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HomeMy WebLinkAboutFin Investment Policy 2014Department: FINANCE Prepared by: Van Bach, �,)C AccountinLy Manager INVESTMENT POLICY jq�­! �)A I I� J 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 il d 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. 9 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. WIM 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. Lei :A L r*_X 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. • 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. Zi 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 9EM 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. i 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, Z =9 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