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HomeMy WebLinkAboutCC 13 TUSTIN INVEST POL 6-6-88 NO. 13 DATE: HAY 27, 1988 TO: FROM: SUBJECT: WIL~ A. HUSTON, CITY MANAGER RON~AULT, DIRECTOR OF FINANCE CITY OF TUSTIN INVESTMENT POLICY ,,, J RECOMMENDATION: Receive and file the Statement of Investment Policy as drafted by the Director of Finance. DISCUSSION: The California Government Code, Section 53646, requires that a Statement of Investment Policy be submitted annually to the City Council. Attached for your review and acceptance is the Policy Statement for fiscal 1988-89. It has been drafted per guidelines established by the California Municipal Treasurers Association to be in full compliance with the Government Code, as amended in 1984. The policy as submitted, reflects direction given by Council in regards to acceptable investments. RAN:ls Attachments CITY OF TUSTIN STAI'FJ4ENT OF INYESTT~T POLICY PURPOSE This Statement is intended to provide guidelines for the prudent investment of the City's temporary idle cash, and outline the policies for maximizing the efficiency of the City's cash management system. The ultimate goal is to enhance the economic status of the City while protect, lng its pooled cash. OBJECTIVE The City's cash management system is designed to accurately monitor and forecast expenditures and revenues, thus enabling the City to invest funds to the fullest extent possible. The City attempts to obtain the highest yield obtainable as long as investments meet the criteria established for safety and liquidity. POLICY The City of Tustin operates its temporary pooled idle cash investments under the Prudent Man Rule (Civil Code Sect. ZZ6[, et seq.) ([) This affords the Jity a broad spectrum of investment opportunities as long as the investment is deemed prudent and is allowable under current legislation of the State of California (Government Code Section 53600 et seq..) The City Council has directed that investments may be made in the following -media: -Certificates of deposit (? Time Deposits) placed with commercial banks and or savings and loan companies. -Negotiable Certificates of Deposit.-Bankers Acceptances-Commercial Paper-Local Agency Investment Fund {State Pool)' Demand Deposits-Repurchase Agreements {Repos)-Passbook Savings Account Demand Deposits Criteria for'selecting investments and the order of priority are: Safety. The safety and risk associated with an investment refers to the potential loss of principal, interest or a combination of these amounts. The City only operates in those investments tha~ are considered very safe. The Prudent Man Rule states, in essence, that "in investing...property for the benefit of another, a trustee shall exercise the judgment and care, under the circumstances then prevailing, which men of prudence, discretion and intelligence exercise in the management of their own affairs ..... " Ltqufdtt7.- This refers to the abtltty to "cash in" at any moment in time With a minimal chance of losing some portion of principal or interest. Liquidity is an important investment quality especially when the need for unexpected funds occurs occasionally. 3. Yield. Yield is the potential dollar earnings an investment can provide, an--6-d-~metimes is described as the rate of return. Safek. eepin!. Securities purchased from brokers/dealers shall be held in third party safekeeping by the trust department of the local agency's bank or other designated third party trust, in local agency's name and control, whenever possible. Investment Objective. The cash management system of the City of Tustin is designed to accurately monitor and forecast expenditures and revenues, thus insuring the investment of monies to the fullest extent possible. Attempts to obtain highest interest yields possible as long as investments meet the criteria required 'for safety and liquidity. Ctt7 Constraints. The City of Tusttn operates its pooled idle cash investments under the Prudent Man Rule. This affords a broad spectrum of investment opportunities So long as the investment is deemed prudent and is permissible under currently effective legislation of the State of California and other imposed legal restrictions. Restrictions imposed by the City Council are located in the Investment Strategy accompanying this policy. The City strives to maintain the level of investment of all funds as near 100% as possible, through daily and projected cash flow determinations. Idle cash management and investment transactions are the responsibility of the City' Treasurer.' The basic premise underlying the City's investment philosophy is, and will · continue to be, to insure that money is always safe and available when needed. Attachment: Investment Strategy STRATEGY- e Nhen making an' investment decision, the purchase of an investment is made with the intent of holding that tnvesl=nent to ma~urft~y. Cash flow projections are fully utilized to balance the liquidity needs at all times. 3. Close working relationships are maintained with many bankers and brokers and may be contacted with each buy, sell or swap investment transaction. 4. Current economic forecasts are obtained from financial experts in the field through bankers and brokers on a regular basis. Close rapport is maintained with the Community Development and Redevelopment Agency, and all other City ~epartments having a significant impact on cash flow. 6. Active bank balances are kept at lowest possible balance without Jeopardizing good bank relationships. The City's portfolio is tested so that, at no time, legal limits of types of investments are exceeded. They are: a. Purchase of Bankers Acceptances may not exceed 40% of the portfolio based on the date of purchase, nor be longer than 270 days. be Negotiable CD's are limited to 30% of the portfolio on the date of purchase. If a savings and loan negotiable CD is bought, only the top l0 associations in the U.S. are accepted. Ce Purchases of Commercial Paper must be A-l, P-1 rated from U.S. Corporations with assets greater than $500,000,000. They must not represent more than 10% of the corporations' outstanding commercial paper and not exceed 30% of the City's portfolio at the date of purchase. 8. At no time will the City's portfolio contain more than $5 million of certificates of deposit (time deposits) purchased from the same bank or savings and loan. g. The Treasurer is required to comment on any recommendation made to the City Council for the issuance of long-term debt, such as bonds or certificates of participation. 10. The Treasurer is required to obtain the highest yield feasible on investments, provided the objectives of safety and liquidity are first met. Time deposits will be invested state-wide.in an effort to obtain favorable interest rates. Local banks and savings and loan institutions will be regularly contacted for possible investing opportunities, but in no case will investments be made in these types of institutions outside the State of California. The investment policy and strategy are reviewed at least annually.