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HomeMy Public PortalAbout10) 7H Resolution 17-5256 adopting FY 2017-18 Statement of Investment PolicyAGENDA ITEM 7 .H. ADMINISTRATIVE SERVICES DEPARTMENT MEMORANDUM DATE: June 20, 201 7 TO: The Honorable City Council FROM: Bryan Coo k, C ity Manager By : Tracey L. Hause , Admin istrative Services Director SUBJECT: ADOPTION OF RESOLUTION NO . 17-5256 ADOPTING THE FISCAL YEAR (FY) 2017-18 STATEMENT OF INVESTMENT POLICY RECOMMENDATION : The C ity Council is requested to adopt Resolut ion No. 17-5256 (Attachment "A "), adopting the Statement of Investment Policy for the City of Temple City fo r FY 2017-18 . BACKGROUND : 1. On June 17 , 2008 , the C ity Council approved the Statement of Investment Po li cy for FY 2008-09 which included limits to invest in Negotiable Certificates of Deposit (COs) wi th matu rites ranging fro m 30 to 360 days . 2. On August 19 , 2008 , the City Council approved an amendment to Sect ion VI of the Statement of Investment Policy for FY 2008-09 to allow the City to invest in COs w ith maturit ies ranging from 30 days to 24 mon t hs . 3. On June 28 , 2011 , the C ity included a change in the Statement of Investment Policy for FY 2011-12 to allow t he City to invest in COs with maturities ranging f rom 30 days to 60 months. 4 . On June 19, 2012 , the C ity Council approved the FY 2012-13 Statement of Investment Po li cy as presented , with no recommended changes from the prior adoption. 5 . On August 7 , 2012 , the C ity Council approved revisions t o the FY 2012-1 3 St atement of Investment Pol icy , expand ing the types of investment the City could invest in . These additional types of investments included Los Angeles County Pooled Investment Fund (LACPIF) and medium-term notes. ---~ -------------------------~ City Council June 20 , 2017 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 C ity's idle funds in financial institutions , government agencies , the State of California Local Agency Investment Fund (LAIF ), the LACPIF and med ium-term corporate notes which meet the criteria required for safety and liquid ity. Further, the Administrative Serv ices Director/City Treasurer is also required to report on a quarterly bas is , to the City Council and City Manager, information regard ing investment and deposits . In order to be proactive and completely transparent, the Administrative Services Director/C ity Treasure r provides a monthly report on the investment of the City of Temple City's funds to both the City Council and City Manager. The only change recommended , since its last adoption in June 2016 , is clarificat ion of the minimum ratings from the rating agencies for Medium-term Notes (Page 5) since its last adoption in June 2016. CITY STRATEGIC GOALS: By adopting Resolution No. 17-5256, approving the Statement of Investment Policy for FY 2017-18 , the City Council will promote or further the City's Strategic Goal of Good Governance. FISCAL IMPACT: This agenda item has no fiscal impact on the Proposed FY 2017-18 City Budget. ATTACHMENT: A. Resolution No . 17-5256 ATTACHMENT A RESOLUTION NO. 17-5256 RESOLUTION OF CITY COUNCIL OF THE CITY OF TEMPLE CITY CALIFORNIA ADOPTING THE ATTACHED FISCAL YEAR (FY) 2017-18 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 w ith 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 s igned such legislation in to law effective January 1, 1996, as Section 53600 et seq . of the Californ ia Government Code ; and WHEREAS, the Admi nistrative Services Director/City Treasurer of the C ity of Templ e City recommends adoptio n of the FY 2017-18 Statement of Investment Po li cy as attached (Ex hibit "1"). NOW, THEREFORE, IT IS RESOLVED that the City Council of the City of Temple City adopts the attached FY 2017-18 Statement of Investment Policy. APPROVED AND ADOPTED this 20th day of June, 2017 . Mayor ATTEST: Peggy Kuo , City Clerk Eric Va il , C ity Attorney I hereby certify that the foregoing resolution , Reso lution No . 17-5256, was duly passed , approved a nd adopted by the C ity Council of the City of Temple C ity at a special meeti ng held on the 20th day of June 2017 , by the follow ing vote : AYES : Councilmember: NOES: Council member: ABSENT: Councilmember: ABSTAIN : Councilmember: City Clerk Exhib it 1 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 CONST RAINTS IX. POLICY REVIEW CITY OF TEMPLE CITY STATEMENT OF INVESTMENT POLICY I. PURPOSE This statement is intended to provide a guideline for the prudent in vestmen t of temporary idle cash , trust funds and res tricted mon ies and to out li ne a po li cy for ma xim izing the efficiency of the cash management system . Ultimate investment goal is the protection of cash i nvestments. II. OBJECTIVE The cash management system of the City of Temple City is designed to acc urately monitor and forecast expenditures and revenues , thus insuring the investment of monies to the fullest extent possible . Attempts to obtain highest interest yields possib le are a statemen t of fact as long as investments meet the criteria req u ired for safety and liquid ity. Ill. SCOPE Th is investment po li cy applies to activ it ies of the City w ith regard to investi ng 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 ma y be c reated from t ime to t ime. IV. STANDARDS OF CARE 1. PRUDENCE The standard of prudence to be used by investment officia ls shall be the "prudent investor" standard as set forth in Section 53600 .3 of the Cal ifornia Government Code , which states in part that , 'When investing , re investing , purchasing , acquiring , exchang ing , selling , and managing publ ic f unds, a trustee shal l act with care , skill , prudence , and diligence un der the circumstances then prevailing , that a prudent person acting in a like capac ity and familiarity with those matters would use in the conduct of fu nds of a like character and with like aims , to safeguard the principal and ma intain the liqu idity needs of the Agency". The prudent investor standard sha ll be app li ed in the context of manag ing 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 Cal ifornia 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 T reasurer by the C ity 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 ass igned 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 investme nt transactions Treasurer/Deputy City Treasurer (t he above signers as well as one of signers l isted 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 536 35) allows the C ity to i nvest in the following instruments : CGC In ves tm ent Type Max imum Authorized Requi red Secti on Maturi ty Li mi t (%) Rat in g 5360 1(a) Loca l Age ncy Bonds 5 years one one 5360 1(b) U.S. Treasury Obl igations 5 years one one 53 60 1(c) State o f Californ ia Ob ligat ions 5 years No ne one 53601(d) CA Loca l Agenc y Obligations 5 years one one 53601(e) U.S. Age nc ies 5 years one one 5360 I (f) Banke rs Ac ce pta nces* 180 days 40% Fed Reserve Eligible 53601(g) Com merc ia l Pape r** 270 days 25 % A I /PI Rating 5360 1(h) Negotia bl e Ce rti fica tes of Depos it 5 years 30% one 536 01 (i) Re pur cha se Agree ment s I year None None 53601(i) Reve rse Rep urchase Agree ments*** 92 days 20% of base one 53601G) Medium Term otes 5 yea rs 30% A rating 53 60 1(1<) Mu tual Funds**** l A 20% Multiple 5360 1(1<) Money Market Funds A 20% Multiple 5360 1(m) Colla teralized Bank Deposi ts 5 years one one 5360 1(n) Mortgage Pass-Through Sec uri t ies 5 years 20% AA Rating 5360 1(d) Loca l Age ncy Investment Fu nd (LA IF) l A one one 53601(d) Co un ty Po o led Investme nt Fund s l A one one 53 635 Ti me Depos it s 5 ye ars None None o more !han 30"/o of surplus funds may be invested in Bankers Acceptances of an y one commerc1al bank. Commercial paper iss uers must be U.S. Corporat ions with $500 million plus in assets . Purchases may not represen t more than I 0"1o of outstanding paper of an issuing corporati on . Reverse Repurchase Agreements must be made \\ilh primlll) dealers oflhe Federal Reserve Bank of ew York and lhe secun ues used for lhe agreement must have been held by lhc issue r for at least 30 days . •••• o more !han I 0"/o of an agen cy's surplus funds may be invested m any one mutua l fund . STATEMENT OF INVESTMENT POLICY PAGE4 For Fiscal Year 2017-18 , the City of Temple City is limiting its purchase of investments to the following vehicles: • LAIF (Local Agency Investment Fund )-a specia l 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 agen cy. However, any investment with LAIF must comply with other self-imposed restrictions as specified in th is 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 len gth of time they are deposited . Interest is pa id quarterly. The State retains an amount for reasonable costs of making the investments, not to exceed one-half of one percent of the earn ings ; The interest rates are fairly high because of poo ling the State's surplus cash with the surplus cash deposited . Th is creates a multi -bill ion dollar money pool and allows diversified investments . In a high interest rate market, the City does better than LAIF , but in times of low interest rates , LAIF yields are higher. The City conti nually 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 partici pants. The primary objective of the Treasury 's Investment Policy is to ensure the safety of the principal. The secondary objective is to meet the liquid ity needs of the participants and the third objective is to achieve a return on funds in vested. 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 adopti ng a Resolution authorizing and requesting the investment of excess funds in th is Pool. • Certificates of Deposit-time deposits of a bank o r savings and loan . They are purchased in various denom inations with maturities ranging f rom 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 wh ich rece ives revenues and pays disbursements . Interest earned can be paid to the local jurisdictions on a regular basis or left in the account to offset th e fees for STATEMENT OF INVESTMENT POLICY PAGE5 monthly services; • Money Market Mutua l Funds-referred to in the California Government Code Section 5360 1 (k) as shares of beneficial in teres t issued by divers ified management companies investing in securities authorized by Section 5360 1 (a) to (I) incl usive . Money Market Mutual Funds must have an average maturity of 90 days or less , per SEC regulations ; • U .S . Treasur ies -Debt instruments issued d irectly by the Un ited States Government. These instruments are of highest credit quality and payment of principal and interest are backed by the full fa ith 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 qua li ty. • Medium-term Notes -Corporate institutions organized and operating w ithin the United Sta tes or by depository institutions l icensed by the Un ited States or any states and operating with in the Un ited States . One nationally recognized rating agency must rate notes eligible for investment in the "AA" category . This includes the lowest AA rating category , wh ich is AA-for Standard and Poor's and Fitch , and AA3 for Moody's . VII. REPORTING METHODS The Treasurer/Deputy City Treasure r 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 depos it or cost of secu rity ; e) Current market value of securities and source of market value ; f) State that there are sufficient funds to meet the next 6 months' ob li gations 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 depos its . State law a lso allows as an eligible security, first trust deeds having a value of 150% of the total amount of the depos its . IX. POLICY REVIEW As required by Section 53646 of the California Government Code , th is Statement of Investment Policy shall be reviewed at least annually as a publ ic meeting of the City Council to ensure its consistency with the overall objectives of preseNation of principal , liquidity and return , and its relevance to current law , financial and economic trends .