HomeMy WebLinkAbout1995-02-14; City Council; Resolution 95-33v
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RESOLUTION NO. 95-33'
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 14th day of FEBRUARY , 1995, by the following
vote, to wit:
AYES: Council Members Lewis, Nygaard, Kulchin, Finnil
NOES: None
ABSENT: None
ATTEST:
ALETHA L. RAUTENKRANZ, city c7eL;;;, (SEAL)
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CITY OF CARLSBAD EXHIBI'
STATEMENT OF INVESTMENT POLICY
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1.0 Introduction. The purpose of this document is to identify various policies
procedures that enhance opportunities for a prudent and systematic investment PC
and to organize and formalize investment-related activities. Related activities wl
comprise good cash management include accurate cash projections, the expedit
collection of revenue, the control of disbursements, cost-effective banking relations,
arranging for a short-term borrowing program which coordinates working caF
requirements and investment opportunities.
2.0 Policy. It is the policy of the City of Carlsbad to invest public funds not requ
for immediate day-to-day operations in safe and liquid investments having the higk
possible return while conforming to all state statutes governing the investment of pu
funds.
3.0 Scope. It is intended that this policy cover the investment activities of
contingency reserves and inactive #m& ka$h .............. under the direct authority of the City. ...........................
3.1 .I
3.1.2
3.1.3
3.1.4
3.1.5
3.1.6
844
3.1.8
General Fund
Special Revenue Funds
Debt Service Funds
Capital Project Funds
Enterprise Funds
Internal Service Funds
Any new funds created by the City Council, unless specific
exempted.
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4.0 Objectives. The primary objectives, in order of priority, of the City's investme,
activities shall be:
4.1 'Safety. Safety of principal is the foremost objective of the investment prograr
Investments of the City shall be undertaken in a manner that seek to ensul
preservation of capital in the overall portfolio.
4.2 Liquidity. The City's investment portfolio will remain sufficiently liquid to enab
the City to meet all operating requirements which might be reasonably anticipate(
4.3 Return on investment. Investment return becomes a consideration only aft
the basic requirements of safety and liquidity have been met. The City shall attem
to obtain the highest available return provided that the requirements of safety ar
liquidity are first met.
The City Treasurer shall strive to maintain the level of investment of all contingenc
reserves and inactive funds as close to 100% as possible. While the objectives of safe
and liquidity must first be met, it is recognized that portfolio assets represent a potenti
source of significant revenues. It is to the benefit of the City that these assets t
managed to produce optimum revenues, consistent with state statutes and loc
ordinances.
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 portfoli
Investments shall be made with judgement and care--under circumstances thc
prevailing-- which persons of prudence, discretion, and intelligence exercise in tt
management of their own affairs, not for speculation, but for investment, considering tt
probable safety of their capital as well as the probable income to be derived.
6.0 Duties and Responsibilities. The management of inactive cash and the investme
of City funds are the responsibility of the City Treasurer as directed by the City Counc
In the endeavor to have all inactive cash invested all the time, the City Finance Direct
will assist the City Treasurer in the gathering of information to create cash flow estimate
The City Treasurer may designate a Deputy City Treasurer, who in the absence of tl
City Treasurer, will assume the City Treasurer's duties and responsibilities.
No person may engage in an investment transaction covered by the terms of this polil
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 proce
shall seek to act responsibly as custodians of the public trust. The City Treasurer,
when appropriate the Deputy City Treasurer, shall avoid any transaction that might imp;
public confidence in the City's ability to govern effectively.
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8.1.10 Local Agency Investment Fund (LAIF) of the State of California
Investments will be made in accordance with the laws an(
regulations governing those Funds.
8.1.1 1 County Investment Pool of the County of San Diego. Investment will be made in accordance with the laws and regulations governin! the pool. ~~v~~'iifi-~8~~wl~~~~~~~~~~i~~~o~~~~ p~rtfoj&, . . ... ... . .. . . . . .. . ... ... . .. . ..................... .t . . . . .. . _,. .......................................... . . . . ..... . . . .. . . . ......... . . .
:e .:.:. ................................................ :.:,:. .................................................... :,:,:, ...................................................... ................................. ......_.,.....__. ::::::.:.:::::.: , _,,,, ,_
9.0 Diversification. The portfolio will be diversified to avoid incurring unreasonabl
and avoidable risks regarding specific security types or individual financial institution!
In addition to the limitations on specific security types indicated in paragraph 8.0 of thl
Investment Policy, no more than 10% of the City's portfolio will be placed with any sing1
financial institution.
10.0 Selection of financial institutions and brokers. Investments shall be purchase
only through well established, financially sound institutions. The City Treasurer shz
maintain a list of financial institutions and brokers approved for investment. All financi;
institutions and brokers who desire to become qualified bidders for investmer
transactions will be given a copy of the City's Investment Policy, and in turn must suppl
the City 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, E
10.4 Proof that commercial banks, savings banks, or savings and loa
10.5 Proof that brokerage firms are members in good standing of a nation
appropriate.
associations 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 Ci
of Carlsbad, and second to other financial institutions in the State of California.
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11 .O Purchase and Payment. A competitive bid process, when practical, will be usec
to place all investment purchases. Purchases on margin will not be made. Payment fc
securities will be done on a Delivery Versus Payment (DVP) basis via the City’
custodian.
13.2
13.3
The average portfolio investment maturity shall be 3 years or less.
dollar-weighted average will be used in computing the average maturi
of the portfolio.
Before an investment is made in securities that mature more than 5 yea
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 n
be greater than 10% of the portfolio, and will be counted in tf
percentage of the portfolio that may mature beyond 3 years. b
investments will be made that mature beyond 10 years from the curre
date.
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To further provide for liquidity, investments will be made only in readily marketal:
securities actively traded in the secondary market.
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16.0 Safekeeping and custody. All security transactions, including collateral .
repurchase agreements, entered into by the City shall be conducted on a delivery-v
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.
securities will be held in the nominee name of the custodian. Collateral for time depos
in savings and loans will be held by the Federal Home Loan Bank or an approved Agc
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 ti
monthly report.
of Depository. Collateral for time deposits in banks will be held in the City's name in t
17.1
17.2
17.3
17.4
17.5
17.6
17.7
17.0
17.9
17.10
17.1 1
17.12
Type of investment
Institution
Date of maturity
Amount of deposit or cost of the security
Current market value of securities - sf 12 TT)BRu
Yield to maturity
Weighted average yield of the portfolio
Weighted average days to maturity of the portfolio from the current da
Percent of portfolio maturing within one year
Percent of portfolio maturing between one and 3 years
Percent of portfolio maturing between 3 years and 5 years
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 compositic
of the fund; a review of trends regarding the size of the fund, portfolio yields, and cas
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 mec
current short-term cash flow needs. These needs may arise either because projecte
cash disbursements exceed projected cash receipts, or because the City's cas
accounts may be temporarily overdrawn due to the efforts to invest 100% of inactib
funds at all times. To provide for these contingencies the City Treasurer is authorize
to take the following actions:
18.1 Short-term loan. When there is a shortfall between projected cash revenue
and projected cash disbursements, the City Treasurer will secure a loan in th
amount that would equal the cash deficit plus projected cash disbursements for on
month. Any such loan will be repaid within one year.
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18.2 Line of credit. The City Treasurer may maintain a line of credit with the Cio
bank in an amount to cover sums temporarily overdrawn because of efforts
invest all idle funds at all times.
19.0 Exceptions. Occasionally, exceptions to some of the requirements specified in tt Investment Policy may occur f'~~~~:~)rd~~~v~~~e~~~ because of events subsequent
the purchase of investment instruments, e.g., the rating of a corporate note held in t
portfolio is downgraded below an "A" rating, or total assets in the portfolio decli
causing the percentage invested in corporate notes to rise above 30%, or an unforese
expenditure causes investments maturing within one year to fall below 50% of t
portfolio.
State law is silent as to how exceptions should be corrected. Exceptions may
temporary or more lasting; they may be self-correcting or require specific action.
specific action is required, the City Treasurer should determine the course of action t;
would correct exceptions to move the portfolio into compliance with State and C
requirements. Decisions to correct exceptions should not expose the assets of .
portfolio to undue risk, and should not impair the meeting of financial obligations as tt
fall due. Any subsequent investments should not extend existing exceptio
Exceptions, and the decisions to correct the exceptions, will be reviewed with i
Investment Review Committee referred to in paragraph 21 .O below.
20.0 Internal control. This policy and the strategy for and conduct of the investmc
of City funds will be reviewed by an Investment Review Committee as set forth below 3
by 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 cond
reviews of the City's investment portfolio, the strategy being utilized for the investm
of City funds, and the City's investment policy. This Committee will be composed of
City Treasurer (acting as the Chair), the Deputy City Treasurer, and the Finanl
Management Director. Additionally, an outside financial advisor may be included as
advisor without a vote. The Committee will be convened periodically as necessar)
desirable but no less frequently than once each quarter.
22.0 Investment policy adoption. Section 53646(a) of the California Government Cc
requires the City Treasurer or Chief Fiscal Officer to render annually to the legisla
body of the local agency a statement of investment policy. The City's investment PO
shall be adopted by resolution of the. City Council. The policy shall be reviewed
required but at least on an annual basis by the Investment Review Committee. 1
modifications must be approved by the City Council.
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