HomeMy Public PortalAboutResolution 06-95 Finance-Investment Policy Adoptione
Resolution No. 6-95
A RESOLUTION OF THE MAYOR AND COUNCIL OF MCCALL, IDAHO RELATING TO
FINANCE; ADOPTING AN INVESTMENT POLICY.
WHEREAS:
From time to time the City of McCall has funds that are not immediately needed for public
purposes.
The City desires to prudently invest those funds to maximize the public benefits of such funds.
NOW, THEREFORE, be it resolved by the Mayor and City Council of McCall, Idaho, as follows:
Section 1: That the policy annexed hereto and made a part of this resolution as if set forth
entirely herein, be and it is hereby adopted and approved.
Section 2: That the City Treasurer be, and the same is hereby authorized and directed to invest
City funds in accord with this policy.
Section 3: That this resolution be in full force from its passage and approval.
PASSED AND APPROVED this 23d day of March 1995.
Al LEST:
AsT1,70-„,
Mayor
City of McCall
Investment Policy
1.0 Policy:
It is the policy of the City of McCall to invest public funds in a manner which will provide the
highest investment return with the maximum security while meeting the daily cash flow demands
of the City and conforming to all state statutes governing investment of public funds.
2.0 Scope:
This financial policy applies to all financial assets of the City of McCall. These funds are
accounted for in the City of McCall's General Purpose Financial Statements.
2.1 Funds:
2.1.1 General Fund
2.1.2 Streets Special Revenue Fund
2.1.3 Library Special Revenue Fund
2.1.4 Recreation Special Revenue Fund
2.1.5 Tort Liability Special Revenue Fund
2.1.6 Drug Enforcement Special Revenue Fund
2.1.7 Debt Service Fund
2.1,8 Capital Projects Fund
2.1.9 Water Enterprise Fund
2.1.10 Sewer Enterprise Fund
2.1.11 Golf Enterprise Fund
2.1.12 Airport Enterprise Fund
2.1.13 Self Insurance Internal Service Fund
2.1.14 Urban Renewal Fund
3.0 Prudence:
Investments shall be made with judgment and care --under circumstances then prevailing --which
persons of prudence, discretion and intelligence exercise in the management of their own affairs,
not for speculation, but for investment, considering the probable safety of their capital, as well as
the probable income to be derived.
3.1 The standard of prudence to be used by investment officials shall be the "prudent
person" standard and shall be applied in the context of managing an overall portfolio.
Investment officers acting in accordance with written procedures and the investment policy and
exercising due diligence shall be relieved of personal responsibility for an individual security's
credit risk or market price changes, provided deviations from expectations are reported in a
timely fashion and appropriate action is taken to control adverse developments.
4.0 Obiective:
The primary objectives, in priority order, of the City of McCall's investment activities shall be:
4.1 Safety: Safety of principal is the foremost objective of the investment program.
Investments of the City of McCall shall be undertake in a manner that seeks to ensure the
preservation of capital in the overall portfolio. To attain this objective, diversification is
Investment Policy
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required in order that potential losses on individual securities do not exceed the income generated
from the remainder of the portfolio.
4.2 Liquidity: The City of McCa11's investment portfolio will remain sufficiently liquid to
enable the City to meet all operating requirements which might be reasonably anticipated.
4.3 Return on Investments:. The City's investment portfolio shall be designed with the
objective of attaining a rate of return throughout budgetary and economic cycles, commensurate
with the City of McCall's investment risk constraints and the cash flow characteristics of the
portfolio.
5.0 Delegation of Authority:
Authority to manage the City of McCall's investment program is derived from Section 50-1013,
Idaho Code. Management responsibility for the investment program is hereby delegated to the
City Treasurer, who shall establish written procedures for the operation of the investment
program consistent with this investment policy. Procedures should include reference to: PSA
repurchase agreements, wire transfer agreements, banking service contracts and
collateral/depository agreements. Such procedures shall include explicit delegation of authority
to persons responsible for investment transactions. No person may engage in an investment
transaction except as provided under the terms of this policy and the procedures established by
the City Treasurer. The City Treasurer shall be responsible for all ,transactions undertaken and
shall establish a system of controls to regulate the activities of subordinate officials.
6.0 Ethics and Conflicts of Interest:
Officers and employees involved in the investment process shall refrain from personal business
activity that could conflict with property execution of the investment program, or which could
impair their ability to make impartial investment decisions. Employees and investment officials
shall disclose to the City Manager any material financial interests in financial institutions that
conduct business within this jurisdiction, and they shall further disclose any large personal
financial/investment positions that could be related to the performance of the City of McCall,
particularly with regard to the time of purchases and sales.
7,0 Authorized Financial Dealers and Institutions:
The City Treasurer will maintain a list of financial institutions authorized to provide investment
services. In addition, a list will also be maintain of approved security broker/dealer selected by
credit worthiness who are authorized to provide investment services in the State of Idaho. These
may included "primary" dealers or regional dealers that qualify under Securities & Exchange
Commission Rule 15C3-1 (uniform net capital rule). No public deposit shall be made except
in a qualified public depository as established by state laws.
All financial institutions and broker/dealers who desire to become qualified bidders for
investment transactions must supply the City Treasurer with the following: (1) Audited
Financial Statements; (2) proof of National Association of Securities Dealers (NASD)
certification, (3) proof of registration with the State of Idaho; and (4) certification of having read
the City of McCall's investment policy.
An annual review of the financial condition and registrations of qualified bidders will be
conducted by the City Treasurer.
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A current audited financial statement is required to be on file for each financial institution and
broker/dealer in which the City of McCall invests.
8.0 Authorized and Suitable Investments:
The City of McCall is empowered by statute to invest in the following types of securities:
8.1 Revenue bonds issued under the Revenue. Bond Act.
8.2 City coupon bonds provided for under Section 50-1019.
8.3 LID: bonds provided for under Chapter 17, Title 50.
8.4 Time deposit accounts with public depositories.
8.5 Bonds, treasury bills; interest -bearing notes, or other obligations of the United States, or
those for which the faith and credit of the United States are pledged for payment of principal and
interest.
8.6 General obligation bonds of the State of Idaho for which the faith and credit of the State
of Idaho are pledged for payment of principal and interest.
8:7 General obligation bonds of any county, city, metropolitan water district, municipal
utility district, school district, or other taxing districts of Idaho.
8.8 Notes, bonds, debentures, or other similar obligations issued by the Farm Credit System
or institutions forming a part thereof under the Farm Credit Act of 1971; in bonds or debentures
of the Federal Home Bank Board; in bonds, debentures and other obligations of the Federal Home
Loan Bank Board; in bonds, debentures and other obligations of the Federal National Mortgage
Association; in the bonds of any federal home loan bank established under the National Housing
Act; and instrumentalities of the government of the State of Idaho or the United States.
8.9 Repurchase agreements with Idaho public depositories covered by any legal investment
for the State of Idaho.
8.10 Tax anticipation notes and registered warrants of the State of Idaho and the taxing
districts of the State of Idaho.
8.11 Savings accounts including, but not limited to, accounts on which interest or dividends
are paid and upon which negotiable orders of withdrawal may be drawn, and similar transaction
accounts.
8.12 Time deposit accounts and other savings accounts of state and federal savings and loan.
associations located within the geographical boundaries of the state in amounts not to exceed the
insurance provided by the federal savings, and loan corporation, including but not limited to
accounts on which interest or dividends are paid and upon which negotiable orders of withdrawal
may be drawn, and similar transaction accounts.
8.13 Share, savings, and deposit accounts of state and federal credit unions located within the
geographical boundaries of the state in amounts not to exceed the insurance provided, including,
but not limited to accounts on which interest or dividends are paid and upon which negotiable
orders of withdrawal may be drawn, and similar transaction accounts.
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9.0 Collateralization:
Collteralization will be required on two types of investments: certificates of deposits and
repurchase agreements. In order to anticipate market changes and provide a level of security for
all funds, the collateralization level will be 102% of market value of principal and accrued
interest.
Collateral will always be held by an independent third party with whom thecity has a current
custodial agreement. A clearly marked evidence of ownership (safekeeping receipt) must be
supplied tothe city and retained.
10.0 Safekeeping and Custody:
Allsecurity transactions, including collateral for repurchase agreements, entered into by the City
of McCall shall be conducted on a delivery -versus -payment (DVP) basis. Securities will be
held by a third party custodian designated by the Treasurer and evidenced by safekeeping
receipts.
11.0 Diversification:
The City of McCall will diversify its investments by security typeand institution.. With the
exception of U.S. Treasury securities and authorized pools, no more than 50% of the city's total
investment portfolio will be invested ina single security type or with_ a single financial
institutions.
12.0 Maximum Maturities:
To the extent possible, the City of McCall will attempt to match is investments with anticipated
cash flow requirements. Unless matched to a specific cash flow, the City will not directly invest
in securities maturing more than one year from the date of purchase. However-,. the City may
collateralize its repurchase agreements using longer -dated investments not to exceed three years
to maturity.
13.0 Internal Control:
The City will, in conformity with section 50-1010, Idaho Code, provide an annual audit meeting
the standards of the American Institute of Certified Public Accountants' "Generally Accepted
Auditing Standards" by an independent auditor. This audit will provide internal control by
assuring compliance with policies and procedures.
14.0 Performance Standards:
The investment portfolio shall be designed with the objective of obtaining a rate of return
throughout budgetary and economic cycles, commensurate with the investment risk constraints
and the cash flow needs.
14.1 Market Yield (Benchmark): The basis used by the Treasurer to determine whether
market yields are being achieved shall be the six-month U.S. Treasury Bill rate.
15.0 Reporting:;
The Treasurer ischarged with the responsibility of including a market report on investment
activity and returns in the City's Financial Report.
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16.0 Investment Policy Adoption: The City's investment policy shall be adopted by resolution of the
City Council. The policy shall be reviewed annually by the City Manager and City Treasurer.
Any modifications made to the policy shall also be by resolution of the City Council.
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GLOSSARY
AGENCIES: Federal agency securities.
ASKED: The price at which securities are
offered.
BANKERS' ACCEPTANCE (BA): A draft or
bill or exchanged accepted by a bank or trust
company. The accepting institution guarantees
payment of the bill, as well as the issuer.
BID: The price offered by a buyer of securities.
(When you are selling securities, you ask for a
bid.) See Offer.
BROKER: A broker brings buyers and sellers
together for a commission.
CERTIFICATE OF DEPOSIT (CD): A time
deposit with a specific maturity evidenced by the
a certificate. Large -denomination CD's are
typically negotiable.
COLLATERAL: Securities, evidence of
deposit or other property which a borrower
pledges to secure repayment of a loan. Also
refers to securities pledged by a bank to secure
deposits of public monies.
COMPREHENSIVE ANNUAL FINANCIAL
REPORT (CAFR): The official annual report
for the City of McCall. It includes five
combined statements for each individual fund
and account group prepared in conformity with
Generally Accepted Accounting Principals
(GAAP.) It also includes support schedules
necessary to demonstrate compliance with
finance -related legal and contractual provisions,
extensive introductory material, and a detailed
StatisticalSection.
COUPON: (a) The annual rate of interest that
a bond's issuer promises to pay the bondholder
on the bond's face value. (b) A certificate
attached to a bond evidencing interest due on a
payment date.
DEALER: A dealer, as opposed to a broker,
acts a principal in all transactions, buying and
selling for his own account.
DEBENTURE: A bond security only by the
general credit of the issuer.
DELIVERY VERSUS PAYMENT: There are
two methods of delivery of securities: delivery
versus payment and delivery versus receipt.
Delivery versus payment is delivery of securities
with an exchange of money for the securities.
Delivery versus receipt is delivery of securities
with an exchange of a signed receipt for the
securities.
DISCOUNT: The difference between the cost
price of a security and its maturity when quoted
a lower than face value. A security selling
below original offering price shortly after sale is
considered to be at a discount.
DISCOUNT SECURITIES: Non -interest
bearing money market instruments that are
issued at discount and redeemed at maturity for
full face value, e.g. U.S. Treasury Bills.
DIVERSIFICATION: Dividing investment
funds among a variety of securities offering
independent returns.
FEDERAL CREDIT AGENCIES: Agencies
of the Federal government set up to supply
credit to various classes of institutions and
individual, e.g., S&L's, small business firms,
students, farmers, farm cooperatives, and
exporters.
FEDERAL ' DEPOSIT INSURANCE
CORPORATION (FDIC): A federal agency
that insures bank deposits, currently up to
$100,000 per deposit.
FEDERAL FUNDS RATE: The rate of
interest at which Fed funds are traded. This rate
is currently pegged by the Federal Reserve
through open -market operations.
FEDERAL HOME LOAN BANKS (N'HLB):
The institutions that regulate, and lend to
savings and loan associations. The Federal
Home Loan Banks play a role analogous to that
played by the Federal Reserve Banks vis-a-vis
member commercial banks.
LIQUIDITY: A liquid asset is one that can be
converted easily and rapidly into cash without a
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substantial loss of value. In the money market,
a security is said to be liquid if the spread
between bid and asked price is narrow and
reasonable size can be done at those quote.
LOCAL GOVERNMENT INVESTMENT
POOL (LIP): The aggregate of all funds from
political subdivisions that are placed in the
custody of the State Treasurer for investment
and reinvestment.
MARKET VALUE: The price at which a
security is trading and could presumably be
purchased or sold
MASTER REPURCHASE AGREEMENT:
A written contract covering all future
transaction between the parties to repurchase --
reverse repurchase agreements that establishes
each party's rights in the transactions. A master
repurchase agreement will often specify, among
other things, the right of the buyer -lender to
liquidate the underlying securities in the event
of default by the seller -borrower.
MATURITY: The date upon which the
principal or stated value of an investment.
becomes due and payable.
MONEY MARKET: The market in which
short-term debt instruments (bills, commercial
paper, bankers' acceptances, etc.) are issued and
traded.
014'.1B'LR: The price asked by a seller of
securities. (When you are buying securities, you
ask for an offer.) See Asked and Bid.
OPEN MARKET OPERATIONS: Purchases
and sales of government and certain other
securities in the open market by the New York
Federal Reserve Bank asdirected by the FMC in
order to influence the volume of money and
credit inthe economy. Purchases inject reserves
into the bank system and stimulate growth of
money and credit: sales: have the opposite effect.
Open market operations are the Federal
Reserve's most important and most flexible
monetary policy tool.
PORTFOLIO: Collection of securities held by
an investor.
PRIMARY DEALER: A group of government
securities dealers who submit daily reports of
market activity and positions and monthly
financial statements to the Federal Reserve Bank
of New York and are subject to its informal
oversight. Primary dealers include securities
and Exchange Commission (SEC) -registered
securities broker -dealers; banks, and a few
unregulated firms.
PRUDENT PERSON RULE: An investment
standard In some states the law requires that a
fiduciary, such as a trustee, may invest money
only in a list of securities selected by the custody
state --the so-called legal list. In other states, the
trustee may invest in a security f it is one which
would be bought by a prudent person of
discretion and intelligence who is seeking a
reasonable income and preservation of capital.
QUALIFIED PUBLIC DEPOSITORIES: A
financial institution which does not claim
exemption from the payment of any sales or
compensation use or ad valorem taxes under the
laws of this state; which has segregated for the
benefit of the commission eligible collateral
having a value of not less than its maximum
liability and which has been approved by the
Public Deposit. Protection Commission to hold
public deposits.
RATE OF RETURN: The yield obtainable on
a security based on its purchase price or its
current market price. This may be the
amortized' yield to maturity on a bond or the
current income return.
REPURCHASE AGREEMENT (RP' OR
REPO): A holder of securities sells these
securities to an investor with an agreement of
repurchase them at a fixed price on a fixed date.
The security "buyer" in effect lends the "seller"
money for the period of the agreement, and the
terms of the agreement are structuredare
structured to compensate the "buyer" for this.
Dealers use REPO extensively to finance their
positions. Exception: When the Fed is said to
be doing RP, it is lending money, that is,
increasing bank reserves.
SAFEKEEPING: A service to customers
rendered by banks for a fee whereby securities
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and valuables of all types and descriptions are
held in the bank's vaults for protection.
SECONDARY MARKET: A market made for
the purchase and sale of outstanding issues
following the initial distribution.