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HomeMy WebLinkAboutCDC/2010-22 1 RESOLUTION NO. CDC/2010-22 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 INVESTMENT POLICY FOR THE YEAR 2010 5 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 ofInvestment Policy and reaffirmed the policy 11 12 13 for years 2006-2009; and WHEREAS, the Commission now deems it desirable to adopt the City of San Bernardino 14 Economic Development Agency's Annual Statement ofInvestment 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 Section 2. 22 III 23 III 24 III 25 III 26 III 27 III 28 This Resolution shall take effect upon the date of its adoption. 1 6 thereof, held on the 19th day of April 7 Commission Members: Ayes Nays 8 MARQUEZ x 9 DESJARDINS x 10 BRINKER x 11 SHORETT x - 12 KELLEY x 13 JOHNSON ~ 14 MC CAMMACK x 15 16 The foregoing Resolution is hereby approved this c-JtJ7J..I day of April 18 19 1 2 3 4 5 17 CDCj2010-22 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 I HEREBY CERTIFY that the foregoing Resolution was duly adopted by the Community Development Commission of the City of San Bernardino at a j oint regular meeting ,2010, by the following vote to wit: Abstain Absent -,C--;-'-' 2 - CI1:6\~-j Secretary ,2010. ~ atri J. Morris, . erson mumty Development CommIssIOn of the City of San Bernardino 20 21 22 Approved as to Form: 23 24 By: 25 26 27 28 \~-1 fL Agency Cou el 2 CDC/2010-22 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 ofthe 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 1 P:\Agendas\Agenda Attachments\Agenda Attachments\Agrmts-Amend 2010104-19-10 Statement of Investment Policy. doc CDC/2010-22 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 2 P:lAgendaslAgenda AttachmentslAgenda AttachmentslAgrmts-Amend 2010104-19-10 Statement ofInvestment Policy.doc CDC/2010-22 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-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. 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. 3 P:lAgendaslAgenda AttachmentslAgenda AttachmentslAgrmts-Amend 2010104-19-10 Statement of Investment Policy. doc CDCj2010-22 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-l by Moody's Investor Service or A-l+ 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. 4 P:\Agendas\Agenda AttachmentslAgenda AttachmentslAgrmts-Amend 2010104-19-10 Statement of Investment Policy. doc CDC/2010-22 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: "AI" by Moody's Investors Service, or "A+t1 by Standard & Poor's, or "A+t1 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_t1 by Standard & Poor's, or "A_t1 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) ofthe three (3) ratings as follows: "P-l" by Moody's Investors Service, or "A-l+t1 by Standard & Poor's, or "F -1 +t1 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-l " by Moody's Investors Service, or "A-l +" by Standard & Poor's, or "F-l +" 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 "AI" 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 anyone deposit. 5 P:lAgendaslAgenda AttachmentslAgenda AttachmentslAgrmts-Amend 2010\04-19-10 Statement of Investment Policy.doc CDC/2010-22 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 Money 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 6 P:\Agendas\Agenda Attachments\Agenda Attachments\Agnnts-Amend 2010\04-19-10 Statement ofInvestment Policy.doc CDC/2010-22 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 1. 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. 7 P:lAgendaslAgenda AttachmentslAgenda AttachmentslAgrmts-Amend 2010\04-19-10 Statement of Investment Policy.doc