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HomeMy WebLinkAboutResolution 90-018 N.C.S. 01/16/19901 Resolution No. 90-18 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 1990 4 5 WHEREAS, Government Code Section 53646 requires each 6 City Treasurer to annually render to the legislative body of 7 the local agency a Statement of Investment Policy, and; 8 9 WHEREAS, the-City Treasurer has the responsibility to 10 invest the pooled idle cash of all of the City funds, and; 11 12 WHEREAS, the City Treasurer has developed a Statement 13 of Investment Policy and submitted said Policy to the City 14 Council for review. 15 16 NOW, THEREFORE BE IT RESOLVED that the City Council 17 approves the 1990 Investment Policy as shown in Exhibit A 18 attached. Under the power and authority conferred upon. this Council by the Charter of said REFERENCE: I hereby certify the foregoing Resolution was introduced and adopted by,.the ~._ Council of the City of Petaluma at a (Regular) (A~~pffaiad) meeting on the ......__lhxh._..... day of ............Janua.ry ............................... 19..9.Q., by the ~_~ following vote.: ._ AYES: Tencer, Woolsey, Cavanagh, Balshaw, Davis, Mayor Hilligoss NOES: ~ ABSENT: ATTEST: CA 10-85 V~IC yor Sobel City Clerk ____„ __ Council Fi(l]e .................................... Res. No. ....7.~,', 1()........... N.C.S. "EXHIBIT A" CITY OF PETALUMA 1990 STATEMENT OF 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 ultimate goal is to enhance the interest earnings of the City while protecting it's pooled cash. SCOPE Thies Lnvestment Policy shal'1;apply to activities of the City with,~regard to the investment of temporarily id]:e funds of all fund types,., including the following c General Fund S:pec'ia'1 Revenue Funds Debt Service Funds Capital Projects Funds Special Assessment Funds Enterprise Funds Internal Service Funds Trust and Agency Fund's The Policy shall also apply to :funds of the Petaluma Community Development Commission. ' The cash management a.nd investment transactions 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 pos ble. The City attempts to obtain the highest interest yield as long.`a inyestinents meet the criteria established for safety and liquidity. ' The City .strives tq maintain the level_of investment. of all funds of 9:5% of available cash, through daily and projected cash flow' determinations . The basic premise underlying the Ci.ty.'s.nvestment phi osophy~s,ta insure that money.is a-lways safe and avalable~when-needed.. POLICY TheeCity:of Petaluma operates its temporar.y~pooled idle cash _. investments. under Government code Section .53600, et seq. and ~~.- Civ_1 Code Section 2;2;61, et seq., the. (Prudent Man Rule"). The- "Prudent Man Rule/t 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, dscreti'on and nte].lgence exercise in the management of their own .~ aff'aira, ~ not, for speculation.. but for investment considering ~~the probable safety of their capital as well as the probable income to be derived".. ' Eligible~investment:securties f-rom State :Government Code 5ecton 5363'5 that area- commonly used by the City are: -. Local Agency.Investment.Fund-(.LAIF) ' - Certif'icat'es of~•Deposi,ts placed-with commercial .banks and%or'savngs aril loan companies -:Negotiable. Certificates of Deposit -.Bankers Acceptances -:S'ecurtie's of 't'he U.S. Government or:w.its Agencies - Repurchase: Agreements Commercial Paper .: Attached is' a d'escr..ptori of -the above> securities and a copy of the Government Code Section •5:363.5._ Other investment securities a.uthorzed~by State Government • Code S'ecton'53635-, as amended, are also eligible for investment of City .Funds". ~~ Below is a ummary,o:f the current statutory limits imposed - ~ by the Government Code on certain-investments: PERMITTED INVESTMENTS;/DEPOSITS PERCENTAGES MAX: MATURITY Securities of the U. S,. Govt. Unlimited Certificates ~of Deposit ~ Unlimited Negotiable Cert~f`icates . of Deposit 30% Bankers Acceptances 40% Commercial Paper ~ 30% LAIF-. $10,000,00:0 Passbook Deposits n/a Repurchase Agreement n/a _ Reverse Repurchase Agreement n/a . ` Mutual :Funds ~ 15 0 Medium Term Notes 30% 5 years* 5 years* 5 years* 2x70 days 180 days n/a n/a 1 year 1 year** n/a 5 years * May be :extended with Cay•Councl approval -. **Specif~;c.City Council approval is required for each .investment. . , ..x THE OBJECTIVES FOR'-SELECTING INVESTMENTS AND ORDER OF PRIORITY ARE': A. Safety: It is-.the primary duty and responsibility of the Treasurer"to protect, preserve and maintain. cash~and investments on beYalf of the citizens of the community. B. Liquidity: Ah adequate percentage of the portfolio should be maintained in liquid short-term securities which .can be~converted to cash i,f necessary to meet disbursement -requirements. Since alT cash requirements cannot be anticipated,. investments in securities with active secondary.`or resale markets is preferred and emphasis on marketable securities with low sensitivity to market risk. C. Yield: Yield should~.become.a consideration only of"ter the basic requirements of safety and liquidity have been met. SAFEKEEPING, COLLATERALI:ZATION AND BROKERS All .investment s;ecurtes'purchased by the City shall be held in safekeeping by 'an iristitut~on designed as primary agent or at the City. The primary agent shall issue a sa€ekeepng receipt to the City lsting~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 requirements for.any amount .exceeding FDIC or FSLIC coverage. Other securities shall be collateralized by the actual security Yie,ld_in safekeeping by the. primary agent. In selecting .brokers and .dealers, the:City. Treasurer shall conduct comprehensive credit and capitalization analy-sis to determine that firms are adequately financed.to conduct public business. MONITORING AND REPORTING. The City Treasurer shall routinely monitor the investment portfolio and sha-1.1 file with•the City Council a monthly Treasurer's Report whch'shall riclud'e a Statement'of' Investments and other ;information as requ°ired by Government Code Section 5364.6. Below is a list of the required elements of the monthly reporting: A. Type of Investment . B. Institution C. .Date of Maturity D~. Amount of .deposit. or cost of the securi. y E. Current market value of securities with maturity in ex~ess~of 12 months F. Rate of interest G. Statement, relating.the report to the Statement of Investment Policy H. Statement that there are sufficient funds~to meet the next 30 day's obligations ..CITY OF PETALUMA 199.0 STATEMENT OF INVESTMENT POLICY SUMMARY` OF TYPES OF` INVESTMENTS` AVAILABLE TO LOCAL GOVERNMENTS LAIF Th,e~Local Agency Investment fund (LAI'F) was created by the State in 1976 to provide focal governments with access to a large investment pool-that can generate higher interest . yields and provide a hgh~degr.ee of~liqud`ty. The deposits and withdrawals are` done by electroni-c. transfers of funds (wire transfers) and begin earnng~ir-terest on a daily basis. Over 1500 local agencies participate in the LALF investment pool. These agencies invest approximately $5.6 billion. which is added to: $'13.4 State funds for a $19.0 billion investment portfo io. The investment portfolio is widely distributed over :many types of investment instruments and is not adversely nipacted._by sudden shifts in 'the investment market. In addition, the large portfolio and wide distribution provides f.or greater .flexibility investments to take advantage of changing interest rates. There is a limitat~~iori.of $10 million per Agency subject to a maximum of 10 transactions per month.. The security of I,AIF investments is in two parts. The State Treasurer's and.: Controller's offices are responsible for the accounting, processing, and safe keeping of the~City's funds 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'. Goverriment,or Federal Agency, collateral of major banks, or major corporation collateral. The security depends on the type of investment. Certificates of Deposits (CD) Cert-ificates of Deposits,. sometimes known as "Jumbo Accounts`1t.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. The State law requires Public Fund CD's to be collateralized by the f.inancial'ins.ttution :at 110%, with U.S. Government notes/bonds or at 150% with quality First Trust Deeds. This collateral can. be waived i.f Federal Insurance (FDIC for . banks :or FSLI+C for savings and loans.) is available. These ,.. felleral~, agencies will r-sureeach account up to $100., 000 . The City :generally waives the co'llateralization requirements for the FDIC or FSLIC-insurance. The waiver of co ateral is a wide spread practice and wi l generally generate higher interest rates arid~provde the greatest"security for the funds from the Federal Insurance Agencies. Negotiable Certificate of` Deposit (NCD This investment. is similar to the Fixed CD's above. However', the NCD can~be sold on~a "secondary market" prior to the: ma urity date.. Normally, NCD's are issued in $500,000 and $1,000,0O:O.amounts and require a combination of securities to protect the.: public funds. The State Code limits N.CD''s to not more than 30% of 'the .local agency's portfolio and' 5 year maximum' term. :The security is, the credit worth;ness'~of the i~s uer, as these deposits are uninsured and uneollateralized promissory notes. Banker's .Acceptances_LBA A Banker's Acceptance is a time draft which has been-drawn on grid a°ccepted.by a bank. This financial instrument is generally used for short-term (30 and 18'0 days.) financing of export., import, or sto"rage of goods.. By accepting the dra_ft., the bank is I:ab_le for the payment at maturity. This bank liability makes the. Banker's Acceptance a marketable investment.. The State Code limits BA's to not more than 270 days maturity and 4Q% of the local agency's portfolio:. U..S. Treasury Bills C.ommonly'ref'erred to as T-B11s, these are short-term marketable s;ecur,ties sold as obligations of the U.S. Government.:, They are offered in three month, six month, and one-year",.maturt'es. T-Bills do not accrue interest but are s'old' at>a discount to pay face value at maturity. . U..S. Treasury Notes These are~~marketable, riter.est-bearing securities sold as obligations of the U.S. Government with original maturities of one to~ten years. Interest is paid semi-annually. U..S. Treasury Bonds These: are the same as U.S.. Treasury Notes except they have original maturities of ten years or longer. Federal Agency Issues.. Many F~ederal.Government sponsored.-Agencies are authorized to issue short term and long term 'obligations 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 193Q:'~ s sand have. since become independent quasi-public agencies,.~~The security ,for. their issues :is the guarantee of the Agency to pay-.. The Federal Government has only. an implied liability to the extent that the. .Agency has an open credit line to borrow from the U.S. Treasury. It is widely accepted that F'eder,al Agency issues are as `secure as U.S.`Government notes. There is an actiwe~seeondary market, aya~ able to sell these issues. prior to maturity... 'The 'issues are: fairly liquid depending on the' prevailing market~nterest rates at the time of sale. Repurchase Acrreements (ReAOs A Repurchase Agreement is a contractual. arrangement between a financial institution, or dealer, ,and an investor. This agreement' nor-mall.y can run for one or more days.: The investor puts .up funds for a certain~~number of days at a, stated, yield. Sn return, it takes. a given blook of securities as collateral. At maturity, the securities are repurchased by the financial institution with interest. This is used generally for overnight investments. Commercial Raper (CP) Commercial Paper are unsecured Pr..omssory Notes of industrial corporations, utilities and bank holding companies. Notes "are 'in bearer form starting at $,100,000. State law'lmias a City to investments in .United States corporations bav.ing; assets in-excess. of five $undred million dollars- with .a "A" ar hi"gYer rating,... Cities .may not .invest more than,3'Oo of the portfolio and not exceed a term of 180 days. GOVERNMENT CODE § 53635 § 53635, Deposit and investment of funds of local agencies • As far as possible, all money .belonging to, or iri the custody of, a local - " agency, including money paid to the treasurer or other official' to pay the principal;. interest, or -,penalties of bonds,. shall, be deposited for safekeeping in state or national .banks., savings associations or federal associations, credit unions, or federally insured industrial loan companies in this state selected. by the treasurer or other official having the ;aegal custody of the money; or, unless otherwise; directed by the legislative body pursuant to Section 53601, maybe invested, in the following: (a)' Bonds issued by ahe local agency; including `bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by the focal agency or by a_ department, board, agency, or authority of the local agency. . (b) United States Treasury notes, bonds;, bills, `or certificates of indebtedness; or'those for which the faith and. credit of the. United States are pledged for the payment of principal and interest. (c) Registered state warrants or treasury notes or_ bonds of this state, including bonds payable solely out. of the revenues from arevenue-producing property owned,.` controlled, or operated by the state or by a department, board, agency, or authority of the state. ,(d) Bonds, notes,. warrants, or other evidences of indebtedness of any local agency within this state; including bonds payable solely out of the revenues `from.. a revenue-producing property owned, controlled, or operated by the local agency, or by a-department, board, agency, or authority of` the local agency. (e) Obligations issued by banks `for cooperative's; federal .land banks, federal intermediate credit' banks; federal home loan banks, the Federal Home Loan -- - Bank; tfie Tennessee Valley Authority,; or in obligations, participations; or other instruments of, 'or issued by; or fully. guaranteed as to principal and interest' by, .the Federal Natignal Mortgage..Association or in guaranteed portions of Small, Business. Administrationnotes; or in,obligations, ?participa- tions, or other instruments of, or issued: by, federal agency or a United .States government-sponsored. enterprise.: (f) .Bills of exchange or time drafts drawn. om~and :accepted by a commercial bank; .otherwise .known as bankers , acceptances; which. are eligible for purchase. by the ?Federal Reserve System, Purchases of bankers .acceptances may not:. exceed X2.70 days maturity or 40 percent of the .agency's surplus funds which may -be invested pursuant to this section. However; no more than 30' percent of the agency's surplus fund& may= be .invested in ~ the bankers acceptances of any .one commercial bank` pursuant to this section. This subdivision does not pi eclude a municipal"utility district from. investing any surplus money in its Treasury in ariy manner authorized by the Municipal Utility District- Act, Division 6 (commencing with Section 11501) of the Public Utilities Code: (g) Commercial paper- of "prime" ,quality of the =highest ,ranking or •of. the highest: letter and :numerical rating'..as provided:. :for by Moody's .Investors Service;, Inc.; `or Standard and Poor's Corporation. Eligible paper is~ further limited ao 'issuing .corporations. that, are organized and. operating within the United States and having total, assets in excess of :fi'we hundred million dohars: ($500,000,000) ;and, having an "A" or higher rating for the. issuer's debt,. other han 'commercial paper; if any; as provided for by Moody's f 12 Gov coae~ ~ ~ 53 § 536.35 GOVERNMENT CODE Investors. Service, Inc., or Standard and Poor's Corporation. Purchases of -- eligible commercial paper may not exceed 180 days maturity nor represent more than 10 percent :~of the outstanding paper of an issuing corporation. Purchases of commercial ,paper may not exceed 1' S percent of the agency's surplus money which may be invested pursuant to this section. An addi- tional 15 percent, or a total of 30 percent of the agency's money or money in its. custody, may be invested pursuant. to this subdivision. The. additional l5 percent may be so invested only if the dollar-weighted .average maturity of the entire amount does not exceed 31 days. .``Dollar-weighted average maturity" means the sum of the amount of each outstanding. commercial paper' investment .multiplied by the number of days to maturity, divided by the total amount of outstanding commercial. paper. (h) Negotiable certificates of deposit issued by a nationally or state-char- tered bank or a .savings association or ,federal association or a state or federal credit union or by a state-licensed. branch of a foreign bank. Purchases of negotiable. certificates of deposit may not exceed 30 percent of the agency's surplus money which may be .invested pursuant. to this section. For purposes of this section,. negotiable, certificates of deposit do not come within .Article 2 (commencing with Section 536`30) of :Chapter 4 of Part 1 of Division 2 oP Title 5, except that the amount so invested shall be subject to the- limitations of Section 53638'. For purposes of this section, the legislative body of a local agency .and the treasurer or other official of .the local agency having legal custody of the money are prohibited from: depositing or investing local agency funds, or funds in the custody of the local, agency, in negotiable certificates of deposit issued by a.state. or federal credit union if a member of the 'legislative body of the local agency, or an employee of the administrative officer, manager's office; budget office, auditor-controller's office, or treasurer's office of `the .;local agency .also serves on the board of directors, or any committee appointed by the board of directors, or the credit committee or supervisory committee of the state or federal credit union .issuing: the negotiable certificates of deposit. ~(i) Investments in .repurchase agreements or reverse repurchase agreements of any securities authorized. by this section; so .long as the proceeds of the reverse repurchase agreement are invested solely to supplement the income normally :received from 'these securities. Investment in a reverse repurchase agreement shall be made only upon prior approval of the legislative body of the -.local agency. For purposes of this section, the. term "repurchase agreetnent" means a purchase of securities by the local agency .pursuant 'to an agreement by which, the seller will. repurchase the securities on or before a specified. date and for a specified ,amount and ~wi11 deliver the underlying securities to the local agency by book entry, physical delivery, or by third- party custodial agreement. The transfer of underlying securities to the counterparty bank's customer book entry. account may be used 'for book entry delivery. The term "counterparty" for- the, purposes of this subdivision, .means the other party to 'the transaction.. A counterparty bank's trust department or safekeeping department may be used. for physical delivery of the. ,underlying security. - The teiin •of repurchase agreements shall be for one year or less: The term _"securities;" for purpose ofrepurchase under this subdivision; -shall mean . =securitie`s' of the. Game issuer, description, 'issue date, and ;maturity. The term "rev.erse repurchase agreement".' means a sale of securities by, .the ocal agency pursuant to an agreement by which the local agency will 54 [, 2 Gov Code) GOVERNMENT CODE' § 53635 repurchase such securities on. or before a .specified date and for a specified amount. (j) Medium-term notes of a maximum of five .years' maturity issued by corporations organized and operating: within. the: United States or by depository institutions licensed by the United States or any state and operating within the` United States: Notes -eligible for investment under this subdivision shall be rated in a rating category of "A" or its equivalent or better by 'a .nationally recognized rating aervice: Purchases of rnedium-term notes. may not- exceed 30 percent of the agency's surplus, money which may be invested pursuant to this. section. (k). Shares of beneficial interest issued by diversified management companies, as defined in Section. 23701m of the Revenue and Taxation Code, investing in the securities and o>ligations as authorized by "subdivisions (a) to (k), inclusive, of this section and which comply with the .investment restrictions of this article and Article 1 (commencing- with, Section 53600). To be eligible for .investment pursuant to this subdivision, these companies shall either: (1) .attain ~ the highest ranking. or' the- highest letter and numerical rating provided. 'by not less than. two of the three largest nationally •recognized rating services,, or. (2) have an investment adviser registered with the Securities and 'Exchange Commission with not, less than five years' exper-i- ence investing in the securities aril obligations as authorized by subdivisions (a) to (m), inclusive; of this section and with .assets under management in excess of five hundred million. dollars ($500;000;000). The purchase price of shares of beneficial interest purchased pursuant to this subdivision shall not include any commission that these companies may charge and shall not exceed 15 percent of the agency's surplus money which may be invested pursuant to this section. (1) Notes, bonds, or ..other obligations. which are at all times secured by a valid first priority security interest in .securities of the types listed by Section 53651" as eligible securities '.for the purpose of securing local .agency deposits having a market .value at least equal to Ghat .required by Section 53652 for the purpose of securing local aagency deposits. The securities serving as collateral shall be placed by delivery or book entry into the custody of a trust .company or the: crust department of .a bank which is not affiliated with the issuer of the secured obligation, .and the security interest shall be perfected in accordance, with"'the requirements of the Uniform Commercial Code or .federal regulations applicable to the types of securities in which the security interest :is granted. Amended Stats 1987 ch 446 §2, ch 887 § 5:5. Amended Stats 1988 ch '294 sec 2, effective July 7, 1988, ch 491 sec 2, ch ]t)04 sec 2, operative January ,1, 1989. Amendments: ' 1987 Amendment:. (1) Deleted "a" before ''federal agency",; (2) amended subd (i) by (a) deleting the comma after "specified date" in the third sentence; (b) .substituting "by" for "a" after "delivery, or" in the bird sentence; (c) deleting the semicolon after "book" both times it appears in the fourth sentence; {tl) substituting "shall ,mean" for "means" in the last sentence of `the first paragraph; and (e) designated the former last sentence of the first paragraph to be the second paragraph; (3) deleted former subd (j) which; read: "(j) Mortgage securities purchased under an agreement to .resell pursuant to subdivision (i), provided that the mortgage securities are .eligible investments. under subdivision (a) or (b) of Section 13000 of .the Financial Code. A local .agency's investment 'in "a 'mortgage' security shall not exceed 95 :percent .of the. mortgage securities' 'fair. market value and shall not exceed 25 percent of the agency's surplus money which may be invested pursuant to. this'section.' ; (4) redesignated' former subds (k) and (])'to be subds ,(j) and (k); (5) amended subds (j) by (a)deleting "corporate" after "Medium-term", and after "medium-term' ; (b) adding the apostrophe after "five years"; '(c) adding "organized and" after "corporations"; (d)"adding "or by.depository insiitufions licensed by the United States or any state and Itz coy coder 55 ., .~ . § 53635 GOVERNMENT CODE. - operating within the United States' ; (e) substituting "Notes" for; "securities"; (f) substituting '`a rating ` category of "A" or i[s equivalent or better by a nationally .recogriiied rating service" for "the ,top three note rating categories by two of the three largest nationally recognized rating services' ; (g) substituting '`Purchases".for "Purchase"; and:(ti) substituting "'30" for "1'4"; (6) amended subd (k) by (a) substituting "(k)" for "(1)" after "(a) to"; (b) substituting "Article 1"`for "Articfe 2' ; (c) substituting "Section 53600" for "Section 33630"; (d) delefing "the" after "'(1) attain ahe ',;, and '(e) adding the. apostrophe after "five years' ; (7) added` subd (I); and (8) deleted the former last,, paragraph. which read: "This section shall remain.in eH'ect orily'until'January 1, 1988, and as of that date is repealed,'unless a later enacted statute, which is enacted before January 1, 1988, deletes or extends chat. date. If .that" date is not deleted oc" extended, then, on and after January 1, x988, pursuant to Section 9611 of the'Government, Code, Section 53635 of the Government. Code, as amended by Sectio^ 2'S of Chapter 567 of the Statutes of 1983, shall have the same force and effect as if this temporary provision had. not been eiiacted." (As :amended by Stafs 1987, ch 887, compared to the section as it read prior to 1987. This section was also amended by an earlier chapter, ch 446. See Gov C § 9605.) Note-Seethe 1988 Note following § 53630.