HomeMy WebLinkAboutResolution 2001-020 N.C.S. 01/16/2001.{~
Resolution 1Vo. 2001-0201~T.C. S.
of the City of Petaluma, California
APPROVING 'THE
INVESTMENT POLICY FOR 2001
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 RE IT RESOLVED, that the City Council approves the 2001
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
Council of the City of Petaluma at a Regular meeting on January 16, 2001, Approved as to
by the following vote:
4'
City Attorney
AYES: O'Brien, Healy, Torliatt, Maguire, Moynihan, Vice Mayor Cader-Thompson, Mayor Thompson
NOES: None
ABSENT: None
ATTEST: ~ _
° City Clerk .Clark ompson
Reso. No. 2001-020 N.C.S.
•
CITY OF PETALLJIVIA, C1~I,IF~®I~NIA
2001 STATEMENT OF INVESTMENT POLICY
William J. Thomas
Finance Director/City Treasurer
Reso. No. 2001-020 N.C.S. Page 2
\Y~5$
City of Petaluma, .California 2001 Statement of Investment Policy
2 EXHIBIT A to Resolution approving Investment Policy
3
4 CITY OF PETALUIYIA, CALIFORNIA
5 2001 STATEIVIENT OF INVESTMENT POLICY
7 POLICY
8
9 It is the policy of the City of Petaluma, CA to invest public funds in a manner that.. will provide
1 o the highest. investment return with the maximum security while meeting the daily cash flow
1.1 demands of the entity and conforming to all state and local statutes governing the investment of
12 public funds.
13
1.4 SCOPE.
IS
16 This investment policy applies to all financial assets, of the City of Petaluma, CA. These funds
17 are accounted for in the City of Petaluma, CA Comprehensive. Annual Financial Report. and
18 include:
19
20 General Fund
21 Special Revenue Funds
22 ~ Debt Ser-vice Funds
23 Capital Project Funds
24 Enterprise Funds
25 Internal Service Funds
26 Trust and Agency Funds
27
This Policy shall also apply to funds of the Petaluma Community Development Commission
''~ (PCDC), Petaluma. Public Financial Authority, Petaluma Public Facility Financing Corporation
3o and any other agency o.r trust funds under the control of the City Treasurer.
31
32 PRUDENCE
33
34 Investments .shall be made with judgment and care -under circumstances then prevailing -
35 which persons of prudence, discretion and intelligence exercise. in the management of their own
36 affairs, not for speculation, but. for investment, considering the ,probable safety of their capital as
37 well as the probable income to be derived.
38
39 OBJECTIVE
40
4.] The primary objective in priority order, of the City's. investment activities shall be:
42
43 1. Safety: Safety of principal is the foremost .objective of the investment program.
44 Investments of the City of Petaluma, CA shall be undertaken in a manner that seeks to
45 ensure. the preservation of capital in the overall portfolio.
46 2.. Liquidity: The City's investment portfolio will remain sufficiently liquid to enable. the
47 City of Petaluma, CA to meet all operating requirements which might be reasonably
48 anticipated. .
49 3. Return on Investments: The City's investments shall be designed with the objective of
5o attaining a rate of return throughout budgetary and economic cycles, commensurate with
51 the City's investment risk constraints and the cash flow characteristics of the portfolio..
52
3 DELEGATION OF AUTHORITY
~,~ Under the City Charter Sectron 24, the City Treasurer is appointed by the City Manager with the
56 ~ approval of the City Council. The City Treasurer is also the City's Finance Director.
57
Reso. No. 2001-020 N.C.S. Page 3
City of Petaluma,. California 2001 Statement of Investment Policy
_ 1 The daily .cash management, investment.transacfions and .account reconciliation's are the primary
- 2 responsibilities of `the City Treasurer. These activities are also carried out by other members of
3 the Finance Department under the direction of the City Treasurer.
4
-5, ETHICS AND CONFLICT OF INTEREST
6
7 Officers and employees .involved in the investment process shall refrain from personal business
8 activities that could conflict with proper execution of the investment program or which could
9 impair their ability to make impartial decisions. Officers and employees involved in the
10 investment. process shall abide by the Conflict of Interest Code, (California Government Code
i 1 Section 1090 et seq;) and. the California Political Reform Act (California. Government Code
12 Section 81000 et 'seq.).
13
14 PERMITTED INVESTMENTS
1s -
16 The City may invest in the following investments sources that are allowed by State Government
17 Code Section 53601 and 53635:
18
19 ^ Local Agency Investment Pools (State LAIF or Sonoma County Investment Pool)
20 Certificates of Deposits with commercial banks and/or savings and loan companies
21 Negotiable Certificates of Deposit
2z ^ Banker's Acceptances
23 ^ Securities of the U.S. Government or its Agencies
24 Repurchase Agreements. (for overnight investment) .
25 ^ Commercial Paper
26 Money Market
27 Mutual: Funds
8 Guaranteed Investment Contracts
0
3'1 COLLATERLIZATION
32
33 Deposit-type securities (i.e. Certificates of Deposit) shall be collateralized at the minimum State
34 of California collateral pool requirements for any amount exceeding FDIC or FSLIC coverage.
3'S
36 BROKERS
37
38 In selecting securities brokers; the City Treasurer shall conduct credit and capitalization analysis
39 to determine that firms are adequately financed to conduct public business.
40
41 LOCAL INVESTMENT POOL POLICIES AND REPORTS.
42
43 To the, extent there: are investments in the State or Sonoma County investment pools, the' City
44 Treasurer shall review and maintain current copies of the adopted investment policies of the State
45 and Sonoma County. The- policies shall be reviewed for concurrence with the investment policy
46 of the City.
47
48 SAFEKEEPING AND CUSTODY
49
5o All security transactions entered into by the City of Petaluma, CA shall be conducted on a
51 delivery-versus payrilent basis: Securities will be held by third party custodian designated by the
52 City Treasurer and evidenced by safekeeping receipts.
53
INTERNAL CONTROL
~'
5.6 The City Treasurer shall. establish an annual process of independent review by an external
57 auditor.- This review will .provide internal control by a"ssur`irig compliance with policies and
58 procedures.
Reso. No. 2001-020 N.C.S. :Page 4
°_. City of Retaluma, California 2001 Statement of Investment Policy
1 •
2 PERFORNIANGE STANDARDS
3
4 The. investment portfolio shall be designed -with the, objective of obtaining a rate of return
5, throughout budgetary and economic cycles, commensurate.-with the investment risk constraints
6 and the cash flow needs.
7
8 The City's investment benchmark. for market yield is the Three Month U.S. Treasury Bill, which
9 had an average yield of 5.7% in December 2000.
l0
11 The City's investment amount benchmark is to nyest.97% of all idle funds.
12
13 REPORTING
14
t 5 The City Treasurer shall provide a monthly investment report to the City Council, which
16 provides a clear picture of the status of the current investment portfolio. This report will be
• 1 ~ formal'ly submitted. to the City Council each quarter at a public meeting.
18
19 Schedules in the quarterly Treasurer's Report will include'the following:
20
21 A list of individual securities held at the end of the reporting. period by authorized
22 investment category
23 Average life: and final maturity of all investments
24 Earnings rate on an annualized basis
25 Market value, -par value and amortized book value
26 Percentage of the portfolio by investment category
a
Reso. No. 2001-020 N.C.S. Page 5
City of Petaluma, California 2001 Statement of Investment Policy
ATTACHMENT A
3 CITY OF' PETALUMA
~4 2001 STATEMENT OF INVEST"MEANT POLICY
5
6 SUMMARY OF TYPES OF'INVESTMENTS
7 AVAILABLE'TO LOCAL GOVERNMENTS
9
10 STATE INVESTMENT POOL (LAIF)
11
12 The Local Agency Investment Fund (LAIF) was created by statute in 1977 and- provides an
13 investment alternative for .local agencies.- The program offers participating agencies to
14 participate in a major portfolio, which invests hundreds of millions of dollars a day. The deposits
15 and withdrawals are done by e ect_ronic transfers of funds (wire transfers) and deposits earn
16 interest on'a daily basis.
17
t 8 Over 2,815 local agencies participate in the LAIF investment pool. These agencies invest
19 approximately $.12:3 billion, which is added to $27.7 billion in State funds fora $40.0 billion
20 investment portfolio. The investment portfolio is "widely distributed over many types of
21 investment. instruments and is not adversely impacted by sudden "shifts in the investment. market.;
22 In addition, the- large portfolio and wide distribution provides for greater flexibility in 'investing
23 to take advantage of changing interest rates.
24
25 There is a limitation of $2Q million per ,legal entity within an agency. There is also a maximum
26 often transactions, deposits or withdrawals per month.
27
8 The security of LAIF investments is in two parts. The State. Treasurer and Controller's offices are
responsible for the accounting,, processing, and. safe keeping of the Gity's funds through the State
o Treasurer's investment procedure and policies. The State maintains .insurance and bonds
31 covering. employee honesty and errors. The. City funds are able to be withdrawn at any time and
32 are protected by State law from seizure or impoundment by any State Officer.
33
34 Once. the funds are pooled with other local agencies, and invested, the security for the funds.
35 varies with the investment, Each investment is secured by Federal Insurance, the US
36 Government or Federal-'Agency, collateral of major banks, or major corporation collateral.. The
37 security depends on the type of investment.
38
39 SONOMA COUNTY INVESTMENT POOL .
40
41 The Sonoma County Treasurer maintains an :investment pool in which the County;" Schools,
42 Special Districts and Cities can participate. The investment portfolio totals approximately
43 $85.0,080;000. This .investment ,pool operates in :the .same manner as the State pool: The. County
44 Treasurer is subject. "to the: same State Government Code regarding .investments as the City. As
45 with the State investment fund, City funds can be withdrawn at any time and are protected by
46 State Law from seizure or impoundment by any County Officer.
47
48 CERTIFICATES OF DEPOSITS (CD)
49
5o Certificates of Deposits;, sometimes known as "Jumbo Accounts" or "Fixed CD's" are savings
51 accounts with Banks or Savings and Loans. These accounts are. for a specific amount, have a set
52 :interest rate, and set maturity date. There is a substantial interest penalty if the CD is withdrawn
53 prior to the maturity-date.
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U
Reso. No. 2001-020 N.C.S. Page 6
City of Petaluma, California 2001 Statementoflnvestment Policy
2 The State law requires Public Fund CD'sto ~be collateralized by the financial .institution at 110%
3 with. US Government notes/bonds or' at 15.0% with. quality First Trust Deeds. This collateral can
be waived if Federal Insurance (FDIC ~ for banks or. FSLIC for savings and loans) is available.
,: 5' These federal agencies will. insure each. account up to $10:0,000.
6
7 The City generally waives the collateralization requirements for the FDIC or FSLIC insurance.
8 The waiver of collateral is a-wide spread practice and will generally .generate higher'interest"rates
9 and provide the. greatest security .for the funds from the Federal Insurance Agencies. For deposits
l0 in excess of $100,000, the collateralization requirements are not waived.
t1
12 NEGOTIABLE CERTIFICATE OF DEPOSTT ~NCI)~
13
14 This investment is similar to the Fixed CD's above. However, the NCD can be sold. through. a
15 broker on a "secondary market" prior to the maturity date. Normally, NCD's are issued in
16 $500;000 and. $1,000,000 amounts. The State Code limits NCD's to not more than 30% of the
17 local agency's portfolio and to a fine-year maximum term: The ,security is the credit worthiness
18 of the issuer. These deposits are uninsured and uncollateralized'pmmissory notes.
19
20 BANKER'S ACCEPTANCES (BA)
2.1
22 A Banker's Acceptance is a timedraft of invested funds, which has been drawn on and accepted ~ -
23 for repayment. by a bank. This financial instrument is generally used for short term (30 and I$0
24 days) financing of export, import;. or storage of goods. By accepting the draft (investment of City
25 funds), the bank is liable for the. payment at maturity. This bank liability makes the Banker's
26 Acceptance a marketable investment. The State Code limits BA's to not more than 270 days to
27 maturity acid 40% of the local agency's portfolio. In addition, -not more than 30% of the -local
8 agency's portfolio may be placed in any one bank.
0' US 'T'REASURY BILLS
31
32 Commonly referred to as T=Bills, these are short-term marketable securities sold as obligations of
33 the US Government. They .are offered in three month, six month, nine month and one-year
34 maturities. T-Bills do not accrue interest but are sold at a discount,. and pay the face value at
35 maturity.
36
37 US ~T'REASURY NOTES
38
39 These are marketable, interest-bearing securities sold. as obligations of the US Government with
40 original maturities of one to ten years. Interest is paid semi-annually.
41
42 iJS' T'REASURY_BON. DS
43
44 These are the same as US Treasury Notes except they have original maturities of ten years or
45 longer.
46
47 F+~EDERAL AGENCY'ISSUES
48
49 Many Federal Government Agencies are authorized to issue short term and long term obligations
5o that are. used to ,finance various programs such as home loans, business loans, farm loans, etc.
51 These Agencies were. created by the Federal Government in the 1930's and have since become
52 independent quasi-public agencies. The. security for'their issues 'is the guarantee of the Agency to
53 pay. The Federal Government has only an implied liability to the extent that the Agency has an
open credit line 'to borrow from the U.S. Treasury. It is widely accepted that Federal Agency
issues are as .secure as U.S. Government notes.
56
57 There is an acfive secondary market .available to sell these issues prior to maturity. The issues
58 are fairly liquid depending on the prevailing market interest rates at the time of sale.
Reso. No. 200.1-020 N.C.S.. Page 7
City of Petaluma, California _ 2001 Statement of Investment Policy
1 Some of the more .common agency notes' are issued. by the Federal National Mortgage
' 2 Association .(Fannie .Mae), Federal: Home Loan Banks, Federal Home' Loan Mortgage
3 Corporation (Freddie Mac); and the Federal. Farm Credit Banks.
' 4.
` 5, REPURCHASE AGREEMENTS AND REVE'RSE,REPURCHASE AGREEMENTS (REPOS)
' 6
7 A Repurchase Agreement is a short-term investment. agreement to loan City funds -for a fixed
8 period in return for a fixed interest rate and secured collateral, such as U.S. Treasuries or Agency
9 Notes. This type of. investment is usually done for overnight or very short term. (7 days)
1o investment of funds left in the .general operating checking account. Reverse Repurchase
11 agreements is a short,-term investment, which is used to take advantage of market interest rate
12 changes and increase the size of the portfolio. State-law was amended in 1996 to limit the use of
13 both repurchase and :reverse repurchase agreements. The City Council must approve each
14 reverse repurchase agreement.
15
16 COMMERCIAL PAPER. (C)P~
17
18 Commercial Paper are unsecured promissory notes of .industrial corporations,, utilities and bank
19 holding companies. The notes are in bearer form in amounts starting at $100,000. State law
20 limits the City to investments in United States corporations having assets in excess of five
21 hundred million dollars with an "A" or Higher rating.. Cities may not invest more than 30% of the
22 portfolio in commercial paper and the CP's may not exceed a term of 180 days.
23
24 1VIUTUAL FUNDS
25
26 An investment company that; pools money and can invest in a variety of securities,. including
27 fixed'-income securities and money market instruments, cities may invest in Mutual Funds or
8 Money Market funds that receive the highest. ranking or the highest letter'and numerical rating by
two of the three. largest nationally recogriized rating services.. The Mutual Funds must abide by
o the same investment restrictions and :regulations that apply to public. agencies in California.
31 Money Market Funds must follow- regulations specified the.:Security and Exchange Commission
32 under the Investment Company Act of 1940., The City must verify that the Mutual Fund is in
33 compliance with state laws for~public agencies priorto purchasing shares.
34
35 GUARANTEED INVESTMENT CONTRACT (GIC)
36
37 This is an agreement acknowledging receipt of funds for deposit,. specifying ,terms .for withdrawal
38 and guaranteeing a rate of interest to be paid. The investment follows all. state laws for the
39 investment. of public funds.
40
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Reso. No. 2001-020 N.C.S. Page 8
City of Petahxma, California 2001 Statement o£Investinent Policy
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•
PERMITTED INVESTMENTS AND CONDITIONS EOR.USING THEM
Investment Type Maximum
Maturity (2) Maximum %
of Portfolio Quality
Requirements
Local Agency 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
US Agencies 5 Years None None
Bank Acceptances 270 Days 40% (3) Fed. Reserve Eligible
Commercial Paper 180 Days 15% or 30% (4) Al/P1 Rating
Negotiable Certificates of Deposit 5 Years 30% None
Repurchase Agreements ~ 1 Year None None
Reverse Repurchase Agreements 92 Days 20% of Base None (6)
Medium-Term Notes 5 Years 30% A Rating
Mutual,Funds N/A 20% (5°) Multiple . (7)
Money Market Funds (1) N/A 20% Multiple (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 Government Code Sections 53601 & 53635 (a-n)
(1) This document iefers to Money Market Mutual,Funds as Money Market Funds. They must have an average weighted maturity of 90
days.or less and abide,by SEC regulations. '
(2) Section 53601 states. any. investment that at the time of purchase has over 5 years to maturity must be authorized by the legislative
body not less than 3 months priorto the(investment.
(3) No mote than 30% of the surplus funds maybe in Bankers Acceptances of•any one commercial bank.
(4) Limit. is 30% if dollarweighted average maturity of alLcommercial paper does. not exceed 31 days. Commercial paper issuers must
be US Corporations with -$500 million plus in assets. Purchases may not represent more than 10% of the outstanding paper of an
issuing corporation.
(5) No more than 10% of an agency's surplus funds may 6e invested in any one mutual fund.
(6) Reverse.Repurchase Agreements must be made with primary dealers of the Federal. Reserve Bank of New York and the securities
usedfor theGagreement must have been held by-the issuerfor atleast 30 days.
(7) Mutual ;funds must receive the highest ranking by 2 of the 3 largest nationally recognized rating agencies or retain an investment
advisor who, is registered, or exempt from,regisfration, with. the SEC and has-at least 5 years' experience investing in securities and
obligations authorized in Section 53601 and 53635 (a j, m or n) of the Government Code with assets.in excess of $SOO million.
(8) Money .market funds must receive the highest ranking by 2 of the 3 largest nationally recognized rating agencies or retain an
ingestmentadvisor who is registered; or exempt from registration, with the SEC and has at least 5 years' experience managing money
market funds in excess of $500 million.
Reso. No. 2001-020 N.C.S.
Page 9
City. of Petaluma, California 2001 Statement of Investment Policy
2 ATTACHMENT B
3
,~4 GOVERNIVIENT CODE SECTI®N 53635
5 AS AIVIENDED
6
7 53635. As far as possible, all money belonging to, or in the
8 custody of, a local agency, including money paid to the treasurer or
9 other official to pay the principal, interest, or penalties of bonds,
1 o shall be deposited -for safekeeping in state or national banks,
11 savings associations or federal associations, credit unions, or
12 federally°insured .industrial loan. companies in this state selected by
13 the treasurer or other official having the legal' custody of the
14 money; or, unless otherwise directed by the legislative body pursuant
15 to Section 53.601, may be invested in the investments set forth
16 below. A local .agency purchasing or obtaining any securities
17 described in this ection, in a negotiable, bearer, .registered, or
18 nonregistered format, shall require delivery of all the securities to
19 the local agency, including those purchased for the agency by
20 financial advisors; consultants, or managers using the agency's
21 funds, by book .entry, physical delivery, or by third-party custodial
22 agreement. The transfer of securities: to the counter party bank's
23 customer book entry account may be used for book-entry delivery: For
24 purposes of this section, "counter party" means the other party to
the transaction. A counter party bank's trust department or separate
safekeeping department may be used for-the physical delivery of the
27 security if the security is held in the name of the local agency.
28
29 (a) Bonds issued by the local agency, `including bonds payable
3o solely out of the revenues from arevenue-producing property owned,
31 controlled, or operated by the local agency or by a department,
32 board, .agency, or authority of the local agency.
33
34 (b) United States Treasury notes, bonds, bills, or certificates of
35 indebtedness, or those for which the faith and credit of the United
36 States are pledged for the payment of principal and interest.
37
38 (c) Registered. state warrants or treasurynotes or bonds of this
39 state;,including bonds payable solely out of the revenues from a
40 revenue-producing. property owned, controlled, or operated by the
41 state or by a department, board, agency, or authority of the state.
42
43 (d) Bonds, notes, warrants, or other evidences of indebtedness of
44 any local agency within this state, including bonds payable solely
45 out of the revenues from arevenue-producing property owned,
46 controlled, or operated by the local. agency, or by a department,
board, agency, or authority of the local agency.
Reso. No. 2001-020 N.C.S. Page 10
City of Petaluma, California 2001 Statement of Investment "Policy
2 (e) Obligations issued ~by banks for cooperatives, federal land
~3 banks, federal interrriediafe 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 Mortgage 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
10 - States government-sponsored enterprise.
11
12
(f) Bills of exchange or.tme drafts drawn on and accepted by a
13 commercial bank, otherwise known as banker's acceptances. Purchases
14 of bankers acceptances may not exceed 270" days maturity or 40 percent
15 of the agency's surplus funds which-may be invested pursuant to this
16 section. However, no more than 30 percent of the agency's surplus
r~ funds may be invested in the bankers acceptances of any one
18 commercial. bank pursuant to this section.
19
20 This subdivision does not preclude a municipal utility district
21 from;investing any surplus money 'in its treasury in any manner
22 authorized. by the Municipal Utility District Act, Division 6
(com~menci~ng with Section 115~0~1) of'the Public Utilities Code.
25 (g) Commercial paper of "prime" quality of'the highest ranking or
26 of the highest letter and numerical rating as provided for by Moody's
27 Investors Service, Inc., or Standard and Poor's Corporation.
28 Eligible paper is further limited to issuing corporations that are
29 organized. and operating within the United States and having total
30 assets in excess of five hundred million dollars ($500,000,000) and
3 ] haying 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 I80 days maturity nor
35 ~ represent more than 10 percent of the outstanding paper of an issuing
36 corporation. Purchases of commercial paper may not exceed 15
37 percent of the agency's surplus money which may be 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 invested
40 ~ pursuant to this.-subdivision. The additional 15 percent may be so
41 invested only if the dollar-weighted average maturity of the entire
42 amount does not exceed 31 days.."Dollar-weighted average maturity"
43 means the sure of the amount. of each outstanding commercial paper
44 investment. multiplied by the number of days to maturity, divided by
~~ the total amount of outstanding commercial paper.
Reso. No: 2001-020 N.C.S: Page 11
City of:Petaluma, California 2001 Statement of Investment Policy
2 (h) Negotiable certif Cates of deposit issued by a nationally or~
~3 state-chartered bank or a savings assocation,or federal association
4 or a sta"te or federal credit union or by a state-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 may be
7 invested pursuant to this section. For purposes of this section,
8 negotiable certificates of deposit do not conic within Article 2
9 (commencing with Section 5363Q) of Chapter 4 of Part 1 of Division 2
1~0 of Title 5, except that. the amount so invested shall be subject to
11 the limitations of'Secton 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 .custody of the money are
14 prohibited from depositing or investing local agency funds, or funds
15 in the custody of the .local agency, in'negofiable 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 off ce 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
.~ the negotiable certificates of deposit.
25 (i) (1) Investments in repurchase agreements or reverse repurchase
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,, when the 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 g"reater 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 ocal agency, prior to repurchase agreement on December 31,
42 1994, and was sold using a reverse repurchase agreement on December
43 31, 1994,.
44
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Reso. No. 2001-020 N.C.S. Page 12
City of Petaluma, California 2001 Statement of Investment Policy
2 (B) The security to be sold on reverse repurchase agreement has
~~ been owned and fully paid .for by the local agency for a minimum of 30
4 days priorto sale, the total of all reverse repurchase agreements
5 on investments owned~by the local.. agency not purchased 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
1 o between the sale of a securityusing a reverse repurchase agreement
11 and the final maturity date of the same security.
12
13 (4) After December 31, 1994, a reverse repurchase agreement may
14 not be entered into with securities. 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 the settlement of the reverse repurchase agreement, in 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
amount to that obtained .from selling a securityto a .counter party by
way of a reverse repurchase agreement; on securities originally
25 purchased subsequent to December 31, 1994, shall not be used to
26 purchase another security with ~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 codicil
29 guaranteeing a minimum earning or spread for the entire period
30 between the sale of 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 not be
33 entered irito unless the percentage restrictions specified in that
34 subparagraph are met,. including the total of any reverse repurchase
35 agreements .specified in subparagraph (A) of paragraph (3).
36
37 (5) Investments in reverse repurchase. agreements or similar
38 :investments in which the local agency sel s;securities prior to
39 purchase. with a simultaneous agreement to repurchase the security,
40 rmay only be made upon prior approval of the governing body of the
41 local agency and shall only be made with primary dealers of the
42 Federal Reserve Bank of New York.
43
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City of Petaluma, California 2001 Statement of Investment Policy
(6) (A) "Repurch'ase agreement" means a purchase of securities by
3 the local agencypursuant to an agreement by which the counter party
4 seller will repurchase the securities on or before a specified date
5 and fora 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 may be used for book-entry delivery.
to
11 (B) "Securities," for•purpose of repurchase 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, and
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
~ participants,. excluding. any amounts. obtained through selling
' 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 amaxmum of five years' maturity issued
32 by corporations organized and operating within the United States or
33 by depository institutions licensed bythe 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 may not exceed 30 percent
38 of the agency's surplus money which may be invested pursuant to this
39 section.
40
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Reso. No. 2001 _020 N.C.S. Page 14
City of Petaluma; ":California 2001 Statement of Investment Policy
(k) (1) Shares of beneficial. interest issued by diversified
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 53600). However,
7 notwithstanding 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 company's board of directors
10
11 finds that the counter party presents a minimal risk of default, and
12 the value of the securities underlying'a repurchase agreement may be
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 registe "red with the Securities
18 and Exchange Commission under the Investmerit Company Act of 1940 (15
19 U.S.C. Sec. 8Oa-1 et seq.).
20
21 (3) If investment is in shares issued pursuant to paragraph (1),
22 the company shall have met either of the following criteria:
(A) .Attained the highest ranking or the highest letter and
25 numerical rating provided by not less than two nationally recognized
26 statistical rating organizations.
27
28 (B) Retained an investment adviser registered or exempt from
29 registration with the Securities and Exchange. Commission with not
30 less than five years' experience investing in the securities and
31 obligations 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) Ifnvestment is in shares issued pursuant to=paragraph (2),
36 the company shall have met either of the 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 Securities and Exchange Commission with not
44 less'than .five years' experience managing money market mutual funds
with assets under management in excess of five hundred million
,dollars ($500,000,000).
. 47
Reso. No. 2001-020 N.C.S. Page 15
City of Petaluma„ California 2001 Statement of Investment Policy
(5) The purchase price of shares of beneficial interest purchased..
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 may be invested. pursuant to this section.
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 obligations which are at all times .
12 secured by a valid first priority security interest insecurities of
13 .the types listed. by Section 53651 as eligible securities for the
14 purpose ofsec~uri~ng 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
r9 affiliated with the issuer of the secured obligation, ..and the
20 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
is granted.
25 (m) Any mortgage pass-through security, collateralized mortgage
26 obligation, mortgage-backed or•otherpsy-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 may be invested
36 pursuant to this section.
37
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City of Petaluma, California - 2001 Statement of Investment Policy
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