HomeMy WebLinkAboutResolution 97-055 03/03/1997
;1
Resolution No. 97-55 N.C.S.
of the Ciry of Petaluma, California
APPROVING THE
1997 INVESTMENT POLICY
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 of all
the City funds, and;
WHEREAS, the City Treasurer has developed a Statement of Investment Policy and
submitted said Policy to the City Council. for review:
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Petaluma
approves the 1997 Investment Policy as shown in Exhibit A, attached.
Under the power and,authority conferred upon this Council by the Charter of said City.
REFERENCE: Ihcreby certify the foregoing Resolution was introduced and
Council of the City of Petaluma at a Regulaz meeting on Approved as to
Mazch 3, 1997, by the following vote: rm:
~ty Attorney
AYES: Read, Ke11eP, Stompe, Torliatt, Maguire, Vice Mayor Hamilton, Mayor IIilligoss
NOES: None
ABSENT: None
ATTEST:
City Clerk Mayor
Reso. No. 97-SS NCS
City of Petaluma 1997 Statement of Investment Policy
t
z EXHIBIT A toResolution~approving Investment.Policy
3
4 CITY OF PETALU1vIA
5 1997 STATEMENT OE'INyESTMENT POLICY
6
7 PURPOSE
s
9 This Statement is intended to provide guidelinesfor the prudent;investment of the temporary idle
to cash under the City Treasurer's control: The primary goalsare'to protectthe security of public
11 funds, provide funds when needed for use and earn a reasonable rate of investment interest.
12
t3 SCOPE
14
is Under the 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
to 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 with regard to the investment of
22 temporarily idle funds of all fiind types, including the following:
23
24 General Fund
25 Special Revenue Funds
z6 Debt Service Funds
27 Capital Projects Funds
2s Enterprise Funds
29 Internal Service Funds
3o Trust and Agency Funds
31
32 This Policy shall also apply to:funds of the Petaluma Comrttunity Development Commission
33 (PCDC),.Petaluma Public Financing Authority, Petaluma Public Facility Financing Corporation
34 and any other agency or trust funds under the control of-the City Treasurer.
35
36 In order to provide flexibility>and efficiency in cash and investment management, the City uses a
37 general operating accountand`investmentpool system. Wherrthe revenues are received-from
3a taxes; fees and other sources, it is':recorded in the City'sfinance system to the appropriate fund
39 and account. The checks and cash from all funds are then deposited into an operating account.
4o The'single operatingaccount allows'formore efficient.management of daily transactions and
at investments from the account. Theinvestment earnings from`all;investments are allocated on a
42 quarterly proportionally back to each fund that provided the cash for the investments.
43
as There are several restricted fund.sources that are not included in the City's investment pool and
45 are invested separately. These`invested,fiindstyill receive`the interest earnings on a periodic basis
46 from the direct investment source orseparate investmenfpool. Examples of these funds are debt
a7 reserves and certain special revenue and trust funds, such as, Child Care fund and Prince Trust.
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1
City of Petaluma .1997 Statement of Investment Policy
1
z OBJECTIVE
3
4 The City's cash management system is designedh.to:inonitor and,forecast expenditures and
5 revenues, thus enablingahe City to invest funds to; the fullest extent possible. The City attempts
6 to obtain the highest interest yield as ong-asinvesfinents meet the criteria established for safety
7 and liquidity.
s
9 The City strives to maintain the level of investment of all funds of 98% of available cash, through
to daily and projected.cash flow"determinations.
it
12 The basic premise underlying the City's investment philosophyis to insure that City funds are
13 always safe and available when needed.
L4
15 POLICY
16
17 The City ofPefaluma operates,its temporary pooled idle,cash investments under State
1s Government Code SectlonS3600, et seq., as amended. The;followingsections of the State
19 Govemment code require the,following:
20
z1 Section 53600.3 - Govemigg bodies of loca4agencies orpersons authorized to make
22 investment decisions on.behalf of those local agencies investing public funds pursuant to
23 this chapter are trustees and herefore fiduciaries subjectto the prudent investor standard.
za When investing, reinvesting; purchasing, acquiring; exchanging, selling, and managing
25 public funds, a trustee'shall act with care; skill; prudence; and diligence underthe
26 circumstances then prevailing, that a prudent person acting in a like capacityand
27 familiarity with those matters-would use in the.conductbf funds of a like character and
2s with like aims, to safeguard 4he principal and•mainfain the liquidity needs of the agency.
z9 Within theaimitations of thisaection and considering~individual investments as part to an
30 overall strategy, a trustee is authorized to acquire investments as authorized bylaw.
31
32 Section 53600.5 -When investing, reinvesting; purchasing, acquiring, exchanging, selling
33 and managing publiafunds;, the primary objective of a trustee shall be to safeguard the
34 principal of the funds;rinder its control. The secondary objective shall"be to meet the
35 liquidity needs of the depositor. The third objective shall be to achieve a return on the
36 funds under its control.
37
38 PERMITTED INVESTMENTS
39
4o The City generally invests in the following investments that are allowed by State Government
4r Code Section 53635:
42
43 -Local Agency Investment Pools (State LAiF or Sonoma County Investment Pool)
4a -'Certificates ofDepositsplaced wrth commercial
45 banks,and/orsavings and.loan companies
a6 -Negotiable Certificates of
Deposit
47 -Bankers Acceptances
48 -Securities ofthe,U'S. Government or its Agencies
49 -Repurchase Agreements (for overnight investment)
50 -Commercial Paper
51
52 The State Government.Code also allows for additional types of investment securities that are not
53 commonly used by the City. Attached is a description of the above listed securities, Attachment
54 A, and a copy of the State Government Code, Attachment'B.
55
56 This policy also provides'that other investment securities authorized by State Government Code
57 Section 53635; as amended, are also eligible forinvestment.of City Funds.
2
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City of Petaluma 1997 Statement of Investment Policy
1
2 Below is a summary of the current;stattitory limits imposed by.`the State Government Code on
3 authorized investments of public fiinds:
4
5
6 Investment Type Maximum Maximlun % Quality
7 Maturity (2) of Portfolio Requirements
8
9
10 Local Agency. Bonds 5 Years None None
11 US Treasury, Obligations 5 Years None None
12 Stale of California Obligations 5 Years None None
13 CA Local Agency Obligations 5 Years None None
14 US Agencies 5 Years None None
15 Bank Acceptances 270 Days 40%:(3) Fed. Reserve Eligible
16 Commercial Paper 180 Days 15% or 30% (a) Al/P 1 Rating
17 Negotiable Certificatesof Deposit 5 Years 30% None
18 Repurchase Agreements 1 Year None None
19 Reverse Repurchase Agreements 92 Days 20% of-Base None (6)
20 Medium-Term Notes 5 Years 30%a A Rating
Z1 Mutual Funds N/A 20°/a(s) Multiple (7)
22 Money MarketFunds (q N/A 20% Multiple (s)
23 Collateralized-Bank Deposits 5 Years None None
24 Mortgage Pass=Thru Securities 5 Years 20°/a AA Rating
25 Time Deposits 5 Years None None
26 County Pooled Investment Funds N/A None None
27
28
29 Sources California Govemmrnt Code Sections 53601 & 53635 (a-n)
30 (1) This document refers to Money MarkecMutual Funds as Money Market Funds: They must have an average weighted maturity of 90 days
32 or less and abide by SEC regulations.
33 (2) Section 53601 stales any invesunrnt that al the lime of purchase has aver S years to maturity must be authorized by the legislative body not
34 Tess than 3 months prior to the invesmlrnL
35 (3) No more than 30%of the surplus funds riiay be N Bankers Acceptances of any one commercial bank
36 (4) Limrt is 30%tf dollar weighted average mamrity of alf commercial paper, does not exceed3l days. Commercial paper issuers must be US
37 Corporations with $500 million plus in assets. PnrcFiases may not represent more than 10%of the outstanding paper of an issuing
38 rorporaticn.~
39 (5) No more than 10% of an agrncy's surplus funds maybe invested in any one mutual fiind.
40 (6) Reverse Repurchase Agreements must be made with, prvnary dealers of the Federal Reserve Bank of New York and the securities used for
4l the agreement must have been held by;the Issuer for atleasl30 days.
42 (7) Mutual funds must receive the highest rankurg by 2 of the 3 largest nationally recognised rating agencies or retain an investment advisor
43 who is registered; or ezemplfrom registration, with the SEC and has a[ least 5 years"experience investing N securities and obligations
44 authorized in Section 53601 and 53635 (a j, m or. n) of 1He Govemmrnt Code with assets in excess of $500 million.
45 (8) Money market funds must receivetAe highest ranking by2 of the 3 largest nationally„ recognised rating agencies or retain an inves{mrnl
46 advisor whois registered, orezempDfrom registration; with the SEGand has at leasl3~years' experience managing money martcetfunds m
47 ezcess of $500 million.
48
49
5o PRIMARY OBJECTIVES FOR SELECTING INVESTMENTS IN ORDER OF PRIORITY
51
52 1. .Safety:. It`is the.primary duty and responsibility
53 of the"Treasurerto protect, preserve and maintain
54 cash-:and investments on behalf of the citiiens of
55 the City.
56
57 2. Litauidit~ An•adequate percentage of the portfolio '
58 is mainfaned in liquid short-term securities
59 which canoe converted to cash if necessary to meet
6o disbursetnent requirements. Since all cash
61 requirements carinot be anticipated, investrnentssin
3
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1 securities with active secondary orresale`markets
2 is preferred.and emphasis onma~ketablesecurities with
3 low sensitivity to market interest rate risk,
a
5 3. Yield`. Yield isa consideration.only;after;the-basic
6 requirements of safety and liquidity have been met.
7
S SAFEKEEPING OF INVESTMENTS
9
to All investment securities purchased directly by the City. shall be held in safekeeping by an
tt institution designated as safekeeping agent or at the City in registered book or physical form. The
12 primary agent shalLissue a safekeeping"receipt to the City listing the specificinstrument, rate,
13 matunty and other pertinent information.
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City of Petaluma 1997 Statement o£Investment Policy
i
2 COLLATERALIZATION
3
4 Deposit-type securities (i. e. Certificates.ofDeposit) shall be collateralized aYthe minimum State of
5 California collateral pool requirements for any'amount exceeding FDIC or FSLIC coverage.
6
7 BROKERS
8
9 In selecting securities brokers, the City°TreasurershalL conduct credit and capitalization analysis
to to determine that firms are adequately financedto conduct public business.
I1
12 LOCAL INVESTMENT POOL POLICIES AND REPORTS
13
la To the extent there are investments.in the State orSonoma County investment pools; the City
15 Treasurer shall review and maintain ciirrent copies of the.adopted investment policies. of the State
16 and Sonoma County. The policies shall be reviewed for concurrence with the.mvestment policy
17 of the City.
18
19 The City Treasurer shall submit the State_ required quarterly reports of the investment transactions
zo of the investment pool to the City Council as part of the monthly City Treasurer reports.
21
22 INVESTMENT OF DEBT PROCEEDS.
23
24 The City deposits selected debt;proceeds; reserves and other "debt related funds with the California
25 Arbitrage.Mapagement Program (CAMP,). This is an investmenT.program authorized by City
26 Council Resolution 91-169. It`was created by other cities as a_ Joint Powers.Authority (7PA) for
27 the investment=of local agency funds which may 6e subjecf to Federal arbitrage regularions. The
z8 investment portfolio ismanaged 6y a broker on contract with,the JPA. The investment type
29 securities are regulated by'the State Government, Code and further limited by the specific debt
3o issuance resolutions and federal restrictions.
31
32 CITY INVESTMENT MONITORING•AND RESORTING
33
34 The City Treasurer shall routinely monitor the entire investment portfolio and shall file with the
35 City Council a monthly Treasurer's Report which shall include a Statement of Investments and
36 other information as required.
37
38 Attachment C is an example of the monthly report for December; 1996. The City Treasurer
39 believes this report exceeds the recommended minimum requirements of the amended State Code
40 and provides the City Council with additional information regarding bank accounts and
a1 reconciliation with the City's General Ledger.
a2
5
Reso.9~-55 rlCS
City of Petaluma 1997 Statement of Investment Policy
1
2 ATTACfIMENT A
3
q CITY OF ~PETALUMA
5 1997 Statement of Investment Policy
6
7 SUMMARY OF TYPES OF INVESTMENTS
g AVAILABI:E TO LOCAL GOVERNMENTS
9
to LOCAL AGENCY INVESTMENT POOLS
11
12 State Investment Pool (LATE)
13
la The Local Agency Investment fund (LAIF)was createdby,the State in 1976 to provide local
15 govermnents with access to a large investment pool that can generate: higherinterest yields and
16 provide a high degree o£liquidity. The deposits and withdrawals aie done by electronic transfers
17 of funds (wire transfers) and begin earning interest on a:daily'basis.
18
19 Over 2,200 local agencies participate inthe LAIF investment pool. These agencies invest
20 approximately $8:9 billion which is added to $18.1 billion in State funds fora $27billion
21 investment portfolio. The investment portfolio is widely distributed over many types of
22 investment instruments and is not;adversely impacted by sudden shifts in the investment market.
23 In addition, the large portfolio and wide distribution provides for greater flexibility investments to
za take advantage of changing interest rates.
25
26 There is a limitation of $20 million per Agency subject to a maximum of IO transactions per
27 month.
28
29 The security ofLAIF investments,is in two parts. The State Treasurer's and Controller's offices
3o are responsible for the accounting,;processing,.snd safe keeping of the City's funds through the
31 State Treasurer's investment procedure and-policies The State maintains insurance and bonds
32 covering employee honesty and errors. The Grty funds are able to be withdrawn at any time and
33 are protected by State law from. seizure or impoundment by any State Officer.
34
35 Once the funds are pooled with other local agencies, and invested, the security for the_ funds
36 becomesthe investment. Each investment is,secured by Federal Insurance; the U.S. Government
37 or Federal Agency, collateral ofmajor banks, or major"corporation col?ateral. The security
38 depends on the type of investment.
6
Reso .4'`1-5 5 ~S
City of Petaluma 1997 Statement of Investment Policy
1
2 Sonoma County Investment Pool
3
a The Sonoma County Treasurer`maintains an investment'pool which the County, ,Schools; Special
5 Districts and Cities can participate. The investment portfolio is approximately<$762,800000.
6 This investment pool operates in the same manner as'the State pool. The County Treasurer is
7 subject to the same State Government Code,regarding'inyestments asthe City: As with the State
8 investment fund, he City fiinds can be withdrawmat any time and are protected by State Law
9 from seizure or impoundment by"any County Officer.
10
11
12 Certificates of Deposits (CD)
13
la Certificates of Deposits, sometimes known as "Jumbo Accounts" or "Fixed CD's""are savings
15 accounts, with Banks or Sayingstand;Loans. These accounts are for a specific amount, a set
I6 interest rate, and set maturity date. There is a substantialinteresf penalty if the CD is withdrawn
17 prior tothe maturity date.
18
19 The State law requires Public Fund CD's to be collateralized by the financial institution at 110%
20 with U.S. Government noteslbonds,or at 1'50% with quality FirstTrusi Deeds. This collateral can
21 be waived if Federal Insurance (FDIC. for banks or FSLIC for savings and loans) is available.
22 These federal agencies will insure each account up to $100;000.
23
2a The City generally waives the collateralization requirements for the FDIC or FSLIC; insurance:
2s The waiver of collateral is a wide spread practice and wilLgenerally,generate higher interest rates
26 and provide the greatestsecurity for the funds from the'Federal Insurance Agencies. For deposits
27 in excess of $100,000, the collateralization requirements are not waived.
2s
29 Neeotiable Certificate of Deposit (NCD1
30
31 This investment is similar to the Fixed CD's above. However, the NCD can be sold through a
3z broker on a "secondary market" priorto the maturity date. Normally, NCD's are issued in
33 $500,000 and $1,OOQ000 amounts. The State'Codelimits NCD's4o not more than 30% of the
34 local agency's portfolio and 5 year maximum term. The.security:is the credit worthiness of the
35 issuer, as these deposits are uninsured and uncollateralized promissory notes.
36
37 Banker's Acceptances (BA)
38
39 A Banker's Acceptance: is a time draft of invested funds which has been drawn on and accepted
ao for repayment by a bank. This financial instrument is generally used for short terns (30 and 180
al days): financing of.export; import, or storage of goods. By accepting the draft (investment of City
42 funds), the bank is fable for the payment at maturity. This,barik liability makes the Banker's
43 Acceptance a marketable..investment. The State Code limits BA's to not more than 270 days
4a maturity and 40% ofthe local agency's portfolio. In addition, not more than30% of the local
45 agency's portfolio may be placed in any one bank.
a6
a~ U.S. Treasury Bills
as
a9 Commonlyreferred to as T-Bills,.these are short-term marketable securities sold as obligations of
5o the U.$. Government. Theyare offered in three month, six month, nine month and one-year
51 maturities. T-Billsdo not accrue interest but are sold at a discount to pay face value at maturity.
7
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City of Petaluma 1997 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. Government with
5 original maturities of one to ten years. Interest is paidsemi-annually.
6
7 U S Treasur~Bonds
8
9 These are the same as'U. S. Treasury Notes except they have original maturities often years or
l0 longer.
II
12 Federal Agency Issues
13
la Many Federal Government sponsored Agencies are authorized to issue short term and long term
15 obligations that are used to finance various programs such as home loans; business loans, farm
16 loans, etc. These Agencies were created by the Federal Government in the 1930's and have. since
17 become independent quasi-public agencies. The security for their'issues is the guarantee of the
18 Agencyto pay.. The Federal Government has only an implied liability to the extent that the
19 Agency has an open creditline~to borrow from the U.S. Treasury. It is widely acceptedahat
zo Federal Agency issues aze as secure as U. S. Government notes.
21
22 There isan active secondary mazket`available to sell these issues prior to maturity. The issues are
23 fairly.liquid depending on the prevailing market interest rates at the time of sale.
2a
25 Some of the more: common agency notes are issued by`the Federal National Mortgage. Association
25 , (Fannie-Mae), FederaTHome Loari Banks, Federal Home'Loan Mortgage Corporation (Freddie
27 Mac), and the Federal:Farm Credit Banks.
28
29 Repurchase Agreements and Reverse Repurchase Agreements fReoosl
30
31 A Repurchase Agreement is'a short term investment agreement<to loan City funds for a fixed.
32 period in return for a fixed interest rate and secured collateral, such as U. S. Treasuries or Agency
33 Notes. This type of investment-is usually done-for overnight or very short term (7 days)
34 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 hasbeen amended in 1996 to limit the use of both
37 repurchase and reverse repurchase-agreements. The City Council must approve each reverse
38 repurchase agreement.
39
ao Commercial Pager (CPl
41
42 Commercial Paper are unsecured promissory notes ofindustrial corporations, utilities and bank
43 holding companies: The notes are in.bearer form starting at $100,000. State law limits the City
4a to investments in~United States corporations having. assets itr excess of five hundred million
a5 dollars with a' "A" or higher rating. Cities may not'invest more than30% of the portfolio and not
a6 exceed a term of'1S0 days.
8
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City of Petaluma 1997 Statement of Investment Policy
1
2 ATTACfIMENT B
3
q GOVERNMENT CODE SECTION 53635
5 AS AMENDED
6
7
s 53635. As farces possible, all money belonging to, or in the
9 custody of, a local agency, including money paid to the treasurer or
to other official rto pay!the principal, interest, or penalties of bonds,
11 shall be deposited for safekeeping in state or na4ional banks, savings
12 associations or federal associations, credit unions„ or federally
13 insured industrial loan.companies in this state selected by the
la treasurer or other: official having-ahe.legal custody of the money; or,
15 unless otherwise directed by the legislative body pursuant to Section
16 53601, may be invested in the investments set forth below. A local _
17 agency purchasing,or obtaining any securities:described in this sectipn,
ig in a negotiable, bearer,, registered, or nonregistered format, shall
t9 require delivery: of all the securities to the local agency,. including
20 those purchased for;the agency,by financial advisors, consultants, or
21 managers using he agency's funds, by book. entry, physical delivery, or
22 by third-party custodial'agreement. The transfer of securities to the
z3 counterparty bank's'customer book entry`account may be used for
z4 book-entry delivery.; .For purposes of this:secfion, "counterparty" means
25 the other party to the transaction. A counterparty bank's trust
26 department or separate safekeeping department may be used for the
27 ,physical deliveryofthe security if the security is held in the name of
2s the local agency.
29
30 (a) Bonds,issued,by the local agency;.including bonds payable solely
31 out of the revenues from arevenue-producing property owned, controlled,
32 or operated bythe oral agency orby a department, board, agency, or
33 authority of the local agency.
34
35 (b) United States Treasury notes, bonds, bills, or certificates of
36 indebtedness, orthose for which,the faith and credit of the United
37 States are pledged for the payment of principal and,interest.
38
39 (c) Registered state warrants or treasury notes or bonds of this
ao state, including bonds payable solely out of the revenues from a
4t revenue-producing property owned, controlled, or operated by the state
a2 or by a department, board, agency, or authority of the state.
43
44 (d) Bonds, notes, warrants, or other evidences of indebtedness of
45 any local agency within,this state, including bonds payable solely out
46 of the revenues from arevenue-producing property owned, controlled, or
47 operated by the local agency, or by a department, board, agency, or
48 authority of the local agency.
49
9
Reno, 91- 5 S.nICs
City of Petaluma 1997 Statement of Investment Policy
1
z (e) Obligations issued by banks for cooperatives; federal land
3 banks, federal intermediate creditbanks, federal home loanbanks, the
4 Federal Home Loan Bank, the Tennessee Valley Authority, or in
5 obligations, .participations, or other,instruments of, or issued by, or
6 fully guaranteed as to principal and interest by, the Federal National
7 Mortgage Association; or in guaranteed portions of Small Business
8 Administration notes; or in obligations; participations, or other
9 instruments of; or issued by, a federal agency or a United States
10 government-sponsored enterprise.
11
12 (f) Bills of exchange or time drafts drawn on and accepted by a
13 commercial bank; otherwise known' as bankers acceptances,. which are
la eligible for purchase by tfie Federal Reserve System. Purchases of
15 ~ bankers acceptances!may'not exceed 270 days.maturity or40 percent of
16 the agency's surplus.funds which niay`be invested,pursuanYto this
17 section. However, no.more than 30 percent of the agency's surplus funds
18, maybe invested in;the bankers acceptances ofany one commercial bank
19 pursuant to this section.
20
21 This subdivision does not'preclude a municipal utility district from
22 investing any surplus money'in its'treasury in any manner authorized'by
23 the Municipal Utility District Act, Division 6 (commencing with Section
2a 11501) of the Public Utilities Code.
25
26 (g) Commercial paper of "prime" quality of the highest ranking or of
27 the highesY.letter and:numerical rating as provided for by Moody's
28 Investors Servrce, Inc., or Standard and Poor's;Corporation. Eligible
29 paper is further 9imited to issuing corporations that are organized and
30 operating-within the United States and having total assets in excess of
31 five hundred million dollars ($500;000,000) and having an "A" or higher
3z rating for the. issuer's debt, other than commercial paper, if any, as
33 provided for by 1Vloody's,Investors Service, Inc., or Standard and Poor's
3a Corporation. Purchases of eligible commercial paper may not exceed-180
35 days maturity nor represent more:than 10 percent of the outstanding
36 paper of an issuing corporation. Purchases of commercial paper may not
37 exceed 15 percent.ofthe agency's surplus money which may be invested
38 pursuant to this section. An additional 15 percent, or a total of 30
39 percent of the agency's money or money in its custody, maybe invested
4o pursuant to this subdivision. The additional 15 percent may be so
at invested only if the dollar-weighted average maturity ofthe entire
42 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 the
45 total amount of outstanding commercial paper.
10
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City of Petaluma 1997 Statement of Investment Policy
1
2 (h) Negotiable certificates of.depositssued by a nationally or
3 state-chartered bank o; a savings association or-federal association or
a a state or federal;credt union_,or by astate-licensed branch of a
5 foreign bank. Purchases of negotiable certificates of deposit may not
6 exceed 30 percent of
the agency's. surplus money which maybe invested
7 pursuant to this section: Forpurposes of this section, negotiable
8 certificates of deposit do not come within Article 2 (commencing with
9 Section 53630) ofChapter4 ofPart I ofDivision 2 ofTitle 5, except
to .that the amount so ingested shall be subject to the limitations of
11 Section 53638. For purposes of this,section, the legislative body of a
12 local agencyand the treasurer or other official of the local agency
13 fiaving,legal custody of the: money are prohibited from depositing or
14 investing local,agency funds; or fundsig the custody of the local
l5 agency, in negotiable certificates of depositissued by a state or
16 federal credit union if a member of the`legislative body of the local
17 agency, or an employee-ofthe administrative officer, manager's office,
is budget office, auditor-controller's. office; or treasurer's office of the
19 local agency also serves on the board ofdirectors, or any committee
20 appointed by theboard of directors,-or the credif committee or
21 supervisory committee of the-state or federal credit union issuing the
z2 negotiable certificates of deposit.
23
24 (i) (1) Investments in-repurchase agreements or reverse repurchase
25 agreements of any securities authorized by this section, so long as the
26 agreements are subject to this subdivision; including the delivery
27 requirements specified in this section..
28
29 (Z) Investments in repurchase agreements may be made, on any
3o investment authorized in this section, when the term of the agreement
31 does not,exceed one year. The market value of securities that underlay
32 a repurchase agreement shall be valued at 102 percent or greater of the
33 funds borrowed againstthose securities and the value shall be adjusted,
3a no less than quarterly.
35
36 (3) Reverse repurchase.agreements maybe utilized only when either
37 of the following conditions are°met:
38
39 (A) The securitywas owned or specifically committed to purchase, by
ao the local agency; prior to repurchase agreement on December 31, 1994,
al and was sold using a reverse repurchase agreement on December 31, 1994.
42
I1
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City of Petaluma 1997 Statement of Investment Policy
1
2' (B) The security to be sold on reverse repurchase agreement has been
3 owned and fully paid for by the local agency fora minimum of 30 days
4 prior to sale, the total of all reverse reptrchase agreements on
5 investments owned by the local agency-not purchased or committed to
6 purchase, prior to Decgmber'31; 1994,. does not exceed 20 percent of the
7 base value of the portfolio;:and-tfie agreement does not exceed a term of
g 92 days, unless the agreement,includes a written,codicil guaranteeing a
9 minimum earning or spread:for the entire period between the sale of a
to security using a reverse repurchase:agreement and the final maturity
I1 date of the same security:
12
13 (4) After December3l, 1994, a:reverse repurchase agreemenYmay not
la be entered into with securities not`sold on a reverse repurchase
15 agreement and.,purchased, or committed to'purchase, prior to that date,
16 asa means of financirig orpaying,for the security sold on a reverse
17 repurchase agreement;;:but may only be'entered into with securities owned
18 and previously paidRfor;,for a minimum of 30 days prior to the
19 settlement of the reverse repurchase: agreement, in order to supplement
20 the yield on_securities ownetl arid~ previously paid,for or to provide
21 funds for the itrimediafe payment of a local agency obligation. Funds
22 obtainedrorfiirids"within'the pool of an equivalent amount to that
23 obtained--from sellingia "security to a counterparty by way of a reverse
24 repurchase agreement; on securities originally'purchased subsequentto
25 December 31,.1994, shall not be used.to purchase another security with a
26 maturity longer than,92 days from,the'initial settlement date of the
27 reverse repurchase agreement, unless the'reverse repurchase agreement
28 includes a written codicil guaranteeing`a minimum earning or spread for
29 the entire period'between the sale-of a.security using a reverse
3o repurchase agreement and the final•maturity date of the same security.
31 Reverse repurchase agreements specified in subparagraph (B) of paragraph
32 (3) may not be entered into uriless he percentage restrictions specified
33 in that subparagraph are met, including the total of any reverse
3a repurchase agreements specified in subparagraph (A) of paragraph (3).
35
36 (5) Investments in reverse repurchase::agreements or similar
37 investments in which the local,agencysells securities prior to
38 purchase, may only be made uponprior approval of the governing;body of
39 the local agency.
40
al (6) (A) "Repurchase agreement" means a purchase of securities by the
42 local agency pursuant to an agreement by which the•counterparty seller
43 will repurchase the!securities on orbefore a specified date and for a
44specified amount and the counterparty will deliverthe underlying
as securities to the local agency by book entry; physical delivery, or by
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City of Petaluma 1997 Statement of Investment Policy
1
2
3 third,party custodial agreement. The transfer of underlying securities
4 to the counterparty bank's cusfomerbook-entry account maybe used for
5 book-entry delivery.
6
7 (B) "Securities,""forpurpose ofiepurchase under this subdivision,
s means securities of the same issuer, description, issue date, and
9 maturity.
10
11 (C) "Reverse repurchase agreement" means a sale of securities by the
l2 local agencypursuant to.an agreement by which the local agency will
13 repurchase the securities on or before a specified date; and includes
la other comparable agreements.
IS
16 (p) Forpurposes.of this section, the.base value of the local
17 agency's' pool portfolio shall be that dollar amount obtained by totaling
18 all cash balances placed in the pool,by all pool participants, excluding
19 any amounts obtained-through selling. securities by way of reverse
20 repurchase agreements or other similar borrowing-methods.
21
22 (E) For purposes of this section, the spread is the difference
23 between the cost:of funds obtained.using.the`reverse repurchase
24 agreement.andahe eainings obtained'on the reinvestment of the funds.
25
26 (F) Repurchase agreements and;reverse'+repurchase agreements shall
27 only be made-with primary dealers of the Federal'Reserve Bank of New
28 York.
29
30 (j) Medium-term notes of a maximum of five years' maturity issued by
31 corporations; organized and operating within the United States or by
3z depository insiiiutions licensed bythe United States or any state and
33 operating within the United States. Notes eligible for investment under
3a this. subdivisionshall be rated in a rating category of "A" or its
35 equivalent or betterby a nationally recognized rating service.
36 Purchases of medium-term notes maynot exceed' 30 percent. of the agency's
37 surplus money which maybe invested pursuant,to this section.
38
39 (k) Shares of beneficial interestiissued by-diversified management
40 companies investing in the securities and obligations as authorized by
a 1 subdivisions (a) to9(k), inclusive;, of this section and which comply
az with theinvestment;resfrictions of this article and Article 1
a3 (commencing with Section 53600). To be eligible for investment pursuant
as to this subdivision, these companies shall_either: (1) attain the
45 highest ranking or"the: highest letter and numerical rating provided by
ab not lessthan two of the three largest.nationally recognized rating
a~ services, or (2) have an investment adviser registered with the
13
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City of Petaluma 1997 Statement of Investment Policy
1
2 Securities.and Exchange Commission with not less than five years'
3 experience investing in the securities and obligations as authorized by
4 subdivisions (a) to (m), inclusive, of this section and with assets
5 under management in excess of five:hundred'million dollazs
6 ($500,000,000). The purchase price of sharesof beneficial interest
7 purchased pursuant to this subdivision shalhnot include any commission
8 that these companies,may charge and shall not exceed 15 percent of the
9 .agency's surplus money which maybe invested pursuant to this section.
10
11 (1) Notes, bonds; or: other obligations which are at all times
12 secured by a valid first priority security interest in securities of the
13 types listed by Section 53653 as eligible securities for the purpose of
14 securing local agency'deposits having a market value at least equal to
IS that required by Sectiiin.:53652 for"the.purpose of securing local agency
[6 deposits. The securities: serving as`collateral shall. be placed by
17 delivery or book entry;into the•custody of a trust company or the trust
is department of a bank which is;not `afltiated with the issuer of the
19 secured obligation, and;the=,security:'interest shall be perfected in
20 accordance with the requirements of the Uniform Commercial Code or
zl federal regulations'applicable.to the types of securities in which the
22 security interest is granted.
23
24 (m) Any mortgage pass'-through security, collateralized.mortgage
25 obligation, mortgage-backed~orother pay;through bond, equipment
25 lease-backed certificate, consumer receivable pass-through certificate,
27 or consumer receivable-backed bond of,a maximum of five years maturity:
28 Securities eligible forinvestmentunderthis subdivision shalTbe
29 issued by an issuer having an "A" orhigherrating for the issuer's debt
3o as provided by a nationally'recognized rating,service and rated in a
31 rating category of "AA" or its equivalent or better by anationapy
32 recognized rating service. Purchase of securities authorized by this
33 subdivision may not exceed 20 percent of the agency's surplus money that
3a may 68 invested pursuant to this section.
14
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