HomeMy WebLinkAboutItem 4.02 AnnualInvestPolicy (2)SUBJECT:
EXHIBITS ATTACHED:
RECOMMENDATION:
FINANCIAL STATEMENT:
AGENDA STATEMENT
CITY CLERK FILE # 320-30
CITY COUNCIL MEETING DATE: (November 2, 1999)
Adoption of Annual Investment Policy
~ j'q'X Report Prepared by: Fred Marsh, Finance Manager
Statement of Investment Policy for the City
~,Aa.4~"Accept and file report
None
DESCRIPTION: In November of 1998, the City Council adopted the current investment policy,
which emphasizes the need for saf6ty and liquidity above yield in the investment of public monies. The.
City's current investment policy, as well as State Law, require that it be reviewed by the City Council on
an annual basis.
City Staff has reviewed the City's current investment policy and has determined that it complies with
current State laws regulating investments and continues to provide for adequate diversification of
investments and controls over investment related activities. Staff is therefore recommending no changes.
to the policy at this time. '
Staff Reeommendation
It is recommended that the City Council receive and file this report.
G:XINVSMNTSXAGPOLICY,DOC
COPIES TO:
ITEM NO.
II.
STATEMENT OF INVESTMENT POLICY FOR THE
CITY OF DUBLIN
INTRODUCTION
The purpose of this document is to identify Various policies and procedures that enhance
opportunities for a prudent and systematic investment policy. This document also serves to
organize and formalize investment related activities.
SCOPE
It is intended that this policy cover all funds and investment activities under the direct authority
of the City of Dublin, as set forth in the State Government Code, sections 53600 et seq.. Cash
held by the City shall be pooled in order to more effectively manage City cash resources. All
pooled funds are accounted for in the City's Comprehensive Annum Financial Report and
include:
Funds
General Fund
Special Revenue Funds
Capital Project Funds
Internal Service Funds
Enterprise Funds
Agency Funds
Excluded funds are those held with a fiscal agent. They may have their own specific "permitted
investments" as shown in their bond covenants.
ms
OBJECTIVES
General: The overall obligation of the City Treasurer is to maintain sufficient cash to pay
existing debts. It shall be the policy of the City to invest the maximum mount of idle cash
available to the City in order to generate interest earnings, which supplement other City revenue
sources. The investment program shall be subject to the following parameters, which are
presented in their order of importance:
(1)
Safety: The first priority for the investment program shall be the safety of the principal
amount invested, Speculation or risky investment media will be avoided, even though
high interest rates .might be offered, Protection and preservation of municipal
investments on behalf of the citizens of the community is of primary importance, The
following list provides examples of investments which demonstrate safety,
Treasury and Federal agency paper, and repurchase agreements are the highest
quality investment available in terms of safety and liquidity. The City shall not
directly enter into repurchase agreements, although this investment tool may be
used by authorized pooled investments which are managed by others (i.e. LAIF;
Mutual Funds, ere).
Certificates of deposit (negotiable and nonnegotiable) and savings accounts must
be insured by FDIC, SAIF, or collateralized at 110% of market value with U.S.
Treasury and Agency Securities.
EXHIBIT A
(2)
(3)
(4)
(5)
(6)
Bankers acceptances must be secured by the irrevocable primary obligation of the
accepting domestic bank.
The Local Agency Investment Fund (LAIF) shall be considered as a proper
investment for safety inasmuch as the State Treasurer of California is the State
Elected Officer responsible for that investment portfolio.
Commercial paper of "prime" quality from a domestic corporation having total
assets in excess of five hundred million dollars and an "A" rating or higher shall
be considered as a safe investment.
Only money market accounts that have 100% of their assets invested in Treasury
Federal agency paper shall be considered safe.
This list has been presented for descriptive purposes only and actual investments shall be
in accordance with authorized Sections of the Government Code.
Liquidity: An adequate percentage of the portfolio should be maintained in liquid short-
term investments which can be converted to cash if necessary to meet disbursement
requirements. Since all cash requirements must be anticipated, investments in securities
with active secondary or resale markets is highly recommended. Emphasis should be on
marketable securities with low sensitivity to market risk. Maturities of investments for
which there is limited oppommity for resale (i.e. certificates of deposit held by banks and
savings and loans) shall be staggered to maximize liquidity. '.
Many of the investment examples identified in paragraph #1 above demonsIrate the type
of investments which demonstrate liquidity.
Field: Yield should become a consideration only af[er the basic requirements of safety
and liquidity have been met. The City intends to hold its investments to maturity in order
to maximize its return on its investments and minimize its exposure to potential Iosses
resulting from temporary declines in the market values of its investments. Although there
may be oppommities to resell securities, this type of regular trading is not considered
consistent with the City's goals.
Diversification: The investment portfolio will be diversified to avoid incurring
unreasonable and avoidable risks regarding specific security types or individual financial
institutions. This shall also conform with applicable sections of the Government Code.
Prudence: The agency adheres to the guidance provided by California Civil Code
Section 2261 related to the "prudent person rule." The exercise of investment decisions
in accordance with this policy shall be made with judgment and care and shall consider
the probable safety of the invested capital as well as the probable income to be derived.
Public Trust: All participants in the investment process shall act as custodians of the
public trust. Investment officials shall recognize that the investment portfolio is subject
to public review and evaluation. · The overall program shall be designed and managed
with a degree of professionalism that is worthy of the public lrust. Thus employees and
officials involved in the investment process shall refrain from personal business activity
that conflicts with proper execution of the investment program, or impairs their ability to
make impartial investment decisions. Additionally the City Treasurer and the Deputy
Treasurer shall file applicable financial disclosures as required by the Fair Political
Practices Commission (FPPC).
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EXHIBIT A
In a diversified portfolio it must be recognized that occasional measured losses are
inevitable, and must be considered within the context of the overall portfolio's investment
return, provided that adequate diversification has been implemented.
IV. DESIGNATION OF CITY TREASURER TO CARRY OUT INVESTMENT DUTIES
As authorized in Government Code Section 53607, the City Treasurer and/or any duly appointed
Deputy City Treasurer is/are hereby authorized to invest, reinvest, sell, or exchange monies
within the City Treasury. The Assistant City Manager/Administrative Services Director shall be
designated as the City Treasurer and the City Manager and/or Finance Manager shall be
designated as the Deputy City Treasurer. Quarterly reports of said transactions, if any, shall be
provided to the City Council.
V. INVESTMENT INSTRUMENTS
The authorized investments to be made by the City Treasurer shall be in accordance with
Sections 53601 and 53635 of the California Government Code as they may be mended.
Reporting of all transactions shall occur as noted in Section VIII below. The City Treasurer /
Deputy City Treasurer shall not directly invest any monies in Repurchase Agreements or Reverse
Repurchase Agreements unless this policy is amended by the City Council. In accordance with
Government Code Section 53601.6 (including as it may be further amended) no investment shall
be made directly in any of the following instruments: inverse floaters, range notes, or interest
only strips derived from a pool of mortgages 6-e- Collateralized Mortgage Obligations).
VI,
TERM OF INVESTMENTS
Maturities of investments will be selected based on Iiquidity requirements to minimize interest
rate risk and maximize earnings. Current and expected yields will be analyzed and the portfolio
will be invested accordingly.
As specified in Government Code Section 53601, the City Council must expressly authorize the
investment of funds which mature in excess of five years. Placement of such investments cannot
occur until three months has lapsed from the date of authorization. The selection of maturities by
the Treasurer shall also take into consideration any other policies adopted by the City Council
such as an adopted policy on the Use and Management of General Fund Reserves.
VII. INTERNAL CONTROLS
City Treasurer and'City Staff shall develop and implement such administrative procedures and
internal controls which ar:.: considered prudent, given the size of the organization and the
complexity of investments. The controls are designed to prevent losses of public funds arising
from fraud, error or imprude. p.t actions by employees and officers of the City.
Existing procedures require; :.?.11 wire transfers involving investments to be fully documented and
approved by the City Trea;'zrer and Deputy City Treasurer. Monthly reconciliations to bank
statements and the related $. '~.neral ledger accounts is conducted to ensure proper handling of all
investment transactions. ;~ :-~ independent analysis by an external auditor shall be conducted
periodically to review int~-,~nal controls, account activity and compliance with policies and
procedures.
VIII. REPORT INFORMATION
EXHIBIT A
The Treasurer shall report to the City Council on a quarte~y basis within 30 days following the
end of the quarter specific information related to the City investments. At a minimum the report
shall include the following:
a)
b)
c)
d)
e)
0
g)
h)
Type of Investment
Issuer
Date of Maturity
Par and dollar mount invested
Current Market Value as of the date of the report
Source of the market value information
A statement of compliance with the investment policy
A statement as to the ability of the City to meet its expenditure requirements for
the next six months
In accordance with the Governmental Accounting Standards Board (GASB) Statement No. 31,
"Accounting and Financial Reporting for Certain Investments", as of June 30th of each Fiscal
Year the City will report all investments with maturity dates in excess of one year at market
value in the Comprehensive Annual Financial Report. Any change in the value of the
investments will be recognized on an annual basis, as a component of interest income. This
reporting change shall begin to take effect for the year ending June 30, 1998.
SELECTION OF INSTITUTIONS
In selecting the financial institutions for the deposit or investment of City of Dublin funds, the
City Treasurer shall consider the credit worthiness of institutions which are utilized. All
broker/dealers should be primary dealers regularly reporting to the New York Federal Reserve
Bank.
Efforts shall be made to monitor the credit characteristics and financial history throughout the
period in which agency funds are deposited or invested. In the case of securities purchased by or
on behalf of the agency, a third party safekeeping account, who is in no way related to the
company who sold the securities, shall be maintained in the name of the City of Dublin.
RISK TOLERANCE
As noted, diversification shall be utilized to control risk. No individual investment transaction
shall be undertaken which jeopardizes the total capital position of the overall portfolio. All
transactions will be executed on a delivery versus payment basis. When practical, a competitive
bid process will be used to place all investment purchases.
REVIEW OF INVESTMENT POLICY
This policy shall be subject to review by the City Council on an annual basis, at a public
meeting. Any recommended modifications or amendments shah be presented by Staff to the
City Council for their consideration and adoption.
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EXHIBIT A