HomeMy WebLinkAboutCC Res 4495 1996-08-12
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RESOLUTION NUMBER
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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
1996/1997
THE CITY COUNCIL OF THE CITY OF SEAL BEACH DOES HEREBY RESOLVE:
WHEREAS, the California State Legislature passed legislation
during the 1984 session requiring the filing of an
annual Statement of Investment Policy by local public
agencies; and
WHERERAS, 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 of Investment 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 been filed by the City Treasurer for
Fiscal Year 1996/97 in compliance with section
53646(a) of the Government Code of the State of
California.
PASSED, APPROVED
Seal Beach, at
day of
D ADOPTED BY THE City council ~~~e city of
ing h reof held on the ~-
, 1996 by the following vote:
AYES:
NOES:
COUNCILMEMBERS
ABSENT:
COUNCILMEMBERS
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STATE OF CALIFORNIA )
COUNTY OF ORANGE ) SS
CITY OF SEAL BEACH )
I, Joanne M. 'leo, City Clerk of the City of Seal Beach,
California, do hereby certify that the fOtr~~Resolution
is an original copy of Resolution Number on file in
the office of the City Clerk, passed:c;:proved and adopted
by the City Council of~~ City of S al BeaCht!t a m~~ng
thereof held on the ~day of OhA' 19.;ua'
Q",{Jh( k
~y Cler /
Resolution Number ~~~~
Exhibit A
CITY OF SEAL BEACH
STATEMENT OF INVESTMENT POLICY
1996/1997
J:IlTRODUCTJ:OIf:
This statement is intended to outline the policies for prudent
investment of idle City funds by providing guidelines for suitable
investments while maximizing the efficiency of the City's Cash
Management Program.
The responsibility for the day to day investment of the City'S
funds is the responsibility of the Director of Administrative
Services/Treasurer. The investment policy applies to all financial
assets of the city and are pooled in an managed portfolio. The
investment pool or portfolio will be referred to as the "Fund"
throughout this document.
The City'S Cash Management Program is designed to accurately
monitor and forecast expenditures and revenues, thus enabling the
investment of funds to the fullest extent possible. Maturities are
matched as close as possible to coincide with cash requirements..
Length of maturities is based on consideration of the yield curve
and estimate of future interest rate movement.
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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 policies are:
1. To assure compliance with all Federal, State and Local laws I
governing the investment of monies.
2. To protect the principal monies of the city.
3. To generate the maximum amount of investment income within
the parameters of this Statement of Investment Policy and the
Investment Portfolio Guidelines.
OBJECTJ:VES:
1. SAFETY 01' PRJ:IfCJ:PAL - Safety of principal is the foremost
objective of the City of Seal Beach. Each investment
transaction shall seek to ensure that capital losses are
avoided.
2. LJ:gUJ:DJ:TY - Liquidi ty 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. YJ:BLD - 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.
The City strives to maintain 100% investment of idle funds after
consideration for a compensating balance to cover the cost of
services provided by the bank. The funds available for investment
are determined by cash flow projections updated daily. Investments
are monitored so that legal limits on types of investments are not
exceeded.
AUTRORJ:ZBD J:RVEBTKBlfTB:
Seal Beach invests idle funds under the "Prudent Man Rule" which
states that:
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. Resolution Number ~J/q~
"Investment shall be made with judgement and care, under
circumstances 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 governed by the California Government Code, Sections
53600 et seq. Within the context of these limitations, the
following investments are authorized, reflected by the advantages
of each:
U.S. Treasury securities are highly liquid in addition to
being considered the safest of all investments.
Pederal Agency securities are highly liquid and considered
riskless.
Bankers Acceptances are frequently the highest in yield, are
safe investments, and are highly liquid.
Commercial paper issued by prime rated industrial and
financial institutions allows the investment of money for one
to 180 days at rates higher than we can earn from the
previously listed securities.
Certificates of Deposits allow the City to select the exact
amount and day of maturity as well as the exact depository.
There are penalties for withdrawal of funds prior to the
original maturity date.
lIegotia):)le Certificates of Deposit are high grade instruments,
paying a higher interest rate than regular certificates of
deposit. They are liquid because they can be traded in the
secondary market.
Repurchase Aqre_ents allow us to invest large amounts of
money for less than thirty days at rates higher than we can
earn from other short term investments.
The Local Agency Investment Fund of the State of California
offers high liquidity because our deposits can be wired to our
checking account within twenty-four hours. Interest is
computed on a daily basis.
Medium Term corporate lIotes offer a competitive alternative to
Negotiable Certificates of Deposits and standard Certificates
of Deposits. These securities enjoy an active secondary market
to provide liquidity.
Mutual Punds is another authorized investment allowing the
City to maintain liquidity and receive money market rates.
DBPOSITORY SBRVICBS
Money must be deposited in state or national banks, state or
federal savings associations or state or federal credit unions in
the state. It may be in inactive deposits, active deposits or
interest-bearing active deposits. The deposits cannot exceed the
amount of the bank's or savings and loan's .paid up capital and
surplus.
The bank or savings and loan must secure the active and inactive
deposits with eligible securities having a market value of 110% of
the total amount of the deposits. State law also allows as an
eligible security, first trust deeds having a value of 150% of the
total amount of the deposits. A third class of collateral is
letters of credit drawn on the Federal Home Loan Bank (FHLB).
The treasurer may at their discretion waive security for that
portion of a deposit which is insured pursuant to federal law.
Currently, the first $100,000 of a deposit is federally insured. It
is to the City's advantage to waive this collateral requirement for
the first $100,000 because we receive a higher interest rate.
Resolution Number ~~~
OUALIFIED DEALERS AND INSTITUTIONS:
The city shall transact business only with banks, savings and loans
and registered investment securities dealers. The purchase by the
city of any investment other than those purchased directly from the
issuer, shall be purchased either from an institution 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 member of a Federally regulated securities
exchange, a National or State-Chartered Bank, a Federal or State
Association (as defined by Section 5102 of the Financial Code), or
a brokerage firm designated as a Primary Government Dealer by the I
Federal Reserve Bank. The city Treasurer 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 set forth 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 of the Institution's fiscal year
end.
SAFEKEBPING OF SBCURITIBS:
To protect against potential losses caused by collapse of
individual securities dealers, all securities owned by the City
except securities used as collateral for repurchase agreements,
shall be kept in safekeeping by a third party bank trust
department, acting as agent for 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.
RBPORTING:
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The Treasurer shall render a monthly report to the city Council
showing the type of investment, institution, date of maturity,
amount of deposit, current market value for all securities with a
maturity of more than twelve months, rate of interest, and such
data as may be required by the City Council.
POLICY RBVIn:
This investment policy shall be reviewed at least annually to
ensure its consistency with the overall objectives of preservation
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.
Elizabeth Stoddard,
Director of Administrative Services/Treasurer
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Resolution Number ~~
Exhibit A
CITY OF SEAL BEACH
INVESTMENT PORTFOLIO GUIDELINES
1996/1997
These guidelines are established to direct and control investment
activities in such a manner to assure that the goals established in
the Investment Policy are attained.
CASH FORECAST. The cash flow of the City shall be analyzed
with the receipt of revenues and maturity of investments
scheduled so that adequate cash will be available to meet the
disbursement requirements.
POOLED CASH. Whenever practical, the City's cash should be
consolidated into one bank account and invested on a pooled
concept basis. Interest earnings may be allocated according to
fund cash and investment balances.
LONG TERM MATURITIES. As a general rule, long term maturities
should not represent a significant percentage of the total
Fund, as the principal risk involved can outweigh the
potential for higher earnings. No more than 15% of the total
Fund nay be invested in securities with maturities greater
than three years.
DIVERSIFICATION. The Fund should consist of a mix of various
types of securities, issuers, and maturities.
COMPETITIVB BIDS. Purchase and sale of securities shall be
made on the basis of competitive bids and offers with a
minimum of two quotes being obtained, when practical.
SAFEKEEPING. Securities purchased from broker/dealers shall be
held 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 Administrative Services.
STRATEGY. Strategy refers to the plan of action for managing
financial resources in the most advantageous manner. The
Director of Administrative Services uses the following
elements in developing strategy.
Economic Forecasts. Economic forecast information
developed by economists and financial experts and
obtained through bankers and brokers is used to assist
with the formulation of an investment strategy for the
city.
Investment ImDlementina. Execute only investment
transactions which conform with anticipated cash flow
requirements, economic condition and interest rate trends
and are consistent with the established Investment Policy
Statement.
RaDDort. A close working relationship with City
Departments having a significant impact on cash flow, is
maintained in order to maximize the efficiency of the
City'S cash management system and establish cash flow
requirements.
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 return to preserve the value of the
portfolio.
Resolution Number #9:5"
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J:NVEBTMENT VEBJ:CLEB. The following parameters are outlined for
authorized investments as provided in the statement of
Investment Policy.
U.B. TREASURY'. are direct obligations for which the full
faith and credit of the United states Government are
pledged for payment of principal and interest. There is
no limitation as to the percentage of the portfolio which
can be invested in this category as they are both safe
and liquid. The U.S. TREASURY BJ:LLS, U.S. TREASURY NOTES
and U. S. TREASURY BONDS.
FBDERAL AGDCY J:SBUEB or obligations qualify as legal
investments and are acceptable as security for public
deposits. They usually provide higher yields than
treasury issues with all of the same advantages. Federal
Agency Issues include, but are not limited to GIIMA
(Government National Mortgage Association) , FFCB
(Federal Farm Credit Bank) , FBLB (Federal Home Loan Bank
Board), FBLMC (Federal Home Loan Mortgage Corporation),
PRMA (Federal National Mortgage Association), SLMA
(Student Loan Mortgage Administration), REFCORP
(Resolution Funding Corporation), PBA (Federal Housing
Administration) and TVA (Tennessee Valley Authority).
Although there is no percentage limitation on these
issues, the "prudent investor" rule shall apply for a
single agency name as U.s. Government backing is implied
rather than guaranteed.
BANKERS ACCEPTANCES or bills of exchange or time drafts drawn
on and accepted by a commercial bank. Banker's Acceptances
purchased 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 any
one bank.
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CERTIFICATE 01' DEPOSIT shall be evaluated in terms of Federal
Deposit 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 for that portion of a deposit
which is insured pursuant to federal law.
COJIMERCIAL PAPER ranked "P1" by Moody's Investor Services or
"A1" by Standard and Poor's, and issued by a domestic
corporation having assets in excess of $500,000,000 and having
an "A" or better rating on indebtedness 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.
NBGOTIABLE CERTIFICATES 01' DEPOSITS issued by a Nationally or
State-Chartered Bank or a state or Federal Savings and Loan
Association. Only certificates issued by the 20 largest banks
or savings and loan association will be considered. No more
than 30% of the city's idle funds may be invested in
Negotiable Certificates of Deposits.
REPURCHASE AGREEMENTS with banks and dealers with which the I
city has entered into a master repurchase contract which
specifies terms and conditions of repurchase agreements. The
maturity of repurchase agreements shall not exceed 90 days.
The market value of securities used as collateral for
repurchase agreements shall be monitored daily by the Director
of Administrative Services and will not be allowed to fall
below 100% of the value of the repurchase agreement. In order
to conform with provisions of the Federal Bankruptcy Code
which provides for the liquidation of securities held as
collateral for repurchase agreements, the only securities
, . Resolution Number 4~.s-
acceptable as collateral shall be eligible negotiable
certificates of deposit, eligible banker's acceptances or
securities that are direct obligations of, or that are f~lly
guaranteed as to principal and interest by the united states
or any agency of the United states.
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LOCAL AGBNCY INVESTHENT FUND established by the state
Treasurer for the benefit of local agencies up to the maximum
permitted by state Law.
HBDIUM-TBRN NOTBS of a maximum of five years maturity issued
by corporations organized and operating within the United
states or by depository institutions licensed by the united
states or any state and operating within the United states. No
more than 30% of the Fund may be invested in medium term
notes.
MUTUAL FUNDS or shares of beneficial interest issued by
diversified management companies as defined in section
23701(m) of the Revenue and Taxation 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:
1) Attain the highest ranking or the highest letter and
numerical rating provided by not less than two of the three
largest nationally recognized rating services, and
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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), inclusive and with
assets under management in excess of $500,000,000. The
purchase price of shares of beneficial interest, (mutual
funds) purchase pursuant to this subdivision shall not include
any commission that these companies may charge. No more than
15% of the Funds may be invested in mutual funds.
Investments not described herein, including but not limited to
common stocks are prohibited from use in this Fund.
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