HomeMy WebLinkAboutResolution 92-027 02/03/1992~ FZesolution No. y2-27 N.C.S.
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 1992
4
5 WHEREAS, Government Code Section 53646 requires each City
6 Treasurer to annually ren-der to the legislative body of the local agency a
7 Statement of Investment Policy, and;
8
9 WYIEREAS, 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
13 Investment. Policy and submitted said Policy to the City Council for review.
1.4
15 NOW, THEREF®RE EE IT RESOI,~IEI) that. the City Council
16 approves the 1992 Investment Policy as shown in,.Exhib t,A attached.
Under the power and authority conferred upon this Council by the Charter of said City.
REFERENCE: I hereby certify the foregoing Resolution was introduced and adopted by the Approved as to
Council of the City of Petaluma at a (Regular) (t~jxid~iC~c) meeting
on the ....3rd ............... day of .....--•----Fel~ru~ry---......................-., 19-..92, by the + ~'
following vote:
ity Attorney
AYES.: Read, Davis, Cavanagh, Nelson, Vice Mayor Woolsey, P/Iayor Hilligoss
NOES: None
~`
ABSENT: ~~ / `
ATTES'T' : .................... .. -.... .. -. - ....................
City~~~~T~ CITY C~.~ Gbancil File ............................_...-.. Mayor
CA 10-85 Res. No......~~..~L..-27........... N.C.S.
"EX~IIBIT A"
CITY OF PETALUMA
.1992 STATEMENT O:F INVESTMENT POLICY
PURPOSE
This Statement is intended to provide guidelines for the prudent investment of the
temporary idle cash under the City Treasurer's control. The ulaimate goal is to
enhance the interest. earnings of the City while protesting it's pooled cash.
SCOPE
Theis Lnvestment Policy shall apply to activities of the, City with reggard to the
investment of temporarily idle funds of all fund types, including the following:
General Pund _
Special Revenue Funds
Debt Service ~Pun'ds
Capita Projects Funds
Enterprise Funds
Internal Service Funds
Trust and Agency Funds
The Policy shall also apply fio.:funds of the Petaluma Community Development
Commission {PCDC) which are controlled by the PCDC. Treasurer and investment
activity is directed by the City Treasurer.
The cash:management and investment transactions are the responsibility of the
City Treasurer.
OBJECTIVE
The City's cash management~system is desiggned to monitor and forecast
expenditures and revenues, thus enabling th~e.Cityy to invest funds to the fullest
extent possible. The City attempts to obtain the highest interest yield as long. as
investments mee the criteria established for.safety-and liquidity.
The Cityy.~strives to~~mainfiain the level of investment of all funds of 95% of
available cash, through daily and projected cash flow determinations.
The basic premise underlying the City'`s investmentphlosophy is to insure that
City funds .are always safe. and. available when needed.
POLICY
The City of-Petaluma operates its temporary-pooled idle cash investments under
Governme,na code Section 53600, et seq. and Civil Code Section 2261, et seq.., the
"Pru`dent 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,
di'scretio.n.and i telligence exercise in the management of their own affairs,
not for~spe~culat`on but for investment consideri~ng~the probable safety of
their capi al as well as.the ,probable incorne~to be derived".
The City generally invests in the following investments that are allowed by State
Code:
- Local.Agency Investment Fund (LAIF)
- Certificates of Deposits pplaced 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 _
The above investment securities are eligible for City investment under State
Goverrime,nt;Code Section.53635. The State-Code.alsoahowsfor add~itional''types
of investment securities that are not commonly used by the City. Attached is a
description of the above listed securities and a copy of the~State Code.
Ths~policy also.provi'd'es 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 impo `ed by the Government
Code on certain investments:
Permitted Investments
Securities of~the U.S. Govt.
Certificates. of Deposit
Negotiable,Certificates of Deposit
Bankers Acceptances
Commercial Paper
LAIF
Passbook Deposits
Repurchase Agreement
Reverse Repurchase Agreement
Mutual Fwnds
1Vlediurn Term Commercial Notes
Investment Limits
1Vlaturity Limits
S years *
5 years,*
5 years *
270 days
180 days
n/a
n/a
1 year
lyear*~
n/a.
5 years
Unlimited
Unlimited
30%
40.%
30%
$10,000; 0.0,0.
n/a
n/a
n/a
15%
3.0%
* May be extended with "City Council approval
* *Speaific~Cty Council approval is required for each,investment.
A. ~,afet~ It is'the primary duty andresponsibility
of the Treasurer to protect, preserve and maintain
cash and'investments on behalf of the citizens of
the community.
B. L' ui ',' An adequate, percentage of th:e portfolio
should be maintained in liquid short-term securities
~a-a.7~'cs
which can be converted to cash if necessa . to meet
disbursement requirements. Since all cash
requirements cannot be anticipated, investrne_nts in
securities~with active secondary or resale markets
is preferred and emphasis on marketable securities with low
sensitivity to market risk.
C. Yield:Yiel'd should become a consideration only
after the basic. requirements of safety and liquidity
have been meet.
AFEKEEPING. COLLA_T~ERA~L~TION AND BROKE
All investment securities purchased by the City shall be held in safekeep~ng,by an
institution designed as prima: agent or at the City. 'I'.he primary agent shall rssue
a safekeeping receipt to the City listing the specific instrument, rate, maturity and
other pertinent information.
Deposit-type securities (i.e: Certificates of.Deposit) shall be collateralized
through the State of. California collateral pool re~uiremen s for any amount
exceeding FDIC or FSLIC coverage. Other secur~tres shall be collateralized by
the actual security held in safekeeping by the prim'ar-y agent.
In selecting brokers and dealers; the City Treasurer shall conduct;comprehensive
credit and capitalization analysis~to determine thatfirms are adequately financed
to conduct pu6'lc business.
The City and PCDC invest se ected debt proceeds,,reserves and other debt related
funds with the Calif orna Arbitrage Management Program. This is an investment
program authorized by:Resolution 91-169. It wascreated through a Joint Powers
Authorty(JPA) for the investment of local agency~fundswhich maybe subject to
Federal arbitrage regulations. The investmentportfolao is managed by a'broker
on con.trac.t with the J°PA. The investment securities are regulated by the State
Government Code and further limited by the specifc~debt issuance resolutions.
1VIONITORING AND REPO~R'TING
The City Treasurer shall routinely monitor the investment portfolio and shall file
with the City Council a monthly Treasurer's Report whi'ch' shall include a
Stateme_ nt of. Investments. and other information as required by .Government Code
Section 53646.
Attached is an example of the monthly reportfor December, 1-991: This report'
exceeds, the ;minimum requirements of the S ate Code and provides the City
Councilwith additional>infor-oration rega~rding.bank accounts and reconciliation
wi `h the General Ledger.
qa^a7 ~'cS
CITY ~OF P~ETALU,IVIA
,1992. STA'Y'EIVIENT OF INVESTMENT POLICY
SUMMARY OF'TYPES OF INVESTIVI~ENTS
AVAILABLE TO LOCAL GOVERNMENTS
The Local Aggency Inves merit fund (LAIF).was created by the State in 1976 to
provide. local governments with access to a large investment pool that can
generate higher inter-est°yields and`~pprovide a high.d'egree of liquidity. The
deposits and_withdrawals ar.e.done'liy electronic transfers of funds (wire transfers).
and begin earning interest on ~a daily basis.
Over 1,650:1'ocal agencies participate in the LAIF investment pool. These
agencies irivest approxmateay $8.3 billonwhich is added to $12.6 State funds.for
a $20.9 bi°llion~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 dis:tributon_provdesfor greaferflexbility investments to take
advantage of changing interest:'rates.
There is a 1;imitati_on: of $.1S million per Agency subject to a maximum of 10
transactions per month.
The security of LAIF.nves:tments is in two par-ts. The Sttate Treasurer's and
Controller's offices ar.e r.esp:onsible-for the accounting,°processing, and safe
beeping of'the City's.fun'ds 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 lawfrom serzure or impoundment by any State Officer.
Once the-funds are pooledwi.th other local agencies
the funds becomes the investment: Each investment
Insurance, the U.S. Government or Federal Agency,
major corporation collateral. The security depends
Certificatgs of De osts ;CDI
and-invested, the securi y for
is secured by Federal
collateral of major banks, or
on~"the type of investment.
.Certficates of D:e.posits, sometimes known as "Jumbo Accounts" or "Fixed CD's"`
ar,e savings accounts with Banks or Savings and Loans. These accounts are fbr;a
specific amount,,a,set interest rate, and set maturity date. There is a substantial
interesi penalty if -the. GD is withdrawn prior to the maturity date.
The Stat;e law requires Public Fund CD's tabe collateralized byy tihe financial
institution ~at 110% with U.S: Government nodes./bonds or at 150% with quality
Frst.Trust-Deed`s. This collateral can be waived if'Fed'eral Insurance (FDIC for
banks. or FSLIC for savings and loans) is available. These federal agencies will
insure each account up to $100,000.
The City generally.waives the collateralization requirements for the FDIC or
FSLIC .insurance. 'The waiver of collateral is a wide. spread practice and will
generally generate higher i~nte-rest rates and provide the greatest security for the
funds from t'he Federa'1 Insurance Agencies.
Q o2- -- ~j.`1 /V ~ GAS
Neg~tiabl`e Certificate of De~os~i.t NCD)
This investmena, is° similar to the Fixed. CD's above. I-lowever, the NCD can be
sold on a "secon;d`ary market" prior to the maturity date. Normally, NCD's'are
issued in $SOQ,000 and $1,000;000 amounts and require a combination: of
securities to protect the public funds. T,he State Code limits NCD's to not more
than 30% of the localagency's portfo io and S year maximum term. The s'ecur-i:ty is
the ereelit worthiness of the issuer, as these deposi s are uninsured and
uncollateralizedpmmissory notes.
Banker's Acceptances (BAZ
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 s°hort term (30 and' 1'80 days)
financing of export; import, or storage of goods. Byaccep,ting the draft, the bank
is liable £or the pa merit at'maturity. -This bank liability makes the Banker's
Acceptance a marketable investment. The State Code limits BA's to
than 270 days maturity and 40% of the local agency's'portfolio.
U.S._ Treasury_Bills
not more
Commonly referred to as T=Bills, these are short-term marketable securities-sold
as obligations of the U.;S. Government. They are offered in~;fhree month, six
month, and one-year maturities. T=Bills do not accrue interest but are sold at a
discount to pay face value at maturity.
U.S. Treasury Notes
These are marketable, interest=bearing securities sold,as obligations of the U.S.
Government with orig-final maturities of one to ten years. Interest is paid semi-
annually.
U.S. Treasury Bonds
These are the same a ~U.S. Treasury Notes except they-have original maturities of
ten years or longer.
Federal Agency Issues
1Viany~Federa~l Government, ponsored Agencies are authorized to issueshort Germ
and long term obligations that are used. to finance various programs such as home
loans; business loans,,, farm loans; etc. These Agencies were cleated by the
Federal Government in the 1930's and- have since b`e'come: independent quasi-
public.,agences_. The ecurty for their issues is the guarantee of ahe Agency to
pay. The Federal Government h.as only an.i_mplied liability to the extent that the
Agency has. an open credit -line to borrow from the U.S. Treasury. It is widely
accepted that Federal Agency issues are~assecure as U:S. Government notes.
There is anactive secondary market availa~b~le to sell these issues prior to
maturity. T.h'e-issues. are_fairly liquid depending on the prevailing. market interest
rates at the .time of sale.
Repurchase Agreements (RTC
~ a - ~-`l .~'~
~; Y
•'~~
A Repurchase Agreement is a contractual arrangerrient~ between a financial
institution, or deale:r., and an investor. This agreement normally can run for one
or more days:. The investor huts up funds for a certain number of days at a stated
yield. Tn return, it takes a, given block of securities as collateral. At maturity, the
securities are'repurehased bythe financial institution with. interest. This is used
generally for overnight investments.
Commercial Paper (CPS
Commercial_ Paper are unsecured. Promissory Notes of industrial cor~orat~ions,
utilities and bank holding companies. N'otes.are in bearer form starting at
$100,000. State law.limits; a City to investments in. United States corporations
having assets'in exec s.of five hundred.mil~lion dollarswi~th a "A" or higher rating.
Cities may not invest more than 30% of-the portfolio and not exceed a term of 180
days,
9a - ~.~ n~c~s