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HomeMy WebLinkAboutR35-Economic Development Agency . , . ECONOMIC DEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO REOUEST FOR COMMISSION/COUNCIL ACTION DATE: January 24, 2002 SUBJECT: ANNUAL STATEMENT OF INVESTMENT POLICY COr(1"' dILl, t 0-\.-', , ~ m-L FROM: Barbara Lindseth Administrative Services Director --_.._----------------------------------------------.------------------------------.-.---------_._---_._----------------------------------- Synopsis of Previous Commission/Couneil/Committee Action(s): On December 4, 2000, the Community Development Commission adopted the Agency's Annual Statement of Investment Policy for the year 2001. Recommended Motion(s): (Community Develonment Commission) MOTION: RESOLUTION OF THE COMMUNITY DEVEWPMENT COMMISSION OF THE CITY OF SAN BERNARDINO, CALIFORNIA, ADOPTING THE ECONOMIC DEVELOPMENT AGENCY'S ANNUAL STATEMENT OF INVESTMENT POLICY FOR THE YEAR 2002. Contact Person(s): Barbara Lindseth Phone: 663-1044 Project Area(s): All Ward(s): All Supporting Data Attached:1l!I Staff Report IJ Resolution(s) 0 Agreement(s)/Contract(s) 0 Map(s) 0 LtrlMemo FUNDING REQUIREMENTS: Amount: None Source: NA Budget Authority: NA SIGNATURE: 7 ~ f " lL CL< '^-~7j~ 'zI, Barbara Lindseth Admin Services Director Commission/Council Notes: _~~_s;:~_~J~~~_:L________________________________________-------------------------------------------- GVO:BL:Agenda CDC Investment Policy COMMISSION MEETING AGENDA MEETING DATE: 2/19/02 Agenda Item Number: 1(35" ECONOMIC DEVELOPMENT AGENCY STAFF REPORT -----------------------------------------------------------------------------------------------.------------------ Annual Statement ofInvestment Policv Background Government Code Section 53646 requires that the Community Development Commission ("Commission") annually adopt a Statement ofInvestment Policy for the Economic Development Agency. On December 4, 2000, the Commission adopted the Agency's Annual Statement of Investment Policy for the year 200 I. Current Issue The Agency's annual "Statement ofInvestment Policy" ("Policy") is attached for the year 2002. After review and comments by the Agency's auditors, Conrad and Associates, the Policy presented for adoption is substantially the same Policy as adopted by the Commission for the years 1989 through 2001, and it is essentially the same Policy adopted by the City of San Bernardino. The Policy is used as a guideline for the efficient placement and monitoring of investments of idle cash. The Policy outlines the types of investments the Agency may purchase, which are the same types of investments allowed under the City's Policy, while stressing the importance ofmaximizing the yield earned on all investments and minimizing the risks. The criteria for selecting investments, and the order of priority, are: (i) safety; (ii) liquidity; and, (ill) yield. The Agency current invests with the State of California Local Agency Investment Fund (LAlF) pool, and with Wells Fargo Bank investment services. Funds held by the Bond Trustee are invested in accordance with approved bond documents. Recommendation That the Commission adopt the Agency's Annual Statement ofInvestment Policy for the year 2002. /' J .} "6 flC4 r.;' eM," =-=./; ? ~ Is-< "7 Barbara Lindseth Administrative Services Director GVO:BL:Agenda CDC Investment Policy COMMISSION MEETING AGENDA MEETING DATE: 2/19/02 Agenda Item Number: , e e e 15 16 Iii 18 19 20 21 22 23 24 25 26 27 28 ~~~w I RESOLUTION NO. 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 2002. WHEREAS, on December 4, 2000, the Community Development Commission ("Commission") adopted the City of San Bernardino Economic Development Agency's Annual Statement ofInvestment Policy for the year 2001; and WHEREAS, the Commission now deems it desirable to adopt the City of San Bernardino Economic Development Agency's Annual Statement of Investment Policy for the year 2002. NOW, THEREFORE, BE IT RESOLVED BY THE COMMUNITY DEVELOPMENT COMMISSION OF THE CITY OF SAN BERNARDINO, AS FOLLOWS: Section 1. The Commission hereby adopts the City of San Bernardino Economic Development Agency's Annual Statement ofInvestment Policy for the year 2002, as attached hereto. Section 2. This Resolution shall take effect upon the date of its adoption. II II II II II II --; I(.3D Z/;C; !IJ^ , . ECONOMIC DEVELOPMENT AGENCY City of San Bernardino "2002 Statement ofInvestment Policy" I. Pu rpose This Statement ofInvestment Policy (the "Policy") is intended to provide guidelines for the prudent investment of the Economic Development Agency's (the "Agency") idle cash, 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 span of 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. e 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: e 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") 1 . 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 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 tit In selected fmancial 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 fmancial history throughout the period in which Agency funds are deposited or invested. 2 e IV. Investments Authorized investment instruments shall include: Securities of the United States Government and obligations ofits 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. e 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. e 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 3 e 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 30% of the cost of the portfolio. D. Commercial paper ranked P-I by Moody's Investor Service or A-I+ 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 270 days to maturity nor represent more than 10% of the outstanding paper of the issuing corporation. Purchases of commercial paper may not exceed 15% of the cost of the value of the portfolio. e E. Negotiable certificates of deposit issued by nationally or State chartered banks or State or 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 of90 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 value of the repurchase agreements. G. Local Agency Investment Fund (LAIF), which is a State of California managed investment poo~ 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 2% of the total investment portfolio. e 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 20% of the total portfolio may be invested in this manner. 4 . e 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 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. Reporting a. b. c. e d. e. f. g. h. 1. 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: Type of investment Institution- issuer of investment Cost of investment Par value of investment Market value of investment Source of market information Date of maturity Statement of compliance of the portfolio as to the investment policy Statement as to the ability to meet its expenditure requirement for the next six (6) months VIII. Internal Controls e 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 [mancial 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 Administrative Services Director, or designee, shall oversee investment activities. 5 . , . ** FOR OFFICE USE ONLY - NOT A PUBLIC DOCUMENT ** RESOLUTION AGENDA ITEM TRACKING FORM Meeting Date (Date Adopted): 2 - \ 9-o;L Item # Vote: Ayes \- 'I Nays k 12. 3-5 Resolution # Abstain -D- COC!?((1? - 9 ( Absent .+:r Change to motion to amend original documents: ~ Reso. # On Attachments: ~ Contract term: - Note on Resolution of Attachment stored separately: =- Direct City Clerk to (circle I): PUBLISH, POST, RECORD W/COUNTY NulINoid After: .- By: - Date Sent to Mayor: 2-Z0-<07- Date of Mayor's Signature: ;)<)0..0;;; Date ofClerk/CDC Signature: J--;? \'-'0;). Reso. Log Updated: ,/'" Seal Impressed: Date Memo/tetter "ent for Signature: 60 Day Reminder Letter Sent on 30th day: 90 Day Reminder Letter Sent on 45th day: See Attached: Date Returned: - SeG A tt!'lc:hed: See Attached: Request for Council Action & Staff Report Attached: Updated Prior Resolutions (Other Than Below): Updated CITY Personnel Folders (64\3, 6429, 6433, 10584, 10585, 12634): Updated CDC Personnel Folders (5557): Updated Tr"-ffic Folders (~85, 8234, 655, 92-389): YesL No Yes No~ Yes No --..L Yes ,/ N07 Yes No Copies Distributed to: City Attorney Parks & Rec. Code Compliance Dev. Services EDA r' Finance Police Public Services Water. Others: MIS Notes: BEFORE FILING, REVIEW FORM TO ENSURE ANY NOTATIONS MADE HERE ARE TRANSFERRED TO THE YEARLY RESOLUTION CHRONOLOGICAL LOG FOR FUTURE REFERENCE (Contract Term, etc.) Ready to File: ~ Date: )-)~D;; Revised 01/12/01