HomeMy WebLinkAbout1989-11-07; City Council; Resolution 89-375,*
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RESOLUTION NO. 89-375
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF CARLSBAD, CALIFORNIA, REVISING THE CITY'S INVESTMENT POLICY.
WHEREAS, the City adopted an investment pol icy on January 2, 198
4 I( and revised on March 28, 1989, as required by Section 53646 of t'
5 // Government Code, and
6 /I WHEREAS, the City Council may from time to time revise this policy
7 // may be necessary to provide proper guidance to City staff and the Ci
8 11 Treasurer, and
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WHEREAS, the City Treasurer has reviewed the existing investmc
pol icy and has recommended minor modifications which improve the Ci tj
abil i ty to manage inactive funds, and
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City
Carlsbad, California, as follows:
l4 I1 1) The attached investment policy (Exhibit A) is hereby adopted i
l5 11 shall become effective immediately,
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2) That the Council finds that the investment policy (Exhibit A)
in conformance with Sections 53601 and 53635 of the Government Code.
l8 !/ PASSED, APPROVED AND ADOPTED at a regular meeting of the City Counc
19 I of the City of Carl sbad, California, held on the 7th day of Novembel
1989, by the following vote, to wit: 20
21 AYES: Council Members Lewis, Kulchin, Pettine, Mamaux and Larson
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NOES: None
ABSENT : None
ATTEST:
26 J&Gz&~
27 ALETHA L. RAUTENKRANZ, City Cler
28 (SEAL)
0 a EXHIBIT A
RevisedSeptember26, 198
CITY OF CARLSBAD
STATEMENT OF INVESTMENT POLICY
I. INTRODUCTION
Section 53646(a) of the Cal i fornia Government Code requires th Treasurer or Chief Fiscal Officer to render annually to the legislativ body of the local agency a statement of investment policy. Th statement of investment policy set forth herein is a revision of ths City of Carlsbad’s Investment Pol icy as approved by the Carlsbad Cit. Council on January 2, 1985, and as revised on March 28, 1989. I provides policy guidance for the investment of all City funds no required for the immediate day-to-day operation of the City.
11. BACKGROUND
A. OBJECTIVE - The primary investment objective is the pruden utilization of surplus cash and idle or inactive City funds t generate a reasonable rate of return with an understanding an recognition of the associated risks involved. The City shal strive to maintain the level of investment of all idle funds a close to one hundred percent as possible through daily an projected cash flow determinations and forecasts as made availabl by the City’s Director of Finance.
B. RESPONSIBILITY - The management of idle cash and the investmen of City funds are the responsibility of the City Treasurer a directed by the City Council. The Treasurer will also be guide1 in this responsibility by the Government Code of the State o Cal iforni a specifying legal investments, by the prudent man rul and by the provisions of this policy.
C. DELEGATION OF RESPONSIBILITY - In the absence of the Cit, Treasurer, the Deputy City Treasurer will assume the Treasurer’ duties and responsi bi 1 it i es.
D. LEGAL INVESTMENTS PERMITTED UNDER STATE LAW - The City Treasure may invest City funds in the following instruments as specifie in the Government Code, Section 53601 and as further limited i this pol icy.
- Obligations of the U.S. Government, its agencies an( instrumentalities.
- Registered state warrants or treasury notes or bonds of thl State of Cal i forni a.
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- Bonds, notes or warrants of any local agency within the Stat' of California.
- Time Certificates of Deposits and Negotiable Certificate of Deposit offered by commercial banks, savings and loa institutions and state and federal credit unions. Negotiabl Certificates of Deposit are limited to 30% of the portfolio
- Prime bankers acceptance with the following limitations:
a. Must be eligible for purchase by the Federal Reservl System.
b. May not exceed 270 days maturity or 25% of the City' portfol i 0.
c. No more than 10% of the City's portfolio may be investe in the bankers acceptances of any one commercial bank
- Prime Commercial Paper of the highest numerical rating o Moody's Investment Services, Inc., or Standard & Poor Corporation. Commercial paper may not exceed 30% of thl total portfolio or 180 days maturity.
- Repurchase Agreements.
- Reverse Repurchase Agreements.
- Money market funds whose portfolio consists of one or mor' of the foregoing legal investments.
- Mortgage Securities purchased under Repurchase Agreements May not exceed 95% of fair market value and 25% of eligibl funds .
- Medium-Term Corporate Notes of U.S. companies with a maximur maturity of five years and rated in the top three ratin! categories by two of the three largest rating services Purchases limited to 15% of eligible funds.
- No Load Mutual Funds investing in the securities ant obligations of the foregoing legal investments. Purchase: limited to 15% of the eligible funds.
The City may also invest idle funds in the State of Californit Local Agency Investment Fund in accordance with the laws an1 regulations governing such investments.
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111. INVESTMENT PHILOSOPHY
A. BASIC PREMISE - The basic premise underlying the City's investment philosophy is to insure that sufficient funds are available to meet the obligations of the City when needed. The investment pol icy of the City is one that seeks aggressive management of
inactive cash balances, yet emphasizes the safety, liquidity and security of the investment instruments.
B. ACCEPTABLE RISK - Acceptable risk, as it relates to this investment policy, is defined as that risk which a person is permitted to take in the investment of the City's funds under the terms and intent of the Prudent Man Rule which states, in essence, that "in investing . .. property for the benefit of another, a trustee shall exercise the judgement and care under the circumstances then prevailing, which men of prudence, discretion and intelligence, exercise in the management of their own affairs."
C. PREFERENCES - When two or more investment opportunities offer essentially the same maturity, yield, quality and liquidity, priority will be given first to the financial institutions based in the City of Carlsbad, and second to other financial institutions in the State of California.
D. ETHICS - All participants in the City's investment process shall seek to act responsibly as custodians of the public trust. The City Treasurer shall avoid any transaction that might impair public confidence in the City's ability to govern effectively.
IV. POLICY STATEMENT
A. INVESTMENT LIMITS - To insure that invested funds are always available when needed, the City Treasurer will maintain thc following policy on investment maturities.
1. At least 67% of the portfolio will be invested in instrument: with maturities of less than one year from the current date.
2. No more than 33% of the portfol io may be invested ir instruments maturing one year or more from the current date, with no more than 10% of the portfolio invested in maturitie: beyond ten years from the current date.
3. The City Treasurer shall maintain an average portfol ic investment maturity of 3 years or less. If the averagc maturity exceeds 3 years at any time, the Treasurer shall take steps to reduce the average maturity to three year: within 90 days from such time.
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Investments will be made only in readily marketable
securities, actively traded in the secondary market. No more than 10% of the investment portfol io will be placed with any one financial institution. If a decline in the portfolio results in more than 10% of the total being invested with one institution, the funds necessary to reduce the investment to 10% will be removed upon maturity or when no loss would occur.
4. Any investment in securities with maturities greater than five years will require that:
a) The City Treasurer first consult with and receive the approval of the Finance Director for such investment.
b) The City Treasurer and Finance Director review the City’z long term cash flow needs prior to making suct investments.
B. INVESTMENT CRITERIA - The criteria for selecting investments, bJ order of priority, shall be:
1. Safety. It is the Treasurer’s primary duty anc responsi bi 1 ity to protect, preserve and maintain intact cast and investments placed in trust with the Treasurer on behali of the citizens of the community.
2. Liauiditv. An adequate percentage of the portfolio shoulc be maintained in liquid short-term securities which can bc converted to cash if necessary to meet disbursemenl requirements.
3. Yield. Yield becomes a consideration only after the basic requirements of safety and 1 iquidi ty have been met. Thc City shall attempt to obtain the highest available yieldin! investment provided that the criteria for safety an( liquidity are first met.
Section 53637 of the Government Code requires money to bc deposited in any depository selected from those banks and saving: and loan associations agreeing to pay the highest rate 0- interest.
The City seeks to attain market rates of return on its investment: consistent with constraints imposed by safety, cash flo\ considerations, and state laws that restrict the placement 0‘ pub1 i c funds.
U.S. Government and Agency obligations are the highest qualit: investments available to the City in terms of investment safet: and liquidity.
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C. INSURED INVESTMENTS - Investments in commercial bank and savings and loan institution time certificates of deposit shall be fully insured up to $100,000 by the Federal Deposit Insurance Corporation and the Federal Savings & Loan Insurance Corporation respectively.
D. COLLATERALIZATION - Investments in certificates of deposit in excess of $100,000 shall be properly collateralized. Government Code Section 53649 specifies that the City Treasurer is responsible for entering into deposit contracts with each depository. Section 53652 of the Government Code requires that the depository pledge securities with a market value of at least 10% in excess of the City‘s deposit as collateral in government securities and fifty percent in excess of the deposit as coli ateral in mortgage pool s.
E. ACTIVE AND PASSIVE TRADING - Active and passive trading of securities is authorized. Active trading is the buying and selling of securities in the market in an effort to take advantage of short term profits and advantageous arbitrage situations. Passive trading is the purchase of securities and their retention until they mature. Active trading can result in occasional loss of principal and should be engaged in only when there appears to be a clear advantage at the outset.
F. SELECTION OF FINANCIAL INSTITUTIONS - Investments shall be purchased only through well established, financially sound institutions. The City shall maintain a list of financial institutions approved for investment. Commercial banks and savings and loan associations must be State or Federally chartered and must maintain a minimum net worth to asset ratio of three percent. Total regulatory net worth divided by total assets equals the net worth to asset ratio. They must also have a positive net earnings for the last reporting period. Commercial banks must have on file in the Treasurer’s Office a current FDIC call report and savings and loans must have on file in the Treasurer’s Office the latest monthly FHLBB report. Brokerage firms must be members in good standing of a national securities exchange.
G. SHORT-TERM BORROWING - The City is permitted by 1 aw to borroh money to meet current short-term cash flow needs during period5 when projected cash disbursements exceed projected cash receipts through the use of tax exempt instruments such as revenuc anticipation notes and tax anticipation notes. The amount whict can be borrowed equals the total of the cash deficit plu! projected cash disbursements for one month. These funds may bc borrowed at the beginning of the fiscal year and repaid at the en( of the year.
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H. LINE OF CREDIT - The effort to maintain idle funds 100% invested at a1 1 times can result in the City’s cash accounts being temporarily overdrawn from time to time. To guard against this, the City is authorized to maintain a line of credit with the City’s bank in a sufficient amount to cover sums temporarily overdrawn.
V. REPORTING AND REVIEW
A. REPORTS - The Treasurer shall annually review the Statement of Investment Pol icy and report to the City Council. The Treasurer shall also submit to the City Council a monthly report showing type of investment, institution, maturity date, amount of deposit, current market value of all securities with a maturity of more than twelve months, and rate of interest. This report will show its relationship to the statement of investment policy.
B. REVIEW - This policy and the strategy for and conduct of the investment of City funds will be reviewed by an investment review committee as set forth below and by the City’s auditors in the conduct of their annual audit of the City.
C. INVESTMENT REVIEW COMMITTEE - An Investment Review Committee is hereby established to conduct periodic reviews of the City‘s investment portfolio, the strategy being utilized for the investment of City funds, and the City’s investment policy. This Committee will be composed of the City Treasurer, the Deputy City Treasurer and the City Finance Director as voting members. Additionally, an outside financial advisor may be included as ar advisor without a vote. The Committee will be convenec periodically as necessary or desirable but not less often thar quarterly.
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