HomeMy Public PortalAboutResolution 02-40901
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RESOLUTION NO. 02 -4090
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TEMPLE
CITY ACKNOWLEDGING THE RECEIPT AND FILING OF THE
STATEMENT OF INVESTMENT POLICY FOR FISCAL YEAR 2002 -2003
WHEREAS, the California 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 public 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
WHEREAS, the City Treasurer of the City of Temple City declares the Statement of Investment
Policy to be as attached (Attachment A).
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Temple City claims that
a Statement of Investment Policy for the City of Temple City has been filed by the City Treasurer for the
Fiscal Year 2002 -2003.
APPROVED AND ADOPTED this 18th day of June, 2002.
MAYOR
ATTEST:
I, hereby certify that the foregoing Resolution, Resolution No. 02 -4090 was duly adopted by the City
Council of the City of Temple City at a regular meeting held on the 18th day of June, 2002 by the following
vote:
AYES: Councilman - Souder, Wilson, Zovak, Vizcarra, Gillanders
NOES: Councilman -None
ABSENT: Councilman -None
ATTACHMENT A
CITY OF TEMPLE CITY
STATEMENT
OF
INVESTMENT POLICY
CITY OF TEMPLE CITY
STATEMENT OF INVESTMENT POLICY
I. PURPOSE
I1. OBJECTIVE
III. 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. CITY CONSTRAINTS
2. LEGAL CONSTRAINTS
IX. POLICY REVIEW
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CITY OF TEMPLE CITY
STATEMENT OF INVESTMENT POLICY
PURPOSE
This statement is intended to provide a guideline for the prudent investment of
temporary idle cash, trust funds and restricted monies and to outline a policy for
maximizing the efficiency of the cash management system. Ultimate investment
goal is the protection 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 interest yields
possible are a statement of fact as long as investments meet the criteria required
for safety and liquidity.
III. SCOPE
This investment policy 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 prudence to be used by investment officials shall be the
"prudent investor" standard as set forth in Section 53600.3 of the California
Government Code, which states in part that, "When investing, reinvesting,
purchasing, acquiring, exchanging, selling, and managing public funds, a
trustee shall act with care, skill, prudence, and diligence under the
circumstances then prevailing, that a prudent person acting in a like
capacity and familiarity with those matters would use in the conduct of funds
of a like character and with like aims, to safeguard the principal and
maintain the liquidity needs of the Agency ". The prudent investor standard
shall be applied in the context of managing the overall portfolio.
2. DELEGATION OF AUTHORITY
The authority to manage and operate the investment program is granted to
the Treasurer pursuant to Section 53607 of the California Government
Code. Individuals who may execute investment transactions are those
positions who are authorized signatures for warrants and checks. No other
person may execute an investment transaction.
STATEMENT OF INVESTMENT POLICY
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V. INTERNAL CONTROLS
The Treasurer is responsible for establishing and maintaining an internal control
structure designed to ensure that the assets of the entity are protected from loss,
theft or misuse.
The Treasurer shall establish the investment functions so that specific
responsibility for the performance of duties and segregation of duties are assigned
with a clear line. The functions of authorizing, recording transactions, 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
Review formal investment policy
City's Auditing Firm
Adopt formal investment policy
City Council
Execute investment transactions
Treasurer
(the above signer as well as
one of signers listed below)
City Clerk, City Manager, City
Attorney
Investment verification and
recordation
Finance Supervisor
Reconcile investment records to
bank statements
Junior Accountant
While no internal control system, however elaborate, can guarantee absolute
assurance that the City's assets are safeguarded, it is the intent of the City's
internal 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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STATEMENT 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:
CGC
Section
Investment Type
Maximum
Maturity
Authorized
Limit ( %)
Required
Rating
53601(a)
Local Agency Bonds
5 years
None
None
53601(b)
U.S. Treasury Obligations
5 years
None
None
53601(c)
State of California Obligations
5 years
None
None
53601(d)
CA Local Agency Obligations
5 years
None
None
53601(e)
U.S. Agencies
5 years
None
None
53601(f)
Bankers Acceptances*
180 days
40%
Fed Reserve
Eligible
53601(g)
Commercial Paper **
270 days
25%
A1/P1 Rating
53601(h)
Negotiable Certificates of Deposit
5 years
30%
None
53601(i)
Repurchase Agreements
1 year
None
None
53601(i)
Reverse Repurchase Agreements * **
92 days
20% of base
None
53601(j)
Medium Term Notes
5 years
30%
A rating
53601(k)
Mutual Funds * * **
N/A
20%
Multiple
53601(k)
Money Market Funds
N/A
20%
Multiple
53601(m)
Collateralized Bank Deposits
5 years
None
None
53601(n)
Mortgage Pass - Through Securities
5 years
20%
AA Rating
53601(d)
Local Agency Investment Fund (LAIF)
N/A .
None
None
53601(d)
County Pooled Investment Funds
N/A
None
None
53635
Time Deposits
5 years
None
None
*
**
* **
No more than 30% of surplus funds may be invested in Bankers Acceptances of any one commercial bank.
Commercial paper issuers must be U.S. Corporations with $500 million plus in assets. Purchases may not represent more than
10% of outstanding paper of an issuing corporation.
Reverse Repurchase Agreements must be made with primary dealers of the Federal Reserve Bank of New York and the
securities used for the agreement must have been held by the issuer for at least 30 days.
No more than 10% of an agency's surplus funds may be invested in any one mutual fund.
STATEMENT OF INVESTMENT POLICY
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For Fiscal Year 2002 -2003, 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
which local agencies may use to deposit funds for investment. There is no
minimum investment period and the minimum transaction is $5,000, in
multiples of $1,000 above that, with a maximum balance of $40,000,000 as
of January 1, 2002 for any agency. However, any investment with LAIF
must comply with . other self- imposed restrictions as specified in this
Investment Policy. The City is restricted to a maximum 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
determined by the amounts deposited and the length of time they are
deposited. Interest is paid quarterly. The State retains 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 pooling the State's surplus cash
with the surplus cash deposited. This creates a multi - billion 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 1
higher. The City continually invests in the Local Agency Investment Fund.
• Certificates of Deposit - time deposits of a bank or savings and loan. They
are purchased in various denominations with maturities ranging from 30 to
360 days. The interest is calculated on a 360 -day basis and is payable
monthly.
• Passbook Savings Account - a certificate of deposit issued in any amount
for a non specified amount of time. Interest rate is much lower than CD's
but the savings account allows flexibility. Funds can be deposited and
withdrawn according to daily needs.
• Interest Bearing Checking Accounts - a checking account which receives
revenues and pays disbursements. Interest earned can be paid to the local
jurisdictions on a regular basis or left in the account to offset the fees for
monthly services.
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VII. REPORTING METHODS
The Treasurer shall prepare a quarterly investment report as required by Section
53646 of the California Government Code which provides a clear picture 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:
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STATEMENT OF INVESTMENT POLICY
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VII. REPORTING METHODS (CON'T)
a) Type of investment
b) Institution or issuer
c) Date of Maturity
d) Amount of deposit or cost of security
e) Current market value of securities and source of market value
f) State that there are sufficient funds to meet the next 6 months' obligations
or provide an explanation as to why sufficient monies shall or may not be
available.
g) State that investments are in compliance with the City's investment policy or
manner in which the portfolio is not in compliance
Effective January 1, 2001 the City shall submit copies of its second and fourth
quarter reports to the California Debt and Investment Advisory Commission within
60 days after the close of the second and fourth quarters of each calendar year. If
the City has maintained 100 percent of its investments portfolio during the entire
reporting period with the Local Agency Investment Fund, it will be required to file
with the commission a certification within 60 days of the end of the second and
fourth quarters of the calendars year stating the distribution and amount of its
investment portfolio instead of submitting copies of its second and fourth quarter
reports.
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.
Additionally, a minimum of 50% of the outstanding investments must
mature within a one -year time period.
STATEMENT OF INVESTMENT POLICY
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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 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
eligible securities having a market value of 110% 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 required 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 preservation of
principal, liquidity and return, and its relevance to current law, .financial and
economic trends.