HomeMy Public PortalAbout12) 7G Statement of Investment Policy for FY 2019-20AGENDA
ITEM 7.G.
ADMINISTRATIVE SERVICES DEPARTMENT
MEMORANDUM
DATE: June 18, 2019
TO: The Honorable City Council
FROM: Bryan Cook , City Manager
Susan Paragas , Administrative Services Director
SUBJECT: RESOLUTION NO. 19-5405 ADOPTING THE STATEMENT OF
INVESTMENT POLICY FOR FISCAL YEAR (FY) 2019-20
RECOMMENDATION:
The City Council is requested to adopt Resolution No . 19-5405 (Attachment "A "),
adopting the Statement of Investment Policy for FY 2019-20 .
BACKGROUND AND ANALYSIS:
The City's Statement of Investment Policy establishes an administrative plan which
allows inve stment of the C ity 's idl e funds in financia l institutions, government agencies ,
the State of Ca lifornia Local Agency Investment Fund (LA IF ), the Los Ange les County
Investment Pool (LACPIF) and medium-term corporate notes which meet the criteria
required for safety and liquid ity .
Since the last adoption of th is policy on June 19, 2018 , no changes have been made .
CITY STRATEGIC GOALS:
This action will further the City's St rategic Goa l to promote Good Governance .
FISCAL IMPACT:
There is no fiscal impact of this action to the City's Budget.
ATTACHMENT:
A . Resolution No . 19-5405
ATTACHMENT A
RESOLUTION NO. 19-5405
A RESOLUTION OF CITY COUNCIL OF THE CITY OF
TEMPLE CITY, CALIFORNIA, ADOPTING THE ATTACHED
FISCAL YEAR (FY) 2019-20 STATEMENT OF
INVESTMENT POLICY
WHEREAS, the Ca li fornia State Legislature passed legislation during the 1995
session amending Section 53600 et seq . of the California Government Code with respect
to authorized investments , written statements of investment policy and quarterly reporting
by local publ ic agencies ; 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 2019-20 Statement of Investment Policy as
attached (Exhibit "1 ").
NOW, THEREFORE, IT IS RESOLVED that the City Council of the City of Temple
City adopts the attached FY 2019-20 Statement of Investment Pol icy .
APPROVED AND ADOPTED this 18th day of June , 2019 .
Nanette Fish , Mayor
ATIEST:
Peggy Kuo , City Clerk Greg Murphy, City Attorney
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I hereby certify that the foregoing resolution , Resolution No. 19-5405, was duly passed ,
approved and adopted by the City Council of the City of Temple C ity at a special meeti ng
held on the 18th day of June 2019 , by the following vote :
AYES: Councilmember:
NOES: Councilmember:
ABSENT: Councilmember:
ABSTAIN : Councilmember:
C ity Clerk
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CITY OF TEMPLE CITY
STATEMENT
OF
INVESTMENT POLICY
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CITY OF TEMPLE CITY
STATEMENT OF INVESTMENT POLICY
I. PURPOSE
II. OBJECTIVE
Ill. SCOPE
IV. STANDARDS OF CARE
1. PRUDENCE
2. DELEGATION OF AUTHORITY
V. INTERNAL CONTROLS
VI. SUITABLE AND AUTHORIZED INVESTMENTS
VII. REPORTING METHODS
VIII. POLICY CONSTRAINTS
1. C ITY CONS TRAINTS
2 . LEGAL CONST RAINTS
IX . POLICY REVIEW
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EXHIBIT 1
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EXHIBIT 1
CITY OF TEMPLE CITY
STATEMENT OF INVESTMENT POLICY
I. PURPOSE
This statement is intended to provide a guideline for the prudent investment of
temporary idle cash , trust funds and restricted monies and to outl ine a policy for
maxim izing the efficiency of the cash management system . Ultimate investment goal
is the protect ion of cash investments .
II. OBJECTIVE
The cash management system of the City of Temple City is designed to accurately
monitor and forecast expenditures and revenues , thus insuring the investment of
monies to the fullest extent possible . Attempts to obtain highest inte rest yields
possib le are a statement of fact as long as investments meet the criteria requi red for
safety and liquidity .
Ill. SCOPE
Th is in vestment po li cy applies to activities of the City with regard to investing the
financial assets of all funds , including the following : General Fund , Special Revenue
Funds , Assessment Funds, Internal Service Funds , Capital Projects Funds, Debt
Service Funds , Reserve Funds , Trust and Agency Funds , and any other Funds that
may be created from time to time.
IV. STANDARDS OF CARE
1. PRUDENCE
The standard of p rudence to be used by investment officials sha ll be t he
"prudent investor" standard as set forth in Section 53600 .3 of the California
Government Code , which states in part that , "When investing , reinvest ing ,
purchasing , acqu iring , exchanging , selling , and managing publ ic funds , a
trustee shall act with care, sk ill , prudence , and diligence under t he
circumstances then prevailing , that a prudent perso n act ing in a like capacity
and familiarity wit h those matters wou ld use in the conduct of fu nds of a like
character and with like aims , to safeguard the principal and mai nta i n t he
liquidity needs of th e Agency". The p rudent investor standard sha ll be appl ied
in the context of managing the overall portfolio.
2. DELEGATION O F AUTHORITY
The authority to manage and operate the investment program is g ranted to
th e Treasurer pursuant to Section 53607 of the Cal ifornia Government Co de .
Individuals who may execute investment transactions are those positions who
are authorized sig natures for wa rra nts and checks o r those persons
designated as a Deputy City T reasurer by the City Treasure r. No other
persons are a utho ri zed to execute an i nvestment tra nsact ion .
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STATEMENT OF INVESTMENT POLICY
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V. INTERNAL CONTROLS
EXH I BIT 1
The Treasurer/Deputy City Treasurer is responsible for establish ing and maintaining
an internal control structure designed to ensure that the assets of the entity are
protected from loss , theft or misuse.
The Treasurer/Deputy City Treasurer shall establish the investment functions so that
specific responsib ility for the performance of duties and segregation of duties are
assigned with a clear line . The functions of authorizing , recording transaction s , and
performing reconciliations are handled by separate persons to reduce the risk that a
person is in a position to conceal errors or fraud in the normal course of duty.
The current segregation of duties are as follows :
Function Responsibility
Develop formal investment policy Treasurer/Deputy City Treasurer
Review formal investment policy City's Auditing Firm
Adopt formal investment policy City Council
Execute investment transactions Treasurer/Deputy City Treasurer
(the above signers as well as
one of signers listed below)
City Manager, City Clerk , Director
of Parks & Recreation
Investment verification and Administrative Services Director
recordation
Reconcile investment records to Accountant
bank statements
While no internal control system, however elaborate , can guarantee absolute
assurance that the C ity 's assets are safeguarded , it is the inten t of the City's intern a l
control system to provide reasonable assurance that management of the investment
function meets the City's objectives. These internal controls shall be reviewed
annually by the independent auditor.
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EXHIB IT 1
STAT EMENT OF INVESTMENT POLICY
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VI. SUITABLE AND AUTHORIZED INVESTMENTS
*
••
•••
The California Government Code (Section 53601 and 53635) allows the City to invest
in the following instruments:
C G C Investm e nt T ype Max imum Autho r ized Required
Secti o n Maturity Li mit (%) Rat in g
53 601 (a) Lo cal Agen cy Bo nd s 5 years o ne o ne
53601 (b) U.S . T reasury Obl igati o n s 5 years o ne o ne
53601 (c) State of C a li fo rn ia Oblig atio n s 5 years o ne o ne
53 601 (d) C A Local Agen cy Oblig atio n s 5 years o ne o ne
53601 (e) U.S. Agenc ies 5 years o ne o n e
5360 l (f) Bankers Acceptan ces• 180 days 4 0% Fed Reserve
Elig ible
53 601 (g) Commercial Paper• • 270 d ays 25% A I/PI Ra tin g
5360 1(h ) egotiabl e Certifi cates o f De pos it 5 years 30 % o ne
53 60 l(i) R ep urchase Ag reements I year o ne o ne
53 60 I (i) Reverse Repurchase Agreements*** 92 days 20%of base o ne
53 601 G) Medi u m Term otes 5 years 30% A rati ng
53 60 I (k) Mutual Funds•• •• l A 2 0% Mu lti p le
53601 (k) Money Market Fund s l A 20% Multi p le
53601 (m ) Coll atera li zed Bank De posits 5 years o ne None
53601 (n) Mo rtgage Pass -Thro ug h Securities 5 years 20% AA Ratin g
53 601 (d) Local Agency In v es tm e nt Fund (LA IF) l A o ne o ne
53601 (d ) County Pooled Investm ent Fu nd s l A o ne o ne
53 63 5 Time D epo s its 5 ye ars o ne o ne
No more than 30% of surplus funds may be mvested in Bankers Acceptances of any one commercial bank .
Commercial paper issuers must be U S Corporations with $5 00 m1lllon plus in assets. Purchases may not represent more than
I 00/o of outstanding paper of an issumg corporation.
Reverse Repurchase Agreements must be made wi th prim ary dealers of the Fede ra l Reserve Bank of New York and the securit ies
used for the agreeme nt must have been held by the issuer for at least 30 days .
•••• o more than 10% of an agency's surplus funds may be mvested many one mutua l fund .
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STATEMENT OF INVESTMENT POLICY
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EXHIBIT 1
The City of Temple City is limiting its purchase of investments to the following
vehicles :
• LAIF (Local Agency Investment Fund)-a special fund in the State Treasury
wh ich local age ncies may use to depos it funds for investment. There is no
min imum investment period an d the minimum transaction is $5 ,000 , in
multiples of $1 ,000 above that, w ith a maximum ba lance of $40 ,000,000 as of
January 1, 2002 for any agency. However, any investment w ith LAIF m ust
comply with other self-imposed res trictions as specified in this In vestment
Policy . The City is restricted to a ma ximum of fifteen transactions per month.
It offers high liquidity 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 determ ined by t he a mounts
deposited and the length oftime they are depos ited . Interest is paid quarterly.
The State retains an amount fo r reasonable costs of making the in vestments ,
not to exceed one-half of one percent of the earn i ngs ;
The interest rates are fairly high because of pooling the State 's su rp lu s cash
with the surplus cash depos ited . This creates a multi -billion dollar money pool
and allows diversified investments . In a high interest rate market, the City
does bette r than LAIF , but in times of low interest rates , LAIF y ields are higher.
The City con ti nually invests in the Local Agency Investment Fund .
• LACPIF (Los Ange les County Pooled Investment Fund-The Los A nge les
County T reasu re r and Tax Collector (Treasury ) ma intains an Externa l
Investment Pool (Pool ) and manages t he Pool of behalf of the part icipan t s.
The primary objective of the Treasury's Investment Pol icy is to ensu re the
safety of the principal. The secondary objective is to meet the liq ui d ity needs
of the participants and the third object ive is to achieve 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 Resolutio n authorizing
and request ing the investmen t of excess funds in this Poo l.
• Certificates of Deposit-time deposits of a bank or savi ngs and loan . They
are purchased in various denominations with maturities rang ing from 30 days
to 60 months . The interest is ca lculated on a 360 -day basis and is payab le
monthly , semi-annually , or at maturity in case of short term CO 's ;
• Passbook Savings Account - a cert ificate of deposit issued in any amount for
a non-specified amount of time. Inte rest rate is much lower than CO 's bu t the
savings accoun t allows flex ib il ity . Funds can be deposited and w ithdrawn
according to da il y needs ;
• Interest Beari ng C hecki ng Accounts - a checking account wh ic h rece ives
revenues and pays disbursements. Interest earned can be paid to the loc al
j urisdictions on a regular basis or left in the account to offset the fees for
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STATEMENT OF INVESTMENT POLICY
PAGES
monthly services;
EXHIBIT 1
• Money Market Mutual Funds-referred to in the Californ ia Government Code
Section 53601 (k) as shares of beneficial interest issued by diversified
management companies investing in securities authorized by Section 53601
(a) to (I) inclusive . Money Market Mutual Funds must have an average
maturity of 90 days or less , pe r SEC regulations ;
• U.S. Treasuries -Debt instruments issued directly by the United St ates
Government. These i nstruments are of highest credit 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 credit quality.
• Medium-term Notes-Corporate i nstitutions organized and ope rating within
the United States or by depository institutions licensed by the Un ited States
or any states and operating with in the United States. One nati onally
recognized rating agency must rate notes elig ible for investment in the "AA"
category . Th is includes the lowest AA rat ing category , which is AA-for
Standard and Poor's and Fitch , and AA3 for Moody's.
VII. REPORTING METHODS
The Treasurer/Deputy City Treasurer shall prepare a quarterly investment report as
required by Section 53646 of the Cal ifornia Government Code which provides a clear
p icture of the status of the current investment portfolio. The report should be provided
to the City Manager and legislative body . The report should include the following :
a ) Type of investment;
b) Institution or issuer;
c) Date of Maturity;
d) Amount of deposit o r cost of secur ity ;
e ) Current market value of securities and source of market value ;
f) State that there are sufficient funds to m eet the ne xt 6 months' obligations or
provide an explanation as to why sufficient monies shall or may not be
available ; and
g) State that i nvestments are in comp liance with the City 's investment policy or
manner in wh ich the portfolio is not in compliance
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STATEMENT OF INVESTMENT POLICY
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VIII. POLICY CONSTRAINTS
1. CITY CONSTRAINTS
EXHIBIT 1
The City of Temple City operates its pooled idle cash investments unde r the
Prudent Investor Standard . The Treasurer w ill evaluate local banks and
savings institutio ns and may invest idle cash funds w ith such institutions when
the criteria for prudent investment previously stated are met. T he C ity
operates its investment pool according to State and self-imposed constra ints .
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 in te rest
on ly strips derived f rom a poo l o f mortgage as p roh ibited under Section
5360 1.6 of the California Government Code. Any investment extending
beyond a five-year period requ ires 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 unions within t he State of
California . The deposits cannot exceed the amou nt of t he ban k's or savings
and loan 's pa id-up capital and surplus .
The bank or savings and loan must secure public funds deposits with eligible
securities having a market value of 110% of the tota l amount of the deposits .
State law also allows as an e lig i ble security , first trust deeds having a va lue of
150% of the tota l amount of the depos its .
IX. POLICY REVIEW
As req uired by Sectio n 53646 of the Cal iforn ia Government Code, th is Statement o f
Investment Policy shall be reviewed at least annually as a publ ic meeting of the City
Council to ensure its consistency with the overall objectives of preservation of
principal , liquid ity and ret urn , and its relevance to current law , fi nancial and econom ic
t re nds.
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