Loading...
HomeMy WebLinkAboutCC Resolution 12921 (Investment Policy)RESOLUTION NO. 12921 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN RAFAEL TO UPDATE THE CITY OF SAN RAFAEL INVESTMENT POLICY WHEREAS, the City Council of the City of San Rafael takes seriously its stewardship of the City's public resources and City'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 City's cash. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of San Rafael hereby adopts the updated Investment Policy that is attached hereto as Exhibit A. I, ESTHER C. BEIRNE, Clerk of the City of San Rafael, hereby certify that the foregoing resolution was duly and regularly introduced and adopted at a regular meeting of the City Council of said City held on Monday the 1 st day of March, 2010, by the following vote, to wit: AYES: COUNCILMEMBERS: Brockbank, Connolly, Heller, Levine & Mayor Boro NOES: COUNCILMEMBERS: None ABSENT: COUNCILMEMBERS: None ESTHER C. BEIRNE, City Clerk WAManagement Services- WorkFile\Finance- WorkFile\Council Material\Resolutions\2010\City\Investment Policy Resolution 2010.doc Exhibit A City of San Rafael Investment Policy APPROVED March 1, 2010 The City Council of the City of San Rafael (the "City") 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 funds of the City. All such funds will be invested in accordance with this Investment Policy and with applicable sections of the California Government Code. This Investment Policy was endorsed and adopted by the City Council on the approved date noted above. It replaces any previous investment policy or investment procedures of the City. SCOPE It is intended that this Investment Policy cover all short-term operating funds and investment activities of the City. These funds are accounted for in the annual audit report, and include: • General Fund • Special Revenue Funds • Debt Service Funds • Capital Projects Funds • Enterprise Funds • Internal Service Funds • Fiduciary Funds Additional funds that may be created from time to time shall be administered in accordance with the provisions of this Investment 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 principal investment objectives of the City are: 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. 5. Compliance with the City's Municipal Code and with all applicable California statutes and Federal regulations. Page 1 City of San Rafael Investment Policy March 1, 2010 DELEGATION OF AUTHORITY The management responsibility for the City's investment program is delegated annually by the City Council to the Treasurer pursuant to California Government Code Section 53607. The Treasurer may delegate the authority to conduct investment transactions and to manage the operation of the investment portfolio to other specifically authorized staff members. The Treasurer shall maintain a list of persons authorized to transact securities business for the City. No person may engage in an investment transaction except as expressly provided under the terms of this Investment Policy. The City Manager and the Treasurer jointly shall develop written administrative procedures and internal controls, consistent with this Investment Policy, for the operation of the City's investment program. Such procedures shall be designed to prevent losses of public funds arising from fraud, employee error, misrepresentation by third parties, or imprudent actions by employees of the City. The City 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 City's financial resources. PRUDENCE The standard of prudence to be used for managing the City's investments shall be California Government Code Section 53600.3, the prudent investor standard which states, "When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a trustee shall act with care, skill, prudence, and diligence under the circumstances then prevailing, including, but not limited to, the general economic conditions 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 like character and with like aims, to safeguard the principal and maintain the liquidity needs of the agency." The City's overall investment program shall be designed and managed with a degree of professionalism that is worthy of the public trust. The City recognizes that no investment is totally without risk and that the investment activities of the City are a matter of public record. Accordingly, the City recognizes that occasional measured losses may be desirable in a diversified portfolio and shall be considered within the context of the overall portfolio's return, provided that adequate diversification has been implemented and that the sale of a security is in the best long-term interest of the City. The Treasurer and authorized investment personnel acting in accordance with written procedures and exercising due diligence shall be relieved of personal responsibility for an individual security's credit risk or market price changes, provided that the deviations from expectations are reported in a timely fashion to the City Manager and appropriate action is taken to control adverse developments. Page 2 City of San Rafael Investment Policy March 1, 2010 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 City and they shall subordinate their personal investment transactions to those of the City. 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 City 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 Investment Policy immediately upon being enacted. However, in the event that amendments to these sections conflict with this Investment Policy and past City investment practices, the City may delay adherence to the new requirements when it is deemed in the best interest of the City 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 for approval. The City 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 purchase. 2. Federal Aaencv debentures and mortgage-backed securities with a final maturity not exceeding five years from the date of purchase issued by the Government National Mortgage Association (GNMA). 3. Federal Instrumentalitv (government sponsored enterprise) debentures, discount notes, callable and step-up securities, with a final maturity not exceeding five years from the date of purchase, 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. 4. Repurchase Aareements 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 Page 3 City of San Rafael Investment Policy March 1, 2010 collateral not exceeding five years. For the purpose of this section, the term collateral shall mean purchased securities under the terms of the City'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 City'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 a City approved Master Repurchase Agreement with the City. The Treasurer shall maintain a copy of the City's approved Master Repurchase Agreement along with a list of the broker/dealers who have executed same. 5. 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 $500,000,000 and (3) have debt other than commercial paper, if any, that is rated "A" 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. 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 City'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 City's total portfolio. 6. Eliaible 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 bankers acceptances of any one commercial bank, and the aggregate investment in bankers acceptances shall not exceed 40% of the City's total portfolio. 7. 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 Page 4 City of San Rafael Investment Policy March 1, 2010 operating within the United States, with a final maturity not exceeding five years from the date of purchase, 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 City's total portfolio. 8. Negotiable Certificates of Deposit with a maturity not exceeding five years from the date of purchase, 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. The aggregate amount invested in negotiable certificates of deposit shall not exceed 30% of the City's total portfolio. 9. Non-negotiable Certificates of Deposit and savings deposits with a maturity not exceeding 180 days, 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. 10. State of California's Local Agencv 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 Investment 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 City's total portfolio. It is the intent of the City 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. PORTFOLIO MATURITIES AND LIQUIDITY To the extent possible, investments shall be matched with anticipated cash flow requirements and known future liabilities. The City will not invest in securities maturing more than five years from the date of purchase, unless the City Council has by resolution granted authority to make such an investment at least three months prior to the date of investment. Page 5 City of San Rafael Investment Policy March 1, 2010 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 City 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 a City 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 City, 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 City's portfolio, authorized broker/dealers will attest in writing that they have received a copy of this policy. The City 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 Investment 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 City is offered a security for which there is no other readily available competitive offering, the Treasurer will document quotations for comparable or alternative securities. SELECTION OF BANKS The Treasurer shall maintain a list of banks that are approved to provide banking services for the City. 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. Page 6 City of San Rafael Investment Policy March 1, 2010 SAFEKEEPING AND CUSTODY The Treasurer shall select one or more banks to provide safekeeping and custodial services for the City, in accordance with the provisions of Section 53608 of the California Government Code. A Safekeeping Agreement approved by the City 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 City'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 City. Sufficient evidence to title shall be consistent with modern investment, banking and commercial practices. All investment securities, except non-negotiable Certificates of Deposit, Money Market Funds and LAIF, purchased by the City will be delivered by either book entry or physical delivery and will be held in third -party safekeeping by a City approved custodian bank, its correspondent bank or its Depository Trust Company (DTC) participant account. All Fed wireable book entry securities owned by the City shall be held in the Federal Reserve system in a customer account for the custodian bank which will name the City as "customer." All DTC eligible securities shall be held in the custodian bank's DTC participant account and the custodian bank shall provide evidence that the securities are held for the City as "customer." All non -book entry (physical delivery) securities shall be held by the custodian bank or its correspondent bank and the custodian bank shall provide evidence that the securities are held by the bank for the City as "customer." PORTFOLIO PERFORMANCE 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 City'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 City's portfolio, its rate of return will be computed net of all fees and expenses. Page 7 City of San Rafael Investment Policy March 1, 2010 REPORTING On a monthly basis, the Treasurer shall submit to the Council a report of the investment earnings and performance results of the City'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 City; 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 Investment Policy or an explanation for not - compliance; 7. A description of any of the City'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 adopted by resolution of the City Council annually. It shall be reviewed at least annually to ensure its consistency with the overall objectives of preservation 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 City Council for approval. Page 8 CITY OF SAN RAFAEL INTERNAL CONTROL GUIDELINES AND PROCEDURES INVESTMENT FUNCTION RESPONSIBILITIES Revised 3/2010 Formal Investment Policy: Prepared/Updated By Finance Director Cutwater Asset (formerly MBIA) Submitted to/Approval City Manager/Council N/A Investment transaction approval Finance Director Accounting Supervisor Verification of investment (i.e. broker Accountant UII Accounting Supervisor confirm matched to investment records) Preparation of written notification to Accountant UII Accounting Assistant UII custodial agent for transactions sales, calls and purchases Execution of investment transactions Accounting Supervisor Finance Director Recording of investment transactions Accountant UII Accounting Supervisor in investment records, including reconciliation to safekeeping and custodial records Recording of investment transactions Accountant VII Accounting Supervisor in accounting records Reconciliation of investment records Accountant UII Accounting Supervisor to accounting records Review of financial institution's Finance Director & Cutwater Accounting Supervisor financial condition, including brokers Asset (Formerly MBIA) and dealers Review of custodial safekeeping Finance Director Accounting Supervisor services for investment securities Periodic review of collateral as Finance Director Accounting Supervisor defined in investment policy Periodic review of investment Finance Director Accounting Supervisor portfolio - comparison to goals, policies and objectives Monthly investment report: Schedules and supporting docs Cutwater Asset (Formerly Accounting Supervisor MBIA) & Accountant UII Staff Report preparation and Finance Director Accounting Supervisor distribution Updates to cash management internal Finance Director Accounting Supervisor controls and investment procedures W:%,Management Services- WorkFile\Finance- WorkFile�Cash Management and Treasury\InvestmentsTOLICY\CY 2010 versionMCity investment functions 2010 update.doc