HomeMy WebLinkAboutReso 97-019 - Amending Investment Policy 408 � � . . • �
RESOLUTION NO. 97-�q
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF REDDING AMENDING INVESTMENT POLICY 408.
WHEREAS, on April 2, 1991, the City Council adopted an Investment Policy
numbered 408 to provide guidelines for the prudent investment of the City's idle funds, which
Policy has been amended from time-to-time; and
WHEREAS, the City Council wishes to further amend its Investment Policy, as
recommended by the City Treasurer;
NOW, TI3EEREFORE, IT IS RESOLVED by the City Council that the City's
Investment Policy No. 408 be amended as set forth in the annual update attached hereto and
made a part hereof.
I HEREBY CERTIFY that the foregoing resolution was introduced, read and adopted
at a regular meeting of the City Council on the 4th day of February, 1997, by the following
vote:
AYES: COUNCII.MEMBERS: P• Anderson, R. Anderson, Kehoe and McGeorge
NOES: COUNCIL MEMBERS: None
ABSENT: COUNCII, MEMBERS: Murray
ABSTAIN: COUNCIL MEMBERS: None
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DAV cGE GE, yor
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Attest: Form Approved: �
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Connie Strohmayer, C' Clerk W. Leonard Wingate, City Attorney
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CI TY OF REDDI�VG, CALIFORNIA
Council Policy
SUBJECT Resolution Policy Effective
Number Number Date Page
Investment Policy 408 1
Background
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The treasurer or chief fiscal officer shall annually render to the legislative bodv of the local aqencY
and anv oversiqht committee a statement of investment �olicv which the leqislative body of the
local apencv shaii consider at a public meetina An�changes in the policy shall aiso be considered
bv the legislative body of the locai aqencv at a pubiic meeting. Gove�nment Code 53646(a)
amended 1/2/96.
it is in the best interest of the City to have the Treasurer's Investment Policy adopted by resolution
in order to have consistent guidelines for reporting and updating procedures relating to the
investment of City funds.
Purpose
The City Treasurer, who has been given the authority by Council to invest and reinvest City funds,
should have clear guidelines in place for reporting this activity to Council.
Therefore, the Investment Policy is designed to provide guidelines for the prudent investment of the
City's idle funds and reporting of the same. Amending or updating of this policy shall be conducted
no less than once a year.
Policy
The City Treasurer has the fiduciary responsibility to maximize the productive use of assets
entrusted to his/her {+#s� care and to invest and manage those funds wisely and circumspectly.
Therefore, the City must operate its idle cash investment pool under the "prudent man rule" (Probate
Code Article 2, Sections 16040/042). This affords the City a broad spectrum of investment
opportunities as long as the investment is deemed prudent and is allowable under current legislation
of the State of California (Government Code Section 53600, et seq.).
The City recognizes that it has an obligation to be aware of the possible social and political impacts
of its investments and will act responsibly if issues of this nature arise.
Priority will be given to investments that promote community economic development (i.e. dealing
with local financial institutions, etc.) provided that the investment selection criteria is met and yield
is not significantly impacted. The City Treasurer shall strive, whenever possible, to make
investments that benefit the local area.
The City Treasurer shall strive to maintain the level of investment of all idle funds as near
100 percent as possible. Concurrently, the City Treasurer shall layer investment maturities to meet
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CITY OF REDDING, CALIFORN/A
Council Policy
SUBJECT Resolution Policy Effective
Number Number Date Page
Investment Policy 408 2
anticipated cash needs and attempt to maximize investment yields while satisfying the guidelines
herein presented.
The City shall be watchful of economic changes and as interest rates are falling, invest longer term;
when interest rates are rising, invest shorter term, as practicable to meet the City cash flow
demands.
Administration/Responsibility
The City Treasurer and the Deputy City Treasurer are responsible for idle cash management.
Investments shall be made by the individual so directed by the Treasurer. Cash flow and technical
information shall be provided by the Finance Division. Each investment must be authorized by the
Treasurer or Deputy in Treasurer's absence. The ' Finance Officer or designee
shall review each investment transmittal as to compliance with City Policy and for the purpose of
financial tracking.
The n�•^^+^� ^{ �;^^^^� Finance Officer designated as Treasurer by resolutions for City entities, is
responsible for cash management of RABA, Redding Redevelopment Agency,
, and Housing Authority. Investment of entity idle funds is administered by the
City Treasurer and reviewed by the ' Finance Officer.
Trustee accounts, as well as being governed by State Code, shall have guidelines included in their
contracts as to the strength of financial institutions in which they may choose to invest City funds.
As designated in the long-term debt resolutions, the City Treasurer, n��^^+^� ^f ��^^^^^ Finance
Officer, or designee shall estabtish guidelines for Trustee contracts and jointly monitor the monthly
accounts.
The City Treasurer shall call together an Investment Policy Advisory Committee meeting once a
year, or as needed, for the purpose of reviewing and updating this Policy. A minimum of two
conferring with the Treasurer shall be among the following: the City Manager, the Assistant City
Manager, the ' Finance Officer or designee, and the Director of Administrative
Services.
Investmenfs Allowable/Currenf California Code No. 53601
Obligations, participations or other instruments of or issued by the U.S. Government or its agencies;
State and Municipal Bonds.
Small Business Administration loans (federally guaranteed portion only)
Federal Home Loan Bank obligations
Federal National Mortgage Association loans (federally guaranteed)
Certificates of deposit (time deposits) placed with commercial banks and/or savings and loan
companies
Negotiable certificates of deposits
Bankers acceptances
Commercial paper
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CITY OF REDDING, CALIFORIVIA
Council Policy
SUBJECT Resolution Policy Effective
Number Number Date Page
Investment Policy 408 3
Local Agency Investment Fund demand deposits (LAIF state pool) `(See addendum on page 4)
Repurchase agreements (Repos)
Passbook savings account demand deposits
Mutual Funds
Medium Term Corporate Notes
California Arbitrage Management Program (CAMP) Resolution No. 90-594.
Local Agency Investment Fund deposit of bond proceeds not subject o arbitrage (SB 614)
Mortgage Pass-Through Securities with maximum maturity of five (5) years (AB 3576)
Criteria for Selecting lnvestments in Priority Order
1. Safety — The safety and risk associated with an investment refers to the potential loss of
principal and/or interest. There are basically two types of risk in cash investment. The first,
credit risk, refers to the financial strength of the entity that is obligated to repay the
investment. The second, principal protection, refers to the potential loss of principal due to
market fluctuations or due to an early liquidation of the investment.
In order for the City to fulfill its public fiduciary responsibility in regard to the funds entrusted
to it, the City must participate in only those investments which present no substantial threat
to principal.
2. Liquidity — This is the marketability of an investment or the ease with which it can be
converted to cash. Generally, the more liquid or marketable the security, the lower the yield.
The importance of this factor in investment selection is dependent upon the possibility of the
circumstances arising that would necessitate the investment being converted to cash before
maturity.
Funds must be available in varying amounts to meet the City's daily cash needs. The City,
therefore, shall structure its investments in such a manner as to provide for the daily cash
needs of the City while, at the same time, participating in longer term' higher yield
instruments with cash that is not currently restricted from expenditure or for which there is
not an immediate need.
3. Yield — The yield is the earnings an investment provides. It is usually expressed as an
annual rate or return (the percentage annual earnings are of the invested principal). Since
obtaining investment earnings is the motivation for investing, yield is a significant factor in
all investment transactions. However, it shall become a consideration only after all other
investment criteria is satisfied. Whenever possible, interest is to be paid to the City
Treasurer monthly.
1 Legislation effective 1/2/89 restricts the length of investment term to five (5) years....., ..._............. ... ... .........
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CI TY OF REDDING, CALIFORNIA
Council Policy
SUBJECT Resolution Policy Effective
Number Number Date Page
investment Policy qpg 4
4. LAIF — When a City LAIF account has reached the maximum deposit, the City Treasurer,
may at her discretion, transfer City funds into an Entity LAIF account2 if in so doing the yield
will be significantly higher than other lawful investments. In this case, the Treasurer will
keep a separate set of books for City and Entity investments and wifl allocate the interest
earnings proportionately.
lnvestment Limifafions
Security purchases and holdings shall be maintained within the statutory limits imposed by the
California Government Code. Investment securities shall not be purchased by means of leverage.
Collateral Requiremenfs
Collateral requirements for government funds are 110 percent if backed by U.S. Government
securities or 150 percent if backed by a Real Estate pool. The City of Redding funds are backed
by Government Security pools. Securities underlying a repurchase agreement must have a market
value of at least 105 percent of the cost of the repurchase agreement. If the market value of the
underlying security falls below this requirements, the dealer bank shall assign additional securities
to the repurchase agreement so that the margin requirement is met, or the dealer bank shall return
the City's investment. Repurchase Agreements must include this in writing.
With Whom to Transact
The City Treasurer shall make investment transactions only with financial institutions, national firms,
or security dealers that are reputable and that exhibit financial stability. In addition, the security
� dealers must be able to meet the requirements for classification as primary dealers with the New
York Federal Reserve Bank.
Competitive Offers
The City Treasurer shall contact at least three investment officers or broker/dealers and log the
potential yield for investments and the estimated cost of services that would result from dealing with
that institution or individual. This information shall be utilized as a significant factor in the selection
and periodic review of the institutions and/or individuals utilized for investment transactions.
Diversification
The portfolio shall contain a variety of security types, issuers, and maturities.
2Entity in this case, is referring to Public Agencies related to the City of Redding but separate by law,whose funds
the City Treasurer manages in the area of bank reconciliation and investment of idle cash pursuant to cooperative
investment policies. (i.e. Redding Area Bus Authority, Redding Redevelopment Agency,
Se�era�ie�, and Housing Authority. ... .... ......... ....:...... ......... ... ... ._....-:
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CI TY OF REDDI G, CALIFORN/A
Council Policy
SUBJECT Resolution Policy Effective
Number Number Date Page
Investment Policy 408 5
Safekeeping
Investment securities purchased by the City shall be held in the name of the City of Redding, or
delivered to the City, or it its third-party custodian within the State of California. Investment
purchases shall be delivery versus payment.
Selling Securities Prior to Mafurity
Losses may be acceptable on a sale and should be taken if the reinvested proceeds will generate
earnings (net of the resultant capital loss or early withdrawal penalty) that are greater than the
earnings that would be generated if the existing investment were held to maturity. Any sale of
securities at a loss, without this purpose of reinvestment, must be reviewed by the Investment Policy
Advisory Committee.
Monthly Report
The City Treasurer shall file a monthly report to the City Council and the City Manager. This report
shall state its relationship to this investment policy, shall include information that demonstrates that
the City's expenditure requirements can be met in the following six 6 months and shall disclose
the investment information that is required by Government Code Section 53646. In addition, the
report shall list the number of wire transfer investment transactions which took place during the
month.
Debt Proceeds3
Notwithstanding any other provisions to the contrary, debt issue proceeds shall be invested in
"permitted investments" as defined by the trust agreement associated with the debt issue. Such
investment shall be in compliance with requirements imposed by rating agencies, bond insurers, and
Federal and State law. Investments allowable under current California Government Code No. 53601
are stated in the City Council Investment Policy. (Amendment 4/7/92, Council approval for the
investment of bond proceeds in the State Pool, Local Agency Investment Fund, LAIF).
Included in the investment policy is the criteria to be utilized for the selection of investments and
the order or priority. For purposes of this policy, the term "Treasurer" is that individual defined in
the bond documents and amendments of the debt issue. The Treasurer is subject to the applicable
provisions of any indenture, trust agreement, or resolution providing for a trustee or other fiscal
agent. This individual is designated as the depositary of the issuing authority to have custody of
all the money of the issuing authority from whatever source and, as such, shall have the powers,
duties, and responsibilities specified in 6505.5 of the Government Code. The Treasurer is
designated as the public officer or person who has charge of, handles, or has access to any
property of the authority.
3Debt proceeds section added by Resolution No. 91-230 effective June 18, 1991.
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CITY OF REDDING, CALIFORN/A
Council Policy
SUBJECT Resolution Policy Effective
Number Number Date Page
Investment Policy 408 6
Due Diligence
it shall be the responsibility of the Treasurer to structure and monitor the bond proceeds investment
process and to verify that fees paid to brokers are reasonable and commensurate with the work
performed. The Treasurer shall consult with bond counsel and financial advisors, when applicable,
during the development of the bond issue documents and shall be responsible for determining
whether the proceeds shall be actively or passively invested as a result of Federal regulations that
may govern the issue.
Conflicis of Interest
Underwriters and financial advisors may not receive compensation, finder's fees, honoraria or gifts
from parties involved in investment transactions. Subject to any restrictions imposed by Federal
regulations, the bond underwriter or advisor may bid for investment funds in an openly competitive
bidding, but not as a sole source broker or intermediary. If a financial advisor or underwriter also
acts in an investment capacity, the firm shall certify that its fees do not exceed the fees it
customarily charges for investment activity and include no compensation for services provided in
the underwriting.
Avoidance of Abuses
The City will refrain from abusive practices in the investment of bond proceeds and will obtain
market price instruments. For bond issues to which Federal yield or regulatory restrictions apply,
the primary objective shall be to prudently obtain satisfactory market yields and to minimize the
costs associated with investment of such funds. The Treasurer shall obtain full disclosure of
brokerage and other fees associated with investment of bond proceeds and shall require written
disclosure of any payments made by investment firms or brokers to third parties associated with the
City of the issuance of its bonds.
Arbiirage Record Keeping
The Treasurer shall establish systems and procedures to comply with Federal regulations governing
the investment of bond proceeds, including investment record keeping systems.
Amended:
March 16, 1993, by Resolution No. 93-85
April 5, 1994, by Resolution No. 94-80
April 18, 1995, by Resolution No. 95-102
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