The URL can be used to link to this page

Home My WebLink AboutCC Res 5051 2002-08-12 RESOLUTJONNUMBER Str/ '. A RESOLUTION OF TI-1E CITY COUNCIL OF THE CITY OF SEAL BEACI-I, CALIFORNIA, ADOPTING AND FILING TilE ANNUAL STATEMENT OF INVESTMENT I)OLICY AND GUIDELINES FOR THE FISCAL YEAR 2002/2003 WHEREAS, the California State LeglslatUle passed leglslal10n dUllng the 1984 session rf"quning tile filing of an annual Statement ofInvestmcnt Polley by local publIc agencies, and I WHEREAS, the Orange County bankruptcy resulted in fllrther legislation 111 Senate bills 563 and 8661einforclllg the "prudent man" Investment ofpubJic funds; and WHEREAS, the Clly Treasuret, m conJllnction wtlh the City Manager oflhe CIty of Seal Ueach, declllres the annllal Statement of Investment Policy and Investment Guidelines to he as slaled In attached Exllibit A. NOW, TI-IEREf;0R'E;<FI-IE CITY COUNCIL OF THE CITY OF SEAL BEACl-I DO ES I-IERE-B.'~~Rlis'61lY:.E~ Section I Tlt!f:t~m~ual r~(~:e~~nt of Investment Pohcy ami Gmdehnes has been tiled by the t ~~. ~ ii City Tleasurel fm-Flscal Year .2002/2003 m comphllnce with Section 53646(a) of lhe . ... I l. Government €odc of the Stale ofeahfomia. \, .. / PASSED, APj>IWYED,AND ~DOrTED BY THE Ci meellng hereoflleld on ti{e /c::2~ day of ,2002 by tile follOWIng vole' _ I AYES. COuNCrLMEMBER~ (!);'fl1dl, of't-'~d- NOES: COUNCILMEMBERS ABSENT' COUNCILMEMBERS J.&_~ MAYOR STATE OF CALIFORNIA) COUNTY OF ORANGE ) SS CITY OF SEAL BEACH ) I I, Joanne M. Yeo, City Clerk of the City of Seal Beach, Califomta, ~.s:bY certIfy that the foregomg Resolution IS the original copy of Resolution Number 'j on file in the office of the CIty Clerk, passed, approved, and nl!sJpted by the Cit ouncll of the City of Seal Beach at a meeting thereof held on the ~ day of ,2002 I I 1 Resolution Number ~~I CITY OF SEAL BEACH STATEMENT OF INVESTMENT POLICY 2002/2003 INTRODUCTION: This statement IS mtended to ollthne the policies for prudent mvestment of Idle City funds by providing gUldehnes for suttable investments while maXlmtzmg the efficIency of tile City's Cash Management Program. The responsIbIlity for the day to day investment of the CIty's funds is the responsIbIlity of tile Director of Admimstra\lve ServlcesfTreasurer. The investment policy applies to alt financial assets of the city and IS pooled m a managed portfoho. The mvestment pool or portfoho WIll be referred to as the "Fllnd" throughout this document The City's Cash Management Program IS deSigned to accumtely momtor and forecast expend.tures and revenues, thus enabhng tile Investment of funds to the fullest extent possible Matnrities are matclled as close as possible to coincide With cash reqUirements Length of maturities is based on consldera\lon of the yield cllrve and es\lmate of future mterest rate movement. TIle mvestment policies and prac\lces of the City of Seal Beach are based upon Federal, State and Local law and prudent money management. The pnmary goals oflhese pohCles are: 1. To assure compliance wltll alt Fedeml, State and Local law govermng the mvestment of moneys; 2. To protect the principal moneys of the City, 3. To generate the maximum amount ofinvestrnent income Within the parameters oft/us Statement of Investment Pohcy and tile Investment Portfolio Guu\ehnes OBJECTIVES' SAFETY OF PRINCIPAL - Safety ofpnncipalls the foremost objec\lve of the CIty Seal Beach. Each mvestmentlIansaction shall seek to ensure caplta\losses are aVOided. 2. LIQUIDITY - LiqUidIty is the second mosttmportant objecl1ve of tile CIty of Seal Beach It IS impOltant that the portfolio contain investments, whIch proVIde the ablhty of being easily sold at any tnlle WIth mmlmal nsk of loss of pllnclpal or mterest. 3. YIELD - TIle City's Fund shall be designed to altam a malket-avetage rate of return through economic cycles TIle market-average rate of relum IS defined as the average return on tlnee-month U S Treasllry Bills TIle Ctty stnves to mamtam' \00% mvestment of Idle funds afiel consldera\lon for a compensatmg balalice'to cover the co'st of services provided by the bank The funds aV3llable for investments are determined by cash /low proJec\lons updated daily Investments are monitored so those legal hmlts on types of mvestments are not exceeded AUTHORIZED INVESTMENTS: .' Seal Beach mvests Idle fllnds undel the "Pmdent Man Rule" which states that. "Investment shall be made wltll Judgement and care, under CIrcumstances then prevmllng, wllicll pel sons of prudence dlscre\lon, and mtelhgence exercise in the management of their own affairS, not for speculatIOn, but for mvestment, consldermg tile plObable safety of their capital as well as the probable income to be derived." The CIty IS governed by the California Government Code, Sections 53600 et seq W111lln the context of these IInlltatlOns, the tollowmg mvestments ale authOrized, leflected by the advantages of eacll: Resolution Number ~~I' V.S Treasury secunlles ale highly hqUld m add.tlOn to bemg constdered the safest of all mvestments Fed", al Agency secunlles are IIlghly hqUld and consIdered nskless. Bankers Acceptances are frequenlly the highest m Yield, are safe mvestments, and are highly liqUId Commelclal Paper Issued hy prime rated mdustnal and financial inslttnllons allows tile mvestment of money for one to 180 days at rates hIgher tllan we can eam flO1\ltlle previously listed secullltes. I Certificates of DepOSits allow the City to select the exact nrnount and day of matulIty as well as the exact depOSItory, There are penalltes for wIthdrawal of funds pnor to tile ongmal matunty date Negollable Certtficates of DeposIt are high-grade instfllments, paying a lI.gher IIlterest rate that regular certtficates of depOSit They are liqUId because they can be traded III tile secondary market. COMMERCIAL PAPER ranked "PI"by Moody's Investor Services or "AI" by Standald and Poor's, and tssued by a domesltc corporalton having assets m excess of $500,000,000 and havmg an "A" or beltel ratmg on mdebtedness otller than commercial paper and be orgamzed and opemtlllg withm the Umted States Commercial Paper may not exceed 180 days 10 maturity No more than 25% of the cIty's Idl" funds may be mvested in commercIal paper. NEGOTIABLE CERTIFlCA TES OF DEPOSITS Issued by a NatIOnally or State-Chartered Bank or a State or Federal savmgs and Loan AssoClalton. Only certllicates Issued by the 20 lalgest banks or savings and loan associatIOn Will be considered. No more than 30% If the cIty's tdle funds may be mvested III Negollable Certificates ofDepostts REPURClTASE AGREEMENTS with banks and dealels With which the city lias entered into a master repUlchase contract, wluch speCIfies terms and condlltons of replllchase agreements. The matunty of repurchase agreements sllall not exceed 90 days. The market value of seClll.t,es IIsed as collateral for repurchase agleements shall be monitored daily by the Director of Admlmstrative Services and will not be allowed to fall below 102% of the value of tile repmcllase agleement In order to conform With proVISIons of tile Federal Bankfllptcy Code wluch prov.des for the hqllldation of secunltes held as collateral for repurchase agreements, the only secunltes acceptable as collateral shall be ehglble negollable certIficates of deposit, ehglble bankel's acceptances, or securil1es that are direct obhgal1ons of, or that are flllly guaranteed as to pnnclpal and interest by the United States or any agency of the United States 111e use of Replllchase Agreements is InDIted to the extent they are mvestment vehicles penodlcally used by the Local Agency Investment Fund (LAIF) and not a direct purchase by tile Clly of Seal Beacll. I LOCAL AGENCY INVESTMENT FUND estabhshed by the State Tr"asurel for tile benefit of local agencies up to the maximum pernulted by State Law. MEDIUM-TERM NOTES ofmaxunum of five years matunty issued by corporal1ons orgalll7ed and operatlllg wltllin tile Umt"d States or by depOSitory insl1tllltons hcensed by tile Ulllted States or any state and operating WIth m the Umted Sates. Per Government Code Section 5360 I (J) medIUm-term notes are to be rated "A" or belter by a nationally recogmzed ralmg selVlce No more limn 30% oCthe City's Idle fund may he invested m MedIUm-Term notes MUTUAL FUNDS or sllares of benefiCIal interest issued by diversified management compames as defined in Secl10n 2370 I (m) of the Revenlle and Taxation Code, mvestmg III the secunties and obligatIons as authollzed by subdiVISIOns (A) to (L), mcluslve, of that seclton and wluch comply With the mvestment le&trictlOns (Cahfornia Goverlunent Code, commenclllg With Secllon 53630), compames shall eltller' I) Altam tile highest rankmg or the IIlghest letter and numerical rating provuled by not less than two of the t1uee largest nallonally recogmzed rating services, and 2) Have an investment adVIser registered wllh tile Secuulles and Exchange Comrn.ssion With uot less than five years expeIience investmg in secunl1es and obhgal1ons as autllonzed hy subdIVIsions (a) to (m), inclUSive and With assets under management m excess of $500,000,000. The purcllase puce of shares of benefiCial mtelest, (mutual funds) purchase pllrsuant to thIS &ubdlvlsion sllall not IIlclude any comm.sslon that these compames m,lY charge No more than 15% of the Funds may be mvested m mutual funds I Resolution Number ~~ Investments not described herem, mcludlllg but not limIted to common stocks are prohIbited ft om use III this Fund. 1 CITY OF SEAL BEACH INVESTMENT PORTFOLIO GUIDELINES 2001/2002 These gUldehnes are estabhshed to direct and control mvestment acltvlltes m sucll a manner to assure that the goals estabhshed m the Investment Pohcy are attamed. CASH FORECAST. TIle cash flow of the City sllall be analyzed with the receipt of reveuues and maturity of mvestments sclleduled so tllat adequate cash will be avallahle to meet the disbursement reqUIrements. I'OOLED CASH, Whenever pracltcal, the Clly's cash should be consolidated mto one bank accounl and mvested on a pooled concept baSIS. Interest earnings may ht: allocdted accordmg to ruud cash aud investment balances. LONG TERM MATURITIES, As a general rule, long tenn maturiltes should uot represeut a slgmficant percentage of the total Fund, as tile prmclpalllsk iuvolved can outwetgh the potenltal for higher eammgs. No more than 15% of tile total Fund may be mvested UI secuntles WIth matuultes greater tban lI11ee yem'S. DIVERSIFICATION, The Fund should consist ofa mix of variOUS types ofsecunltes, Issuers, and maturities I COMPETlVE IUDS, Purchase and sale of secunhes shall be made on the baSIS of competItive bids and offers WIth a mInimum oflwo quotes beiug obtallled, when pracltcal SAFEKEEPING, Secmiltes purchased from brokerldealers sllall be held m IInrd party safekeepmg by the Trust Departmenl of the Bank designated by the Director of Admmlstrahve Services. Said Secunltes shall be held m the name of the City or Seal Reach WIth the trustee execulmg transactIOns as directed by the Director of Admm- Istrahve Services STRATEGY. Strategy refers to tile plan of action for managmg financial resources III tile most advantageous manner TIle Director of Admnnstraltve Semces uses the followmg elements 111 developing strategy EconomIc Forecasts Economic forecast information developed by ecouollusts and financial experts and obtamed through bankers and brokers IS used to assIst WIth the formlllatlOn of an mvestment strategy for the City. Investment Imolementinl!. Execute only investment transactIOns WhlCIl conform with antiCIpated cash flow reqUIrements, economIc COndition and mterest rate ltends and are consIstent With tile estabhshed Investment Policy Statement 1 Raooort A close working relatlonslup willi City Departments havmg a slgmfy- cant impact on cash flow IS maintamed in order to maximize the effiCIency of the City's cash management system and establish cash flow reqUtrelllents Y,eld Euhancement Ulthze mvestment tecllmques to mcrease y'etd aud to Mamtam a fully mvested posllton. Preserve Portfoho Value Develop YIeld standards in Older to mamtam earnmgs Consistent with tile market average rate of return to preserve the value of the portfolIO INVESTMENT VEHICLES, TIle followmg palameters are outlult:d for authonzed Investments as prOVided m the Statement of Investment Pohcy Resolution Number ~51 U,S. TREASURY'S are direct obligations for winch the full faith and cledlt of tile Umted States Govemment and pledged tor payment of prIncIpal and mtel est. There IS no Iimitalton as to the percentage of the portfoho that can be mvested in tins category, as tlley are both safe and hqllld The V.S, TREASmtY DILLS, V,S. TREASURY NOTES and D.S, TREASURY BONDS, FEDEnAL AGENCY ISSUES or obhgations quahfy as legalmvestmenls and are acceptable as securIty for pubhc deposits. They usually provide hlgller Yields than treasury Issues wIth all of the same advantages Fedelal Agency Issues mc1ude, but are not limited to GNMA (Govemmenl Naltonal Mortgage Association), FFCn (Federal Farm Credit flank), FlILH (Fed- elal Home Loan Bank Board), FHLMC (Federal Home Loan M0I1gage Corporation), FNMA (Federal Naltonal Mortgage Association), SLMA (Student Loan Mortgage Admimstralton), REFCORP (Resolulton Funding Corporation), FHA (Fedelal Housmg Admimstrahon) and TV A (Tennessee Valley AutllorIty). Although there IS no percentage linlltal10n ontllese Issues, the "prudent mvestor" rule shall apply for a smgle agency name as U S Government backlOg IS Imphed ralller than guaranteed. I flANKERS' ACCEPTANCES or bIlls of exchange 01 tune drafts drawn on and accepted by a comlllelcial bank Banker's Acceptances purcllascd may not exceed 180 days to matullty or 40% of the cIty's surplus funds No more tllan 30% of the CIty's surplus funds may be mvested 10 banker's acceptances Issued by anyone bank CERTICA TR Ol? DEPOSIT shall be evaluated llllemlS of Federal Depo~lt Insurance Corpora lion (FDIC) coverage For depOSits to excess of tile insured maxunum of $100,000, approved collatcHlI at tile percentage above market value as speCified by law shall be requiled. TIle Director of Admmlstrative ServICes may attllelr (lIscrellon waIve secnrIty for that portIOn of a depOSit that is lIlsured pursuant to federal law. Repurchase Agreements allow us to mvestlalge amounts of money for less tllan Tlllrty days at rates hIgher than we can eam from other sllOrt-term investments The City will notmvesl 10 Repurchase Agreements. TIle authorlzalton sllalllilmt Repurchase Agreemenls to tllose IIlvestment velllcles purchased only throngh the Local Agency Investment Fund (LAlF) I The Local Agency Investment Fund of the State ofCahfomia offers Ingh hquidity because OUl deposits can be Wired to our checkmg account wtth- III twenty-four hours. Interest IS computed on a dmly baSIS Medium Tenu Corporate Notes offer a compelttlve altemallve to Negollable CertIficates of Deposits and standard Certificates of DepOSIts. TIlese secunltes enJoy an acltve secondary Market to provide liquidIty. Mutual Funds IS another authOrIzed mvestment allowing tile CIty to mamtam Llqllldlty and receIve money market rates. Gualanteed Investment Contracts (GIC's) DEPOSITORY SERVICES Money must be deposIted III state or naltonal banks, state or federal savmgs associallons or state or federal credIt unions in the state. It may be 10 macl1ve depOSIts, acltve depOSIts or mtelest- bearIng acltve depOSIts. The depOSIts cannot exceed the amount of the bank's or savmgs and loan's paid up capital and surpllls TIle bank or savmgs and loan mllst secure the acltve and mactlve depOSits Willi ehglble secutil1es havmg a market value of 110% of the total amount of the depOSits Stale law also allows as a n eligible security, firsltmst deeds havmg a value of 150% of tile total amount oftlle depOSits. A thIrd class of collatemlls lellers of credll drawn on tile Fed- eral Home Loan Dank (FHLD). I Tile treasurel may at their discretIOn waive secnnty for that portIon of a depOSit, which is msured purSllant to federal law. Cunently, the first $100,000 because we receive a higher llllerest rate. I I I Resolution Number ~~" OUALlFIED DEALERS AND INSTITUTIONS: The CIty Hall sllall transact busmess only wIth banks, savmgs and loans and registered Investment secuultes dealers. The purchase by the City of any mvestment other than TIlOse purcllased dIrectly from the ISSUer, sllall be purchased eltller from an mstltutlon Ltcensed by the State as a broker-dealer, as defined in Section 25004 of the Corporations Code, who IS a membel of the NatIOnal AsSOCIation of Secuntles Dealels, or a member of a Federally regulated securities exchange, a NatIOnal or Sate-Chartered Bank, a Fed- eral or State ASSOCiation (as defined by Section 5102 of the Financial Code), or a brokel age finn deSIgnated as a Pnmary Govellunent Dealer by tile Federal Reserve Bank. 't he Clly Treasurer shall mvestlgate all mstltlltlons whIch Wish to do business wllh the CIty, III order to determme If they are adequately capltahzed, make markets III securities appropnate to the City's needs, and agree to abide by the conditions set fortll in the CIty or Seal Beach's Investlnent Pohcy and Investment Portfolio Guidelllles Tlus WIll be done annually by havmg tile Fmanclal Institutions complete and return the Appropriate questionnaIre, and an audIted Fmanclal Statement must be Plovlded wltIun 120 days Ifthe Institution's fiscal year end. SAFEKEEPING OF SECURITIES: To protect agamst potenllallosses caused by collapse of md,vldllal secuntles d"alers, all securities owned by the CIty except securities used as collateral for repurchase agreements, shall be kepI in safekeepmg by a thlf(1 party bank trust department, actmg as an agent for the Cay IInder the terms of a custody agreement executed by the bank and by tile City IInder tile ternlS of a custody agleement executed by tile bank and by the CIty All seculllles WIll be received and delivered using standard dehvery velsus payment procedures REPORTING:' The Treasurer sllalllender a monthly report to the City CounCil showmg the type of Investment, institution, date of maturity, amount of depOSit, current market V'dlue fOt all SecuritIes with a maturity of more than twelve months, rate ofmterest, and such data as may be reqUired by the City Council. POLICY REVIEW Tins IIlvestment pohcy sllall he reViewed at least annually to ensure its consIstency wllh ovelall ohJeCtlves ofpreservallon of PRINCIPAL. LIQUIDITY, AND YIELD and ItS relevance to current law, financial and economic trends, and to meet the needs of the City of Seal Beach. (2?J1Lht df.vK~ /,{;:.-'-a Pamela Arends-Kmg, Director of Administrative ServiceslTreasurer