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HomeMy Public PortalAbout11-05-1996LIIAGENDA ITEMS FOR CONSIDERATION AT TFiE REGULAR MEETING OF THE LYNIIVOOD INFORMATION,, INC. TO BE HELD ON NOVEMBER 5,-1996 7:30 P.M. _ CITY HALL COUNCIL CHAMBERS ,/ OPENING CEREMONIES E C E! E D CITY OF LYNWOOU 1. CALL TO ORDER CITY c~ER~a oF, ;c~ l.J~ ~l ~ ~ IJJ~ 2. ROLL-CALL AB ~ ~ 7i8~9i]Oilli~2~1i2~3t4~516. Louis-Byrd ~ . _ Louis J. Heine /~~ ~ ~ ~,/%l~`~j Robert Henning ~ ~ l,'~ ~. Armando Rea Paul Richards 3. CERTLFICATION OF AGENDA POSTING BY CITY CLERK PUBLIC ORAL COMMUNICATIONS (Regarding Agenda Items Only) SCHEDULED MATTERS 4. MINUTES Regular Meeting of October 1, 1996. 5. LYNWOOD INFORMATION, INC. INVESTMENT POLICY Comments': The investment policies and practices of the Lynwood Information, Inc. are based on state law and prudent money management. The City Treasurer, being responsible for ..investing the unexpended cash in the City treasury, has prepared the Lynwood .Information, inc. Investment Policy. Recommendation: Staff recommends for the City Council to adopt the Lynwood ~~ Information, Inc.. Investment Policy and direct staff to bring back to the City Council procedures to facilitate the Investment Policy. ~~~, • • 6. WARRANT REGISTERS: A RESOLUTION OF THE LYNWOOD INFORMATION INC. - LYNWOOD, CALIFORNIA ALLOWING AND APPROVING THE DEMANDS AND ORDERING WARRANTS THEREOF ADJOURNMENT MOTION TO ADJOURN TO THE REGULARLY SCHEDULED MEETING ON 'DECEMBER 3, 1996 AT 7:30 P.M., IN THE COUNCIL CHAMBERS OF THE CITY HALL, 11330. BULLIS ROAD, CITY OF LYNWOOD, CALIFORNIA. LYNWOOD INFORMATION, INC., OCTOBER 1, 1996 The Lynwood Information, Inc. of the City of Lynwood met in a Regular Session in the City Hall, 11330 Bullis Road on the above date at 8:44 p.m. Chairman Richards presiding. Directors Byrd, Heine, Henning, Rea and Richards answered the roll call. Also present were City Manager Gonzales, Acting City Attorney Estrada and City Clerk Hooper. City Clerk Hooper announced the Agenda had been duly posted in accordance with The Brown Act. PUBLIC ORAL COMMUNICATIONS -AGENDA ITEMS ONLY None SCHEDULED MATTERS It was moved by director Heine, seconded by Director Byrd and carried to approve the f®llowing minutes: a} Regular Meeting, September 3, 1996 Ck~airman Richards introduced the next item,- Revised .Conflict of Interest Codes for the Lynwood Information, Inc. and Other Entities. It was moved by Director Byrd, seconded by Director Heine to adopt: LII RESOLUTION NO. 96-11 ENTITLED: "A RESOLUTION OF THE BOARD OF DIRECTORS OF LYNWOOD INFORMATION, INC. ADOPTING A CONFLICT OF INTEREST CODE CONTAINING DESIGNATED POSITIONS AND DISCLOSURE CATEGORIES". ROLL CALL: .AYES: DIRECTOR BYRD, HEINE, REA, RICHARDS NOES: ~ NONE ABSENT: DIRECTOR HENNING Chairman Richards introduced the next item, Reapropriation of Funds. It 'was .moved by Director Byrd, seconded by Director Rea to adopt: LII RESOLUTION NO. 96-12 ENTITLED: "A RESOLUTION OF THE L`l'NWOOD INFORMATION, INC. OF THE CITY OF LYNWOOD AUTHORIZING THE APPROPRIATION OF FUNDS TO COVER OUTSTANDING ENCUMBRANCES AT YEAR ENDING JUNE 30,1996". ROLL CALL: AYES: DIRECTOR BYRD, HEINE, REA, RICHARDS NOES: NONE ABSENT: DIRECTOR HENNING It was then moved by Director Heine, seconded by Director Byrd to adopt: LII RESOLUTION NO. 96-13 ENTITLED: "A RESOLUTION OF THE LYNWOOD INFORMATION INC. LYNWOOD, CALIFORNIA, ALLOWING AND APPROVING THE DEMANDS AND ORDERING WARRANTS THEREOF" ROLL CALL: ACES: DIRECTOR BYRD, HEINE, REA, RICHARDS NOES: NONE ABSENT: .DIRECTOR HENNING Having. no further discussion, it was moved by Director Byrd, seconded by Director Rea and carried to adjourn at 8:45 p.m. ~_ AGDIDI Tom! CHAIRMAN PAUL H. RICHARDS, U C: CITY CLERK ANDREA L. HOOPER • DATE: November 5, 1996 TO: THE HONORABLE CHAIRMAN AND MEMBERS OF THE BOARD FROM: Faustin Gonzales, City Manager - . SUBJECT: ~ Investment Policy PURPOSE To -have the City Council adopt the attached City of Lynwood Investment Policy and direct the City Manager to bring back procedures to facilitate the coordination of investing unexpended cash - in Rhe City treasury. BACKGROUND Attached is a report prepared by the City Treasurer on the City of Lynwood Investment Policy. ANALYSIS The City Treasurer has prepared a commendable Investment Policy for the City of Lynwood. Overall, the Investment Policy complies with the prudent investor standard established in the Government Code Section 53600. To accompany the Investment Policy, staff recommends that procedures be established to ., expedite the coordination of investing idle cash. RECOMMENDATION , Staff recommends for the City Council to adopt attached City of Lynwood Investment Policy and direct the City Manager to bring back procedures to .facilitate the coordination of investing' unexpended cash in the City treasury. Date: - ~ ... To: Honorable Mayor and Council Members From: Iris Pygatt, City Treasurer Subject: Investment Policy---Lynwood Information Inc. INTRODUCTION • The investment policies and practices of the City of Lynwood are based on state law and prudent money management. The statement is intended to provide guidelines for the . prudent investment of the city's temporary idle cash, and is submitted annually for Council review. The primary goals of these policies are: 1. To assure compliance with al}government and Federal, State and local laws governing the.irrvestment of monies under the control of the City 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 this statement of investment policies and guidelines for - suitable investments: 4. To ensure adequate liduidity is provided for the prompt efficiency handling of City's disbursement. POLICY As a general Taw city and in accordance with authority of the City Council of the. City of Linwood, the City Treasurer is responsible for investing the unexpended cash in the City treasury. This investment policy applies to all the investment activities of the City of Lynwood, except for the Employees Retirement and Deferred Compensation Funds, wfiich are administrated separately. This policy applies to all funds with some limited exceptions for Bond Proceeds managed by-the Trustees. The Trustee has no obligations in adhering to this policy due to the Bond Indenture Agreement. Policy statements outlined in this document focus on the City of Lynwood's pooled funds, but will also _ apply to all the funds under the Cite Treasurer's span of control unless exempted by resolution or statue. • PIEZUDENCE Generally, investments shall be made in the contest of the "Prudent Investor" rule which states that; "Investments shall be made with judgment and care, under circumstances then prevailing, which persons of prudence, discretion, and intelligence excise 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 to be derived." It is the City's full intent, at the time of purchase, to hold all investments until maturity to .ensure the return ~f all invested principal dollars. However, it is realized that market prices of securities will vary depending on economic and interest rate conditions at any point in time: The City Treasurer and other individuals assigned to manage the investment portfolio, acting within the intent and scope of the investment- policy and other written procedures and exercising due diligence, shall be relieved of personal responsibility and liability for an individual security's credit risk or market price change, provided deviations from :expectations are reported in a timely manner and appropriate action is taken to control diverse developments. • OBJECTIVES Safety of principal Safety of principal is the foremost objective of the City of Lynwood. Each investment transaction shall seek to ensure that capital losses are avoided, whether from securities default, broker-dealer default or erosion of market value. The City shall seek to preserve principal by mitigating the two types of risk, credit risk and market risk. Credit risk, defined as the risk of loss due to failure of the issuer of a ~. security, shall be mitigated by investing in 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, defined as market value fluctuations due to overall, limiting the average maturity. of the City's investment portfolio to two years, the maximum maturity of an~~.orte security u) five years, structuring the portfolio based on historic and current cash flow analysis eliminating the need to sell securities prior to maturity anti avoiding the purchase of long term securities for the sole purpose of short term speculation. LIQUIDITY Because the City operates its own water utility and bills monthly for this service, cash - flow is generated on a daily basis. 1-listorical cash-flow trends are compared to current cash flow requirements on an ongoing, basis in an effort to ensure that the City's investment portfolio will remain sufficiently liquid to enable the City to meet all reasonable anticipated operating requirements. COLLATERAL RE(1UIREMENTS - Collateral are required for investments in certificates of deposit, repurchase agreements and reverse repurchase agreements. In order- to reduce market risk, the collateral level - will be at least 1O2% of market value of principal and accrued interest. _ Iti order to conform with the provisions of the Federal Bankruptcy Cede which provides f~)r liquidation of securities held as collateral, the only securities acceptable as collateral shall be certificates of deposit, commercral paper, eligible banker's acceptances, 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 agency of the United States. AUTHORIZED INVESTMENT , Generally, investments shall be made in the context of the "prudent investor" rule, which states: ":..investments shall be made with judgment and care, under circumstances then prevailing, such 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." The City is further governed by California Government Code, Sections. 53600 et seq. Within the context of these limitations, the following investment are authorized, as further limited herein: A. - United States Treasury Bills, Notes and Bonds, or those for which the full faith and credit of the United States are pledge for payment of principal and interest. There is no limitation as to the percentage of the City's surplus funds which can be invested: The maximum maturity length shall not exceed S years. B. Obligations issued by the Government National Mortgage Association (GNMA), the Federal Farm Credit Bank System (FFCB), the Federal Home Bank Board (FHLB), and Federal National Mortgage Association (FNMA) and those insured by the Federal Housing Administration (FHA). Although there is no percentage limitation on these issues, the "prudent investor" rule shall apply for a single agency name, as U.S. Government, backing is implied rather than guaranteed. (.. Bill of exchange or time drafts drawn on and accepted by a commercial. batik, otherwise known as banker's acceptance. Banker's acceptances purchased may not exceed 270 days' maturity or 40/0 of the City's temporarily idle funds. I). Commercial paper ranked "P1" by Moody's Investor Services and "A1+" by Standard and Poor's, 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 bebentures as provided by Moody's or Standard and Poor's. Purchase of eligible commercial paper may not exceed 180 days' maturity nor represent more than l0°l0 of the outstanding paper of an issuing corporation. Purchase of commercial paper may not exceed 15% of the City's surplus funds. • Fi. Negotiable certificates of deposit issued by a Nationally or State-Chartered Bank or a State or Federal Savings and Loan Association. Purchase of negotiable certificates of deposit my not exceed 30% of total portfolio. A maturity limitation. of five years is applicable. F. Repurchase agreements. The City may invest in repurchase agreements with banks and dealers with which the City has entered into a master repurchase contract that specifies terms and conditions of repurchase agreements. The maturity of repurchase agreements shall not exceed 90 days and when the underlying securities are United States Treasurers or Agencies and that the market collateral equals 1029r, of the repurchase agreement amount including accrued interest, and the maximum maturity length of that collateral does not , exceed 5 years. The only securities acceptable as collateral shall be eligible . negotiable certificates of deposits, eligible banker's acceptances, or securities that are direct obligation of, or that are fully guaranteed as to principal and interest by, the United States or any agency of the United States. FL Reverse repurchase agreements that specify terms and conditions may be transacted with broker dealers and financial institutions but can not exceed 20/0 of the portfolio value on the gate entered into. The City may enter into reverse repurchase agreements may-not exceed 90 days. I. Local Agency Investment Fund. The City may invest in the Local Agency Investment Fund (LAIF) established by the State Treasurer for the beriefit of,local agencies up to the nruimum permitted by State law. J. Time Deposit. The City may invest in non-negotiable time deposits and collateralized in accordance with the California Government Code, in those banks and savings and loan association that meet the requirements for investment in negotiable certificates of deposit. Since time deposits are not liquid, no more that 25% of the temporarily idle fund may be invested in this category. K. .Medium Term Cooperate Notes, with a maximum maturity of five years may be purchased. Securities eligible of investment shall be rated AA or better by Mood's or Standard & Poor's rating services. Purchase of medium term notes may not exceed 30~h of the market value of the portfolio and not more that 1.5% . of the market value of the portfolio may be invested in notes issued by one cooperation. Commercial paper holdings should also be included when calculating the 15°/n limitation. L. Ineligible investments. Investments not described herein, including, but not limited to common stocks and corporate bonds, are prohibited from use in this .portfolio. Further, investments which exceed five years in maturity require authorization by City Council prior to purchase. (QUALIFIED DEALERS AND INSTITUTION The City shall transact business only with banks, savings-and loans and registered investment dealers.. The purchase by the City of any Investment other than those , purchased directly from the issuer, shall be purchased either from an institution licensed . by the State as abroker-dealer, as defined in Section 25004 of the Corporations Code, who. is a member of the National Association of Securities Dealers, or a member of a Federally regulated securities exchange, a National or State-Chartered Bank, A Federal or State Association (as defined by Section 5102 of the Financial Code), or a brokerage firm designated as a Primary Government Dealer by the Federal Reserve Bank. . The City Treasurer's staff shall investigate all institutions that wish to do business with ' -,the City,. in order to determine if they are adequately capitalized, make markets in securities appropriate to the City's. needs,.and agree to abide by the conditions set forth in .. i ~ ~ - the City of Lynwood's Investment Policy. This will be done by having the Financial Institutions complete.and return the appropriate questionnaire. COMPETITIVE BIDDING It is the policy of the City to require competitive bidding for gc)vernment agencies and . securities for transactions that are not classifies as "new issues" securities. To the purchase of no "new issue" securities. and the sale of all securities at least three bidders must be contacted. SAFEKEEPING OF SECURITIES To protect against potential losses by collapse of individual securities dealers, all securities owned by the City, including collateral on repurchase agreements, shall be held in safekeeping by a third party bank trust department acting as agent for the City under the terms of a custody agreement executed by the bank and by the City. AiI securities will be received and delivered using standard delivery versus payment procedures. INVESTMENT~2EPORTIN{; AND MONTHLY REPORT The Treasurer shall render a monthly report to the City Council showing the type of investment, institution, date of maturity, par value of investment, cost basis of investment, current market value of all securities, rate of interest, and such data as may be required by the City Council. The Report shall also detail all repurchase agreements, and shall state its relationship to this Statement of Investment Policy as directed under the Code. II\fVESTMENT CONTROLS The City Treasurer has developed a system of internal investment controls. These controls are designed to prevent losses of public funds arising from fraud, employee error, misrepresentation of third parties, or imprudent actions by employees and officers of the treasurer's staff. LEGISLATIVE CHANE;ES Any State of California legislative action, that further restricts allowable matures, investment type or percentage allocations, will be incorporated into the City of Lynwood Investment Policy and supersede all previous applicable language. DELEGATION OF AUTHORITY In the absence of the City Treasurer, the authority to execute investment transactions, affecting the City's temporarily idle funds will be restricted to the Deputy Treasurer. PC)LICY REVIEW Theis Investment Policy shall be review at least annually to ensure its consistency with. the overall objectives of preservation of PRINCIPAL, LIQUIDITY AND RETURN, and its relevance to current law, flnanclal and eCOllomlC tl'end, and to meet the needs of the City of Lynwood. Any amendments to the policy shall be forward to City council for approval. The City strives to maintain the level of investment of all surplus funds as near l00°/n as possible, through daily and projected cash flow determinations. 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