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HomeMy WebLinkAbout1986-08-05; City Council; Resolution 87271 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 RESOLUTION NO. 8777 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA REVISING THE CITY'S INVESTMENT POLICY. WHEREAS, the City adopted an investment policy on January 2, 1985, and revised on September 10, 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 minor 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: The attached investment policy (Exhibit A) is hereby adopted and shall become effective immediately. PASSED, APPROVED AND ADOPTED at a regular meeting of the day City Council of the City of Carlsbad, California, held on the 5th of August , 1986, by the following vote, to wit: AYES: Council Members Casler, Lewis, Chick and Pettine NOES: None ABSENT : Council Member Kulchin %Wq 1. L-- MARY H. CASLER dMayor ATTEST: (SEAL) CITY OF CARLSBAD STATENENT OF INVESTMENT POLICY I. IWTRODUCTJON Section 53646(a) of the California Goverrment Code requires the Treasurer or Chief Fiscal Officer to renrler anmally to the legislative body of the local agency a statement of investment policy. The statement of investment policy set forth herein is a revision of the City of Carlsbad's Investment Policy as apprwed by the Carlsbad City Council on 3aruary 2, 1985, and as revised on September IO, 1985. It prwides policy guidance for the investment of all City fulds not required for the immediate day- to-day operation of the City. I I. BACKGROUND A. OB3ECTIVE - The primary investment objective is the prudent utilization of surplus cash and idle or inactive City fmds to generate a reasonable rate of return with an understanding and recognition of the assciated risks involved. The City shall strive to maintain the level of investment of all idle fmds as close to one hundred percent as possible through daily and projected cash flow determinations and forecasts as made available by the City's Director of Finance. B. RESPONSIBILITY - The manqement of idle cash and the investment of City fmds are the responsibility of the City Treasurer as directed by the City Council. responsibility by the Goverrment Code of the State of California specifying legal investments, by the prudent man rule and by the provisions of this policy. The Treasurer will also be guided in this C. DELEGATION OF RESPONSIBILITY - In the absence of the City Treasurer, the Deputy City Treasurer will assume the Treasurer's duties and responsibilities . 0. LEGAL INVESTMENTS PERMITTED UNDER STATE LAW - The City Treasurer may invest City fmds in the following instruments as specified in the Goverrment Code, Section 53601 and as further limited in this policy. 8 Obligations of the U.S. Goverrment, its agencies and instrumentalities. Q Registered state warrants or treasury notes or bonds of the State of California. Q Bonds, notes or warrants of any local agency within the State of Cali fo r ni a. 3 8 Time Certificates of Deposit and negotidle Certificates of Deposit offered by commercial banks and savings and loan institutions. Negotirble Certificates of Deposit are limited to 30% of the portfolio. 8 Prime bankers acceptances with the following limitations: a. Must be eligible for purchase by the Federal Reserve System. b. May not exceed 270 days maturity or 25% of the City's portfolio. c. No more than 10% of the City's portfolio may be invested in the bankers acceptances of any one commercial bank. Q Prime Commercial Paper of the highest numerical rating of Moody's Investment Services, Inc., or Stardard & Poors Corporation. Commercial paper may not exceed 30% of the total portfolio or 180 days maturity . Q Repurchase Agreements. 8 Reverse Repurchase Agreements. Q Money market fwds whose portfolio consists of one or mre of the foregoing legal investments. The City may also invest idle fmds in the State of California Local Agency Investment Fund in accordance with the laws and regulations governing such investments. I 11. INVESTMENT PHILOSOPHY A. BASIC PREMISE - The basic premise underlying the City's investment philosophy is to insure that sufficient flnds are available to meet the obligations of the City when needed. City is one that seeks aggressive management of inactive cash balances, yet emphasizes the safety, liquidity, and security of the investment instruments. The investment policy of the B. ACCEPTABLE RISK - Acceptable risk, as it relates to this investment policy, is defined as that risk which a person is penitted to take in the investment of the City's fmds under the tenns 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 judgment and care under the circumstances then prevailing, which men of prudence, discretion and intelligence, exercise in the management of their own affairs." -2- 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 instiwtions in the State of Cali fo r ni a. D. ETHICS - All participants in the City's investment process shall seek to act responsibly as custodians of the public trust. Treasurer shall avoid any transaction that might impair public confidence in the City's ability to govern effectively. The City IV. POLICY STATEMENT A. INVESTMENT LIMITS - To insure that invested fmds are always available when needed, the City Treasurer will maintain the following policy on investment maturit ies : 1. At least 67% of the portfolio will be invested in instruments with maturities of less than one year fron the current date. 2. No more than 23% of the portfolio may be invested in instruments maturing between one and ten years fran the current date. No more than 10% of the portfolio may be invested in instruments maturing more than ten years fran the current date. 3. 4. The City Treasurer shall maintain an average portfolio investment maturity of 3 years or less. If the average maturity exceeds 3 years at any time, the Treasurer shall take steps to reduce the average maturity to three years within 90 days fran such time. Investments will be made only in readily marketable securities, actively traded in the secondary market. No more than 10% of the investmen$ portfolio will be placed with any one financial institution. of the total being invested with one institution, the fmds necessary to reduce the investment to 10% will be removed upon maturity or when no loss would occur. If a decline in the portfolio results in more than 10% 6. INVESTMENT CRITERIA - The criteria of priority, shall be: 1. Safety. It is the Treasurer's protect, preserve and maintain in trust with the Treasurer on canmunity. for select irg investments, by order primary duty and responsibility to intact cash and investments placed behalf of the citizens of the 2. Liquidity. An adequate percentage of the portfolio sbuld be maintained in liquid sbrt-tenn securities which can be converted to cash if necessary to meet disbursement requirements. -3- 3. Yield. Yield becomes a consideration only after the basic requirements of safety and liquidity have been met. The City shall attempt to obtain the highest available yielding investment provided that the criteria for safety and liquidity are first met. _111 Section 53637 of the Goverment Code reqires money to be deposited in any depository selected fran these banks and savings and loan associations agreeing to pay the highest rate of interest. The City seeks to attain market rates of return on its investments consistent with constraints imposed by safety, cash flow considerations, and state laws that restrict the placement of public funds. U.S. Goverrment and Agency obligations are the highest quality investments available to the City in tens of investment safety ad liquidity. C. INSURED INVESTMENTS - Investments in commercial bank and savings and loan insitution 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 be properly collateralized. Goverrment Code Section 53649 specifies that the City Treasurer is responsible for entering into deposit contracts with each depository. Goverrment 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 goverrment securities and fifty percent in excess of the deposit as collateral in mortgage pools. Section 53652 of the E. ACTIVE AND PASSIVE TRADING - Active and passive trading of securities is mthorized. Active trading is the buying and selling of securities in the market in an effort to take advantage of short tenn 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 eqaged 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. All securities held for safe keeping shall be registered in the City's name. 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 - 4- . 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 MLBB report. firms must be members in good standing of a national securities exchange . Brokerage G. SHORT-TERM BORROWING - The City is permitted by law to borrow money to meet current short-term cash flow needs during periods when projected casH disbursements exceed projected cash receipts through the use of tax exempt instruments such as reveme anticipation notes and tax anticipation notes. of the cash deficit plus projected cash disbursements for one month. These funds may be borrowed at the beginning of the fiscal year and repaid at the end of the year. The amount which can be borrowed equals the total. H. LINE OF CREDIT - The effort to maintain idle funds 100% invested at all times can result in the City's cash accounts being temporarily overdrawn fran 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 renler to the City Council a Ent of Investment Policy. 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. i nves tme nt po lic y . This report will show its relationship to the statement of 8. REVIEW - This policy and the strategy for and corduct 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 anmal audit of the City. C. INVESTMENT REVIEW COMMITTEE - An Investment Review Committee is hereby established to corduct periodic reviews of the City's investment portfolio, the strategy being utilized for the investment of City funds, ard 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, a financial advisor, prwided by a recognized auditing firm may be included as an advisor without a vote. as necessary or desireable but not less often than quarterly. The Committee will be corwened periodically - 5- 7