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HomeMy WebLinkAboutSA Resolution 05-2012 (Investment Policy)RESOLUTION NO. 05-2012 A RESOLUTION OF THE CITY OF SAN RAFAEL AS SUCCESSOR AGENCY TO THE FORMER SAN RAFAEL REDEVELOPMENT AGENCY TO UPDATE THE INVESTMENT POLICY. WHEREAS, the City of San Rafael as Successor Agency to the former San Rafael Redevelopment Agency takes seriously its stewardship of the Successor Agency's public resources and Successor Agency's current cash management practices; and WHEREAS, the State Government Code Section 53646(a)(2) requires consideration or approval of the investment policy annually; and WHEREAS, all funds are invested in accordance with the investment policy and applicable sections of the California Government Code; and WHEREAS, the investment policy is intended to provide a long-term strategy for prudent care of the Successor Agency's cash; NOW, THEREFORE, BE IT RESOLVED that City of San Rafael as the Successor Agency to the former San Rafael Redevelopment Agency hereby adopts the updated Investment Policy that is attached hereto as Exhibit A. I, ESTHER C. BEIRNE, Clerk of the City Council of the City of San Rafael as Successor Agency, hereby certify that the foregoing resolution was duly and regularly introduced and adopted at a regular meeting of the City Council of the City of San Rafael as Successor Agency held on Monday, the 4t" day of June, 2012, by the following vote, to wit: AYES: COUNCILMEMBERS: Connolly, Heller, Levine, McCullough & Mayor Phillips ESTHER C. BEIRNE, City Clerk Investment Policy For The City of San Rafael as Successor Agency to the Former San Rafael Redevelopment Agency APPROVED June 4, 2012 The City of San Rafael as Successor Agency to the former San Rafael Redevelopment Agency ("Agency") has adopted this Investment Policy in order to establish the investment scope, objectives, delegation of authority, standards of prudence, reporting requirements, internal controls, eligible investments and transactions, diversification requirements, risk tolerance, and safekeeping and custodial procedures for the investment of the Agency. All such funds will be invested in accordance with this Policy and with applicable sections of the California Government Code. This Policy was endorsed and approved by the Agency on the date noted above. It replaces any previous investment policy or investment procedures of the Agency. SCOPE It is intended that this Policy cover all short-term operating funds and investment activities of the Agency. These funds are accounted for in the annual audit report, and may include: • General Fund • Special Revenue Funds • Debt Service Funds • Capital Projects Funds • Fiduciary Funds Additional funds that may be created from time to time shall be administered in accordance with the provisions of this Policy. All cash shall be pooled for investment purposes. The investment income derived from the pooled investment account shall be allocated to the contributing funds based upon the proportion of the respective average balances relative to the total pooled balance in the investment portfolio. Investment income shall be distributed to the individual funds not less than annually. OBJECTIVES The Agency's funds shall be invested in compliance with all applicable City Municipal Codes, California State statutes, and Federal regulations, and in a manner designed to accomplish the following objectives, which are listed in priority order: 1. Preservation of capital and protection of investment principal. 2. Maintenance of sufficient liquidity to meet anticipated cash flows. 3. Attainment of a market value rate of return. 4. Diversification to avoid incurring unreasonable market risks. ram City ofSan Rafael aeSuccessor Agency to the former San Rafael Redevelopment Agency Investment Policy June 4.2O12 EXHIBIT A DELEGATION OF AUTHORITY The management responsibility for the Agency's investment program is delegated annually bvCity Treasurer pursuant hlCalifornia Government Code Section 53607. The Treasurer may delegate the authority to conduct investment transactions and tomanage the operation of the investment portfolio to other specifically authorized staff members. The Treasurer ohm|| maintain G list of persons authorized to transact securities business for the Agency. No person may engage in on investment transaction except as expressly provided under the terms ofthis Policy. The City Manager and the Treasurer jointly shall develop written administrative procedures and internal oonLno|o, consistent with this Policy, for the operation of the Agency's investment program. Such procedures shall be designed to prevent losses ofpublic funds arising from frGud, employee ernor, misrepresentation by third partieo, orimprudent actions byemployees ofthe Agency. The Agency may engage the support services of outside investment advisors in regard to its investment program, so long as it can be clearly demonstrated that these services produce a net financial advantage or necessary financial protection of the Agency's financial The standard of prudence to be used for managing the Agency's investments shall be California Government Code Section 53800.3. the prudent investor standard which states, "When investing, nsinveoting, purohosing, aoquihng, exohanging, aeUing, or managing public funds, a trustee shall act with o@ne, ekiU, prudenoa, and diligence under the circumstances then prevailing, including, but not limited to, the general eDDDODlic CODditiDDS and the anticipated needs of the agency, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a |iha character and with like aims, to safeguard the principal and maintain the liquidity needs of the agency." The Agency's overall investment program shall be designed and managed with a degree of professionalism that is worthy of the public tnJG[. The Agency recognizes that no iDV8GtOleOt is totally without risk and that the iDV8StnleDt activities of the Agency are 8 matter Of public record. Accordingly, the Agency recognizes that occasional measured losses may be desirable in a diversified portfolio and shall be considered within the context of the overall portfolio's retUrD, provided that adequate diversification has been implemented and that the sale of a security is in the best long-term interest of the Agency. The TRe8SUFe[ and authorized investment personnel @CdUg in accordance with written procedures and exercising due diligence Sh8U be relieved of personal responsibility for aD individual security's credit risk or market price Ch8Dg8S, provided that the deviations from expectations are reported in @ timely fashion to the City Manager and appropriate action is taken t0control adverse developments. City of San Rafael as Successor Agency to the former San Rafael Redevelopment Agency Investment Policy June 4, 2012 ETHICS AND CONFLICTS OF INTEREST Elected officials and employees involved in the investment process shall refrain from personal business activity that could conflict with proper execution of the investment program or that could impair or create the appearance of an impairment of their ability to make impartial investment decisions. Employees and investment officials shall disclose to the City Manager any business interests they have in financial institutions that conduct business with the Agency and they shall subordinate their personal investment transactions to those of the Agency. In addition, the City Manager and the Treasurer shall file a Statement of Economic Interests each year pursuant to California Government Code Section 87203 and regulations of the Fair Political Practices Commission. AUTHORIZED SECURITIES AND TRANSACTIONS All investments and deposits of the Agency shall be made in accordance with California Government Code Sections 16429.1, 53600-53609 and 53630-53686, except that pursuant to California Government Code Section 5903(e), proceeds of bonds and any moneys set aside or pledged to secure payment of the bonds may be invested in securities or obligations described in the ordinance, resolution, indenture, agreement, or other instrument providing for the issuance of the bonds. Any revisions or extensions of these code sections will be assumed to be part of this Policy immediately upon being enacted. However, in the event that amendments to these sections conflict with this Policy and Agency investment practices, the Agency may delay adherence to the new requirements when it is deemed in the best interest of the Agency to do so. In such instances, after consultation with the City's attorney, the City Manager and the Treasurer will present a recommended course of action to the City Council of the City of San Rafael acting as Successor Agency for approval. The Agency has further restricted the eligible types of securities and transactions as follows: 1. United States Treasury bills, notes and bonds with a final maturity not exceeding five years from the date of trade settlement. 2. Federal Aqencv debentures and mortgage-backed securities with a final maturity not exceeding five years from the date of trade settlement issued by the Government National Mortgage Association (GNMA). 3. Federal Instrumentality (government sponsored enterprise) debentures, discount notes, callable and step-up securities, with a final maturity not exceeding five years from the date of trade settlement, issued by the following only: Federal Home Loan Banks (FHLB), Federal National Mortgage Association (FNMA), Federal Farm Credit Banks (FFCB) and Federal Home Loan Mortgage Corporation (FHLMC). Federal Instrumentality securities shall be rated at least AAA or the equivalent by a nationally recognized statistical -rating organization (NRSRO) at the time of purchase. Page 3 City of San Rafael as Successor Agency to the former San Rafael Redevelopment Agency Investment Policy June 4, 2012 4. Medium Term Notes 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, with a final maturity not exceeding five years from the date of trade settlement, and rated at least A or the equivalent by a NRSRO. No more than $1,000,000 shall be invested in medium term notes of any one issuer, and the aggregate investment in medium term notes shall not exceed 30% of the Agency's total portfolio. 5. Neaotiable Certificates of Deposit with a maturity not exceeding five years from the date of trade settlement, in state or nationally chartered banks or savings and loans that are insured by the FDIC, subject to the limitations of California Government Code Section 53638. If issuers have senior debt outstanding, it shall be rated at least AA or the equivalent by a NRSRO at the time of purchase. Non-negotiable Certificates of Deposit and savings deposits with a maturity not exceeding 180 days from the date of trade settlement, in state or nationally chartered banks or savings and loans with a California branch office that are insured by the FDIC. Time Certificates of Deposit exceeding the FDIC insured amount shall be secured pursuant to California Government Code Section 53652. In addition, per the conditions of California Government Code Section 53601.8 and notwithstanding Section 53601, the Agency may invest in certificates of deposit at a commercial bank, savings bank, savings and loan association, or credit union that uses a private sector entity to assist in the placement of certificates of deposit. The aggregate amount invested in any type of certificate of deposit shall not exceed 30% of the Agency's total portfolio. 6. Special Assessment District Obliaations issued by the former San Rafael Redevelopment Agency as Limited. Obligation Improvement Bonds related to special assessment districts and special tax districts. Investment in such obligations requires the approval of the Agency and maturities may extend to 30 years from the date of trade settlement. 7. Prime Commercial Paper with a maturity not exceeding 270 days from the date of purchase with the highest ranking or of the highest letter and number rating as provided for by a NRSRO. The entity that issues the commercial paper shall meet all of the following conditions in either sub -paragraph A. or sub -paragraph B. below: A. The entity shall (1) be organized and operating in the United States as a general corporation, (2) have total assets in excess of five hundred million dollars ($500,000,000) and (3) Have debt other than commercial paper, if any, that is rated "K or higher by a NRSRO. B. The entity shall (1) be organized within the United States as a special purpose corporation, trust, or limited liability company, (2) have program wide credit enhancements, including, but not limited to, over collateralization, letters of credit or surety bond and (3) have commercial paper that is rated "A-1" or higher, or the equivalent, by a NRSRO. Page 4 City of San Rafael as Successor Agency to the former San Rafael Redevelopment Agency Investment Policy June 4, 2012 Purchases of eligible commercial paper may not represent more than 10% of the outstanding commercial paper of any single corporate issuer. No more than 10% of the Agency's total portfolio or $1,000,000 whichever is less, shall be invested in the commercial paper of any one issuer, and the aggregate investment in commercial paper shall not exceed 25% of the Agency's total portfolio. 8. Eliqible Bankers Acceptances issued by FDIC insured commercial banks, rated at least A-1 or the equivalent by a NRSRO with maturities not exceeding 180 days from the date of purchase. If issuers have senior debt outstanding, it shall be rated at least A or the equivalent by a NRSRO. No more than $2,000,000 shall be invested in banker's acceptances of any one commercial bank, and the aggregate investment in banker's acceptances shall not exceed 40% of the Agency's total portfolio. 9. Repurchase Aqreements with a final termination date not exceeding one year collateralized by U.S. Treasury obligations, Federal Agency securities, or Federal Instrumentality securities listed in items 1, 2 and 3 above with the maturity of the collateral not exceeding five years. For the purpose of this section, the term collateral shall mean purchased securities under the terms of the Agency's approved Master Repurchase Agreement. The purchased securities shall have a minimum market value including accrued interest of 102% of the dollar value of the funds borrowed. Collateral shall be held in the Agency's custodian bank, as safekeeping agent, and the market value of the collateral securities shall be marked -to -the -market daily. Repurchase Agreements shall be entered into only with broker/dealers who are recognized as Primary Dealers by the Federal Reserve Bank of New York or have a primary dealer within their holding company structure. Primary Dealers approved as Repurchase Agreement counterparties shall have a short-term credit rating of at least A- 1 or the equivalent and a long-term credit rating of at least A or the equivalent. Repurchase agreement counterparties shall execute an Agency approved Master Repurchase Agreement with the Agency. The Treasurer shall maintain a copy of the Agency's approved Master Repurchase Agreement along with a list of the broker/dealers who have executed same. 10. State of California's Local Agency Investment Fund (LAIF), pursuant to California Government Code Section 16429.1. 11. Monev Market Funds registered under the Investment Company Act of 1940 that (1) are ,'no-load" (meaning no commission or fee shall be charged on purchases or sales of shares); (2) have a constant daily net asset value per share of $1.00; (3) invest only in the securities and obligations authorized in this Policy and (4) have a rating of at least AAA or the equivalent by at least two NRSROs. The aggregate investment in money market funds shall not exceed 10% of the Agency's total portfolio. It is the intent of the Agency that the foregoing list of authorized securities and transactions is strictly interpreted. Any deviation from this list must be preapproved by resolution of the City Council of the City of San Rafael acting as Successor Agency. City of San Rafael as Successor Agency to the former San Rafael Redevelopment Agency Investment Policy June 4, 2012 To the extent possible, investments shall be matched with anticipated cash flow requirements and known future liabilities. The Agency will not invest in securities maturing more than five years from the date of purchase, unless the City Council of the City of San Rafael acting as Successor Agency has by resolution granted authority to make such an investment at least three months prior to the date of investment. SELECTION OF BROKER/DEALERS The Treasurer shall maintain a list of broker/dealers authorized for investment purposes, and it shall be the policy of the Agency to purchase securities only from those authorized firms. To be eligible, a firm must be licensed by the State of California as a broker/dealer as defined in Section 25004 of the California Corporations Code, and: 1. be recognized as a Primary Dealer by the Federal Reserve Bank of New York or have a primary dealer within its holding company structure, or 2. report voluntarily to the Federal Reserve Bank of New York, or 3. qualify under Securities and Exchange Commission (SEC) Rule 15c3-1 (Uniform Net Capital Rule). Each authorized broker/dealer shall be required to submit and annually update an Agency approved Broker/Dealer Information Request form which includes the firm's most recent financial statements. The Treasurer shall maintain a list of the broker/dealers that have been approved by the Agency, along with each firm's most recent broker/dealer Information Request form. In the event that an external investment advisor is not used in the process of recommending a particular transaction in the Agency's portfolio, authorized broker/dealers shall attest in writing that they have received a copy of this policy. The Agency may purchase commercial paper from direct issuers even though they are not on the approved broker/dealer list as long as they meet the criteria outlined in Item 5 of the Authorized Securities and Transactions section of this Policy. COMPETITIVE TRANSACTIONS Each investment transaction shall be broker/dealers. At least three broker/dealers their bid and offering prices shall be recorded. competitively transacted with authorized shall be contacted for each transaction and If the Agency is offered a security for which there is no other readily available competitive offering, the Treasurer will document quotations for comparable or alternative securities. Im City of San Rafael as Successor Agency to the former San Rafael Redevelopment Agency Investment Policy June 4, 2012 SELECTION OF BANKS The Treasurer shall maintain a list of banks that are approved to provide banking services for the Agency. To be eligible for authorization, a bank must be a member of the FDIC and shall qualify as a depository of public funds in the State of California as defined in California Government Code Section 53630.5. SAFEKEEPING AND CUSTODY The Treasurer shall select one or more banks to provide safekeeping and custodial services for the Agency, in accordance with the provisions of Section 53608 of the California Government Code. A Safekeeping Agreement approved by the Agency shall be executed with each custodian bank prior to utilizing that bank's safekeeping services. Custodian banks will be selected on the basis of their ability to provide services for the Agency's account and the competitive pricing of their safekeeping related services. The purchase and sale of securities and repurchase agreement transactions shall be settled on a delivery versus payment basis. All securities shall be perfected in the name of the Agency. Sufficient evidence to title shall be consistent with modern investment, banking and commercial practices. All investment securities purchased by the Agency will be delivered by either book entry or physical delivery and will be held in third -party safekeeping by an Agency approved custodian bank, its correspondent bank or its Depository Trust Company (DTC) participant account. The Agency's custodian shall be required to furnish the Agency a list of holdings on at least a monthly basis and safekeeping receipts or customer confirmations shall be issued for each transaction. The investment portfolio shall be designed to attain a market rate of return throughout budgetary and economic cycles, taking into account prevailing market conditions, risk constraints for eligible securities, and cash flow requirements. The performance of the Agency's investments shall be compared to the average yield on the U.S. Treasury security that most closely corresponds to the portfolio's actual weighted average effective maturity. When comparing the performance of the Agency's portfolio, its rate of return will be computed net of all fees and expenses. i� City of San Rafael as Successor Agency to the former San Rafael Redevelopment Agency Investment Policy June 4, 2012 REPORTING On a quarterly basis, the Treasurer shall submit to the City Council of the City of San Rafael acting as Successor Agency a report of the investment earnings and performance results of the Agency's investment portfolio. The report shall include the following information: 1. Investment type, issuer, date of purchase, purchase price, date of maturity, par value, current rate of interest and dollar amount invested in all securities, and investments and monies held by the Agency; 2. A description of the funds, investments and programs; 3. A market value as of the date of the report (or the most recent valuation as to assets not valued monthly) and the source of the valuation; 4. Overall portfolio yield based on historical cost; 5. Weighted average final maturity and weighted average effective maturity; 6. A statement of compliance with this Policy or an explanation for not -compliance; 7. A description of any of the Agency's funds, investments or programs that are under the management of contracted parties, including lending programs; and 8. A statement of the ability to meet expenditure requirements for six months, as well as an explanation of why money will not be available if that is the case. POLICY REVIEW This Investment Policy shall be reviewed and approved by the City Council of the City of San Rafael on behalf of the Successor Agency annually to ensure its consistency with the overall objectives of principal, liquidity, yield and diversification and its relevance to current law and economic trends. Any amendments to this Investment Policy shall be forwarded to the Agency for approval. W Wanagement Services- WorkFile\Finance- WorkFile';cash Management and Treasury,lnvestments"POLICY`.CY 2012 version\Agency Policy Approved 2012.doc CITY OF SAN RAFAEL ;;i ;;i ill li-iiiml-ormT, INSTRUCTIONS: USE THIS FORM WITH EACH SUBMITTAL OF A CONTRACT, AGREEMENT, ORDINANCE OR RESOLUTION BEFORE APPROVAL BY COUNCIL / AGENCY. SRRA / SRCC AGENDA ITEM NO. '53A - DATE OF MEETING: 6/4/12 FROM: Mark Moses and Van Bach DEPARTMENT: Finance Department DATE: 5/16/12 TITLE OF DOCUMENT: Investment Policy for the Successor Agency Department Head (signature) (LOWER HALF OF FORM FOR APPROVALS ONLY) APPROVED AS COUNCIL AGENCY APPROVED AS TO FORM: AGENDA ITEM: City Manager (signature) City Attorney (signature)f- 0 11 REMARKS: