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.
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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 .