HomeMy WebLinkAboutAgenda Bill Item 2 CITY'OF PETALUNIA,CALIFORNIA. 2
AGENDA BILL
Agenda Title: Meeting Date:
Resolution approving the 2001 Investment Policy January 16, 2001
•
Finance William J. Th s William J. Thomas Phone-4 23 er:
Department: Director: Contact Person:
omas 778-4323
Cost of Proposal Amount Budgeted: N/A
N/A ,Account Number:.
N/A
Attachments to.Agenda'Packet'Item:
Resolution approving 2001•Investment Policy
Exhibit A to Resolution— Investment Policy
Government Code Section.53635, as amended
Sunimarv.statement: State lawsrequireall:focal agencies to develop an annual investment policy that must
be considered by the City 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 liability of
•
both the City staff and the City Council .
Council Priority: THIS AGENDA ITEM IS CONSIDERED TO BE PART OF, OR NECESSARY TO, ONE OR MORE OF THE
1999-2000 PRIORITIES ESTABLISHED By THE:CITY,COUNCIL ON JANUARY 30, 1999.
Priority(s) Complete Budget, Revenue'and Service Level.Review
•
Recommended.City.Council Action/Suggested Motion:
Adopt the resolution approving•the 2001 Investment,Policy
•eview d by Fi'a•ce Director: Review•, .s.sf i7::ra ans• ApprGL ed bvfCiW Manager:
I ►ate �a.1 / l jDate:
, 1COY�� - 7
Today's Date: Revision #.and ! I e ' •d: (File Code: S/Agenda/Investment policy
# 2001
•
•
CITY OF PETALUMA, CALIFORNIA
AGENDA REPORT FOR
JANUARY 16, 2001 •
INVESTMENT POLICY FOR 2001
1. EXECUTIVE SUMMARY
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 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 liability of both the City staff andthe City Council.
2. BACKGROUND:
The Investment Policy provides valuable information on how to properly manage public finds.
The proposed'Investment Policy for the year 2001 has not been changed in.basicicontent from the
one approved for2000. 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 30, 2000 totaled $37,554,556., Of This amount.
67:41Y/0 is invested in the state Local Agency Investment Fund (LAIF) that paid i6.47% for the
month of November 2000. The portfolio has 30.62%invested in federal agencies that are paying
an average'' of 6.52%. The remaining 1:97% of the portfolio is invested in.the. California
Arbitrage Management Program that paid 6.44%for the month of November 2000. •
The City earned $2,005,549 in interest from the investment portfolio during the .1'999/2000 fiscal
year.
3. ALTERNATIVES:
Add to or'amend_the Investment Policy within the limits of state laws.
4.. FINANCIAL IMPACTS:
Developing the Investment Policy and administering it while investing all idle, funds takes
approximately 204 hours of staff time and the estimated cost is $8,150 annually: This is included
in the Finance Department budget for salaries and benefits.
5. 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. RECOMMENDATION:
Adopfthe"resoliition approving the 2001 Investment Policy.
•
RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF PETALUMA APPROVING THE
INVESTMENT POLICY FOR 2001
•
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 2001
Investment Policy as shown in Exhibit A attached.
S
•
,;1f � v G
yy
if
( (iiç g
"tip
i
CITY OF PETALUMA, CALIFORNIA
2001 STATEMENT OF INVESTMENT POLICY
William J. Thomas
Finance Director/City Treasurer
•
City of Petaluma. California 2001 Statement of Investment Policy
2 EXHIBIT A to Resolution,approving"Investnient Policy
•4 CITY OF PETALUMA,CALIFORNIA
5 2001 STATEMENT OF INVESTMENT POLICY
6
7 POLICY
8
9 It is the policy of the City of Petaluma. CA to invest public funds;in a manner that will provide
10 the highest investment return with the maxiniutn security while meeting the daily cash flow
11 demands of the entity and conforming to all state and,local statutes governing the investment of
12 public funds.
13
14 SCOPE
15
16 This investment policy applies to all financial assets of the City of Petaluma, CA. These funds
17 are accounted for in the City of Petaluma, CA Comprehensive Annual Financial Report and
18 include:
19
20 General Fund
21 Special Revenue Funds
22 Debt Service Funds
23 Capital Project Funds
24 Enterprise Funds
25 Internal Service Funds
26 Trust and Agency Funds
27
k28 This Policy shall also apply to funds of the Petaluma Community Development Commission
9 (PCDC), Petaluma Public Financial Authority, Petaluma Public Facility Financing Corporation
30 and any other agency or trust funds under the control of the City Treasurer.
31
32 PRUDENCE
33
34 Investments shall be made with judgment and care — under .circumstances then prevailing -
35 which persons of prudence, discretion and intelligence exercisein.the management of their own
36 affairs, not for speculation, but for investment, considering the probable safety of their capital as
37 well as the probable income to be;'derived.
38
39 OBJECTIVE
40
41 The primary objective in priority order, of the City's investment activities shall be
42
43 1. Safety` Safety of principal is the foremost objectivel'of the investment program.
44 Investments of the City of Petaluma, CA shall be undertaken in a.manner that seeks to
45 ensure the presetvation:of capital in the overall portfolio..
46 2. Liquidity: The City's investment portfolio will-.remain>sufficiently liquid to enable the
47 City of Petaluma, CA to meet all operating requirements which might be reasonably
48 anticipated.
49 3. Return on Investments: The City's investments shall he designed with the objective of
50 attaining a rate of return throughout budgetary and economic cycles, commensurate with
51 the City's investment risk constraints and the cash flow characteristics of the portfolio.
52
53 DELEGATION OF AUTHORITY
4
55 Under the City Charter_Section 24, the City Treasurer is appointed by the City Manager with the
56 approval of the City Council'. The City Treasurer is also the City's Finance Director.
57
City of Petaluma. California 2001 Statement of Investment Policy
1 The daily cash management, investment transactions and account reconciliation's are the primary
2 responsibilities of the City Treasurer. These activities are also carried out by other members of
3 the Finance Department under the direction of the City Treasurer. •.
4
5 ETHICS AND CONFLICT OF INTEREST
6
7 Officers and employees involved in the investment process shall refrain from personal business
8 activities that could conflict with proper execution.of the investment program or which could
9 impair their ability to make impartial decisions.. Officers and employees involved in the
10 investment ,process shall abide by the.Conflict of Interest Code„(California Government Code ”
I 1 Section 1090 et. seq.) -and the California Political Reform Act (California Govetiunent Code
12 Section 81000 etseq.).
13
14 PERMITTED INVESTMENTS
15'
16 The City.may invest in,;the-following investments sources that are allowed by State:Government
17 Code Section 53601 and
53635:
18
19 • Local Agency Investment Pools (State:LAIF'of Sonoma County InvestmentP_ool)
20 • Certificates of Deposits with commercial banks and/or savings and loan companies
21 • Negotiable Certificates of Deposit
22 • Banker's Acceptances •
23 • Securities of the U.S. Government of its Agencies
24 • Repurchase Agreements (for overnight investment) •
25 • Commercial Paper
26 • Money Market
27 • MutuatFunds-
28 • Guaranteed Investment Contracts •
.)9 •
30 •
31 COLLATERLIZATION
32
33 Deposit-type°securities (i.e. Certificates of Deposit) shall be collateralized at the,minimum State
34 of California;collateratpool requirements for any amount exceeding FDIC or FSLIC'.coverage.
35
36 BROKERS
37
38 In selecting securities brokers, the City Treasurer shall conduct credit and capitalization analysis
39 to determine that firms are adequately financed to conduct public business.
40
41 LOCAL IINVESTMEN POOL POLICIES AND REPORTS
42
43• To the extent there are investments in the State or Sonoma County;investment pools, the City
44 Treasurer shall;review and`mainta n current copies of the adopted investment policies:of the State
45 and Sonoma County. The policies shall be reviewed for concurrence with the investment policy
46 of the;City.
47 - •
as SAFEKEEPING AND CUSTODY
49
50 All security transactions entered into by the City of Petaluma,. CA shall be. conducted on a
51 delivery-versus payment basis. Securities-Will be held by third party custodian'designated by the
52 City Treasurer and`evidenced by safekeeping receipts.
53
- 54. INTERNAL CONTROL
55
56 The City Treasurer shall establish an annual process of independent review by an external
57 auditor. This review will provide internal control by assuring compliance with policies and
58 procedttres.
•
City of Petaluma,California 2001 Statement of Investment Policy
1
2 PERFORMANCE STAND ARDS
•3
4 The investment portfolio shall be designed With the objective of obtaining a rate of return
5 throughout budgetary and economic cycles, commensurate with the investment risk constraints
6 and the cash flow needs.
7
8 The City's investment benchmark for market yield is the Three Month U.S. Treasury Bill, which
9 had an average yield of 5.7% in December.2000.
10
t 1 The City's investment amount benchmark is to invest 97% of all idle funds.
12
13 REPORTING
14
15 The City Treasurer shall provide a monthly investment report to the City Council, which
16 provides a clear picture of the status of the current investment portfolio. This report will be
17' formally submitted to the City Council each quarter at a public meeting.
18
19 Schedules in the quarterly Treasurer's Report will include the following:
20
21 • A list of individual securities held at the end of the reporting period by authorized
22 investment category
23 • Average life and final maturity of all investments
24 • Earnings rate on an annualized.basis
25 • Market value, par value:and,amortized book value
26 • Percentage of the portfolio by"investment category
•
•
3
City of Petaluma, California 2001 Statement of Investment Policy
ATTACHMENT A
2
3. CITY OF PETALUMA AI,
4 2001 STATEMENT OF INVESTMENT POLICY
5
6 SUMMARY OF TYPES OF INVESTMENTS .
7 AVAILABLE TO LOCAL GOVERNMENTS
8
9
10 STATE INVESTMENT POOL(LAIF)
11
12 The Local ,Agency Investment Fund (LAIF) was created by statute in 1977 and provides an
13 investment alternative for local agencies: The program offers participating agencies to
14 participate in a;major portfolio, which invests hundreds of millions of.dollars a day. The deposits
15 and withdrawals are done by electronic transfers of funds (wire transfers) and deposits earn
16 interest on a daily:basis.
17
18 Over 2,815 local agencies participate in the LAIF investment pool. These agencies_ invest
19 approximately'$12,3 billion, which is added to $27.7 billion in State funds for a $40`0 billion
20 investment portfolio. The investment portfolio is widely distributed over many types of
21 investment instruments and is not adversely impacted by sudden shifts in the investment market.
22 In addition, the large portfolio and wide distribution provides for greater flexibility in investing
23. to take advantage,of changing:.interest rates.
24
25 There is a-lirnitation:of$20 million per legal entity within an agency. There is also a.tnaximum
26 of ten transactions, deposits or withdrawals per month.
27
28 The security of LAIF investments is in two parts. The State Treasurer and Controller's offices are •
29 responsible for the accounting, processing, and safe keeping of the City's funds through the State
30 Treasurer's investment procedure and policies. The State maintains insurance and bonds
31 covering employee honesty and errors. The City funds'are'able to be withdrawn at any time and
32 are protected by State law from seizure or impoundment by any State Officer.
33
34 Once the funds are pooled with other local agencies, and invested,, the security for the funds
35 varies with the investment. Each investment` is secured by Federal Insurance, the US
36 Govenmientor Federal;Agency,.collateral of major banks, or major corporation collateral. The
37 security depends on the type of investment.
38 . ' .
•39 SONOMA COUNTY INVESTMENT POOL
40
41 The Sonoma County Treasurer maintains an investment pool in which,the County, Schools,
42 Special Districts and Cities can participate: The investment portfolio totals approximately
43 $850,080,000. This investment pool operates in the same manner as the State pool. The County
44 Treasurer is subject.to the same State Government Code regarding investments as the City. As.
45 with the State investment fiend, City funds can,be withdrawn at any time and are protected by
46 State Law from seizure or impoundment by any County Officer.
47
48 CERTIFICATES OF DEPOSITS (CD)
49
50 Certificates of Deposits, sometimes known as "Jumbo. Accounts" or "Fixed CD's" are savings
51 accounts with Banks or Savings and Loans. These accounts are for a specific amount, have a set
52 interest rate, and set maturity date. There is a substantial interest penalty if the CD is withdrawn
53 prior to the maturity date.
54
4
City of Petaluma, California 2001 Statement of Investment Policy
2 The State law requires,Public.Fund CD's to be collateralized,by the financial institution at 110%
3 with US Government notes/bonds or-at 150% with quality First Trust Deeds. This collateral can
•4 be waived if Federal Insurance (FDIC for banks or FSLIC for savings and loans) is available.
5 These federal agencies will insure each account up to $100,000.
6
7 The City generally waives the collateralization:requirements for the FDIC or FSLIC insurance.
8 The waiver of collateral is.a wide spread practice and will generally generate higher interest rates
9 and provide the greatest security for the funds from,the Federal Insurance Agencies. For deposits
10 in excess of$100,000, the collateralization requirements.are,not:waived.
II
12 NEGOTIABLE CERTIFICATE OF DEPOSIT(NCD)
13
14 This investment is similar to the Fixed CD's above. However, the NCD can be sold through a
15 broker on a "secondary market" prior to the maturity date. Normally, NCD's are issued in
16 $500,000 and $1,000,000 amounts. The State Codelimits,NCD's to not more than 30%e of the
17 local agency's portfolio and to a five-year maximum term. The security is the credit worthiness
is of the issuer. These deposits are uninsured and uncollateralized.promissory notes.
19
20 BANKER'S ACCEPTANCES (BA)
21
22 A Banker's Acceptance is a time draft of invested funds, which has been drawn on and accepted
23 for repayment by a bank. This financial instrumem is generally used for short term (30 and 180 .
24 days) financing of export, import,-or storage of goods. By accepting the draft (investment of City
25 funds), the bank is liable for'the payment at maturity. This bank liability makes the Banker's
26 Acceptance a marketable investment.. The State Code litnits BA's-to not more than 270 days to
27 maturity and 40% of the local agency's portfolio. 'In addition, not more than 30% of the local
28 agency's portfolio may be placed in,anyone bank.
9
30 US TREASURY BILLS •-
31
32 Commonly referred tows T-Bills. these are;short-term marketable securities sold as obligations of
33 the US Government. They are offered `in three month, six month, nine month and one-year
34 maturities. T-Bills do not accrue interest but are sold at adiscount, and pay the face value at
35 maturity.
36
37 US TREASURY NOTES
38
39 These are marketable, interest-bearing securities sold as,obligations of the US Government with
40 original maturities of one to ten years. Interest is paid semi-annually.,.
41
42 US TREASURY.BONDS •
43
44 These are the same as US Treasury Notes except they have original maturities of ten years or
45 longer.
46
47 FEDERAL AGENCY ISSUES
48
49 Many Federal Government Agencies are authorized to issue short term and long term obligations
50 that are used to finance various programs such as home loans, business loans, farm loans, etc.
51 These Agencies were created by the Federal Government in the 1930's and have since become
52 independent quasi-public;agencies. The.Security for their-issues is the guarantee of the Agency to
53 pay. The Federal Government has only an implied liability to the extent that the Agency has an
W4 .open credit,line to borrow from the U.S.`Treasury. It is widely accepted that Federal Agency
5 issues are as.secure as U.S. Government notes,
56
57 There is an active secondary market available to sell these issues prior to maturity.. The issues
58 are fairly liquid depending on the prevailing market interest rates at the time of sale..
5
City of Petaluma, California 2001 Statement of Investment Policy
I Some of the more common agency notes are issued by the Federal National Mortgage
2 Association (Fannie Mae), Federal Home Loan Banks, Federal Home Loan Mortgage .
3 Corporation (Freddie Mac), and the Federal Farm Credit Banks.
4 -
•
5 REPURCHASE:AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS(REPOS)
6
7 A Repurchase Agreement is a short-term investment agreement to loan City funds for a.fixed
8 period in return fora fixed interest rate and secured collateral, such as U.S`. Treasuries or Agency •
9 Notes. This type of investment is usually done for overnight or very short term (7 'days)
10 investment of funds left in the general operating checking account. Reverse Repurchase
11 agreements is a short-term' investment,,which is used to take advantage of market.interest rate
12 changes and inctease::the=size of the portfolio...State law was amended in 1996 to liinit.the use of
13 both repurchase and reverse repurchase agreements. The City Council must approve each
14 reverse repurchase agreement.
15
16 COMMERCIAL PAPER(CP)
17
I8 Commercial Paper are ,unsecured promissory'notes of industrial corporations, utilities and bank
19 holding companies.. The notes are in bearer formin amounts starting at $100,000. State law
20 limits the City to investments in United States corporations having assets in excess of five
21 hundred,million dollars with an "A" or higher rating. Cities may not invest more than 30%0 of the
22 portfolio in commercial paper and the CP?s may not exceed a term of 180'days.
23
24 MUTUAL FUNDS
25
26 An iinvestment company that pools money and can invest in a variety of securities, including
27 -income securities and money market instruments, cities may invest in Mutual.Funds or
28 Money Market-funds that receive the highest ranking or the highest letter and numerical rating by
29 two of the three largest nationally recognized rating services. The Mutual Funds must abide by
30 the same investment restrictions and regulations that apply to public. agencies in California.
31 Money Market Funds must follow regulations specified the Security and Exchange Commission
32 under the Investn'ientE Company Act of 1940. The City must verify that the Mutual Fund is in
33 compliance with statelaws forpublic agencies prior to purchasing shares.
34
35 GUARANTEED'INVESTMENT CONTRACT(GIC)
36
37 This is an agreement acknowledging,receipt of funds for deposit,;specifying terms for withdrawal
38 and guaranteeing a-rate of interest to be paid. The investment follows all state law s for the
39 investment of,public funds.
40
•
•
•
•
6
City of Petal'tnna„California 2001 Statement of Investment Policy
I PERMITTED INVESTMENTS AND CONDITIONS FOR USING THEM
2
�'4 Investment Type Maximum Maximum% Quality
5 Maturity(2) of.Portfolio Requirements
6
7 -
8 Local Agency Bonds 5 Years 'None' None
9 US Treasury Obligations - .5 Years None • None
10 State of California Obligations 5 Years :None None
I I CA Local Agency Obligations 5 Years None None
12 US Agencies 5 Years None None
13 Bank Acceptances 270,Days 40%(3) Fed. Reserve Eligible
14 Commercial Paper 180 Days 15%or 30%(4) Al/PI Rating
15 Negotiable Certificates of Deposit 5 Years 30% None
16 Repurchase Agreements I Year None None
17 Reverse.Repurchase Agreements 192 Days 20%of Base. None (6)
18 Medium-Term Notes 5 Years 30% A 'Rating
19 Mutual Funds N/A 20%(5) Multiple (7)
20 Money Market Funds(I) N/A 20% Multiple (8)
21 Collateralized Bank Deposits 5'Years Node, None
22 Mortgage Pass-Thru Securities 5 Years 20% AA Rating
23 Time Deposits 5 Years None None
24 County Pooled Investment Funds N/A ' • None None
25
26
27 Source: California Government Code Sections, 53601 & 53635 (a-n)
78 '
•
9 (1) This document refers to Money Market Mutual Funds as Money Market Funds They must have an average weighted maturity of 90
0 days or less and abide by SEC regulations.
31 (2) Section 53601 states any investment that at the time of purchase has over 5 years to maturity must be authorized by the legislative
32 body not less than 3 months prior to theinvestment
' 33 (3) No more than 30%of the surplus funds may be in Bankers•Acceptances of any one commercial bank.
34 (4) Limit is 30%if dollar weighted average maturity of all commercial paper does not exceedr31 days. Commercial paper issuers must
35 be US Corporations with 5500 million plus in assets: Purchases may not represent More than 10%of the outstanding paper of an
36 issuing corporation.
37 (5) No more than 10%of an agency's surplus funds may be invested in anyone mutual:fund. •
38 (6) Reverse Repurchase Agreements must be made,with.primary dealers of.the Federal Reserve Bank of New York and the securities
39 used for the agreement must have beedtheld by the issuer for at least 30 days.
40 (7) Mutual funds must receive the;htghest ranking by L2 of the 3 largest nationally recognized rating agencies or retain an investment
41 advisor who is registered,or,exempt from:registration,with the SEC and has at least 5 years' experience investing in securities and
42 obligations authorized in Section 53601iand 53635(a;j,.m'or d)of the Government Code with assets:in excess of$500 million.
43 (3) Money market funds must receive the highest ranking t by 2 of the 3 largest nationally recognized rating agencies or retain an
44 investment advisor who is registered,or exempt from registration with the,SEC and has at least 5 years'experience managing money
45 market funds in excess of$500 million. ,
46
. •
7
City of Petaluma. California 2001 'Statement of Investment Policy
2 ATTACHMENT B
3
4 GOVERNMENT CODE SECTION 53635
5 AS AMENDED
6
7 53635. As far as possible, all money belonging to, or in the
8 custody of, a local agency,including money paid to the treasurer or
9 other official'to pay the principal, interest,-or penalties of bonds,
10 shall be deposited for safekeeping in state of national banks,
11 savings associations or federal associations, credit unions, or
12 federally insured industrial loan companies+in this state selected by
13 the treasurer or other official having•the legal custody of the
14 money; or unless otherwise directed by the legislative bodypursuant •
15 to,Section 53601, may be invested in:the investments set forth
16 below. A,localagencypurchasing or obtaining any securities '
17 described in this section,-in a negotiable, bearer, registered,,or
18 nonregistered format, shall require delivery of all the securities to
19 thelocahagency, including those purchased for the agency by
20 financial advisors, consultants; or managers using the agency's
21 • funds, by, book entry, physical delivery, or by third-party custodial
22 agreement. The transfer of securities to the counter party bank's
23 customer book entry account may be used for book-entry delivery. For
24 purposes,of this section, "counter party"rmeans•the other party to
25 the transaction. A counter party banks trust department or separate
26 safekeeping department may be used for the physical delivery Of
27 security if the security is held in the name of the local agency.
28
29 (a) Bonds issued by the,local agency;including bonds payable
30 solely out of the revenues from a revenue-producing property owned,
31 controlled, or operated.by`the:localagencyor by.a•department,. •
32 board, agency; or authority of the local agency.
33
34 (b) United States Treasury notes, bonds, bills, or certificates of
35 indebtedness, or those for which thefaith and credit of the United
36 States are pledged for the payment of principal and interest.
37
38 (c) Registered state warrants,or treasury notes or bonds•of this
39 statey,including bonds payable solely:out of the revenues from a
40 revenue-producing property owned,controlled, or operated by the
41 state or by a department, board, agency, or authority of the state.
42
43 (d) Bonds, notes, warrants. or other evidences of indebtedness of
44 any local agency within this state. including bonds payable solely
45 out of the revenues from-arevenue-producing property owned,
46 controlled. or operated by the local agency, or by a department,
47 board, agency, or authority the local agency.
48
•
8
City of Petaluma. California 2001 Statement of Investment Policy
(e) Obligations ssued by banks for cooperatives, federal land
3 banks,.federal intermediateicredit 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 fullyguaranteed•as to principal and interest'by, the Federal
7 National Mortgage.Association; or in guaranteed portions of Small
s Business Administration notes; or in obligations,participation's, or
9 other instruments of, or issued by, a federal agency or a United
10 States government-sponsored_enterprise.
I1
12 (f) Bills of exchange,or'time.'drafts drawn,omand accepted by a
13 commercial bank, otherwise known as banker's-acceptances. Purchases
14 of bankers acceptances may not exceed 270 daysmaturity 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 subdivision does'not preclude'a municipal utility district
21 from investing any surplus money in its treasury in-any manner
22 authorized by the Munieipal Utility District Act, Division 6
igs3 with Section 11501) of Public-.Utilities Code.
4
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 Investors Service, Inc., or Standard and Poor's Corporation.
28 Eligible paper is further.limited to issuing corporatibns;that are
29 organized and operating Within the United,States,and,having total
30. assets in excess of Eve hundred:niilliondollars ($500;000,000) and
31 having an "A!' or'highet;rating for the issuer's'debt, other than
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 commercial paper may not exceed 1'80days maturity nor
35 represent more than 10 percent of the outstanding paper of an issuing
36 corporation. Purchases of commercial paper may not exceed.15
37 percent of the agency's surplusmoney which may-be invested pursuant
38 to-this section. An additional 15 percent, or a°total of30 percent
39 of the.agency''s money or money in its custody, may be invested
40 pursuant to this subdivision. The additional 15 percent may be so
41 invested only if the dollar-weighted average maturity of the 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, divided by
•5 - the total amount of outstanding commercial paper.
46
•
9
City of Petaluma, California 2001 Statement of Investment Policy
•
(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 astate-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 may be
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 33630) of Chapter 4 o Part 1 of Division2
10 of Title 5, except that the amountso.'invested shall be subject to
11 the limitations:of Section 53638. For purposes of this section, the
12 legislative body of a local agencyand 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 a state or federal credit union if a member of the
17 legislative bodyof the.local agency, or an employee of the
18 administrativeofficer, manager's office, budget office,
19 auditor-controller's office, or treasurer's office of the local
20 agency also serves ontheboard of directors, or any committee
21 'appointed by the board of directors;'or the credit committee or
22 supervisory committeetof the stateor federal credit union issuing
23 the negotiable certificates of deposit. •
24
25 (i) (1),Investments inrepurchastagreements or reverse repurchase
26 agreements-of any securities authorized by this section, so long as
2• the agreements,aresubject,to'this subdivision, including the
28 delivery requirements specified in this section.
29
30 (2) Investments in repurchase agreements maybe made, 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�these-securities and the value
35 shall be adjusted no less than.quarterly.
36
37 (3) Reverse repurchase agreements may btutilized 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.
4? 1994. and was sold using a reverse repurchase agreement on December
43 31, 1994.
44
•
•
10
•
City of Petaluma, California 2001 Statement of Investment Policy
11112 (B) The security 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, prior to December 31, 1994 does notexceed20 percent
7 of the base value,ofthe portfolio,?and the agreement does not exceed
8 a term of 92 days; unless the agreement.inchides a-written codicil
9 guaranteeing a minimum earning or spread for the entire period
10 between the sale of a'security using,a reverse-repurchase agreement
11 and the final maturity date-of the same security..
12
13 (4) After.December 31, 1994, a reverse repurchase agreement may
14 not be entered into with securities not sold ona reverse repurchase
15 agreement.and purchased, or committed to;purchase;prior to 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
18 securities owned and previously paid for, for a minimum of 30 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 for:the,immediate payment of a'local agency
22 obligation. Funds obtained or funds within the pool of an equivalent
3 amount,to that obtained from selling a security to a counter party by
4 way-of a reverse repurchase agreement;on,securities.originally
25 purchased subsequent to December 3,1, 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
34 subparagraph dre met, including the.total of any reverse repurchase
35 agreements specified in subparagraph (A) of paragraph (3).
•
36
37 (5) Investments in reverse repurchase agreements orsimilar
38 investments 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 hank of New York.
43
S
11
City of Petaluma. California 2001 Statement of Investment Policy
2 (6) (A)"Repurchase agreement" means a•purchase of securities by ..
3 the local agency pursuant to an agreement by which the counter party
4 seller will repurchase the securities on or before...a specified date
5 and fora°specified amount and the counter party will deliver the
6 underlying securities to the local agency by book entry,physical
7 delivery, or bythird party custodial agreement. The transfer of
8 underlying securities to the counter party bank's customer book-entry
9 account may used for book-entry delivery.
10
1 t (B) "Securities," for purpose of repurchase under this
12 subdivision,means securities of the same issuer, description, issue
13 date, and maturity.
14
15 (C) "Reverse repurchase,agreement" means a sale of securities by
16 the local agency pursuant to an agreement-by which the local agency
17 will repurchasethesecurities 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 •
24 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 ftmds'obtained using the reverse repurchase
•
29 agreement and the earnings=obtained on the reinvestment of the funds.
30
31 (j)Medium-term notes of a:maximum of five_years' maturity issued
32 by corporations organized and Operating'within ithe 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 berated ilia rating category
36 of"A" or its equivalent or better by a;nationally recognized rating
37 service. Purchases of medium-termnotes may not exceed 30 percent
38 of the agency's surplus money which may be invested pursuant to this
39 section.
40
12
•
City of.Petaluma. California 2001,Statement of Investment Policy
(k) (1).Shareslof beneficial;interest issued by diversified
3 management companies that invest in the securities and obligations as
4 authorized by subdivisions (a);to (j);'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 these restrictions, a,counterparty to,a reverse
8 repurchase agreement is;not required to be a primary.dealer of the
9 Federal Reserve Bank of New'York if thecompany's board of directors
10
11 finds that the counter party presents a.minimal,risk of default, and
12 the value of the securities underlying a repurchase'agreement may be
13 100 percent o'f the sales price if the securities are marked to market
14 ' daily.
15
16 (2) Shares of beneficial"interest issued..by diversified management.
17 companies that-are-money market funds registered'withithe•Securities
18 and Exchange Commission under the Investment Company Act of 1940 (15
19 U.S.C. Sec.�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:
4 (A) Attained the.highest,ranking or the highest letter and
25 numerical rating provided by hot less than two'natiionallyrecognized
26 statistical rating organizations.
27
28 (B) Retained an investment adviser registeredter 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 (j), inclusive, or
32 subdivision (I) 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 following criteria:
37
• 38 (A) Attained the highest ranking or the highest letter and
39 numerical rating.proyided by not less than two nationally recognized
40 statistical rating organizations.
41
42 (13) Retained an investment adviser registered or exempt from
43 registration with the Securities and Exchange Commission with not
44 less than live years' experience managing money:market_mutual fiords
05 with assets under management in excess of five hundred million
46 dollars ($500,000,000).
47 •
13
City of Petaluma. California 2001 Statement of Investment Policy.
2 (5) The purchase price of shares of beneficial interest purchased •
3 pursuantto'this subdivision shall not include:any-commission-that
4 the companies may charge and shall not exceed 20 percent of the
5 agencys surplus money that may beinvested pursuant to this section.
6
7 However, no more than l0•percent,oftheagency's.surplus-funds=may
8 be invested in shares of beneficial:interestof any one mutual-fund
9 pursuant to paragraph (1).
10
11 (1) Notes, bonds, or,other obligations which are at all times
12 secured by a valid first•priorit •security interest in securities of
13 the types listed by Section 5365.1 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 for the purpose 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 the secured obligation, and the
20 security interest shall be"perfectedr-in accordance with the
21 requirements of the Uniform Coininercial-Code or federal regulations
22 applicable to the types•of securities in which the security interest
23 is granted.
24 •
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 consumetreceivable-backed bond of a maximum of five
29 years maturity. Securities eligible forinvestment under this
30 subdivision'shall be issued'by.anissuer having an "A" or higher
31 rating for the issuer's debt as provided by a nationally recognized
32 rating service and rated MA 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 percentof the agency's surplus money that may be.invested
36 pursuant to this section.
37
38
•
• 1i
7 City of Petaluma, California 2001 Statement of Investment Policy
ATTACHMENT C
4
•
15 -