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HomeMy WebLinkAbout2004-3141 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 RESOLUTION NO. 2004-314 RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO APPROVING THE CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT REVISED INVESTMENT POLICY FOR THE PROCEEDS RECEIVED FROM THE SETTLEMENT OF STATE OF CALIFORNIA, ON BEHALF OF THE DEPARTMENT OF TOXIC SUBSTANCES CONTROL V. UNITED STATES DEPARTMENT OF THE ARMY., ET AL., UNITED STATES DISTRICT COURT CASE NO. CV 96-5205(MRP) CONSOLIDATED WITH CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT V. UNITED STATES DEPARTMENT OF THE ARMY, UNITED STATES DISTRICT COURT CASE NO. CV 96- 8867(MRP), AND REPEALING RESOLUTION NO.2004-283. WHEREAS, the City of San Bernardino has been in negotiations with the United States Department of the Army and the Environmental Protection Agency involving groundwater contamination. WHEREAS, the City of San Bernardino will enter into a consent decree setting forth terms and conditions of settlement in cases entitled State of California, on behalf of the Department of Toxic Substances Control v. United States, et al., CV 96-5205(MRP) and City of San Bernardino, Municipal Water Department v. United States, et al., CV 96-8867(MRP) which involve use of contamination clean-up funds over a period of more than fifty (50) years, and WHEREAS, the Water Department's investments are pooled with the City of San Bernardino's investments and managed by the City Treasurer in accordance with the City of San Bernardino's Investment Policy, and WHEREAS, the Board of Water Commissioners adopted an Investment Policy applicable solely to those proceeds derived from settlement proceeds from the cases referenced herein, and adopted a revised City of San Bernardino Municipal Water Department Investment Policy on September 28, 2004, and Page 1 of 3 2004-314 1 RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO APPROVING THE CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT REVISED INVESTMENT POLICY FOR THE PROCEEDS 2 RECEIVED FROM THE SETTLEMENT OF STATE OF CALIFORNIA, ON BEHALF OF THE DEPARTMENT OF TOXIC SUBSTANCES CONTROL V. UNITED STATES DEPARTMENT OF THEARMY, ET AL., UNITED STATES DISTRICT COURT CASE 3 NO. CV 96-5205(MRP) CONSOLIDATED WITH CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT V. UNITED STATES DEPARTMENT OF THE ARMY, UNITED STATES DISTRICT COURT CASE NO. CV 6-8867(MRP), AND REPEALING 4 RESOLUTION NO.2004-283. 5 WHEREAS, the Mayor and Common Council adopted Resolution 2004-283 on September 7, 6 2004, approving said Investment Policy to be effective September 7, 2004; and 7 8 WHEREAS, the City of San Bernardino Municipal Water Department proposes revisions to 9 said policy which have been reviewed by the City Treasurer; and 10 WHEREAS, the City Treasurer concurs and recommends that the Mayor and Common Council 11 adopt this resolution. 12 NOW THEREFORE, BE IT RESOLVED BY THE MAYOR AND COMMON COUNCIL OF THE 13 CITY OF SAN BERNARDINO AS FOLLOWS: 14 15 SECTION 1. Recitals. 16 The City of San Bernardino Municipal Water Department Revised Investment Policy is set 17 forth in Exhibit "A" attached hereto and incorporated herein by reference as though fully set forth at 18 length. 19 20 SECTION 2. Implementation. 21 The City of San Bernardino Municipal Water Department Revised Investment Policy applying 22 to the proceeds of the Settlement Agreement with the United States of America in the above- 23 referenced Civil Actions No. CV 96-8867 and CV 96-5205 (MRP) (MRP) Consolidated is hereby 24 approved. 25 26 SECTION 3. Resolution 2004-283 is hereby repealed. 27 / 28 / Page 2 of 3 2004-314 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16' 17 18 19 20 21 22 23 24 25 26 27 28 RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO APPROVING THE CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT REVISED INVESTMENT POLICY FOR THE PROCEEDS RECEIVED FROM THE SETTLEMENT OF STATE OF CALIFORNIA ON BEHALF OF THE DEPARTMENT OF TOXIC SUBSTANCES CONTROL V. UNITED STATES DEPARTMENT OF THE ARMY, ET AL., UNITED STATES DISTRICT COURT CASE NO. CV 96-5205(MRP) CONSOLIDATED WITH CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT V. UNITED STATES DEPARTMENT OF THE ARMY, UNITED STATES DISTRICT COURT CASE NO. CV 96-8867(MRP), AND REPEALING RESOLUTION NO. 2004-283. I HEREBY CERTIFY that the foregoing Resolution was duly adopted by the Mayor and Common Council of the City of San Bernardino at a it. reg. meeting thereof, held on the 4th day of October 2004, by the following vote, to wit: COUNCIL MEMBERS AYES NAYS ABSTAIN ABSENT ESTRADA x LONGVILLE x MCGINNIS x DERRY x KELLEY x JOHNSON x MCCAMMACK x Raelrel G. Clark, City Clerk The foregoing resolution is hereby approved this Approved as to Form and legal content: JAMES F. PENMAN, City Attorney By: of day of October s, Mayor Bernardino 2004. Page 3 of 3 2004-314 EXHIBIT A City of San Bernardino Municipal Water Department REVISED Investment Policy Effective Policy It is the policy of the City of San Bernardino Municipal Water Department to invest public funds in a manner which provide the highest investment return with the maximum security, while meeting all cash flow demands. Investments will be made in conformity to the California Government Code, Sections 53601 through 53659 and approved by the Board of Water Commissioners of the City of San Bernardino. 2. Scope This investment policy applies to the proceeds received from the settlement of State of California Department of Toxic Substance Control v. United States Department of the Army, United States District Court Case No. 96-5205-MRP consolidated with City of San Bernardino Municipal Water Department v. United States Department of the Army, United States District Court Case No. 96- 8867-MRP. This Policy is in lieu of any other City policy. In the event of any conflict between this policy and any other policy, this policy shall control. 3. Prudence Investments shall be made with judgement and care - under circumstances then prevailing - which 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. 3.1. The standard of prudence to be used shall be the "prudent investor' standard and shall be applied in the context of managing an overall portfolio. Investment officers acting in accordance with this Investment Policy and the Investment Management Procedures and exercising due diligence shall be relieved of personal responsibility for an individual security's credit risk or market price changes, provided deviations from expectations are reported in a timely fashion and appropriate action is taken to control adverse developments. 3.2. It is the Municipal Water Department's full intent, at the time of purchase, to hold all investments until maturity to ensure the return of all invested principal dollars. 4. Objectives Pursuant to Government Code Section 53600.5 which states "When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, the primary objective of a trustee shall be to safeguard the principal of the funds under its control. The secondary objective shall be to meet the liquidity needs of the depositor. The third objective shall be to achieve a return on the funds under its control." -1- 2004-314 4.1. Safety Safety of principal is the foremost objective of the City of San Bernardino Municipal Water Department. Each investment transaction shall seek to ensure that capital losses are avoided, whether from securities default, broker -dealer default or erosion of market values. To attain this objective, the City of San Bernardino Municipal Water Department shall seek to preserve principal by mitigating credit risk and market risk. 4.2. Liquidity The City of San Bernardino Municipal Water Department's investment portfolio will remain sufficiently liquid to enable the Water Department to meet all cash flow requirements which might be reasonably anticipated. 4.3. Yield The Water Department's investment portfolio shall be designated with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account the investment risk constraints and liquidity needs. Return on investment is of secondary importance compared to the safety and liquidity objectives described above. The core of investments are limited to relatively low risk securities in anticipation of earning a fair return relative to the risk being assumed. Securities shall not be sold prior to maturity with the following exceptions: • A security with declining credit may be sold early to minimize loss of principal. • A security swap would improve the quality, yield or target duration in the portfolio. • Liquidity needs of the portfolio require that the security be sold. 5. Delegation of Authority Authority to manage the City of San Bernardino Municipal Water Department's investment program is hereby granted to the City Treasurer. Responsibility for the operation of the investment program is delegated by the City Treasurer to the Municipal Water Department's Director of Administration and Finance, who shall act in accordance with established written procedures and internal controls for the operation of the investment program consistent with this Investment Policy. 5.1. Investment Procedures 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. 6. Ethics and Conflicts of Interest Employees involved in the investment process shall refrain from personal business activity that conflicts with proper execution of the investment program, or impairs their ability to make impartial investment decisions. Employees shall disclose any material interests in financial institutions with which they conduct business. They shall further disclose any personal financial/investment positions that could be related to the performance of the investment portfolio. Employees shall IPA 2004-314 refrain from undertaking personal investment transactions with the same individual with whom business is conducted on behalf of the City of San Bernardino Municipal Water Department. Selection of Financial Services Providers 7.1. Selection of Trustees and Investment Advisors The Municipal Water Department may utilize the services of Trustees and Investment Advisors. As it deems necessary, the Municipal Water Department will select Trustees and Investment Advisors through a competitive process. An annual review of any selected financial service providers with be conducted by the Director of Administration and Finance. 7.2. Selection of Broker/Dealers Should broker/dealer services be needed, a list will be maintained of broker/dealers authorized to provide investment services. These may include "primary' dealers or regional dealers that qualify under Securities and Exchange Commission (SEC) Rule 15C3-1. All broker/dealers who desire to become qualified bidders for investment transactions must supply the following: (1) Audited financial statements (2) Proof of National Association of Security Dealers (NASD) certification (3) Proof of State registration (4) Certification of having read the City of San Bernardino Municipal Water Department's Investment Policy, Investment Management Procedures and depository contracts An annual review of the financial condition and registration of all broker/dealers qualified to be on the list will be conducted by the Director of Administration and Finance. 8. Authorized and Suitable Investments The City of San Bernardino Municipal Water Department is authorized by Government Code Section 53601 to invest in the following securities, as of the date of this policy: (1) United States Treasury notes, bonds, bills, or certificates of indebtedness, or those for which the faith and credit of the United States are pledged for the payment of principal and interest. • Maximum allowable portfolio percentage: 100%. (2) Federal agency or United States government -sponsored enterprise obligations, participations, or other instruments, including those issued by or fully guaranteed as to principal and interest by federal agencies or United States government -sponsored enterprises, including callables. • There is no percentage limitation of the portfolio which can be invested in this category. (3) Bills of exchange or time drafts drawn on and accepted by a commercial bank, otherwise known as bankers acceptances. • Purchases of banker's acceptances may not exceed 180 days to maturity nor exceed 40% of the Municipal Water Department's money, which may be invested pursuant to this section. However, no more than 30% of the Municipal Water Department's money may be invested in the bankers acceptances of any one commercial bank pursuant to this section. -3- 2004-314 (4) Commercial paper of "prime" quality of the highest ranking or of the highest letter and numerical rating as provided for by Moody's Investors Service, Inc., or Standard and Poor's Corporation. • Purchases of eligible commercial paper may not exceed 25% of the Water Department's money. Eligible commercial paper shall have a maximum maturity of 270 days. In addition, the Water Department may purchase no more than 10% of the outstanding commercial paper of any single issuer. (5) Negotiable certificates of deposit issued by a nationally or state -chartered bank, a savings association or federal association, a state or federal credit union, or by a state -licensed branch of a foreign bank. • Purchases of negotiable certificates of deposit may not exceed 30% of the Municipal Water Department's money which may be invested pursuant to this section. (6) Time deposits, non-negotiable and collateralized in accordance with the California Government Code, may be purchased through banks or savings and loan associations. • No more than 25% of the Municipal Water Department's money may be invested in time deposits. (7) Medium -term notes, defined as all corporate and depository institution debt securities issued by corporations organized and operating within the United States or by depository institutions licensed by the United States or any state and operating within the United States. Securities eligible for investment shall be rated AA or better by Moody's or Standard & Poor's rating services. (1) Purchases of medium -term notes may not exceed 30% of the Municipal Water Department's money that may be invested pursuant to this section. No more than 15% of the market value of the portfolio may be invested in notes issued by one corporation. Commercial paper holdings should also be included when calculating the 15% limitation. (8) Any mortgage pass -through security, collateralized mortgage obligation, mortgage -backed or other pay -through bond, equipment lease -backed certificate, consumer receivable pass - through certificate, or consumer receivable -backed bond having an "A" or higher rating for the issuer's debt and rated in a rating category of "AK or equivalent or better by Moody's or Standard & Poor's rating services. • Purchase of securities authorized by this section may not exceed 20% of the Municipal Water Department's money. (9) Various daily cash funds including short-term money market accounts administered for or by trustees, paying agents and custodian banks contracted by the City of San Bernardino Municipal Water Department may be purchased as allowed under State of California Government Code. In addition to the above, the City of San Bernardino Municipal Water Department is hereby authorized to invest in: (A) Any security guaranteed by, or supported by a pledge of any of the above listed securities (see (1) through (9) above). (B) A collateralized "Guaranteed Investment Contract" • A "Guaranteed Investment Contract" is defined as a contract in which an insurance company or an affiliate thereof guarantees to return the principal and interest to the Municipal Water Department on a series of specified dates and at specified rates of interest. The State of California managed investment pool, may be used up to the maximum permitted by California State law. SS 2004-314 In the event of any changes to the California Government Code addressing permissible and allowable investments, the terms and provisions of the Government Code shall prevail. 9. Maximum Maturities To the extent possible, it is prudent that the Municipal Water Department match its investments with anticipated cash flow requirements. Because the investments support a 50 year or greater obligation, it is the intention of the Municipal Water Department to hold investments with maturities in excess of 5 years, and is hereby specifically authorized to do so. 10. Diversification Unless the investment is a Guaranteed Investment Contract, the investments shall be diversified by: • Limiting investments to avoid overconcentration in securities from a specific issuer or business sector (excluding U.S. Treasury securities), • Limiting investment in securities that have higher credit risks, • Investing in securities with varying maturities, and • Continuously investing a portion of the portfolio in readily available funds such as local government investment pools, money market funds or overnight repurchase agreements to ensure that appropriate liquidity is maintained in order to meet cash flow requirements. 11. Safekeeping and Custody All security transactions entered into by the Municipal Water Department shall be conducted on a delivery -versus -payment (DVP) basis. Securities will be held by a third party custodian designated by the Director of Administration and Finance and evidenced by safekeeping receipts. 12. Internal Controls The Director of Administration and Finance shall establish an annual process of independent review by an external auditor. This review will provide internal control by assuring compliance with policies and procedures. 13. Reporting The Director of Administration and Finance shall prepare an investment report at least monthly, including a management summary that provides an analysis of the status of the current investment portfolio and transactions made over the last month. This management summary will be prepared in a manner which will allow the Municipal Water Department to ascertain whether investment activities during the reporting period have conformed to the Investment Policy. The report should be provided to the Board of Water Commissioners and the City Treasurer. The report will include the following: • Issuer or broker/dealer (financial institution) • A listing of individual securities held at the end of the reporting period by authorized investment category. • Average life and final maturity of all investments listed. • Coupon, discount or earnings rate. -5- 2004-314 • Par value, Amortized Book Value and Market Value. • Percentage of the portfolio represented by each investment category. • A description of the compliance with the Investment Policy. • Information demonstrating that the Water Department's expenditure requirements can be met in the following year. • Other information regarding the Water Department's portfolio as appropriate. 14. Investment Policy Adoption The City of San Bernardino Municipal Water Department's Investment Policy shall be adopted by resolution of the Board of Water Commissioners and the City Council. The Policy shall be reviewed annually by the Board of Water Commissioners and the City Council, and as otherwise necessary. Any modifications made thereto must be approved by both the Board of Water Commissioners and the City Council. go