HomeMy WebLinkAboutResolution 2003-012 N.C.S. 01/27/2003Resolution No. 2003-012 N.C.S.
of the City of Petaluma, California
RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF PETALUMA APPROVING THE
INVESTMENT POLICY FOR 2003
WHEREAS, the City Treasurer has annually rendered to the City Council a Statement of
Investment Policy, and;
WHEREAS, the City Treasurer has the responsibility to invest the pooled idle cash from
all of the City's 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 2003
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 Resohition was introduced and adopted by the Approved as to
Council of the City of Petaluma at a (Regular) (Adjourned) (Special) meeting form
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on the .........2.1111......... day of ........~1riu11:y .................................. 20.0, by the
following vote: •••••••••••• •• •••••••••••
Cit Attorney
AYES: Canevaro, Mayor Glass, Harris, Healy, Moynihan, Torliatt
NOES: None
ABSENT: Vi ~ Mayor O' 'en ~
ATTEST: ............................................................................................ ... .... .. ..r ... ...........................
City Clerk Mayor
Council File ...................................
Res. No_..._.2003-0.12.......N.CS.
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CITY ®F I'ETALLJMA, CALIF®I~NIA
2003 STATEMENT ®F INVESTMENT P®LICY
William J. Thomas
Finance Director/City Treasurer
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EXHIBIT A TO THE RESOLUTION
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City..of Petaluma, California 2003 Statement of Investment Policy
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2 CITY ®F' PE,TALiJMA, CALIF®RNIA
3 2003 STATEMENT OF INVESTMENT POI,IC~'
4
5 POLICY
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7 It is the policy of the City of Petaluma, CA to. invest public funds in a manner that will provide
8 the highest investment return with the maximum security while meeting the daily cash flow
9 demands of the entity and conforming to all state and local statutes governing the investment of
1 o public funds.
11
12 SCOPE
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14 This investment policy applies to all financial assets of the City of Petaluma, CA. These funds
15 are accounted for in the City of .Petaluma, CA Comprehensive Annual Financial Report and
16 include:
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18 General Fund
19 Special Revenue Funds
20 Debt Service Funds
21 Capital Project Funds
22 Enterprise Funds.
23 Internal Service Funds
24 Trust and Agency Funds
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26 This Policy shall also apply to funds of the Petaluma Community Development Commission
27 (PCDC), Petaluma Public Financial Authority, Petaluma Public Facility Financing Corporation
28 and any other agency or trust funds under the control of the City Treasurer.
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30 PRUDENCE
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32 Investments shall be made with judgment and care -under- circumstances then prevailing -
33 which persons of prudence, discretion and intelligence exercise in the management of their own
34 affairs, not for speculation, but for investment, considering. the probable safety of their capital as
35 well as the probable income to be derived.
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37 OBJECTIVE
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39 The primary objective in priority order, of the City's investment activities shall be:
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41 1. Safety: Safety of principal is the foremost, objective of the investment program.
42 Investments of the City of Petaluma, CA shall be undertaken in a manner that seeks to
43 ensure the preservation of capital in the overall portfolio.
44 2. Liquidity: The. City's investment portfolio will remain sufficiently liquid to enable the
45 City of Petaluma, CA to meet all operating requirements which might be reasonably
46 anticipated.
47 3. Return on Investments: The City's investments shall be designed with the objective of
48 attaining a rate of return throughout budgetary and economic cycles, commensurate with
49 the City's investment.risk constraints and the cash flow characteristics of the portfolio.
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51 DELEGATION OF AUTHORITY
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53 Under the City Charter Section 24, the City Treasurer is appointed by the City Manager with the
54 approval of the City Council. The City Treasurer is also the City's Finance Director.
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56 The daily cash management, investment transactions and account reconciliation's are the primary
57 responsibilities of the City Treasurer. These activities are .also carried out by other members of
58 the Finance Department under the direction of the City Treasurer.
City of Petaluma, California ~ 2003 'Statement oflnvestment Policy
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2 ETIIICS AND CONFI:ICT OF INTEREST
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Officers and employees involved in the investment process shall refrain from personal business
activities that could conflict with proper `execution. of the investment program or which could
impair their .ability `to make .impartial decisions: Officers and employees involved in the
investment. process shall abide by ;the Conflict of Interest Code, ,(California 'Government Code
Section 1090 ef, seq.) .and the California Political, Reform Act (California Government Code
Section .81.000 et seq.).
PERMITTED INVESTMENTS
The City'may invest in the following roves"tments sources that are allowed'by State Government
Code Section 53'.601 and 53635:
^ Local Agency Investment Pools (State LAIF or' Sonoma County Investment Pool)
^ California Asset.IVlanagement Program (CAMP) .
^ Certificates of Deposits with.. commercial banks and/or savings and loan companies'
^ Negotiable Certificates of Deposit.
^ Banker's Aceepfances
^ Securities of the US. Govermnent or its Agencies
^ .Repurchase Agreements (for overnight investment)
^ Commercial Paper
^ 1Vloney:Market
^ Mutual Funds
Guaranteed Investment Contracts
COLLATERLIZATION
Deposit-type. securities (i.e: Certificates of`Depost) shall be collateralized at the minimum State
of California collateral pool requirements for any amount exceeding FDIC or FSLIC coverage.
BROKERS
In s.eleeting securities brokers, the City Treasurer shall conduct credit and capitalization analysis
to determine that firms.'are adequately financed to conduct public business.
LOCAL INVESTMENT POOL POLICIES AND REP®RTS
To the .extent .there are' investments'in the State or Sonoma County .investment pools, 'the City
Treasurer shall review and maintain current copies of they adopted. investment policies of the State
and Sonoma County. The policies shall be reviewed for concurrence with the investment policy
of the City.
SAFEKEEPING AND CUSTODY
All security `transactions entered into by the City of Petaluma, CA shall be conducted on a
delivery-versus- payment basis: Securities wily be held. by third party custodian designated by the
City Treasurer and evidenced by safekeeping receipts.
City.of Petaluma, California 2003 Statement of Investment Policy
1 INTERNAL CONTROL
2
3 The City Treasurer shall establish an annual process of independent review by an external
4 auditor. This review will provide internal control by assuring compliance with policies and
5 procedures.
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7 PERFORMANCE STANDARDS
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9 The investment portfolio shall be designed with the objective of obtaining a rate of return
1o throughout budgetary and economic cycles,. commensurate with the investment risk constraints
11 and the cash flow needs.
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13 The City's investment benchmark for market yield is the Three Month i7.S. TreasuryBill, which
14 had an average yield of 1.19% in December 2001. .
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16 The City's investment amount benchmark is to invest 97% of all idle funds.
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18 REPORTING
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20 The City Treasurer shall provide a monthly investment report to the City Council, which
21 provides a clear picture of the status of the current investment portfolio. This report will be
22 formally submitted to the City Council each quarter at a public meeting.
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24 Schedules in the quarterly Treasurer's Report will include the following:
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26 ^ A list of individual securities held at the end of the ,reporting period by authorized
27 investment category
28 Average life and final maturity of all investments
29 Earnings rate on an annualized basis
30 ^ Market.value, par value and amortized book value
31 Percentage of the portfolio by investment category
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City of Petaluma, California 2003 Statement of Investment Policy
2 CITY OF PETALUMA
3 2003 STATEMENT OF INVESTMENT POLICY
SUMMARY OF TYPES QF INVESTIVIENTS
AVAILABLE TO LOCAL G"OVERNMENTS
9 STATE INVESTMENT POOL (LATE)
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11 The Local Agencylnvestment Fund (LATE), a voluntaryprogram created by statute, began in
12 1977 as an'investment alternative for California's local governments and special districts and
13 ~ continues today under the State of California Treasurer's office: The enabling legislation for the
14 LAIF is .Section 16429'.1,2,3 of the California Government Code.
15 This program.offers participating agencies the opportunity to participate in a major portfolio
16 which daily invests hundreds of millions of.dollars, using the investment expertise of the
17 Treasurer's Office Investment~staff at no additional cost to the taxpayer. This in=house
i 8 management team is comprised of civil servants who 'have individually worked for the State .
19 Treasurer's Office for over 20 years.
20 The LAIR is parE.of the: Pooled Money Investrnenf:Account (PMIA). The PMIA began in 1953
21 and has oversight provided by the Pooled Money Investment Board (PMIB) and. an in-house.
22 ~ Investment Committee: The PMIB .Board members are the: State Treasurer, Director ofFinanee,
23 and State Controller.
24 The LAIF has:ouersight by the Local Investment Advisory Board (LIAB): -The Board.eonssts of
25 five members as designated by Statute. The. Chairman is the State Treasurer, or'his designated
26 representative... Two members qualified`by,traning and.experience in the. field of investment or
27 finance, and the .State Treasurer appoints two members who are Treasurers; .finance or fiscal
28 officers or business managers employed by any County, City or local district or Municipal
29 Corporation. of this, state.. The term of each appointment is two years or at the pleasure of the
3'0 appointing authority. -
3:1 All securities are purchased under the authority of the Governrrieilt Code Section .16430 and
32 16480:4; The State Treasurer's Office°ttkes delivery of'all. securities purchased on a delivery
33 versus payment basis using a .third-party custodian. All investments are purchased at market; and
34 market valuation :is conducted monthly:
35 Additionally, the PMIA has Policies, Goals; and Objectives for the portfolio to.make certain that
36 our goals of Safety; Liquidity and Yield are not jeopardized and that prudentmanagerrient
37 prevails. These policies are formulated by .investment; staff and reviewed by both the PMIB and
38 the LIAB on an annual basis:
39 The Bureau of:State Audits on an annual.. basis audits, the State: Treasurer's Office. The:resulting.
40 opinion:is included in the subsequent PMIB monthly report. following its publication. The Bureau
41 of State Audits. also has a continuing audit process throughout the year. The State Controller's
42 Office as well as an in-house audit process involving three .separate divisions audit' all investment.
43 and LAIF claims on a daily basis.
- 44 It has been determined.. that -the State oflCalifornia cannot declare bankruptcyunder..Federal
. .: ... ..
- 45 'regulations; thereby allowing`the Goverrunent Code Section '1`.6429.3 to stand. This Section states
'` City~ofPetahima, California 2003 Statement of Investment Policy
1 "money placed wth.the StateTreasurer',for depost.in the:LAIF shall not be subject.to
2 impoundment or seizure by any. State .off cal or State ~agercy."
3 The LAIF has grown from 293 participants and $468 million in 1977 to 3,039 participants and
4 $19.9 billion in 2002.
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6 The Local Agency Investment Fund (LATE) was created by statute in 1977 and provides an
7 investment alternative for local, agencies:. The program- offers participating agencies to
8 participate in a major portfolio,. which invests hundreds of millions of dollars a day. The deposits
9 and withdrawals are done by electronic transfers of .funds (wire transfers) and deposits earn
to interest on a daily basis.
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12 There is a limitation of $4.0 million ;per legal entity within an agency. _ There is also a maximum
13 of fifteen transactions, deposits or withdrawals per. month.
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15 SONOMA COUNTY INVESTMENT POOL
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17" The Sonoma. County Treasurer maintains an investment -pool in which the County,. Schools,
18 , Special Districts and Cities can participate. This investment.-pool operates" in the same manner as
19 , the State. pool. The County Treasurer is subject to the same State Government~Code regarding
20 investments as the City. As with the State investment fund,. City funds can be withdrawn at any
21 time and are protected by State Law from seizure or impoundment by any County Officer. The
22 City does not participate in this pool but retains the .option to do so.
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24 CALIFORNIA ASSET MANAGEMENT PROGRAM (CAMP)
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26 CAMP provides California public agencies, together with any bond trustee acting on behalf of
27 such public agency, assistance with the investment of and accounting for bond proceeds and
28 surplus funds. For bond proceeds, the objective of CAMP is to invest and account of such
29 proceeds ~ in compliance with arbitrage management and rebate requirements of the Internal
30 .Revenue Service. The program includes the California Asset Management Trust, a California
31 common law trust organized in 1.989. The Trust currently offers a professionally managed
32 money market .investment. portfolio, the Cash Reserve Portfolio, to provide public agencies with
33 a convenient method of pooling funds for temporary investment pending their expenditure. The
34 Trust also provides .record keeping, custodial and arbitrage rebate. calculation services for bond:
35 proceeds. As part of the program, public agencies may also establish individual, professionally
36 managed investment accounts.
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38 .The .Pool seeks to attain as high a level of current income as is consistent with the preservation of
39 , principal. Thee Pool purchases only investments of the type in which public agencies. are:
40 permitted by statute to invest surplus funds and proceeds. of their own bonds.
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42 CERTIFICATES OF DEPOSITS (CD)
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44 ~ Certificates of Deposits,. sometimes known as "J.umbo Accounts" or "Fixed CD's" are savings
45 accounts with Banks or Savings .and Loans. These accounts are for a specific amount, have a set
46 interest rate, and set maturity date. There is a substantial interest penalty if the CD is withdrawn
47 prior to the maturity date.
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49 The State law requires Public Fund CD's to be collateralized ,by the financial institution at 110%
5o with US Goverrunent notes/bonds or at 150% with quality First Trust Deeds. This collateral can
51 be waived if Federal Insurance (FDIC for banks or FSLIC for savings and loans) is available.
52 These federal agencies will insure each account up to $100,000.
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54 The City generally waives the collateralization requirements. for the FDIC or FSLIC insurance.
55 The waiver of collateral is a wide spread practice and will generally generate higher interest rates
,.
City of Petaluma, California 2003 Statement of Investment Policy
1 and provide thee. greatest security for the funds from the Federal Insurance Agencies. For deposits
2 in excess of $100,000, the collateralization requirements are not waived.
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4 NEGOTIABLE CERTIFICATE OF DEPOSIT (NCD)
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6 This ~ investment is imilar to the. Fixed CD's above. However, the-NCD can be sold through a
7 broker on a "secondary market" prior to the maturity date. Normally, NCD.'s are issued.. in
8 $500,000 and $ L;OOO,OOQ amounts. The State Code- limits NCD's to not. more than.. 30% of :the
9 local agency's: portfolio and to a five-year maximum: term. The security is the credit worthiness
to of'the issuer.. Thesedeposits are uninsured and uneollaferalized promissory notes.
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12 BANKER'S ACCEPTANCES'(BA)
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14 A Banker's Acceptance is a time. draft. of invested funds, which has been drawn ~on and accepted
is forrepayment by a:bank. This financial instrument is generally used-for short term (30 and 1.80
16 days) financing of export, import, or storage' of good's. By accepting the draft (investment of .City
17 funds), .the bank is liable for the payment at maturity. This, bank liability makes the Banker's
18 Acceptance- a: marketable investment. `The State Code- limits BA's to not. more than 180 days to
19 maturity and 40% of the local agency'sportfolio. Iii .addition,, not more- than, 30% of the local
20 agency's'portfo'lo may be placed in any one bank.
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22 US'TRE:ASURY.BILLS
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24 Commonly referred to as T-Bills,. these are short-term marketable securities. sold,as obligations of
25 the US Government, They are offered in three month, six month, nine month and one-year
26 maturities. T-Bills do: nbt accrue interest but are sold at a discount, and:. pay the face value at
27 maturity..
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29 US TREASURY NOTES'
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31 These'are marketable, interest=bearing securities. old as obligations of the US Government with
32 original maturities of one to ten years. Interest is paid semi-annually.
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34 US TREASURY BONDS
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36 These are the same as US Treasury Notes except they Have original maturities of ten years or
37 longer.
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39 I+EDERAL AGENCY TSSUES
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41 Many Federal Government Agencies are' authorized to 'issue short term and loig;~~fenn obligations
42 that are used ,to finance. various programs. such.. as home .loans, business. loans,. farm loans, etc.
43 These Agencies were created by the Federal Government in the 1930's and have since become
44 independent quasi-public agencies. The security for th. er issues is the guarantee of the Agency to
45 pay. The Federal Government has only an implied 1'iability to ,the extent that, the. Agency has an
p _ ury.
47 ~ sues are aslsecure as U.S Government not seas It is widely accepted that Federal Agency
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49 There is an active secondary .market available. to sell these issues prior to maturity, 'The issues
5o are fairly liquid depending on the prevailing: market interest rates at"the time of `sale.
51 Some: of ,the more common agency notes are issued by the Federal National Mortgage
52 Association (Fannie Mae); Federal Home Loan Banks;, Federal Home Loan Mortgage
53 Corporation (Freddie Mae), and the Federal Farm Credit Banks..
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55 REPURCHASE AGREEMENTS AND REVERSE REPURCHHASE AGREEMENT&{RErOS)
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57 A Repurchase Agreement is -a short-term. investment agreement to loan City funds :for a fixed
58 period in return for a fixed `interest rate. and. secured collateral, such as U.S. Treasuries or Agency
' _ ~ City of Petaluma, California 2003 Statement of Investment Policy
1 Notes. This type of investment is usually done for overnight or very short term (7 days)
2 investment of funds left in the general. operating checking account. Reverse Repurchase
3 agreements is a short-term investment, which is used to take advantage of market interest rate
4 changes and increase the size of the portfolio. State law was amended in 1996 to limit the use of
5 both repurchase and reverse repurchase agreements. The City Council must approve each
6 reverse repurchase agreement.
8 COMMERCIAL PAPER (CP)
9
to Commercial Paper is unsecured promissory notes of industrial corporations, utilities and bank
ii holding compariies: The notes .are in bearer form in amounts starting at $100,000. State law
12 limits the City to investments. in United States corporations having assets in excess of five
13 hundred million dollars with an "A" or higher rating. Cities may not invest more than 25% of the
1.4 portfolio in commercial paper and the CP's .may not exceed a term of 270 days.
15
16 MUTUAL FUNDS
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18 An investment company that pools money and can invest in a variety of securities, including
19' fixed-income securities and money market instruments; cities may invest in Mutual Funds or
20~~ Money Market funds that receive the highest ranking or the highest letter and numerical rating by
21 two of the three largest nationally recognized rating services. The Mutual Funds must abide by
22 the same investment restrictions and regulations that apply to public .agencies in California.
23 Money Market Funds must follow regulations specified the Security and Exchange Commission
24 under the Investment Company Act of 1940. The .City must verify that the Mutual Fund is in
25 compliance with state laws for public agencies prior to purchasing .shares.
26
27 GUARANTEED INVESTMENT CONTRACT (GIC)
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29 This is an agreement acknowledging receipt of funds for deposit, specifying terms for withdrawal
3o and guaranteeing a rate of interest to be paid. The investment follows all state laws for the
31 investment of public funds.
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City of Petaluma, California 2003 Statement of Investment Policy
1 PERMITTED INVESTMENTS AND CONDITIONS FOR USING THEM
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Investment Type• Maximum
Maturity (2) .Maximum %
~ of Portfolio Quality
Requirements.
LocalAgency Bonds 5 Years None None
US Treasury Obligations. 5 Years. None None
State of California Obligations 5 Years None None
CA Local Agency Obligations 5 Years None None
LIS Agencies S Years None None
Bank Acceptances 180 Days 40% (3) 'Fed.. Reserve 'Eligible..
Commercial Paper 270 Days 25% (4) A1/P1 Rating
Negotiable Certificates of Deposit ~ Years 30% .None
Repurchase Agreements 1 Year None None
Reverse RepurchaseAgreemerits 92 Days 20% of Base None (6).
Medium-Term Notes 5 Years 30% A ~ Rating
Mutual Funds N/A 2Q% (5) • 1Vlultiple (7).
Money Market-Funds (;1) N/A 20% 1Nlultiple (8)
Collateralized.Bank Deposits 5. Years None None
Mortgage Pass=Thru Securities 5 Years 20% AA Rating
Time Deposits 5 Years None None
County Pooled Investment Funds N/A None .None
Source: California Govemment Code Sections 53601 &53635 (a-n)
(1) This document refers, to Money Market,Mutual Funds:as Money Market Funds. They must have an average weighted :maturity of 90
days or less and abide by $EC'regulations.
(2) Section 53601 states any investment that at the time df purchase has over5 years to maturity must be authorized by the legislative.
• body not less than 3 months prior to tfie investmenf.. •
(3) No more ,than 30% of the surplus funds may be in Bankers Acceptances of anyone:commercial bank.
(4) Commercial paper issuersgmust be US Corporatidns with-$500 millioh plusin assets. Purchases may not represent more than 10% of
the outstandingpaper of an isstiing;co~poratioh.
(5) No more,than 10%; of an agency's surplus funds may be.invested irr anyone mutual fund.
(6) Reverse Repurchase.Agreements•mustbe made with primary dealers of the.Federal Reserve Bank of New York:and t_he securities
used.for"tfie,agreemt;ntmust;have been held bylthe issuer for.at least'30 days.
(7) Mutual ,funds musf. receive the highest`ranking'by 2 of. the 3' largest.nationallyrecog~iized rating agencies. or :retain an investment
advisor who is registered,. or*exempf fromsegistrafion, with the SEC ahd has at,least 5 years' ezperieiice investing in securities and
obligations authorized in Section 53601 and,33635 (a-j, m or h) of he Govemment Code~with assets,in excess of$SOO:million.
(8) Ivloney market funds must receive:the highest ranking by 3 of the 3 largest nationally recognized rating agencies or retain an
investment advisor who is:registered, or exempt from registration, with. the SEC and,has at leasCS years' experierice`managing money
market-funds'-ih excess of $500 million.
City of Petaluma, California 2003 Statement of Investment Policy
1
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3 GOVERNMENT CODE' SECTION 53635
4 AS AMENDED
5
6 53635. As far as possible, all moneybelonging to, or in the
7 custody of, a local agency, including money paid to the treasurer or
8 other official to pay the principal, interest, or penalties of bonds,
9 shall be deposited for safekeeping in state or national banks,
1o savings associations or federal associations; credit unions, or
11 federally insured industrial loan companies. in this. state selected by
12 the treasurer or other official having the legal custody of the
13 money; or, unless otherwise directed by the legislative body pursuant
14 to Section 53.601., maybe invested in the investments set forth
15 below. A local agencypurchasing or obtaining any securities
16 described in this section, in a negotiable, bearer, registered, or
17 nonregistered format,. shall require .delivery of all the securities to
18 the local agency, including thosepurchased forthe.agency by
19 ~ financial advisors, consultants, or managers using the agency's
20 funds, by book entry; physical delivery, or by third-party custodial
21 agreement. The transfer of securities to the counter party bank's
22 customer book entry account may be used forbook-entry delivery. For
23 purposes of this section, "counter party" means the other party to
24 the transaction. A counter party bank's trust department or separate
25 safekeeping department may be used for the physical delivery of the
26 securityif the security is held in the name of the local agency.
27 -
28 (a) Bonds issued by the local agency, including bonds payable
29 solely out of the revenues from arevenue-producing property owned,
30 controlled, or operated by the local agency or by a department,
31 board, agency, or authority of the local agency.
32 ,.:
33~,.~~` (b) United States. Treasury notes, bonds, bills; or certificates of
34x. = ~ indebtedness, or those for which the faith and credit ofthe United
35 States are pledged for the payment of principal and interest.
36
37 (c) Registered state warrants or treasury notes or bonds of this
38 state, including bonds payable solely out of the revenues from a
39 revenue-producing property owned, controlled, or operated by the
4o state or by a department, board, agency, or authority of the state.
41
42 (d) Bonds, notes, warrants, or other evidences of'~indebtedness of
43 any local agency within'this state, °.including bonds payable solely
44 out of the revenues from arevenue-producing property owned,
45 controlled, or operated by the local ~agency,.orby a department,
46 board, agency, or authority of the local. agency.
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9
City of Petaluma,: California 2003-Statement of Investment Policy
1 _
2 (e) Obligations issued by banks for cooperatives; federal land
3 banks, federal. intermediate. credit banks, federal home loan banks,
4 the Federal Home .Loan Bank, the Tennessee Valley Authority, or in
5 obligations, participation's; or other instruments~of, or issued by,.
6 or fully guaranteed as to principal and interest by; the Federal
7 National 1Vlortgage. Association; or in guaranteed portions of Small
8 Business Administration notes; or in obligations, participation's; or
9 other instruments of, or issued. by, a federal agency or a United
to States government-sponsored enterprise.
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12 (f) Bills of exchange or time drafts drawn on and accepted by a
13 commercial bank, otherwise known as banker' acceptances. Purchases
14 of bankers acceptances may not.. exceed'270 .days. maturityor 40 percent
15 of the :agency's surplus funds which maybe invested pursuant to this
16 section. However, no more t11an 30 percent of the agency's .surplus
17 funds: maybe invested in the bankers' acceptances of any one
18 commiercial bank~pursuant to this section.
19
20 This subdivision does not preclude a.municipal utility district
21 from investing :any surplus'money yin. its treasury in any manner
22 authorized by the Municipal Utility District Acf; Division 6
23 (commencing with Section 1.1501) of the Public Utilities Code.
24
25 (g) Commercial paper of "prime." quality ofthe highest;ranking or
26 ofahe highest letter and numerical~~ratng as provided. for by 1Vloody's
27 Investors Service, Inc., or.Standard,and Poor's Corporation.
28 Eligible paper>is -further limited to :issuing corporations that: are
29 organized :arid operating within the United. States and .hawing; total
30 :assets in excess of five hundred million dollars ($500,000.;000) and
31 having an "A:'' or higher rating, for the -issuer's debt, other than.
32 commercial paper, if any,. as provided for by Moody's Investors
33 Service;, Inc.:, or Standard ..and Poor's Corporation. Purchases of
34 ~ eligible commercial paper may not exceed 180 days maturity nor
35 represent more than, IO percent.of the'outstanding paper of an issuing
36 corporation. Purchases of.comriiercial paper may not exceed 15
37 percent. of the agency's surplus money; which maybe .invested pursuant
38 to this section. An additional 15 percent, or a total of 30, percent
39 of the agency's money or money in its custody, maybe iiiwested
4o pursuant to this subdivision. The additional 15 percent, may be.so
41 invested only`if`the dollar-weighted average maturityof the,entire
42 amount does not exceed 31 days. "Dollar=weighted average maturity"
43 means the sum ofthe amount of "each outstanding commercial. paper
44 investment multiplied by the number ofdays to maturity, divided by
45 ~ the. total amount of outstanding commercial paper.
46
10
Cty of Petaluma, California 2003 Statement of Investment Policy
2 (h) Negotiable certificates of,deposit issued by a nationally or
3 state-chartered bank or a savings:associaton or federal association
4 or a state or federal credit union or by astate-licensed branch of a
5 foreign bank. Purchases of negotiable certificates of deposit may
6 not. exceed 30 percent of the agency's surplus money, which maybe
7 invested pursuant to this section. For purposes of this section,
8 negotiable certificates of deposit do not come within Article 2
9 (commencing with Section 53630) of Chapter 4 of Part 1 of Division 2
10 of Title 5, except that the amount so invested shall. be subject to
11 the limitations of Section,53638. For purposes of this section, the
12 legislative body of a local agency and the treasurer or other
13 official of the local agency having legal custodyof the money are
14 prohibited from .depositing or investing local agency funds, or funds:
15 in the custody of the local agency, in negotiable certificates of
16 deposit issued by a state or federal credit.union if a,member of the
17 legislative body of the local agency, or an employee of the
18 administrative officer, manager's office, budget office,
19 auditor-controller's office, or treasurer's office of the local
20 agency also serves. on the board of directors, or any committee
21 appointed by the board of directors, or the credit committee or
22 supervisory committee of the state or federal credit union issuing
23 the negotiable certificates of deposit.
24
25 (i) (1) Investments in repurchase agreements or reverserepurchase
26 agreements of any securities authorized. by this section, so long as
27 the agreements are subject to this subdivision, including the
28 delivery requirements-specified in this section.
29
30 (2) Investments in repurchase agreements may be made, on any
31 investment authorized in this section, whenthe term, of the agreement
32 does not exceed one year. The market value of securities that
33 underlay a repurchase agreement shall be valued at 102 percent or
34 greater of the funds borrowed against .those securities and the value
35 shall be adjusted no less than quarterly.
36
37 (3) Reverse repurchase :agreements may be utilized. only when either
38 of the following conditions are met:
39
40 (A) The security was owned or specifically committed to purchase,
41 ~ by the, local agency, prior to repurchase agreement on December 31,
42 1..994, and was sold using a reverse repurchase agreement on December
43 31,1994..
44
11
City of Petaluma, California. 2003 Statement of Investment Policy
2 (B) The security to be sold on reverse repurchase agreement'has
3 been. owned and fully paid for by the local agency for a minimum of 30
4 days prior to sale, the~total of all, reverse repurchase agreements
5 on investments. owned by the local agency notpurchased or committed
6 to purchase, prior to December:31, 1994, does not exceed.20 percent
7 of the base value of the portfolio, and the agreement does not exceed
8 a term of'92 days, unless the agreement includes a written codicil
9 guaranteeing a minimum earning or spread for the entire period
10 between the sale of a secur-ty using a reverse repurchase .agreement.
11 and•the final maturity date of the same security.
12
13 (4) After December- 31,'1`994, a:reverse repurchase agreement may
14 riot. be ente"red into with securifies not sold: on a reverse repurchase
15 agreement: and purchased; or committed to purchase, prior to• that.
16 date, as.a means of financing: or paying for the security sold on a
17 reverse repurchase agreement, but may only be entered into with
18 ~ securities owned and previously-paid for, for a minimum of 30 days
19 prior to theaeftlement ofthe reverse repurchase agreement; :ins order
20 ~to supplement the yield on securities owned. and previously paid for
21 or to provide funds 'for the `immediate payment of a local agency
22 obligation. Funds obtained or funds within the pool of an equivalent
23 amount to that obtained from selling a security to a counterparty by
24 • way of a reverse repurchase agreement, on securities originally
25 purchased' subsequent to p.ecernber 31, 1994, shall. not be used to
26 purchase another security wth•a maturity longer'than 92 days from
27 ,the initial +settlement date of the reverse repurchase agreement,
28 unless the reverse repurchase agreement includes a written'codcil
29 guaranteeing a minimum earning or spread' for the entire:period
30' ,between the;saleof a security using a reverse repurchase agreement;
31 ~ and the final'maturity date of the same security. Reverse repurchase.
32 agreements specified in subparagraph (B) of paragraph (3)'may notbe
33 entered into unless the percentage.:restrictions specified in that
34 subparagraph are, met; including the total of any reverse repurchase
35 agreements specified;in. subpara'grapli (A) ofparagraph (3).
36
37 (5) Investments~in reverse repurchase agreements or similar
38 investments in which the local agency sells securities prior to
39 purchase with a simultaneous agreement,to repurchasethe security,
4o may only be-made upon prior approval of the :governing body of the
41 local agency and sha1T only be made with primary dealers of "the
42 Federal Reserve Bank of New York. ~'
43
12
City of Petaluma;. California 2003 Statement of Investment Policy
2 (6) (A) "Repurchase agreement" means a purchase of securities by
3 the local agency pursuant to an agreement by which the counter party
4 seller will repurchase the securities on or before a specified date
5 and for a specified amount and the counter party will. deliver the
6 underlying securities to the local agency by book entry, physical
7 delivery,. or by third party custodial agreement. The transfer of
8 underlying securities to the counter party bank's customer book-entry
9 account maybe used for book-entry delivery.
10
11 (B) "Securities," for purpose ofrepurchase under this
12 subdivision, means securities of the same issuer, description, issue
13 date, and maturity.
14
15 (C) "Reverse repurchase agreement" means a sale of securities by
16 ~ ~, the local agency pursuant to an agreement by which the local agency
17 will repurchase the securities. on or before a specified date, arid
18 includes other comparable agreements.
19
20 (D) For purposes of this section, the base value of the local
21 agency's pool portfolio shall be that dollar amount obtained by
22 totaling all cash balances placed in the pool by all pool
23 participants, excluding any amounts obtained through selling
24 securities by way of reverse repurchase agreements or other similar .
25 borrowing methods.
26
27 (E) For purposes of this section, the spread is the difference
28 between the cost of funds obtained using the reverse repurchase
29 agreement and the earnings obtained on the reinvestment of the funds.
30
31 (j) .Medium-term notes of a maximum. of five years' maturity issued
32 by corporations organized and operatng:wi"thin ,the United States or
33 by depository institutions licensed by the United States or any state
34 and operating within the United States. Notes eligible for
35 investment under this subdivision shall be rated in a rating category _
36 of "A" or its .equivalent or better by a nationally recognized rating
37 service. Purchases of medium-term notes' maynot exceed 30 percent
38 of the agency's surplus money which maybe. invested pursuant to this
39 section.
40
13
City of Petaluma, California 2003 Statement of Investment Policy
2 (k) (1) Shares of beneficial. interest issued by diversified
3 management companies:that invest in the securities and obligations as
4 authorized by subdivisions (a) .to (j), ,inclusive, or subdivision
5 (1) or'(m) and that comply with'the investment.restrictions of this
6 article-and. Article 1 (commencing with Section 53:600). However,
7 notwiths"tandng these restrictions, a counter party to a reverse
8 repurchase agreement is not required to 'be a primary dealer of the
9 Federal Reserve Bank of-New York if the °companys board of directors
l0
11 finds that the counter party presents a minimal risk of default, and.
12 ~ the value of the securities underlying a repurchase agreement maybe
13 100 percent of the sales price if the securities are marked to market
14 daily:
15 . .
16 (2) Shares of beneficial, interest issued,by diversified management
17 .companies that are money market funds registered with the, Securities '
18 and Exchange Commission under the Investment Company Act of 1.,940 (15
19 U:S..C. See..8:0a-1 et seq.).
20 .
21 (3) If investment is in ahares issued.,pursuant to paragraph (1),
22 the eornpany shall have mete either of the following criteria:.
23
24 (A) Attained the highest ranking or the highest letter and
25 numerical.rating providedby not less,than two nationallyrecognized
26 statistical rating organizations. .
27 ,
28 (B) Retairied.an investment adviser registered or exempt,from
29 registration with the Securities. and Exchange Commission with. not
30 less than.fiye years' experience investing in the securities and
31 obli-gations authorized by subdivisions (a) to (j), inclusive; or
32 subdivision (1) or (m) and with assets under`management in excess of
33 five hundred million dollars ($500;000;000).
34 -
35 _ (4) If investment is in shares issued pursuant to paragraph (2),
36 the company shall have met' either ofthe following criteria:
37
38 (A) Attained the highest ranking or the highest letter and
39 numerical rating provided by not less than two nationally recognized ~ '
40 statistical rating organizations.
41
42 (B) .Retained an investment adviser registered. or exempt. from
43 registration with the Securites.and Exchange Commission with:not
44 less than five years' experience managing money market mutual funds
45 with assets under management in excess of five hundred million
46 dollars ($500,000,000).
47
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City of Petaluma, California 2003 Statement of Investment Policy
2 (5) The purchase price of shares of beneficial interest purchased
3 pursuant to this subdivision shall not include any commission that
4 the companies may charge and shall not exceed 20 percent of the
5 agency's surplus money that maybe invested pursuant to this section.
6
7 However, no more than 10 percent of the agency's surplus funds may
8 be invested in shares of beneficial interest of any one mutual fund
9 pursuant to paragraph (1).
10
11 (1) Notes, bonds, or other obligationswhieh are at,all times
12 secured by a valid first priority security interest in securities of
13 the types.listedbySectlon 53651 as eligible securities for the
14 purpose of securing local agency deposits having a market value at
15 least equal to that required by Section 53652 for the purpose of
16 securing local agency deposits. The securities serving as collateral
17 shall. be placed by delivery or book entry into the custody of a
18 trust company or the trust department of a bank,. which is not
19 affiliated with the issuer of the secured obligation, and the
z0 security interest shall be perfected in accordance with the
21 requirements of the Uniform Commercial Code or federal regulations
22 applicable to the types of securities in which the. security interest
23 is granted.
24
25 (m) Any mortgage pass_through security, collateralized mortgage
26 obligation, mortgage-backed or other pay-through bond, equipment
27 lease-backed certificate, consumer receivable pass-through
28 certificate, or consumer receivable-backed bond of a maximum of five
29 years maturity. Securities eligible for investment under this
3o subdivision shall be issued by an issuer having an "A" or higher
31 rating for the issuer's debt as provided by a nationally recognized
32 . - rating service and rated in a rating category of "AA" or its
33 equivalent or better by a nationally recognized rating service.
34 Purchase of securities authorized by this subdivision may not exceed
35 20 percent of the agency's surplus money that maybe invested
36 pursuant to this section.
37
38
15