HomeMy WebLinkAbout1989-03-28; City Council; Resolution 89-77r
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RESOLUTION NO. 89-77
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, 198
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Code, and f5
and revised on May 5, 1987, as required by Section 53646 of the Governme
7 WHEREAS, the City Council may from time to time revise this policy
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Treasurer, and 9
may be necessary to provide proper guidance to City staff and the Ci
10 WHEREAS, the City Treasurer has reviewed the existing investme
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in conformance with Sections 53601 and 53635 of the Government Code. 18
2) That the Council finds that the investment policy (Exhibit A) 17
shall become effective immediately, 16
1) The attached investment policy (Exhibit A) is hereby adopted a 15
Carlsbad, California, as follows: 14
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City 13
ability to manage inactive funds, and I.2
policy and has recommended minor modifications which improve the City
19 PASSED, APPROVED AND ADOPTED at a regular meeting of the City Counc
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1989, by the following vote, to wit: 21
of the City of Carlsbad, California, held on the 28th day of March
22 AYES: Council Members Lewis, Kulchin, Mamaux, Larson & Pettine
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NOES : None
ABSENT: None
26 /I ATTEST:
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2. Q- ALETHA L. RAUTENKRANZ, City Cler
(SEAL)
0 0 EXHIBIT 1
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Revised March 28, 1989
CITY OF CARLSBAD
STATEMENT OF INVESTMENT POLICY
I. INTRODUCTION
Section 53646(a) of the Cal ifornia Government Code requires the Treasurer or Chief Fiscal Officer to render annually 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 Carl sbad’s Investment Pol icy as approved by the Carl sbad City Counci 1 on January 2, 1985, and as revised on May 5, 1987. It provides pol icy guidance for the investment of all City funds not required for the immediate day-to-day operation of the City.
11. BACKGROUND
A. OBJECTIVE - The primary investment objective is the prudent utilization of surplus cash and idle or inactive City funds to generate a reasonable rate of return with an understanding and recognition of the associated risks involved. The City shall strive to maintain the level of investment of all idle funds 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 management of idle cash and the investment of City funds are the responsi bil ity of the City Treasurer as directed by the City Council. The Treasurer will also be guided in this responsibility by the Government Code of the State of Cal i forni a specifying 1 egal investments, by the prudent man rule and by the provisions of this policy.
C. DELEGATION OF RESPONSIBILITY - In the absence of the City Treasurer, the Deputy City Treasurer will assume the Treasurer‘s duties and responsibilities.
D. LEGAL INVESTMENTS PERMITTED UNDER STATE LAW - The City Treasurer may invest City funds in the following instruments as specified in the Government Code, Section 53601 and as further limited in this pol icy.
- Obligations of the U.S. Government, its agencies and instrumentalities.
- Registered state warrants or treasury notes or bonds of the State of California.
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- Bonds, notes or warrants of any local agency within the State of California.
- Time Certificates of Deposits and Negotiable Certificates of Deposit offered by commercial banks, savings and loar
Certificates of Deposit are limited to 30% of the portfolio. institutions and state and federal credit unions. Negotiabh
- Prime bankers acceptance 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.
- Prime Commercial Paper of the highest numerical rating of Moody’s Investment Services, Inc. , or Standard & Poor: Corporation. Commerci a1 paper may not exceed 30% of the total portfolio or 180 days maturity.
- Repurchase Agreements.
- Reverse Repurchase Agreements.
- Money market funds whose portfolio consists of one or more of the foregoing legal investments.
- Mortgage Securities purchased under Repurchase Agreements. May not exceed 95% of fair market value and 25% of eligible funds.
- Medium-Term Corporate Notes of U.S. companies with a maximum maturity of five years and rated in the top three rating categories by two of the three largest rating services. Purchases limited to 15% of eligible funds.
- No Load Mutual Funds investing in the securities and
ob1 igations of the foregoing legal investments. Purchases limited to 15% of the eligible funds.
The City may also invest idle funds in the State of California Local Agency Investment Fund in accordance with the laws and regulations governing such investments.
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III. INVESTMENT PHILOSOPHY
A. BASIC PREMISE - The basic premise underlying the City's investment philosophy is to insure that sufficient funds are available tc meet the obligations of the City when needed. The investmenl policy of the City is one that seeks aggressive management 01 inactive cash balances, yet emphasizes the safety, liquidity an( security of the investment instruments.
B. ACCEPTABLE RISK - Acceptable risk, as it re1 ates to thi! investment policy, is defined as that risk which a person i: permitted to take in the investment of the City's funds under thc terms and intent of the Prudent Man Rule which states, in essence: that "in investing . .. property for the benefit of another, i trustee shall exercise the judgement and care under tht circumstances then prevailing, which men of prudence, discretior and intell igence, exercise in the management of their ow1 affairs."
C. PREFERENCES - When two or more investment opportunities offel essentially the same maturity, yield, quality and liquidity priority will be given first to the financial institutions basec in the City of Carlsbad, and second to their financia' institutions in the State of California.
D. ETHICS - All participants in the City's investment process shal' seek to act responsibly as custodians of the public trust. Thc City Treasurer shall avoid any transaction that might impail public confidence in the City's ability to govern effectively.
IV. POLICY STATEMENT
A. INVESTMENT LIMITS - To insure that invested funds are alway avail able when needed, the City Treasurer wi 11 maintain thl 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 portfolio may be invested i 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 i investment maturity of 3 years or less. If the averag maturity exceeds 3 years at any time, the Treasurer shal 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 marketablc securities, actively traded in the secondary market. No morc than 10% of the investment portfolio will be placed with an) one financial institutions. If a decline in the portfolic results in more than 10% of the total being invested with onc institution, the funds necessary to reduce the investment tc 10% will be removed upon maturity or when no 1 oss woulc occur.
4, Any investment in securities with maturities greater thal 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 Ci ty’z long term cash flow needs prior to making suct investments.
INVESTMENT CRITERIA - The criteria for selecting investments, b~ order of priority, shall be:
1. Safety. It is the Treasurer‘s primary duty an( responsi bil i ty to protect , preserve and maintain intact cast and investments placed in trust with the Treasurer on behall of the citizens of the community.
2. Liauidity. An adequate percentage of the portfolio shoulG be maintained in liquid short-term securities which can be converted to cash if necessary to meet disbursement requirements.
3. Yield. Yield becomes a consideration only after the basic requirements of safety and 1 iquidity have been met. The Citl shall attempt to obtain the highest available yieldin: investment provided that the criteria for safety anc liquidity are first met.
Section 53637 of the Government Code requires money to be deposited in any depository selected from these banks and saving: 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 pub1 i c funds.
U.S. Government and Agency obligations are the highest quality investments available to the City in terms of investment safety and liquidity.
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C. INSURED INVESTMENTS - Investments in commercial bank and saving5 and loan institution time certificates of deposit shall be full3 insured up to $100,000 by the Federal Deposit Insuranck Corporation and the Federal Savings & Loan Insurance Corporation respectively.
D. COLLARTERALIZATION - 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 coll 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. 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 a1 so 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 1 oans must have on fi 1 e 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 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 revenue anticipation notes and tax anticipation notes. The amount which can be borrowed equals the total 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.
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H. LINE OF CREDIT - The effort to maintain idle funds 100% investec at all times can result in the City’s cash accounts bein< 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 render to the City Council a Statement of Investment Pol icy. The Treasurer shall a1 so 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 wi 11 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, a financial advisor, provided by a recognized auditing firm may be incl uded as an advisor without a vote. The Committee will be convened periodically as necessary or desirable but not less often than quarterly.
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