of the public joining us virtually or in person like to provide comment

this item. If so, please click the raise hand button and zoom and in-person attendees can fill

out a blue or I guess a yellow speaker card or raise their hand to be called upon and we'll

public speakers may speak for up to three minutes on this item. So this is just the minutes.

If anyone from the public has any comments on the minutes.

No. So we don't have any in-person or virtual speakers on. Are there any

committee member comments or

motions to approve events.

Second.

I wanted to fix 5.2

on my name.

Oh.

You said 5.2

on the menu.

Yeah.

On one.

Oh, I see it.

That's all.

Thank you.

yeah do you want to um amend your motion yeah we'll move to approve as amended

yes we have a motion by uh meeting member ramirez seconded by uh committee member ramos

um i will uh we'll do a roll call vote on this but i'll all abstain since i was

on the committee at the time or uh but holding back to the office and so um

is it okay to do a little call for that one so we have a record individual

so maybe one of the students for me

there you go i'm fired in here roll call yes uh committee member dud wacky here um

council senior yes member emily ronnes yes and chair

I'll abstain.

Thank you.

So that concludes item three.

We'll move on to item four, which is oral communication from the public.

So this portion of the meeting is reserved for persons wishing to speak on anything that isn't on the agenda today.

So would any member of the public joins virtually or in person like to comment on items that are not on today's agenda?

Please, if you're on Zoom, please click the raised hand button and attendees.

raise their hand if they'd like.

Seeing none, we'll close oral communications

for the public and move on to item 5.1,

presentation of the status of the city's portfolio

and investment policy.

The finance administrative services director

will make brief remarks before the presentation

by Chandler Asset Management,

the city's investment advisory firm.

Well, I'll turn it over to you, Mr. Rampone.

Thank you.

Thank you, Chair Clark and committee members.

Derek Rampone, your finance and administrative services director.

Item 5.1 is our annual update where we hear from our investment advisory firm.

Today we have Bill Denny here on Zoom who will be walking us through the most recent investment report, which is from June 30, 2025.

And he'll be happy to answer any questions that you may have at the end.

So we'll go, we'll just kick it off with Bill.

So Bill, thanks for being here.

Good morning, everyone.

Thank you for having me.

I'm just confirming you can hear me clearly.

Yes. Yes.

Great.

And I'm just going to share my screen real quick.

I think.

I'm not going to share.

I think it's a .

Good.

For some reason, my computer isn't letting me share.

I don't know if it's the settings in Zoom.

Is it possible for someone to pull up the quarterly report that was in the agenda as of June 30 and share with the screen?

We all have the presentation.

Oh, great.

So, perfect.

If you could just go to page four.

All right. So if you could go to page four. So staff has asked me to keep my comments to around

five minutes. So I'm going to go relatively quickly. But if anyone has any questions or

concerns, I'm happy to go into greater detail. As we all know, since October, I'm assuming as we all

know since October 1st, the U.S. government has been shut down based on our reconciliation bill.

You know, because of that, the economic data that has been released in the month of October has come

to a standstill. We will be getting the CPI inflation report this Friday at 530 a.m. And

the reason why that report is going to be released is those employees were deemed essential

because those calculations are used for the annual cost of living adjustments for

Social Security payments. But if you look at the employment picture, this data is a little stale,

but it does show the overall trend. And overall, the employment backdrop, although softer and job

growth is softer, some of that is largely attributed to the lack of immigration that's

happening right now based on the current policies of the administration. You can see the unemployment

rate, both the U3 and the U6, which is referred to as the underemployment rate. Both of those

remain low and are really consistent with full employment. So we would characterize the backdrop

as more of a low hire, low fire environment. And it's our base case that this is likely to continue

going forward. I'm going to forward over to page six, which just shows

the inflation data. So on the left, we have the consumer price index. Again, this report will be

released this Friday at 530 in the morning. And unless the government reopens, that will be the

last time we will get some really meaningful economic data. The Fed really forecasts based

on the chart on the right, which is the personal consumption expenditures index.

The dashed line or the core number, you can see it's just marginally below 3%.

Based on Chandler's forecasts, which assume that we will get a brief period of two to three months

of more firm inflation at the core level and then revert back to trend, which we view as around

two-tenths per month. Really, core inflation will end December above 3%, and it will also be

right around 3% as of June 2026. So we do expect monetary policy to be in play, and we do expect

the Fed funds rate to be reduced at the October meeting. But we are circumspect, given the

the trajectory of inflation that the Fed funds rate will be able to be lowered in a really

meaningful way, i.e. more than 100 basis points looking out into June of 2026, which is what the

market is softly pricing in currently. I'm going to go to page 13, which really just shows treasury

yields. And I think this is a big part of the story. So the graph on the right, the green bar

shows yields as of June and that dashed purple line as of June 2024, so the prior year. So you

can really see that the Fed funds rate has been reduced. And so because of that, we see the

shorter term yields are lower. But as we move further out the curve and you go to the seven

and really the 10 year and 30 year point, you can see those yields are peri passu and in the

30-year case higher than they were in June of 2024. So what this is exhibiting is a steeper

yield curve, and we no longer have, or we think over time, we're no longer going to have an

inverted yield curve where short-term rates are higher than longer-term rates. Currently,

the spread between the two-year note and the 10-year treasury note is just above 50 basis points.

We think this needs to migrate to be closer to 100 basis points, and we think that will happen over,

a three to nine month forecast horizon. And we really think that needs to happen because front

end rates stayed anchored or come a little bit lower. And those 10 year notes a little bit higher.

The good news is, is that the city of Mountain View's portfolio invests, you know, kind of out

to five years. So you should be insulated from this move. But we do think that the treasury curve

will be steeper over time based on our sovereign debt profile, as well as the sovereign debt

profile of other developed market economies. So our view is that the economy is poised to slow down,

but we are not poised to have a recession in our view, because we do believe that the

employment picture is going to remain in this low fire, low hire environment. And we also believe

that because of the fiscal One Big Beautiful Bill that was passed earlier this year, we are

anticipating some fiscal stimulus in the first half of 2026, which should be a tailwind for the

economy. So before I talk about the portfolio, does anyone have any questions on our economic outlook?

I do have, I guess this is more a portfolio question, so I'll say that.

Okay, fair enough. So if we could go to page, starting on page 16.

So the next three, yes, sir.

People were nodding their heads.

Did any of the other committee members?

Sorry about that.

Go ahead.

So if we go to page 16, it shows the statement of compliance.

This is our compliance dashboard.

This report is sent to the finance team staff at the city of Mountain View every month by the third business day.

And we just like to highlight that everything is in compliance.

And I'd also like to highlight on page 17, it really highlights about two-thirds of the way down.

It shows the socially responsible prohibited investments.

And you can see the stuff that we have profiled not to invest in, including fossil fuels, firearms, and tobacco.

So that is something we do test for on an ongoing basis.

On page 19, you can see the portfolio characteristics.

So between March of 25 and June of 25, you can see the duration did extend a little bit from 196 to 207.

It is just shy of the benchmark duration of 211.

If you look at that average purchase yield, it increased on a quarter over quarter basis from 328 to 340.

But it is still below the market yield.

And that really reflects the adjustment of the portfolio because of the change in monetary policy and the increase in the Fed funds rate where those short term rates went from basically the zero lower bound all the way up to above 5% and are now, as of today, just over 4%.

So this implies that there's a modest loss in the portfolio in aggregate, but the total returns of the portfolio look very good.

And I'll get to that page in a moment.

On page 20, we have our sector distribution. So you can see the weights and the change on a quarter

over quarter basis from the treasury agency, corporate, supranational, et cetera. So the

overall allocation, everything here looks pretty stable. We would note that the agency allocation

is lower than it is historically. And that's because the relative value and the opportunity

in that space has changed in the sense that there isn't a lot of relative value because there's

really not much issuance. So we are seeing both in the portfolio that you manage by your staff,

as well as other portfolios that we see in the state of California, you know, that agency

allocation has really contracted. So this is pretty consistent with what we're seeing across

the board. And then I'd highlight page 23, and this shows the total returns of the respective

portfolios. So I'd really draw your attention to those annualized returns at the one year,

three-year, and five-year point. So you can see the overall portfolio is very much in line with

the benchmark. So the one-year return was $577 compared to the benchmark of $576. And that five-year

return was $143 versus $144. If you move two columns over to the right, you can see the all-corporate

portfolio. So this had a one-year return of $669 compared to $662, and then a five-year return of

214 compared to 142. We would just like to highlight to the committee that based on the

both investment policy and the constraints of the city of Mountain View, that corporate portfolio,

although it's very well diversified compared to the index, it is a very concentrated portfolio.

So we do expect to see some volatility with those returns relative to the benchmark,

but we are optimistic that we'll continue to generate some of that relative value with the

outperformance compared to the benchmark. And then lastly, I would direct your attention to page 23.

So this really shows the overall diversification of the portfolio. It also highlights of the change

of the investment policy last year where we've been able to invest in single A rated corporates

as opposed to just double A rated corporates. So some of the new names, excuse me, in the portfolio

include Morgan Stanley, Toyota, JP Morgan, Qualcomm, Wells Fargo, etc. So this is basically

broadening out the overall portfolio based on the investment policy change that you made.

So this is what I hope I went in my five minute window. And this is what I was prepared to present

today. And I'm happy to answer any questions on behalf of the committee. Thank you very much.

Are there any questions on this item?

Yeah, thank you.

Sorry.

We received some public comment via email regarding...

Yeah, I think we determined that if folks have comments on the actual investment policy,

it is probably the most appropriate under 5.2, which is the next item.

for either the public or us to discuss.

I mean, it melds in with the report from the last year or so,

but I think if we want to consolidate things by 0.2

is probably the most appropriate time.

I was wondering,

based on the ask from the public,

do we know if any of these companies

would be not on there anymore?

Could you reframe the question? I couldn't hear. I apologize.

Bill, the question is, of the corporate issues that we currently have in the portfolio,

would any of them be involved in businesses that the public had commented on, whether it's

prisons, detention centers, military, industrial equipment, and things of that nature?

So the answer in Chandler's interpretation is no. I will tell you that we have seen other cities with mixed results bring up Caterpillar as a name because of even though those are not defense companies per se, but the way their equipment is being used in the Middle East, some cities have brought that up as a red flag.

When we evaluate Caterpillar, it profiles as a capital equipment company.

So it does not screen out based on either an ESG or a sector basis of a name that we would avoid to be consistent with some of those entities that we're looking to avoid weapons of mass destruction.

So the Caterpillar holding in our judgment would be inconsistent with that.

But there is nothing in your portfolio, you know, based on the SRI, the socially responsible investing constraints that you have, as well as the overall conservative nature of the portfolio that would be consistent with any of those sectors.

Thank you.

Thank you.

I had a few questions.

I think it would be helpful if on page 19, you also in the future show the average dollar price.

In addition to the, since the portfolio is currently at a discount, in addition to market yield versus the purchase yield, just so we get a sense as to what the average dollar price is there.

So I believe we have that in the summary report at a different element, but I will highlight that to staff and have them get back to you on that.

Okay, thank you.

And then the second question is since last year when we approved the purchase of single A securities, there have been a handful that have been added, I see, on page 30, you know, starting with Bank of America and ending with Qualcomm.

I mean, do you have any comment on that as to what the yield pickup was and whether that's been successful in terms of allowing the city to diversify more and get additional income from going from double A to single A securities?

Sure. So we've also from June of last year to June of this year and working with Derek and Elliot and Grace, we've actually increased the overall allocation to corporates on a year over year basis because the policy has become closer to California government code.

We've also been able to increase our sector diversification.

Previously, we were more heavily weighted towards industrials and less towards financials because other than the insurance funding agreement back notes, most of those financials were rated single A.

So that's really enabled us to diversify the portfolio more.

And just generically, I would say, because we've been able to invest in some of those

larger, globally systemically important banks that are domiciled in the US, and I would

really highlight Morgan Stanley Bank of America and JP Morgan, they tend to trade at an additional

pickup and spread relative to the other finance names that were previously just AA.

And I would say that spread pickup would average between 20 to 25 basis points for those individual holdings.

So I think we're just in the first year of seeing the benefit of the expansion of the investment policy.

And I would expect it to continue to benefit the portfolio going forward.

But we're still working our way through of kind of increasing the diversification and taking advantage of the change of the investment policy based on the additional monies the city's been able to allocate to the corporate portfolio, as well as maturities.

We've made a decision not to sell securities out of the portfolio.

So we're really constrained by maturities and then new monies that the city is able to allocate to this portfolio.

But in general, we would view it as a success. And we would really just highlight that additional spread that we're able to pick up in some of those names. And also just the benefits of having increased diversification in the overall portfolio, which we think will benefit over time.

Thank you.

There are questions?

So we'll take public comment on this item.

Would any member of the public join us virtually

or personally comment on this item?

If so, please raise hand in Zoom or .

So these can raise their hand.

And like I said, if we want to consolidate

any comments around the investment policy on the next item

since they're attached, but it also kind of bleeds into this.

So it's either way.

Is there anyone on the line?

Okay.

Well, thank you, Bill, for the presentation.

I did have just one quick existential, I guess, because we're living in a world where I never

thought I'd be in a presentation where we said we don't have U.S. data on the economy.

The world's largest economy isn't producing data at the moment, or only some data, and we might not get more data for a while.

Which raises the question of the concentration that we have in U.S. treasuries.

I know they've kicked the debt limit hand down the road again, and I'm sure they'll continue to do so.

But, you know, if we continue with this brinkmanship and we get to the world where, OK, we're closer than we've ever been to what the what the treasury says is the is the X date.

I guess in that world, it doesn't really matter where your money is.

It's because it's just going to be such a very strange world.

But it's a very long way of saying we live in unusual times.

Is this an appropriate mix of treasuries for a portfolio like this, you know, in a city that's doing something?

I think this traditionally makes sense.

I'm just curious sort of what your thoughts are more globally or not globally, but just high level.

So my first, I would just answer unequivocally yes.

We do think that treasuries are an appropriate investment for this type of portfolio and really almost all fixed income portfolios,

portfolios, whether it be a pension plan, reserve funds, or what have you kind of across the board.

So the government shutdown is not affecting because the debt limit was extended. It's separate.

So the government shutdown is not going to impede the ability of the U.S. Treasury to make payments

on our government debt. We do think that it is sacrosanct, and we've certainly been down this

road before where the debt ceiling kind of gets close to that brinksmanship point and then is

always sort of pushed out and extended. And we would expect, it's our base case that that will

continue to be the case. We would agree that there'll continue to be brinksmanship, but we do

believe that the U.S. Treasury understands the significance and importance of not defaulting on

its debt. And it's really kind of a semantic thing with the debt ceiling. And we have the

utmost faith that it will ultimately always be extended. And I think all the, you know,

regardless of the political party throughout the different administrations, I think all the

Treasury secretaries have been really steadfast in that belief. And I believe ultimately that is

what will happen. And that is the Chandler view, that it is very unlikely that we think the

probability of the U.S. defaulting on its debt is extremely low. And we would also argue that

although our political sausage making looks pretty ugly, a lot of other developed market

economies are facing similar issues. France would be certainly a case in point.

but we continue to think that the U.S. will ultimately remain the reserve currency and

remain the global benchmark for risk-free rates. That makes sense. Thank you. Yes, very, very,

very, very small risk of default, but probably the highest risk we've ever had in my lifetime.

Anyway, that makes sense. Thank you, Bill, for the presentation. We really appreciate it.

It's my pleasure. Thank you.

So there's no action on this item since it's just a presentation.

If there are no other comments or questions from the committee, we'll move on to the next item.

5.2, the annual report of the Investment Review Committee for fiscal year 2425.

Finances and Services Director again, Gary McFarlane, will make three remarks on this item.

Thank you again.

So item 5.2 is the annual report that goes to the city council from the committee.

Usually they'll provide the draft during this meeting and then the chair will work with our team to kind of finalize any final comments in preparation for submission to the city council.

And we're anticipating that to happen in December.

We're going to briefly just walk you through the draft report, a couple of minutes, and I'm going to turn it over to Grace and Elliot now for that.

Thank you.

Thank you, Derek Elliott Young, principal financial analyst.

So this draft report is as of 630-25, the same as Bill's presentation.

So I'll just turn on a couple of highlights.

If you go to page three, we have the performance versus the benchmarks for duration and total rate of return.

The city was in compliance with the policy, the 15% at all time with the duration benchmark,

and within 3% of the benchmark, 9 of the 12 months.

There was a significant increase in the benchmark from June 30, 24, where we went up from 1.90 to about 2.11.

So you see we lag it a little bit as we try to catch up.

Our ability to increase our duration is limited by available money to invest.

So we are trying to catch up with that, but we have matched it in recent months.

The total rate of return for both the corporate holdings and the city holdings are the highest they've been in 10 years.

A lot of that is due to the market value increases, which we don't realize because we tend to hold our investments to maturity.

But the yields to maturity have also been strong at about 3.4% as of June 30.

Next page, total portfolio is now just over a billion.

And we averaged an earnings rate of 3.07% on the year, which was about $31.3 million in interest for the year.

On the next page, the diversification compliance.

We were within policy limits in all categories.

Our treasuries have increased.

I think Bill mentioned that our agencies have decreased.

And that's just a function of the availability of agencies as well as the limited spread between treasuries.

Our corporates are up to 11.7% as of June 30, and it's actually higher to about 13% as of September.

And that's as we increase diversification because of the changes to the investment policy.

Next page, if we look at the allocation of the portfolio, you see the majority is between the capital project funds and our restricted funds, which is the water, wastewater, sewer,

or sorry, water, wastewater, and solid waste,

as well as the shoreline regional park community

and our housing funds.

And for internal control and reporting,

we hold a monthly internal meeting

to discuss strategy and status of the portfolio.

We also post the monthly statements

on the city website

and the quarterly investment reports to council.

And so in summary, we are in compliance

and had no violations over the past year.

Thank you. Are there any questions on this?

I had a question, not specific to the report, though, but at the last meeting, a question, and it relates really to a breakout of the portfolio between what's allocated to the general fund, what's allocated to capital projects, and what's allocated to reserves or restricted funds.

The city manager asked Chandler to look into possibly doing something in terms of having a different investment policy based upon the length of the liability.

And this is something I think I had mentioned had come up 10 plus years ago.

You know, as the portfolio has grown, it is still all being managed as if it was kind of a cash account, you know, a short term cash account.

But some of the funds, especially those for capital projects and restricted, have much longer term liabilities, but are still being managed in a very restrictive way in terms of duration and credit quality.

And I think you had asked, can anything be done to change this so that, in essence, the city derive higher levels of income than the portion of the portfolio that has a different liability characteristic than the short-term cash fund that's used for general fund operations?

So I was just wondering if anything had happened on that. And I think as the portfolio has grown to a large amount here and so much of it is restricted and in the capital projects fund, this is a good question.

Yeah. Bill, do you remember exactly what we talked as far as what was researched when we discussed it? And wasn't it limited due to the policy, the length of time as far as five years?

We did discuss this. And I think a part of it, the reason why we didn't do anything was based on our overall market outlook and for the change in the shape of the yield curve, which is still our base case, that the yield curve needs to be steeper.

And we felt like it made more sense from a protection of principle and total return environment that this wasn't sort of the timeframe to do that.

And we would still believe in that view based on our outlook on where the 10-year notes should gravitate towards.

But this should be a continuing discussion in regards to bifurcating a portion of the portfolio.

And I'm not privy to what that amount would be.

But we have talked over the years about bifurcating a portion of the portfolio when the yield curve normalizes to take better advantage of this.

Within California government code, you know, you can go beyond five years in just specific asset classes, really treasuries, agencies and mortgage backed securities and municipals as well.

So it would to fully take advantage of this, we would probably look to update the policy in regards to some mortgage securities to provide a little more diversification and flexibility.

But that would be something that we we should continue to discuss.

And not that we're trying to time the market, but we should be in an environment where we're getting compensated for taking that longer term risk.

And as the treasury curve is no longer inverted, you know, that would be the time to start considering it.

And based on to the extent that our view is valued, you know, we really do think that, you know, that the curve needs to steepen more.

But as it gets to that, you know, maybe closer to that hundred basis point differential between two year and 10 year notes,

that might be the time to make a strategic decision to bifurcate a modest portion of the portfolio into a longer term strategy.

And Bill, just under California law, does the duration have to always average below five years? Is that how you would do it? Do you barbell the portfolio or are you just allowed to have certain asset classes be more than five years?

you're allowed to just have certain asset classes be beyond five years. And depending, we have a

significant number of clients who have done this. It's predominantly water districts and joint

powers authorities that have longer liabilities. And typically they'll have a benchmark that maybe

has a duration closer to three and three quarters, as opposed to the current portfolios too.

And they'll invest between zero to 10 years. We also have, and this is more limited, but we do

have some entities that have bifurcated their portfolio and just taken a portion of it and only

invested it with a benchmark duration of between five and 10, which would really push up your

duration on that portfolio to closer to six and change. So there's multiple ways that we could do

it and we'd work with staff to explore what made the most sense. I would say the more conservative

first step would be to take a portion of the portfolio and manage it versus a one to 10 year

benchmark. And we could ascertain what made sense from a credit, a mortgage slash securitized basis

and a municipal basis, as well as treasuries and agencies. Thank you. So there are other

municipalities that actually do bifurcate the portfolio. So they'd have one portfolio that

would be more like a cash account and then a separate portfolio that might be longer term

and for capital projects? I would say that to an extent, the city of Mountain View is already

doing that because they have investments in LEIF and local government investment pools,

more for liquidity. And then this portfolio, although it is still pretty short,

does invest out to five years. So it would be very consistent with what we see from a reserve

portfolio. We do see larger cities and certainly the city of Mountain View, given the corpus of

assets that you have would qualify. Over the past two to three years, we've seen

the desire to have a longer duration portfolio from some larger cities where previously

that was really dominated by JPAs or joint powers authorities and water agencies. I would say it's

limited, but there are a very small number of cities that are doing that. Some of your

neighboring cities that we work with, the city of Sunnyvale would be an example.

they, in their investment policy, they have the ability to invest out to seven years

in certain security types, but they're still running their portfolio versus a one to five

year benchmark, which is a little bit longer than what the city of Mountain View is doing.

And then we're seeing some other cities, the city of Stockton would be an example,

where they have split out their reserve portfolio between a one to five and a one to 10 year

strategy amongst a couple of different managers. So, but I would say just to be clear, you know,

it's limited in the amount of cities that we're seeing to do that.

Although this conversation is getting more interesting,

but we do see it with a lot of water agencies and other entities.

I think I would encourage the staff to look into that to a greater extent

as the portfolio continues to grow and roughly two thirds of it.

I don't know what the liability is on the capital projects or their restricted

money. I don't know when you think you would need that money and when the projects would be funded.

But to me, it seems like it's a sound policy to at least explore having separate portfolios

for the cash account. That would be my recommendation, not aggregate it all, but to

have it separate, as Bill said, some municipalities do, and have the ability for the portion of the

portfolio that's restricted and for capital projects to try to match the liability more to

the duration of the securities as opposed to just kind of having it all together.

I think the city, over a longer-term time period, if the portfolio remains this large,

could really obtain some higher levels of income that could be used for services.

Any comments or questions?

So back to the letter that we received from the public.

I think staff got a letter as well.

They asked for more items to be prohibited from us investing in.

What are the next steps if we would like to pursue that?

Sure.

So we're in have been researching.

We started researching it with Chandler Asset Management.

And I think today we'd like some direction from the committee on what we what your intentions

or desires would be, but definitely something that we can research that will take a little time.

Sure.

We have questions before we do public comment. Yes.

Yeah, I got two.

The CERB that's going under the new actuarial evaluation, is there any anticipated changes with that, like in the discount rate, or maybe the same as always?

Yeah, go ahead.

Thank you for the questions.

We are the OPEP study, we usually conduct every two years.

So there's one coming up as of June 30, 2025.

In the last study, our discount rate was actually 5.6%.

That's what we use for the valuations.

But in this one, upcoming one that we are anticipating, there might be a, we're in the

process of doing the evaluation.

And actually the discount rate is actually in discussions.

we anticipate it would be higher than 5.6 percent given the current markets, but we haven't determined

what would be the rate the city would use at this point. And we do anticipate we have the study done

probably in December, January.

Did you comment on the investment policy too?

Something else?

We'll do comments after we take public comment if that's okay.

Yeah, we'll come back to you.

All right.

Yep.

What other questions we can do now?

Okay, so we'll open this item for public comment.

If any member of the public join us virtually or in person would like to provide comment on this item, please, if you're on Zoom, please click the raised hand button.

If you're in person, you can either raise your hand or fill in a little speaker card to be called upon.

And we'll take in-person speakers first, and then we'll do three minutes, and then we'll move over to Zoom if that's okay.

So if you're online, go ahead and queue up, click your raise hand button so we know you want to speak.

And we'll start with in-person speakers if there are any to comment on this item.

Just raise your hand.

Yeah.

So my name is Sammy.

I'm a Mountain View resident.

And I think, as you guys may have seen, I'm proposing this change in the language for our investment policy.

Because I've been for a while now concerned about how our city invests during these dangerous times that we live in.

I really love our city's commitment to community for all and our participation in the 2017 amicus brief to protect our eminence.

I'm the son of an American

whose family has been directly impacted by

and by an international arms industry that profits from it.

And he's an American with values.

As a resident of Mountain View,

it pains me to think that my city

could potentially be invested in companies

that sell arms or military services

that could be used in violation of human rights

or international law.

And it's unconscionable that the city funds

could be invested, for example, in mass detention, especially as the current administration in

Washington is using ICE to attack our communities and lock people up unjustifiably. So that's why

I believe it's crucial for us to uphold Community for All and expand our previous firearms

manufacturer ban and codify these values further in our investment policy. Thank you. Other comments?

Yeah, go ahead.

Hi, everyone.

I'm Ronnie Ziger, a longtime Mountain View resident.

I've practiced medicine here.

I also am a tech worker.

I've worked at Google and local startups.

And I'm commenting here today because I've been able to thrive here.

After my family left Chile when I was a kid, fleeing state-sponsored violence.

and before that, my grandparents left Europe fleeing Nazi persecution as Jews in Europe.

I really want to recognize the city's prior work in prohibiting unethical investments

in firearm, cigarette, and fossil fuels.

And today, I have many friends who are facing daily threats from ICE and the federal government

that's escalating the use of violence, that's making many of our community members feel

less safe and by updating our investment policy as was proposed in written public comment um the

city can take this modest but morally clear action to help ensure that um our local funds

are not funding such violence thank you thank you are there public speakers

um uh anyone online who'd like to speak no okay um so we'll close public comment on that item and

bring the item back to the committee for any um any other discussion or suggestions to staff or

or discussion amongst ourselves um on this particular item and i think um

um we'll start with um direct i think you had oh i had something short unrelated you know um

section uh eight on the um authorized uh institute and broker dealer um maybe just

it's just back to staff just um maybe a consideration of another bullet like a number four

um i know like the requirements are like audited financial statements a broker dealer questionnaire

there and a statement um just from like my end like i've noticed um increase in like um enforcement

from like board of accountancy and so you know firms that audit broker dealers have to be

registered with the pcob and sometimes have been um issued like audited financial statements with

a clean opinion but then the firm gets in trouble maybe like many many many many years later

um so i had just a suggestion just to consider you know maybe a check that the auditor of those

financial statements are registered with the pcob that they're in good standing both the

pcob state board accountancy uh and their member like aicp um i think this is like a small

additional kind of like check just to you know make sure everything uh compliant right

That's all I have, yeah.

Other comments or questions?

Did you want to do the video earlier?

Yeah, that would be wonderful.

I don't really understand Mr. Recky's thing, but I would support it.

It sounds sensible.

I was like, it sounds like not a problem for us, but you never know sometimes.

But we did receive as a public comment and the letter that was sent ahead of time, some asked to add more prohibited items to our investment plan.

So I would love to know what would be the next steps, what kind of time frame we would be looking at if we want to make this change.

if it's the exact language or if it's a different language.

My understanding when I met with the public on this,

they weren't tied to the identified by,

but I thought that might just be easier for us.

But if it's not easier than this,

then I'm happy to be dissuaded from that.

But I would love us to ensure that we don't invest

in a lot of these companies that assist ICE

in going after our own residents.

Thank you, Vice Mayor.

So what next steps for me would be to work

with Chandler Asset Management and come up with maybe

some proposed language that fits, that will work

with our investment policy if that's what the committee

would like to do, explore, potentially adding some language

to clarify some additional prohibited investments.

So we'll work with Chandler.

It'd probably be a little while, but we'll work with Chandler and come back to this group with any proposed modifications.

Do you have a sense of the actual timeline?

Are we going to wait for another year?

Because we just did our minutes, and I was just like, oh, my gosh, Lisa.

And I was just like, oh, it's been a while.

Typically, we meet annually, but we can obviously meet sooner than annually.

So I would imagine it would be before the next 12 months, so a couple of months.

at least two or three months.

So early next year, I would imagine.

And part of it would be to reverse engineer it

and actually identify the firms

that would meet that criteria.

So we kind of have, you know,

like a no-fly list and go from there.

Would it be helpful if the public comment

sent in a list of actual companies?

So I would suggest that we look to our firm

who has a lot of experience in this

and they've worked with other cities in this regard too.

So I think we know what the gist is

that our residents are looking for.

So I would suggest that we have staff work with our firm on that.

And then we can look into those categories.

The good news that we've heard is that right now

we do not appear to have any investments

that would cover any of those concerns that residents have raised,

other than perhaps tangentially Caterpillar.

So I think we have some work to do to work with the firm and follow up on it.

And then we will definitely come back before that one-year mark

and give you all an update and update the public as well.

Are there any comments before?

I guess I'll save my comments for the end.

I was going to make a motion.

I'd like to comment before.

My comment is that while I personally support being as socially responsible as possible and agree with the public's comments, before I was asked to vote on a new policy, I'd really like to know what criteria Chandler uses to make this determination.

I think on the earlier socially responsible topics, it was fairly straightforward.

Tobacco, firearms.

What's the third one?

Oh, fossil fuels.

I think as we move into this new area, it becomes more difficult and more subjective as to what is in this category.

I don't know.

I know the public gave the names of some organizations that do this service, but I don't know anything about those organizations.

I don't know what their history is or who's on their group.

So I would, before I was able to vote on this, I would very much like to know what the criteria is.

And I would not feel comfortable just saying that an organization that I don't know about is doing this or that Chandler's doing this, making the determination.

I would like something a little clearer on that.

I would also like to know, one, Bill did comment, it does not appear that anything we own, and I don't believe we own Caterpillar.

We do own Caterpillar? Okay, I'm sorry. We do own Caterpillar.

Okay, but other than Caterpillar, it doesn't appear that anything we own may fall into that category.

But I would like to also know, I assume that Chandler works off an approved list of securities.

and I'd like to know from that approved list which items would be impacted so that before we vote on

it we have a real sense as to what the impact is and then the third thing would be so that we know

what the the yield give up would be what the impact would be and then we could make a educated

determination as to what the the pros and cons of it are so I think while I personally support this

I think we need a lot more information and a lot more guidance from staff and Chandler as to how the mechanics of this and what the impact of this would be.

Other comments before I chime in?

I largely agree with you.

So I think there are, I want to pursue socially responsible investing.

I supported the changes that we made, I think, a long time ago around environmental sustainability.

But if you look at the policy, what you'll see is that at the time, there was council action around this, not just committee action.

It was a broad goal and a significant one.

And there were a lot of other organizations that were moving in that direction.

So there were we had outside resources that had lists of companies that weren't that were semi neutral or at least considered neutral.

I think in the in the investment world, I think we we have like the or at least we reference the investment research investor responsibility research center.

And I don't know what they might have some resources around this.

But I guess what I'm getting at is we were very specific in terms of what we wanted to prohibit, and that was manufacturers of cigarettes.

You can very clearly, does this company manufacture this thing or do they not?

You know, we had investment or we had things that we wanted to encourage.

But we also said, you know, no entities that manufacture firearms or cigarettes or direct exploration, production, refining of fossil fuels.

I think what we've received from the public is, I wouldn't even know how to begin to determine which company falls into.

There are some of those categories that I think would be easier to determine which companies would fall into that than others.

And then there are some of the catch-alls that were in there where, you know, we start talking about, you know, Caterpillar and Amazon and I don't, I just, you know, in percentage of what revenue they receive from certain things, I just, and also like, I feel like we're trying to fix something that isn't broken yet.

So I think there are two approaches to this. One is for the committee to narrow down very specifically what it sort of like we did previously on what categories of things we might generally want to avoid and maybe look at the investment, whatever research centers that we think would be most appropriate to identify those companies or those lists.

or we can create a policy statement.

And I think we can sort of like we've done previously

where we've said we've encouraged investments

in the community and economic development

or we discourage certain things.

Our managers kind of know what those are,

but we also get every year,

we get the opportunity to review that list

just like we just did.

And I'm very comfortable with the list of issues that we have today.

And that's more of a longer term.

We just keep an eye on things as opposed to spending a whole bunch of time identifying what, you know, not investing in companies that promote violence means.

They did identify possible different lists to do.

They did.

But I'm not sure that those are commonly used in the investment world, though, because there are peace institutes and things that identify these things that are, I think, clearly advocacy organizations.

And then there are more neutral investment organizations that actually go out and look at what is the percent of revenue that this organization gets from this particular activity, which I think is much more neutral than some of the other institutes.

also I think if we were to make this decision today without um I think there are elements within

our community that would be very disturbed by us going in this path um and not having the opportunity

to comment on it I don't think we're passing the language today staff has kind of made that clear

to me but they but they need to know what they're going to research yes um but isn't that what uh

committee member wanted to know he wanted to know what would this mean for us and i think that's what

but we have to tell them what it means us first for them to like is it are we are we concerned

about weapons manufacturing are we concerned about all of the things that were enumerated

some of the things that were enumerated because i'm not comfortable with the entire list so which

item are you not comfortable with? The catch-all. So if it was specific to, so we already say if you

don't, you don't invest and you need more companies that manufacture arms. Correct.

We also say military service. That's, that is contained. That's extremely broad. There,

Because anyone who works even remotely with the U.S. Defense Department, I mean, the U.S. Defense Department uses Google.

I don't know where you draw this line.

You see what I'm getting at?

Does Palantir count or do they not?

Oh, I would count Palantir.

Sorry, thank you.

manager help me. So I do recall receiving public comments, but I haven't seen the specific letter

lately. So I think what we would want to do maybe is just have the committee give us direction to

if there are certain, as the chair is saying, if there are certain perhaps categories,

then I think staff and the firm can look into that.

But I don't know if the specifics would be something that staff would recommend.

I just don't know either way or the other.

And as the chair said, I would imagine that staff might have some concerns about the broadness of some things.

But I just don't know without, you know, doing the research.

But I think knowing where the committee is at now, if there are certain categories, if you want to say, for example, the weapons of mass destruction or, you know, entities that what are some of the languages here?

Mass incarceration and detention.

Yeah, see, I just I just don't know about that, because then that does that mean certain construction? It's just very broad. I don't know what it means. And I would actually like to be able to talk to the firm and see what other cities have done in this regard that have kind of taken up this extension of the socially responsible investing.

so I just don't know that we would be able to narrow it down so some direction from the

committee would be good if there are certain categories that you're interested in but otherwise

we'll we'll have to just look at whether this could or couldn't work

I see Mr. Bill has his hand up.

Oh, hi.

Sorry, Bill.

And we'll come to Bill with his back.

Sure.

If it's okay, I would just like to educate.

I know staff is aware, but I'd like just the committee to be aware.

So Chandler, a couple of years ago, we contracted with S&P IQ, and we contracted with S&P IQ

to provide ESG ratings.

So we, as part of our approval list across all the names that we follow that we think are suitable for all of our clients, those that follow California government code and those that don't, we do screen all those names for their ESG scores every quarter.

And so we use what's referred to as ESG integration, which means that we consider those ESG factors in determining investment suitability, but it's not the driving factor.

The driving factor is still balance sheet strength, the earnings outlook, corporate governance and overall.

And we don't necessarily have the ESG factors dominate all of those, but we do review those ESG factors on a quarterly basis and all the names that we follow.

And when we do notice a change in those scores or trending lower, that is something that our credit committee will dig deeper into.

So I just wanted to let you know that as just an overall body, Chandler is very engaged in environmental, social and governance kind of oversight.

But again, I want to emphasize we don't have an ESG approved list, but we do consider those factors in determining investment suitability.

So just a little, maybe just a little something else to consider.

And this is something I can explore with staff a little bit further.

But I just wanted your body to know that, you know, for our clients that follow California government code, you know, we have a fiduciary responsibility as well.

And we are very, you know, we are very cognizant of your investing money on behalf of the public.

And I think that's reflected in all the underlying investments that we make within the corporate sector on your behalf.

Would it be helpful in the future, in future reporting that you provide that ESG rating on all of our corporate holdings so that this committee can see what the S&P ESG rating is?

So right now it's just a black box. We don't know anything about what those ratings are.

Sure. So we do charge an additional fee for that. And I'd be happy to talk with staff.

And, you know, it costs us to do those ESG scores and that, I mean, all of our competitors who do that do charge.

It's a pretty modest fee.

But nonetheless, there is a fee to provide that across the overall portfolio.

And that's really industry standard.

I think that would be helpful if so.

Sometimes when we talk about this, and I would agree with your comments very much, in the abstract, it all sounds very good.

But when the rubber meets the road and after being an investment world for 40 years, it sometimes gets much more complicated and much more difficult than it sounds.

So that's why I'm really interested in what the mechanics are as opposed to in addition to what the policy would be.

So I think the more information we have, there may not even really be a problem here.

Yeah, that's what I was going to say, Chair. Just looking at this list, we don't have investments in these. And I think that it's great that our residents are aware and have told us some of the cities that they're pointing to that have updated their policies.

So just having the time to be able to look at Richmond and Alameda and even some of our cities here on the peninsula, because this conversation is going on.

So I think just having that time, but at least knowing we don't have investments in these right now.

And then we can come back to get committee and also look at what we can do at the open of Black Box.

And I'll just add, our current construct and framework is likely going to weed out a lot of these anyway.

For fun, I just Googled Palantir's corporate bond rating. It's a B3.

So I think if staff can go back and work with Chandler within the construct that we currently have to identify to your points and your point, you know, what is it we would be talking about?

I think we can come back with something that will then give the opportunities to focus a little more on what the universe could be, because it's probably going to be an extremely small universe that wouldn't meet our criteria anyway.

I'm going to go to Luis first, and then I'm Mr. Reckett.

I'm going to attempt, so some of us eventually have to go to work.

And we have another immediate reason.

um not run this off I'm going to do my best to craft a motion that hopefully will be acceptable

to to the committee uh so I will move to accept the report in advance um the draft um subject to

the review of staff and the chair uh to um at the city council uh with some additions and the first

being to have staff evaluate the recommendations from including remember radkey from half an hour

ago um and if they seem reasonable then you know formally incorporate them um it didn't sound

too problematic to me but i just want to make sure you know staff can come back with appropriate

language um i i'm not ready to i don't know what a modest fee may be um but i'm happy for staff to

evaluate that and then return to the investment review committee uh with the recommendation i'm

not certain that i would be ready to advance that to the city council for formal formal inclusion in

the policy but if it makes sense then if staff says hey good idea maybe in a future update uh

we can do that and then also to have staff evaluate uh the letter and the recommendations from the

public and return to the investment review committee my guess is it will have no impact

to our portfolio so i i i don't want to um uh you know spend too much time

crafting language when it probably will not materially affect our investments to begin with

but for staff to come back with uh language and an implant implementation strategy that's also an

important part of the the policy um that achieves the the objectives that the the public have laid

out but also are actionable um and to come back with information to demonstrate to the investment

investment review committee that there really is no impact of the portfolio which i think is

probably our shared application so that would be my motion um

um oh um well it's just a friendly amendment i want to make sure we get mr baracki in

oh okay just real quick um i guess what also be helpful is with that uh with the s&p uh esg score

maybe uh just get a couple a couple offensive investments against gold standard i guess

investments just to see like numerically, like where those are all going, just to better understand

the rating mechanics, I guess. That's all. So the reality, I'll just comment here. The reality is

most companies that meet the underlying credit quality requirements of California government

code are large just by nature. And because they're large, they take, for the most part,

they take reporting on environmental, social, and governance factors pretty seriously.

So I can tell you that the number of names that we have on our approved list that have a low ESG score are very few and far between.

And the names that typically have a low score basically have low data availability.

So they basically, either because they're private.

So a good example of names in your portfolio that would have a low ESG score would be like the Northwestern Mutual Life Insurance Funding Agreement backnotes,

which are extremely high quality and we think offer some compelling relative value.

But because the company is private, they don't make that data available to S&P,

so their score is low.

So companies like that that have a low score and low data availability,

we tend to discount.

And I can just tell you that the large companies that provide that data availability,

it's very rare to find a name that is much below the 50th percentile.

So for the most part, we're just not seeing that.

The other name, and this one I find ironic, that always scores low is Berkshire Hathaway.

And the reason why Berkshire Hathaway scores low is they provide very low data availability,

which doesn't seem consistent with some of their overall themes on just corporate governance

overall.

So those would just be two highlights.

But I can tell you anecdotally, when we score your portfolio and looking at your names,

we're really not going to find names that have many names that are even below the 50th

percentile relative to the peer group.

on an ESG basis.

So the motion by

Mayor Ramirez

I think I'm generally OK with the direction.

I think I think I want to limit it a little bit more instead of the same staff

to investigate the public comments.

I just if we can focus it on there, I'm I'm perfectly happy

looking at what other communities done and what might make sense in terms of um we were talking

about the um you know companies or subsidiaries that are involved in mass incarceration those

sorts of things i think where i where i don't want them to spend a whole bunch of time is on the

really really broad the you know someone who facilitates the violation of human rights but

I don't know what that means.

And I think that would...

I just think those are the...

Or who is involved in military services,

I don't know.

These are just really hard to define.

And honestly, at the end of the day,

I think what we're going to find is

we're not going to...

These companies are probably not going to.

And so I just don't want to...

I think the real value in this is kind of the message that we send the community in the statements, not really what's actually going, because I doubt that we're going to end up in a world where.

I think just to give you an example, if you click on the military services link that they provided, Boeing is on there.

I'm not going to vote to do this for the way I'm sorry.

Do we know we don't, but I'm just saying that even if we did, I would, I just, I can't support the

evidence, but unless we, unless we narrow it down to, um, just mass incarceration, stuff that I think

is very, very easy to, um, enumerate. Right. I mean, I guess that's just me. One of the troubles with this is we, we can very,

I'm looking at this from sort of a plain reading.

Like, you know, if I'm certain the military uses email, right?

But I wouldn't call using Gmail a military service, right?

If our staff and Bill is telling us don't invest in these,

they have a really good sense of what this means,

which is why I'm willing to defer to staff

to help us understand sort of the universe of activity

that has occurred. I don't want to quibble on what is or isn't a military service. It sounds like

you have some intuitive understanding, either because you're not doing that,

going down the rabbit hole of, well, military officials wear boots. So therefore, every

company that has any participation in the manufacturing of boots is ineligible. I don't

think that's what we're trying to get at, right? There's some source that you're using to determine

which companies would fall within these categories, and I'm willing to defer to your judgment on how

to define that. We don't have to use this language, right? It's just more staff, I think, already has

a very strong intuitive understanding of how to interpret this, and I'm willing to defer to them

come to us with reasonable language for the policy statement and then an implementation

strategy that I trust will probably have very little or no impact on our portfolio.

I understand the motion.

If there's a second we can vote on it, I probably won't support it because I think we're trying

to fix something that isn't broken.

And we're going to do an enormous amount of work to, at the end of the day, make ourselves

feel better, but not actually do anything different.

I would just also add that we're talking about 10% of the portfolio.

And while I agree the purpose is good, I mean, how much time does staff want to spend with exactly the topics that are being raised here of analyzing what the company is doing?

And that's why it's in the end is probably going to be offloaded to a third party like S&P as opposed to and even it seems like Chandler does that, too.

So I would discourage staff from getting into a role of making this determination as to what is fits this criteria and what doesn't fit the criteria.

It will be a lot of time and work and probably friction from the public in terms of what the decision is for something that is currently not a problem and is limited to 15 percent of the overall portfolio and really kind of falls outside of what, in my view, what the role of the city of Mountain View is to do.

So I would just be very careful how broad we make this and how much time and effort staff is going to put into this when we've, I think, acknowledged that currently is not a problem with the portfolio, but that there probably should be something in a policy that addresses this.

But I think before we vote on it, we really need to know the mechanics of how this is being done.

But I would discourage staff getting in a role of making this determination as to whether it's socially responsible or not.

I think that is a black hole we don't want to set go down.

I agree with you. I think the question I would have for staff is this doesn't sound to me like a 500 hour project.

This sounds like a five to 10 hour project.

So I think maybe helping us understand the workload that would go into this research.

And is there direction we can provide to narrow the scope, as the chair has suggested, where we're not investing a huge amount of time, you know, parsing every word, you know, going into the semantics, but achieving the spirit of the request from the public?

I'm going to take a stab at this.

I think if we look at their approved list, which you mentioned earlier, because that is the universe that we would only invest in.

We can look at the names on that list and see if any of them appear to touch on any of these businesses.

And we can come back to the committee and show those without staff making any determination one way or another.

Because I do think at the end of the day, it's going to be an extremely small universe of stuff we're talking about.

Another way we could filter it is, aside from the approved list, who's A and above, most of these firms aren't even going to meet that threshold.

So maybe there's a way, without spending a lot of time, we can show what the universe would be in consultation with Chandler, because I think it's going to end up being a moot point.

So if that would help the committee, if we come back just to show what the current approved list looks like, and if there's any name that even looks like it could touch on one of these, then the committee can decide where they want staff to go from there.

And that takes the judgment part out of it for staff.

We're not making judgments because I concur that judgment decisions should be vetted further by the committee.

So this would just be a show you what may or may not be an issue in terms of portfolio construction with the types of names that we would only be allowed to invest in anyway.

That's reasonable.

That would be reasonable.

And you could include just if someone just wants to provide copies of the investment policies from the other jurisdictions that were mentioned, maybe two or three of them.

And then the other final piece of the compromise.

if we, I don't want to do a special meeting for that.

So if whatever regular meetings that we have,

that to me, if we were already invested

in things that were concerning,

then I think time would not be on our side.

I don't think anything's going to happen

between now and whenever the next time we meet,

which might be sooner than a year

because of everything that's going on.

So whenever there's a regular scheduled meeting,

that that can be incorporated into and agendized as part of I think that's the time to do it I

don't want to have a special meeting about this um I I think I just don't think it's a good use

time okay are you okay with that I will second your motion

I'm not sure I remember what it was but um but I I think they tell me if I'm

if I'm Ruth that be or not to speculate um it's to

um take the action we're supposed to take today which is to um um to receive the draft of fiscal

24 20 25 investment review committee report to the city council um to um there were earlier comments

from committee members that you incorporated in the notion but yeah yeah did did staff did you

capture those okay okay yeah that and then um and then um and then based on the the public comments

of the letter that we received, reviewing basically what Mr.

Andrews said earlier, taking a look and just identifying

at the next, whenever it makes sense,

at the next meeting that we, the next reasonable meeting

that we have.

If we have one, two weeks from now, it's too soon.

But just look at that.

And then maybe just if we can have some examples

of other jurisdictions policies around this

that were mentioned, I think that would be really helpful too.

And then we can decide where we want to proceed from here.

!

!

Review is a standard staff practice.

Happy to do that.

OK.

Does that work for everyone?

Including their city manager?

Are you happy with that?

OK.

Great.

So are there any other comments to sort of vote?

All in favor of the motion?

Raise your hand.

Okay, it looks unanimous. Anyone opposed? No. So that passes unanimously. And we will thank you,

everyone who participated in this particular item. And thank you, Bill, again. I really appreciate

your time walking us through this. Are there any staff item six or any staff comments, questions,

or performance.

If not, we'll adjourn this meeting

at

9.51

We're going to make it fast, right?

Yeah, we're going to go fast.

Just how fast? Do you have any latitude

at all or do you need a hard 10?

10.30?