HomeMy WebLinkAbout1996-02-13; City Council; Resolution 96-611
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Exhibit 1 0 0
RESOLUTION NO. 96-61
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
as required by Section 53646 of the California Government Code; and
WHEREAS, Section 53646(a) of the California Government Code
requires the City Treasurer to render annually to the City Council a statement of
investment policy; 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 2) is hereby adopted and
shall become effective immediately.
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2. That the Council finds that the investment policy (Exhibit 2) is in
conformance with Sections 53601 and 53635 of the California Government Code.
PASSED, APPROVED AND ADOPTED at a regular meeting of the City
Council on the 13thday of February , 1996, by the following vote, to wit:
AYES:
NOES: None
Council Members Lewis, Nygaard, Kulchin, Finnila a
ABSENT: None
ATTEST:
- (SEAL) 6 L. QP&Z2JA ALETHA L. RAUTENKRANZ, City Clerk
Exhibit 2 0 0
CITY OF CARLSBAD
STATEMENT OF INVESTMENT POLICY
Approved by City Council 43&wary 14, 1 %X
1.0 Introduction. The purpose of this document is to identify various policies anc
procedures that enhance opportunities for a prudent and systematic investment polic)
and to organize and formalize investment-related activities. Related activities whict-
comprise good cash management include accurate cash projections, the expeditious
collection of revenue, the control of disbursements, cost-effective banking relations, anc
arranging for a short-term borrowing program which coordinates working capita
requirements and investment opportunities.
2.0 Policy. It is the policy of the City of Carlsbad to invest public funds not required
for immediate day-to-day operations in safe and liquid investments havin
while conforming to all state statutes return
erning the investment of public funds.
3.0 Scope.
contingency reserves and inactive cash under the direct authority of the City.
It is intended that this policy cover the investment activities of all
3.1 Pooled Investments. Investments for the City and its component units will be
made on a pooled basis, including the City of Carlsbad, the Housing authority of
the City of Carlsbad, the Parking Authority of the City of Carlsbad, the City of
Carlsbad Public Improvement Corporation, the Carlsbad Redevelopment Agency,
and the Carlsbad Municipal Water District. The City’s Comprehensive Annual
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
the City Council, unless specifically
exempted.
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4.1 Safety. Safety of principal is the foremost objective of the investment program
Investments of the City shall be undertaken in a manner that seek to ensure
preservation of capital in the overall portfolio.
4.2 Liquidity. The City's investment portfolio will remain sufficiently liquid to enable
the City to meet all operating requirements which might be reasonably anticipated
4.3 Return on investment. Investment return becomes a consideration only aftei
the basic requirements of safety and liquidity have been met. The City shall attempl
to obtain 7 return provided that the requirements
of safety re first met.
The City Treasurer shall strive to maintain the level of investment of all contingency
reserves and inactive funds as close to 100% as possible. While the objectives of safety
and liquidity must first be met, it is recognized that portfolio assets represent a potential
source of significant revenues. It is to the benefit of the City that these assets be
managed to produce optimum revenues, consistent with state statutes and local
ordinances.
5.0 Duties and Responsibilities. The management of inactive cash and the investment
In the endeavor to have all inactive cash invested all the time, the City Finance Director
will assist the City Treasurer in the gathering of information to create cash flow estimates.
investor" standard and shall be applied in the context of managing the overall portfolio.
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10.0' Diversification. The portfolio will be diversified to avoid incurring unreasonable
and avoidable risks regarding specific security types or individual financial institutions
In addition to the limitations on specific security types indicated in paragraph 8.0 of this
11 .O Selection of financial institutions and brokers. Investments shall be purchased
only through well established, financially sound institutions. The City Treasurer shall
maintain a list of financial institutions and brokers approved for investment. All financial
11.1 Current audited financial statements.
11 -2 Depository contracts, as appropriate.
11.3 A copy of the latest FDIC call report or the latest FHLBB report, as
appropriate.
11.4 Proof that commercial banks, savings banks, or savings and loan
associations are state or federally chartered.
11.5 Proof that brokerage firms are members in good standing of a national
securities exchange.
Commercial banks, savings banks, and savings and loan associations must maintain a
minimum net worth to asset ratio of 3% (total regulatory net worth divided by total
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, liquidity,
yield, and quality, priority will be given first to the financial institutions based in the City
of Carlsbad, and second to other financial institutions in the State of California.
not be made.
13.0 Collateralization. Investments in time certificates of deposit shall be fully insured
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
in excess of $100,000 shall be properly collateralized. Section 53652 of the California
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Government Code requires that the depository pledge securities with a market value oi
at 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
California Government Code specifies that the City Treasurer is responsible for enterinc
into deposit contracts with each depository.
Investments in repurchase agreements must also be collateralized. In order to anticipate
market changes and provide a level of security for all funds, the collateralization level wil
be 102% of market value of principal and accrued interest.
14.0 Maximum maturities. A policy of laddered maturities will be followed for poolec
investments, as follows:
14.1 At least 50% of the portfolio will be invested in instruments maturing withir
. one year from the current date. w 25,~ sf t!x p- O/ ..
5..years wi.i.l...not..be mad.e.'except.as.'provided i" paragraph 1 4.3 of this Investmen,
Policy.
14.2 The average portfolio investment maturity shall be 3 years or less. A dollar-
weighted average will be used in computing the average maturity of the portfolio.
14.3 Before an investment is made in securities that mature more than 5 years
from the current date, the City Treasurer and the Financial Management Directot
will review the City's long term cash needs. Both must concur before such an
investment is made. Investments beyond 5 years will not be greater than 10% oi
the portfolio, and will be counted in the percentage of the portfolio that may mature
beyond 3 years. No investments will be made that mature beyond 10 years from
the current date.
To further provide for liquidity, investments will be made only in readily marketable
securities actively traded in the secondary market.
Maturities for investments held separately will conform with the trust indenture for each
issue.
15.0 Investment strategy. For pooled investments, a buy and hold strategy will
generally be followed, that is, investments once made will usually be held until maturity.
A buy and hold strategy will result in unrealized losses as market interest rates rise.
Unrealized losses, however, will dissipate as the maturity dates of the investments are
approached or as market interest rates decline. A buy and hold strategy requires thal
the portfolio be kept sufficiently liquid to preclude the undesirable sale of investments
prior to maturity. Occasionally, the City Treasurer may find it advantageous to sell an
investment prior to maturity, but this should only be on an exception basis and only
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when it is clearly favorable to do so.
Investments held separately for bond proceeds will follow the trust indenture for eacl
issue.
16.0. Performance standard for pooled investments. Laddered maturities and a bu)
and hold strategy for pooled investments will cause the investment portfolio to attain i
market-average rate of return through-out budgetary and economic cycles
I be mort
closely related to, but lag behind, changes in short-term market rates. The rate of returr
of the investment portfo the maturity value of the investments. i
ge ill be used in calculating the rate of returr
. Sincea
17.0 Safekeeping and custody. All security transactions, including collateral foi
repurchase agreements, entered into by the City shall be conducted on a delivery-vs.,
payment basis. All securities owned by the City will be h third-party custodiar
designated by the City Treasurer and evidenced by a statement from the
custodian. All securities will be held in the nominee nam ustodian. Collatera,
for time deposits in savings and loans will be held by the Federal Home Loan Bank or
an approved Agent of Depository. Collateral for time deposits in banks will be held in
the City’s name in the bank’s Trust Department or in the Federal Reserve Bank.
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18.6
’ 18.7
18.8
18.9
Weighted average yield of the portfolio
erage days to maturity of the portfolio from the ewrwi# date
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
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18.10 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 fiscr
year. Among other items, the annual report will include an analysis of the compositior
of the fund; a review of trends regarding the size of the fund, portfolio yields, and cast-
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 mee
current short-term cash flow needs. These needs may arise either because projectec
cash disbursements exceed projected cash receipts, or because the City’s cast-
accounts may be temporarily overdrawn due to the efforts to invest 100% of inactive
funds at all times. To provide for these contingencies the City Treasurer is authorizec
to take the following actions:
19.1 Short-term loan. When there is a shortfall between projected cash revenue:
and projected cash disbursements, the City Treasurer will secure a loan in tht
amount that would equal the cash deficit plus projected cash disbursements for
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 with the
City’s bank i ount to cover sums temporarily overdrawn because of efforts
to invest all idle funds at all times.
20.0 Exceptions. Occasionally, exceptions to some of the requirements specified in this
Investment Policy may occur for pooled investments because of events subsequent to
the purchase of investment instruments, e.g., the rating of a corporate note held in the
portfolio is downgraded below an “AA“ rating, or total assets in the portfolio declim
causing the percentage invested in corporate notes to rise above 30%, or an unforeseer
expenditure causes investments maturing within one year to fall below 50% of the
portfolio.
State law is silent as to how exceptions should be corrected. Exceptions may be
temporary or more lasting; they may be self-correcting or require specific action. If
specific action is required, the City Treasurer should determine the course of action that
would correct exceptions to move the portfolio into compliance with State and City
requirements. Decisions to correct exceptions should not expose the assets of the
portfolio to undue risk, and should not impair the meeting of financial obligations as they
fall due. Any subsequent investments should not extend existing exceptions.
Exceptions, and the decisions to correct the exceptions, will be reviewed with the
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 investmeni
of City funds will be reviewed by an Investment Review Committee as set forth below anc
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 conduc
reviews of the City’s investment portfolio, the strategy being utilized for the investmen of City funds, and the City’s investment policy. This Committee will be composed of thc
City ‘Treasurer (acting as the Chair), ..
Financial Management Director, and
Additionally, an outside financial advisor may be i
ote. The Committee will convene periodically as necessary or desirable bui
no less frequently than once each quarter.
23.0 Investment policy adoption. Section 53646(a) of the California Government Code
requires the City Treasurer or Chief Fiscal Officer to render annually to the legislative
body of the local agency a statement of investment policy. The City’s investment polic)
shall be adopted by resolution of the City Council. The policy shall be reviewed as
required but at least on an annual basis by the Investment Review Committee. An)
modifications must be approved by the City Council.
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