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HomeMy WebLinkAboutReso 49-1996RESOLUTION NO. 49-96 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 to bring the City's Investment Policy to the City Council annually as a result of state legislation last year; and WHEREAS, this policy was primarily created by the legislature due to the bankruptcy of the Orange County investment pool which follows the recommended format set down by the California Municipal Treasurer's Association; and WHEREAS, the primary concept used in this policy is the "Prudent Man Rule" which applies prudence, discretion and intelligence towards the management of City Funds, a copy attached hereto as Exhibit "A" entitled "Statement of Investment Policy"; and WHEREAS, the objective of this policy is to maintain Safety, Liquidity and Yield, more commonly known as "SLY". NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of South San Francisco does hereby approve the City's Treasurer's investment policy. 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 regular meeting held on the 10th day of April , 1996, by the following vote: AYES: Councilmembers Joseph A. Fernekes, Eugene R. Mullin, Robert Yee and Mayor Jack Drago NOES: None ABSTAIN: None ABSENT: Treasurcr. Pol Councilmember John R. Penna EXHIBIT A TO RESOLUTION NO. 49-96 CITY OF SOUTH SAN FRANCISCO STATEM'ENT OF INVESTMENT POLICY JANUARY 1, 1996 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 INVESTMlq~ OP. JECT~S: SAFF~TY 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. !,IQUIDITY 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. YIEI,D 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 Ks defmed as the average return on three-month U.S. treasury bills. AUTHORIZlr, D INVF, STM~,~S: 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. BANKERS 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. (This type of investment should be used for a very short term - a week or less). THE I.OCAI, 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 ($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 MATF. O COUNTY INVESTMENT FUND, established for the benefit of local agencies, 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 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 the City then receives a higher interest rate on the total investment. QUAI,IFIED DEAl,ERS 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 fLrm 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 ~;ECURITIES 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 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. INTERNAl, CONTROLS The Dffector 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 the structure shall be designed to provide reasonable assurance that these objectives are met. The concept of reasonable assurance recognizes that 1. the cost of a control should not exceed the benefits likely to b~ derived; and, 2. the 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. POI ,ICY 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. Beverly B{/nalanza-Ford t/ City Treasurer, South :San Francisco a:staffi410.doc 4