HomeMy WebLinkAboutFin Investment Policy 2014Department: FINANCE
Prepared by: Van Bach, �,)C
AccountinLy Manager
INVESTMENT POLICY
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Agenda Item No:
Meeting Date: June 16, 2014
City Manager Approval
BACKGROUND: The investment crisis that occurred in Orange County nearly twenty years
ago prompted several revisions to the investment codes that govern all California public
agencies. Among the changes enacted in 1996 was the requirement that each jurisdiction adopt
an investment policy that is reviewed annually. Since that time, the requirement has been made
optional; however, the State encourages agencies to bring investment policies to their respective
boards and councils. The City's policy includes such an annual review by City Council and an
accompanying resolution approving the policy.
The purpose of this report is to provide the City Council with an opportunity to review the City's
current cash and investment management policies and changes recommended by staff, and to
formally approve the policy.
In January 2005, the City engaged Cutwater Asset Management (formerly MBIA) to manage the
long-term portion of the City's investment portfolio. These services were suspended in December
2011 because the City did not have sufficient cash to invest long-term under this advisory
structure. The growth in fund balances since that time prompted the City to revive its contract
with Cutwater beginning in March 2014. One of the first tasks in which Cutwater engaged was a
ceview of the City's investment policy. Staff has incorporated the comments and
recommendations of the Cutwater investment professionals in preparing the proposed policy
described in and attached to this report.
0
The proposed policy, including a review of recommended changes, was placed on the agenda for
review and discussion at the Finance Committee meeting of June 12, 2014.
FOR CITY CLERK ONLY
F *11 e N.
Council Meeting-, N"/&
Disposition:
ANALYSIS: The City's investment approach continues to be risk averse. Historically, the City
has avoided the types of investing that would expose the City to loss of investment principal.
Safety, liquidity and yield remain the order of priority for cash and investment management. The
City pursues a fair market return on its investments after considering its cash flow requirements
and current investment portfolio structure.
The review of the current Investment Policy by Cutwater and City staff yielded the following
recommended changes:
Federal Agency Securities: Specific issuer names have been removed in order to broaden th,1-1
investment universe for el4dble Agency issuers.
I
• Federal Instrumentality Securities: Specific issuer names have been removed in order to
broaden the investment universe for eligible Instrumentality issuers.
• Medium -Term Notes: The maximum investment per issuer has been changed to 5% of the
portfolio from $1,000,000.
Certificates of Deposit: Language updated to comply with recent changes to California
legislation.
• Prime Commercial Paper: The $ 1,000,000 limit per issuer has been replaced with a limit of
5% of the portfolio per issuer. The diversification requirement remains at 10% of the
outstanding paper of any single issuer.
Repurchase Agreements.- Rating requirements for counterparties to repurchase agreements
have been deleted-, as such ratings are not required by Code. Important safeguards for
repurchase agreement transactions are reflected in existing requirements.
Language pertaining to physical delivery of securities has been deleted to reflect current
business practices.
A
FISCAL IMPACT: There is no direct fiscal impact from accepting the policy as propose%.&.
ACTION R-EQUIRED: Staff recommends that the Council adopt the resolution approving the
investment policy as presented.
ATTACHMENTS
Redlined Version of Proposed Investment Policy
Resolution
City of San Rafael Investment Policy
The City Council of the City of San Rafael (the City) has adopted this Investment Policy (th
Policy) in order to establish the investment scope, objectives, delegation of authorit
standards of prudence, reporting requirements, internal controls, eligible investments an
transactions, diversification requirements, risk tolerance, and safekeeping and custodi
procedures for the investment of the funds of the City. All such funds will be invested i
accordance with this Policy and with applicable sections of the California Government Cod
This Policy was endorsed and adopted by the City Council on the approved date note
above. It replaces any previous investment policy or investment procedures of the City.
It- is intended that this 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 accordancJ4
with the provisions of this Policy. I
All cash shall be pooled for investment purposes. The investment income derived from th
pooled investment account shall be allocated to the contributing funds based upon th
proportion of the respective average balances relative to the total pooled balance in th
investment portfolio. Investment income shall be distributed to the individual funds not les,11
than annually.
A
The City'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.
9M
City of San Rafael
Investment Policy
June 16 2014
101:44: 1 111, 0
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 andI
to
manage the operation of•
the investment portfolio to other specifically authorized sta
y
members. The Treasurer shall maintain a list of persons authorized to transact securitie's
business for the City. No -person may engage in an investment transaction except as
expressly provided under the terms of this Policy.
The City Manager and the Treasurer jointly shall develop written administrative procedures
and internal controls, consistent with this 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.
[azi-11 91:4 ki,
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 dgence 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 faarity 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. 77
The City's overall investment program shall be designed and managed with a degree
0 0
professionalism that is worthy of the public trust. The City recognizes that no investment i
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
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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 securit
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.
City of San Rafael
Investment Policy
It Irle% 'I OW2 JU
NJV-%Aj- 1 %0 N.0 I A- W 1 %0 ne 16, 2014
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.
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 exteons 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 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 Treasu[y bills, notes and bonds with a final maturity not exceeding five
years from the date of trade settlement.
2. Eederal, Agency
debentures
and mortgage-backed securities with a final maturity not
exceeding
"NW-UTILAI TV
five
-I
years from
the date of trade settlement-4ssued-by-4he--Goven4n4ent
T- klq;;;r
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
Z =0
City of San Rafael
Investment Policy
I r% An,()
une 16 2014
date of trade settlement, and rated at least A or the equivalent by a NRSRO. No more
than $.1. ;0.0)G-,.QW5% of the p rtfolio 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.
III III Implill
11
quivallent, with maturities not exceedinq five years from the date of trade settlement. I
addition, the Citv may not invest in the CD of a state or federal credit union where an.
person with investment deon makinq authority at the City also serves on the board
directors, or any committee appointed by the board of directors, or the credit committe
or the suii. viso[y committee of the state or federal credit union issuinq the negotiabl
certificates o osit. No more than 5% of the portfolio may be invested in the CDs ol
any one issuer, and the aggreqate investment in CDs shall not exceed 30% of th
portfolio.
Fill III 111 11113111111 1 , IIIII ill�iillillill I qlliii I Pill I I IIIII I lI
all, I I a,
Government Code Section 53651 and 53652. The City shall comp
secure compliance with the se h e'
Government Code Section 53649 and 56652.
1011101 !m�11111�11 T I I
deposits per.section 53601.8 and 53635.8 in the Government Code. No more than 5% 1
the, portfolio may be invested throuqh any one private sector entity that assists in th
placement of such 11 not exceed 30W
of the portfolio.
578.,-- Special Assessment District Obligations issued by the City of San Rafael as Limited
Obligation Improvement Bonds related to special assessment districts and special tax
districts. Investment in such obligations requires the approval of the City Council and
maturities may extend to 30 years from the date of trade settlement.
Prime Commercial Pa er 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 $500,000,000 and
(3) Have debt other than commercial paper, if any, that is rated "A" or higher
by a NRSRO.
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City of San Rafael
Investment Policy
ae
June 16 2014
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 collateral ization ,
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 th(&
outstanding commercial paper of any single corporate issuer. No more than 4-05% of the
City's total portfolio ^r III -A
iGhevef-is�, shall be invested in the commercial
I -
paper of any one issuer, and the aggregate investment in commercial paper shall noll
exceed 25% of the City's total portfolio.
Eligible Banker's Acceptances . issued by FDIC insured commercial banks, rated
least A-1 or the equivalent by a NRSRO with maturities not exceeding 180 days fromth
date of purchase. If issuers have senior debt outstanding, it shall be rated at least A o
the equivalent by a NRSRO. No more than $2,000,000 shall be invested in banker'
acceptances of•
any one commercial bank, and the aggregate•
investment in banker'
acceptances shall not exceed 40% of the City's total portfolio. I
Repurchase Agreements with a final termination date not exceeding one yea
collateralized by U.S. Treasury obligations, Federal Agency securities, or Feder
Instrumentality securities listed in items 1, 2 and 3 above with the maturity of th
collateral not exceeding five years. For the purpose of this section, the term collater
shall mean •purchased securities under the terms of the City's approved Maste
Repurchase Agreement. The purchased securities shall have a minimum market valu
including accrued interest of 102% of the dollar value of the funds borrowed. Collater
shall be held in the City's custodian bank, as safekeeping agent, and the market value o
the collateral securities shall be marked -to -the -market daily.
1-W
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.
2
9712. -State of California's Local Agency Investment Fund (LAIF), pursuant to California
Government Code Section 16429. 1.
Money 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 City's total portfolio.
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City of San Rafael
Investment Policy
June 16. 2014
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.
1:161
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.
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
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 Ne1
Capital Rule).
Each authorized broker/dealer shall be required to submit and annually update a Cit
approved Broker/Dealer Information Request form which includes the firm's most rece
financial statements. The Treasurer shall maintain a list of the broker/dealers that hav
been approved by the City, along with each firm's most recent broker/dealer Informatio
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 shall attest in writing
that they have received and reviewed a copy of this policy.
The City may purchase commercial paper from direct issuers even though they are not o
the approved broker/dealer list as long as they meet the criteria outlined in Item 5 of th
Authorized Securities and Transactions section of this Policy. I
Each investment transaction shall be competitively transacted with authorized
broker/dealers. At least three broker/dealers shall be contacted for each transaction and
'their bid and offering prices shall be recorded.
City of San Rafael
Investment Policy
It imn,l
%r%AVINO2014
If the City is offered a security for which there is no other readily available competitiwe-r,
tiffering, the Treasurer will document quotations for comparable or alternative securities.
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.
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 purchased by the City will be delivered by iA ^10 ook entry GF
nd will be held in third -party safekeeping by a City approved custodian
bank
7 - - T"K *_1 7 --- or its Depository Trust Company (DTC) participant account.
The City's custodian shall be required to furnish the City a list of holdings on at least a
monthly basis and safekeeping receipts or customer confirmations shall be issued for each
transaction.
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04111��=IvMrli ;
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.
ai "
City of San Rafael
Investment Policy
h inim-'I ')r)l'l
WA601-1 1%.# W7 A -W I. June 16 2014
:44 ; M :4
On a quarterly 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 an(
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 nc
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 City's funds, investments or programs that are under th(
management of contracted parties, including lending programs; and
8. A statement of the ability to meet expenditure requirements for six months, as well as ar
explanation of why money will not be available if that is the case.
The Treasurer shall submit to the Council a report of any changes affecting more than 15%
of the investment portfolio within 30 days of such change.
POLICY REVIEW
This Investment Policy shall be reviewed and approved by City Council 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 additional
amendments to this Investment Policy shall be submitted to the City Council for approval.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN RAFAEL TO APPROVE
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 City's Investment Policy requires consideration and approval of the
investment policy annually- and
WHEREAS, all funds are invested m 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.
1, ESTHER C, BEIRNE, Clerk of the City of San Rafael, hereby certify that the foregoing
resolution
eso ion was duly and regularly introduced and adopted at a regular meeting of the City Council
of said City held on Monday the 16th day of June, 2014, by the following vote, to wit:
AYES: COUNCILMEMBERS: Bushey, Colin, McCullough & Mayor Phillips
R "611111��111111'
ABSENT: COUNCILMEMBERS: Connolly
e.ff s6t;o Fae...O. &Ct It
The City Council of the City of San Rafael (the City) has adopted this Investment Policy (the
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 Policy and with applicable sections of the California Government Code.
This 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.
It is intended that this 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 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.
The City's funds shall be invested in compliance with all applicable City Municipal Code
California State statutes, and Federal regulations, and in a manner designed to accomplis
the following objectives, which are listed in priority order: I
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.
Im
City of San Rafael
Investment Policy
June 16, 2014
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.
TheTreasurer 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 Policy.
The City Manager and the Treasurer jointly shall develop written administrative procedures
and internal controls, consistent with this 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 it...
investment program, so long as it can be clearly demonstrated that these services produc,
a net financial advantage or necessary financial protection of the City's financial resources. I
The standard of prudence to be used for managing the City's investments shall be Californi4,
Government Code Section 53600.3, the prudent investor standard which states, "Whei
investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds
a trustee shall act with care, skill, prudence, and diligence under the circumstances thei
prevailing, including, but not limited to, the general economic conditions and the anticipate(
needs of the agency, that a prudent person acting in a like capacity and familiarity with thos(
matters would use in the conduct of funds of a like character and with like aims, t�l
safeguard the principal and maintain the -liquidity needs of the agency. 77
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 writte
procedures and exercising due diligence shall be relieved of personal responsibility for a
individual security's credit risk or market price changes, provided that the deviations fro
expectations are reported in a timely fashion to the City Manager and appropriate action i
taken to control adverse developments. I
City of San Rafael
Investment Policy
June 16, 2014
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, theCity 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.
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 Policy immediately upon being enacted. However, in the
event that amendments to these sections conflict with this 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 Treasua bills, notes and bonds with a final maturity not exceeding five
years from the date of trade settlement.
2. Eederal Agency debentures and mortgage-backed securities with a final maturity not
exceeding five years from the date of trade settlement.
3. Eederal Instrumen• (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.
4. Medium -Term Notes issued by corporations organized and operating within the Unite
States or by depository institutions licensed by the United States or any state an
operating within the United States, with a final maturity not exceeding five years from t
e
n
h
�
date of trade settlement, and rated at least A or the equivalent by a NRSRO. No mo joi
than 5% of the portfolio shall be invested in medium-term notes of any one issuer, an
the aggregate investment in medium-term notes shall not exceed 30% of the City's tot
portfolio.
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City of San Rafae,
Investment Policy
June 16, 2014
5. Negotiable Certificates of Deposits (CDs) of commercial banks rated at least A-1, or the
equivalent, with maturities not exceeding five years from the date of trade settlement. In
addition, the City may not invest in the CD of a state or federal credit union where any
person with investment decision making authority at the City also serves on the board of
directors, or any committee appointed by the board of directors, or the credit committee
or the supervisory committee of the state or federal credit union issuing the negotiable
certificates of deposit. No more than 5% of the portfolio may be invested in the CDs of
any one issuer, and the aggregate investment in CDs shall not exceed 30% of the
portfolio.
i,. Non-negotiable Certificates of D and savings deposits with a maturity no
exceeding five years from the date of trade settlement, in FDIC insured state o
nationally chartered banks or savings banks that qualify as a depository of public fund
in the State of California as defined in California Government Code Section 53630.5. N
more than 5% of the portfolio may be invested in the CDs of any one issuer, and th
aggregate investment in CDs shall not exceed 30% of the portfolio.
Deposits in excess of the insured amount shall be secured pursuant to California
Government Code Section 53651 and 53652. The City shall comply with and act to
secure compliance with the security (collateralization) system speed in the
Government Code Section 53649 and 56652.
7. Deposits may be placed using a private sector entity that assists in the placement o
deposits per section 53601.8 and 53635.8 in the Government Code. No more than 5% o
the portfolio may be invested through any one private sector entity that assists in th
I
placement of such deposits and the aggregate investment in CDs shall not exceed 300
of the portfolio. )I
8. Special Assessment District Obligations issued by the City of San Rafael as Limite
Obligation Improvement Bonds related to special assessment districts and special ta
districts. Investment in such obligations requires •the approval of the City Council an
maturities may extend to 30 years from the date of trade settlement. I
9. Frime Commercial Pa er with a maturity not exceeding 270 days from the date o
purchase with the highest ranking or of the highest letter and number rating as provide
for,by a NRSRO. The entity that issues the commercial paper shall meet all of th
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 $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
ejA-1 11 or higher, or the equivalent, by a NRSRO.
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City of San Rafae,�
Investment Policy
June 16, 2014
Purchases of eligible commercial paper may not represent more than 10% of the
tutstanding commercial paper of any single corporate issuer. No more than 5% of the
City's total portfolio, shall be invested in the commercial paper of any one issuer, and the
2ggregate investment in commercial paper shall not exceed 25% of the City's total
portfolio.
1O..Eligible Banker's 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 City's total portfolio.
11. Repurchase A-greements with a final termination date not exceeding one yea
collateralized by U.S. Treasury obligations, Federal Agency securities, or Feder
Instrumentality securities listed in itemsand 3 above with the maturity of th
collateral not exceeding five years. For the purpose of this section, the term collater
shall mean purchased securities under the terms of the City's approved Maste
Repurchase ♦Agreement. The purchased securities shall have a minimum market valu
including accrued interest of 102% of the dollar value of the funds borrowed. Collater
shall be held in the City's custodian •bank, as safekeeping agent, and the market value o
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. 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.
12. State of California's Local Agency Investment Fund (LAIF), pursuant to California
Government Code Section 16429. 1.
13. Mone Market Funds registered under the Investment Company Act of 1940 that (1) a
it no-load" (meaning no commission or fee shall be charged on purchases or sales o
r
0
shares); (2) have a constant daily net asset value per share of $1.00; (3) invest only i
the securities and obligations authorized in this Policy and (4) have a rating of at leas
AAA or the equivalent by at least two NRSROs. The aggregate investment in mone
market funds shall not exceed 10% of the City's total portfolio. �1
It is the intent of the City that the foregoing list of authorized securities and transactions i
strictly interpreted. Any deviation from this list must be preapproved by resolution of the Citi4
Council. i
City of San Rafael
Investment Policy
June 16, 2014
To the extent possible, investments shall be matched with anticipated cash flo
requirements and known future liabilities. The City will not invest in securities maturing morZ4
'than five years from the date of purchase, unless the City Council has by resolution grantell
authority to make such an investment at least three months prior to the date of investment. I
Ro-1:411111*41 0 0 a W 0 A
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 a,.
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,,
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 Ne
Capital Rule). I
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 recommendinii-
Q*
a particular transaction in the City's portfolio, authorized broker/dealers shall attest in writingi
that they have received and reviewed 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 Policy.
Each investment transaction shall be
broker/dealers. At least three broker/dealers
their bid and offering prices shall be recorded.
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.
The Treasurer shall maintain a list of banks that are approved to provide banking service
for the City. To be eligible for authorization, a bank must be a member of the FDIC ani
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City of San Rafael
Investment Policy
June 16, 2014
shall qualify as a depository of public funds in the State of California as defined in California
Government Code Section 53630.5.
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 app I roved 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 versu's payment basis. All securities shall be perfected in the name of the City.
® evidence to title shall be consistent with modern investment, banking and
commercial practices.
All investment securities purchased by the City will be delivered by book entry and will be
I -
held in third -party safekeeping by a City approved custodian bankor its Depository Trusi
Company (DTC) participant account.
The City's custodian shall be required to furnish the City a list of holdings on at least a
monthly basis and safekeeping receipts or customer confirmations shall be issued for each
transaction.
261 A 0 a M W
The investment portfolio shall be designed to attain a market rate of return througho
budgetary and economic cycles, taking into account prevailing market conditions, ris
constraints for eligible securities, and cash flow requirements. The performance of the Cityj'..
investments shall be compared to the average yield on the U.S. Treasury security that mo
closely corresponds to the portfolio ) s actual weighted average effective maturity. Whe
comparing the performance of the City I s portfolio, its rate of return will be computed net of a I
tees and expenses.
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IVA 201 A
On a quarterly basis, the Treasurer shall submit to the Council a report of the investme
earnings and performance results of the City's investment portfolio. The report shall includ
the following information- I
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,
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City of San Rafael
Investment Policy
June 16, 2014
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 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.
The Treasurer shall submit to the Council a report of any changes affecting more than 15%
of the investment portfolio within 30 days of such change.
2614 LWA N
This Investment Policy shall be reviewed and approved by City Council 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 additional
amendments to this Investment Policy shall be submitted to the City Council for approval.
9• � i
INSTRUCTIONS: USE THIS FORM WITH EACH SUBMITTAL OF A CONTRACT, AGREEMENT,
ORDINANCE OR RESOLUTION BEFORE APPROVAL BY COUNCIL / AGENCY.
SRSA / SRCC AGENDA ITEM NO. —SRCC
DATE OF MEETING: June 16, 2014
FROM: Van Bach
DEPARTMENT: Finance
DATE: June 16, 2014
TITLE OF DOCUMENT: Annual Review and Resolution of Approve the City's Investment Policy
-0001
Department Head (signature)
(LOWER HALF OF FORM FOR APPROVALS ONLY)
APPROVED AS COUNCIL / AGENCY
AGENDA ITEM:
02M ff-. ier (signature)
APPROVED AS TO FORM:
M