HomeMy WebLinkAbout1991-04-02; City Council; Resolution 91-101..
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RESOLUTION NO. 91 -1 01
A RESOLUTION OF THE CITY COUNCIL OF
THE CITY OF CARLSBAD, CALIFORNIA,
REVTSING THE CIWS INVESTMENT POLICY
WHEREAS, the City adopted an investment policy on January 2,198i
as required by Section 53646 of the Government Code, and
WHEREAS, the City Council may from the to time revise this polic
as may be necessary to provide proper guidance to City staff and the Ci
Treasurer, and
WHEREAS, the City Treasurer has reviewed the existing investmei
policy and has recommended modifications which improve the City's ability t
manage inactive funds, and
NOW, THEREFORE, BE IT RESOLVED by the City Council of the Cil
of Carlsbad, California, as follows:
1) The attached investment policy (Exhibit A) is hereby adopted ar
shall become effective immediately. i ///
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2) That the Council finds that the investment policy (Exhibit A) is i
conformance with Sections 53601 and 53635 of the Government Code.
PASSED, APPROVED AND ADOPTED at a regular meeting of the Cit
Council of the City of Carlsbad, California, held on the 2nd day of AP
, 1991, by the following vote, to wit:
AYES: Council Members Lewis, Kulchin, Larson, Nygaard and
NOES: None
St ant on
ABSENT: None
ATTEST:
AALtL4,i?+ ALETHA L. RAUTENKRANZ, City Cle k
(SEAL)
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CITY OF CARLSBAD
STATEMENT OF INVESTMENT POLICY
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Revised March 12, 1991
1.0 Introduction. The purpose of this document is to identify various policies a
procedures that enhance opportunities for a prudent and systematic investment policy ai
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 disbursments, cost-effective banking relations, and arranging fo~
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 i
immediate day-to-day operations in safe and liquid investments having the highest possil
return while conforming to all state statutes governing the investment of public fund.
3.0 Scope. It is intended that this policy cover the investment activities of all surpl
cash and idle or inactive funds under the direct authority of the City. These funds a
accounted for in the City's Comprehensive Annual Financial Report and include:
3.1 General Fund
3.2 Special Revenue Funds
3.3 Debt Service Funds
3.4 Capital Project Funds
3.5 Enterprise Funds
3.6 Internal Service Funds
3.7 Any new funds created by the City Council, unless specifically exempted.
4.0 Objectives. The City Treasurer shall strive to maintain the level of investment of;
idle funds as close to 100% as possible. The primary objectives, in order of priority, of tl
City's investment activities shall be:
4.1 !MeV. Safety of principal is the foremost objective of the investment prograr
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 reasonab:
anticipated.
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4.3 Return on investment. Investment return becomes a consideration only afker tl
basic requirements of safety and liquidity have been met. The City shall attempt
obtain the highest available return provided that the requirements of safety a1
liquidity are first met.
5.0 Prudence. The standard of prudence to be used shall be the "prudent perso
standard and shall be applied in the context of managing the overall portfolio. Investmen
shall be made with judgement and care -- under circumstances then prevailing -- whic
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 tht
capital as well as the probable income to be derived.
6.0 Duties and Responsibilities. The management of idle cash and the investment 1
City funds are the responsibility of the City Treasurer as directed by the City Council. I
the endeavor to have all idle cash invested all the time, the City Finance Director will assi
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 Treasure
will assume the City Treasurer's duties and responsibilities.
No person may engage in an investment transaction covered by the terms of this polic
unless directed by the City Treasurer. The City Treasurer shall be responsible for z
transactions undertaken under the terms of this polky.
7.0 Ethics and conflicts of interest. All participants in the City's investment process sk
seek to act responsibly as custodians of the public trust. The City Treasurer, or wht
appropriate the Deputy City Treasurer, shall avoid any transaction that might impair pub1
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 fiu-thc
limited in this policy.
8.1
8.2
Obligations of the U.S. Government, its agencies and instrumentalities.
Bankers Acceptances that are eligible for purchase by the Federal Resen
System. Purchases may not exceed 270 days maturity or 25% of ti portfolio.
8.3 Time Certificates of Deposit. Deposits should not exceed one year maturit
Deposits will be collateralized as specified in paragraph 12.0 of th
Investment Policy.
Negotiable Certificates of Deposit issued by nationally or state-chartere
bank. Purchases may not exceed 30% of the portfolio.
Prime Commercial Paper of the highest numerical rating of Moody
Investment Services, Inc. or Standard & Poors Corporation. Purchases mz
not exceed 180 days maturity or 15% of the portfolio.
8.4
8.5
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8.6 Repurchase Agreements with a maximum maturity of one week. Repurcha:
agreements will only be with banks and primary dealers who have long-ter
debt rated in one of the top 2 categories of Moody's Investment Services, In
or Standard and Poors Corporation. Investments will be collateralized
specified in paragraph 12.0 of this Investment Policy and may not excec
10% of the portfolio.
Money market funds whose portfolio consists of one or more of the foregoit
legal investments.
Medium-term Corporate Notes issued by corporations operating within tl
United States and rated in the top two rating categories by two of the thr
largest rating sewices. Purchases may not exceed 30% of the portfolio.
No Load Mutual Funds investing in the securities and obligations of t:
foregoing legal investments. Purchases may not exceed 15% of the portfolj
8.7
8.8
8.9
8.10 Local Agency Investment Fund (LAIF) of the State of California. Investmen
will be made in accordance with the laws and regulations governing tho,
Funds.
9.0 Diversification. The portfolio will be diversified to avoid incurring unreasonable ai
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 mainta
a list of financial institutions and brokers approved for investment. All financj
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 Ci
Treasurer with the following:
10.1 Current audited financial statements.
10.2 Depository contracts, as appropriate.
10.3
10.4
10.5
A copy of the latest FDIC call report or the latest FHLBB report, i
appropriate.
Proof that commercial banks, savings banks, or savings and loan associatioi
are state or federally chartered.
Proof that brokerage firms are members in good standing of a nation
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 tot
assets), and must have had a positive net earnings for the last reporting period.
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When two or more investment opportunities offer essentially the same maturity, liquidit
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.
11.0. Purchase and Payment. A competitive bid processy when practical, will be used
place all investment purchases. Purchases on margin will not be made. Payment 6
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 insurc
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 Californ Government Code requires that the depository pledge securities with a market value of
least 10% in excess of the City's deposit as collateral in government securities, and 50
in excess of the deposit as collateral in mortgage pools. Section 53649 of the Californ
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 Mardmum 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 with
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 remainii
25% may have maturities extending to 5 years from the current. Investmer
having a maturity greater than 5 years will not be made except as providl
in paragraph 11.3 of this Investment Policy.
13.2 The average portfolio investment maturity shall be 3 years or less. If tl
average maturity exceeds 3 years at any time, the City Treasurer shall ta
steps to reduce the average maturity to 3 years within 90 days from SUI
time. A dollar-weighted average will be used in computing the avers(
maturity 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 Finance Director w
review the City's long term cash needs. Both must concur before such i
investment is made. Investments beyond 5 years will not be greater th
10% of the portfolio, and will be counted in the percentage of the portfol
that may mature beyond 3 years. No investments will be made that matu
beyond 10 years from the current date.
13.3
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To further provide for liquidity, investments will be made only in readily marketal:
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 st;
and local laws, ordinances or resolutions that restrict investments. Given the
requirements, the basis used by the City Treasurer to determine whether market yields E
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 ri
of return of the City's portfolio.
15.0 Active and passive trading. Active and passive trading of securities is authorizc
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 res
in occasional loss of principal and should be engaged in only when there appears to bt
clear advantage at the outset.
16.0 Safekeeping and custody. All security transactions, including collateral f
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. A
securities will be held in the nominee name of the custodian.
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 he 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 investmc
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 month
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
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18.0 Short-term borrowing. The City is permitted by law to borrow money to m
current short-term cash flow needs. These needs may arise either because projected cq
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 follow actions:
18.1 Short-term loan. When there is a shortfall between projected cash reven
and projected cash disbursements, the City Treasurer will secure a loan in
amount that would equal the cash deficit plus projected cash disbursements for '
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 Cf
bank in an amount to cover sums temporarily overdrawn because of efforts to in\
all idle funds at all times.
19.0 Internal control. This policy and the strategy for and conduct of the investmeni
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.
20.0 Review. An Investment Review Committee is hereby established to conduct revit
of the City's investment portfolio, the strategy being utilized for the investment of (
funds, and the City's investment policy. This Committee will be composed of the (
Treasurer, the Deputy City Treasurer, and the Financial Management Director as vot
members. Additionally, an outside financial advisor may be included as an advisor with
a vote. The Committee will be convened periodically as necessary or desirable but no 1
frequently than once each quarter.
21.0 Investment policy adoption. Section 53646(a) of the California Government Cc
requires the City Treasurer or Chief Fiscal Officer to render annually to the legislative bc
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 on an annual bz
by the Investment Review Committee and any modifications made thereto must
approved by the City Council.
File: C:\WSI\TREASURE\INSTl
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