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HomeMy WebLinkAboutReso 91-148 - Establish and Adopt a policy providing guidelines for the prudent investment of the City's idle funds i RESOLUTION NO. - Iy i A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF REDDING ESTABLISHING AND ADOPTING A POLICY PROVIDING GUIDELINES FOR THE PRUDENT INVESTMENT OF THE CITY' S IDLE FUNDS. WHEREAS, the City Council of the City of Redding is charged with the responsibility of establishing municipal policies to guide the various functions of the City and, where necessary, to establish procedures by which functions are performed; and WHEREAS, regulatory policies established by the City Council are usually adopted by Ordinance and included in the Municipal Code. However, other policies are also established, which by their nature do not require adoption by Ordinance; these policy statements, adopted by Resolution of the City Council, need to be consolidated in a reference document for easy access; and WHEREAS, on August 4, 1987, by Resolution No. 87-261, the City Council adopted a Council Policy Manual to achieve said objectives; and WHEREAS, City Council wishes to establish an Investment Policy to provide guidelines for the prudent investment of the City' s idle funds, a copy of which is attached hereto and incorporated herein by reference; NOW, THEREFORE, IT IS HEREBY RESOLVED by the City Council of the City of Redding as follows: 1. That all of the above recitals are true and correct; 2. That attached hereto and incorporated herein by reference is the policy statement to be incorporated in the Council Policy Manual pertaining investment of the City' s idle funds. e I � i 3 . That the Council Policy attached hereto be and hereby is adopted as the Council Policy of the City of Redding pertaining to investment of the City' s idle funds. I HEREBY CERTIFY that the foregoing Resolution was introduced and read at a regular meeting of the City Council of the City of Redding on the 2nd day of April, 1991 , and was duly adopted at said meeting by the following vote: i AYES: COUNCIL MEMBERS: Arness, Dahl, Fulton, Moss & Buffum NOES: COUNCIL MEMBERS: None ABSENT: COUNCIL MEMBERS: None ABSTAIN: COUNCIL MEMBERS: None I NAN VWUM, a or City oRedding ATTEST: , ETHEL A. NICHOLS, City Clerk FORM PPROVED: R DALL A. HAYS, ity Attorney I 1 . CITY OF REDDING, CALIFORNIA COUNCIL POLICY SUBJECT RESOLUTION POLICY EFFECTIVE PAGE NUMBER NUMBER DATE INVESTMENT POLICY 91-148 408 04/02/91 1 { 1 1 BACKGROUND Government Code 53646 requiring City Treasurers ' or Fiscal Offi- cers to submit an annual update of investment policy and monthly i reports to Council, is no longer enforceable since January 1 , { 1991 . I It seems in the best interest of the city to have the Treasurers' I Investment Policy adopted by resolution in order to have consis- tent guidelines for reporting and updating of procedures relating to the investment of City revenue. ' PURPOSE i The Treasurer, who has been given the authority by Council to j invest and reinvest City funds (RMC 2 . 20 . 030) , should have clear guidelines in place for reporting this activity to Council. Therefore, the Investment Policy is designed to provide guide- lines for the prudent investment of the City' s idle funds and 1 reporting of the same. Amending or updating of this policy shall be conducted no less than once a year. i POLICY � . The City has the fiduciary responsibility to maximize the produc- tive use of assets entrusted to its care and to invest and manage ' those public funds wisely and circumspectly. Therefore , the City must operate its idle cash investment pool under the "pru- dent man rule" (Probate Code Article 2 , Sections 16040/042) . This affords the City a broad spectrum of investment opportuni- ties as long as the investment is deemed prudent and is allowable undercurrent legislation of the State of California (Government Code Section 53600 , et seq. ) . i 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. I The City shall strive, whenever possible , to make investments that benefit the local area. Priority will be given to invest- ments that promote community economic development (i.e . - I dealing with local financial institutions , etc. ) provided that i the investment selection criteria is met and yield is not signifi- cantly impacted. 1 The City shall strive to "maintain the level of investment of all idle funds as near 100% as possible. Concurrently, the City shall layer investment maturities to meet anticipated cash needs I CR 0049 I CITY OF REDDING, CALIFORNIA COUNCIL POLICY SUBJECT RESOLUTION POLICY EFFECTIVE PAGE NUMBER NUMBER DATE 1 INVESTMENT POLICY 91-148 408 04/02/91 2 1 and attempt to maximize investment yields while satisfying the guidelines here presented. The City shall attempt to take advantage of imperfections in the i investment market and contra-cyclical changes in interest rates as long as the investment complies with the selection criteria herein stated. I The City Treasurer and Deputy Treasurer are responsible for idle cash management. Investments shall be made by the individual so a directed by the Treasurer. Cash flow and technical information I shall be provided by the Finance Department. Each investment must be authorized by the Treasurer or the Deputy Treasurer. The Director of Finance or the Assistant Director of Finance shall review each investment transmittal as to compliance with City Policy and for the purpose of financial tracking. 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 Treasurer, Director of Finance or Assistant Director of Finance shall establish guidelines for Trustee contracts and jointly emonitor the monthly accounts. j The City Treasurer shall call together an advisory meeting once a year, or as needed, for the purpose of reviewing and updating this Policy. Those conferring with the Treasurer will be the I City Manager, Assistant City Manager, Director of Finance and Assistant Director of Finance. ' Investments allowable under current California Code No. 53601 are: 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 a Bankers acceptances Commercial paper Local Agency Investment Fund demand deposits (LAIF state pool) * (See addendum on page 4) Repurchase agreements (Repos) Passbook savings account demand deposits Mutual Funds CR 0049 i 0 • J CITY OF REDDING, CALIFORNIA COUNCIL POLICY SUBJECT RESOLUTION POLICY EFFECTIVE PAGE NUMBER NUMBER DATE INVESTMENT POLICY 91-148 408 04/02/91 3 Medium Term Corporate Notes California Arbitrage Management Program (CAMP) Resolution 90-594 Criteria for selecting investments and the order of priority are: 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 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 . Compliance with Investment Strategy - Funds must be avail- able in varying amounts to meet the City' s daily cash needs . Conversely, some funds of the City are reserved or restricted and, therefore , are not available until some future date. i The City, therefore, shall structure its investments in such 1 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. *Legislation effective 1/2/89 restricts the length of investment term to 5 years. 3 . 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 circumstance arising that would necessitate the investment being converted to cash before maturity. 4 . Yield - The yield is the earnings an investment provides. It is usually expressed as an annual rate of return (the percent- age annual earnings are of the invested principal) . Since obtaining investment earnings is the motivation for invest- ing, yield is a significant factor in all investment transac- tions. However, it shall . become a consideration only after all other investment criteria is satisfied. Whenever possi- ble, interest is to be paid to the City Treasurer monthly. CR 0049 CITY OF REDDING, CALIFORNIA COUNCIL POLICY SUBJECT RESOLUTION POLICY EFFECTIVE PAGE NUMBER NUMBER DATE INVESTMENT POLICY 91-148 408 04/02/91 4 * when the City LAIF account has reached the maximum deposit, the City Treasurer may, at her discretion, transfer City i funds into an **Entity LAIF account 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 will allocate the inter- est earnings proportionately. I ** Entity, 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. (i.e. , Redding Area Bus Authority) Investment limitations: Security purchases and holdings shall be maintained within the statutory limits imposed by the California Government Code . Investment securities must be fully paid for at time of purchase. Collateral Requirements: J Collateral requirements for government funds are 110% if backed I by U. S. Government securities or 150% if backed by a Real Estate pool. The City of Redding funds are backed by Government Securi- ty pools. Securities underlying a repurchase agreement must have a market value of at least 105 percent of the cost of the repur- chase agreement. If the market value of the underlying security falls below this requirement, the dealer bank shall assign addi- tional 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. Selling securities prior to maturity: Losses may be acceptable on a sale and should be taken if the rein-vested 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 City Trea- surer, Director of Finance, and approved by the City Manager. ! Diversification: The portfolio shall contain a variety of security types , issuers and maturities. 1 With whom to transact: The City shall make investment transactions only with financial institutions , national firms or security dealers that are reputa- ble and that exhibit financial stability. The security dealers I i CR 0049 CITY OF REDDING, CALIFORNIA COUNCIL POLICY SUBJECT RESOLUTION POLICY EFFECTIVE PAGE NUMBER NUMBER DATE INVESTMENT POLICY 91-148 408 04/02/91 5 I must, in addition, be able to meet the requirements for classifi- cation as primary dealers with the New York Federal Reserve Bank. i Competitive offers: The Treasurer shall contact the applicable investment officer, broker, and/or dealer for the potential yield from investments and for 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 used for investment transactions. Safekeeping: i Negotiable securities purchased by the City shall be held in the name of the City of Redding, or delivered to the City, or to its third-party custodian. Investment purchases shall be delivery versus payment. Monthly report: The City Treasurer shall file a monthly report to the City Coun- cil and City Manager. This report shall state its relationship to this investment policy, shall include information that demon- strates that the City' s expenditure requirements can be met in the following month 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. { i i CR 0049