HomeMy WebLinkAboutR38-Economic Development Agency CITY OF SAN BERNARDINO
ECONOMIC DEVELOPMENT AGENCY
FROM: Emil A.Marzullo SUBJECT: AnFMt@*dt*f !#cM6 cMt
Interim Executive Director g'
by:
DATE: April 14,2010 Agenda Item No:
by:
Synopsis of Previous Commission/Council/Committee Action(s)' w rotary
City of San Bernardino
On April 8, 2010, Redevelopment Committee Members Johnson, Brinker and alternate Shorett unanimously voted to
recommend that the Community Development Commission recommended adoption of the Agency's Annual Statement of
Investment Policy for the year 2010.
Recommended Motion(s): - - -
(Community Development Commission)
Resolution of the Community Development Commission of the City of San Bernardino, California, adopting the
Economic Development Agency's Annual Statement of Investment Policy for the year 2010
Contact Person(s): Lori Panzino-Tillery Phone: (909)663-1044
ProjectArea(s): All Ward(s): All
Supporting Data Attached: Q Staff Report 0 Resolution(s)❑Agreement(s)/Contract(s)❑Map(s)❑Letter(s)
FUNDING REQUIREMENTS: Amount: $ -0- Source: N/A
Budget Authority: N/A
Signature: Fiscal Review:
Emil A.WarzuMo,Int cutive Director Lori illery t A inistrative Services
Director
Commission/Council Notes:
i
P:AV d.\C.m De CommM..\CDC2010 19-iDA=W SgrcmeM Oflnvutmem ftiry2010 SIL&c COMMISSION MEETING AGENDA
1 Meeting Date: 04/19/20110
j Agenda Item Number: �V
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ECONOMIC DEVELOPMENT AGENCY
STAFF REPORT
ANNUAL STATEMENT OF INVESTMENT POLICY
BACKGROUND:
Government Code Section 53646 requires that the Community Development Commission
("Commission") annually adopt a Statement of Investment Policy for the Economic Development
Agency. On December 5, 2005, the Commission adopted the Agency's Annual Statement of
Investment Policy and reaffirmed the policy for years 2006-2009.
CURRENT ISSUE:
The Agency's annual "Statement of Investment Policy" ("Policy") is attached for the year 2010. After
review, and no comments or suggested changes, by the Agency's auditors, Rogers Anderson Malody
and Scott (RAMS), the Policy presented for adoption is a substantial update from the previous Policies
adopted by the Commission and the City of San Bernardino. The Policy is used as a guideline for the
efficient placement and monitoring of investments of all funds held by the Redevelopment Agency of
the City of San Bernardino acting as the Economic Development Agency ("Agency") that are eligible
to be invested and to outline the policies for maximizing the efficiency of the Agency's cash
management system. The ultimate objectives of the Agency are to enhance the economic status of the
Agency while protecting its pooled cash and all other funds under the control of the Agency and to
accurately monitor and forecast expenditures and revenues, enabling the Agency to invest funds to the
fullest extent possible and to strive to obtain the highest yield possible as long as investments meet the
criteria established for safety and liquidity.
The final basic premise underlying the Agency's latest proposed investment philosophy is to ensure the
safety of existing funds and ensure consistent availability of same.
The Agency currently invests with the State of California Local Agency Investment Fund ("LAIF")
pool, and with Citizens Business Bank. Funds held by the Bond Trustee are invested in accordance
with approved bond documents.
Under the 2010 Policy, authorized investment instruments shall 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 (to be collateralized at 102%); commercial paper;
negotiable certificates of deposit; LAIF demand deposits; passbook savings account demand deposits;
interest bearing demand deposits; and, money-market accounts of acceptable instruments. Such
authorized instruments, may be limited to a defined percentage of the cost of value of the portfolio
pursuant to the terms of the 2010 Policy. All investments will be limited to maturity dates of no more
than three (3)years, except investments of funds held by the Bond Trustee.
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Agenda Item Number: , W y
Economic Development Agency Staff Report
Agency's Annual Statement of Investment Policy 2010
Page 2
The 2010 Policy shall allow the Agency to encumber the Agency pooled investments as may be
invested from time to time pursuant to the Policy for the purpose of accomplishing other borrowings
and loans utilizing such Agency pooled investments as pledged collateral for such additional loans to
the Agency. The loans secured by the Agency pooled investments shall only be for either project
specific purposes or general working capital loans and lines of credit of the Agency in furtherance of
either the administrative obligations of the Agency or other redevelopment activities of the Agency.
The dollar amount of the Agency pooled investments that may be utilized at any particular time as
collateral for such loans pursuant to the 2010 Policy shall not exceed a dollar amount equal to eighty-
five percent (85%) of then current dollar value of the total Agency pooled investment funds that are
invested at anytime.
ENVIRONMENTAL IMPACT:
None.
FISCAL IMPACT:
None.
Account Budgeted Amount: $0.00 Balance as of: April 14, 2010
Balance after approval of this item: $0.00
RECOMMENDATION.
That the Community Development Commission adopt the attached Resolution.
�L f - —
Emil A. Marzullo, Interim Executive Director
P:UgendaACom D"Co issionkCDC2010 19-10MmmlStdementoflnsvt.WP4 2olosPdon COMMISSION MEETING AGENDA
Meeting Date: 04119t220110
Agenda Item Number: 938
1 RESOLUTION NO.
2
3 RESOLUTION OF THE COMMUNITY DEVELOPMENT COMMISSION
OF THE CITY OF SAN BERNARDINO, CALIFORNIA, ADOPTING THE
4 ECONOMIC DEVELOPMENT AGENCY'S ANNUAL STATEMENT OF
5 INVESTMENT POLICY FOR THE YEAR 2010
6 WHEREAS, Government Code Section 53646 requires that the Community Development
7 Commission ("Commission") annual adopt a Statement of Investment Policy for the City of San
8 Bernardino Economic Development Agency; and
9 WHEREAS, on December 5, 2005,the Commission adopted the City of San Bernardino
10
Economic Development Agency's Annual Statement of Investment Policy and reaffirmed the policy
11
for years 2006-2009; and
12
13 WHEREAS, the Commission now deems it desirable to adopt the City of San Bernardino
14 Economic Development Agency's Annual Statement of Investment Policy for the year 2010.
15 NOW, THEREFORE, THE COMMUNITY DEVELOPMENT COMMISSION OF THE
16 CITY OF SAN BERNARDINO DOES HEREBY RESOLVE, DETERMINE AND ORDER, AS
17 FOLLOWS:
18 Section 1. The Commission hereby adopts the City of San Bernardino Economic
19 Development Agency's Annual Statement of Investment Policy for the year 2010, as attached
20 hereto.
21
22 Section 2. This Resolution shall take effect upon the date of its adoption.
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1
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 2010
4
5 I HEREBY CERTIFY that the foregoing Resolution was duly adopted by the Community
6 Development Commission of the City of San Bernardino at a meeting
thereof, held on the day of ,2010,by the following vote to wit:
7
Commission Members: Ayes Nays Abstain Absent
j 8 MARQUEZ —
9 DESJARDINS _
10 BRINKER _-
11 SHORETT _
12 KELLEY _-
13 JOHNSON
14 MC CAMMACK
15
16
17 Secretary
18 The foregoing Resolution is hereby approved this day of 12010.
19
20 Patrick J. Morns, Chairperson
Community Development Commission
21 of the City of San Bernardino
22 Approved as to Form:
23
24 By:
25 Agency toui ei
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ECONOMIC DEVELOPMENT AGENCY
City of San Bernardino
"2010 Statement of Investment Policy"
I. Purpose
This Statement of Investment Policy (this "Policy') is intended to provide guidelines
for the prudent investment of all funds held by the Redevelopment Agency of the City
of San Bernardino acting as the Economic Development Agency (the "Agency") that
are eligible to be invested, 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 and all other funds
under the control of the Agency.
When investing proceeds from the issuance of bonds and held by the bond
trustee/fiscal agent, the Agency is not limited to the allowable investments identified
in this Policy. Bond Proceeds shall be invested in accordance with the requirements
and restrictions as outlined in the bond documents.
California Government Code requires that the Agency's Investment Policy be
updated on an annual basis.
II. Objective
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.
III. Policy
The Agency adheres to the guidelines 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 minimization of risks associated with investments refer to attempts
to reduce the potential loss of principal, interest, or a combination of the two. The
first level of control is in California State (the "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
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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.
B. Liquidity
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 expected need for funds
to be disbursed.
Most investments are highly liquid, with the exception of collateralized or insured
term certificates of deposit issued 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 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 selected 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.
F. No Commingling of Funds Nor Other Pooled Investments
All Agency funds to be invested pursuant to this Policy are derived from sources
that are unique to the Agency as a Community Development Agency in the State
of California and shall not be commingled with or otherwise pooled with other
investment funds of the City of San Bernardino or any other governmental agency
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or department of the City of San Bernardino. The Agency must maintain the
integrity of the accountability of the special purpose funds that are entrusted to the
Agency to enable the Agency achieve its stated purposes pursuant to the laws of
the State of California in a financially prudent manner.
IV. Investments
Authorized investment instruments shall 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 (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-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-1 Moody's and P-1 Standard and Poor's ratings are purchased.
The Agency operates its investment program with many federal, state and self-
imposed constraints. This Policy prohibits the purchasing of or dealing in stocks,
futures, options, derivatives, security loan agreements, and federal agency securities
that take the form of inverse floaters, range notes, mortgage-backed interest-only
strips, or any floating-rate investment without a floor.
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 Percentages
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 date over three (3) years. An exception to the three (3)year maturity limit is
investments of funds held by the Bond Trustee whereby it is prudent to match the
portfolio of the bond funds with the maturity schedule of the bond issue.
It is the Agency's full intent, at the time of purchase, to hold all investments until
maturity to ensure the return of all invested principal dollars.
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A. United States Treasury bills, bonds and notes or those for which the full faith and
credit of the United States are pledged for payment of principal and interest have
no percentage limitation of the portfolio for investment purposes, but are limited
to the three (3)year maturity.
B. Obligations issued by the Government 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 ("FHLMC") have no percentage
limitation of the portfolio, although the three(3) year maturity is applicable.
C. Bills of exchange or time drafts drawn on and accepted by commercial banks,
otherwise known as banker's acceptances may not exceed 180 days to maturity or
thirty percent(30%)of the cost of the portfolio.
D. Commercial paper ranked P-1 by Moody's Investor Service 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 their long term debentures as
provided by Moody's or Standard and Poor's, may not exceed two hundred
seventy (270) days to maturity nor represent more than 10% of the outstanding
paper of the issuing corporation. Purchases of commercial paper may not exceed
fifteen percent (15%)of the cost of the value of the portfolio.
E. Negotiable certificates of deposit issued by nationally or State chartered banks or
State or Federal savings institutions may not exceed thirty percent (30%) of the
total portfolio, and the maturity limit of three(3) years is applicable.
F. Repurchase agreements may not exceed maturity of ninety (90) days and shall not
exceed ten percent(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
one hundred two percent (102%) of the value of the repurchase agreements.
G. LAIF, which is a State of California managed investment pool,may be used to the
maximum permitted by California State law.
H. Time deposits, non-negotiable and collateralized in accordance with the
California Government Code, may be purchased through banks or savings and
loan associations with no more than two percent (2%) of the total investment
portfolio.
I. Various daily cash funds, including short-term money market accounts
administered for or by trustees, paying agents and custodial banks contracted by
the Agency, may be purchased as allowed under State of California Government
Code. Only funds holding United States Treasury or Government Agency
obligations may be utilized. No more than twenty percent (20%) of the total
portfolio may be invested in this manner.
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J. Municipal Bonds:
Registered treasury notes or bonds of any of the other forty-nine (49) state
governments of the United States, in addition to California, payable solely out of the
revenues from a revenue-producing property owned, controlled, or operated by a state
or by a department, board, agency or authority of any of the other forty-nine(49) state
governments of the United States, in addition to the State of California. Such
securities must have ratings from at least two (2) of the three (3) ratings as follows:
"Al" by Moody's Investors Service, or"A+" by Standard & Poor's, or"A+" by Fitch
Ratings; or as otherwise approved by the Agency.
Registered general obligation treasury notes or bonds of any of the fifty (50) state
governments of the United States. Such securities must have ratings from at least two
(2) of the three (3) ratings as follows: at least "A3" by Moody's Investors Service, or
"A-" by Standard& Poor's, or"A-" by Fitch Ratings; or as otherwise approved by the
Agency.
Adjustable rate registered treasury notes or bonds of any of the fifty (50) state
governments of the United States, including bonds payable solely out of the revenues
from a revenue-producing property owned, controlled, or operated by a state or by a
department, board, agency or authority of any of the other 49 United States, in
addition to the State of California. Such securities must have ratings from at least two
(2)of the three (3) ratings as follows: "P-I"by Moody's Investors Service, or"A-1+"
by Standard & Poor's, or "F-I+" by Fitch Ratings; or as otherwise approved by the
Agency.
Adjustable rate notes or bonds warrants, or other evidences of indebtedness of any
local agency within the State of California with a minimum rating of either "P-1" by
Moody's Investors Service, or "A-1+" by Standard & Poor's, or "F-I+" by Fitch
Ratings, including bonds, notes, warrants, or other evidences of indebtedness payable
solely out of the revenues from a revenue-producing property owned, controlled, or
operated by either the local agency, a department, board, agency, or authority of the
local agency, or of any local agency within the State of California.
Taxable or tax-exempt bonds, notes, warrants, or other evidences of indebtedness of
any local agency within the State of California with a minimum rating of either"Al"
by Moody's Investors Service, or "A+" by Standard & Poor's, or "A+" by Fitch
Ratings (the minimum rating shall apply to the local agency, irrespective of any credit
enhancement), including bonds, notes, warrants, or other evidences of indebtedness
payable solely from the revenues from a revenue-producing property owned,
controlled or operated by either the local agency, a department, board, agency or
authority of the local agency, or of any local agency within the State of California.
K. FDIC-insured Certificates of Deposit:
The principal amount of the investment must be federally insured. No more than the
prevailing FDIC insured coverage amount may be invested with any one deposit.
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Interest on the principal must be paid to the Agency at least annually. The placement
of Certificates of Deposit with local banks that qualify in accordance with
Government Code section 53601(h) is encouraged. The Agency, at its discretion,
may invest a portion of its surplus funds in certificates of deposit at a commercial
bank, savings bank, savings and loan association, or credit union using a private
sector entity to assist in the placement of such certificates, provided that it complies
with Government Code Section 53601.8. Such investments may not exceed in total
fifteen percent (15%) of the Agency's funds invested pursuant to Government Code
Sections 53601.8, 53635.8 and 53601, and shall have a maximum maturity of one
year from the date of the deposit.
L. FDIC-insured Monev Market Accounts:
Federal Deposit Insurance Corporation insured money market savings accounts or
time deposits which are deposited through depository institutions which are
participants of the Money Market Insured Deposit Account Service("MMIDAS").
M. Certain Deeds of Trust:
The Agency may acquire from commercial lenders, banks and other parties certain
promissory notes secured by deeds of trust on properties located within designated
Redevelopment Project Areas of the Agency in furtherance of assisting either the
investment of funds or other redevelopment efforts in any Redevelopment Project
Area of the Agency. The provisions of this subsection M. shall be applicable for a
period of time not to exceed one (1) year from and after the date of adoption of this
amended Policy or shall terminate earlier upon the acquisition by the Agency of one
(1) such promissory note secured by one or more deeds of trust utilizing the
provisions of Section VII. below.
VI. Collateral Requirements
Collateral is required for investments in certificates of deposit and repurchased
agreements. In order to reduce market risk, the collateral level will be at least one
hundred two percent(102%) of market value or principal and accrued interest.
In order to conform with the provisions of the Federal Bankruptcy Code, which
provides for liquidations of securities held as collateral, the only securities acceptable
as collateral shall be certificates of deposit, commercial paper, eligible banker's
acceptances, medium term notes or securities that are direct obligations or, or are
fully guaranteed as to principal and interest by, the United States or any agency of the
United States.
VII. Use of Agency Investment as Collateral for Agency Loans
The Agency may encumber the Agency pooled investments as may be invested from
time to time pursuant to this Policy for the purpose of accomplishing other
borrowings and loans utilizing such Agency pooled investments as pledged collateral
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for such additional loans to the Agency. Such Agency loans as may be secured by the
Agency pooled investments shall be for either project specific purposes or general
working capital loans and lines of credit of the Agency in furtherance of either the
administrative obligations of the Agency or other redevelopment activities of the
Agency. The dollar amount of the Agency pooled investments that may be utilized at
any particular time as collateral for such loans pursuant to this Policy shall not exceed
a dollar amount equal to eighty-five percent (85%) of then current dollar value of the
total Agency pooled investment funds that are invested at anytime in accordance with
this Policy. The market value of such Agency pooled investment funds shall be
determined for compliance purposes as of the date of the pledge as authorized by this
Section VII. The provisions of this Section VII. shall be applicable for a period of
time not to exceed one (1) year from and after the date of adoption of this amended
Policy or shall terminate earlier upon the acquisition by the Agency of one (1)
promissory note secured by one or more deeds of trust utilizing the provisions of
Section V.M. above.
VIII. Reporting
The Agency shall submit regular investment reports to the legislative body. Under
Section 53646 of the California Government Code the required elements of the report
shall include:
a. Type of investment
b. Institution- issuer of investment
C. Cost of investment
d. Par value of investment
e. Market value of investment
f. Source of market information
g. Date of maturity
h. Statement of compliance of the portfolio as to the investment policy
i. Statement as to the ability to meet its expenditure requirement for the next six
(6)months
IX. 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 the third parties, unanticipated 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 record keeping, custodial safekeeping, clear delegation of
authority, specific limitations regarding securities losses remedial action, written
confirmation of telephone transactions, minimizing the number of authorized
investment officials, documentation of transactions and strategies, and code of ethics.
The Executive Director, or designee, shall oversee and authorize all investment
activities pursuant to this Policy.
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