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HomeMy WebLinkAboutReso 2004-023 - Investment PolicyRESOLUTION NO. 2004-23 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF REDDING AMENDING COUNCIL POLICY NO. 408 ENTITLED INVESTMENT POLICY. WHEREAS, on April 2, 1991, the City Council adopted Investment Policy No. 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 and the Investment Advisory Committee; NOW, THEREFORE, IT IS RESOLVED by the City Council that the City's Investment Policy No. 408 be amended as set forth in the attached annual update, made a part hereof by this reference. I HEREBY CERTIFY that the foregoing resolution was introduced, read, and adopted at a regular meeting of the City Council on the 17th day of February, 2004, by the following vote: AYES: NOES: ABSENT: ABSTAIN: COUNCIL MEMBERS: Cibula, Kight, Mathena, Stegall and Pohlmeyer COUNCIL MEMBERS: None COUNCIL MEMBERS: None COUNCIL MEMBERS: None Attest: Connie Stroh'mayer, 'City ~r~e'/ Form Approved: Brad L. Fuller, City A CITY OF REDDING, CALIFORNIA COUNCIL POLICY SUBJECT RESOLUTION POLICY EFFECTIVE PAGE NUMBER NUMBER DATE INVESTMENT POLICY 91-148 408 04/02/1991 1 B;I CKGR 0 UND The Treasurer or Chief Fiscal Officer shall annually render to the legislative body of the local agency and any oversight committee a statement of investment policy, which the legislative body of the local agency shall consider at a public meeting. Any changes in the policy shall also be considered by the legislative body o£the local agency at a public meeting. Government Code 53646(a) amended January 2, 1996. 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 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 Cali£omia (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 anticipated cash needs and attempt to maximize investment yields while satisfying the guidelines herein presented. CITY OF REDDING, CALIFORNIA 'COUNCIL POLICY SUBJECT RESOLUTION POLICY EFFECTIVE PAGE NUMBER NUMBER DATE INVESTMENT POLICY 91-148 408 04/02/1991 2 .4DMINISTR21 TION/RESPONSlBILITY The City Treasurer aiid "-..~ .........~,,~,,~y,.~.y~:'-- '~ l ~,~,~. ........... or designee 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 to determine if it complies with the allowable investments section of the City Policy and for the purpose of financial tracking. The 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 are directed by the Finance Officer and is administered by the City Treasurer. aiid .... : ..... -' ~--- "~ - 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, Finance Officer, or designee shall establish 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. In addition, the committee will include two community members representing the finance industry bringing the committee total membership to five. INVESTMENTS ALLOWABLE The City complies with current California Code Section 53600 et seq., and is incorporated herein. See attachment. CRITERIA FOR SELECTING INVESTMENTS 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 li~u~d..ation of the investment. - II i ..... · CITY OF.REDDING' CALIFORNIA. :' i ·" 'COUNCIL POLICY ' SUBJECT RESOLUTION POLICY EFFECTIVE PAGE NUMBER NUMBER DATE iNVESTMENT POLICY 91-148 408 04/02/1991 3 In order for the City to fulfill its public fiduciary responsibility in regard to the funds entrusted to it, the City must parti~qpate invest in only those in-eestme~ securities 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 termI higher yield instruments with cash that is not currently restricted fi.om 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 of 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. 4. LAIF - When a City LAIF account has reached the maximum deposit, the City Treasurer, may at his/her discretion, transfer City 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 interest earnings proportionately. ~ I 1 Legislation effective January 2, 1989 restricts the length of investment term to five (5) years. 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 pursuant to cooperative investment policies. (i.e. Redding Area Bus Authority, Redding Redevelopment Agency,and Housing Authority. CALIFORNIA · "i.-. -":':i~.. -:; ~' . COUNCIL POLICY . ' SUBJECT RESOLUTION POLICY EFFECTIVE PAGE NU1VIBER NUMBER DATE INVESTMENT POLICY 91-148 408 04/02/1991 4 INVESTMENT LIMITATIONS Security purchases and holdings shall be maintained within the statutory limits imposed by the California Government Code. In addition, the following restriction are imposed. a)Investment securities shall not be purchased by means of leverage. b)investments whose credit ratings downgrade below single A by Moodys or Standard and Poors shall be sold within a reasonable amount of time to minimize the possible loss of, principal. COLLATERAL REQUIREMENTS 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 remm the City's investment. Repurchase Agreements must include this in writing. A current law provides that investments in repurchase agreements shall be in compliance if the value of the underlying securities is brought back up to 10,2 105 percent no later than the next business day in accordance with City (Ci~-y ...... : ....... ' '" ......... ' (I) Policy...~-'~',,l,,.j--- ~,.u..,1 ~,,~,~ is ,,,o ~.~,.~.~., 53635 WITH WHOM TO TRANSA CT The City Treasurer or Deputy City Treasurer designee 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 classifications as primary dealers with the New York Federal Reserve Bank. COMPETITIVE OFFERS The City Treasurer or Deputy City Treasurer designee shall ermtaet obtain at least three offers from investment officers or broker/dealers including and-obtain the potential yield for each security we plan to purchase. Each Investment Officer or Broker/Dealer shall have on file a current Request For Information (RFI). The RFI 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. ~,. CITY OF REDDING, CALIFORNIA , COUNCIL POLICY SUBJECT RESOLUTION POLICY EFFECTIVE PAGE NUMBER NUMBER DATE INVESTMENT POLICY 91-148 408 04/02/1991 5 SAFEKEEPING Investment securities purchased by the City shall be held in the same name of thc City of Redding, or delivered to thc City, or it to its third-party custodian within the State of California. Investment purchases shall be delivery versus payment. SELLING SECURITIES PRIOR TO MATURITY Losses may bc acceptable on a sale and should be taken if the reinvested proceeds will generate earnings (net of thc 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 discussed with the Investment Advisory Committee. REPORTING The City Treasurer shall file a monthly report to the City Council and the City Manager. This report shall show how the investments have been made and whether they are in conformance to the 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. 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 04/07/92, Council approval for the investment of bond proceeds in the State Pool, Local Agency Investment Fund, LAIF.) Included in thc investment policy is the criteria to be utilized for the selection of investments and the order of priority. For purposes of this policy, the t¢~m "Treasurer" is that individual defined in the bond documents and amendments of the debt issue. The Treasurer is subject to thc applicable provisions of any indenture, trust agreement, or resolution providing for a trustee or other fiscal agent. This individual is designated as the depository of thc issuing authority to have custody of all the money of the issuing authority from whatever source and, as such, shall have thc powers, duties, and responsibilities specified in 6505.5 of the Government Code. Thc Treasurer is designated as the public officer or person who has charge of, handles, or has access to _any property of the authority. 3 Debt proceeds section added by Resolution No. 91-230 effective June 13, 1991. · CITY OF.'REDDING, CALIFORNIA :, ' -'. · .COUNCIL POLICY - · SUBJECT RESOLUTION POLICY EFFECTIVE PAGE NUMBER NUMBER DATE INVESTMENT POLICY 91-148 408 04/02/1991 6 DUE DILIGENCE It shall be the responsibility of the Trcasurer'to structure and monitor the bond proceeds investment process and to verify that fees paid to brokers arc 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 thc issue. CONFLICTS OF INTEREST Underwriters and financial advisors may not receive compensation, finder's fees, honoraria or gifts from partie.s 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 sole source broker or intermediary. If a financial advisor or underwriter also acts in an investment capacity, thc 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 AB USES 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. ARBITRA GE RECORD KEEPING Thc Treasurer shall establish systems and procedures to comply with Federal regulations governing the investment of bond proceeds, including investment record keeping systems. Reference: California Government Code Section 53600, et seq. Amended March 16, 1993, by Resolution No. 93-085 Amended April 5, 1994, by Resolution No. 94-080 Amended April 18, 1995, by Resolution No. 95-102 Amended February 4, 1997, by Resolution No. 97-019 Amended December 1, 1998, by Resolution No. 98-170 Amended February 15, 2000, by Resolution No. 2000-37 Amended February 19, 2002, by Resolution No. 2002-32 Amended Februar~ 18~ 20031 by Resolution No. 2003-21 _