HomeMy Public PortalAbout02-03-2004LII•". .. .ti ~ ,., ~ .
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This Agenda contains a brief general description of each item to be considered. Copies of the Staff
reports or other written documentation relating to each item of business referred to on the Agenda are
on file in the Office of the City Clerk and are available for public inspection. A person who .has a
question concerning any of the agenda items may call the City Manager at (310) 603-0220, ext. 200.
Procedures for Addressing the Council
IN ORDER TO EXPEDITE-CITY COUNCIL BUSINESS, WE ASK THAT ALL PERSONS WISHING TO
ADDRESS THE COUNCIL FILL OUT A FORM PROVIDED AT THE DOOR, AND TO TURN IT IN TO
THE CITY CLERK PRIOR TO THE START OF THE MEETING. FAILURE TO FILL OUT SUCH A
FORM WILL PROHIBIT YOU FROM ADDRESSING THE COUNCLL IN,.THE ABSENCE OF THE
UNANIMOUS CONSENT OF THE COUNCIL. - ~,~2, ~~ ,.
AGENDA ITEMS ON FJLE FOR CONS1DERATION ~ kn;.4J ~,; ~..,,,,, ,_ _„_ _.~
AT THE REGULAR MEETING OF -
THE LYNWOOD INFORMATION INC. ~ ~,, ~„ ,~ ,,.
TO BE HELD ON FEBRUARY 3, .2004 `~" `' " ~~~~ '
6:00 P. M ~~A ~
COUNCIL CHAMBERS
11330 BU,LLIS ROAD, tYNWOOD, CA 90262
LOUIS BYRD ~ '~~~'
CHAIRMAN ,.
LETICIA VASQUEZ FERNANDO PEDROZA ~ 1~;
VICE-CHAIRMAN DIRECTOR
RAMON RODRIGUEZ ~ MARIA T. SANTILLAN
DIRECTOR DIRECTOR '
CITY MANAGER CITY ATTORNEY
,LORRY HEMPE ARNOLDO BELTRAN
CITYCLERK CITY TREASURER
ANDREA L. HOOPER IRIS PYGATT
OPENING CEREMONIES
1. CALL TO ORDER
2. ROLL'CAL'L OF DIRECTORS
Fernando Pedroza ,
Ramon Rodriguez ~ '
,:~:~~{ Maria T. Santillan
Leticia Vasquez
Louis Byrd"
3. CERTIFICATION OF AGENDA POSTING BY SECRETARY
1
y ~ PUBLIC ORAL.. COMMUNICATIONS
(Regarding Agenda Items Only)
PUBLIC ORAL COMMUNICATIONS
IF AN -ITEM IS NOT ON THE AGENDA, THERE SHOULD BE NO SUBSTANTIAL
'DISCUSSION OF THE -ISSUE BY THE COUNCIL, BUT 1T IS ALL RIGHT FOR
COUNCIL TQ REFER THE MATTER TO THE STAFF OR SCHEDULE SUBSTANTIVE
- DISCUSSION FOR A FUTURE MEETING.
(The Ralph M. Brown Act, Government Code Section 54950-54962, Part III, Paragraph
5.)
CONSENT CALENDAR
4. MINUTES" OF PREVIOUS MEETINGS:
Regular Meeting December 16, 2003
5. PRESENTATION BY COMCAST ON STATUS OF CABLE SERVICES IN
LYNWOOD ~ r
Comments:
To introduce the representative from Comcast to the Board of Directors of
. Lynwood information .Incorporated to present the status of cable services in
Lynwood.
' ~ Recommendation:
{
..Staff recommends that the Board of Directors of Lynwood Information receive
and: file this report.
6. " TREASURER'S STATEMENT OF INVESTMENT POLICY
Comments:
The purpose of this item is to establish guidelines for the prudent investment of
the Lynwood. Information Inc. {LII) idle and surplus cash.
Recommendation:
t
Staff recommends that the Lynwood Information Inc. adopt the attached
resolution entitled "A RESOLUTION OF THE LYNWOOD INFORMATION INC.
OF THE CITY OF LYNWOOD APPROVING THE TREASURER'S STATEMENT
OF INVESTMENT POLICY".
7.. APPROVAL OF THE WARRANT REGISTER
Comments:
City of Lynwood warrant register dated February 3, 2004 for FY 2003-2004.
Recommendation:
Staff recommends for the Lynwood Information Inc. Members to approve the
warrant register.
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CLOSED SESSION
8. CLOSED SESSION ITEMS
A. With respect to every item of business to be discussed in closed session pursuant to
Section 54956.9:
CONFERENCE WITH LEGAL COUNSEL -ANTICIPATED LITIGATION
TWO (2) CASES
ADJOURNMENT
THE NEXT REGULAR MEETLNG WILL BE HELD ON FEBRUARY 17, 2004 AT 6:.00
_ P.M. IN COUNCIL CHAMBER ROOM, CITY HALL, CITY OF. LYNWOOD,
.CALIFORNIA.
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LYNWOOD INFORMATION, INC.
REGULAR MEETING
OCTOBER 7, 2003
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The Lynwood Information, Inc. of the City of Lynwood met in a Regular Meeting in the
Council Chambers, 11330 Bullis Road on the above date at 8:00 p.m.
Chairman Byrd presiding.
. Directors Pedroza, Rodriguez, Santillan, Vasquez and Byrd answered roll call.
.Also present were City Manager Hempe, City Attorney Beltran, Secretary. Hooper and
Treasurer Pygatt.
Secretary Hooper announced that ~ the agenda had been posted in accordance with the
Brown Act.
PUBLIC ORAL COMMUNICATIONS
(Regarding Agenda Items Only)
NONE
PUBLIC ORALS COMMUNICATIONS
NONE
CONSENT CALENDAR
All matters listed under the Consent Calendar will be acted upon one motion affirming
the action recommended. on the agenda. There will be no separate discussion on these
items. prior, to voting unless members of the Council or staff request specific items be
removed from the Consent Calendar for separate action.
It was moved by Director Pedroza, second by Director Santillan to approve the minutes,
receive and file and adopt the following Resolutions.
Item #5: `PROBLEMS EMERGE WITH TRANSFER OF CELLULAR PHONE
NUMBERS
The purpose of this item is to inform the Board of Directors of Lynwood Information
Incorporated of the unexpected problems that have occurred since the Federal
Communications Commissions (FCC) ruling to allow cellu_ lar phone .consumers to
transfer their phone numbers to another carrier.
Staff recommends that .the .Board of Directors of Lynwood Information Incorporated
receive and file, this report.
AG~1V®A
ITEM
Item #6: REAPPROPRIATION OF FUNDS.
The purpose of this item is to have the Chairman, and Members of the Lynwood
Information Incorporated adopt the attached resolution reappropriating funds to cover '
,outstanding encumbrances for fiscal year ending June 30, 2003.
' RESOLUTION N0.2003.027 ENTITLED:
' • A RESOLUTION OF THE CITY COUNCIL OF 'THE CITY OF LYNWOOD
AUTHORIZING THE REAPPROPRIATION OF FUNDS FOR OUTSTANDING
ENCUMBRANCES AT FISCAL YEAR ENDING JUNE 30, 2003.
Item #7: APPROVAL OF THE WARRANT REGISTER
RESOLUTION N0.2003.028 ENTITLED:
A RESOLUTION OF THE LYNWOOD INFORMATION INC. OF THE CITY OF
LYNWOOD ALLOWING AND APPROVING THE DEMANDS AND
WARRANTS THEREFORE.
ROLL CALL:
AYES: DIRECTOR PEDROZA, RODRIGUEZ, SANTILLAN, VASQUEZ
AND BYRD
..NOES: NONE
ABSTAIN: NONE
ABSENT: NONE
DISCUSSION ITEM
Item #8: MEETING DATE AND COMPENSATION
. The purpose of this item is to have the Chairman and Board Directors provide direction
to staff relative to the changes in the Corporation's schedule for regular meetings and
meeting stipend.
In order to continue to provide LII with timely information relative to legislative action
and financing strategies, staff is recommending that the Board members select one of the
following options relative to its meeting schedule and compensation:
1. Continue with current meeting schedule and stipend
2. Amend. the bylaws to reflect change in meeting schedule to quarterly meetings
with quarterly stipend rate of $450 per meeting. _
3. Amend the bylaws to reflect change in meeting schedule to monthly meetings
with stipend rate of $200-$300 per meeting..
4. Amend the bylaws to reflect change in stipend only at rate between $200-$300
per meeting.
,.
Director Pedroza -Stated he would like to make a motion to continue the Item.
Chairman Byrd -Second the motion.'
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Director S~antillan -Stated that, she would like to make a Substitute motion to changeahe
compensation of the Directors and leave the City Treasurer and City Clerk for another
meeting so that we can look into that for further. review .including Option #3 Amend the
bylaws to reflect change in meeting schedule to monthly meetings with stipend rate
range of $200-$300 per meeting.
Director Rodriguez -Second the. motion.
Vice Chairman Vasquez -Stated that she had proposed her own salary scale that she
would like to present to the Directors, and again I think that this item needs to be
reviewed very carefully I think that the change of the quarterly meetings is not going to
work, I think, that what needs to be done is to change the stipend amount and it can
actually be lower than what has been recommended, again I think we should really look
into this before we make any decision.
Director Rodriguez -Explained that this issue is not pertaining the City Treasurer or the
City Clerk it is only for the Directors, and yes we have to look into the per diems and car
allowances, but we can discuss this in another meeting. Let us not forget that we are part
time employee's riot full time employees.
Vice Chairman Vasquez -Stated that she does agree with Mr. Rodriguez, but we still
need to give this more thought and we need the staff to do the necessary research to be
able to makethe right decision, I agree with reducing the salary.
Director Pedroza -Stated that he would like to clarify Mr. Rodriguez comment, that not
everytime we have a meeting we have all agencies, we only have these meetings when it
is something important that needs to be discussed, I also agree with the salary reduction,
but we have a new City Attorney that needs to look into all these documents before
making any decision.
Chairman Byrd -Stated that he feels that this item should be continued for further review
and discussion. And believes that this is a full time job.
Director Rodriguez -Stated that. our staff is running the City not the Directors we are
only the policy makers we are here to make the decisions that our staff recommends.
Vice Chairman Vasquez -Explained that the meeting compensation is not the only
problem, there are other issues for example the traveling policy the City has no traveling
policy the Directors should consider these other issues, the other area of abuse is the per
diems.
Director Santillan -Stated that we can cut the compensation and we can bring all of these
issues back the car allowance, stipend and travel policy, we can look into the
compensation now.
SUBSTITUTE MOTION ROLL CALL:
AYES:. DIRECTOR RODRIGUEZ .AND SANTILLAN
NOES: DIRECTOR PEDROZA, VASQUEZ AND BYRD
ABSTAIN: NONE
ABSENT: NONE
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MAIN MOTION ROLL CALL:
AYES: DIRECTOR PEDROZA, VASQUEZ AND BYRD
NOES: DIRECTOR RODRIGUEZ AND SANTILLAN
ABSTAIN: NONE
ABSENT: NONE
ADJOURNMENT
Having no further discussion, it was moved by Director Pedroza, seconded by Director
Rodriguez and carried to adjourn the Regular Council Meeting at 8:15 p.m.
Louis Byrd, Chairman
Andrea L. Hooper, Secretary
SATE:
T~-.
FROM:
BY:
SUBJECT:
PURPOSE:
February 3, 2004
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HONORABLE CHAIRMAN AND MEMBERS OF LYNWOOD
INFORMATION INCORPORATED
Lorry Hempe, City Manager
johonna Howard, Public Relations Officer
Presentation by Comcast on Status of Cable Services In
Lynwood
To introduce Comcast representative, Mr. Stephen Sawyer, Director of
Governmental Affairs, Southern California Region to the Board of
Directors of Lynwood Information Incorporated to present the status of
cable services in .Lynwood.
BACKGROUND:
The bulleted information is a brief background on cable services available
in the City. Staff has invited Mr. Stephen Sawyer to discuss with the
Board of Directors of Lynwood Information, Inc. the status of cable
services in Lynwood.
^ Comcast is one of southern California's-major cable .providers and
the leading cable television provider in the country.
^ Cable services have been available to Lynwood residents since the
early 1980s, after the City of Lynwood entered into a 15 year cable
franchise agreement with Roger's Communications on. October 15,
1981.
• Over the years there have been. numerous cable system franchise
transfers between cable providers with the most recent being
Comcast's merger of AT&T Broadband in 2002.
AG~N®A`
IT~I1~
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^ In April 2002, the Lynwood City Council by resolution extended the
cable franchise agreement on a month-to-month basis pending the
.approval of a franchise renewal.
^ The City of Lynwood is part of a cable consortium of nine southeast
;Los Angeles County cites sharing the usage of a single cable
. television channel for public. access programming. These cities
include Bellflower, Paramount, Downey, La Mirada, Santa Fe
Springs, Maywood, Bell, Bell Gardens and Lynwood. Comcast
provides public access to these cities on Channel 36 of its channel
line up.
^ According to Comcast, there are approximately 4,000 cable
television subscribers (households) in~Lynwood.
^ Comcast also provides High Speed Internet (cable modem) to
residential subscribers; however, the City has no account of this
number.
^ Based on the cable franchise agreement, Comcast pays the City of
` Lynwood 5% of the gross revenues generated from Lynwood. cable
subscribers.
^ No franchise fee is provided for High Speed Internet because the
FCC has ruled that this is an interstate information service and not
a cable television service.
^ Comcast has undergone numerous service enhancements to
maintain its ground in the rapidly changing telecommunications
industry, including upgrading its infrastructure to fiber optics,
upgrading to digital cable, upgrading to HDTV, and more..
RECOMMENDATION:
Staff recommends that the Board of Directors of Lynwood Information
incorporated receive and file this report.
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DATE: February 3, 2004
TO: CHAIRMAN AND DIRECTORS OF THE LYNWOOD INFORMATION
INC.
FROM: Eris Pygatt, City Treasurer
S'UBJ'ECT; TREASURER'S STATEMENT OF INVESTMENT POLICY
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PURPOSE
The purpose of this item is to establish guidelines for the prudent investment of
the Lynwood Information Inc.'s idle cash.
°. BACKGROUND
The investment policies and practices of the Lynwood Information Inc. (LII), are
based on state laws and principles of prudent .money management. This
statement is intended to provide guidelines for the prudent investment of the
' Lynwood Information Inc. temporarily idle and surplus cash, while meeting the
. ~ short and long term cash flow demands, and it is submitted annually for LII
review. The primary goals of these policies are:
1.. To assure compliance with all federal, state, and local laws governing the
investment of monies under the control of the Treasurer.
2. To protect the principal and asset holdings of the .City's portfolio.
3. To generate the maximum amount of investment income within the
parameters of these .investment policies and guidelines for suitable
investments.
4. To ensure that adequate liquidity is provided for the prompt and efficient
handling of LII disbursements.
'RECOMMENDATION
It is recommended that the Chairman and Directors of the Lynwood Information
lnc. adopt the attached resolution entitled;." A RESOLUTION OF THE
LYNWOOD INFORMATION INC. OF THE CITY OF LYNWOOD APPROVING
THE TREASURER'S STATEMENT.OF INVESTMENT POLICY"
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POLICY: `
Annually, in accordance with California Government Code (CGC) Section 53646,
the Treasurer will render to the City Council a Statement of Investment Policy for
consideration and approval at a public meeting. Any investments currently held
- at that time that does not meet the guidelines of this policy; as charged from time
to time by the City Council, shall be exempt from the requirements of this policy.
However,, at-the investment maturity or liquidation, such funds shall be reinvested
only as provided by this policy, which offer guidance to brokers and any external
investment advisors on the investment of City- funds. This investment policy
applies to al! investment activities of the City, except for the Employees
Retirement and. Deferred compensation funds are excluded because it is
separately managed by a third party administrator. This policy applies to all city
funds; except for bond proceeds that are managed by trustees. Trustees must
comply with the provision of bonds indenture agreements.
SCOPE: -
Policy statements .outlined in this document apply to the City's pooled funds, as
well as other- financial assets under the City Treasurer's control unless exempted
by resolution. or by statue.. These funds are accounted for the City of Lynwood
Comprehensive Annual Financial Report and include:
3.1 Fund:
3.1.1 General Fund
3.1.2 Special Revenue Funds
3.1.3 Capital Project funds 3.1.4 Enterprise Funds
3.1.5 Trust and Agency Funds
- 3.1.6 Retirement Pension Funds 3.1..7 Internal Service Funds
° PRUDENCE:
Thee standard of prudence to be used by investment officials shall be the "prudent
investor" standard (CGC Section 53600.3) and shall be applied in the context of
managing an overall portfolio which states that:
"Investments shall be made with judgment and care, under circumstances then
i prevailing, which persons of prudence, discretion, and intelligent exercise in the
management of their .own affairs, not for speculation, but for investment,
. considering the probable income to be derived"
- At the time of purchase, it is the City's intent to hold all investments until maturity
to ensure the return of all invested principal. However, it is recognized that
market prices of. securities will .vary depending on economic and interest rate
condition at any .point in time.
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The City treasurer, and other individuals who may be designated to manage the
City's investment portfolio, when acting. within the intent and scope of this
investment policy and other authorized written procedures, and when exercising
due diligence, are relieved of personal liability for the individuals security's credit
risk or market price change of a security or other investment, provided that
deviations from expectations are reported to the City of Lynwood in a timely
manner and that appropriate action is taken to mitigate unforeseen adverse
conditions.
GOALS AND OBJECTIVES:
Within the overriding requirement of compliance with atl Federal, State and local
laws governing the investment of moneys under the control of the Treasurer, and
as specified in the (CGC Section 53600.5), when investing, reinvesting,
purchasing, acquiring, exchanging, selling and managing public funds.
Taking into account the City's daily and periodic cash flow needs, the City
desires to invest all temporarily idle funds at a close to 100% as is reasonable
possible. The major portion of the City's investment portfolio will consist of
investment securities having maturates of one year or less. Longer term
maturates are authorized, but may not general exceed 15% of the investment
portfolio.
The basic goal of the City's investment policy is to ensure safety and availability
of temporarily idle funds when they are needed. The primary objectives, in
priority order, of the investment activities shall be:
a. Safety: Safety of principal is the foremost objective of the investment
program. Each investment transaction must seek to ensure that capital
losses are avoided, whether from securities default, broker-dealer
default,. or erosion of market value. The city will endeavor to preserve
principal by mitigating both credit risk and market risk, as specified
below.
Credit risk, which is defined as the risk of loss due to insolvency or other
failure of the issuer of a security, must be mitigated by purchasing
investment grade securities and by diversifying the investment portfolio
so that the failure of any one issuer does not unduly harm the City's
capital base and cash flow.
Market risk, which is defined as market value fluctuations, must be
mitigated by limiting the average maturity of the city's investment
portfolio to one year, limiting the maximum maturity of anyone security to
one year, structuring the portfolio to take into account historic and
current cash flow analysis, eliminating the need to sell securities for the
sole purpose of short term speculation.
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b. Liquidity: Because the City operated its own water utility and bills
monthly for utility services, cash flow is generated on a daily basis.
Historical cash flow trends must be compared to current cash flow
requirements on an .ongoing basis to ensure that the City's investment
portfolio will remain sufficiently liquid to enable the City to meet all
reasonable anticipated operating requirements.
c. Return on the Investment: The investment portfolio shall be designed
and managed with the objective of attaining an benchmark rate of return
throughout budgetary and economic cycles, taking into account the
investment objectives, authorized investments and the cash flow needs
of the City.
DELEGATION OF AUTHORITY:
In accordance with Section 53607 of the Government Code, the City of Lynwood
management responsibility for the investment program is hereby delegated to the
Treasurer, who shall be responsible for all transactions undertaken and shall
establish a system of control to regulate the activities of subordinate officials, and
their procedures in the absence of the Treasurer. Under the provision of CGC
Section 53600.3, the treasurer is a trustee and a fiduciary subject to the prudent
investor standard. The City may delegate to the City treasurer the authority to
invest or reinvest City funds for aone-year .period.
The Treasurer may delegate all, or a portion of his/her investment authority to a
Deputy City Treasurer. Prior to the delegation of the investment authority to a
Deputy City Treasurer, the Treasurer shall notify the City council and request
confirmation of the delegation. Delegation of investment authority will not
remove or abridge the Treasurer's investment responsibility.
INVESTMENT PROCEDURES:
The Treasurer shall establish written investment policy procedures for the
operation of the investment program consistent with this policy. The procedures
should include reference to: safekeeping, 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
Treasurer.
ETHICS:
Elected officials, City officers an employees and any other individual involved in
the investment operations are prohibited from personal business activity that
could conflict with proper execution of the investment program, or which could
impair their ability to make impartial investment decisions, or which could give the
appearance thereof Furthermore, these same individuals shall disclose any
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material financial interest in financial institutions that conduct business within
their jurisdiction, and they shall further disclose any large personal
financial/investment positions that could be related to the performance of the
City.
QUALIFIED DEALERS AND INSTITUTIONS:
The City may transact business only with banks, savings and loans associations,
and registered investment dealers. Any investments other than those purchased
directly from a issuer must be purchased from (i) an individual or entity licensed
by the State as abroker-dealer, as defined in Section 25004 of the Corporations
Code, and which is a member of the National Association of Securities Dealers,
or (ii) from a member of afederally-regulated securities exchange, or (iii) a
national or state charted bank; or (iv) a federal or state association (as defined by
Section 5102 of the Financial Code). Or (v) a brokerage firm designated as a
primary government dealer by the Federal Reserve Bank.
The City Treasurer must investigate and evaluate all financial institutions that
desire to do business with the City in order to determine whether they are
adequately capitalized, whether they make markets in securities that are
appropriate to the City's needs, and whether they will agree to abide by the
conditions and limitations set forth in the City's investment policy. This may be
accomplished by the following: a financial institution to complete and return an
appropriate questionnaire, audited financial statements, proof of National
Association of Security Dealers certification.
AUTHORIZED AND SUITABLE INVESTMENTS:
General, investments must be made in accordance with the "prudent investor
rule" that is cited under the heading ".Prudence.."
The City is subject to California Government Code, Sections 53600 et seq.
within the context of these limitations, the following investments are authorized,
subject to the restrictions noted below:
a. United States treasury bills, notes, and bonds or similar instruments for
which the full faith and credit of the United States is pledged for payment
of principal and interest. There is no limitation on the percentage of the
City's surplus funds that can be invested in these instruments. The
maximum maturity period may not exceed 5 years.
b. Obligation issued by banks for cooperatives, Federal land banks, federal
intermediate credit banks, the Federal Home Loan Board (FHLB), and the
Federal National Mortgage Association (FNMA). Although there is no
percentage limitation on investments in these obligations, the "prudent .
investor rule" applies to obligations issued by any of these agencies,
because U.S. Government backing is implied rather than guaranteed.
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c. Commercial paper rated "PI" by Moody's Investor Services and "AL+" by
Standard & Poor, and issued by a domestic corporation having assets in
excess of $500,000,000 and having an "AA" or better rating on its long-
term debt as determined by Moody's or by Standard and Poor. The
purchase of eligible commercial paper may not exceed 180 days maturity
nor represent more than 1 0% of the outstanding paper of an issuing
corporation. The Purchase of commercial paper not to exceed 15% of the
City's surplus funds.
d. Negotiable certificates of deposit issued by a national or state-charted
bank or a state or federal saving and loan association. Negotiable
certificates of deposit may not exceed 30% of the City's total portfolio.
Certificates purchased from a bank may not exceed 30% of the City's total
portfolio. Certificates purchased from a bank may not exceed the
shareholder's equity in the bank. Certificates over $500,000 purchased
from savings and loan association may not exceed the net worth of the
association. A maturity limitation of 5 years is applicable.
e. State of California Local Agency Investment Fund (LAIF) is permitted, with
the knowledge that the fund may invest in come vehicles allowed by
statue but not otherwise authorized by the City Council in this (SIP). The
Treasurer shall obtain from the State treasurer, no less than quarterly
reports providing sufficient detail to adequately judge the risk inherent in
the LAIF portfolio, and shall inform the City Council immediately of any risk
noted that may warrant reconsideration of this investment vehicle. (Limits:
Maximum concentration $30 million combined limit for all accounts.)
f. Investment in new government sponsored pools will be subject to due
diligence. A thorough investigation of the pool is required prior to
investing, and on a continual basis.
g. Funds held under the terms of a Trust Indenture or other contract or debt
issuance agreement may be invested according to the provisions of those
indentures agreements.
h. The City may invest in non-negotiable time deposits that are collateralized
as required by the California Government Code, and that are maintained
in banks and savings and loans associations that meet the requirement for
accepting deposits of public funds. Because time deposits are not liquid,
no more than 25% of the city's temporarily idle funds may be invested in
this category.
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Medium term corporate notes with a maximum maturity of 5 years may be
purchased Securities eligible for.investment must be rated AA or better by
Moody's Standard & Poor's rating services. Medium term notes may not
exceed 305 of the market value of the City's portfolio, and not more than
15% of the market value of the portfolio may be invested in notes issued
by anyone corporation. Commercial paper holding must be included when
calculating this 15% limitation.
PROHIBITED INVESTMENTS:
The City Treasurer is prohibited from the following:
1. Corporate share of stocks, corporate bonds and reverse purchase
agreements.
2. Borrowing for investment purposes ("Leverage") is prohibited.
3. Buying or selling securities "on Margin" is prohibited.
4. Investing in any instrument, which is commonly known as a "derivative"
instrument (options, futures, swap, caps, floors, collars, US Treasury
strips, interest only bonds, interest only strips derived from mortgage
pools), or any investment that may result in a zero interest accrual, even if
held to maturity, is prohibited.
5. Under the provision of CGC Sections 53601.6 and 53631.5, the City shall
not invest any funds covered by this SIP in instruments knows as
Structured Notes (e.g. Inverse floaters, leverage floaters, structured CD's
range notes, equity linked securities). Any such investments are
prohibited.
6. Trading securities for the sole purpose of speculating on the future
direction of interest rates is prohibited.
COLLATERAL REQUIREMENTS:
Collateral is required for investments in certificates of deposit and repurchase
agreements. In order to reduce market risk and provide a level of security for all
funds, the collateralization level will be (102%) market value of principal and
accrued interest.
In conformity with the provisions of-the Federal Bankruptcy Code that provide for
the liquidation of securities held as collateral, the only securities acceptable as
collateral are certificates of deposit, commercial paper, eligible bankers
acceptances, and medium term notes or securities that are the direct obligation
of, or -are fully guaranteed as to principal and interest by the United States or any
City of the United States.
An independent third party with whom the City has a current custodial agreement
will always hold collateral.
The right of collateral substitution is granted.
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DIVERSIFICATION:
The Treasurer shall maintain a diversified portfolio to minimize the risk of loss
resulting from over concentration of assets in a specific maturity, issuer, or
security type, 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 in
a single security type or with a single financial institution.
MAXIMUM MATURITIES:
Every effort will be made to match investment maturities to cash flow needs.
Matching maturities with cash flow dates will reduce the need to sell securities
prior to maturity, thus reducing the market risk. Unless matched to a specific
cash flow, the portfolio will not- directly invest in securities maturing more than
one year or less from the date of purchase (excluding LAIF).
Reserve funds may be invested. in securities exceed one year if the maturity of
.:such investments is made to coincide as nearly as practicable with the expected
use of the -funds. No portion of the portfolio may exceed five years.
INTERNAL CONTROL:
Internal policies and procedures shall be developed to assure that appropriate
controls are in place to document and confirm all transactions. The Treasurer
shall recommend establishing 'an annual process of independent review by an
external auditor. This review will provide internal control by assuring compliance
with policies and procedures.
PERFORMANCE~STANDARDS:
The investment portfolio shall be designed with the objective of obtaining a rate
of return throughout budgetary and economic cycles, commensurate with.
investment risk constraints and cash flow needs:
a. Investment Strategy: The portfolio's basis ihvestment strategy is to buy
and hold investments until maturity. However the treasurer may sell a'
security due to adverse changes in credit risk or due to adverse changes
in credit risk or due to unexpected cash flow needs.
b. Market Yield (Benchmark): Market average will be determined by year-
end average rates of return from a combination of indices: Locaf Agency
Investment Fund (LAIF), 3-month and 6-month treasury bills.
REPORTING:.
Ln compliance with Government code Section 53607 and 53646, the Treasurer
shall provide the.City Council quarterly investment reports,, which provide a clear
picture of the status of the current investment portfolio. The management report
should- provide a condensed summary of the most important information in the
report,..plus a detailed report covering the following elements:
1. A listing of individual securities held at the end of the reporting period by
authorized investment category.
2. Average life and final maturity of all investments listed.
3. Coupon, discount or earnings .rate.
4. Par value., amortized book value and market value
5. ~ Percentage of the portfolio represented by each investment category.
INVESTMENT POLICY ADOPTION.:
The Treasurer shall annually render to the City Council a Statement of
Investment policy as required in Section 53646(a) of the Government Code. The.
City's investment policy shall be adopted by resolution of the city Council and
shall be reviewed annually; any modification made thereto must be approved by
the legislative body.
• •
Glossary
Active Deposits. Funds which are immediately required for disbursement.
Active investment management. An investment strategy that involves the active trading of securities
in an attempt to earn above-average returns on a portfolio. Active investment management requires
frequent monitoring of financial markets.
Agency. A debt security issued by a federal or federally sponsored, agency. Federal agencies are
backed by the full faith and credit of the U.S. Government. Federally sponsored agencies (FS.As) are
backed by each particular agency with a market perception that there is an implicit government
guarantee. An example of federal agency is the Government National Mortgage Association (GNMA).
An example of an FSA is the Federal National Mortgage Association (FNMA).
Arbitrage.'Generally, transactions by which securities are bought and sold in different markets at the
same time for the sake of the profit arising from a difference in prices in the two markets. .
Bankers' Acceptances (BA's). Time drafts or bills of exchange that are accepted payment by banks
engaged in the financing of international trade. BA's finance the importation, exportation, shipment or
storage of foreign and domestic goods. BA's are usually backed by documentation such as invoices,
bills of lading, or warehouse receipts. Upon acceptance by a bank-, a BA becomes an irrevocable and
unconditional obligation of the accepting bank, while it is also an obligation of the drawer as well as
any endorser thereof.
Basis point. By common agreement, 0.01% ofyield on a fixed income security (1/100 of 1 %).
Bond Equivalent Yield (BEI~. An annual yield, expressed as a percentage, describing the rectum
provided to bond holders. A band equivalent yield is double simple interest, semiannual yield. Since
Treasury and agency notes and bonds pay interest semiannually, the bond equivalent yield is a way to
compare yields from discount securities, such as Treasury bills and bankers' acceptances with yields
available from coupon securities. From that usage, this yield measure is also known as the coupon
yield equivalent. For securities that pay daily, monthly or quarterly interest, the bond equivalent yield.
understates the. benefits obtained from the compounding of those investments.
Book-entry clearance. A system for the transfer of ownership of securities through entries on the
records of a centralized agency.- The centralized agency holds securities on behalf of their owners;
A4ien the securities are sold, ownership is transferred by bookkeeping entry from the seller to the
purchaser. In the case of U.S government, securities, securities certificates are not issued, and
ownership of the securities is evidenced in computer records maintained by the Federal Reserve
System. For other types of securities, book entry clearance is made available through linked or
interfaced systems maintained by four securities depositories, which hold securities and act on behalf
of their participants.
Book-entry security. A security which is not available to purchasers in physical form. Such a security
maybe held either as a computer entry on the records of a central holder (as is the case with U.S.
certain government securities) or in the form of a single, global certificate.
• •
.Book value. The value at which a security is carried on the inventory lists or other financial records of
an investor. This value may be the original cost of acquisition of the security, or original cost adjusted
by the amortization of a premium, or accretion of a discount. The book value ma_v differ sicnificantl~~
from the security's can ent value in the market.
Broker. A broker brings buyers and sellers together for a commission paid by the initiator of the
transaction or by both sides; he does not position or take ownership of the security.
Certificate of Deposit (CD). A deposit of funds, in a banl: or savings and loan association, for a
specified term that earns interest at a specified rate or rate formula.
Collateralization. Process by which a borrower pledges securities, property or other deposits for the
purpose of securing the repayment of a loan and/or security.
Commercial Paper. Unsecured short-term promissory notes issued by corporations, with maturities
ranging from 2 to 270 days. May be sold on a discount basis or may bear interest. Firms with lower
ratings or without well known names usually back their commercial paper with guazantees or bank
letters of credit.
Coupon rate. Interest rate, expressed as a percent4ge of par or face value, that issuer promises to pay
over lifetime of debt security.
Credit Risk. The risk to an investor that an issuer will default in the payment of interest and/or
principal on a security.
Current Yield (Current Return). A measure of the simple interest annual yield for interest-bearing
investments with maturities of one yeaz or more. To calculate the current yield, the annual coupon
interest income is divided by the amount paid to acquire the investment. It is important to note that the
current yield is only accurate for investments purchased at par. The current yield calculation includes
just one income cash flow. the annual interest income. It ignores the profit or loss resulting from
discounts and premiums.
Custody. The service of an organization, usually a financial institution, of holding (and reporting) a
customer's securities for safekeeping. The financial institution is known as the custodian.
Dealer. An individual or firm who, as a matter of regular business, purchases or sells securities for his
account and risk.
Delivery versus payment (DVP). A settlement procedures where payment for a securitiess purchase is
made simultaneously with the transfer of the purchased securities. The same procedure applies for a
securities sale; the securities aze transferred as payment is made.
Derivative instrument. A security that derives its value from an underlying asset, group of assets,
reference rate, or an index value. Some derivative instruments can be highly volatile and result in a
loss of principal in changing interest rate environments.
• •
Discount. The amount by which a bond sells under its par (face) value.
. Discount securities. Securities that do not pay periodic interest. Investors earn the difference bet~~een
the discount issue price and the full face value paid at maturity. Treasury bills, bankers' acceptances
and most commercial.paper are issued at a discount.
Diversification. Dividing investment funds among a variety of securities, offering independent returns.
to reduce risk inherent in particular securities.
Effective Annual Yield. A seldom used expression to refer to the yield on an investment expressed on
a compound interest basis.
Fed Wire.. Computerized network linking the Fed with its district banks, member banks, and primary
dealers in government securities.
Federal Agency Securities. A variety of securities issued by several Federally sponsored
agencies. Some are issued on a discount'basis and some are issued with coupons. Several
have the full faith and credit guarantee of the U.S. government, although others do not.
Federal Deposit Insurance Corporation (FDIC). A federal agency that insures bank deposits,
Currently up to $ 100,000 per deposit.
Federal funds (Fed Funds). Funds placed in Federal Reserve banks by depository institutions in
excess of current reserve requirements. These depository institutions may lend fed funds to each other
overnight or on a longer basis. They may also transfer funds among each other on a same-day basis
through the Federal Reserve banking system. Fed funds are considered to be immediately available
funds.
Fed Funds Rate -Interest rate charged by one institution lending federal funds to another.
Floater. A floating rate security with an interest rate that resets at specified intervals according town
underlying index, such as LIBOR (the London Interbank Offered Rate), and is based on a
predetermined formula. The value of a floater will fluctuate as interest rates change and therefore can
be very volatile. .
Inactive deposits. Funds not immediately needed to disbursement.
Interest rate risk. The risk associated ), with declines or rises in interest rates which cause an
investment in afixed-income security to increase or decrease in value.
Inverse floater. A security .that reacts inversely to the direction of interest rates. These securities can be
very volatile and can lose value in a rising interest-rate environment.
Leverage: An attempt to increase the rate of return on an investment by buying securities on margin or
using borrowed fitnds for investment purposes. This practice can be risky if interest rates rise or if
investment yields are lower than expected.
• •
.Liquidity. The quality of an asset that permits it to be converted quickly into cash without a significant
loss of value.
Local Agency Investment Fund (LAIF). A special fund in the State Treasury which local agencies
may use to deposit funds for investment and for reinvestment. There is no minimum investment period
and the minimum transaction is $5,000, in multiples of $1,000 above that, with a maximum of $20
million for any, agency. It offers high liquidity because deposits can be converted to cash in 24 hours
and. no interest is lost. All interest is distributed to those agencies participating on a proportionate share
.determined by the amounts deposited and the length of time they are I deposited. Interest is paid
quarterly via a check, warrant, or direct deposit to the agency's State !Pooled-Fund account. The State
keeps an amount for reasonable costs of making the investments,
not to exceed 1 /4 of a percent of the earnings.
Marketability. The measure of ease with which a security can be sold in the secondary market.
Mark-to-Market. The practice of valuing a security of portfolio according to its market value, rather
than its cost or book value.
Market Rate of Return. The average yield of the 3-month U.S. Treasury Bill or other index that
closely, matches the average maturity of the portfolio.
Market Value. The price at which the security is trading and could presumably be purchased or sold.
Maturity Date. The specified day on which the issuer of a debt security is obligated to repay the
principal amount, or face value of, a security.
Money Market Mutual Fund. Mutual funds that invest solely in money market instruments (short-
term debt instruments, such as Treasury bills, commercial paper, bankers' acceptances, repos and
federal funds).
Mutuat Fund. An investment company that pools money and can invest in a variety of securities,
including fixed-income securities and money market iristruments. Mutual funds are regulated by the
Investment Company Act of 1940 and must abide by the following Securities and Exchange
Commission (SEC) disclosure guidelines.
Negotiable. Salable.
Par: Face value or principal value of a bond, typically $1,000 per bond.
.Passive investment management. An investment strategy where securities are bought with
the intention of holding them to maturity or investments in benchmark products designed to yield a
market rate of return.
Principal. The face amount or par-value of a debt instrument.
• •
7
Primary Dealer. A small group of large banla and brokers that have pledged to make a market for am
Treasury securities at any time. The are required to report their inventory positions and volume ~f
activities to the Federal Reserve. Because of this, they are given the right to deal directly with the
Federal Reserve in their daily operations.
Prudent Investor Standard. A standard of conduct where a person acts with care, skill, prudence, and
diligence when investing, reinvesting, purchasing, acquiring, exchanging, selling and managing funds.
The test of whether the standard is being met is if a prudent person acting in a similar situation ~~~ould
engage in similar conduct to ensure that investments safeguard principal and maintain liquidity.
Rate of return. The amount of income received from an investment. expressed as a percentage. A
market rate of return is the yield that an investor can expect to receive in the current interest-rate
environment utilizing abuy-and-hold to maturity investment strategy.
Public Securities Association. The bond market trade association, which publishes a Master
Repurchase Agreement that is widely accepted as the industry standard.
Rating. Judgment of creditworthiness of an i suer made by an accepted rating service.
Repurchase Agreement (Repo). A form of secured, short-term borrowing in which a security is sold
with a simultaneous agreement to buy it back from the purchaser at a future date. A master repurchase
Y agreement is a: written contract governing all future transactions between the parties and seeks to
establish each party's rights in the transaction.
.Reverse Repurchase Agreement. A form of secured, short-term investment in which a security is
purchased with a simultaneous agreement to sell it back to the seller at a future date.
Safekeeping. A procedure where securities are held by a third party acting as custodian for a fee
- Secondary Market. Markets for the purchase and sale of any previously issued financial instrument.
The first sale of a financial instrument by the original issuer is said to be done a Primary market. All
subsequent trades are said to be secondary market.
Securities Investors Protection Corporation (SIPC), A private corporation providing insurance to
brokerage firms to cover customer accounts up to 500:000 in securities (including (100,000 in cash).
Swap. The trading of one asset, or cash flows, for another. Sometimes used in active portfolio
management to increase investment returns by "swapping" one type of security for another. Also used
to manage risk;. for example, swapping fixed interest rate payments for floating rate payments.
Total return. Interest income paid on the invested principal, plus interest income earned from the
successive reinvestment of that interest income, plus projected capital gains (or minus losses) on the
investment, Differs from yield to maturity because (1) it can include gains or losses from sales prior to
maturity, and (2) it permits the assumption~of a reinvestment..rate different from the yield earned on the.
underlying principal.
• •
Treasury Bills. Short-term U.S. government non-interest bearing debt securities ~•ith maturities of no
longer than one year and issued in minimum denominations of $10,000. Auctions of three- and six
month bills are weekly, while auctions of one-year bills are monthly. The yields on these bills are
monitored closely in the money markets for signs of interest rate trends. .
Treasury Notes. Intermediate U.S. government debt securities with maturities of one to ] 0 nears and
issued in denominations ranging from S 1,000 to S 1 million or more.
Treasury Bonds. Long-term U.S. government debt securities with maturities often nears or loner
and issued in minimum denominations of $1,000. Currently, the longest outstanding maturity for such
securities is 30 years. - -
Uniform Net Capital Rule. Securities and Exchange Commission 15C3-1 outlining capital
requirements for brokers.
Weighted Average Maturity (W AM). The average maturity of all the securities that comprise
a portfolio.
Yield. Loosely refers to the annual. return on an investment expressed as a percentage on an annual
basis. For interest-bearing securities, the yield is a function of the rate, the purchase price, the income
that can be earned from the reinvestment of income received prior to maturity, call or sale and the time
from purchase to maturity, call or sale. Different formulas or methods are used to calculate yield. See
Yield to Maturity and Total Return Analysis.
Yield-to-maturity. The rate of return yielded by a debt security held to maturity when both the interest
payments and the investor's potential capital gain or loss are included in the calculation of the return.
• •
RESOLUTION NO.
A RESOLUTION OF THE. LYNWOOD INFORMATION INC. OF THE CITY OF
LYNWOOD APPROVING THE TREASURER'S STATEMENT OF
.INVESTMENT POLICY ,
WHEREAS, the Treasurer is responsible for The Lynwood Information Inc.
cash flow whereby funds are transferred from various accounts to meet operating
obligations; and .
WHEREAS, the Treasurer is also responsible for the investment of idle
cash; and
WHEREAS, the Treasurer has prepared guidelines for a prudent
investment policy; and
WHEREAS, the policy contains certain. investment criteria; and
WHEREAS, the basic premise of the policy is to ensure the safety of
funds and assure that the Lynwood Information Inc.'s cash needs are met.
NOW, THEREFORE, the Lynwood Information Inc. do hereby find,
proclaim, order and resolve as follows:
Section 1. That the Treasurer's Statement of Investment Policy is hereby
approved.
Section 2. This resolution shall go into effect immediately upon its
adoption
PASSED, APPROVED and ADOPTED this day of
Louis Byrd, Chairman
ATTEST: APPROVED AS TO FORM:
SECRETARY COUNSEL
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