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Home My WebLink AboutCC 12 INVEST POLICY 02-19-91ys err i a 9r. A 'f .f • ;� -)ATE: TO: FROM: SUBJECT: FEBRUARY 14, 1991 WILLIAM A. HUSTON, CITY MANAGER CONSENT CALENDAR NO. 12 2-19-91 " Inter - Com RONALD A..NAULT, DIRECTOR OF FINANCE PROPOSED CHANGES TO THE CITY OF TUSTIN INVESTMENT POLICY RECOMMENDATION: Adopt the attached City of Tustin Statement of Investment Policy for the fiscal year 1990-91 as recommended by the City of Tustin Audit Committee. DISCUSSION: The Statement of Investment Policy that we are presently operating under was adopted by the City Council in June, 1990. Members of the City's Audit Committee have been monitoring the present economic conditions in the context of potential impacts on the investment environment. The Audit Committee has proposed changes to the Policy and presented them to the Council at their joint meeting held on January 28, 1991. The proposed changes are in Section II, Guidelines, and are directed at subsection 5., Investment Limitations. Page three of the attached policy has been highlighted to show the changes. The primary concern is with non-insured deposits, the term of Commercial Paper purchases and the addition of the Orange County Treasury Co -mingled Pool as an authorized investment alternative. Ronald A. Nault Director of Finance Attachment RAN: 1s a:invstmnt.cc ��Y O G � City of Tustin Department of Finance CITY OF TUSTIN STATEMENT OF INVESTMENT POLICY FOR THE FISCAL YEAR 1990-1991 I. GENERAL 1. Safety. It is the primary duty and responsibility of the City, City Council, City Treasurer and Director of Finance at all times to protect, preserve and maintain intact the principal placed in trust with the City on behalf of the citizens of the community. 2. Liquidity. An adequate percentage of the portfolio shall be maintained in liquid, short-term securities which can be converted to cash as necessary to meet disbursement requirements. 3. Yield. Yield is to be a consideration only after the basic requirements of adequate safety and liquidity have been met. 4. Legal Investment Authority. Temporarily idle monies shall be invested in accordance with State and local laws and regulations and this Statement of Investment Policy. 5. Statement of Investment Policy. Each year after review and report by the Audit Committee, the Treasurer shall submit to the City council a proposed Statement of Investment Policy for Council consideration and adoption as submitted, or as revised by the City Council. 6. Cash Purchase Only. Securities shall not be purchased on margin, credit or for other than full cash payment and shall not be pledged as collateral. 7. Repurchase Agreements. Funds shall not be invested in repurchase or'reverse repurchase agreements of any kind. S. Selling Securities Prior to Maturity. Generally losses will be acceptable on a sale before maturity if the reinvested proceeds will earn income with a present value greater than the present value of the income that would have been generated by the old investment, considering any capital loss or forgone interest on the original investment. 300 Centennial Way • Tustin, California 92680 • (714) 544-8890 9. Monthly Report. The Treasurer or Chief Fiscal Officer shall render a monthly report to the City Manager and the City Council, which states its relationship to the Statement of Investment Policy. This report is filed with the Chief Executive and the Governing Body. Sample attached, Exhibit I. Required elements of the monthly report are as follows: a. Type of investment b. Institution c. Date of maturity d. Amount of deposit or cost of the security e. Current market value of securities with maturity in excess of twelve months f. Rate of interest g. Statement relating the report to the Statement of Investment Policy h. Statement that there are sufficient funds to meet the next 30 days' obligations II. GUIDELINES. The following directions and limitations are hereby established to direct and control investment activities in such a manner that above -stated goals are achieved. 1. Investment Transactions. Every investment transaction shall be reviewed, authorized and documented by the Treasurer. 2. Pooled Cash. Wherever practical, the City's cash shall be consolidated into one bank account and invested on a pooled concept basis. Interest earnings shall be allocated according to fund cash and investment balances. 3. Competitive Bids. Purchase and sale of securities shall be made on the basis of competitive offers and bids whenever practical. 4. Cash Forecast. The cash flow for the City shall be analyzed with the receipt of revenues and maturity of investments scheduled so that adequate cash will be available to meet disbursement requirements. . S. Investment Limitations. Security purchases, deposits and holdings shall be maintained within statutory limits imposed by the California Government Code and shall include only the following: 2 a. Certificates of deposit (or time deposits) of less than $100,000 may be placed with commercial banks, savings and loan institutions and federally insured industrial loan companies (with a percentage of equity to assets of not less than 3.0 percent to the extent they are fully insured by the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation as required by the Government code. Deposits in excess of $100,000 may be made based on a full evaluation of financial soundness of the depository and approved collateral at the required percentage of market value in accordance with California Government Code Section 53651 and 53652. Evaluation of financial soundness shall be based on a minimum equity to asset ratio of three (3) t $100 million of assets pereent minimum; co - Thued.. profitability based on the latest quarter-end/year-to-date FHLB Reports; and external rating service rating of A or better, er its n A�^f71 l T7^� 1 en �� - -�--_ AiAW.e MeedRyeps g,QITC, etc. yes; Findley' The maximum depos ��,: `*per : *ristitution shall not :....... :.:..:.:..::.::::::..:..:.:::: : 1 million exceed 1e:<:1 .................. non-insured deposits sail not exceed ten (10) percent of invested funds and limited to a maximum maturity of t*ieG years. b. Prime quality Commercial Paper, highest letter and numerical long term debt ratings by Moody's or Standard and Poors, AA or equivalent, but not to exceed twenty-five (25) percent of invested funds At- t-hP time of purchase and limited to a maximum C. Local Agency Investment Fund (State Pool), :fir .. c�Ir-A rte..: (Count County emand deposits. d. Commercial Bank Time Drafts (Banker's Acceptances), highest letter and numerical long term debt ratings by Moody's or Standard and Poors, AA or equivalent, but not in excess of twenty-five percent (25%) of invested funds at the time of purchase with a maximum maturity of one hundred and eighty (180) 3 days. e. Medium Term Notes of a maximum maturity of five (5) years issued by corporations organized and operating within the U.S. or by depository institutions licensed by the U.S. or any State, and operating within the U.S. Notes eligible for investment under this subdivision shall have a long term debt rating of AA or its equivalent by Moody's or Standard and Poors. Purchases may not exceed ten percent (10%) of invested funds at the time of purchase. f. Federal Agency bonds or notes, but not in excess of twenty-five percent (25%) of invested funds at time of purchase with a maximum maturity of five (5) years. g. Treasury bills , bonds or notes not exceeding five (5) years to final maturity. 6. Liquidity. The marketability (salability) of a security shall be considered at the time of purchase, as the security may have to be sold at a later date to meet an unanticipated cash demand. 7. Long -Term Maturities. As a general rule, long-term maturities shall not represent a significant percentage of the total portfolio, as the principal risk involved can outweigh the potential for higher earnings. In no event shall any investment have a term longer than five (5) years and, at the time of purchase, holdings with maturities greater than one (1) year shall not exceed 15 percent (15%) of the total portfolio. 8. Authorized Dealers/Brokers. Investments shall be transacted only through brokers/dealers which have been reviewed by the Finance Director for reliability, credit worthiness and trustworthiness. 9. Diversification. The portfolio shall consist of a mix of the various types of securities approved by statute and this Statement of Investment Policy as well as a mix of issuers and maturities. lo. Safekeeping. Securities purchased from brokers/dealers shall be held in third party safekeeping by the trust department of the local agency's bank, or by other third party trustee designated by the Director of Finance. Said securities shall be held in the name of the City with the trustee executing agreements and confirmations 4 of investment transactions as directed by the City Treasurer. III. STRATEGY. Strategy refers to the ability to manage financial resources in the most advantageous manner. 1. Economic Forecasts. The Treasurer periodically shall obtain economic forecasts from economists -and financial experts through bankers and brokers in order to assist the Treasurer with the formulation of investment plans. 2. .Implementing Investment Strategy. The Treasurer shall execute investment transactions which conform with anticipated interest rate trends and the current investment strategy plan. 3. Rapport. The Treasurer shall maintain a close working relationship with the departments of the City so as to anticipate and accommodate disbursements of City funds. For liquidity planning purposes, department heads shall apprise the Treasurer when large expenditures are anticipated. 4. Preserve Portfolio Value. The Treasurer shall develop yield standards in order to maintain earnings near the market and to preserve the value of the City's portfolio. a:invstmnt.cot 01-04-91 A