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Home My WebLink About05- Development Department D E V E L O P M E N T D E P A R T M E N T OF THE CITY OF SAN BERNARDINO REQUEST FOR COMMISSION/COUNCIL ACTION From: KENNETH J. HENDERSON Subject: INVESTMENT POLICY Executive Director Date: December 7, 1993 ------------------------------------------------------------------------------- Synopsis of Previous Commission/Council/Committee Action(s): On January 22, 1990, the Community Development Commission adopted the annual Statement of Investment Policy for the year 1990. On December 17, 1990, the Community Development Commission adopted the annual Statement of Investment Policy for the year 1991. On December 16, 1991, the Community Development Commission adopted the annual Statement of Investment Policy for the Year 1992. I On February 15, 1993, the Community Development Commission adopted the annual Statement of Investment Policy for the Year 1993. ------------------------------------------------------------------------------- Recommended Motion(s): � (Community Development Commission) MOTION: That the Community Development Commission approve and adopt the Development Department's Annual Statement of Investment Policy for the year 1994. Administrator KENNETH J. #ENDERSON Executive Director ------------------------------------------------------------------------------- Contact Person(s) : Ken Henderson/Barbara Lindseth Phone: 5081 Project Area(s) : All Ward(s): 1 - 7 Supporting Data Attached: _ Staff Report; Statement of Investment Policy FUNDING REQUIREMENTS: Amount: $ N/A Source: N/A Budget Authority: N/A ------------------------------------------------------------------------------- Commission/Council Rotes: ------------------------------------------------------------------------------- KJH:bjl:1888A COMMISSION MEETING AGENDA Meeting Date: 12/20/19C9�3 Agenda Item Number: _I D E V E L O P M E N T D E P A R T M E N T OF THE CITY OF SAN BERNARDINO STAFF REPORT -------------------------------------------------------------------------------- Investment Policy Government Code Section 53646 requires that the Community Development Commission annually approve a Statement of Investment Policy for the Economic Development Agency, Development Department. Attached, is the Development Department's "Statement of Investment Policy" for the year 1994. The proposed policy is the same policy adopted by the Commission for the years 1989, 1990, 1991, 1992, and 1993. This policy is used as a guideline for the efficient placement and monitoring of investments by outlining the types of investments the Development Department 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 risk on same. The criteria for selecting investments, and the order of priority are: (i) safety; (ii) liquidity, and; (iii) yield. On December 9, 1993, the Redevelopment Committee considered this matter and recommended to the Community Development Commission approval of JeN same. Staff recommends adoption of the form motion. L,� aw5 KENNETH J. NDERSON, Executive Director Development Department KJH:bjl:1888A COMMISSION MEETING AGENDA Meeting Date: 12/20/1993 I Agenda Item Number: ECONOMIC DEVELOPMENT AGENCY DEVELOPMENT DEPARTMENT OF THE CITY OF SAN BERNARDINO "Statement of Investment Policy" I. Purpose This Statement is intended to provide guidelines for the prudent investment of the Development Department's temporary idle cash, and outline the policies for maximizing the efficiency of the Development Department's cash management system. The ultimate goal is to enhance the economic status of the Development Department while protecting its pooled cash. II. Ob_i ective The Development Department's cash management system is designed to accurately monitor and forecast expenditures and revenues, thus enabling the Development Department to invest funds to the fullest extent possible. The Department attempts to obtain the highest yield obtainable as long as investments meet the criteria established for safety and liquidity. III. Policy The Development Department operates its temporary pooled idle cash investments under the prudent man rule (Civil Code Section 2261, et seq) . This affords the Department a broad spectrum of investment opportunities, so long as the investment is deemed prudent and is allowable under current legislation of the State of California and other imposed legal restrictions. A) Safety- 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 Development Department only invests in those instruments that are considered very safe. DEVELOPMENT DEPARTMENT Statement of Investment Policy Page - 2 - 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 Development Department may have an unexpected need for funds to be disbursed. A 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 Development Department 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 guideline and strategy are adhered to. 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-1 Moody's and P-1 Standard and Poor's ratings are purchased. DEVELOPMENT DEPARTMENT Statement of Investment Policy Page - 3 - The Development Department 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 Development Department 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 Development Department'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 funds will be available to meet the Department's cash flow requirements. No investment will be made with a maturity over three years. VI. Reporting The Department 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 VII. 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 Department. Controls deemed most important include: control of collusion, separation of duties, separating DEVELOPMENT DEPARTMENT Statement of Investment Policy Page — 4 — 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. 0988A