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HomeMy WebLinkAbout12-City Treasurer ORIGINAL CITY OF SAN BERNARDINO - REQUEST FOR COUNCIL ACTION From: DAVID C. KENNEDY CITY TREASURER Subject: 2006/07 Investment Policy Dept: CITY TREASURER Date: May 4, 2006 Synopsis of Previous Council Action: Resolution #2005-156 adopted June 20, 2005 Resolution #2004-228 adopted July 22, 2004 Resolution #2003-194 adopted July 21,2003 Resolution #2002-278 adopted August 21, 2002 Recommended motion: Adopt Resolution ~,c.4 PC) Signature Contact person: David C. Kennedy, City Treasurer Phone: ext. 5221 Supporting data attached: Ward: FUNDING REQUIREMENTS: Amount: Source: (Accl. No.) (Accl. Description) Finance: Council Notes: -Rf50" dOO b -/7L.j lIJJqJOll Jfo. /J- CITY OF SAN BERNARDINO - REQUEST FOR COUNCIL ACTION STAFF REPORT SUBJECT: Resolution of the Mayor and Common Council of the City of San Bernardino acknowledging the Receipt and Filing of the Annual Statement of Investment Policy for the Period July 1, 2006 through June 30, 2007 BACKGROUND: The City Treasurer annually files a Statement of Investment Policy with the Mayor and Common Council. This agenda item requests acknowledgement of receipt and filing of the Annual Policy by the City Treasurer for the fiscal year 2006/2007. FISCAL IMPACT: None RECOMMENDA TION~ Adopt Resolution. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 RESOLUTION NO. RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO ACKNOWLEDGING THE RECEIPT AND FILING OF THE ANNUAL STATEMENT OF INVESTMENT POLICY FOR THE PERIOD JULY 1, 2006 THROUGH JUNE 30, 2007. BE IT RESOLVED BY THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO AS FOLLOWS: SECTION 1. The City Treasurer of the City of San Bernardino declares the annual Statement of Investment Policy is as set forth in Exhibit "A", attached hereto and incorporated herein by this Reference as though fully set forth at length. SECTION 2. An annual Statement of Investment Policy for the City of San Bernardino has been filed by the City Treasurer for the period 7/1/2006 through 6/30/2007. III III III III III III III III III Ylo. (2. ~ 1(1 /CJ6 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 2 3 4 5 6 7 8 RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERc'lARDINO ACKNOWLEDGING THE RECEIPT AND FILING OF THE ANNUAL STATEMENT OF INVESTMENT POLICY FOR THE PERIOD JULY 1, 2006 THROUGH JUNE 30, 2006. I HEREBY CERTIFY that the foregoing Resolution was duly adopted by the Mayor meeting thereof, and Common Council of the City of San Bernardino at a 9 held on the , 2006, by the following vote, to wit: day of 10 Council Members: AYES NAYS ABSTAIN ABSENT ESTRADA BAXTER MCGINNIS DERRY KELLEY JOHNSON MCCAMMACK City Clerk The foregoing Resolution is hereby approved this day of 2006. Patrick J. Monis, Mayor City of San Bernardino Approved as to Form: JAMES F. PENMAN, City Attorney By: .[}a..~ /: / ! , ! 'J~/} re, I . ,i I'V'\......--c:--..._ " INVESTMENT POLICY 1.0 Policy It is the policy of the City of San Bernardino to invest public funds in a manner which provides the highest investment return with the maximum security safety, while meeting the daily cash flow demands of the City of San Bernardino. Investments will be made in conformity to the California Government Code, Sections 53601 through 53659 and approved by the City Council of the City of San Bernardino. 2.0 Scope The investment policy applies to all financial assets of the City of San Bernardino, as accounted for in the Comprehensive Annual Financial Report and include: Funds: General Fund Special Revenue Funds Debt Service Funds Capital Projects Funds Enterprise Funds Internal Service Funds Agency Funds 3.0 Prudence Investments shall be made with 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. 3.1 The standard of prudence to be used by investment officials shall be the "prudent person" and/or "prudent investor" standard and shall be applied in the context of managing an overall -1- portfolio. Investment officers acting in accordance with written procedures and the investment policy and exercising due diligence shall be relieved of personal responsibility for an individual security's credit risk or market price changes, provided deviations from expectations are reported in a timely fashion and appropriate action is taken to control adverse developments. 3.2 It is the City's full intent, at the time of purchase, to hold all investments until maturity to ensure the return of all invested principal dollars. 4.0 Objectives Pursuant to Government Code Sec. 53600.5 which states "When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, the primary objective of a trustee shall be to safeguard the principal of the funds under its control. The secondary objective shall be to meet the liquidity needs of the depositor. The third objective shall be to achieve a return on the funds under its control. 4. I Safety: Safety of principal is the foremost objective of the City of San Bernardino. Each investment transaction shall seek to ensure that capital losses are avoided, whether from securities default, broker-dealer default or erosion of market value. To attain this objective, the City of San Bernardino will diversify its investments by investing funds among a variety of securities offering independent returns and financial institutions. Further, City shall seek to preserve principal by mitigating these two types of risk- credit risk and market risk. 4.2 Liquidity: The City of San Bernardino's investment portfolio will remain sufficiently liquid to enable the City of San Bernardino to meet all operating requirements which might be reasonably anticipated. 5.0 Delegation of Authority Authority to manage the City of San Bernardino's investment program is derived from Resolution No. 91-212 of the City of San Bernardino 2 approved on June 4, 1991 and the Charter of the City of San Bernardino. Such authority is given to the City Treasurer. Daily management responsibility for the investment program is hereby delegated to the Deputy City Treasurer who shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinate officials, and their procedures in the absence of the City Treasurer. 5.1 Investment Procedures: The City Treasurer shall establish written investment policy procedures for the operation of the investment program consistent with this policy. The procedures should include reference to safekeeping, wire transfer agreements, banking service contracts, and collateral! depository agreements. Such procedures shall include explicit delegation of authority to persons responsible for investment transactions. No person may engage in an investment transaction except as provided under the terms of this policy and the procedures established by the City Treasurer. 6.0 Ethics and Conflicts of Interest: Officers and employees involved in the investment process shall refrain from personal business activity that conflicts with proper execution of the investment program, or impairs their ability to make impartial investment decisions. Additionally, the City Treasurer is required to annually file applicable financial disclosures as required by the Fair Political Practices Commission (FPPC). 7.0 Authorized Financial Dealers and Institutions: The City Treasurer will maintain a list of financial institutions and approved broker/dealers selected pursuant to Section 53601.5.,which states that any investment not purchased directly from the issuer, shall be purchased either from an institution licensed by the state as a broker/dealer, or from a member of a federally regulated securities exchange, from a national or state-chartered bank, from a federal or state association or from a brokerage firm designated as a primary government dealer by the Federal Reserve Bank. These may include "primary" dealers or regional dealers. No public deposit shall be made except in a qualified public depository as established by state laws. 3 Additionally, all financial institutions and broker/dealers who desire to become qualified bidders for investment transactions must supply the treasurer with the following: 7.1 Audited financial statements 7.2 Proof of National Association of Security Dealers certification 7.3 Proof of state registration 7.4 Certification of having read entity's investment policy and depository contracts The Treasurer will conduct an annual review of the qualified bidders. 8.0 Authorized & Suitable Investments: The City of San Bernardino is empowered by statute to invest in the following securities: 8.1 United States Treasury notes, bonds, bills, or certificates of indebtedness, or those for which the faith and credit of the United States are pledged for the payment of principal and interest. Portfolio percentage: 100% 8.2 Federal agency or United States government-sponsored enterprise obligations, participations, or other instruments, including those issued by or fully guaranteed as to principal and interest by federal agencies or United States government-sponsored enterprises, including callables. There is no percentage limitation of the portfolio, which can be invested in this category, although a 5-year maturity limitation is applicable. 8.3 Bills of exchange or time drafts drawn on and accepted by a commercial bank, otherwise known as bankers acceptances. Purchases of banker's acceptances may not exceed 180 days to maturity nor exceed 40% of the agency's surplus funds, which may be invested pursuant to this section. However, no more than 30% of the agency's surplus funds may be invested in the banker's acceptances of anyone commercial bank pursuant to this section. 8.4 Commercial paper of "prime" quality of the highest ranking or of the highest letter and numerical rating as provided for by Moody's Investors Service, Inc., or Standard and Poor's Corporation. 4 Purchases of eligible commercial paper may not exceed 25% of the agency's surplus money. Purchases of eligible commercial paper may not exceed 270 days to maturity. 8.5 Negotiable certificates of deposit issued by a nationally or state- chartered bank or a savings association or federal association or a state or federal credit union or by a state-licensed branch of a foreign bank. Purchases of negotiable certificates of deposit may not exceed 30% of the agency's surplus money, which may be invested pursuant to this section. A maturity limitation of five years is applicable. 8.6 Time deposits, non-negotiable and collateralized in accordance with the California Government Code, may be purchased through banks or savings and loan associations. Since time deposits are not liquid, no more than 25% of the cash surplus may be invested in time deposits. 8.7 Medium-term notes, defined as all corporate and depository institution debt securities with a maximum remaining maturity of 5 years or less, issued by corporations organized and operating within the United States or by depository institutions licensed by the United States or any state and operating within the United States. Securities eligible for investment shall be rated AA or better by Moody's or Standard & Poor's rating services. Purchase of medium tern1 notes may not exceed 30% of the surplus cash and no more than 15% of the market value of the portfolio may be invested in notes issued by one corporation. Commercial paper holdings should also be included when calculating the 15% limitation. 8.8 Any mortgage passthrough security, collateralized mortgage obligation, mortgage-backed or other pay-through bond, equipment lease-backed certificate, consumer receivable pass through certificate, or consumer receivable-backed bond of a maximum of 5 years maturity, having an "A" or higher rating for the issuer's debt and rated in a rating category of "AA" or equivalent or better by a nationally recognized rating service. Authorized securities may not exceed 20% of the agency's surplus money. 8.9 Various daily cash funds including short-term money market accounts administered for or by trustees, paying agents and custodian banks contracted by the City of San Bernardino may be purchased as allowed under State of California Government Code. 5 Only funds holding U. S. Treasury or government agency obligations can be utilized. 9.0 Local Agency Investment Fund (LAIF): State of California managed investment pool, may be used up to the maximum permitted by California State Law. 10.0 Maximum Maturities: To the extent possible, the City of San Bernardino will attempt to match its investments with anticipated cash flow requirements. Unless matched to a specific cash flow, the City of San Bernardino will not directly invest in securities rnaturing more than five years from the date of purchase. Such an investment will only be made with Council approval. Reserve funds may be invested in securities exceeding five years if the maturity of such investments is made to coincide as nearly as practicable with the expected use of the funds. 10.1 The city will attempt to balance maturities, at the time of investment, in accordance with the following guidelines: Maturity Range I day to 364 days I year to 2 years 2 years to 3 years 3 years to 4 years 4 years to 5 years Percentage of Surplus Cash 10 to 50% o to 50% o to 50% o to 50% o to 50% 11.0 Diversification The City of San Bernardino will diversify its investments by security type and institution. 6 The following summary of maximum percentage limits, by instrument, are established for the City of San Bernardino's total portfolio: Investment Tvpe Local Agency Investment Fund U.S. Treasury Bonds/Notes/Bills U. S. Government Agency Obligations U. S. Government Agency Callables Bankers' Acceptance Commercial Paper Negotiable Certificates of Deposit Time Certificates of Deposit Medium Term Corporate Notes Cash funds and Money Market accounts Passbook savings/demand deposits Mortgage Pass Through Securities 12.0 Safekeeping and Custody: $40,000,000 100% 100% 75% 40% 25% 30% 25% 30% 20% 20% 20% All security transactions entered into by the City of San Bernardino shall be conducted on a delivery-versus-payment (DVP) basis. Securities will be held by a third party custodian designated by the Treasurer and evidenced by safekeeping receipts. 13.0 Internal Controls: The Treasurer shall establish an annual process of independent review by an external auditor. This review will provide internal control by assuring compliance with policies and procedures. 14.0 Reporting The Treasurer shall provide the Mayor, City Manager, Finance Director, City of San Bernardino Water Finance Director, City Attorney, City Clerk, and City Council quarterly investment reports which provide a clear picture of the status of the current investment portfolio. Schedules in the monthly report should include the following: 7 . A listing of individual securities held at the end of the reporting period by authorized investment category. . A verage life and final maturity of all investments listed. . Coupon, discount or earnings rate . Par value, Amortized Book Value and Market Value . Percentage of the Portfolio represented by each investment category 15.0 Investment Policy Adoption: The City of San Bernardino's investment policy shall be adopted by resolution of the City Council. The policy shall be reviewed annually by the City Council and any modifications made thereto must be approved by the City Council. 16.0 Portfolio Management Activity: The City of San Bernardino's investment program shall seek to augment returns consistent with the intent of this policy, identified risk limitations and prudent investment principles. 17.0 Interest Earnings All moneys earned and collected from investments authorized in this policy shall be allocated monthly to various fund accounts based on the cash balance in each fund as a percentage of the entire pooled portfolio. 8 ** FOR OFFICE USE ONLY - NOT A PUBLIC DOCUMENT ** RESOLUTION AGENDA ITEM TRACKING FORM Meeting Date (Date Adopted): (P i J Cj I () ltJ Item # MId-... Resolution # Je)()fo - J1 !IJ Vote: Ayes ~J J "Ii ~ -1:7 Abstain -A- Absent / "f--(p Change to motion to amend original documents D Companion Resolutions N ulllV oid After: days / Resolution # On Attachments: D Note on Resolution of attachment stored separately: D PUBLISH D POST D RECORD W/COUNTY D By: 0,""'00 "->= ~ ~ Date of Mayor's Signature: ' '. /J Date ofClerk/CDC Signature: I; 1J-8--) fJG, , Reso. Log Updated: ~ Seal Impressed: .a Reso. # on Staff Report-/sJ Date Memo/Letter Sent for Signature: I" Reminder Letter Sent: Date Returned: 2'. Reminder Letter Sent: Not Returned: D Request for Council Action & Staff Report Attached: Updated Prior Resolutions (Other Than Below): Updated CITY Personnel Folders (6413, 6429, 6433,10584,10585,12634): Updated CDC Personnel Folders (5557): Updated Traffic Folders (3985, 8234, 655, 92-389): Yes~ No By_ Yes No 7 By_ Yes No~ By_ Yes No V By_ Yes N07 By_ Copies Distributed to: Animal Control D EDA City Administrator D Facilities City Attorney ~ 'i:ttYlIIJ Finance Code Compliance D Fire Department Development Services D Human Resources Others: ~\w -\\1: Ct~---1N 00jAJI.j!\ ) D D Public Services Water Department D D D D D D Information Services D Parks & Recreation ~ V~(c\Police Department Notes: Ready to File: _ Date: Revised 12/18/03