Oswego staff and PFM recommend modest investment-policy updates, stress liquidity and safety

PFM Asset Management's Michelle Binns told the Village of Oswego Committee of the Whole that the firm's work with the village has grown since 2019 and that the primary objectives for municipal investments are safety, liquidity and then return. "First and foremost is safeguarding principles," Binns said, adding that local governments should avoid risking principal to chase yield.

Andrea, a village staff member, said the village adopted a revised investment policy in 1998 to comply with state law and last updated it in 2013. She and Binns recommended small updates to keep the policy aligned with statutory changes enacted since that revision. Andrea summarized the proposed red lines for the board: clarify commercial-paper language consistent with statute, shorten the maximum permitted investment maturity from 10 years to 5 years, and permit only government money-market funds under Illinois law.

The village currently has several accounts with PFM, including a primary investment account, two bond-proceeds accounts (opened in mid‑2025) and a segregated custody account. Binns said account balances with PFM were "just shy of $50,000,000" as of late December in the presentation; Andrea later described the invested total reported in the meeting as $49,400,000. Andrea broke that amount down as about $21,000,000 in excess general-fund balance, $20,000,000 from recently issued bonds for the Lake Michigan connection, $4,000,000 in capital reserves and $4,000,000 in water and sewer reserves; she said about $4,400,000 of the holdings were invested in bonds.

Binns described why PFM moved from a one‑year laddered approach established in 2022 into more liquid positions: with major capital payments approaching, the village needed available cash, and the yield curve has shifted since 2022 so short-term holdings no longer carried the same opportunity cost. She cautioned that if cash is likely to be needed in the near term, keeping funds liquid helps avoid selling securities at a loss.

Board members asked technical questions. When asked how money-market funds are valued, Andrea said the funds are marked to market at year end but reported month-to-month at amortized cost. Jen asked for a plain-language definition of commercial paper; Binns said it is short-term corporate debt with a maturity of 270 days or less and noted statutory portfolio limits (up to one-third of a portfolio in commercial paper, plus an additional one-third in longer corporate notes up to five years). Jen also asked whether Oswego's policy includes environmental or "justice" investment restrictions; Binns said a 2019 initiative from the state treasurer suggested adding such language but that adopting a sustainability restriction is a local choice and, per the Illinois Municipal League (IML) as Binns summarized it, was not mandated.

Andrea said staff would return the red-line policy to the full village board at the next meeting for possible adoption. "Barring any questions, we would bring these revisions back at the next board meeting, so the village board could adopt the changes," Andrea said.

The presentation and Q&A left the committee with clear next steps: staff will supply the redlined policy for formal consideration at a future board meeting and provide any requested numeric clarifications on account breakdowns.