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HomeMy WebLinkAboutReso 102-2002 RESOLUTION NO. 102-2002 CITY COUNCIL, CITY OF SOUTH SAN FRANCISCO, STATE OF CALIFORNIA A RESOLUTION APPROVING THE CITY TREASURER'S INVESTMENT POLICY WHEREAS, the City Treasurer has purposed the attached City Treasurer's Investment Policy; and WHEREAS, the investment policy is consistent with the recommended format developed by the California Municipal Treasurers' Association. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of South San Francisco that the City Council hereby approves the implementation of 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 regular meeting held on the 13th day of November 2002 by the following vote: AYES: NOES: ABSTAIN: ABSENT: Councilmembers Joseph A. Fernekes, Raymond L. Green and Karyl Matsumoto, Mayor Pro Tem Pedro Gonzalez and Mayor Eugene R. Mullin None. None. None. ATTEST: ity Clerk EXHIBIT A CITY OF SOUTH SAN FRANCISCO STATEMENT OF INVESTMENT POLICY INTRODUCTION: The following statement is intended to provide guidelines for the "Prudent Person Standard" of investment of the City's temporary idle cash and to outline the policies for an effective cash management system. Investments shall be made withjudgrnent and care which persons of prudence and intelligence exercise in the management of their own affairs considering safety of principal as well as probable income to be derived. The City's cash management system accurately monitors and forecasts revenues and expenditures enabling the City to invest funds to the fullest extent possible. Thi City Treasurer attempts to obtain the highest yield possible as long as investments meet the criteria established for safety and liquidity. This investment policy includes all City funds except retirement, pension, or bond funds. 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 maintain the principal of the City's investments. To generate the maximum mount of investment income within the parameters of this statement of investment policy. To remain sufficiently liquid to meet all operating expenses that can be reasonably anticipated. TREASURER'S INVESTMENT OBJECTIVES: SAFETY OF PRINCIPAL is the foremost objective of the investment policy. The Treasurer shall seek to ensure that capital losses are avoided with each investment transaction. The objective is to mitigate credit risk (the loss due to failure of the security issuer or broker) and interest rate risk (the market value of the security in the portfolio will fall due to changes in general interest rates). LIOUIDITY is the second most important objective of the investment policy. 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. The longest maturity of 1 any investment shall be five years. The portfolio shall be structured so that sufficient funds are readily available to meet all reasonably anticipated operating expenses. 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 (defined as the average return on a three month U.S. treasury bill) through various economic cycles. Yield will be considered only after the basic requirements of safety, liquidity, and credit quality have been met. AUTHORIZED INVESTMENTS: The following list of investments is deemed prudent and acceptable by the government code of the State of California and the Municipal Treasurers Association of the United States and Canada. This affords the City a wide range of investment opportunities. The City is governed bythe 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. OBLIGATIONS ISSUED BY AGENCIES OF THE UNITED STATES GOVERNMENT, including the Government National Mortgage Association (GNMA), the Federal Farm Credit Bank System (FFC), the Federal Home Loan Bank Board (FHLB), the Federal National Mortgage Association (FNMA), the Federal Home Loan Mortgage Corporation (FHLMC), and the Tennessee Valley Authority (TVA). 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 (180 days) and a 20% limit of surplus money which may be invested in bankers acceptances by municipalities. No more than $5.0 million may be invested in any one institution. COMMERCIAL PAPER must be of prime quality of the highest rating (P1 by Moody's or A1 by Standard and Poors). 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 (15%) of the portfolio, the time of investment (270 days), and the dollar amount invested in any one bank or corporation ($3.0 million). 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.) Since time deposits are not liquid, no more than 20% shall be invested in this type of investment for no longer than one year. Any investment over the $100,000 FDIC insurance shall be collateralized at 110% with United States Treasuries. No more than $5.0 million may be placed in any one institution. REPURCHASE AGREEMENTS (Repos) 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 maturity should not exceed ninety days. Repos should only be purchased when a purchase agreement is executed with a bank in which the underlying U.S. Treasuries pledged as security shall have a market value of at least 102% of the funds borrowed. THE LOCAL AGENCY INVESTMENT FUND is a pooled fund managed bythe state treasurer whose permitted investments are identified in the government code. L.A.I.F. provides for deposits up to a maximum of forty million dollars ($40,000,000). 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 10:00 A.M. THE SAN MATEO 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 shares of beneficial interest issued by diversified management companies, as defined by Section 23701 M of the Revenue and Taxation Code. To be eligible for investment, these funds must strive to maintain a net asset value of $1.00 per share at all times and: a) Attain the highest ranking in the highest letter and numerical rating provided by not less than two of the three largest nationally reco~ized rating services; or b) Have an investment advisor registered with the Securities and Exchange Commission with not less than five years experience investing in the securities and obligations, and with assets under management in excess of five hundred million dollars; and c) Invest solely in those securities and obligations authorized by Sections 53601 and 53635 of the California Government Code. Where the City's Investment Policy may be more restrictive than the State Code, the Policy authorizes investments in mutual funds that shall have minimal investment in securities otherwise restricted by the City's Policy. Minimal investment is defmed as less than 5 percent of the mutual fund portfolio; and Mutual fund investments shall not exceed 20% of the portfolio, with no more than 10% of the portfolio invested with any one institution. MEDIUM-TERM NOTES issued by corporations organized and operating within the Un/ted States or by depository institutions licensed by the United States or any state and operating within the United States. Notes eligible for investment under this subdivision shall be rated in a rating category of "A" or its equivalent or better by a nationally recognized rating service (Standard and Poors, Moody's, or Fitch). Purchases of medium-term notes may not exceed 10 percent of the agency' s surplus money nor to be invested for longer than five years. No more than $2.0 million may be invested in a single issuer corporation. 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, savings and loan, or federal credit union 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. OUALIFIED DEALERS AND INSTITUTIONS The City shall transact business only with national or state-chartered banks, savings and loans, federal credit unions, and registered investment securities dealers. The purchase by the City Treasurer of any investments 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 fn'm 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 AND CUSTODY OF SECURITIES To protect against potential losses caused by the collapse of individual securities dealers, all securities owned by the City, except for investments with LAIF, the San Mateo County Investment Pool, Repurchase Agreements, CD's, mutual funds, or Commercial Paper with maturities often days or less shall be kept in safekeeping by a trust department of a third party bank acting as agent for the City under the terms ora custody agreement executed by the bank and by the City. These funds will be held in the City's name. All trades will be executed by delivery vs. payment (DVP). This ensures that securities are deposited to the third party safekeeper prior to release of funds. COLLATERALIZATION Collateralization is required on two types of investments: certificates of deposit of over $100,000 (CD's) and repurchase agreements (Repos). The collateralization level must be at least 102% for Repos and 110% for CD's. AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS The following institutions are approved by the City Treasurer to conduct business with the City: 1. L.A.I.F. (Local Agency Investment Fund) 2. San Mateo County Pool (automatic for tax monies) 3. Wells Fargo Bank 4. First Tennessee Bank 5. First National Bank of Northern California At present the City Treasurer does not deal with individual brokerage companies. Any broker/dealer/bank representative that the City purchases securities from, other than LAIF and the San Mateo County Pool shall be provided with an updated City Investment Policy on an annual basis. They must sign a letter acknowledging they have received and read the Policy, that they agree to comply with it, and that they will notify the City Treasurer within 24 hours of a ratings downgrade of any Commercial Paper or Medium Term Corporate Notes the City has purchased through them. ETHICS AND CONFLICTS OF INTEREST There is a yearly mandated Form 700 issued by the state of California whereby all elected officials, including the City Treasurer, must disclose all personal assets such as stocks, bonds, properties, business entities, etc., in which said officials may be involved and which could create a conflict of interest with the proper execution of their offices or impak their ability to make impartial decisions. INTERNAL CONTROLS The Treasurer 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 Director of Finance shall establish a process for an annual independent review by an external auditor to assure compliance with policies and procedures. The auditor shall meet with the City Treasurer and propose possible needed changes to the investment policy and/or comment on the diversification of the portfolio. Management responsibility for the investment program is delegated to the elected City Treasurer who shall be responsible for all investment transactions, the Deputy City Treasurer, appointed by the City Treasurer, acts at the discretion and direction of the City Treasurer. The City shall establish an investment oversight committee. The committee shall consist of the City Treasurer, the City Manager, the Finance Director, and the Assistant Finance Director as his alternate. The purpose of the committee is to: · Review the portfolio on a quarterly basis to ensure compliance with the City's investment policy and the requirements of the State of California. Make recommendations to Council to change the investment policy where appropriate. Meet as needed to review the investment portfolio as a result of changes in the marketplace or the economic position of any company or agency that affects the City's investments. City Treasurer and Finance Director shall monitor ratings on Medium Term Notes on a monthly basis. The City Treasurer will report on any recommendations and/or actions taken by the investment oversight committee in her quarterly reports to the City Council. WIRE TRANSFER CONFIRMATIONS Due to the need to preserve segregation of duties and checks and balances, all outgoing wire transactions initiated by the City Treasurer (except for investments with LAIF or the San Mateo County Investment Pool) shall be confirmed by the bank with a person within the Finance Department prior to the completion of that wire transfer. REPORTING The Treasurer shall present to the City Council a quarterly report showing the types of investments, institutions of investment, dates of maturity, amounts of deposit, current market value for all securities, 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 currem law, financial and economic trends, and should meet the needs of the City of South San Francisco. Beverly Bonalanza-Ford City Treasurer, South San Francisco BF:JS:rcf DriveF/corresp/Trea Invest Policy2002