HomeMy WebLinkAbout1993-02-09; City Council; Resolution 93-18-.
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RESOLUTION NO. 93-18
A RESOLUTION OF THE CITY COUNCIL OF
THE CITY OF CARLSBAD, CALIFORNIA,
REVISING THE CITY'S INVESTMENT POLICY
WHEREAS, the City adapted an investment policy on January
2, 1985 as required by Section 53646 of the Government Code; and
WHEREAS, the City Council may from time to time revise this
policy as may be necessary to provide proper guidance to City staff and the
City Treasurer; and
WHEREAS, the City Treasurer has reviewed the existing
investment policy and has recommended modifications which improve the
City's ability to manage inactive funds; and
NOW, THEREFORE, BE IT RESOLVED by the City Council of
the City of Carlsbad, California, as follows:
1. The attached investment policy (Exhibit A) is hereby
adopted and shall become effective immediately.
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2. That the Council finds that the investment policy
(Exhibit A) is in conformance with Sections 53601 and 53635 of the
Government Code.
PASSED, APPROVED AND ADOPTED at a regular meeting of
the City Council on the 9th day of FEBRUARY , 1993, by the following
vote, to wit:
AYES: Council Members Lewis, Stanton, Kulchin, Finnil:
NOES: None
ABSENT: Council Member Nygaard
ATTEST:
ALETHA L. RAUTENKRANZ, City Clerk (SEAL)
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CITY OF CARLSBAD
STATEMENT OF INVESTMENT POLICY
................... Revised January HZ6 ....... ~$?J~~ .............. ................. .............. ........... ....... .............. J
1.0 Introduction. The purpose of this document is to identify various policies a1
procedures that enhance opportunities for a prudent and systematic investment policy a~
to organize and formalize investment-related activities. Related activities which compri
good cash management include accurate cash projections, the expeditious collection
revenue, the control of disbursements, cost-effective banking relations, and arranging f
a short-term borrowing program which coordinates working capital requirements a
investment opportunities.
2.0 Policy. It is the policy of the City of Carlsbad to invest public funds not required f;
immediate day-to-day operations in safe and liquid investments having the highest possib
return while conforming to all state statutes governing the investment of public funds
3.0 Scope. It is intended that this policy cover the investment activities of all sw$- & ..................... .... *: ............. .............................................................. .:.:. :.:. .:.:wmt~figenty ................... ............................................................................... ................... ~sewe$ ..:.. and i4k-e~ inactive funds under the direct authority of the Cit
These"funds"are"accounted for in the City's Comprehensive Annual Financial Report ar
include:
........................................................
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
General Fund
Special Revenue Funds
Debt Service Funds
Capital Project Funds
Enterprise Funds
Internal Service Funds
Carlsbad Municipal Water District Funds
Any new funds created by the City Council, unless specifically exempted.
4.0 Objectives. 1 a The primary objectives, in order of priority, of tl
City's investment activities shall be:
a.
4.1 Safety- Safety of principal is the foremost objective of the investment psograr
Investments of the City shall be undertaken in a manner that seek to ensu
preservation of capital in the overall portfolio.
4.2 Liquidity. The City's investment portfolio will remain sufficiently liquid
enable the City to meet all operating requirements which might be reasonat
anticipated.
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4.3 Return on investment. Investment return becomes a consideration only after t:
basic requirements of safety and liquidity have been met. The City shall attempt
obtain the highest available return provided that the requirements of safety a]
liquidity are first met.
5.0 Prudence. The standard of prudence to be used shall be the "prudent investc
standard and shall be applied in the context of managing the overall portfolio. Investme]
shall be made with judgement and care--under circumstances then prevailing-- whi
persons of prudence, discretion, and intelligence exercise in the management of their ov
affairs, not for speculation, but for investment, considering the probable safety of thf
capital as well as the probable income to be derived.
6.0 Duties and Responsibilities. The management of idle cash and the investment
City funds are the responsibility of the City Treasurer as directed by the City Council.
the endeavor to have all idle cash invested all the time, the City Finance Director will ass
the City Treasurer in the gathering of information to create cash flow estimates. The Ci
Treasurer may designate a Deputy City Treasurer, who in the absence of the City Treasurc
will assume the City Treasurer's duties and responsibilities.
No person may engage in an investment transaction covered by the terms of this polj
unless directed by the City Treasurer. The City Treasurer shall be responsible for
transactions undertaken under the terms of this policy.
7.0 Ethics and conflicts of interest. All participants in the City's investment process sh
seek to act responsibly as custodians of the public trust. The City Treasurer, or wh
appropriate the Deputy City Treasurer, shall avoid any transaction that might impair pub
confidence in the City's ability to govern effectively.
8.0 Authorized investments. The City Treasurer may invest City funds in the followir
instruments as specified in the California Government Code, Section 53601, and as furth
limited in this policy.
8.1 Obligations of the U.S. Government, its agencies and instrumentalities.
8.2 Bankers Acceptances that are eligible for purchase by the Federal Reser
System. Purchases may not exceed 270 days maturity or 25% of t:
portfolio.
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8.3 Time Certificates of Deposit. Deposits should not exceed one year maturi
Deposits will be collateralized as specified in paragraph 12.0 of tl
Investment Policy.
8.4 Negotiable Certificates of Deposit issued by nationally or state-charter
bank. Purchases may not exceed 30% of the portfolio.
8.5 Prime Commercial Paper of the highest numerical rating of Mood:
Investment Services, Inc. or Standard & Poor's Corporation. Purchases m
not exceed 180 days maturity or 15% of the portfolio.
8.6 Repurchase Agreements with a maximum maturity of one week. Repurcha
agreements will only be with banks and primary dealers who have long-tel
debt rated in one of the top 2 categories of Moody's Investment Services, 11
or Standard and Poors Corporation. Investments will be collateralized
specified in paragraph 12.0 of this Investment Policy and may not exce
10% of the portfolio.
8.7 Money market funds whose portfolio consists of one or more of the foregoil
legal investments.
8.8 Medium-term Corporate Notes issued by corporations operating within tl
United States and rated in the top w @x@ ... ....................... rating categories by two of tl
three largest rating services. Purchases may not exceed 30% of the portfoli
8.9 No Load Mutual Funds investing in the securities and obligations of tl
foregoing legal investments. Purchases may not exceed 15% of the portfolj
8.1 0 Local Agency Investment Fund (LAIF) of the State of California. Investmer
will be made in accordance with the laws and regulations goveming tho:
Funds.
8.11 County Investment Pool of the County of San Diego. Investments will 1
made in accordance with the laws and regulations governing the Pool.
9.0 Diversification. The portfolio will be diversified to avoid incurring unreasonable a1
avoidable risks regarding specific security types or individual financial institutions.
addition to the limitations on specific security types indicated in paragraph 8.0 of th
Investment Policy, no more than 10% of the City's portfolio will be placed with any sing
financial institution.
10.0 Selection of financial institutions and brokers. Investments shall be purchased on
through well established, financially sound institutions. The City Treasurer shall maintaj
a list of financial institutions and brokers approved for investment. All fmanci
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institutions and brokers who desire to become qualified bidders for investment transactio
will be given a copy of the City's Investment Policy, and in turn must supply the Cj
Treasurer with the following:
10.1 Current audited financial statements.
10.2 Depository contracts, as appropriate.
10.3 A copy of the latest FDIC call report or the latest FHLBB report,
10.4 Proof that commercial banks, savings banks, or savings and loan associatic
10.5 Proof that brokerage firms are members in good standing of a natior
appropriate.
are state or federally chartered.
securities exchange.
Commercial banks, savings banks, and savings and loan associations must maintain
minimum net worth to asset ratio of 3% (total regulatory net worth divided by to1
assets), and must have had a positive net earnings for the last reporting period.
When two or more investment opportunities offer essentially the same maturity, liquidil
yield, and quality, priority will be given first to the financial institutions based in the Cj
of Carlsbad, and second to other financial institutions in the State of California.
11.0. Purchase and Payment. A competitive bid process, when practical, will be used
place all investment purchases. Purchases on margin will not be made. Payment f
securities will be done on a Delivery Versus Payment (DVP) basis via the City's custodia
12.0 Collateralization. Investments in time certificates of deposit shall be fully insur
up to $100,000 by the Federal Deposit Insurance Corporation or the Federal Savings
Loan Insurance Corporation, as appropriate. Investments in time certificates of deposit
excess of $100,000 shall be properly collateralized. Section 53652 of the Califon
Government Code requires that the depository pledge securities with a market value of
least 10°/o in excess of the City's deposit as collateral in government securities, and 5C
in excess of the deposit as collateral in mortgage pools. Section 53649 of the Califon
Government Code specifies that the City Treasurer is responsible for entering into depo.
contracts with each depository.
Investments in repurchase agreements must also be collateralized. In order to anticipa
market changes and provide a level of security for all funds, the collateralization level w
be 102% of market value of principal and accrued interest.
13.0 Maximum maturities. To the extent possible, the City Treasurer will attempt
match investments with anticipated cash requirements. Unless matched to a specific ca
flow, the City Treasurer will maintain the following policy on investment maturities.
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13.1 At least 50% of the portfolio will be invested in instruments maturing witk
one year from the current date. An additional 25% of the portfolio may ha
maturities extending to 3 years from the current date, and the remaini
25% may have maturities extending to 5 years from the current. Investme1
having a maturity greater than 5 years will not be made except as provid
in paragraph 13.3 of this Investment Policy.
13.2 The average portfolio investment maturity shall be 3 years or less. A doll;
weighted average will be used in computing the average maturity of t
portfolio.
13.3 Before an investment is made in securities that mature more than 5 ye2
from the current date, the City Treasurer and the Financial Manageme
Director will review the City's long term cash needs. Both must conc
before such an investment is made. Investments beyond 5 years will not
greater than 10% of the portfolio, and will be counted in the percentage
the portfolio that may mature beyond 3 years. No investments will be ma
that mature beyond 10 years from the current date.
To further provide for liquidity, investments will be made only in readily marketak
securities actively traded in the secondary market.
14.0 Performance standard. The investment portfolio shall be designed to attain
market-average rate of return throughout budgetary and economic cycles, taking in
account the City's risk constraints, the cash flow characteristics of the portfolio, and sta
and local laws, ordinances or resolutions that restrict investments. Given the
requirements, the basis used by the City Treasurer to determine whether market yields a
being achieved shall be the rate of return of the Local Agency Investment Fund (LAIF)
it existed 3 months prior. A dollar-weighted average will be used in calculating the ra
of return of the City's portfolio.
15.0 Active and passive trading. Active and passive trading of securities is authorize
Active trading is the buying and selling of securities in the market in an effort to ta:
advantage of short term profits and advantageous arbitrage situations. Passive trading
the purchase of securities and their retention until they mature. Active trading can res1
in occasional loss of principal and should be engaged in only when there appears to be
clear advantage at the outset.
16.0 Safekeeping and custody. All security transactions, including collateral fi
repurchase agreements, entered into by the City shall be conducted on a delivery-v5
payment basis. All securities owned by the City will be held by a third-party custodi;
designated by the City Treasurer and evidenced by a statement from the custodian. k
securities will be held in the nominee name of the custodian.
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Collateral for time deposits in savings and loans will be held by the Federal Home Lo,
Bank or an approved Agent of Depository. Collateral for time deposits in banks will
held in the City's name in the bank's Trust Department or in the Federal Reserve Bank
17.0 Reporting. California Government Code 53646 requires that a monthly investme
report be made to the City Council. The following elements will be included in t
monthly report.
17.1 Type of investment
17.2 Institution
17.3 Date of maturity
17.4 Amount of deposit or cost of the security
17.5 Current market value of securities with a maturity in excess of 12 mont€
17.6 Yield to maturity
17.7 Weighted average yield of the portfolio
17.8 Weighted average days to maturity of the portfolio from the current dat
17.9 Percent of portfolio maturing within one year
17.10 Percent of portfolio maturing between one and 3 years
17.11 Percent of portfolio maturing between 3 years and 5 years
17.12 Percent that each type of investment represents in the portfolio
An annual report will also be made to the City Council following the close of the fisc
year. Among other items, the annual report will include an analysis of the composition
the fund; a review of trends regarding the size of the fund, portfolio yields, and ca
income; and a statement regarding anticipated fund activity in the next fiscal year.
18.0 Short-term borrowing. The City is permitted by law to borrow money to mc
current short-term cash flow needs. These needs may arise either because projected ca
disbursements exceed projected cash receipts, or because the City's cash accounts may
temporarily overdrawn due to the efforts to invest 100% of idle funds at all times. '
provide for these contingencies the City Treasurer is authorized to take the followi
actions:
18.1 Short-term loan. When there is a shortfall between projected cash revenu
and projected cash disbursements, the City Treasurer will secure a loan in tl
amount that would equal the cash deficit plus projected cash disbursements for 01
month. Any such loan will be repaid within one year.
18.2 Line of credit. The City Treasurer will maintain a line of credit with the Cit]
bank in an amount to cover sums temporarily overdrawn because of efforts to invc
all idle funds at all times.
19.0 Exceptions. Occasionally, exceptions to some of the requirements specified in tl
Investment Policy may occur because of events subsequent to the purchase of investme
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instruments, e.g., the rating of a corporate note held in the portfolio is downgraded belc
an W $:A;$ rating, or total assets in the portfolio decline causing the percentage invest
in corporate notes to rise above 30%, or an unforeseen expenditure causes investmer
maturing within one year to fall below 50% of the portfolio.
State law is silent as to how exceptions should be corrected. Exceptions may be tempor:
or more lasting; they may be self-correcting or require specific action. If specific action
required, the City Treasurer should determine the course of action that would corrc exceptions to move the portfolio into compliance with State and City requiremer
Decisions to correct exceptions should not expose the assets of the portfolio to undue ri:
and should not impair the meeting of financial obligations as they fall due. A
subsequent investments should not extend existing exceptions. Exceptions, and t
decisions to correct the exceptions, will be reviewed with the Investment Revif
Committee referred to in paragraph 21.0 below.
20.0 Internal control. This policy and the strategy for and conduct of the investment
City funds will be reviewed by an Investment Review Committee as set forth below and
the City‘s auditors in the conduct of their annual audit of the City.
21.0 Review. An Investment Review Committee is hereby established to conduct reviel
of the City‘s investment portfolio, the strategy being utilized for the investment of C:
funds, and the City‘s investment policy. This Committee will be composed of the C
Treasurer (acting as the Chair), the Deputy City Treasurer, and the Financial Managemc
Director. Additionally, an outside financial advisor may be included as an advisor witho
a vote. The Committee will be convened periodically as necessary or desirable but no le
frequently than once each quarter.
22.0 Investment policy adoption. Section 53646(a) of the California Government Col
requires the City Treasurer or Chief Fiscal Officer to render annually to the legislative bo1
of the local agency a statement of investment policy. The City‘s investment policy shall
adopted by resolution of the City Council. The policy shall be reviewed as required but
least on an annual basis by the Investment Review Committee. Any modifications must
approved by the City Council.
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