HomeMy WebLinkAbout1996-02-13; City Council; 13519; ANNUAL REVIEW OF CITY INVESTMENT POLICYe
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- d, 3Gi dRy OF CARLSBAD - AGEND . ILL !
AB# 13; 5 L 7 TITLE: DEPT. I.
MTG. 02/13/96 ANNUAL REVIEW OF CITY INVESTMENT POLICY clTY A’ -7
DEPT. .. CITY Mc TREASURY
RECOMMENDED ACTION:
Adopt Resolution No. %@-6( approving the City’s investment policy.
ITEM EXPLANATION:
The effective management of the City’s investment portfolio plays an important
role in maintaining Carlsbad’s fiscal health. The portfolio is made up of funds
special uses. Among other responsibilities, it is the City Treasurer’s job to
ensure that these funds will be available when needed, and to manage this
resource in a prudent way to provide an acceptable rate of return on investmen
The Treasurer is guided in this process by the City’s investment policy. This
policy sets out the City’s plan for investment of funds based on acceptable lev€
of security, liquidity, and yield.
Under section 53646(a) of the California Government Code the City Treasurer
must present an investment policy to the City Council on an annual basis for th
review and approval. This annual review also gives the Treasurer an opportunil
to recommend revisions to the investment policy, or to improve the plan to takc
advantage of market changes.
received from many sources having a variety of restrictions, designations, or
The Treasurer has assembled an investment review committee made up of the
Assistant City Manager, Financial Management Director, City Attorney, an outsic
financial advisor, and himself to review the status of investments and potential
changes to the policy prior to recommending these changes to the City Counci
This committee meets no less frequently than once each quarter.
.The events of the past year in Orange County and San Diego County promptec
several changes in the California Government Code regarding the investment 0’
public funds. The changes made by the State primarily focused on improving
accountability and safety. For the most part, the action taken by the State
Legislature did not affect the City because the enacted changes were already
part of the City’s investment policy. In fact, in some cases the City has even
greater accountability and safety in its investment practices.
Most of the changes recommended by the City Treasurer this year are change:
parallel the state code. A few changes, however, that pertain to improving
that either update paragraph references to the state code or change wording tc
Page 2 of Agenda Bi R 0. 1’3, 5 17 e
accountability and safety are being recommended. These are summarized as
follows:
a. The statement on ethics and conflicts of interest (paragraph 7.0) has
been made more explicit with regard to actions taken and resolution of potential conflicts.
b, Statements regarding unauthorized investments and investment
activities have been included (paragraph 9.0).
c. Diversification has been given greater breadth in that no more than
5% (in lieu of 10%) of the City’s portfolio may be placed with any
single issuer (paragraph 10.0).
d. The monthly report will include par values and market values of
investments, credit ratings of corporate notes, a statement regarding
sufficiency of cash to meet .obligations for the next six months, and i
statement regarding compliance with the City’s investment policy
(paragraph 18.0).
FISCAL IMPACT:
There is little or no fiscal impact relative to the City’s current investment
practices. However, now that many of the City’s investment practices have bee
mandated by the State, there exists the possibility for some reimbursement. A
.test claim for reimbursement must first be filed with the Commission on State
Mandates. The outcome of any such claim is problematic, and if successful,
would not be forthcoming for a year or more. It is the intention of the Treasure1
to assist in the filing of a claim.
EXHIBITS:
1. Resolution No. 96 -6 1 adopting a revised City investment policy.
2. Revised City Investment Policy.
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@ 0 Exhibit 1
RESOLUTION NO. 96-61
RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF CARLSBAD, CALIFORNIA,
/?WISING THE CITY’S INVESTMENT POLICY
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WHEREAS, the City adopted an investment policy on January 2, 198:
as required by Section 53646 of the California Government Code; and
WHEREAS, Section 53646(a) of the California Government Codc
requires the City Treasurer to render annually to the City Council a statement c
investment policy; and
WHEREAS, the City Council may from time to time revise this polic
as may be necessary to provide proper guidance to City staff and the CitJ
Treasurer; and
WHEREAS, the City Treasurer has reviewed the existing investmen
policy and has recommended modifications which improve the City’s ability tc
manage inactive funds; and
NOW, THEREFORE, BE IT RESOLVED by the City Council of the Cip
of Carlsbad, California as follows:
1. The attached investment policy (Exhibit 2) is hereby adopted anc
shall become effective immediately.
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2. That the Council finds that the investment policy (khibit 2) is ir
conformance with Sections 53601 and 53635 of the California Government Code,
PASSED, APPROVED AND ADOPTED at a regular meeting of the CitJ
Council on the 13thday of February , 1996, by the following vote, to wit:
AYES: Council Members Lewis, Nygaard, Kulchin, Finnila
NOES: None
ABSENT: None
ATTEST:
ll&& A: R,+
ALETHA L. RAUTENKRANZ, City Clerk (SEAL)
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Exhibit 2
CITY QF CARLSBAD
STATEMENT OF INVESTMENT POLICY
Approved by City Council Fetxtwy ! 4, ! 9Q6
1.0 Introduction. The purpose of this document is to identify various policies i
procedures that enhance opportunities for a prudent and systematic investment PO
and to organize and formalize investment-related activities. Related activities wt
comprise good cash management include accurate cash projections, the expeditil
collection of revenue, the control of disbursements, cost-effective banking relations, i
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 aaa:p~ - return while conforming to all state statutes &M$*#$$Q ............................ ............................ ...............................
................................... ................................................... ......................................................... fi"
3.0 ' Scope. It is intended that this policy cover the investment activities oi
nvm&#@&$p@w governing the investment of public funds. ........................
.................................................. .... ::::::::::::::::::::::::::::::::::::
contingency reserves and inactive cash under the direct authority of the City.
3.1 Pooled Investments. Investments for the City and its component units wil
made on a pooled basis, including the City of Carlsbad, the Housing authorit
the City of Carlsbad, the Parking Authority of the City of Carlsbad, the Ci?
Carlsbad Public Improvement Corporation, the Carlsbad Redevelopment Age!
and the Carlsbad Municipal Water District. The City's Comprehensive An1
Financial Report identifies the fund types involved as follows:
3.1.1 General Fund
3.1.2 Special Revenue Funds
3.1.3 Debt Service Funds
3.1.4 Capital Project Funds
3.1.5 Enterprise Funds
3A6 Internal Service Funds
exempted.
3.2 Investments held separately. $fiv~m+~@ &E& ...............................................
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When two or more investment opportunities offer essentially the same maturity, liquil
yield, and quality, priority will be given first to the financial institutions based in the
of Carlsbad, and second to other financial institutions in the State of California.
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when it is clearly favorable to do so.
Investments held separately for bond proceeds will follow the trust indenture for e
issue.
16.0. Performance standard for pooled investments. Laddered maturities and a
and hold strategy for pooled investments will cause the investment portfolio to attz
market-average rate of return through-out budgetary and economic cyc
least 50% of the portfolio must mature within 1 year, the rate of return will be t~
closely related to, but lag behind, changes in short-term market rates. The rate of re
of the investment Dortfolio will be based on the maturitv value of the'investments
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dollar-weighted average &$f&&$$~~~&@&g will be used in calculating the rate of re
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18.10 . Percent that each tVpe of investment represents in the portfolio
An annual report will also be made to the City Council following the close of the fi
year. Among other items, the annual report will include an analysis of the compos
of the fund; a review of trends regarding the size of the fund, portfolio yields, and c
income; and a statement regarding anticipated fund activity in the next fiscal year,
19.0 Short-term borrowing. The City is permitted by law to borrow money to r
current short-term cash flow needs. These needs may arise either because projel
cash disbursements exceed projected cash receipts, or because the City's c
accounts may be temporarily overdrawn due to the efforts to invest 100% of inac
funds at all times. To provide for these contingencies the City Treasurer is author
to take the following actions:
19.1 Short-term loan. When there is a shortfall between projected cash revel
and projected cash disbursements, the City Treasurer will secure a loan in
amount that would equal the cash deficit plus projected cash disbursement
one month. Any such loan will be repaid within one year.
19.2 Line of credit. The City Treasurer may maintain a line of credit witt City's bank in an amount to cover sums temporarily overdrawn because of ef
to invest all $''a@&& ifHe funds at all times. . . . . . . . . . . . .,.( .............. ....................... . ... .. . . . .
20.0 Exceptions. Occasionally, exceptions to some of the requirements specified ir
Investment Policy may occur for pooled investments because of events subseque
the purchase of investment instruments, e.g., the rating of a corporate note held il
portfolio is downgraded below an "AA" rating, or total assets in the portfolio de
causing the percentage invested in corporate notes to rise above 30%, or an unfore
expenditure causes investments maturing within one year to fall below 50% o
portfolio.
State law is silent as to how exceptions should be corrected. Exceptions ma
temporary or more lasting; they may be self-correcting or require specific actio1
specific action is required, the City Treasurer should determine the course of actior
would correct exceptions to move the portfolio into compliance with State and
requirements. Decisions to correct exceptions should not expose the assets c
portfolio to undue risk, and should not impair the meeting of financial obligations as
fall due. Any subsequent investments should not extend existing excepl
Exceptions, and the decisions to correct the exceptions, will be reviewed wit1
Investment Review Committee referred to in paragraph 22.0 below.
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21.0 Internal control. This policy and the strategy for and conduct of the investm
of City funds will be reviewed by an Investment Review Committee as set forth below i
by the City's auditors in the conduct of their annual audit of the City.
22.0 Review. An Investment Review Committee is hereby established to conc
reviews of the City's investment portfolio, the strategy being utilized for the investn
of City funds, and the City's investment policy. This Committee will be composed of City 'Treasurer (acting as the Chair) fi@(&'y~&@&@ '@&&lM @$y $.&Q@@+~
f . ..... . .. :::..::.;:.:::::::. . .. . .. . .. .... . .. ::::-..' . .. ... ':":'.::::: ... _. . .. _. :.: . ... .. :.:.:.:.:.:.:.::.: . .. . .. ... .... ::..::I ............. ............................. . .. . .... .. ... .............................................................................................. . .. .. . ..............,. .:. . ..~.,.,.,_,,.(_"l _.__.,.,.,.(,,,._, . .-, ,_, . :..... Financial Management Director, and the Deputy City Treasurer &$$a t@$!Qn&$@
f@@&@#, Additionally, an outside financial advisor may be included as an adv
without'a'iote. The Committee will convene periodically as necessary or desirable
no less frequently than once each quarter.
23.0 Investment policy adoption. Section 53646(a) of the California Government CI
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 PC
shall be adopted by resolution of the City Council. The policy shall be reviewec
required but at least on an annual basis by the Investment Review Committee.
modifications must be approved by the City Council.
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