HomeMy WebLinkAboutResolution 98-029 02/17/1998 RESOLUTION NO. y8-29 N.C.S.
of the City of Petaluma, California
w A RESOLUTION OF THE CITY COUNCIL OF THE
z CITY OF PETALUMA APPROVING THE
3 INVESTMENT POLICY FOR 1998
5 WHEREAS, the City Treasurer has annually rendered to the City Council a
6 Statement of Investment Policy, and;
7
s. WHEREAS, the City Treasurer has the responsibility to invest the pooled idle
9 cash of all of the City funds, and;
to
t 1 WHEREAS, the City Treasurer has developed a Statement of Investment Policy
IZ and submitted said Policy to the City Council for review.
13
l4 NOW, THEREFORE BE IT RESOLVED that the City Council approves the
Is 1998 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) ~x(~fdtirl~ meeting ~ fporm
on the .17th day of ......._February.......................... • 1s...y$, by the rJ! l~
following vote: ...1..-`-~-----°
City Attorney
AYES: Torliatt, Hamilton, Read, Stompe, Vice Mayor t4laguire, Mayor Hilligoss
NOES: None
ABSENT: Kelle~r~ ~~1~~ ' ~ ,Q.~~p
ATTEST: ....G~',.~h-lldy...c<~.~.. flt...., ~ vrYJ
y
City Clerk Ma or
tbuadl File.._._..._.._
CA IO.flS Res. No. ..._..98.-Z.9....... N C.S.
City of Petaluma 1998 Statement of Investment Policy
1
2 EXI-IIBIT A to Resolution approving Investment Policy
3
4 CITY OF PETALUMA
5 1998 Statement ofInvestinent Policy
6
7 PURPOSE
8
9 This Statement`is intended o provide guidelines forthe prudent investment of the temporary idle
10 cash under the City Treasurer's cdnfrol. The primary goals:are to protect the security oPpublic
11 funds, provide funds when needed,foruse and earn a.reasonable;rate of investment interest.
12
13 SCOPE
14
15 Underthe City Charter Section 24, the City,Treasurer is•appointed by the City Manager with the
16 approval of the City Council. The,City.Treasurer is also-the City Finance Director.
17
18 The daily cash management; investment transactions and account reconciliation's are the. primary
19 responsibilities of the City Treasurer.
20
21 This Investment Policy ..shall apply to'activities of the City witfi.regard to the investment of
22 temporarily idle funds of all fund Types,,including the following(
23
24 General Fund
25 Special Revenue:Funds
26 Debt Service Funds
27 Capital Projects,Funds
28 Enterprise Funds
29 Internal Service Funds
3o Trust and Agency Funds
31
32 This Policy shall also apply to fund's of the Petaluma Community Development Commission
33 (PCDC); Petaluma Public Financing Authority, Petaluma Public Facility Financing Corporation
34 and any other agency or trust funds:under the control ofthe'City Treasurer.
35
36 In order to provide flexibility and efficiency in cash and investment management, the~Cityvses a
37 general operatingaccount and investment;pool system: Whenahe revenues are recei6ed-from
3s taxes, fees and other sources, it-is recorded in the City's finance system to the appropriate fund
39 and account. The checks and cash from all funds are then_deposited into an operatingaccount.
4o Tfie single-operating-account~allows~formore efficient management of dailytransactions.and
41 investments from the account. The investment earnings from all investmentsare;allocated.on a
42 quarterly proportionally back to each fund that provided-the cash for the investments.
43
a4 There are several restricted';fund sources that are not included in the City'.s investment pool and
45 are invested separately. These invested funds will receive the intere"st earnings on a=periodic basis
46 from the direct investment source or separate investment podl. Examples of these funds are debt
a~ reserves and certain special revenue and trust funds; such as, Child Care fund and Prince Trust.
1
Cityof Petaluma 1998 Statement of Investment Policy
1
2 OBJECTIVE
3
4 The City's cash management system:i"s designed fo monitor and forecastexpendifures and
5 revenues;.thus enabling the Gity to invest funds to"the.fullesC extent possible. T_he~Gity attempts
• 6 to' obtain the highest interest yield as long as investments meet the criteria established:for safety
7 and liquidity.
8
9 The City~strives.to.: maintain the level of,investment'ofsll funds o£98% of available cash; "tkirough
10 daily and protected cash flowdeterminations.
1.1
l2 The Basic premise underlyingsthe City's investmentphilosophy is to insure.t_fiat-city funds are
• 13 always.safe and available when needed.
14 ,
IS POLICY`
l6
17 The City of-Petalumaroperates its temporary pooled idle:cash:investments under State
IS Government Code Section 53600, etaeq.; as;amended. The following sections of the State
19 Government code require the following;
20 _
zt Section'S3600:3 -Governing boliesiof IocaLagencies orpersons authorized to~make;
22 investment decisions on,behalf of those Idcal agencies investing public funds.gursuant:-to
23 this chapter are trustees and therefore fiduciaries`subject to'the prudent invesfor-stan""Hard.:.
2~ When investing,, reinvesting, purchasing; acquiring, exchanging, selling; and managing-
25 public funds;,:a trustee shall act;with care;nskill, prudence; and d~hgence;underthe
26 circumstances;then prevailing, that a°,prudent~person acting;n alike capacity ands
27 familiarity with those matters would use in'the conduct of:funds of a like,characte and
28 with;hke aims; ,to safeguard the!principal`:and,maintain the liquidity needs ofthe'iagency:
29 Within the7imitations of this section and considering:individual;investments as part to an
30 overallsfrategy, atrustee is auffiorized'to acquire investments as authorized bylaw.
3I r.
32 .Section 53600:5...= When investing, reinvesting; purchasing, acquiring;:exchanging;•selling
• 33 and managingpullic funds, the primary objective of:a trustee;shall be to;safeguard'the
34 principal of the,funds'under its.control. The secondary.objective,shall be to,meet the
35 liquidity needs of the depositor. The third objective shall be fo achieve a'return on,the
36 funds underits control.
37 •
38 PERIGSITTED:INVESTMENTS •
39
ao The City. generally invests in.the following"invesfinents'that are allowed by'Sfafe Go"verrimerit
a1 Code Section 53615';
~2
a3 ~ - Locaf Agency Investment Pools'(State'LAIF`or Sonoma County Investment'.Pool)
4~ - Gertificates~of Deposits;placed~wth commercial
a5 :banks and/or savings and,loan.companes
a6' -Negotiable Gertificafes ofDeposii
47 -Bankers Acceptances
~s -Securities ofahe U:S. Government or its,Agencies,
a9 -Repurchase A'greernents (for overnight investment)
50 -Commercial Paper
SI
sz The,State Government Code also allows for additional ;types of investment;secunhes tliat~are not
53 commonly used by the City. Attached;is a description of the abovelisted securities, Attachment
54 A, and a copy of the State Government Code, Attachment B.
55
56 Tfiis.policyalso provides.tfiat other"investment securities authorize8,by~State Government Code
57 Section 53635, as amended;; are also eligible for investment ofCity Funds.
=2
City of Petaluma 1998 Statement of Investment Policy
I
2 Below is a summary of the current statutory limits imposed by the State Government Code on
3 authorized investments of .public funds:
4
5
6 Investment Type Ivtazimuln Maximum % Quality
7 Maniriry(z) of Portfolio Requirements
8
9
10 Local Agency Bonds 5 Yeazs None None
Yl US Treasury Obligations 5 Years None None
12 State of California Obligations 5 Years None .None
l3 CA Local Agency Obligations 5 Years None None
14 US Agencies 5 Yeazs None .None
15 Bank ?.cceptances 270 Days 40% (3> Fed. Reserve Eligible
L6 Commercial Paper 180 Days 15%or30%(a) Al/PlRating
17 Negotiable Certificates of Deposit 5 Yeazs 30% None
18 Repurchase.Agreements 1 Year None None
l9 Reverse Repurchase Agreements 92:Days 20% of Base None (6)
20 Medium-Term Notes 5 Years 30n/o A Rating
21 Mutual Funds N/A 20%(s) Multiple
22' Money MarkePFunds (q N/A 20% Multiple (s)
23 Collateralized'Bank Deposits 5 Years None None
24 Mortgage Pass-ThruSecurities 5 Years 20°/n AA Rating
25 Time Deposits 5 Years None None
26 County PooledlnvestmentFunds N/A None None
27
28
29 Source: California Government Code Sections 53601 & 53635 (a-n)
30
31 (I) This document refers to Monev Market Mutua(Funds as Money Market Fundt. They muri have an average weighted maturity of 90 days
32 or less and abide by SEC regulations.
33 (2) Seaien'S3601 states any invesnnrnt tharat t}ie lime of purchase has over 5 years to niamritymust be authorized by the IegislatiLe body not
34 less than 3 months pnorto the investment.
35 (3) No more than 30%of the surplus funds may be in $ankers Acceptancespf any one rnmmercial bank
36 (4) . Limib is 30%iCdollar weighted average maturity of all commercial paper does not exceed 31 days. Commercial paper issuers must be US
37 Corporations wish 5500 million plus in assets. Purchases may not represent more thaml0%oflfie outstanding paper of an issuing
38 corporation.
d9 (5) No more tnanl0%of an agency's mrplns funds may be invested in any one mutual hind
40 (6) .Reverse Repurchase:Agreements must lie made wilh'primary dealers of the Federal Reserve Bank ofNew York and the securities used for
41 the agreement must have been held by the issuer for at lean 30 days.
42 (7) Mutual funds must receive the highest ranking by 2 of tfie 3 largeri nationally recrognized rating agrncies or retain an investment advisor
43 who is registered or exempt Born re 'straiion, with the SEC and has at IeasrS ears' experience investing in securities and obligations
P,r Y
44 authorizetl in Section 53601 and'S3635. (ay, m or n) of the Govemmrnf Code with assess in excess of 5500 million.
4J '(8) Money markeCfunds must receive lhehigheri ranking by1 of the 3darges[ nationally: rerognized rating agencies orretain an investmrnt
46 advisor,who is regiriered or exempt from regiriration, with the SEC and has at lean S,years"experience managing money markeffunds in
47 excess of 5500 million.
48
49
5n PRIMARY OBJECTIVES FOR SELECTING LNVESTMENTS IN ORDER OF PRIORITY
51
5z L Safetv:. It is;;the;primary duty and responsibility
53 ofthe Treasurer to'protect, preserve and'maintain
54 cash and investments on behalf of the citizens of
55 the City.
56
57 2. L'iquiditk= An:adequate percentage of-ahe portfolio
58 is maintained in liquid short-term securities
59 which can be converted to cash if necessary to-meet
6o disbursement requitements. Since all cash
61 requirements cannot be anticipated, investments in
3
City of Petaluma 1998 Statement of Investment,Policy
1
Z securities with active secondary,orresale markets
3 ispreferred and emphasis on;marketable.securities with
4 low'sensitivityto market interest rate risk.
5
6 3. Yield: Yeld'is a consideration,only;atter the;basic
~7 requirements~ofsafety and liquidity~haee;been met.
8
9 SAFEKEEPING OF INVESTMENTS
10
11 All investment securities purchased directly,by the.City shall be-held•in safekeeping byan
12 institution.designated as;safekeeping agent or~at;the Cityin'registered book orphysical form. The
13 primary-agent s}ialLissue~asafekeeping receipt to, the City listing fhe!specific`instrument rate;
to maturity and otherpertinent:information.
15
16 COLLATERALIZATION
17 '
is Deposit-type securities (i:e. Certificates,of•Deposit) shall be collateralized at thg,miriimum State'of
t9 California collateral'pool requirements for any amount exceeding FDIC or,FSLIG;coverage::
20
2t BROKERS. '
22
23 In selectingtsecurities brokers, the.City Treasurer,shall conduct credit and capitalization,analysis
24 to determine tharfirms are adequately financed to:conduct public business.
25 '
26 LOCAL INVESTMENT'POOL POLICIES AND REPORTS
27 ;
28 To the extent there are investments' in the State.;or Sonoma Coiintyinvestme'nf pools; the:City
29 Treasurec`sha[I revii;w and maintain currenf`copies of he adopted investment policies of the,State
30 and Sonoma County: The policies sfialllie reviewed for concurrence with the investment policy
31 ofthe City: '
3 z' I
33 The City Treasurershall submitthe State-required,qu_arterly reports of the investment transactions
35 of the:investment ool to the Cit Council as'part`of the monthlyCity'Treasurer reports.
p Y
36 INVESTMENT' OF'DEBT`PROCEEDS.
37 '
38 ~The,City"deposits selected debt proceeds; reserves and "other, debt related':funds°with thelCalifornia
39 ArbitrageManagement Program (CAMP). Thisis an investment program,authorized by City
40 Council Resolution`.91-169: It-was created by other cities::°as a Joint Powers Authority{JPt?)'for
4t the investment of local agency funds which may b_e, subject;to Federal;arbitrage~iegulations. The'
42 investment;portfolio'is managed by a'brolcer on contract with the JPA. The investment'typ@
43 secucities.are regulated by the State GoyernmentCode'and`furfhe~'Gmited by~the'specific debt.
44 issuance resolutions and federal restrictions. ~
45
46 CITY INVESTIyIENT IvIOIVITORING AND REPORTING
47
48 ThY Cit Treasurerafiall routinel monifor th'e:entire investmentportfolio and• shall file with'the
Y Y
49 Cit Council a monthly Treasurer's Report. In addition; the"City Treasurer will formally: subrriit a
50 quarterly ,Treasurer's Report+to the'GityCouncil'which shall"`include a'Statement of Investments
51 and other information as required. ~
52
53 Attachment C is an_example,of the quarterly monthly deport for:December,1997..'The City
54 Treasu~er,-`b"elieves this;report exceeds'the recoinmerided:minimum:i•equirements,of
the amen8ed
55 State Code and provides the City Council with~additional infortation regarding bank accounts
56 and reconciliationwrth the City's General Ledger:
57' '
4
City of Petaluma 1998 Statement of Investment Policy
t
2 ATTACFIl~~ENT A
3
4 CITY'OF PETALUI~IA
-5 1998 Statementof:Investment Policv
6
7 SUMMA'RY;Ofi TYPES! OF INUESTIviENTS
8 AVAILABLE T'O LOCAL GOVEItIVMENTS
9
t0 -LOCAL AGENCY INVESTIviENT POOLS
11
12 State In4estmentiPool¢AIF)
13
1~ The LocaL;Agency Investment fund (LATE) was created bytheState in 1976 to provide local
is go~emments vnth.access to a;large investment pool that can;generate higher interesYytelds:and
16 provide a high degree of liquidity. The deposits and.withdrawals`are done by electronic •transfers
t7 of funds (wire transfers) and begin earning mteresY;on a,daily basis.
is
19 'Over 2,541 local=agencies participate in3he LA1F investment pool; These agencies invest
20 approximately $7:3' billion which is added to $21-. S billion in State funds fora $28.8 billion
zl investmentportfolio: The investment po;tfolio:is widely.dist~ibuted overmany types of
22 investmentinstruments and is not adversely impacted by sudden sffitts in the investment market.
23 In addition, the large portfolio and wide distribution provides for'greater flexibility investments to
23 take advantage ofctianging interest rates.
25
26 There is a limitation of $20 million per Agency subject to a.maximum_ of 10 transactions per
27 month,.
28
29 The security ofLAIF investments'..is in,two parts. The State~.Tr•easurer's_and Controller's offices
3o ace:responsible for the.accouriting, processing, and safe keeping oPthe City's funds through the
31 State Treasurer's investment procedure;and policies. The State°malnfainsmsurance and bonds
32 covering employee honesty and errors: The City funds are able to be withdrawn at any time and
33 are protected'by State law fromaeizure onimpoundment fiy°any State Officer.
34
35 Once the fundsare pooled with otherJocal agencies„and'invested, he security for the funds
36 becomes the investment. Each investment'is secured by Federal Insurance, the U:S: Government
37 or Federal agency, collateral. of major banks, or'major corporation collateral The security
38 depends on the type of investment'.
5
~ ~i
City of Petaluma 1A98 Statement of Investment Policy
1
2 Sonoma County Investment Pool'
3
a The Sonoma County'Treasurermarntains an'inJestmepr,poolwliich the County„ Schools; Special
s Districts and Cities can participate: The investment portfoli6 is approximately $740;227,300:
6 This investment.pool operates€~n'the same;mariner as the State pool. The County'Treasuier;is.
suJijectto the same;State Government Cod'e:regarding~invesfinents as!~the City._ As withlheState
8 investmenttfilnd; the-City funds can~be withdrawn at anytime and aie!grotected:by'State Law
9 from seizurecor impoundment by any County Officer;
10 ~ 'i
Id
12 Certificates of Deposits (CD)
13
la Certificates ofDeposits; sometimes kiiown as''-'J"uinbo,Accounfs"-.or'"Fised,CD's" aie£savings
l5 accountswith Banksoor Savings and~Loans Thesetaccounts are-for a,specifrc~amount; a set
16 interest"rate, and setmatunt date. There,ts a ,
18 prior to the maturity date. Y i substantial''interest penalty if the~CD is withdrawn
19 The Stateaaw requires Public Fund CD's'to be collateralized by ttie financial;,institution at;l'1'0%
20 with.U.S; Government noteslborids or.af .150%~witfi quality~First'Tiust'Deeds: 'This collateral can
2t be waived if FederaCInsurance'(FDIC for. banks~oi FSLIC<fof savings andaoaris) is available.
2z These federal agencies°will insure each-account"up to~$1'00;000.
23
2a The City generally waives the collateralizatio I re,quirements',for fhe,FDIC or;FSLIC~insurance.
zs The waiver'of collateral is a wide spread practice and`will generally generate higher. interest rates
z6 and provide'-the greatest security fo6the funds from the Federal Insurance Agerici`es. For deposits
27 in excess-of $1.OQ;OOQ t_he collaterahzation"requiremerifs are not waived..
2R' I
29 Negotiable Certificatesof Deposit 7NCD) i
30
31 This.investntent is similar'to the;Fixed CD's above., However, the,NCD can be!soldt_lv_oughla;
32 broker on"a,"secondary`market" prior to the maturity date IVonnally,.NCD's-are Issued in,
33 $500,000 and $1,000;000 amounts. The State,Code limits 1VCD's to,~not more tham30%'ofthe
3a local agenc~s portfolio and S year maziritum term: The,secunty is the;crediYwortfiiness of.tfie
35 issuer, as these deposits:are uninsured ahd iincollateralizedpromissorynotes'.
:36~ - ~
37 Banker's Acceptances'(BAl
38 '
P
ao forBre ae merit"be' a bank s This finanft I instnited funds which has been drawm on and accepted
p y y mends generally used for short term"(30 and 180
a t days).financing of export, import, or storage of goods By accepttng the draft?(investment of City
a2 funds}, the„bank is liable,forthe payment at maturity. This (rank liability makes the Banker's
a3 :Acceptance a markefable_investment. 'The State"Code, limits,BA's;;to'not,more Yhan•270 days
.
as maturity~and 40% ofthe local agency's portfolio.,In addition;;not more than 30% of the local
a5 agency's portfolio may be,placed`m,anyone.Bank.
ab
a7 U. S: Treasury Bills
a8
a9 Commonly referred to as T=Bills, [hese,are short=term marketable+securifes sold as obligations of
5o the US, Governmenti. They are,offered.in three'month, six, month, nine monthand',one-year
si maturities:: T-Bills do.not accrue interest brit are so[d:at a' discount'to-pay face value at maturity.
6'
City of.Petaluma 1998 Statement of Investment Policy
1
2 U.S. Treasury Notes
3
4 These are.marketable; interest=.bearing securities sold as obligations of the U:S. Govemment with
5 original maturities of one to ten' years. Interest is paid semi-annually.
6
7 U.S. Treasury Bonds
8
9 These are the same as U. S. Treasury Notes except they have original maturities often years or
to longer.
Il
12 FederalAeencv Issues
13
l4 , Iviany.Federal Government sponsored Agencies are authorized to issue short-term and long term
t5 oliligations'that are used to finance-various programs such as home loans, business loans; farm
16 loans, etc. These Agencies were created by the Eederal`Governmerit in the 1930's and`have since
17 become independent quasi-public agencies. The security fortheir issues is the guarantee of the
I8 Agency to pay: The Federal:GovernmenYhas only an implied liabilifyfo the extent that the
19 Agency has an open credit line to borrow from the US. Treasury. It is widely accepted that
20 Federal Agency issues are as secure as U. S. Government notes..
21
22. There is an active secondary;market available`fo sell~these issues prior to maturity. The issues are
23 fairly liquid depending orrthe prevailing market interest+rates at the time of sale.
24
23 Some of the, more:corrimon agency'potes,are issued by the Federal National Mortgage Association
26 (Fannie Mae), Federal Home Loan Banks; Federal Home Loan Mortgage:Corporation (Freddie
z7 Mac), and the Federal Farm CreditBanks.
28
29 Repurchase Agreements and Reverse'Repurchase Agreements (Repos)
30
31 A Repurchase Agreement is a shoR term:investment:agreement to loan Gityfiandsfor a fixed
32 period in,refurn'for a fixed interest rate and'secured collateral; such as iJ.S. Treasuries or Agency
33 Notes. This type of investment is usually done for overnight orvery' short term (7 days)
3a investment of funds left in the general operating account. Reverse Repurchase agreements is a
35 short term investment which is,used to take advantage of market interest rate changes and
36 increase the size of the portfolio. State law has been amended in 1996`to limit the use of both
37 repurchase and reverse repurchase. agreeme_ nts. The City Council must approve each reverse
3s repurchase agreement.
39
ao Commercial Paper(CPl
~l
J2 Commercial Paper are unsecured promissory notes of industrial corporations, utilitiesandbank
~3 holding companies. The,notesare in bearer form starting at $100,000. State law limits the City
43 to investments in United States'corporafions~having as"setsin excess offive"hundred million
d5 dollars-with a "A"'orhigher,rating. Cities may not investmore than 30% of the portfolio.and not
~6 exceed a term of+180 days.
7
City of Petaluma i 1998',StatementofInvestmentPolicy
1 r
2 ATTACfIMENT B'
3
a GOVERNMENT CODE SECTION.53635
5 AS AMENDED!
6
7 5363 S. As-far as possible, all money: belonging to, or'in the ' '
s custody o_f,, aaocalkagency; including money paid to the treasurer or
9 otfier official to pay~•the principal; interest;, or penalties of bonds;,
d0 stialhbe deposited for"safekeeping iri state or national`banks
it savings associations or federal associations, ciedit unions,. or
12 federally insured:industrial loan companies'inthis~state,sel`ected'by
t3 the treasurer or, other'offrcial having the legal custody o£ahe
1a money; or, unless,othecwise directed by the legislative`body piirsiaant
15 to Section 53601, may be`nvested,inahe:ihvestments set forth;
16 below. A localagency purchasing or obtaining any securities
47 described in this section; in a negotiable; bearer, registered, or
t8 nonregistered: format, shallrrequire delivery of all the securities•to
19 theaocal,.agency, mcluding<those purchased for the agency by
20 financial advisors, consultants, 'or managers using the agency's
21 funds,.by book entry,,pfiysical delivery, or by third-party custodial
22 agreement. The transfer of securities to the~counterparty bank's
23 customer book.entry account maybe used for°book-enfry.delive"ry. For
2a purposes ofthis section,. "counterparty" means tfie other party`=to'
z5 the ransacfion. A counterparty`bank'sttrust "department oc,~separate
26 safekeeping department may beused for the physical delivery ofthe
27 security.if
the security is held irrthe name of.the local agency.
28
29 (a) Bonds,issiied fiy=the.local' agency; including bonds:payable
30 'solely out ofahe`reventies from a reve"nue;producing property owned;
3t controlled, oC'ope~ated'by~ the local agency-or bya department,
3z board, agency; or authority of the local agency.
33.
( )United St
34 6 ates Treasury notes, bonds; bills, orcertficates of
35 .indebtedness, orthose~foc•whichithe:faith and credit of tfie United
36 States are pledged for the:'payment%of principal and:interesf.
37
38 (c);Registeredatate warrants or treasury, notes or bonds.of this
39 state, including bonds payable~solely out~of fhe revenues from a
a0 revenue-,producing property owned;-controlled; orogerated by the
al' state•or by"adepartment, board; agency, or authortyof the state..
a2
a3 (d) Bonds, notes, warrants, or other evidences o£indebtedness of
4a any local agencywit}iin'this state, including bonds payable solely
45 out'of the revenues from arevenue-producing property=owned;
d6 controlled, or, o erated b the~local;agency, or,by a departmenT,
P Y
a7 board'; agency; or authority of the,local~agency:
d8
49
g
i
City-of Petaluma 1998 Statement of Investment Policy
I
2 (e) Obligations issued by banks for"cooperatives,.federal land
3 banks, federal intermediate credit;banks, federal home loan banks,
a the Federal Home Loan:Bank, the=Tennessee Valley Authority, or in
5 obligations, participations, or other instruments of, or issued by,
6 or fully guaranteed as to principal and interest.by, the Federal
~ NationaLMortgage Association; ar in guaranteed portions of_Small
8 Business,Administration notes; or in obligations; participations, or
9 other instruments of, or issued by, a federal agency or a United
to States.government-sponsored enferprise.
tt
t2 (f) Bills of exchange or time drafts drawn on and accepted by a
t3 commercial bank,. otherwise known.as bankers acceptances. Purchases
to of bankers acceptancesmay not exceed'270 days maturity or 40 percent
l5 of the agency's surplus funds which. maybe invested pursuant to this
t6 section. However, no more than 30 percent of the agency's surplus
17 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
2l from investing any surplus money in its treasury in any manner
22 authorized by the Municipal Utility District Act, Division 6
23 (commencing with Section 11501) of the Public Utilities Code.
24
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 papei is further limited to issuing corporations that. are
29 organized and operating within the United States and having total
3o assets in excess of five hundred million dollars ($500,000,000) and
31 having an "A" or higher rating.for he`issue~'sidebt, other than
32 commercial,paper, if,any,;as provided'for byMoody's Investors
33 Service, Inc,,, or Standard and P,oor's•Corporation. Purchases of
3a eligible commercial paper may not exceed 180 days maturity nor
35 represent more than 10 percent of the outstanding paper of an issuing
36 corporation. P.ucchases of commercial paper may not exceed 15
37 percent of the agency's surplus money whichmay 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
ao pursuant to.fhis subdivision. The additional 15 percent may be so
at invested only if the dollar-weighted average maturity of the entire
a2 amount does"not exceed 31 days. "Dollar-weighted average maturity"
a3 means'the sum of the amount of each outstanding commercial paper
as investment multiplied by the number of days to maturity, divided by
45 the total amount of outstanding commercial paper.
a6
9
City of Petaluma 1998 Statement of Investmen4 Policy
1
z (h) Negotiable,certificates ofdeposit issued by'a-nationally or
3 state-chartered'bank or=asavings association o~federal association' '
a oraatate'orfederal;creditunton or by a state-licensed'branch o£a
5 foreign batik. Purchases of negotiable certificates of
deposit may
6 not exceed 3.O percent of the agency's surplus moneyw}"nch may be
7 invested pursuant-to°this section. For purposes of this section,
8 negotiable certificates of deposit do not.come wiihin,Article 2
9 (commencing=with Section~53630)!of Chapter 4~;ofParf 1 of Divsion2
l0 of Title 5;, except that the amount so invested.shall be subjectrtio
u the=limitations of Section 53638, Eorpurposes of this section, the
t2 legislative'body of,a local agency and fhertreasurer orother
13 official o£the.local agency Navin°g legal custody of the money are
to prohibited':from depositing:oc~nvesting local agency>funds, or funds
15 insthe custody of the`local.agency, in negotiable certificates"of`
i6 deposit issued by a state or federaficredit tinion if a member of the
ll legislative body'of the local agency, or an employee of the
Is 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'lioard of directors; or any committee
u appointed by the board' of:directors; or, the creditcommittee or
22 supervisory committee of--the state or'federal credit union issuing
23 the negotiable certificates of deposif.
24
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
2s delivery requirements specified ~in this section. -
29
30 (2) Investments in:repurchase•agreements may be made; on~any
31 investment authorized'in.this section, whenahe term,ofthe agreement
32 does not`exceed one year. The,market value of,securities that
33 underl_ay.arepurchase agreement shall be valued at 102 percent or
34 greater of the°.funds. borrowed against,fhose securities and the value
35 shall"be.adjusted no lessthan quairterly.
36
37 (3) Reverse repurchase agreementsmay be'utilized only when either
38 of the following conditions are met:
39
ao (A) The security was owned~orspecifically;committed;to purchase,
41 by`the~local=agency, priorto repurchase agreement on December3l;
a2 1994, and was sold using a reverse repurchase agreement on December
a3 31, :1994.
a4
to
Ciry~ofPetaluma 1998 Statement of Investment Policy
l
2 (B) The ecurity 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 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
s a term of 92 days, unless the=agreement includes a written codicil
9 guaranteeing a minimum earning or spread for the entire period
to between the sale,of a security using a reverse repurchase agreement
t t and the final maturity date;of the same security.
12
13 (4) After December 3 T, 1994, a reverse repurchase agreement may
la notbe 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; buE may only be entered'-into with
IS 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 yeld,on securities.ownednnd previously paid for
z t or to provide funds for the immediatepayment of a local agency
zz obligation. Funds obtained or funds within the-pool of an equivalent
23 amount to thatobtained from selling a~security to a counterparty by
2a way ofa reverse repurchaseagreement; on securities originally
25 purchased subsequent-to December 3.1,1'994; shall not be used to
26 purchase anothersecurity with a maturity ongerthan 92 days from
27 the initial ettlement 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
3o between the saleof a security using a reverse;repurchase agreement
3t and the final,maturity_dafe of the same security.;:Reverse repurchase
32 agreements specif
ed;in subparagraph (B) ofparagraph (3) may not be
33 entered into unless the percentage restrictions specified,in that
3s subparagraph are,met, including;the total ofany reverse repurchase
35 agreements specified in subparagraph (A) ofparagraph (3).
36
37 (5) Investments'n reverse. repurchase ag"reements or similar
38 investments'imwhich the local agency~sellssecurities prior to
39 purchase with a simultaneous agreement to.repurchase the security,
~to may only be made upon prior approval of the governing body of the
41 local agency and shall only be madeswith;prirriary dealers of the
-t2 Federal Reserve Bank of New York.
~3
11
City of Petaluma I998 Statement of Investment Policy
I
2 (6) (A) °'Repurchase:agreement"`means;a purchase;'of securities by
3 the-local agencypursuant'o an agreement by, which,the counterparty
4 seller will repurchase the~securities on or before,a specified date
5 and,fora specified amount and~thecounterparty will deliperthe
6 underlying securities to the:local agency:by bookentry, physical
7 delivery,.orby'third;partycustodialragieement. Thetransferof
8 underlying, securities to he counteiparty`liank'§ customer6ook-entry
9 account may be'used forbook-entry'delivery.
to
11 (B)'1Securities," foi purpose:of:repurchase und`er•this
12 subdivision, means securities:of the same issuer, description,:issue
13 ,date, and maturity.
In
15 (C) "Reverse repurchase agreement" means a sale,of securites'by
16 the local agency pursuant to arr_agreement by whichthe local agency
17 will repurchase ttie securities on or$efore a specified date; and
t8 includes other comparafile.agreements.
19 '
20 ('D) For-'purposesofthis,sectioh; he<~6ase 'value oftlelocal
21 agericy's pool portfolio shall"be that dollar:amount obtained'by"
22 totaling all cash balances. placed in the pooC by alPpool
23 participants, excluding anyamountsKobtained"throu¢h selline
2~ securities by way ofreyerse repurchase agreements or other similar
25 borcowing methods. ,
26
27 (E) For purposes of this~.section; theFspread is theadiffecence
28 between the-cost. of funds obtained usirig tfie revePse rep"u~chase
29 agreement an8 the earnings obtained on tfie:reinve`stment ofa}ie;funds.
30
31 (j)",Medium-term_notes; of a maximum offive yean''maturity issued
3z by'corporations organized and operating within the`United States or
33 by depository<institutions~licensed by'the United;States=brariy" state
34 and operating within the United.States Notes`eligible:for
35 investment'under,this subdivisCon-;;shall be rated in~a'rating'category
36 of "A"' or its'equivalent,or better,by apationallyrecognized rating
37 service: ;Purchases of medium-term notes may not'exceed 30 percent.
38 oftheFagency's surplussmoney wfiich may be invested pursuant.to this
39 section:
~0
41 (k) (1) Sharesrofbeneficialinteresfissued by diversified
42 management companies`that investin'the securities and.oblieations as
43 authorized by subdivisions (a)'to (j), inclusive; or subdivision
as (I) or(m) and that comptywith the;;investmenCrestrictions;ofthis
45 article;and.Artcle l (commencing with:Section,5~600): However;
a6 notwithstanding these;restrictions; accounterparty to,a!:reverse;
-17 repurchase agreement is not required'to be a;primary Sealer of the,
a8 Federal Reserve Bank of New York ifthe-company's board of directors
tz
City of Petaluma 1998 Statement of Investment Policy
i
2 finds;hat.the counterpartypresents aminimal risk of default, and
3 the value of the securities underlying a repurchase agreement may be
4 100 percent of the sales price if the>securities ar_.e marked to mazket
5 daily..
6
7 (2) Shares of beneficial interest issued by diversified management
8 companies that are money market funds registered with the Securities
9 and Exchange: Commission under the Investment Company Act of 1940(15
to U.S.C. Sec. 80a-I et seq.).
I1
t2 (3) If investment is in shares issued pursuant to paragraph (1),
?3 the company shall have met either of the following criteria:
14
u (A) Attained the highest ranking or the highest letter and
16 numerical rating provided by not less than two nationally recognized
17 statistical rating organizations..
18
19 (B) Retained an investment adviser registered or exempt from
20 registration with the Securities and Exchange Commission with not
21 less than. five years' experience investing in the securities and
22 obligations authorized by subdivisions (a) to Q), inclusive; or
23 subdivision (1) or (m) and. with assets under management"in excess of
24 five hundred million dollars ($500000,000).
25
26 (4) If investment is in shares issued pursuant to paragraph (2),
27 the company shall have met either of the following criteria:
28
29 (A) Attained the highest ranking or the highest letter and
3o numerical. rating provided by not less.than two nationally recognized
31 statistical rating organizations.
32
33 (B) Retained an investment adviser fegistered or exempt from
34 registration withahe Securities and Exchange Commission with not
35 less than five years' experience managing money market mutual funds.
36 with assets under management in excess of five hundred million
37 dollars {$500,000,000).
38
39 (5) The purchase price of shares of beneficial interest purchased
ao pursuant to this subdivision shall not include any commission that
41 the companies may charge and shall not exceed 20 percent of the
42 agency's surplus money that may'be~invested pursuantto this section:
43
44 However no more than 10 percent ofth"e agency's surplus funds may
a5 be invested in shares of beneficial interest of any one mutual-.fund
46 pursuantsto paragraph (1).
47
13
City of Petaluma 1998 Statement=of Investment Policy
1
2 (1) Notes;`bonds, or otfieT obligations which:are at all times
3 secured by.a valid fi"rst priority security?nterest in seciirities:of
4 the types listed'6y~Section 5365ias eligible securities for he
5 purpose of securing`local~agency'deposits having a market value~at
6 least:equal to thaYrequired.by'$ection 53652.for the:purpose of
7 securing local.agency deposits. The securities serving,as collateral
8 sha1T be placed by delivery orbook<en`try into fhe custody of a
9 trust company or the trusf;department of a,bank whicfi isynof
l0 affiliated wifh the issuerof the secured obligation, and the
1I security interest-shall be perfected in accordance with the
12 requirements ofthe Uniform-CommerciaPCode or federal regglations
13 applicable to the'typ"es,ef secuities:in which the security,inferest
14 is granted.
15
I6 (m):Any'mortgage pass-through security, collateralized mortgage
17 obligation, mortgage-backed or other pay-through bond, equipment
18 lease-backed certificate; consumerreceivable.pass-through
19 certificate, or consumer receivable=backed`bond of a maximum of five
20 years-maturity. Securitieseligible:for investment under this
21 subdivision shall be issued by an issuertiaving an "A" orfiigher
2z rating;for the i`ssuer's debt as provided by a'-nationally recognized
23 ratingservice and rated in~arating;categoryof "AA" or-its
24 equivalent or betterby a nationally recognized rating service.
25 Purchase of securities authorized:by'ttiissubdivision may not exceed
26 20 percent;of the agency's surplus money that maytie'invested
27 pursuant= o this secfion.
28
14