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HomeMy WebLinkAboutR38-Economic Development Agency ECONOMIC DEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO REQUEST FOR COMMISSION/COUNCIL ACTION FROM: BARBARA LIIVDSETH SUBJECT: ANNUAL STATEMENT OF Administrative Services Director INVESTMENT POLICY DATE: December 8,1999 _ _ _ 0RI_G_ !OVAL Svnooeis of Prevbes Commiwlon/CouncWCommittee Adfon(a): On December 21,1998, the Community Deve?opment Commission adopted the Agency's Annual 3tatemeM of Investment Policy for the year 1999. R mew Motion(sl: (Community Development Commbsbnl MOTION: RESOLUTION OF THE COMMUNITY DEVELOPMENT COMMISSION OF THE CITY OF SAN BERNARDIIVO, CALIFORNIA, ADOPTING THE ECONOMIC DEVELOPMENT AGENCY'S ANNUAL STATEMENT OF INVESTMENT POLICY FOR THE YEAR 2000. Comact Person(s): Barbara Lindsath Phone: 50 I Project Area(s): All Ward(s): ~ Supporting Data Attachod:®StaffRaport ? Reso?ution(s) p Agreemem(s)/Contrsa(s) ? Map(s) ? Ltr/Mamo FUNDING REQUIItEMENTS: Amoum: None Source: N~ Budget Authority: NA SIGNATURE: / /Gp `~ti.tP4,tct.~'7c/51~ OSDEL Barbera LindseW Ex Director Admin Services Director Commission/Conneil Notea: GVO:BL:Agenda CDC Investmem Policy COMMISSION MEETING AGENDA MEETIlYG DATE:12/ZO/99 Agenda Item Number: ECONOMIC DEVELOPMENT AGENCY STAFF REPORT ------------------------------------------------------------------------------------------------------------------ Annual Statement of Investment Policy Background Govern~ttt Code Section 53646 requires that the Community Developmem Commission ("Commission's annually adopt a Statement of Investment Policy for the Economic Development Agency. On December 21, 1998, the Commission adopted the Agency's Annual Statement of Investment Policy for the year 1999. Current Issue The Agency's annual "Statement of Investment Polic}~' ("Polic}r~ is attached for the year 2000. The Policy is substantially the same Policy adopted by the Commission for the years 1989 through 1999, and it is essentially 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 idle cash. The Policy outlines the types of inrvestments the Agency may Purchase, which are 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; (h~ liquidity; and, (iu~ Yield. The Agency current invests with the State of California Local Agency Investment Fund (LATE) pool, and with Wells Fargo Bank investment services. The Wells Fargo Bank investments are required as security for the Agency's Wells Fargo Bank Line of Credit. Recommendation That the Commission adopt the Agency's Annual Statement of Investment Policy for the year 2000. ary as Osdel Ea alive Director GV O:BL:Agenda CDC Investment Policy ~ COMMISSION MEETING AGENDA MEETING DATE: 17,RON9 Aseada Item Number. _ C~OG°~~ 1 RESOLUTION NO. 2 RESOLUTION OF THE COMMUNITY DEVELOPMENT COMMISSION 3 OF THE CITY OF SAN BERNARDINO, CALIFORNIA, ADOPTING THE ECONOMIC DEVELOPMENT AGENCY'S ANNUAL STATEMENT OF 4 INVESTMENT POLICY FOR THE YEAR 2000. WHEREAS, on December 21, 1998, the Community Developmern 6 Commission ("Commission") adopted the City of San Bernardino Economic Development Agency's Annual Statement of Investment Policy for the year 1999; 8 and 9 10 WHEREAS, the Commission now deems it desirable to adopt the City of 11 San Bernazdino Economic Development Agency's Annual Statement of 12 Investment Policy for the year 2000. 13 NOW, THEREFORE, BE IT RESOLVED BY THE COMMUNITY © i-1 DEVELOPMENT COMMISSION OF THE CITY OF SAN BERNARDINO, 1~ AS FOLLOWS: 16 17 Section 1. The Commission hereby adopts the City of San Bernardino 1$ Economic Development Agency's Annual Statement of Investment Policy for the 19 Yeaz 2000, as attached hereto. 20 Section 2. This Resolution shall take effect upon the date of its adoption. 21 // 22 // 23 11 24 25 // 26 // © 2? // 28 3 ~' © 1 RESOLUTION OF THE COMMUNITY DEVELOPMENT COMMISSION OF THE CITY OF SAN BERNARDINO, CALIFORNIA, ADOPTING THE 2 ECONOMIC DEVELOPMENT AGENCY'S ANNUAL STATEMENT OF 3 INVESTMENT POLICY FOR THE YEAR 2000. 4 I HEREBY CERTH~'1' that the foregoing Resohrtion was duly adopted by 5 the Community Development Commission of the City of San Bernardino at a 6 meeting thereof, held on the day of , 1999 7 8 by the following vote, to wit: 9 COMMISSION MEMBERS AYES NAYS ABSTAIN ABSENT 10 ESTRADA 11 LIEN 12 MCGINNIS 13 SCHNETZ O 14 15 SUAREZ 16 ANDERSON 17 MILLER 18 19 Secretary 20 The foregoing Resolution is hereby approved this _day of , 1999. 21 22 Judith V apes, Chairperson 23 Community Development Commission of the City of 24 San Bernardino 25 Appm rm gal o ent: 26 By: 27 Ag~7' Counsel 28 I © City of Saa Bernardino ECONOMIC DEVELOPMENT AGENCY Statement of Investment Policy for 2000 I. Purpose This Statement of Investment Policy is intended to provide guidelines for the prudent investment of the Agency's idle cash, and to outline the policies for maidmizing the efficiency of tbe Agency's cash management system The ultimate goal is to enhance the economic status of the Agency whfle protecting its pooled cash and all other fiords under the span of control of the Age>icy. II. Objective The Agency's cash management system is designed to accurately monitor and forecast expenditures sod revenues, thus enabling the Agency to invest funds to the fi~ extent possible. The Agency attempts to obtain the highest yield possible as long as investments meet the criteria established for safety and liquidity. III. Policy 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 judgment 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) Safety Safety and the itiinimizing of risks associated with investments refers to attempts to reduce the potential loss ofprincipal, interest, or a combination of the two. The first level of control is State law, which restricts municipalities to certain investir~nt iiistrutnents. The second level of risk control is the investment m 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 inshvments that have matiuities coinciding with dates of disbursement. The Agency only invests in those instruments that are considered very safe. Economic Development Ag~Y Statement ofInvestment Policy Page 2- b) Liquidity Liquidity is the ability to easily sell investment instruments at a~ time with the minimal risk of losing some portion of principal or interest. Liquidity is an extremely important quality as the Ager~y may have an unexpected need for fiords to be disbursed. Most investments are highly liquid, with the exception of collateralized or insured term certificates of deposit issued by banks. Certificate auttutities 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 posstble 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 Security 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 institut~ns' credit characteristics and financial history throughout the period in which Agency fiords are deposited or invested. ® Economic DevebP~~ AB~y Statement of Investment Poficy Page -3- IV. Investments Authorized investment instruments include: Securities of the United States Governrrrertt and obligation of its agencies; registered treasury notes, bonds, or legal obligations of the State of California; certificates of deposit placed with commercial banks; bankers acceptances; repurchase agreements (to be collateralized at 102%); commercial paper; negotiable certificates of deposit; Local Agency Investment Fund (LAIF) demand deposits; passbook savings account demand deposits; interest bearing demand deposits; and, money-mazket accourrts of acceptable instnmients. Government and agency securities are the highest quality investments available in teens of safety and liquidity. Certificates of deposit, savings accounts, repurchase agreements and bankers acceptar~es aze insured or collateralized. Only . commercial paper with both A-1 Moody's and P-1 Standard and Poor's ratings aze purchased. ® The Agency operates its investment program with many federal, state and self -imposed constraints. It does npt buy stock, or deal in futures, options, derivatives, or security Loan agreerr>ents. 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 and Portfolio Perrentages Investments will be chosen with appropriate maturities so that funds will be available to meet the Agency's cash flow requirements. No investment will be made with a maturity over three (3) years. One exception to the three (3) year maturity limit is investment by tbe Bond Trustee of bond reserve fiords, whereby, it is prudent to match the segregated investment portfolio of the bond reserve fiord with the maturity schedule of an individual bond issue. It is the Agency's fiill intent, at the time of purchase, to hoM all investments until maturity to ensure the return of all im~ested priceipal dollars. Economic Development Agency Statement of Investment Policy Page -4- a) United States Treasury bills, bonds, and notes or those for which the full faith and credit of the United Stated are pledged for payment of principal and interest have no percentage limitation of the portfolio for investment purposes, and are limited to the three (3) year maturity. b) Obligations issued by the Govermrent National Mortgage Association (GNMA), the Federal Farm Credit System (FFCB), the Federal Home Loan Bank Board (FHLB), the Student Loan Marketing Association (SLMA), and the Federal Home Loan Mortgage Association (FIII,MC) have ~ percentage limitation of the portfolio, and are limited to the three (3) year maturity. c) Bills of exchaz?ge or time drafts drawn on and accepted by commercial banks, otherwise known as banker's acceptances, may not exceed 270 days to maturity or 30% of the cost of the portfolio. d) Commercial paper ranked P-1 by Moody's Investor Services or A-1+ by Standard and Poor's, and issued by domestic corporations having assets in excess of $500,000,000 and having an AA or better rating on its long-term O debentures as provided by Moody's or Standard 8c Poor's may not exceed 180 days to maturity nor represent more than 10% of the outstanding paper of the issuing corporation. Purchases of commercial paper may not exceed 1 S% of the cost of the value of the portfolio. e) Negotiable certificates of deposit issued by nationally or state chartered banks or state of federal savings institutions may not exceed 30% of the total portfolio, and the maturity limit of three (3) years is applicable. f) Repurchase agreements may not exceed maturity of 90 days and shall not exceed 10% of the total portfolio. The market value of the securities used as collateral for the repurchase agreements shall not be allowed to fall below 102% of the vahie of the repurchase agreements. g) Locat Agency Investment fund (LATE), which is a State of California managed investment pool, may be used up to the maximum permitted by California State Law. h) Tim deposits, non-negotiable and collateralized in accordance with the California Governrr~nt Code, maybe purchased through banks with no more than 25% of the total investment portfolio. F.co~mx Development Agency . Statem~t of Investment Policy Page -5- i) Various daity cash funds including short-terns money market accounts administered for or by trustees, paying ages and cr~stodial b~enks conhacted by the Ager~y may be purchased as allowed under State of California Government Code. Only firms holding United States Treasury or Government Agency obligations maybe utilized. No more than 20'/0 of the portfolio may be invested m this mamrer. VI. Collateral Requirements Collateral is requ¢ed for investments in certificates of deposit and repurchase agreements. In order to reduce market risk, the collateral level will be at least 102% of market value of principal and accrued interest. In order to conform with the provisions of the Federal l3ankruptcy Code, which provides for liquidation of securities held as collateral, the only securities acceptable as collateral shall be certificates of deposit, commercial paper, eligrble banker's acceptances, medium term notes or securities that are direct obligations of, or are fully guaranteed as to principal and interest by, the United States or any agency of the United States. ® VII. Reporting The Agency shall submit regular investment reports to the legislative body. Required elements of the report shall include: a) Type of investmem b) Institution c) Date of maturity d) Amount of deposit or cost of security e) Current market value with maturity in excess of twelve (12) months f) Rate of interest VIII. Internal Controls A system of internal controls shall be established and documented. The comrols shall be designed to prevent losses of public fiords arisiag from fiaud, employee error, misrepresentation of third parties, unanticipated changes in financial markets, or imprudent actions by employees of the Agency. Controls deemed most important include: control of collusioq separation of duties, separating transaction authority from accounting a~ recordlreepiag, custodial safekeegmg, clear delegation of authority, specific tmoitations regarding securitiesv losses and Economic Devebpmeot Ag~'Y Q Statement of Investment Policy Page -6- remedial action, written confnmation of telephone transactions, minimizing the number of authorized Investment Officials, docrmoentation of transactions and strategies, and code of ethics. I