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HomeMy WebLinkAboutResolution 93-20 01/19/1993R~SO~UtI®~ N®. 93-20 N.C.~. of the City of Petaluma, California 1 A RESOLUTION OF THE CITY COUNCIL OF THE 2 CITY OF PETALUMA APPROVING THE 3 INVESTMENT POLICY FOR 1993 4 5 WHEREAS, Government Code Section 53646 requires each City 6 Treasurer to annually render to the legislative body of the local agency a 7 Statement of Investment Policy, and; 8 9 WHEREAS, the City Treasurer has the responsibility to invest the 10 pooled idle cash of all of the City funds, and; 11 12 WHEREAS, the City Treasurer has developed a Statement of 1.3 Investment Policy and submitted said Policy to the City Council for review. 14 15 NOW, THEREFORE RE IT RESOLVEY) that the City Council 16 approves the 1993 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 th~ roved s to Council of the City of Petaluma at a (Regular) ~9Cdp~k~1) meeting on the ....l.~xl1..-......... day of _......J8riU3~y .................................... 19.83..., by the /// following vote: ..-.. ..-- • --••-; •-•- ---•--.......-.. City Attorn y AYES: Nelson, Barlas, Read, Shea, Hamilton, Vice Mayor Sobel, Mayor Hilligoss NOES: None ABSENT: None .---- ATTEST : ......... .......... ..................-............................................ i<ty Clerk Gbtmcil File(.].._ ............................... CA 10-85 Res. No. ......J.3.-.".0.......... N.C.S. ' City of Petaluma 1993 Statement of Investment Policy "EXHIBIT A" CITY OF PET'ALUMA 1993 STATEIVI_ENT OF INVESTMENT POLICY PURPOSE t This Statement is intended to provide guidelines for the prudent investment of the temporary idle c-ash under the City Treasurer's control. The ultimate goal is to enhance the interest earnings of the City while protecting it's pooled cash. 5COP.E This Investment Policy shall' apply .to activities of the City~with regard to the investment of temporarily idle:funds of all fund types, including the following: General Fund Special Revenue Funds Debt Service Funds Capital Projects Funds Enterprise Funds Internal. Service Funds Trust and Agency Funds This Policy shall -also apply to funds of the Petaluma Community Development Commission (PCDC). The daily cash management and investment transaction are the responsibility of the City Treasurer. OBJECTIVE The City's cash management system is designed to monitor and forecast expenditures and revenues, thus enabling the City to invest funds to the fullest extent possib e. The Ci y attempts to obtain the highest interest yield as long as investments meet. the criteria established for safety and liquidity. The Cit strives to maintain the level, of investment of all funds of 95% of available cash, through daily and projected cash flow de erminations. The basic premise underlying the City's investment philosophy is to insure that City Funds are always safe and available whemneeded. City of Petaluma POLICY 1993 Statement of Investment Policy The City of Petalurria operates its tempora"ry p.ooled idle cash investments under State Government Code Section 53600, et seq. and Civil Code Section 2261, et seq., the "Prudent Man Rule". The "Prudent Man `Rule" obligates a fiduciary to insure that: "...investment shall be made with the exercise of that degree of judgment and care, under circumstances then prevailing, which persons of prudence, discretion and intelligence exercise in the. management of their own affairs, not for speculat`onbut for investment considering the probable safety of their capital as well as the probable income to be derived". The City generally invests in the following investments that are allowed by State Code: . -Local Agency Investment Pools (State, LAIF or County Investment Pool) - Certificates of "Deposits placed with commercial banks and/or savings and loan companies - Negotiable Certificates of Deposit - Bankers Acceptances - Securities of the U.S. Government or its Agencies - Repurchase Agreements - Commercial Paper All of the above investment securi ies are eligible for City investment under State Government Code Section 53635. The State Government. Code also allows for additional types of investment securities that are~not commonly used by the City. Attached is a description of the above listed securities, Attachment A, and a copy of the State Government Code, Attachment B. This policy also provides that other investment securities authorized by State Government Code Section 53635., as amended, are also eligible for investment of City Funds. Below is a summary of the current statutory limits imposed by the State Government Code on certain investments: Permitted Investments Investment Limits Maturity Limits Securities of the U.S. Govt. Certificates of Deposit Negotiable Certificates of Deposit . Bankers Acceptances Commercial. Paper LAIF Passbook Deposits Repurchase."Agree'ment Reveise Repurchase Agreement Mutual Funds Medium Term Commercial Notes Unlimited Unlimited 30% 40% 30% $1.5,000,000 n/a n/a n/a 15% 30% 5 years 5 years 5 years 270 days 180 days n/a n/a 1 year 1 year n/a 5 years * May be extended with City Council approval * * Specific City Council approval is required for each investment. City of Petaluma 1993 Statement of Investment Policy A. Safety: It is the primary duty and. responsibility of the Treasurer to protect, preserve-and maintain cash and investments on behalf of the citizens of the community. B. Liauidit°y: An adequate percentage of the portfolio should be maintained in liquid short-term securities which can be converted to cash if necessary to meet disbursement requirements. Since all cash requirements cannot be anticipated', investments in securities with active secondary or resale markeas is preferred and emphasis on marketable securities with. low sensitivity to market risk. C. Yield: Yield should become a consideration only after the basic requirements of safety and liquidity have been met. SAFEKEEPING, COLLATERALIZATIONRND BROKERS All investment securities purchased directly.by the City shall be held. in safekeeping by an institution designated as primary agent or at the City. The primary :agent shall issue a safekeeping receipt, to the City listing the specific instrument, rate, maturity and other pertinent information. The City currently uses WeI1s Fargo Securities as the Primary Agent. Deposit-type securities (i,e. Certificates of Deposit} shall- be collateralized at the minimum State of California collateral pool requrementsfor any amount exceeding FDIC or FSLIC coverage. Other securities shall be collateralized by the actual security held in safekeeping by fhe City or primary agent. In selecting brokers and. dealers, the City Treasurer shall. conduct credit and capitalization analysis to determine that firms are adequately financed to conduct public business. IN-VESTIVIENT_OF DEBT PROCEEDS The City deposits selected debt proceeds, reserves and o her debt related funds with the California Arbitrage Management Program (.CAMP). This is an investment programauthorized by City Council Resolution 91-169. It was created by other cities as a Joint :Powers Authority (JPA) for tfie.investment of local agency funds which may be subject to Federal arbitrage regulations. The investment portfolio is managed by a broker on contract with the JPA. The investment securities are regulated by the State Government Code and further limited by the specific debt issuance resolutions. MONITORING AND REPORTING The City Treasurer shall routinely monitor the investment portfolio and shall file with the City Council a monthly Treasurer's Report which shall include a Statement of Investments and other information as required by Government Code Section 53646. ~ City of Petaluma ~ 1993 Statement of Investment Policy Attachment C is an example of the monthly report for November, 1°992. Theis report exceeds the minimum requirements of the State Code and provides the City Council wiah additional information regarding bank~aecounts and reconciliation with the General Ledger. _ City of Petaluma 1993 Statement of Investment Policy ATTACHMENT A CITY OF PETALUMA 1993 STATEMENT OF INVESTMENT POLICY SUMMARY OF TYPES OF INVESTMENTS AVAILABLE TO LOCAL GOVERNMENTS LOCAL AGENCY INVESTMENT POOLS LAIF The Local Agency Investmentfund (LAIF} was created by the State in 1976 to provide local governments with access to a la`'rge investment pool that can generate higher interest yields and provide a high degree of liquidity. The deposits and wi hdrawals are done by electronic transfers of funds (wire transfers} and begin earning interest on a daily basis. Over 1,6501oca1' agencies participate in the LAIF investment pool. These agencies invest approximately $$.3 billion which is added to ,$12.6 billion in State funds fora $20.9 billion investment portfolio. The investment portfolio is widely distributed over many types of investment instruments and is not adversely impacted by sudden shifts,in the investment market. In addition, the large portfolio and wide distribut"ion ,provides for greater flexi'bi`lity investments to take advantage of changing interest rates. There is a limitation of $15 million pear Agency subject to a maximum of 10 transactions per month. The security of LAIF investments is in two parts, The State Treasurer's and Controlle;r's offices are responsible for the' accounting, processing, and safe kee-ping of the City'sfunds through the State Treasurer's investment procedure and policies:. The State maintains insurance and bonds covering employee honesty and errors. The City funds are able to be withdrawn at any time and are protected by State law from seizure or impoundment by any State Officer. Once the funds are pooled with other local agencies, and invested, the security for the funds becomes the investment. Each investment is secured by Federal. Insurance, the U.:S. Government or Federal Agency., collateral of major banks, or major corporation collateral. The security depends on the type of investment. Sonoma County The Sonoma County Treasurer also maintains an investment pool which the County, Schools, Special Districts and cities -can participate. The investment portfolio is approximately $438,000,000. This inve"stment pool operates in the same manner" as the State pool. The County Tr-easurer is subject to the same State Government Code regarding investments as the City. As with the.State investmentfund, th`e City funds can be withdrawn at any time and are protected by State Law from seizure or impoundment by any County Officer. Certificates of `Deposits ,CD'l Certificates of Deposits, sometimes known as "Jumbo Accounts" or "Fixed CD's" are savings accounts with Banks or Savings and Loans. These accounts are for a specific amount, a set interest rate, and set.maturity date, There is a substantial interest penalty if the CD is withdrawn prior to the maturity date. ` City, of Pe alums 1993 S atement of Investment Policy ._ The State law requires Public F°und CD's to be collateralized by the financial institu~tionat 110% with U.S. Government notes/bonds or at 150% with quality First Trust Deeds. This colla-feral can be waived if Federal Insurance (FD'IC for banks or FSLIC fo:r savings and loans) is available. These federal agencies will insure each account up to $100,.000. The City generally waives the collateralizafonrequiremen:tsforthe FDIC or FSLIC insurance. Tfie waiver of collateral is a wide spread practice and will generally generate higher interest rates and provide the greatest security for the funds from the Federal Insurance -Agencies. Negotiable Certificate of Devosit (NCD This investment is sim-filar to the Fixed CD's above.. However, the NCD can be _ sold on a "secondary market" prior to the maturity date. Normally, NCD's are issued in $°500,000 and $1„000;':0.00' amounts and require a combination of securities to protect the public funds. The State Code 1'imits NCD's to not more than 30% of the local agency's portfolio and 5 year maximum term. The. security is the creditworthiness of the issuer, as these deposits are uninsured and uncollateralized promissory notes. Banker's Acceptances (BAl A Banker's Acceptance is a~time draft which has been drawn on 'and accepted by a bank. This financial instrument is generally used for short term (3.0 and 180 days) financing of export, import, or storage of goods. By accepting the draft, the bank is liable for the payment at maturity. This bank liability makes the Banker's Acceptance a marketab a investment. The State Code 1'imits BA's to not more than 270 days maturity aril 40% of the local agency's portfolio. U.S. Treasur}~Bills Commonly referred to asT-Bil s, these.-are short-term..marketable securities sold as obligat-ions of the I1.S. Government. They are offered in three month, six month,. and one-year maturities. T=Bills do not accrue interest but are sold at a discoun to pay-face-value at rnaturi y. U.S. Treasury Notes These are marketable, interest-bearing securities soled as obligations of the U.S. Governmen with original maturities of one to ten years. Interest is paid semi- annually. U.S. Treasury Borids These are the same as U.S. Treasury Notes except they have original maturities of ten years or longer. Federal ~-1gency Issues Many Federal Governrn'ent sponsored Agencies: are authorized to issue short term and long term ob igations that are used to finance various programs such as home loans, business loans, farm loans, etc. These Agencies were created by the Federal Government in the 193'0's and have since become-independent quasi- publicage.ncies. The securityfor their issues is the guai;antee of the Agency to pay. The Federal Government has only an implied liability to the extent that the Agency has an open credit line City of Petaluma. 1993 Statement of Investment Policy to borrow from.the U.S. Treasury. It is widely accepted that Federal Agency issues are as secure as U.S. Government notes, There is an ac'ive-secondary market available to sell these issues prior to maturity. The issues are fairly liquid depending on the prevailing market interest rates at the time 'of sale. Repurchase Agreements (,Repose A Repurchase Agreement is a contractual arrangement between a financial institution, or dealer, and an investor. This agreement normally can run for one or more days. The investor puts up funds for a certain number of days at a stated yield. In return, it takes a given block of securities as collateral. At maturity, the securities are repurchased by the financial institution with interest. This is used generally for overnight investments. Commercial Paper (CPS Commereia~l Paper are unsecured Promissory Notes of industrial corporations, utilities and bank holding companies. Notes are in bearer form starting at $100,.000. State law Iim-its a City to investments in United States corporations having assets in.excess of five hundred million dollars with. a "A" or higher rating.. Cities may not invest more than 30% of the portfolio and not exceed a term of 18'0 days.