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HomeMy WebLinkAboutReso 69-1998RESOLUTION NO. 69-98 CITY COUNCIL, CITY OF SOUTH SAN FRANCISCO, STATE OF CALIFORNIA A RESOLUTION APPROVING IMPLEMENTATION OF THE CITY TREASURER'S INVESTMENT POLICY PURSUANT TO SECTION 53646 OF THE GOVERNMENT CODE OF THE STATE OF CALIFORNIA WHEREAS, the City Treasurer is required annually to present the City's Investment Policy to the City Council; and WHEREAS, the primary focus of the policy is the "Prudent Person Rule" which applies prudence, discretion, and intelligence toward the management of City Funds; and WHEREAS, the object of this policy is to maintain Safety, Liquidity and Yield; and NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of South San Francisco that the City Council hereby approves the City Treasurer's investment policy, attached hereto as Exhibit A. I hereby certify that the foregoing Resolution was regularly introduced and adopted by the City Council of the City of South San Francisco at a regul ar meeting held on the 1 0th day of dune ,1998 by the following vote: AYES: NOES: ABSTAIN: ABSENT: Councilmembers James L. Datzman, Joseph A. Fernekes, Karyl MatslJmotn, ,John R. Ponna and Mayor Eugene R Mullin None None None C:~My Documents~RESO~treasure.res.doc ATTEST: City Clerk EXHIBIT A RESOLUTION NO. 69-98 CITY OF SOUTH SAN FRANCISCO STATEMENT OF INVESTMENT POLICY JANUARY 1, 1997 INTRODUCTION: The following statement is intended to provide guidelines for the prudent investment of the City's temporary idle cash and to outline the policies for an effective cash management system. The City's cash management system accurately monitors and forecasts revenues and expenditures enabling the City to invest funds to the fullest extent possible. The City Treasurer attempts to obtain the highest yield possible as long as investments meet the criteria established for safety and liquidity. The investment policies and practices of the Treasurer of the City of South San Francisco are based upon federal, state, and local laws as well as prudent money management. The primary objectives of these policies are: To assure compliance with all federal, state, and local laws governing the investment of monies 2. To protect the monies of the City To generate the maximum amount of investment income within the parameters of this statement of investment policy TREASURER'S INVESTMENT OBJECTIVES: SAFETY OF PRINCIPAL is the foremost objective of the Treasurer of the City of South San Francisco. The Treasurer shall seek to ensure that capital losses are avoided with each investment transaction. LIOUIDITY is the second most important objective of the Treasurer of the City of South San Francisco. It is important that a portion of the portfolio contain investments, which can be easily liquidated with minimal, or no risk to principal and/or interest. YIELD is the interest earned by the City Treasurer on monies invested. The City's fund shall be designed to attain a market-average rate of return through various economic cycles. The market-average rate of return is defined as the average return on three-month U.S. treasury bills. 1 AUTHORIZED INVESTMENTS: The city operates its cash investments under the Prudent Man Rule which is ... an investment standard stating that a trustee who is investing for another should behave in the same way as a prudent individual of discretion and intelligence who is seeking a reasonable income and preservation of capital. This affords the City a wide range of investment opportunities as long as the investment is deemed prudent and is allowable under current state legislation. The City is governed by the California government code, section 53600 et. seq. Within the context of these limitations, the following investments are authorized: U.S. TREASURY SECURITIES for which the faith and credit of the U.S. are pledged for the payment of principal and interest; FEDERAL AGENCY SECURITIES such as obligations issued by banks, federal intermediate credit banks, federal home loan banks, the TVA, or in obligations, participations, or other instruments of, or issued by, or fully guaranteed as to principal and interest by the Federal National Mortgage Association. BANKER's ACCEPTANCES are bills of exchange or time drafts drawn on and accepted by a commercial bank which are eligible for purchase by the Federal Reserve System. There is a time limit (270 days) and a percent limit (30% - 40%) of surplus money which may be invested in bankers acceptances by municipalities. COMMERCIAL PAPER must be of prime quality of the highest rating. Eligible paper is limited to corporations organized and operating within the U.S. and having total assets of at least $500,000,000. There are also limitations as to the percent of portfolio and time of investment. CERTIFICATES OF DEPOSIT are not really considered investments in the true sense of the word. They allow the City Treasurer to select the exact amount, the day of maturity, as well as the exact depository. (There are penalties for withdrawal of funds prior to the original maturity date). REPURCHASE AGREEMENTS allow a purchase of securities by a local agency; by agreement, the seller will repurchase the securities on or before a specified date and for a specified amount. THE LOCAL AGENCY INVESTMENT FUND is a pooled fund managed by the state treasurer whose permitted investments are identified in the government code. L.A.I.F. provides for deposits up to a maximum of twenty million dollars ($20,000,000). L.A.I.F. offers high liquidity as deposits and withdrawals can be wired to and from South San Francisco on the same day, provided the request is made before 9:30 A.M. 2 THE SAN MATEO COUNTY INVESTMENT FUND, established for the benefit of local agencie'~, is a pooled fund managed by the San Mateo County Treasurer. Various county monies due local agencies are deposited in the fund rather than forwarded to the local agencies in check form. MUTUAL FUNDS are authorized investments allowing the City to maintain liquidity and receive money market rates. DEPOSITORY SERVICES Monies must be deposited in state or national banks, state or federal savings and loan associations, or state or federal credit unions in the state of California. The monies may be in inactive deposits, active deposits, or interest-bearing active deposits. The deposits in any institution 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 government securities having a market value of at least 110% of the total amount of the deposits. The treasurer may at her discretion waive security for that portion of a deposit that 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 the City then receives a higher interest rate on the total investment. OUALIFIED DEALERS AND INSTRUCTIONS The City shall transact business only with banks, savings and loans, and registered investment securities dealers. The purchase by the City Treasurer of any investments other than those purchased from the issuer shall be purchased from an institution licensed by the state as a broker-dealer, a national or state-chartered bank, a federal or state association, or a brokerage firm designated as a primary government dealer by the Federal Reserve Bank. The City Treasurer shall investigate all institutions who 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 investment policy of the City of South San Francisco. SAFEKEEPING OF SECURITIES To protect against potential losses caused by the 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 trust department or a third party bank acting as agent for the City under the terms of a custody agreement executed by the bank and by the City. 3 INTERNAL CONTROLS Thc Director of Finance is responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the entity are protected from loss, theft, or misuse. The internal control of thc structure shall be designed to provide reasonable assurance that these objectives are met. The concept of reasonable assurance recognizes that 1. thc cost of a control should not exceed thc benefits likely to be derived; and, 2. thc valuation of costs and benefits requires estimates and judgments by management. Accordingly the Director of Finance shall establish a process for annual, independent review by an external auditor to assure compliance with policies and procedures. REPORTING The Treasurer shall present to the City Council a monthly report showing the types of investments, institutions of investment, dates of maturity, amounts of deposit, current market value for all securities with a maturity of more than twelve months, rates of interest, and such data as may be required by the City Council. The State of California will be supplied with yearly reports per the State Code. POLICY REVIEW This investment policy shall be reviewed annually to ensure its consistency with the overall objectives of safety of principal, liquidity, and yield. The policy should also be relevant to current law, financial and economic trends, and should meet the needs of the City of South San Francisco. /s/ Beverly Bonalanza Ford Beverly Bonalanza-Ford City Treasurer, South San Francisco Disk:stafrptBevsPollcy 4