HomeMy WebLinkAboutAgenda Bill 09.A 01/27/2003„ CITY OF PETALUMA, CALI FORNIA
AGENDA BILL MS7 2001
, Agenda Title
Meeting Date:
Resolution approving the 2003 Investment Policy
January 27, 2003
Department
Director
Contact Person
Phone Number
Finance
W. Thole
W. Thomas
778 -4323
Cost of Proposal N/A
Account Number
N/A
A rnoui t Budgeted N/A
' 'Name of Fund
N/A
Attachments to Agenda Packet Item
Resolution approving 2003 Investment. Policy
Exhibit A to Resolution — Investment Policy
Government Code Section 53635, as amended
Resolution Number 2001 -054 Authorizing the City of Petaluma to Invest in the California Asset
Management Program (CAMP)
Summary Statement
State laws require all local agencies to develop an annual investment policy that must be considered by the
City Council at a public meeting. A good investment policy dries the cash, treasury and investment
management functions of a City. It serves as a guide for setting and achieving program objectives, defines
rules and establishes benchmarks, and reduces the exposure to liability of both the City staff and the City
Council.
Council Priority THIS AGENDA ITEM I$ C ONSIDERED TO BE PART OF, OR NECESSARY TO, ONE OR
MORE OF THE 2001 PRIORITIES ESTABLISHED BY THE CITY COUNCIL ON JULY 21, 2001.
Priority(s):
N/A
Recommended City Council Action /Suggested Motion
Adopt the resolution approving the 2003 Investment Policy
Reviewed by Finance Director:
Revie me -:
Appro ve it Mana er:
D te:
Date:
To ' � te.
Revision # and Date Revised:
File Code:
December 31, 2002
CITY OF PETALUMA, CALIFORNIA
JANUARY 27, 2003
AGENDA REPORT •
FOR
INVESTMENT POLICY FOR 2003
1. EXECUTIVE SUMMARY
State.- laws require -all -local agencies to= develop an annual investment policy that must be considered bythe City a.
Council at a public; meeting. A good :investment policy drives the cash, treasury and investment management
functions of a City. - It. .serves as a guide for setting and achieving program objectives, defines rules and
establishes benchmarks, and reduces the exposure to liabilityof both the City staff and the City Council.
2. BACKGROUND
The Investment Policy provides valuable information on how to properly manage public finds. The proposed
Investment Policy for the year. 2003 has not been changed in-basic content from the one approved for 2002, and
includes the ability to invest City funds in the Califomia. Asset Management Program (CAMP) as an approved
investment option. The City's policy is always to protect investment principal (safety), and to provide. funds to
meet cash demands `(liquidity) while earning a market rate of return.
The City's investment portfolio as of November 20 2002 totaled $52,235,503. This is exclusive of $22,281,378
that is in investments that are managed by outside fiscal agents. Of this amount, 60.19 % is invested in the state .
Local Agency Investment Fund (LAIF) that paid 2:63% for the month of November 2002: The portfolio has
31.84% invested in federal agencies that are paying an average of 4.05 %. The portfolio has 3.88% invested in
the California Asset. Management Program, which paid 1.52% in November. The remainder is invested'in the •
assessment bond for the Washington/McDowell intersection (1.89%) and money market accounts (2.22%) at
November 30, 2002.
3. ALTERNATIVES
Do not adopt investment policy or revise proposed policy.
4. FINANCIAL IMPACTS
The City, through its .investments of idle cash, generates revenue that is used to support the various functions of
the City. Interest is allocated based on average monthly ending cash balances of the individual funds. The City
earned $2,725,319 in interest from the investment portfolio and for investments with fiscal agents during the
2001/2002 fiscal year.
CONCLUSION
The City's Investment Policy complies with state laws and provides the public and the City Council assurance
that all idle funds will be invested in a manner that will insure safety and liquidity while seeking a market rate of
return.
6. OUTCOMES OR PERFORMANCE MEASUREMENTS THAT WILL IDENTIFY SUCCESS OR COMPLETION:
N/A
7. RECOMMENDATION.
Adopt. the resolution adopting the 2003 City of Petaluma Investment Policy
S: /agenda/investment policies /investment policy 2003
RESOLUTION OF THE CITY :COUNCIL, OF THE
'• CITY OF PETALUMA APPROVING THE
INVESTMENT POLICY FOR 2003
WHEREAS, the City Treasurer has annually rendered 'to "the'City'Council a'Statement of Investment
Policy, and,
WHEREAS, the City Treasurer has the responsibility to invest the. pooled idle cash from all of the City's
funds, and;
WHEREAS, the City Treasurer has developed a Statement of Investment Policy and submitted said
Policy to the City Council for review.
NOW, THEREFORE BE IT RESOLVED, that the City Council approves the 2003 Investment Policy as
shown in Exhibit A attached.
•
CITY OF PETALUMA, CALIFORNIA
2003 STATEMENT OF INVESTMENT POLICY
William J. Thomas
Finance Director /City Treasurer
0
EXHIBIT A TO THE RESOLUTION
• i
City-.of Petaluma, Calif ornia 2003 Statement of Investment Polic
2 CIT OF , CALIFORNIA
3 2003 STATEMENT OF INVESTMENT POLICY
4 .
s POLICY
7' It is the policy of the City of Petaluma, CA to invest public funds in a manner that will provide
8 the highest investment return with the maximum security while meeting the daily cash flow
9 demands of the entity and conforming to all state and local statutes governing the investment of
10 public funds.
12 SCOPE
13
14 This investment policy applies to all financial assets of the ,City of Petaluma, CA. These funds
15 are accounted for in the City of Petaluma, CA Comprehensive Annual Financial Report and
16 include:
17
18 General Fund
19 Special Revenue Funds
20 Debt Service Funds
21 Capital Project Funds
22 Enterprise Funds
23 Internal ServiceTunds
24 Trust and Agency Funds
25
26 This Policy shall also apply, ,to funds of the Petaluma Community Development Commission
27 (PCDC), Petaluma Public Financial Authority, Petaluma Public Facility Financing Corporation
28 and any other agency or trust funds under the control of the City Treasurer.
0 9
0 PRUDENCE
31
32 Investments shall 'be made with judgment and care — under circumstances then prevailing —
33 which persons of prudence, ;discretion and intelligence exercise in the management of their own
34 affairs, not for speculation, but for investment, considering the probable safety of their capital as
35 well as the probable income to be derived.
36
37 OBJECTIVE
38
39 The primary objective in priority order, of the City's investment activities shall be:
40
41 1. Safety: Safety of principal is the :foremost, objective' of the investment program.
42 Investments of the City of'Petaluma, CA,;sha'lt be- undertaken in a manner that seeks: to
43 ensure the preservation of capital in the overall portfolio.
44 2. Liquidity: The City's investment portfolio will remain sufficiently liquid to enable the
45 City of Petaluma, CA to meet all operating requirements which might be reasonably
46 anticipated.
47 3. Return on Investments: 'Th'e City's investments shall be designed with the objective of
48 attaining a rate of return throughout budgetary and economic cycles, commensurate with
49 the City'�s;investment risk constraints and the'cash flow characteristics of the portfolio.
50
51 DELEGATION OF AUTHORITY
52
53 Under the City Charter Section'24, the City Treasurer is appointed by the City Manager with the
0 4 approval of the City Council. The City Treasurer is also the City's Finance Director.
5
56 The daily cash management, investment transactions and account reconciliation's are the primary
57 responsibilities of the City [Treasurer. These activities are also .carried out by other members of
58 the`Fin.ance Department under the direction of the City Treasurer.
City of Petaluma, California 2003 Statement of Investment Policy
ETHICS AND CONFLICT OF INTEREST
4 Officers and employees involved in the investment process shall refrain from personal business
5 activities that could conflict with proper execution of the investment program or which could
6 impair their ability to 'make impartial decisions. Officers and employees :involved in the
7 investment" process shall abide by the 'Conflict of Interest Code, (California Government Code
8 Section 1090 et seq.) and the California Political Reform Act (California `Government Code
9 Section 81000 et seq.).)
10
11 PERMITTED INVESTMENTS
12
13 The City may invest- in the, following investments sources that are allowed by State Government
14 Code Section 53601 and 53635:
15
16 m Local Agency Investment Pools (Sfate,LAIF or Sonoma County Investment Pool)
17 ® California. Asset Management Program. (CAMP`)
18 ■ Certificates of Deposits with commercial banks and/or savings and loan companies
19 ® Negotiable Certificates. of Deposit
20 ■ Banker's Acceptances
21 ■ Securities of the U.S. Government or its Agencies
22 Repurchase- Agreements (for overnighi investment)
23 Commercial Paper
24 Money Market
25 ■ Mutual,Funds
26 ■ Guaranteed Investment Contracts
27
28
29 COLLATERLIZATION
30
31 Deposit type securities (i.e. Certificates of Deposit) shall be collateralized at the minimum State
32 of California collateral pool requirenients'for any amount exceeding FDICor FSLIC coverage.
33
34 BROKERS
35
36 In selecting °securities brokers; the City Treasurer shall conduct credit and capitalization analysis
37 to determine that firms are adequately financed to conduct public business.
38
39 LOCAL INVESTMENT POOL POLICIES AND REPORTS
40
41 To the extent there are investments in the State or Sonoma County investment pools, the City
42 Treasurer shall review, and maintain current copies of t_he adopted,investment policies of the State
43 and Sonoma, County. The policies shall be reviewed. for.concurrence with the investment policy
44 of the City::
45
46 SAFEKEEPING.AND CUSTODY
47
48 All security transactions entered into by the City of Petaluma, CA shall be conducted on a
49 delivery - versus payment basis. Securities will be held. by third party custodian designated by the
50 City Treasurer and evidenced 'bysafekeepingreceipts.
5.1
52
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City aluma,
'of P "et � `California , 2003 Statement of Investment Policy
1, INTERNAL CONTROL
2
3 The City Treasurer 'shall establish an annual process of independent :review by an external
4 auditor. This review will provide internal control by assuring compliance with policies and
•5; procedures.
6'
7 PERFORMANCE STANDARDS
8 _
9 The investment portfolio shall be designed with the objective of obtaining a ,rate of return
lo throughout budgetary. and economic cycles, commensurate with the investment risk constraints
- 11 and the cash flow needs..
12
13 The City's investment benchmark for market yield is: the Three. Month U.S. 'Treasury Bill, which
14 had an average yield of 1.19% o- in December 2001_
15
16 The City's investment amount benchmark is to invest 97 % of all idle funds.
17
18 REPORTING
19
20 The City Treasurer shall provide -a :a monthly investment report to the City Council, which
21 provides a clear picture of the status of the current investment portfolio. This report will be
22 formally submitted to the City Council each quarter at t public meeting.
23
24 Schedules -in the quarterly Treasurer's Report will include the following:
25
26 ° A list of individual securities held at the end of the reporting period by authorized
27 investment category
28 Average life and final maturity of all investments.
9 Ea g p
° min s rate on an annualized basis
30 value,
1 ° Percentag of the. value
ortfolio b book value
® g p y category
32
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t
City of Petaluma, California 2003 Statement of Investment Policy
2 CITY OF PETALUMA
3 2003 STATEMENT OF INVESTMENT POLICY
4 • SUMMARY OF TYPES OF INVESTMENTS.
6 AVAILABLE TO LOCAL GOVERNMENTS
7
8
9 STATE INVESTMENT POOL "(LAIF)
10
11 The Local Agency Investment Fund (LAIF),, a voluntary program created by statute, began in
12 1977 as an investment alternative for California's local governments and special districts -and
13 continues today under the, State of California Treasurer's office. The enabling legislation for the
14 LAIF is Section 16429. 1,2,3 of the California Government Code.
15 This program offers participating agencies the opportunity to participate in,a major portfolio
16 which daily invests hundreds of millions of dollars, usihgz the investment expertise of
17 Treasurer's Office Investment staff at no additional cost to the taxpayer. This in -house
18 management team is comprised of civil. servants who :have individually worked for the State
19 Treasurer's Office for over .20 years.
20 The LAIF is part of the Pooled Money Investment Account (PMIA). The PN1IA began in 1953
21 and' has oversight provided by. the Pooled Money Investment Board (PMIB) and an .ii -house
22 Investment .Committee. The PMIB Board members are the State Treasurer,: Director of Finance
23 and State; Controller.
24 The LAIF;has oversight by the Local Investment Advisory Board (LLAB). The Board consists of
25 five members as designated by Statute. The Chairman is the State Treasurer; or his designated
26 representative. Two members, qualified by training and experience in the field of investment or
27 finance, and the State Treasurer appoints two members who are Treasurers, finance or fiscal
28 officers or business managers employed by any County, City or local district or Municipal
29 Corporation of this state. The term of each appointment is two years or at the pleasure of the
30 appointing authority.
31 All securities are purchased under the authority of the Government Code Section 1$430 and
32- 16480.4: The State Treasurer's Office takes delivery of all'securities purchased on a delivery
33 versus payment basis using a third party custodian. All, investments are purchased at market, and
34 market valuation is conducted monthly.
35 Additionally, theTMIA.has Policies Goals, and Objectives for the portfolio to make certain that
36 our goals, of 1S afety, Liquidity and Yield are not jeopardized and that prudent management
37 prevails. These policies are formulated by investment "staff and reviewed by both the PMIB and
38 the LIAB on an annual basis.
39 The Bureau of State Audits on an annual, basis audits. the State Treasurer's Office. The resulting
40 opinion is included-in the subsequent PMIB monthly report following its ,publication. The Bureau
41 of State Audits also has , a continuing audit process throughoutthe,yean The State - Controller's
42 Office as well as an in -house audit process involving three" separate divisions audit all investment
43 and LAIF claims on a basis. •
44 It.has been determined that the State of California cannot declare bankruptcy under Federal
45 regulations, thereby allowing the Government Code Section'16429.3 to stand. This Section states
4
City of Petaluma, California 2003 Statement of Investment Policy
1 "money placed with the State Treasurer for deposit in the LAIF shall not be subject to
2 impoundment or seizure by any State official or State agency."
3 The LAIF has grown from 293 participants and $468 million in 1977 to 3;039 participants and
4 $49.9billion in 2002.
6 The Local Agency Investment 'Fund (LAIF) was created: by statute in 1977 and provides an
7 investment alternative for local agencies. The program offers participating agencies to
8 participate in a major portfo, lio,,which invests hundreds of millions of dollars a day. The deposits
9 -and- withdrawals are" °by - electronic° transfers of funds (wire transfers) and deposits earn -
10 interest on a daily basis.
11
12 There is a limitation of.$40 million per legal entity within an agency. There is also a maximum
13 of fifteen transactions, deposits or withdrawals per month.
14
15 SONOMA COUNTY INVESTMENT POOL
16
17 The Sonoma County Treasurer maintains an investment pool in which the County, Schools,
18 Special Districts and Cities can participate. This investment pool operates in the same manner as
19 the State pool. The County'Treasurer':is subject to -the same State Government Code regarding
20 investments as the City. As• with the State investment fund, City funds can be withdrawn at any
21 time and are protected by State Law from seizure or impoundment by any County Officer. The
22 City does not participate in this pool but retains the option to .do so.
23
24 CALIFORNIA ASSET MANAGEMENT PROGRAM (CAMP)
25
26 CAMP provides California public agencies, together with any bond trustee acting on behalf of
0 7 such public agency, assistance with the investment of and accounting for bond proceeds and
8 surplus funds. For bond proceeds, the objective of CAMP is to invest and account of such
29 proceeds in compliance with arbitrage management and rebate requirements of the Internal
30 Revenue Service. The program includes .the California Asset Management Trust, a California
3.1 common law trust organized, in 1989. The Trust currently offers a professionally managed
32 money market investment portfolio` the Cash Reserve Portfolio, to provide public agencies with
33 a convenient method of pooling funds for temporary investment pending their expenditure. The
34 Trust also provides record keeping., custodial and arbitrage rebate calculation services for bond
35 proceeds. As part of the program, 'public agencies may also establish individual, professionally
36 managed investment accounts.
37
38 The Pool seeks to attain as high.a level of current income as is consistent with the preservation of
39 principal. The Pool purchases only investments of the type in which public agencies are
40 permitted by statute to invest surplus funds and proceeds of their own bonds.
41
42 CERTIFICATES OF DEPOSITS•(CD);
43
44 Certificates of'Deposits, sometimes known as "Jumbo Accounts" or "Fixed CD's" are savings
45 accounts wth Banks or Savings and Loans. - These accounts are fora specific amount have a set
46 interest rate, and set maturity.date. There is a substantial interest penalty if the CD is withdrawn
47 prior to the maturityid`ate.
48
49 The State law requires Public .Fund CD's to be collateralized by the financial institution at 110%
50 with US Government.,notes/bonds.or at 150 %o with quality First Trust Deeds. This collateral can
51 be waived if.Federal Insurance. (FDIC for banks or FSLIC for savings and loans) is available.
J 2 These federal agencies will insure each account up to $100,000.
3
54 The City generally waives the collateralization requirements for the FDIC or FSLIC insurance.
55 The waiver of collateral is a wide spread practice and will generally generate higher interest rates
City of Petaluma, California 2003 State of Investment Polic
1
and provide the greatest security for the funds from the Federal Insurance Agencies. For deposits
'
2
in excess of $100,000, the collateralization requirements are not waived.
3
4
NEGOTIABLE CERTIFICATE OF DEPOSIT (NCD)
5
r
6
This investment is similar to the Fixed CD's above. However, the NCD can be sold through a
7
broker on a "secondary market" prior to the maturity date. Normally, NCD's are issued in
8
$500;000 and $1,000,000 amounts. The State Code limits NCD's to not more than.. 30% of the
9
local: agency's portfolio and to a five =year maximum term. The security is the credit worthiness
`
10
of the issuer. These deposits are uninsured and uncollateralized promissory notes..
12
BANKER'S ACCEPTANCES (BA)
13
14
A Banker's Acceptance is a time draft of invested funds, which has been drawn on and accepted
15
for repayment by a bank. This financial instrument is 'generally used for short term (30 and 180
16
days) financing of export, import, or storage of goods. By accepting the draft (investment of City
17
funds), the bank is: liable for the payment at maturity: This bank liability makes the Banker's
18
Acceptance a marketable investment. The State Code limits BA's to not more than 180 days to
19
maturity and 40% of the local agencys portfolio: In addition, not more than 30% of the local
20
agency's portfolio, may be placed in any one bank.
21
22
US TREASURY BILLS
23
24
Commonly referred to as T- Bills, these are short-term marketable securities sold as obligations of
25
the US Government. The are offered in
They three month, six month, nine month and one -year
26
maturities. T -Bills do not accrue interest but are sold at a discount, and pay the face value at
27
maturity.
28
29
US TREASURY NOTES
30
31
These are marketable, interest - bearing securities sold as obligations of the, US °Government with
32
original maturities of one to ten years. Interest is paid. semi - annually.
33
34
US TREASURY BONDS
35
36
These are the same as US Treasury Notes except they have original maturities often or
37
years
longer.
38
39
FEDERAL AGENCY 'ISSUES
40
41
Many Federal Government. Agencies are authorized. to issue short term and .long term. obligations
42
that are used to finance various programs such as home loans, business - loans, farm loans, etc.
43
These Agencies were created by the Federal Government in the 1.930's and have since become
44
independent quasi- public agencies. The security for their issues is the guarantee of the. Agency to
45
pay. The Federal Government has only an- implied liability to the extent that the Agency has an
46
open credit line to borrow from the U.S. Treasury. It is, widely accepted that Federal Agency
47
issues are as secure as U.S. Government notes.'
48
49
There is an active secondary market available to sell these issues prior to maturity. The issues
50
are fairly liquid depending on the prevailing market interest:,rates at the time of sale.
51
Some' of the more common agency notes are issued by the Federal National Mortgage
52
Association (Fannie Mae), Federal Home Loan Banks, Federal Home ' Loan Mortgage
53
Corporation (Freddie Mac), and the Federal Farm Credit Banks.
54
55
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS (REPOs)
•'
56
57
A Repurchase Agreement is a short-term investment agreement to loan City funds for a fixed
58'
period in return for a fixed interest rate and secured collateral, such as U.S. Treasuries or Agency
y of.Petaluma, California 2003 Statement of Investment Policy
1 Notes This t ype nds left in�t usua overnight
he general operatmg checking ac ount � term Reverse Repurchase
short 7 days)
g stment of fu ase
3
a r-eement, is a;short =t erm"investm'ent, which is used to take advantage of market interest rate
4 changes and,increase the size of the portfolio. State law was amended in 1'996 -,to limit,the use of
5 both repurchase :and - reverse repurchase agreements. The City Council must approve each
6 ` reverse repurchase agreement.
7
8 COMMERCIAL PAPER (CP)
9
1`o Commercial Paper is unsecured promissory notes of industrial corporations, utilities and bank
n- holding companies. The notes are in bearer form in amounts starting at $'100;000. ` State' law
12 limits the City to investments in United States corporations having assets in excess of five
13 hundred million dollars with an " V.. or higher, rating. Cities may not invest more than 25% of the
14 portfolio in comunercial paper and the CP's may not e 'xceed a term of 270 days.
15
16 ''MUTUAL FUNDS
17
18 An investment company that pools money and can invest in a variety of securities, including
19 fixed - income securities and money market instruments, cities' may invest in Mutual Funds or
20 Money Market funds that receive the highest ranking or the highest letter and numerical rating by
21 two of the three largest nationallyrecogni -zed rating services. The Mutual Funds must abide by
22 the same investment restrictions and regulations that apply to public agencies in California.
23 Money Market Funds must follow regulations- specified the Security and Exchange Commission
24 under the Investment Company Act of 1940. The' City must verify that the Mutual Fund is in
25 compliance with state laws for`public agencies prior to purchasing shares.
26
27 GUARANTEED INVESTMENT CONTRACT (GIQ
28
41 9 This is an agreement acknowledging',receipt of funds for deposit, specifying terms for withdrawal
0 and guaranteeing a rate 'of interest to be: paid. The investment follows all state laws for the
31 investment of public funds.
32
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City of Petaluma, California 2Q03 Statement of Investment Policy
1 PERMITTED INVESTMENTS AND CONDITIONS FOR USING THEM
4
9.
_.... X1;0.,..
11
12
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14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
3.1
32
33
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35
36
37
38
39
40
41
42
43
44
45
Investment Type
Maximum Maximum % Quality
Maturity (2) of Portfolio Requirements
Local Agency Bonds.
5 Years
None
None
US Treasury Obligations-
5 Years
None
1Voiie
. State ,of::California - Obligations __
5 Years
None _. '
None.
CA Local Agency Obligations
5, Years
None
None
US, Agencies
5 Years
None
None
Bank Acceptances
180 Days
40 %'(3)
Fed, Reserve
Eligible
Commercial Paper
270 Days
25%(4)
A1/P1
'Rating
Negotiable rCertificate sofDeposit
5 Years
30 %0
'
Repurchase Agreements
1 Year
None
None
Reverse Repurchase Agreements
92'. Days
20% of,Base
None
(6)
- Medium =Term Notes
5 Yeats
30%
A
Rating
Mutual Funds'
N/A
20
Multiple
(7)
Money'MarkefFunds (1)
N/A
20%
`Multiple
(8)
Collateralized' Bank Deposits
5 Years
None
None
Mortgage Pass -Tliru 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 refers to Money Market Mutual Funds as 'Market Fund. The must have an average weighted maturi [y 90
2 Section 53601 states an Investment that at the time of purchase has over 5 ears. to maturit must .be Y Y Y
days or less•and abide b SEC regulations.
O Y e authorized by the legislative
body not less than 3 months prior to the investment.
(3) No more than 30 %o'of the surplus funds :may be in Bankers Acceptances of anybne %commercial bank.
(4) Commercial paper,issuers, must be US Corporations.with S500 million plus in assets. Purchases may not represent more than 10% of
the outstanding paper of;an,issuing corporation..
(5) No more than 10 1 /o=of an agency's'surplus funds maybe invested in.;ahy one - mutual fund.
(6) Reverse Repurchase Agreements must be made with primary dealers of the Federal Reserve Bank of New York and the securities
used for theyagreement must have been held by the issuer for at "least 30 days.
(7) Mutual, funds must receive the highest ranking by 2 of the 3 largest nationally recognized rating agenc es`or retain an investment
advisor' Who is registered', or' exempt from registration, with the SEC and has at least 5 years' .experience investing` to securities and
obligations authorized in Section 53601 and 53635 (a j, m or n) of the Government Code'with':assets in excess of $5ftmillion.
(8) Money market 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; registration with,the SEC and;,has at least 5 years' experience managing money
market funds' in excess of$500 million:
0
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City. of,Petaluma, California 2003 Statement of Investment Policy
1
2
;3 . GOVERNMENT CODE SECTION 53635
4r .
A AMENDED'
S
security if the security is held in the name of the local agency.
6
53635, As.far as poss ble,,all money belonging` to, or in the
7
custody of, a local agency,; including money paid to the treasurer or
8
other official to pay the principal, ,interest, of Penalties of bonds,
9
shall be deposited for safekeeping in state or national banks,
to
savings.assoc atIions or federal -associations ; credit-unions ; or- -- -
11
federally ° insured.industrial loan companies in this state selected by
12
the treasurer or other official having the legal, custody of the
13
money; or, - unless otherwise directed by the legislative body pursuant
14
to Section 53:601, may be.invested in the investments forth
15
below. A local'agency purchasing Or obtaining any securities
16
described in this section, in a negotiable,, bearer, registered, or
17
nonregistered format; shall require delivery of.dll, the securities to
18
the local agency, including those purchased for the agency by
19
financial advisors; consultants, or'managers using the agency's
20
funds, by book entry, physical delivery, or by third- parfycustodial
21
agreement. The transfer of securities to the counter party bank's
22
customer book entry account. may be used for book- entry"delivery. For
23
purposes of this section, "counter parry" means; the 'other party to
24
the transaction. A counterparty bank's trust department or separate
5
safekeeping department may be used for the physical delivery of the
6
security if the security is held in the name of the local agency.
27
28
(a) Bonds issued by the local agency, including bonds payable
29
solely out of the.revenues from a revenue- producing property owned,
10
controlled, or operated by the local agency or by a department,
31
board, agency, or authority of the local agency.
32
33
(b) United States Treasury notes, bonds, bills, or certificates of
34
indebtedness, or those for °which the faith and credit of the United
35
States are pledged for thepayment of principal'`and interest.
36
-
37
(c) Registered state warrants or treasury notes or bonds of this
38
state, including bonds payable solely out of the revenues from a
39
revenue- producing property owned, controlled, or operated by the
40
state or by a department, board, agency, or authority of the state.
41
42
(d) Bonds, notes, warrants, or other evidences of indebtedness of
43
any local' agency within this"state, including bonds payable solely
44
out of the revenues from a revenue - producing property owned,
45
control'le'd, or operated by the local agency, or by a department,
46
board agency, or authority of local agency.
40 7
City. of Petaluma, California 2003 Statement of Investment Policy
2 (e) Obligations issued by banks for cooperatives, federal land
3 banks, federal intermediate credit banks federal home loan banks, •
4 the Federal Home Loan Bank,. the Tennessee Valley Authority, or in
5 obligations, participation "s, or other instruments of, or issued by
6 or fully guaranteed as to principal and interest by,, the.Federai
7 National Mortgage Association; or in guaranteed 'portions of Small
Business Administrafion,notes;' or m. 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 time drafts drawn on and accepted by a
13 commercial. bank, otherwise known as banker's acceptances. Purchases
14 of bankers acceptance& 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,
17 funds °may, be "invested in the bankers' acceptances of any one
18 commercial bank pursuant to this section.
19
20
This subdivi`sion,does not,preclude a municipal utility district
21
from investing any surplus money in ita treasury in any manner
22
authorized by' -the Municipal Utility District Act, D 6
23
24
(commencing with Section 11501) 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
Investorsi 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 (5500,000,000) and
31
having an "A" or higher rating for the issuer's :debt, other that,
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 .eommercial__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 -p4l5br may not exceed 1.5
37
percent;of the agency's - surplus money, which,maybe invested pursuant
38
to this section. An additional 15` percent, or a total of 30 percent
39
of the agency'-s' money or money in its custody,, may be invested
40
pursuant'to this subdivision. The additional 1.5 percent_.may'be so
41
invested only if the dollar- weighted average. maturity ofthe entire
42
amount; does not exceed 31. days. °'Dollar- weighted average maturity"
43
means the sum of the amount ,of.,each outstanding commercial paper
44
investment multiplied`by�the number of days to maturity; divide&by
45
the total amount of outstanding commercial pap_ er.
46
10
City of Petaluma, California 2003 Statement.of Investment Policy
1 '
2- (h) Negotiable certificates, of deposit issued by a.nationally or
• 3 state - chartered bank : or a_ savings association or federal' association
4 or a state 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 maybe
7 invested pursuant to this section., For purposes, of this section,
8 negotiable. certificates of deposit:.do not ; come within Article 2
9 (commencing with Section 53630) of Chapter 4. ''of Part l of Division 2
10 of Title 5, except, that the amount so invested shall be subj ea to
11 the limitations
(if ' Section 53638. For purposes;;of this section the
12 legislative body of a local agency and the treasurer or other
13 official of the local, agency having .legal 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 negotiable certificates of
16 deposit issued by 4 istate or federal credit union if a member of the
17 legislative bodyof;the local agency, or an employee of the
18 administrative officer, manager's office, budget office
19 auditor - controller's office, or treasurer's office of the local ,
20 agency also serves on the board of °directors, or any committee
21 appointed by the, board of directors, or the credit committee or
22 supervisory committee of the state or federal credit union issuing
11
the negotiable certificates: of deposit.
� 3
4
25
O (1) Investments, in repurchase agreements or reverse repurchase
26
agreements of any ;securities authorized by this section, so long as
27
the agreements rare subject to this subdivision, including the
28
delivery requirements specified in, this section:
29
30
(2) Investments in repurchase agreements may' ybe lade, 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
greater of the funds borrowed against those securities and the value
35
shall be adjusted no less than quarterly.
36
37
(3)'Rever8 e repurchase agreements may be utilized only when either
38
of the following conditions are met:
39
40
(A) The security was owned or specifically committed to purchase,
41
by'the local agency, prior to .repurchase agreement on December 31,
42
1994;.and wassold .using a reverse repurchase agreement on December
43
31, 1994.
44
11
City of Petaluma California 2003 Statement'of Investment Policy
2
(B) The'securi"ty 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, pnor'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 ent- includes -a written codicil
9
guaranteeing a ininiintim earning or spread for the entire period'
10
between the sale of a security using a reverse: repurchase agreement
11
and the final maturitydate of the same security.
12
13
(4) After December 31„ 1994 a reverse repurchase agreement may
14
not..be entered into with securitiesnot'sold on a reverse repurchase
15
agreement and purchased, or cOmnitted to purchase; prior t0 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
is
securities owned and previously paid for, for a minimum of 3'0 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 forthe immediate payment:of a local agency
22
obligation. Funds obtained or funds within the pool of an equivalent
23
amount to that obtained from selling a security'to a counter party by
24
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 into unless the percentage. . restrictions, specified in that
3
subparagraph, are met, including the total of any reverse repurchase
35
agreements specified in subparagraph (A) of paragraph (3).
36
3
(5) Investments in reverse repurchase agreements ousimilar
38
investmentsl in which the local agency sells securities prior to
39
purchase with,a simultaneous agreement to repurchase the - security,
40
may 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.Barik of New York.•
43
12
City of Petaluma, California° 2003' Statement of Investment Policy
1
2 (6) (A) "Repurchase agreement" means a purchase of securities by
0 3 the local ,agency pursuant to an .agreement by which. the counter party
4 seller will repurchase securities on or before a specified .date
P
5 and for a specified amount and the counter party will deliver the
6 underlying securities to the local agency by book entry, physical .
7 delivery„ or by third party custodial agreement. The transfer of
8 underlying securities -to the _counter party. bank's customer,bookw entry..
9 account may be used for book -entry delivery.
10
0) Medium =term notes of a maximum of five years' maturity issued
11
(B) "Securities," for purpose of repurchase under this
12
subdivision, means securities of the same issuer, description, issue
13
date, and maturity.
14
investment under this 'subdivision shall be rated in axating category
15
(C) "Reverse repurchase agreement" means a,sa'le 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
23
participants„ `excluding any amounts obtained through selling
e 4
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
0) Medium =term notes of a maximum of five years' maturity issued
32
by corporations, organized. and operating within the United States or
33
by depository institutions licensed by the United States or any state
34
and operating within the United States. Notes eligible for
35
investment under this 'subdivision shall be rated in axating category
36
of "A" or its equivalent,or 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
13
City of Petaluma, California 2003 Statement of Investment Policy
2
(k) (1) Shares of beneficial interest - issued by diversified
3
management companies that invest in the Securities and obligations as
4
authonzed,by subdivisions (a) to 0), .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 thesei restrictions; a counter party to 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
(A) Attained the highest ranking or the highest letter and
11 finds that the counter party presents a minimalxisk of default, and
12 the value of thel securities underlying a repw chase agreement maybe
13 100 percent of the sales price if the securities are marked to market
14 daily.
15
16
(2) Shares of beneficial interest issued by diversified managenent
17
companies that are money market funds registered with the Securities
18
and Exchange Commission under the Investment lCompany Act of `1940 (15
19
U.S.C. See. 80a -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:
23
24
(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 0), inclusive, or
32
subdivision (1) or (m) , and with assets under management in excess of
33
five hundred. million dollars ($500;000;000).
34
35
(4) If investment is in shares issued pursuant to paragraph'(2),
36
the company shall have met either of the f6llowing criteria:
37
38
(A) Attained the highest ranking or the. highest letter and
39
numerical rating provided by not less than , two nationally-reeognized
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 moneymarket mutual funds
45
with assets under management in excess of five hundred million
46
dollars ($500,000,000).
47
•
•
•.
14
City of Petaluma, California 2003 Statement of.Investment Policy
1;
2 (5) The purchase price of shares of beneficial interest purchased
3. ' pursuant to this subdivision shall not include any commission that
4 the companies may charge and shall not exceed 20 percent of
5 agency's surplus money that may invested pursuant to this section.
7 However, no more than 10 percent: of`the agency's surplus funds may
8 be invested" shares.ofbeneficial interest,of.any one,mutualfand
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 i securities of
13
the types listed.by Section 53651 as eligible securities for the
14
purpose of securing: local agency deposits having a market value at
15
least equal to that required by Section 53652 forlhe of
16
securing local agency deposits. The securities serving as collateral
17
shall be placed by delivery or book entry into the custody of a
18
trust company or the trust department of a bank ,.. which is not
19
affiliated with the issuer of thel 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
23
�
is granted.
25
(m) Any mortgage pass - through security, collateralized mortgage
26
obligation, mortgage - backed or other pay - through bond, equipment
27
lease- backed certificate, consumer receivable pass - through
28
certificate, or co n sumer receivable- backed bond of.a, maximum of five
29
years maturity. Securities eligible for investment under this
30
subdivision shall be issued by an issuer havingg 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
38
•
1 ° Resolution No. 2001 -05 N. C.S.
2 of the City of Petaluma, California
4 AUTHORIZING: THE CITY OF PETALUMA TO INVEST
SURPLUS FUNDS IN SHARES OF THE
CALIFORNIA ASSET MANAGEMENT TRUST
7- AND IN INDIVIDUAL PORTFOLIOS
8
9
10
1 l WHEREAS, the City of Petaluma is a Participant in the California Asset Management Trust
12 (the "Trust ") and is authorized to invest-bond proceeds.in the Trust and in Individual Portfolios
13 managed by the investment Advisor to the Trust ( "Individual Portfolios ")' and
14
15 WHEREAS, the Trust will now accept surplus funds for investments and the City of
16 Petaluma desires to invest surplus funds in the Trust and in Individual Portfolios;
17
18 NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Petaluma as
19 follows:
20
21 Section 1. The City of Petaluma:is hereby authorized to purchase shares in the Trust from
22 time to time with available surplus funds of the City of Petaluma, and to redeem some or all of those
23 shares from time to time as such proceeds are needed.
24
Section 2. The City of Petaluma is hereby authorized to invest available surplus funds of the
City of Petaluma- from time to time in one or -more Individual. Portfolios.
2
28 Section 3. The appropriate officers, agents and employees of the City of Petaluma are hereby
29 authorized and directed in the name and on behalf of the City of Petaluma to take all actions and to
30 made and execute any and all certificates, requisitions, agreements, notices,. consents, warrants and
31 other documents, which they, or any of them, might deem necessary or appropriate in order to
32 accomplish the purposes of this Resolution.
33
34 Section 4. This Resolution.shall take effect at the earliest date permitted by law.
35
36
37
38
39 Under the power and authority conferred upon this Council-by the Charter of said City.
40 REFERENCE 1 hereby certify the foregoing Resolution was introduced and adopted by the Council
41- of the City of Petaluma at a Regular meeting on March 12, 204, Approved as to
42 by the following vote: form:
43
44 °-
45 City Attorney
46 AYES: O'Brien, Healy, Moynihan, Vice Mayor Cader- Thompson, Mayor Thompson
47 NOES: None
• ABSENT: Torliatt, Maguire
49
50 ATTEST:
51 City Clerk Mayor
52
53 Resolution No. 2001 -054 NCS