Loading...
HomeMy WebLinkAboutResolution 89-020 N.C.S. 01/17/1989.~ Resolution No. s~-20 N.C.S. of the City of Petaluma, California A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PETALUMA APPROVING THE INVESTMENT POLICY FOR 1989 WHEREAS, Government Code Section 53646 requires each City Treasurer to annually render to the legislative body of the local agency a Statement of Investment Policy, and; WHEREAS, the City Treasurer has the responsibility to invest the pooled idle cash of all of the City funds, and; WHEREAS, The City .Treasurer has developed a Statement of Investment Policy and submitted said Policy to the City Council for review. NOW, THEREFORE BE IT RESOLVED that the City Council approves the 1989 Investment Policy as shown in Exhibit A attached. Under the power and authority conferred upon this Council by the Charter of said City. REFERENCE: I hereby certify the foregoing Resolution was introduced and adopted by the Approved as to Council of the City of Petaluma at a (Regular) (.~al~a>~t~~~E~I~~J meeting .form on the ..-17th..-...-..... day of ...................,~r31A.13~17Cy......................., 19 ~~..., by the following vote: amity Attorney AYES: Cavanagh, Tencer, Sobel, Woolsey, Balshaw, Vice Mayor Davis, Mayo illigoss NOES: 0 ABSENT: ATTEST : . .. ................................ ... ..v ~.-:....---...-..-..-.- City Clerk li~~ Mayor Council File .......................°---........ CA 10-85 Res. No....BC~_.2.©...,._..... N.C.S. '!EXHIBLT A" CITY OF PETALUMA -~ 1.98`9 STATEMENT' OE INVESTMENT POLICY PURPOSE' This Statement is intended to provide guidelines for the prudent investment of the temporaryd7e cash under the City Treasurer's control. The ult'i'mate goal is to enhance the interest earnings of the City wh`le,protecting it's pooled cash. .SCOPE This Investment policy shall apply to activities of the City with regard t'o the investment of temporarily idle funds of all fund types, including the following: General Fund Special R"evenue,Funds .Debt 'Service Funds Capital Projects Funds Special As'ses'sment Funds Internal-`Service Funds Trust and Agency Furids The Policy shall also app y to funds ;of the Petaluma Community Development Commis`s`ion. The Cash ;management and investment transactions are the responsibility of the City Treasurer. ,OBJECTIVE The City's cash, management system is designed to monitor and forecast expenditures: and ;revenues,,, thus enabling the City to nvest funds to the fullest extent possible. The City attempts to obtain the highest interest yield as long as investments meet 'the crter.i'a established for safety and. 1`'quidity. The. City st"rives to maintain the leveh of investment of a.ll :funds, of 95.E of available cash, through daily and projected cash. f`low` determinations, The, ba sic pr~mi,s'e underlying -the City's investment ph"ilosophy is' tq insure, that money is always safe and. ava l~abT,e~ when need"ed . POLICY The City of Petaluma operates its! temporary pooled idle cash investments under Government Code Section 53b00, et, seq. and Civil Code ,Section 22.61, et s:eq., the ("Prudent Man" rul^e). This affords the City a broad spectrum of investment opportunities..: Eligible investment securities from State Government Code Section 5'3635 that ar.e commonT:y used. by the City°are: - Local Agency Investment Fund (CALF) - Certifieat;es of Deposits placed with commercial banks .and%or savings and loan companies ' - Negotiable Certificates of Deposit - Ba ker.s Acceptances - Seeurt•es of the U.S. Gowernment or its Agencies - Repurchase Agreements - Commercial Paper Attached is a summary of the securities most commonly used by the City and a ,copy of the Government Code Section 53635. Other rivestment securities authorized by State Government Code Section 5363.5, as amended,, are riot commonly used by the City .but also eligible for investment of City Funds. Criteria for selecting investments and the order of priority are• `1,. Safety. The s'afe'ty and. risk associated with an nvestmer-t re ers to the potential loss of principal, interest or a:combination of, the e. amounts. The City only operates in those nvestments~that are considered very safe.. 2. Liquidity. This refers to the ability to "cash in" at any moment in time: with a minimal chance of ,losing some .portion of principal or interest. Liquidity is an important investment quality especially when the need. -for unexpected funds may occur... 3. Yield. Yield is the.. potential dollar ear-pings 'an invest- ment can provide, and sometimes is described as the rate of return.- SAFEKEEPSNG,, COLLATERALIZATION"AND BROKERS A11 investment securities purchased by the City ,"hall be held in safekeeping by an institution designated as prima-ry agent or at the ety.. The primary agent shall issue a safekeeping receipt to the City listing the specific instrument, r-ate, maturity and other pertinent information. Deposit-ty.pe securities (i.e. Certificates of D.eposit`) shall be collateralized through th'e State of California collateral poo`1 requirements for any amount".exceeding FDIC or FSLIC coverage. Other securities shall be co lateralized by the actual security held in safekeeping by the primary agent. In selecting brokers and"dealers, :the City Treasurer shall conduct comprehensive ;credit and :captali:zaton analys'i`s to determine tha,t,f:rms are adequately'financed to conduct public business. MONITORTNG AND REPORTING The City Treasurer shall routinely -monitor the investment portfolio and shall file with the CPity.Council,a monthly Treasurer's Report which shall inc'1"ude a Statement of Investments and other information as required by`Government Code Section 5364;6. *_The prudent man~rule states, in essence,, that "in investing property for the benefit o€ another, a trustee shall exercise the judgement and care,, under the circumstances then•prevaing.., which men of prudence, d'iscretionand intelligence exercise in the management. of their own affairs .'10 . CITY OF PETALUMA 1989 STATEMENT OF INVESTMENT- POLICY SUMMARY OF'TY.PES OF INVESTMENTS AVAILABLE' 'TO LOCAL GOVERNMENTS LPiI F The. .Local Agency Investment Fund (LATE) was created by the State;. in 1976'to; provide local governments with access to a large investment pool that can generate Ygher interst yields and provide a high degree of liquidity. The deposits and withdrawals are•done by electronic transfers ,of funds (wire transf.er.sj and begin earning :interest on a daily basis. Over 70O local agencies participate in, the LAIF investment pool. These agencies invest approximately $4.4 billion which is added to $1;2..6 State funds f'or a $.17.0 billion 'investment portfolio. The investment pgrtfolio is widely distributed aver many types of investment instruments and is not adversely impacted by sudden shif~ts'in the investment nvestments to dastributonaprov.des~for greateroflexb-latY ide take advantage of changing interest rates. There ~s a limitation of $`5 mllon~per Agency swbject to a maximum of 8 transactions per :month. The security for LAIF investments is in two parts. The State Treasurer''s and Controller's offices are responsible for the,aecountng, processing, and safe keeping of the City''"s funds through the State Treasurer's investment proc.educe and,pol,c:i~es.: The State maintains insurance and bonds covering employee honesty and er-rocs. The C-ty funds are able to 'be withdrawn at any time. and are protected by State Law from seizure or°'impoundment by :any State Officer. Once.: the. :funds are pooled with other local agencies, and invested', the security for the funds becomes the investment. Each investment •s secured by 'Federal Insurance, the U.S. Gove ,ninent or Federal Agency., collateral of -major banks, .or °maj'or.corporaton collateral. The security depends on the type of investment.. Certi f i~eates of Degos-its BCD ) Certificate's of Deposits, sometimes known. as "Jumbo Accounts" or. "F.ixed,Cp's1° are'savi'ngs accounts with Banks or Savings and LOans.; .These accounts~ar_e for a specific amount, a set inter--est rate,, and s'et 'materity date: There is°,a substantial interest penalty if the CD is withdrawn prior-.~to the maturity date. The State :Law requires Public Fund CD"s to be collateralized by the financial 'nsti.tution at 110% with U.S. Government notes,%bonds or- at 150%'with quality'First Trust Deeds. This collateral can be waived if Federal Insurance (FDIC for Banks or FSLIC for~Savings and Loansj is available. These federal agencies will insure each account up to $100,000. The City generally waives the collateral~zaton requirements for the FDIC or FSLIC insurance. The waiver .of collateral is :a wide spread practice and will. generally generate higher interest rates and provide the greatest; ecurty .for the funds from th'e Federal Insurance Agencies. Negotiable Certificate of Deposit (NCDJ Ths~:nvestment is similar to the Fixed CD's above. °Howev,er, theNCD can be sold on a "secondary market" prior to the .maturity date~•, Normally, NCD'~s are issued. in $500',:00'O,and $1,000,OAO amounts and require a combination of securities to protect the public .funds. The State Code limits NCD's' to not .:more than 30~'of the local agency`s portfolio-. The security is the same as CD's insurance up to $'100,000 and collateral f'or`amounts above $100,000. Bunker's Acceptances (BA) A banker's Acceptance is a time draft which has been drawn on and accepted by a bank. This friancal.nstrument is generally used for short term (30 'and 18 g' days) financing of export,,, import>, or storage of goods. By accepting the draf , the bank is: liable for the payment at maturity. This bank liability makes the Banker's,Acceptarice a marketable investment,.. "The State Code limits: BA•'~s to not more than 270 days maturity and 40$ of; the local agency's•portfolio. U . S . 'Treasury Bi-11•s Commonly referred''to as T-,oil-l s„ these are short-term marketable securities sold as ob_1igatons of the U.S. Government, They are offered in thre.;month~, six month, and .one-year maturities. T-b is do not accrue, interest but-are sol~d at a discount to pay face value at maturity. U'. S. Treasury Notes- These are marketable., interest=bearing securities sold as obligations of the U.S. Government with original maturities of one to ten years, Interest -s paid semi-annually.. U.S. !Treasury 'Bonds These are the same as U.S. Treasury Notes, except they have orig•na'1 maturities of ten years or- longer. .Federal-.Agency Issues Many Federal government sponsored. Agencies are authorized to issue short 'term and long term obligations that are used to finance variou"s ,programs such a home loans, business loans, farm loans, etc: These Agencies were created by the Federal Government in. the '193;0's :and have since become independent quasi-public agencies. The security for their issues is the guarantee of the Agency to pay: The Federal Government has only an implied lab ty to the: extent thaf the Agency has an open credit line to borrow from the U.S. Treasury. It is widely aCdepted that Federal Agency issues are as secure as U.S: Government notes. There is an active secondary market ava+il-able to sell these issues prior to ,maturity. The issues are fairly liquid depending on the prevailing market interest rates at the ti-me of sale. Repurchase Aetreements IREPOS A repurchase agreement is a contractual arrangement between, a financial in"sttuton, or dealer, anal an investor. This agreement normal-ly can run for one or more days. The investor puts up funds for a .certain number of days at asta~ted yield. I~n return, takes a given ;block of securities as co'1lateral At"maturity, the securities ar.e repurchased by the fnanca-l. institution with interest. This is used generally for overnight investments. ~Commerdal Paper (MCP} Commercial paper are unsecured proms ory notes of i-ndustrial cor;ppratons, utilities and bank holding companies. 'Notes. are in bearer form starting at $10.0,000. State law lidits a City to investments in~United States corporations hamming assets in excess of 5 hundred million dollar with a ":A",or higher rating: Cities may not invest more than 3;U$ of idle cash in commercial. paper. § 53630 GaVERNMENT CODE, under Article. 3 (commencinng with Section 17,50) of Chapter :13.5 of Division 1 of the Financial Code to maintain a branch ohice in his state or authorized under federal law to maintain a federal branch. in this state.. Amendcil Stets 1987 ch 887 §.4. Amendments: ' . 1987 Amendment: Added "a community college,district," in subd (a). §' 53635, Deposit :and investment of funds of local :agencies As far as possible,, all ,money belonging to, or in: the custody of, a local. agency; including money, paid to the treasurer or .other official to pay the principal, interest, or penalties of bonds, shall';be deposited :for safekeeping `in state or national' banks, .savings associations or federal associations or • credit unions. in, tlii's state selected by the treasurer or other official having the legal. custody of the :.money; or, unless, otherwise directed .by the legislative body pursuant to Section 33601, may be invested. in the following: (a), Bonds issued by the ocal ,agency, including bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by the local' .agency or by a department; board, .agency, ~or authority of the. local ;agency:- . (bj United States Treasury. ;notes; bonds; bills, or certificates of indebtedness, or those fot` which the faith. and .credit of the United.:States are pledged for the payment of principal and interest. •. ' (c) Registered fate warrants :or treasury notes. or bonds of this state, including. bonds payable solely out of the revenues from arevenue-producing property owned, .controlled,. or operated by the state, or by a department, board, agency, or authority of the state. {d) ,Bonds, notes, warrants; or other evidences of indebtedness of any local agency 'within. this state, =including bonds payable solely out of the revenues • from arevenue-producing property owned, ;controlled, ,or operated by the local. agency, or by a department, board, agency, or' ,authority of the 'local agency.- .,.:. (e) Obligations issued by "banks for cooperatives, federal land; banks, federal .intermediate credit banks,, :federal home loan banks,, the Federal Home Loan .Bank, .the Tennessee Valley Authority,, or in obligations,: participations, or ,other instruments of, or issued by,, or fully ,guaranteed as to principal. and interest by, the Federal National Mortgage Assc:.i'ation; or in :guaranteed portions of Small Business Administration notes; or in obligations, partictpa- tions; or other instruments of, or issued by, federal agency •or a United .. .States government=sponsored enterprise., . (f)" Bills of exchange or :time drafts drawn on :and' accepted by ~ a` comrtiercial bank, otherwise, known, as bankers: acceptances,. which are eligible for purchase,. by the Federal .Reserve System. Purchases of bankers acceptances may not, exceed 270 days maturity or 40' percent of ,the agency's surplus funds which.: may be infested pursuant to this: section, However, no more than 30 percent of 'the :agency's surplus .funds :may be invested in • the `barkers acceptances of any one commercial bank pursuant to this section.:.. This subdivision does not< preclude a municipal utility district from investing any surplus money in its treasury in any manner authorized by .the Municipal Utilit District Act, 'Division 6 commencing with Section 1:1501) y C. of ;the Public Utilities Code..... (g) Commercial paper of "prime" quality of the highest cranking or of the highest letter .and numerical rating as provided .for- by Moody's Investors 40 - (trGa coor,J GOVERNMENT CODE § 53635 Service, Inc:, or Standard :and' Poor's ~Gorporaton. Eligible paper is further. limited' to issuing corporations that, are organized and operating .within the United States and having total assets in excess of five. hundred million dollars ($500,000,000) 'and having an "A" or higher rating' for. the issuer's debt, ~otfier ahan commercial paper, if any,. as provided. "for by Moody's Investors. Service,. Inc:„ or Standard and Poor'$ Corporation. Purchases of eligible commercial paper may not exceed 1.8Q days. maturity nor represent more than IO percent of'the; outstanding paper of an :issuing- corporation. Pu~ harems oney w chc may abe r'in ested pursuant l ~ „percent of the agency's. su , lus ~ this section. An addi- tional l S ,percent, or a total of 30 percent of the agency's money or money in its :custody, {~iay'be~ invested ,pursuant to this ;subdivision. The additional 15 percent may be so invested only if the dollar=weighted average. maturity of the entire amount does not exceed 3l days. "Dollar.-weighted average ,~ maturity 'means the sum of tfie amount of each. outstanding commercial paper, investment ,multiplied by the number of days 'to maturity, divided by the total amount of .outstanding commercial' paper: (h) Negotiable certificates. of deposit issued by a nationally or state-char- ered;bank or a avings .association or federal association or a state or ~. federal' credit `union or by estate-licensed branch .of a foreign bank: Purchases of negotiable certificates of ,deposit may .not ~ exceed - 30 percent of the: ~agency's~ surplus.: rtioney which may be invested. pursuant tar this section.- . For.. purposes of this section, .negotiable certificates of ;deposit do not ,come within Article.2 (commencing with Section `53630) of Chapter ~ of Part 1 of Division 2 of Title S, except .that the amount so invested shall be.aubject o the limitations .of Section 53638: ,For purposes ofthis section, the. legislative - body of a local agency and the ,treasurer or other' official of the locals agency having ;legal custody of the .money 'ate ~ prohibited. fio_ m depositing or investing local agency funds, or funds in the custody of the local agency, in. negotiable certificates of deposit issued by a state or federal credit union if a member of the legislative bod of the local agency,: or an employee of the administrative officer, .manager's o1~ce, budget office, auditor-controller's office, or treasurer's; office` .of 'the local agency :also serves, oa the board of directors, or an committ credit committee or su e ~ appointed by the .board of directors, or the p rvisory committee of the state or' federal credit union issuing the,negotiable certficates of deposit:. (i) Investments in repurchase agreements. or reverse repurchase agreements of any securities authorized by this section, so long as the proceeds of the reverse, repurchase agreement are invested solely to supplement. the income normally received from these securities-. ,Investment in a .reverse repurchase agreement shall 6e ,made only upon prior approval of the 'legislative body of the local agency. For' purposes of this section, 'the term "repurchase.. agreement" means. a .purchase of. securities by the local' agency pursuant to an agreement by which the seller will czpurchase the secu_ rities~-on or befoie a specified, date and .for a specified amount; and will deliver the underlying securities to the 'local agency by :.book entry, ;physical delivery, or by third- party custodial -agteement, The transfer of ` underlying securities to the counterparty bank's, customer book entry account may be used for' `book entry dehvery. The term " counterparty" for ,the par-poses of this subdniision, means the other .party ao the transaction.: °,A counterparty bank's ` trust department. or, safekeeping department may beused .for physical :delivery of the: underlying; security. The term of repurchase agreements shall be 'for one (t2iciov codo~ § 53635 ~ GOVERNMENT BODE year. or Tess. The term "securities;" for purpose of repufchase under this subdivision; shall mean securities of the same issuer, description, issue date,' " and maturity: ~ . . The term "reverse repurchase agreement" means a sale:~of securities by 'the local agency pursuant~~ to an agreement by which the local agency will repurchase such securities, on or before a specified date and for a specified amount. ,._ (j) Medium=term notes of a maximum ' of five. ;years' maturity issued by corporations organized' ,and 'operating ~ within. the "United. States or by depository institutions `li'censed 'by the United .States or any state and ;operating within "the United' States, Notes eligible. for .investment under this subdivision. shall. be rated. in a rating category of '"A" or' its equivalent or better by a nationally recognized .rating service. Purchases of .medium-term . '~ notes may not. exceed ,30 percent of the 'agency's surplus money which may be invested pursuant to this section. '. (k) Shares of `beneficial interest _ issued by diversified management companies, as defined in Section 23701m of the Revenue and Taxation Code, investing in t&e securities and obligations as authorized ~ by subdivisions ~ (a) to (k); inclusive, of this section and which comply with the investment .restrictions of th's article and Article .l (commencing with Section •53600). To be eligible for investment, pursuant; to his subdivision,these compani(~ shall either: (1) ` attain the highest :ranking or the highest„ :letter and numerical rating provided by not sass. '.than .two of the three largest nationally recognized rating• services, or. (2) have an inv,~stment adviser registered with° she Securities and .Exchange Commission.. with not less than five years':. ezperi- ence investing <in. the securities and: obligations as authorized by. subdivisions la) to (m), .inclusive, of this section. and. `with assets under management in excess ~of fiye .hundred• million dolhus ($500,000,000):. The purchase price of shares. of beneficial 'interest, purehased_pursuant to this subdivision shall not include any. commission that these ; Companies, may :charge .and .shah not ,. exceed 15 percent of. the agency $ surpl p X u"s money : wh}ch may , be invested ursuant to his section.: ~ , (~;: Notes, bonds, or :other: obligations: which are at all times secured by a valid first. priority security ;interest in securities of the types listed.. by Section 5365~1,as eligible securities:'for the ,purpose of secut'ing local agency deposits having :a market value of least .equal to;'that'requred by ;Section 53652 for the purpose ;of Securing 'local agency deposits. The securities serving as collateral shall . be placed. by delivery, : or book ~ entry into she .custody of a trust company..or the crust department of a bank. which is not aff listed 'with the issuer of" the secured obligation„ and the;.secunty ;interest shall be perfected: in accordance with the requirements of the ,Uniform Commercial Code or federal regulations. applicable to the types of ~ecprites in which the security. interest :is` granted, ~ , ~ . ~.: Amended'Stats 1987 ch 446 §'2, ch 887 §;5:3. ~ ' Ameudtneatlte ~ .. , 1987 Amendment; (1) a~eleted "a" before "federal'. agency"; (2) amended subd .(i) by (e) deleting the comma after "specified date" iri the third sentence;: (b),substituting. "by" for "a" after "delivery, or" in the third sentence; (e) deleting the. semicolon aftei "book" both times is appears in chd fourth sentence; (d) substituting "9baU,roesn" for "means"' in the last sentence of the first paragraph; and (e) designated' the former lest: sentence of the first paragraph to bathe second paragraph; <3) deleted former subd (j) . wtuctr read: "'(j) Mortgage. securities, purchased under :an agreement 'to 'resell .pursuant to subdivision (i), provided. that the; .mortgage securities are eligible investments ,under subdivision (a) or (b) of Sectiati ,130 of We Financial Code.. A local,' agency's° investment 'in a mortgage security shall 'riot. excad 95 percent of she mortgage securities' fair market value and shall .not exceed 35 percent of the agency's 48' !tz oa cos.) .GOVERNMENT' CODE § :53651 surplue money which ,may be invested pursuant to ,this section:,", (4) raiesgnated formersubds (k) and (i) to be subds (j) and (k); (5}amended subds (j) by (e) deleting "corporate" after "Medium-term" and after "medium-term"; tb) adding •the apostrophe after'"five years" (c) adding. "organized and" gaffer 'corporations"; (d) adding "oi• by depository institutions licensed by the United States. or any state and ope B t fnyg wrthin the United States' ; (e) substituting "Notes" for "securities' j. (Q substituting "a rating cafe o of "A",.or its urvalent or better by a nationally recognized rating service" for "the top three note rating categories by two of the three largest natronally recognized rating services"; (g) substituting "Purchases" for' Purchase'; and (h) substituting."30' for! "14"; (6)amendedsubd (k) by (a) substituting "(k)" for "(4"!after "(s) to"; (b)substituting "Article 1" fore"Article Z'; (c) substituting "Section 33600" for 'Section 53630 ; td) deleting "the." after "Q),attain the"; and (e) adding dhe apostrophe; after "flue Year's' ;i (n added subd (I); and (8) deleted the former last paragraph which -read: "'This sictiori shall remain In effect only until January 1, 1988, and as of that.date`is repealed, unless a later'eiiacted statute, which is enacted before 7anuary, 1, 1988, deletes or calends that. date. If that date is not 'deleted. or eatended,.then, on and after January 1, 1988, pursuant foiSection 961'l,of the~Government Code, Section . 53633_of the Government Code, as amended by Section 25 oF'Chapte S6T of the: Statutes of 19.83, shall have the same force eiid' effect as if this; temporary ;provision had: not, been enacted:" (Ae amended by State 1987,'ch 887, compared to the,sectiori,as it read prlor.to 1987. Tliis section.cvas also amended .by an earlier chapter, c1i 446. See Gov C § 9603.)