HomeMy WebLinkAboutR04-Economic Development Agency
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ECONOMIC DEVELOPMENT AGENCY
OF THE CITY OF SAN BERNARDINO
REOUEST FOR COMMISSION/COUNCIL ACTION
From:
Barbara J. Lindseth
Acting Director
Subject: INVESTMENT POLICY
Date:
December 9, 1994
Svnoosis of Previous Commission/Council/Committee Action(s):
On December 16, 1991, the Community Development Commission adopted the
annual Statement of Investment Policy for the year 1992.
On February 15, 1993, the Community Development Commission adopted the
annual Statement of Investment Policy for the year 1993.
On December 20, 1993, the Community Development Commission adopted the
annual Statement of Investment Policy for the year 1994.
On December 8, 1994, the Redevelopment Committee recommended approval
of the Statement of Investment Policy for the year 1995.
Recommended Motion(s):
(Communitv Develooment Commission)
MOTION:
That the Community Development Commission approve and
adopt the Economic Development Agency's Annual Statement
of Investment Policy for the year 1995.
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Administrator
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Barbara J. Lindseth
Acting Director
Contact Person(s): Barbara Lindseth
5081
Phone:
Project Area(s): All
Ward(s):
1 - 7
Supporting Data Attached:
Staff Reoort: Statement of Investment Policv
FUNDING REQUIREMENTS:
Amount: $
N/A
N/A
Source:
Budget Authority:
N/A
Commission/Council Notes:
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BJL:1888A
COMMISSION MEETING AGENDA
Mee~ing Date: 12/19/1994
Agenda Item Number: ~
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ECONOMIC DEVELOPMENT AGENCY
OF THE CITY OF SAN BERNARDINO
STAFF REPORT
Investment Policv
Government Code Section 53646 requires that the Community Development
Commission annually approve a Statement of Investment Policy for the
Economic Development Agency.
Attached, is the Agency's "Statement of Investment Policy" for the year
1995. The proposed policy is the same policy adopted by the Commission
for the years 1989 through 1994, and is essential the same policy
adopted by the City of San Bernardino. This policy is used as a
guideline for the efficient placement and monitoring of investments of
cash by outlining the types of investments the Agency may purchase
(identical to the types invested in by the City of San Bernardino),
while stressing the importance of maximizing the yield earned on all
investments and minimizing the risks. The criteria for selecting
investments, and the order of priority are: (i) safety; (ii) liquidity,
and; (iii) yield.
On December 8, 1994, the Redevelopment Committee considered this matter
and recommended to the Community Development Commission approval of
same.
Staff recommends adoption of the form motion.
<--&,(uc< c:V ~J~L71(
Barbara J. Lindseth, Acting Director
Development Department
BJL:1888A
COMMISSION MEETING AGENDA
Mee~ing Date: 12/19/1994
Agenda Item Number: ~
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ECONOMI C DKVKLOl'tlKlfT AGKlfCY
OF THE CITY OF SAN BERNARDINO
"Statement of Investment Policy"
I. Puroose
This Statement of Investment Policy is intended to provide guidelines
for the prudent investment of the Agency's cash, and to outline the
policies for maximizing the efficiency of the Agency's cash management
system. The ultimate goal is to enhance the economic status of the
Agency while protecting its pooled cash.
II. Obiective
III.
The Agency's cash management system is designed to accurately monitor
and forecast expenditures and revenues, thus enabling the Agency to
invest funds to the fullest extent possible. The Agency attempts to
obtain the highest yield possible as long as investments meet the
criteria established for safety and liquidity.
policv
The Agency adheres to the guidance provided by the "prudent man rule",
which obligates a fiduciary to ensure that:
"...an investment shall be made with the exercise of that degree of
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."
A) Safetv:
Safety and the minimizing of risks associated with investments
refers to attempts to reduce the potential loss of principal,
interest, or a combination of the two. The first level of control
is in state law, which restricts municipalities to certain
investment instruments. The second level of risk control is the
investment in instruments which appear on examination to be the
most credit worthy. The third level of control is in the reduction
of market risk by investing in sufficient instruments that have
maturities coinciding with dates of disbursement. The Agency only
invests in those instruments that are considered very safe.
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ECONOMIC DEVELOPMENT AGENCY
Statement of Investment Policy
Page - 2 -
B) Liauiditv:
Liquidity is the ability to easily sell investment instruments at
any time with the minimal risk of losing some portion of principal
or interest. Liquidity is an extremely important quality as the
Agency may have an unexpected need for funds to be disbursed.
Most investments are highly liquid, with the exception of
collateralized or insured term certificates of deposit issued by
banks and savings and loans. Certificate maturities are selected
to anticipate cash needs, thereby eliminating the need for forced
liquidation.
C)
Yield:
Yield is the potential dollar earnings an investment can provide,
or "rate of return". The Agency attempts to obtain the highest
yield possible when selecting an investment, provided that the
criteria stated in the Investment Policy for safety and liquidity
are met and the investment guidelines and strategy are adhered to.
D)
Public Trust:
All participants in the investment process shall act as custodians
of the public trust. Investment officials shall recognize that the
investment portfolio is subject to public review and evaluations.
The overall program shall be designed and managed with a degree of
professionalism that is worthy of the public trust. In a
diversified portfolio it must be recognized that occasional
measured losses are inevitable, and must be considered within the
context of the overall portfolios' investment return, provided that
adequate diversification has been implemented.
E) Bank and Securities Dealers:
In selecting financial institutions for the deposit or investment
of Agency funds, staff shall consider the credit worthiness of the
institutions. Staff shall continue to monitor financial
institutions' credit characteristics and financial history
throughout the period in which Agency funds are deposited or
invested.
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ECONOMIC DEVELOPMENT AGENCY
Statement of Investment Policy
Page - 3 -
IV. Investments
Authorized investment instruments include:
Securities of the United States Government and obligations of its
agencies; registered treasury notes, bonds, or legal obligations of the
State of California; certificates of deposit placed with commercial
banks and savings and loans; bankers acceptances; repurchase
agreements; commercial paper; negotiable certificates of deposit;
Local Agency Investments Fund demand deposits; passbook savings account
demand deposits; interest bearing demand deposits; and, money-market
accounts of acceptable instruments.
Government and agency securities are the highest quality investments
available in terms of safety and liquidity. Certificates of deposit,
savings accounts, repurchase agreements and bankers acceptances are
insured or collateralized. Only commercial paper with both A-I Moody's
and P-I Standard and Poor's ratings are purchased.
The Agency operates its investment program with many federal, state and
self-imposed constraints. It does not buy stock, or deal in futures,
options, or security loan agreements. To maximize investment income,
the Agency uses all available economically feasible investment tools.
Economic conditions and various money markets are monitored in order to
assess the probable course of interest rates.
The final basic premise underlying the Agency's investment philosophy
is to ensure the safety of existing funds and ensure consistent
availability of same.
V. Maturities
Investments will be chosen with appropriate maturities so that
will be available to meet the Agency's cash flow requirements.
investment will be made with a maturity over three years.
funds
No
VI . Rellorti11Jt
The Agency shall submit a monthly investment report to the legislative
body. Required elements of the monthly report shall include:
a) Type of investment
b) Institution
c) Date of maturity
d) Amount of deposit or cost of security
e) Current market value of securities with maturity
in excess of twelve (12) months
f) Rate of interest
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ECONOMIC DEVELOPMENT AGENCY
Statement of Investment Policy
Page - 4 -
VII.
0988A
Internal Controls
A system of internal control shall be established and documented. The
controls shall be designed to prevent losses of public funds arising
from fraud, employee error, misrepresentation of third parties,
unanticipated changes changes in financial markets, or imprudent
actions by employees of the Agency. Controls deemed most important
include: control of collusion, separation of duties, separating
transaction authority from accounting and recordkeeping, custodial
safekeeping, clear delegation of authority, specific limitations
regarding securities losses and remedial action, written confirmation
of telephone transactions, minimizing the number of authorized
Investment Officials, documentation of transactions and strategies, and
code of ethics.
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