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HomeMy Public PortalAbout12) 7I Resolution 18-5333 Statement of Investment Policy for FY 2018-19DATE: TO: FROM: ADMINISTRATIVE SERVICES DEPARTMENT MEMORANDUM June 19, 2018 The Honorab le City Council Bryan Cook, City Manager By: Julia James, Interim Admin istrative Services Di rector AGENDA ITEM 7.1. SUBJECT: RESOLUTION NO. 18-5333 ADOPTING THE STATEMENT OF INVESTMENT POLICY FOR FISCAL YEAR (FY) 2018-19 RECOMMENDATION: The City Council is requested to adopt Resolution No. 18-5 333 (Attachment "A "), adopting the Statement of Investment Policy for FY 2018-19 . BACKGROUND AND ANALYSIS: The City's Statement of Investment Policy establishes an administrative plan which allows investment of the City's idle funds in financial institutions , government agencies, the State of California Local Agency Investment Fund (LAIF), the Los Angeles County Investment Pool (LACPIF) and medium-term corporate notes which meet the criteria required for safety and liquidity. Since the last adoption of this policy on June 20 , 2017, no changes have been made. CITY STRATEGIC GOALS: This action will further the City's Strategic Goal to promote Good Governance. FISCAL IMPACT: There is no fiscal impact of this action to the City's Budget. ATTACHMENT: A. Resolution No . 18-5333 This page left blank intentionall y ATTACHMENT A RESOLUTION NO . 18-5333 RESOLUTION OF CITY COUNCIL OF THE CITY OF TEMPLE CITY CALIFORNIA ADOPTING THE ATTACHED FISCAL YEAR (FY) 2018-19 STATEMENT OF INVESTMENT POLICY WHEREAS , the California State Legislature passed legis lation during the 1995 session amending Section 53600 et seq . of the California Government Code with respect to authorized investments , written statements of investment pol icy and quarterly reporting by local public agenc ies ; and WHEREAS , the Governor of the State of California signed such legislation into law effective January 1, 1996 , as Section 53600 et seq . of the California Government Code ; and WHEREAS, the Administrative Services Director/City Treasurer of the City of Temple City recommends adoption of the FY 2018 -19 Statement of I nvestment Pol icy as attached (Exhibit "1 "). NOW, THEREFORE , IT IS RESOLVED that the City Counc il of the City of Temple City adopts the attached FY 2018 -19 Statement of Investment Policy . APPROVED AND ADOPTED this 19th day of June , 2018 . Mayo r ATTEST: Peggy Kuo , City Clerk Eric Va il, C ity Attorney I hereby certify that the foregoing resolution , Resolution No . 18-5333, was duly passed , approved and adopted by the C ity Council of the City of Temple City at a specia l meeting held on the 19th day of June 2018 , by the following vote: AYES : Councilmember: NOES : Councilmember : ABSENT: Councilmember : ABSTAIN: Councilmember : City Clerk Exh ib it 1 CITY OF TEMPLE CITY STATEMENT OF INVESTMENT POLICY I. PURPOSE II. OBJECTIVE Ill. SCOPE CITY OF TEMPLE CITY STATEMENT OF INVESTMENT POLICY IV . STANDARDS OF CARE 1. PRUDENCE 2. DELEGATION OF A UTHORITY V . INTERNAL CONTROLS VI. SUITABLE AND AUTHORIZED INVESTMENTS VII. REPORTING METHODS VIII. POLICY CONSTRAINTS 1. CITY CONSTRAINTS 2 . LEGAL CONST RAINTS IX. POLICY REVIEW CITY OF TEMPLE CITY STATEMENT OF INVESTMENT POLICY I. PURPOSE Th is sta tement is intended to provide a gu ideline for t he prudent investment of temporary idle cash , trust funds and restricted monies and to outline a policy for maxim izing the efficiency of the cash management system . Ultimate investment goal is the protection of cash investments. II. OBJECTIVE The cash management system of the C ity of Temple C ity is designed to accurately mon itor and forecast expenditures and revenues, thus insu ri ng the investme nt of mon ies to the fullest extent possible . Attempts to obtain highest interest yields poss ible are a stateme nt of fact as long as investments meet the criter ia requ ired for safety and liquidity. Ill. SCOPE Th is investment pol icy app li es to activities of the City w ith regard to invest ing the financ ial assets of a ll funds , including the fo ll owing : Genera l Fund , Specia l Revenue Funds , Assessment Fu nds , Internal Serv ice Funds , Cap ita l Projects Funds , Debt Service Funds , Reserve Funds , Trust and Agency Funds , an d any othe r Funds that may be created from t ime to time . IV . STANDARDS OF CARE 1. PRUDENCE The standard of prudence to be used by investment officials sha ll be t he "p rudent investor" standard as set forth in Section 53600 .3 of the Ca lifo rnia Government Code , wh ich states in part that, "When investing , re inve st ing , purchasing , acquiring , exchang ing , selling , and manag ing pub lic funds , a trustee shall act w ith care , skill , prudence , and diligence under the c ircumstances then prevailing , that a p rudent pe rson acting in a like capa ci ty and familiar ity w it h those matters w o uld use in the conduct of funds of a like character and w ith like aims , to safeguard the princ ipal and maint a in the liqu idity needs of the Agency". The prudent invest or standard shal l be a ppl ied in the context of managing the overa ll portfolio . 2. DELEGATION OF AUTHORITY The authority to manage and operate the investment program is g ranted to the Treasurer purs uant to Section 53607 of the Cal ifornia Government Code . Ind iv iduals who may execute investment transact ions are those pos it io ns who are authorized s ignatures for warrants and checks or those pe rso ns designated as a Deputy City Treasu rer by the C ity Treasure r. No other persons are authorized to execute an investment t ra nsa ct ion . ---------------- STATEMENT OF INVESTMENT POLICY PAGE2 V. INTERNAL CONTROLS The T reasurer/Deputy Ci t y Treasurer is responsible for estab lish i ng and ma inta in ing an internal control structure designed to ensure that the assets of the entity are protected from loss , theft or misuse . The T reasurer/Deputy C ity Treasurer shal l establish the investment functions so that specif ic responsibi lity for the performance of duties and segregation of dut ies are ass igned with a clear line . The functions of authorizing , recording transa ctions , and performing reconci liations are handled by separate persons to reduce the ri sk that a pe rson is in a position to conceal errors or fraud in the normal course of duty . The c urrent segregation of duties are as f ollows : Funct ion Responsibility Develop formal investment policy Treasurer/Deputy City Treasurer Review formal investment policy C ity's Auditing Firm Adopt formal investment policy C ity Council Execute investment transactions Treasurer/Deputy C ity Treasurer (the above signers as well as one of signers li sted below) C ity Manager, City C lerk , Directo r of Parks & Recreation Investment verification and Administrative Serv ices Director recordation Reconcile investment records to Accountant ban k statements While no internal contro l system , however elaborate , can guarantee absolute assurance that the City's assets are safeguarded , it is the intent of the C ity's interna l control system to prov ide reasonable assurance that management of the investment funct ion meets the C ity's objectives . These internal controls sha ll be rev iewed annual ly by the independent auditor. STATEMENT OF INVESTMENT POLICY PAGE3 VI. SUITABLE AND AUTHORIZED INVESTMENTS * •• ••• The Cal ifornia Government Code (Section 53601 and 53635) allows the City to in vest in the fo ll owing instruments : CGC Investment Type Maxim um Authorized Required Sect ion Maturity Limit (%) Rating 5360 I (a) Local Age ncy Bond s 5 yea rs None None 5360 1(b) U.S. Treasury Obl igations 5 years one None 5360 I (c) Sta te of Californi a Obl igations 5 years one None 5360I(d) CA Loc a l Agenc y Obligations 5 yea rs None None 5360 I (e) U.S. Agencies 5 years None None 5360 I (f) Bankers Ac ceptances* 180 da ys 40% Fe d Reserve El igible 5360 I (g) Comme rcia l Paper** 270 days 25% A I /P I Rating 5360 I (h) Negot iab le Certificates o f Deposit 5 years 30% None 5360 I (i) Repurc ha se Agreem ents I year No ne None 5360 I (i) Reverse Repurcha se Agreements*** 92 days 20% of base No ne 536010) Medium Term Note s 5 yea rs 30% A rating 5360 I (k) Mutua l Funds**** N/A 20% Multiple 5360 I (k) Money Ma rket Funds N/A 20% Mult ip le 5360 l(m ) Collate ralize d Ban k Deposi ts 5 years None None 5360 I (n) Mortgage Pass-Through Securi tie s 5 yea rs 20% AA Rating 53601(d) Local Agency Inv estment Fund (LAIF) !A one None 53601(d) County Poo led Inves tment Funds NI A None None 53635 Time Depo s it s 5 yea rs None No ne No more than 30% of surpl us fund s ma y be inves ted in Bankers Accep tances of any one commerc ial bank . Com mercial paper iss uers mus t be U.S. Co rporations wi th $500 million plus in ass ets . Purchases may not repre sent more than I 0% of outs tanding paper of an iss uing corpora ti on. Reverse Repurchase Agree ments must be made with prima ry dealers of th e Federal Reserve Bank of New York and th e sec urities used for the agreeme nt must have been held by the iss ue r for at leas t 30 days . •••• No more th an I 0% of an ag ency's su rpl us fun ds may be invested in any one mutual fu nd . STATEMENT OF INVESTMENT POLICY PAGE4 The City of Temp le City is limiting its purchase of investments to the fo ll owing vehicles : • LAIF (Local Agency Investment Fund ) -a special fund in the State Treasury which local agencies may use to deposit funds fo r investment. The re is no m inimum investment period and the minimum transaction is $5 ,000 , in mu lti ples of $1 ,000 above that, with a maximum balance of $40 ,000 ,000 as of January 1, 2002 fo r any agency . However, any investment with LAIF must comply with other self-imposed restrictions as specified in this Investme nt Policy. The City is restricted to a ma xi mum of fifteen transactions per month . It offers high liquid ity because deposits can be converted to cash in twenty- four hours and no interest is lost. All interest is distributed to those agencies participating on a proportionate share basis determined by the amounts deposited and the leng th of time they are depos ited. Interest is paid quarterly . The State reta ins an amount for reasonable costs of making the investments , not to exceed one-half of one percent of the earnings ; The interest rates are fairly high because of pool ing the State's surplus cash with the surplus cash deposited . This creates a multi-bi llion dollar money pool and allows diversified investments. In a high interest rate market , the City does better than LAIF, but in times of low interest rates , LAIF yields are higher. The City continually invests in the Local Agency Investment Fund . • LACPIF (Los Angeles County Pooled Investment Fund -The Los Angeles County Treasure r and Tax Collector (Treasury ) maintains an External Investment Pool (Pool) and manages the Pool of behalf of the part ic ipants . The primary objective of the Treasury's Investment Po licy is to ensure the safety of the principal. The secondary objective is to meet the liquidity needs of the participants and the third objective is to ach ieve a return on funds invested . These objectives are accomplished through the purchase of high quality fixed income investments , held to a designated maturity . Local jurisdictions may participate in this pool by adopting a Resolution authorizing and request ing the inv estment of excess funds in this Pool. • Certificates of Deposit-time deposits of a bank or savings and loan . They are purchased in various denominations with maturit ies ranging from 30 days to 60 months . The interest is calculated on a 360-day basis and is payable monthly, semi-annually , or at maturity in case of short term CO 's; • Passbook Savings Account - a certificate of deposit issued in any amount for a non-specified amount of time . Interest rate is much lower than CO's but the savings account allows flexibility . Funds can be deposited and withdrawn according to daily needs ; • Interest Bearing Checking Accounts -a checking account wh ich rece ives revenues and pays disbursements . Interest earned can be paid to the local j urisdictions on a regular basis or left in the account to offset the fees fo r STATEMENT OF INVESTMENT POLICY PAGES monthly services ; • Money Market Mutual Funds-referred to in the Californ ia Governme nt Code Section 53601 (k) as shares of beneficial interest iss ued by d ive rsified management companies investing in securities authorized by Section 53601 (a) to (I) inclus ive . Money Market Mutual Funds must have an ave rage maturity of 90 days or less, per SEC regulations ; • U .S . Treasuries -Debt instruments issued di rectly by the Un ited States Government. These instruments a re of highest cred it quality and payment of principal and interest are backed by the full faith and credit of the United States Government; and • U .S Agencies -Debt instruments issued by the various federally chartered agencies . These instruments are also of the highest c redit qual ity. • Medium-term Notes-Corporate institutions organized and operating w ithin the United States or by depos itory institutions licensed by the Unit ed States or any states and operating within the Un ited States . One nationa lly recognized rat ing agency must rate notes elig ib le for investment i n t he "AA" category . This includes the lowest AA rating category , which is AA-for Standard and Poo r's and Fitch , and AA3 for Moody's . VII. REPORTING METHODS The Treasurer/Deputy C ity Treasurer shall prepare a quarterly investment report as requ i red by Section 53646 of the Californ ia Government Code which prov ides a clear p icture of the status of the current investment portfolio . The report should be provided to the C ity Manager and legislative body. The report should include the follow ing : a ) Type of investment ; b) Institution or issuer; c ) Date of Maturity ; d) Amount of deposit or cost of security ; e) Current market va lue of securities and source of market value ; f) State that there are sufficient funds to meet the next 6 months' ob li gations or provide an explanation as to why sufficient mon ies shall or may not be available; and g) State that investments are in compliance with the C ity's investment pol icy or manner in which the portfolio is not in compliance STATEMENT OF INVESTMENT POLICY PAGE6 VIII. POLICY CONSTRAINTS 1. CITY CONSTRAINTS ----------------- The City of Temple City operates its pooled idle cash investments under the Prudent Investor Standard . The Treasurer will evaluate local banks and savings institutions and may invest idle cash funds with such institutions when the criteria for prudent investment previously stated are met. The City operates its investment pool according to State and self-imposed constraints . It does not buy stocks; it does not speculate ; it does not deal in futures or options. It does not purchase or sell securities on margins or invest in derivative type investments such as inverse floaters , range notes or interest only strips derived from a pool of mortgage as prohibited under Section 53601 .6 of the California Government Code . Any investment extending beyond a five-year period requires prior City Council approval. 2 . LEGAL CONSTRAINTS Surplus funds must be deposited in State or national banks , State or Federal savings association or State or Federal credit un ions within the State of California. The deposits cannot exceed the amount of the bank's or savings and loan's paid-up capital and surplus . The bank or savings and loan must secure public funds deposits with el igible securities having a market value of 11 0% of the total amount of the deposits. State law also allows as an eligible security , first trust deeds having a value of 150% of the total amount of the deposits . IX. POLICY REVIEW As requ ired by Section 53646 of the California Government Code , this Statement of Investment Policy shall be reviewed at least annually as a public meeting of the City Council to ensure its consistency with the overall objectives of preseNation of principal , liquidity and return , and its relevance to current law , financial and economic trends .