HomeMy Public PortalAbout07) 7D ADOPTION OF 15-5088 FY 2015-16 STATEMENT OF INVESTMENT POLICYAGENDA
ITEM 7.0.
ADMINISTRATIVE SERVICES DEPARTMENT
MEMORANDUM
DATE: June 16, 2015
TO: The Honorable City Council
FROM: Bryan Cook, City Manager
By: Tracey L. Hause, Administrative Services Director
SUBJECT: ADOPTION OF RESOLUTION NO. 15-5088 ADOPTING THE FISCAL
YEAR (FY) 2015-16 STATEMENT OF INVESTMENT POLICY
RECOMMENDATION:
The City Council is requested to adopt Resolution No. 15-5088 (Attachment "A "), adopting
the Statement of Investment Policy for the City of Temple City for FY 2015-16.
BACKGROUND:
1. On June 17, 2008, the City Council approved the Statement of Investment Policy for
FY 2008-09 which included limits to invest in Ne gotiable Certificates of Deposit (COs)
with maturites ranging from 30 to 360 days.
2. On August 19 , 2008, the City Council approved an amendment to Section VI of the
Statement of Investment Policy for FY 2008-09 to allow the City to invest in COs with
maturities ranging from 30 days to 24 months .
3. On June 28, 2011, the City included a change in the Statement of Investment Policy
for FY 2011 -12 to allow the City to invest in COs with maturities ranging from 30 days
to 60 months.
4. On June 19, 2012 , th e City Counci l approved th e FY 2012-13 Statement of Investment
Policy as presented , with no recommended changes from the prior adoption .
5. On August 7 , 2012 , the City Council approved revisions to the FY 2012-13 Statement
of Investment Policy, expanding the types of investment the City cou ld invest in. These
add itional types of investments included Los Angeles County Pooled Inve stment Fund
(LACPIF) and medium-term notes.
City Council
June 19, 2013
Page 2 of 2
ANALYSIS:
The Administrative Services Director/City Treasurer is required to render an annual
statement of investment policy to the legislative body of the local agency. The City's
Statement of Investment Policy establishes an administrative plan which allows investment
of the City's idle funds in financial institutions, government agencies, the State of California
Local Agency Investment Fund (LAIF), the LACPIF and medium-term corporate notes which
meet the criteria required for safety and liquidity. Further, the Administrative Services
Director/City Treasurer is also required to report on a quarterly basis, to the City Council and
City Manager, information regarding investment and deposits. In order to be proactive and
completely transparent, the Administrative Services Director/City Treasurer provides a
monthly report on the investment of the City of Temple City's funds to both the City Council
and City Manager.
CONCLUSION:
It is recommended that the City Council adopt Resolution No. 15-5088, approving the
Statement of Investment Policy for FY 2015-16. There are no recommendations for
changes to the Statement of Investment Policy since its last adoption in June 2014.
FISCAL IMPACT:
This agenda item has no fiscal impact on the Adopted FY 2014-15 City Budget.
ATTACHMENT:
A. Resolution No. 15-5088
ATTACHMENT A
RESOLUTION NO. 15-5088
RESOLUTION OF CITY COUNCIL OF THE CITY OF
TEMPLE CITY CALIFORNIA ADOPTING THE ATTACHED
FISCAL YEAR (FY) 2015-16 STATEMENT OF
INVESTMENT POLICY
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;
and
WHEREAS, the Administrative Services Director/City Treasurer of the City of
Temple City recommends adoption of the FY 2015-16 Statement of Investment Policy as
attached (Exhibit "A").
NOW, THEREFORE, IT IS RESOLVED that the City Council of the City of Temple
City adopts the attached FY 2015-16 Statement of Investment Policy.
APPROVED AND ADOPTED this 16th day of June, 2015.
Tom Chavez, Mayor
ATTEST:
Peggy Kuo, City Clerk Eric Vail, City Attorney
Exhibit "A"
CITY OF TEMPLE CITY
STATEMENT
OF
INVESTMENT POLICY
I. PURPOSE
II. OBJECTIVE
Ill. SCOPE
CITY OF TEMPLE CITY
STATEMENT OF INVESTMENT POLICY
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
CITY OF TEMPLE CITY
STATEMENT OF INVESTMENT POLICY
I. PURPOSE
This statement is intended to provide a guideline for the prudent investment of
temporary idle cash, trust funds and restricted monies and to 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.
Ill. 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 or those persons
designated as a Deputy City Treasurer by the City Treasurer. No other
persons are authorized to execute an investment transaction.
STATEMENT OF INVESTMENT POLICY
PAGE2
V. INTERNAL CONTROLS
The Treasurer/Deputy City 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/Deputy City 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/Deputy City Treasurer
Review formal investment policy City's Auditing Firm
Adopt formal investment policy City Council
Execute investment transactions Treasurer/Deputy City Treasurer
(the above signers as well as
one of signers listed below)
City Manager, City Clerk, Director
of Parks & Recreation
Investment verification and Administrative Services Director
recordation
Reconcile investment records to Accountant
bank statements
While no internal control system, however elaborate, can guarantee absolute
assurance that the 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.
STATEMENT OF INVESTMENT POLICY
PAGE3
VI. SUITABLE AND AUTHORIZED INVESTMENTS
*
"
...
The California Government Code (Section 53601 and 53635) allows the City to invest
in the following instruments:
CGC Investment Type Maximum Authorized Required
Section Maturity Limit(%) 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(1) Bankers Acceptances* 180 days 40% Fed Reserve
Eligible
5360 I (g) Commercial Paper** 270 days 25% A liP 1 Rating
53601(h) Negotiable Ce1tificates 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
53601U) Medium Term Notes 5 years 30% A rating
53601(k) Mutual Funds**** N/A 20% Multiple
5360 l(k) Money Market Funds NIA 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) NIA None None
53601(d) County Pooled Investment Funds NIA 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
I 0% of outstanding paper of an issuing corporation.
Reverse Repurchase Agreements must be made with primary dealers ofthe Federal Reserve Bank ofNew 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
PAGE4
For Fiscal Year 2015-16, 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, LA IF yields are higher.
The City continually invests in the Local Agency Investment Fund.
• LACPIF (Los Angeles County Pooled Investment Fund -The Los Angeles
County Treasurer and Tax Collector (Treasury) maintains an External
Investment Pool (Pool) and manages the Pool of behalf of the participants.
The primary objective of the Treasury's Investment Policy is to ensure the
safety of the principal. The secondary objective is to meet the liquidity needs
of the participants and the third objective is to achieve a return on funds
invested. These objectives are accomplished through the purchase of high
quality fixed income investments, held to a designated maturity. Local
jurisdictions may participate in this pool by adopting a Resolution authorizing
and requesting the investment of excess funds in the this Pool
• Certificates of Deposit -time deposits of a bank or savings and loan. They
are purchased in various denominations with maturities ranging from 30 days
to 60 months. The interest is calculated on a 360-day basis and is payable
monthly, semi-annually, or at maturity in case of short term CO's;
• Passbook Savings Account - a certificate of deposit issued in any amount for
a non specified amount of time. Interest rate is much lower than CO'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
STATEMENT OF INVESTMENT POLICY
PAGE5
monthly services;
• Money Market Mutual Funds-referred to in the California Government Code
Section 53601 (k) as shares of beneficial interest issued by diversified
management companies investing in securities authorized by Section 53601
(a) to (I) inclusive. Money Market Mutual Funds must have an average
maturity of 90 days or less, per SEC regulations;
• U.S. Treasuries -Debt instruments issued directly by the United States
Government. These instruments are of highest credit quality and payment of
principal and interest are backed by the full faith and credit of the United States
Government; and
• U.S Agencies -Debt instruments issued by the various federally chartered
agencies. These instruments are also of the highest credit quality.
• Medium-term Notes-Corporate and depository institution debt securities with
a maximum remaining maturity of five years or less, issued by corporations
organized and operating within the Unites States or by depository institutions
licensed by the United States or any state and operating within the United
States. Notes must have a rating of "AA" or better from Moody's, Standard &
Poors or Fitch.
VII. REPORTING METHODS
The Treasurer/Deputy City 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:
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; and
g) State that investments are in compliance with the City's investment policy or
manner in which the portfolio is not in compliance
STATEMENT OF INVESTMENT POLICY
PAGE6
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.
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.