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HomeMy WebLinkAboutCC Res 4916 2001-07-23 " I I I ~SOLUTJONNUMBER' ~ It, A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SEAL BEACH, CALIFORNIA, ADOPTING AND FILING THE ANNUAL STATEMENT OF INVESTMENT POLICY AND GUIDELINES FOR THE FISCAL YEAR 20012002 WHEREAS, the California State Legislature passed legislation during the 1984 session Requiring the filing of an almual Statement ofInvestment Policy by local Public agencies; and WHEREAS, the Orange 'County bankruptcy resulted in further legislation in Senate Bills 563 and 866 reinforcing the "prudent man" investment of Public Funds; and WHEREAS, the City Treasurer, in conjunction with the City Manager of the City of Seal Beach, declares the annual Statement ofInvestment Policy and Investment Guidelines to be as stated in attached Exhibit A. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SEAL BEACH DOES HEREBY RESOLVE: Section 1: That an annual Statement of Investment Policy and Guidelines has Iieen filed by the City Treasurer for Fiscal Year 200I/2002 in compliance with Section 53646(a) of the Government Code of the State of California, AYES: COUNCILMEMBER PASSED, APPROVED AND t\P..OPTED BY THE City hereof held on the ~If~ day of following vote: ' Seal Beach, at a meeting 2001 by the NOES: COUNCILMEMBERS ABSENT, COUNCILMEMBERS ST TE OF CALIFORNIA) COUNTY OF ORANGE ) CITY OF SEAL BEACH ) , I, Joa~ne M, Y e~, C.ity Cler~ ~or the City of Seal .Beach, Califojnia, do hereby certify that the foregomg resolution tS the ongmal copy of ResolutIon Number~?/~ on file in that office of lb, Chy CM, pu~~ 'p""",,, "'" .."".. by th< City C"~t'~ of "" B"",, " . regul e ting hereof eld on th day of 2001. Resolution Number "9/lp CITY OF SEAL BEACH STATEMENT OF lNVESTMENT POLICY 200112002 INTRODUCTION: This statcmcnt is intended to outline the policies for prudent investmcnt of idle City funds by providing guidelincs for suitable investments while maximizing the efficiency of the City's Cash Management Program. I The responsibility for the day to day investment of the City's funds is the responsibility of the Directur of Administrative Servicesrrreasurer. The investment policy applies to all financial assets of the city and is pooled in a managed portfolio. The investment pool or portfolio will be referred to as the "Fund"thronghout this document. The City's Cash Managemcnt Program is designed to accurately monitor and forecast expcnditures and revenues, thus enabling the investment of funds to thc fullest extent possible. Maturities are matched as close as possible to coincide with cash requirements. Length 'of maturities is bascd on consideration of the yield curve and estimate of future interest rate movement. The investment policies and practices of the City of Seal Beach are based upon Federal, State and Local law and prudent money management. The primary goals of these policics are: I. To assure compliance with all Federal, State and Local law governing the investment of moneys; 2. To protect the principal moneys of the City; 3. To generate the maximum amount of investment income within the parameters ofthis Statement oflnveshnent Policy and the Investment Portfolio Guidelines. 1 OBJECTIVES: I. SAFETY OF PRINCIPAL - Safety of principal is the foremost objective of the City Seal Beach. Each investment transaction shall seek to ensure capital losses are avoided. 2. LIQUIDITY - Liquidity is the second most important objective of the City of Seal Beach. It is important that the portfolio contain investments, which provide the ability of being easily sold at any time with minimal risk of loss of principal or interest. 3. YIELD - The City's Fund shall be designed to attain a market-average rate of return through economic cycles. The market-average rate of return is defined as the average return on three-month U.S. Treasury Bills. ' ..J~"_.' . Thll City - ~trives' to mai~lain 100% investment of idle funds dter consideration for a comp.ensating balance to cover the cost of services provided by the bank. Thc funds available for investm~fits'lV!l deterl1}.in~d by cash flow projections updated daily. Investments are monitored so thuse le~I'limits_on'tYpes of investments are not exceeded. AUTHORIZED lNVESTMENTS: Seal Beach invests idle funds nnder the "Prudent Man Rule" which states that: 'I "Investment shall be made with judgement and care, under cireumstances then prevailing, which persons of prudence discretion, and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived." The City is govemed by lhe Califomia Government Code, Sections 53600 et seq. Within the context of thesc limitations, the following investments are authorized, reflected by the advantages of each: Resolution NUlIII:?er J/9/tc U.S. Treasury securities are highly liquid in addition to being considercd the safest of all investments. Federal Agency securities arc highly liquid and considercd riskIess. Bankers Acceptances are frequently the highest in yield, are safe investments, and arc highly liqnid. 'I Commercial Paper issued by p,'ime rated industrial and financial institutions nllows the investment of money for one to 180 days at rates higher tban we can earn (j'omthe previously listed securities. Certificates of Deposits allow thc City to select the exact nmOlmt and day of matllrity as well as the exact depository, There are penalties for withdrawal of funds prior to the original maturity date. Negotiable Certificates of Dcposit arc high-grade instruments, paying a higher interest rate that regulnr certificates of deposit. They are liquid becanse they can be traded in the secondary market. COMMERCIAL l'Al'ER ranked "Pl"by Moody's Investor Services or "AI" by Standard and Poor's, and issued by a domestic corporation having assets in excess of $500,000,000 and havmg an "A" or betler rating on indehtedness other than commercial paper and be organized and operating within the United States Commercial Paper may not exceed 180 days to maturity No more than 30% of the city's idle funds may be invested in commercial paper. NEGOTIA8LE CEltTlFICATES OF DEPOSITS issued by a Nationally or State-Chartered Bank or a State or Federal savings and Loan Association. Only certiticates issued by the 20 largest banks or savings and loan association will hc considered. No more than 30% if the city's idle funds may be iuvcsted in Negotiable Certificates of Deposits. 1 REI'URCRASE AGREEMENTS with banks lInd dealers with which the city has entered into a master repurchase contract, which specifies temls and conditions of repurchase agreements. The maturity of repurchase agreements shall not cxceed 90 days. The market value of securities used as cullaleraI for repurchase agreements shall be monitored daily by the Director of Administrative Services and will not be allowcd to fall below 100% of the value of the relmrchase agreement. In order to con limn with provisions of the Fedcral Bankruptcy Code which provides for the liquidat ion of securities held as collateral for repurchase agreements, the only securities acceptable as collateral shall be eligible negotiable certificates of deposit, eliglhIc bunker's lIcceptances, or securities that are direct obligations of, or that are fully guaranteed liS to principal and interest by the United States or any agency of the United States. The use of Repnrchase Agreements is limited to the extent they are investment vehicles periodically used by tIle l.ocal Agency Investment Fund (LAIF) and not a direct purchase by the City of Seal Beach. LOCAL AGENCY INVESTMENT FUND established by the State Treasurer for the benefit of local agencies up to the maximum pennitted by State Law. M EDruM-TERM NOTES of maximum of Jive years matnrity issned by corporatiuns organi7ed and operating within the United States or by depository institutions licensed by the United Slates or any state and operating with in the United Sates. No more than 30% of the Fund muy be invested in medium term notes. I MUTUAL FUNDS or shares of beneficial interest issued by diversified management compunies as defined in Section 23101 (m) of the Revenue and Tuxation Code, investing in the securities and obligations as authorized by subdivisions (A) to (L), inclusive, of that section and which comply with the investment restrictions (California Government Code, commencing with Section 53630), companies shall either: I) AUuin the highest ranking or the highest Ieller and namerical rating provided by not less than two of the thrce largest nutionally recognized I'ating services, and 2) Have an investment adviser registered with the Securities and Exchange Commission with not less than five years experience investing in securities and obligations as authorized by subdivisions (a) to (m), inclnsive and with assets under management in excess of $500,000,000. The pnrchase price of shares of beneficial interest, (mutuuI limds) purchase pnrsuant to this subdivision shall not include any commission that these companies mllY charge. No more than 15% of the Funds may be invested in mutuallilllds Resolution Number '111ft, GUARANTEED INVESTMENT CONTRACrS are investment agreements approved by the Credit Provider which are wiUI investment institutions having long-term obligations which are rates "AA-"or higher by S&P and "Aa3" or higher by Moody's as to long term instnlments are rated in the highest rating category by S&P and Moody's; provided that if such rating falls below the twu highest rating categories, the investment agreement shall require the Trustee to replace such tinanciul institution or shall provide lor the investment agreement to be colluteralized at ]evels and under such conditions as are appropriate for the maintenance of the rating of the bonds. Investments not described herein, including but not limited to common stocks are prohibited from nse in this Fund. I CITY OF SEAL REACH INVESTMENT PORTFOLIO GUIDELINES 2001/2002 ' l11ese guidelines are estublished to direct and control investment activities in such a manner to assure that the goals established in the Investment Policy are attained. CASU FORECAST. 11le cash now of the City shall be analYled with the receipt of revenues and maturity of investments scheduled so that adequate cash will be availllbIe to meet the disbursement requirements. POOLED CASH. Whenever practical, the City's cash shoaId be consolidated into one bank account and invested on a pooled concept basis. Interest earnings may be allocated accurding to fund cash and investment balances. I LONG TERM MATURITIES. As a general rule, long term matnrities should not represent a significant percentage of the total Fund, as the principal risk involved cun outweigh the potential lor higher eamings. No more than 15% of the total Fund muy be invested in securities with matarities greater than three years. DIVERSIFICATION. The Fund should consist ofa mix of various types of securities, issuers, and maturities. COMI'ETIV.: mns. Purchase and sale of securities shall be made on the basis of competitive bids and otTers with a minimum of two quotes being obtained, when practical. SAFEKEE1'ING. Securities purchased from broker/dealers shall be hel<! in third party safekeeping by the Trust Department of the Bank designated by the Director of Administrative Services. Said Securities shall be held in the name of the City of Seal Beach with the trustee executing transactions as directed by the Director of Admin- istrative Services. STRATEGY. Strategy refers to the plan of action for managing financial resources in the most advantageous mOWleI'. The Director of Administrative Selvices uses the following elements in developing strategy. Economic Forecasts. Economic forecast infonnation developed by economists and financial experts and obtained through bankers and brokers is used 10 assist with the formulation of an investment strategy for the City. I Investment Imolementing. Execute only investment transactions which confonn with anticipated cash now requirements, economic condition and interest rate trends and are consistent with the established Investment Policy Statement. Rapport. A close working relationship with City Depm1ments having a signify- cam impact on cash now is maintained in order to maximize the efficiency of the City's cash management system and establish cash now requirements. Resolution Number /f9/ (p Yield Enhancement. Utilize investment techniques to increase yield and to Maintain a fully invested position_ Preserve Portfolio Value. Develop yield standards in order to maintain earnings Consistent with the market average rate of retum to prescrvc the vulue of the portfolio. I INVESTMENT VEHICLES. The following parameters are outlincd for authorized Investments as provided in the Statcment of Investment Policy. U.S. TIlEASURY'S are direct obligations for which the full laith and credit of the United States Govenlment and pledgcd for payment of principal and interest. There is no limitation as to the percentage of the portfolio that can be invested in this category, as they are both safe and liquid. The U.S. TREASURY U1LLS, U.S. TIU~ASURY NOTES and U.S. TREASURY nONnS. FEDERAL AGENCY ISSUES or obligations qualifY as legal investments and are acceptable as security for public deposits. They usually provide higher yields than trensury issues with all ofthe same advantages. Federal Agency Issues include, but are not limited to GNMA (Government National Murtgage Associatlon), FFCD (Fcderal Farm Credit Bank), FIlLn (Fed- eral Home Loan Bank Board), FHLMC (Federnl Home Loon Mortgage Corporation), FNMA. (Federal National Mortgage Association), SLMA (Studenll.oan Mortgage Administration), REFCORP (Resolution Funding Corporation), FHA (Federall-Iousing Administration) and TV A (Tennessee Valley Authority). Although there is no percentage limitation ou these issues, the "prudent investor" rule shaUapply for a single agency name as U.S. Government hacking is implied rather than guaranteed. I nANKERS' ACCEPTANCES or bills of exchange or time drafts drawn on and accepted by a commercial baIlie Banker's Acceptmlces purehased may not exceed 270 days to maturity or 40% of the city's surplus funds. No more than 30% of the city's surplus funds may be invested in banker's acceptances issued by anyone bank. CEl~TJCA TF. OF DEI>OSIT shall be evaluated in tenus of Federal neposit Insurance Corporation (FDIC) coverage. For deposits in excess of the insured maximum of $100,000, approved collateral at the percentage above market value as specified by law shall be required. The Director of Administrative Services may at their discretion waive security lor that portion of a deposit that is insured pursuant to federal law. Repurchase Agreements allow us to invest large amounts of money tor less than Thirty days at rntes higher than we can eanl from other short-term investments The City will not invest in Repurchase Ab'Teements. The authorization shall limit Repurchase Agreements to those investment vehicles purchased only through the Local Ageucy Investment Fund (LAIr). The Local Agency Invcstment Fund of the State of California ofters high liquidity beclluse our deposits can be wired to our checking account with- in twenty-four hours. Interest is computed on a daily basis. Medium Term Corporate Noles ofTer a competitive allernative to Negotiable Certiticates of Deposits and standard Cerlilicates of Deposits. These securities enjoy an active secondary Market to provide liquidity. I Mutual [Iunds is another authorized investment allowing the City to maintain Liquidity and receive money market rates. Guaranteed Investment Contracts (GlC's) DEPOSITORY SERVICES Money must be deposited in state or national banks, state or federal savings associations or state or federal credit unions in the state. II may be in inactive deposits, active deposits or interest- bearing active deposits. The deposits cannot exceed the amoant of the balik's or savings and 101m's paid up capital and surplus. Resolution Numbertlq/~ The bank or savings and Ioftn must secure the active and inactive deposits with cligible securities having a market value of 110% of the total amount of the deposits. SliUe Jaw also allows as a n eligible security, first trust deeds having a value of 150% of the total amount ofthe deposits. A third class of collateral is lellers of credit drawn on the Fed- eral Home Loan Bank (FHLB). The treasnrer may at their discretion waive security for that portion of a deposit, which is insnred pursuant to federal law. CnlTenlly, the first $100,000 because we receive II higher interest rate. QUALIFIED DEALERS AND INSTITUTIONS: 1 The City Hall shall transact bnsiness only with banks, savings and loans and registered Investment securities dealers. TIle purehase by the City of any investment other than Those purchased directly from the issuer, shall be purchased either from an instiMion Licensed by the State as a broker-dealer, as defined in Section 25004 of the Corporations Code, who is a member of the National Association of Securities Dealers, or a memher 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 brokerage firm designated as a Primary Government Dealer by the Federal Reserve Bank. The City Treasnrer shall investigate all institutions which wish to do business with the City, in order to determine if they are adequately capitalized, make markets in securities appropriate to the City's needs, and agree to abide by the conditions sct1brth in the City of Seal Beach's Investment Policy and Investment Portfolio Guidelines. This will be done annually by having the Financial Institutions complete and return the Appropriate questionnaire, and an audited Financial Statement must be provided within 120 days if the Institution's liscal year end. SAFEKEEPING OF SECURITIES: To protect against potential losses caused by collllpse of individual securities dealers, all securities owned by the City except securities used as collllteral for repurchase agreements, shall be kept in sali:keeping by a third party hank trust department, acting as an agent for tbe City under the terms of a custody agreement executed by the bank and by the City under the terms of a custody agreement executed by the bank and by the City. All securities will be received and delivered using standard delivery versus payment procedures. I REPORTING:: The Treasurer shall render a monthly report to the City Council showing the type of Investmcnt, institution, date of maturity, amount of deposit, cUlTent markel value for all Securities with a mllturity of more than twelve months, rate of interest, amI such data as may be l1?quired by the City Council. POLICY REVIEW: this investment policy shall be reviewed at least annually to ensure its consistency with overall objectives ofpreservlltion ofI)RlNClPAL, LIQUIDITY, AND YrF.I.D arid its relevance to currentlllw, linancial and economic trends, and to meet the needs of the City of Seal Beach. ~/J du-~- ~ Pamela Arends-King, -0 Director of Administrative Servicestrreasurer I