Res 13-007RESOLUTION NO. 13 -007
A RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF POWAY, CALIFORNIA,
AMENDING INVESTMENT POLICY FOR PUBLIC FUNDS
AND RESCINDING RESOLUTION NO. 12 -018
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of
Poway, California, that the Statement of Investment Policy, attached as Exhibit A, is
hereby adopted as the Investment Policy of the City of Poway.
BE IT FURTHER RESOLVED, that Resolution No. 12 -018 is hereby rescinded.
PASSED, ADOPTED AND APPROVED by the City Council of the City of Poway,
California, at a regular meeting this 7th day of May 2013.
Don Higginson, Mayor
ATTEST:
1 0' 64M
Kristen M. Crane, Interim City Clerk
STATE OF CALIFORNIA )
) ss.
COUNTY OF SAN DIEGO)
I, Kristen M. Crane, Interim City Clerk of the City of Poway, do hereby certify under
penalty of perjury that the foregoing Resolution No. 13 -007 was duly adopted by the
City Council at a meeting of said City Council held on the 7th day of May 2013, and that
it was so adopted by the following vote:
AYES: CUNNINGHAM, VAUS, GROSCH, MULLIN, HIGGINSON
NOES: NONE
ABSENT: NONE
DISQUALIFIED: NONE "'t
Kristen M. Crane, Interim City Clerk
City of Poway
Resolution No. 13 -007
Page 2
EXHIBIT A
CITY OF POWAY
STATEMENT OF INVESTMENT POLICY
May 2013
The City of Poway (the City) has adopted this Investment Policy (the Policy) in order to establish
the investment scope, objectives, delegation of authority, standards of prudence, reporting
requirements, internal controls, eligible investments and transactions, diversification
requirements, risk tolerance, and safekeeping and custodial procedures for the investment of
the funds of the City. All City funds will be invested in accordance with this Investment Policy
and with applicable sections of the California Government Code.
This Investment Policy, dated May 7, 2013, replaces any previous Investment Policy or
investment procedures of the City.
SCOPE
The provisions of this Policy shall apply to all financial assets and investment activities of the
City as accounted for in the City's Comprehensive Annual Financial Report. The employees'
retirement and deferred compensation funds are not covered by this Policy. Also, bond reserve
funds will be invested in accordance with each bond issue's indenture agreement.
All cash shall be pooled for investment purposes. The investment income derived from the
pooled investment account shall be allocated to the General Fund, the Water Fund, the Sewer
Fund, and other funds as budgeted or required by legislation based upon the proportion of the
respective average balances relative to the total pooled balance. Investment income shall be
distributed to the individual funds not less than annually.
OBJECTIVES
The City's funds shall be invested in accordance with all applicable City resolutions, California
statutes, and Federal regulations, and in a manner designed to accomplish the following
objectives, which are listed in priority order:
1. Preservation of capital and protection of investment principal.
2. Maintenance of sufficient liquidity to meet anticipated cash flows.
3. Attainment of a market rate of return.
4. Diversification to avoid incurring unreasonable market risks.
Resolution No. 13 -007
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DELEGATION OF AUTHORITY
In accordance with City of Poway Resolution No. 13 -007, the City Treasurer /Administrative
Services Department is authorized to invest the City's funds in accordance with the California
Government Code Section 53607. The City's Director of Administrative Services serves as the
Treasurer. The Director of Administrative Services may delegate the authority to conduct
investment transactions and to manage the operation of the investment portfolio to other
specifically authorized staff members. No person may engage in an investment transaction
except as expressly provided under the terms of this Policy.
The Director of Administrative Services shall develop administrative procedures and internal
controls, consistent with this Policy, for the operation of the City's investment program. Such
procedures shall be designed to prevent losses of public funds arising from fraud, employee
error, misrepresentation by third parties, or imprudent actions by employees of the City.
The City may engage the support services of outside investment advisors with respect to its
investment program, so long as it can be demonstrated that these services produce a net
financial advantage or necessary financial protection of the City's financial resources. If an
investment advisor is selected to help manage the investment program, a City Investment
Oversight Committee shall be kept informed of the changing investment environment and any
potential restructuring of the portfolio which could result. This Investment Committee shall
consist of the Director of Administrative Services, the Finance Manager, and the Senior
Accountant.
PRUDENCE
The standard of prudence to be used for managing the City's investment program is California
Government Code Section 53600.3, the prudent investor standard, which states that "when
investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a
trustee shall act with care, skill, prudence, and diligence under the circumstances then
prevailing, including, but not limited to, the general economic conditions and the anticipated
needs of the agency, that a prudent person acting in a like capacity and familiarity with those
matters would use in the conduct of funds of a like character and with like aims, to safeguard
the principal and maintain the liquidity needs of the agency."
The City's overall investment program shall be designed and managed with a degree of
professionalism that is worthy of the public trust. The City recognizes that no investment is
totally without risk and that the investment activities of the City are a matter of public record.
Accordingly, the City recognizes that occasional measured losses may occur in a diversified
portfolio and shall be considered within the context of the overall portfolio's return, provided that
adequate diversification has been implemented and that the sale of a security is in the best
long -term interest of the City.
The Director of Administrative Services and authorized investment personnel acting in
accordance with established procedures and exercising due diligence shall be relieved of
personal responsibility for an individual security's credit risk or market price changes, provided
that deviations from expectations are reported in a timely fashion to the City Council and
appropriate action is taken to control adverse developments.
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ETHICS AND CONFLICTS OF INTEREST
Elected officials and employees involved in the investment process shall refrain from personal
business activity that could conflict with proper execution of the City's investment program or
could impair or create the appearance of an impairment of their ability to make impartial
investment decisions. Employees and investment officials shall subordinate their personal
investment transactions to those of the City. In addition, City Councilmembers, the Director of
Administrative Services, the Finance Manager, and the Senior Accountant shall file a Statement
of Economic Interests each year as required by California Government Code Section 87203 and
regulations of the Fair Political Practices Commission.
AUTHORIZED SECURITIES AND TRANSACTIONS
All investments and deposits of the City shall be made in accordance with California
Government Code Sections 16429.1, 53600- 53609, and 53630- 53686. Any revisions or
extensions of these code sections will be assumed to be part of this Policy immediately upon
being enacted.
The City shall not knowingly make any investments in any institution, company, corporation,
subsidiary, or affiliate that practices or supports directly or indirectly through its actions,
discrimination on the basis of race, religion, color, creed, national or ethnic origin, age, sex,
sexual preference, or physical disability.
The City has further restricted the eligible types of securities and transactions as follows:
United States Treasury bills, notes, or bonds with a final maturity not exceeding five years
from the date of trade settlement. There is no limit on the percentage of the portfolio that
may be invested in U.S. Treasury securities.
2. Government Securities
Government Securities in the aggregate shall not exceed 75% of the City's total portfolio.
• Federal Instrumentality Obligations (government sponsored enterprises) with a final
maturity not exceeding five years from the date of trade settlement. No more than 25%
of the City's total portfolio shall be invested in any one issuer and the aggregate amount
shall not exceed 75% of the City's total portfolio.
Federal Agency Obligations with a final maturity not exceeding five years from the date
of trade settlement. No more than 25% of the City's total portfolio shall be invested in
any one issuer and the aggregate amount shall not exceed 75% of the City's total
portfolio.
Mortgage- Related Securities, including Federal Agency and Federal Instrumentality
mortgage- backed securities and collateralized mortgage obligations. Such securities
shall not exceed five years from the date of trade settlement and must be rated at least
"AAA" by at least one Nationally Recognized Statistical Ratings Organization (NRSRO)
and issued by an issuer rated at least "A" or the equivalent by an NRSRO. No more than
20% of the City's total portfolio shall be invested in the combination of Mortgage - Related
Securities and Asset - Backed Securities.
Resolution No. 13 -007
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3. Corporate Securities
No more than 5% of the City's portfolio shall be invested in the obligations of any one
corporate issuer.
Medium -Term Notes 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. Such securities shall have a final maturity not
exceeding five years from the date of trade settlement and shall be rated at least "A ", or
the equivalent, by an NRSRO. No more than 30% of the City's total portfolio shall be
invested in Medium -term Notes.
Asset - Backed Securities including equipment lease- backed certificates, consumer
receivable pass- through certificates, or consumer - receivable- backed bonds. Such
securities shall not exceed five years from the date of trade settlement and must be
rated at least "AAA" by at least one NRSRO and issued by an issuer rated at least "A" or
the equivalent by an NRSRO. No more than 20% of the City's total portfolio shall be
invested in Mortgage - Related Securities and Asset - Backed Securities.
• Prime Commercial Paper with a maturity not exceeding 270 days from the date of trade
settlement and rated at least "A -1 ", or the equivalent, by an NRSRO. The entity that
issues the commercial paper shall meet all of the following conditions in either sub-
paragraph A. or sub - paragraph B. below:
A. The entity shall (1) be organized and operating in the United States as a
general corporation, (2) have total assets in excess of $500,000,000 and
(3) have debt other than commercial paper, if any, that is rated at least
"A" or the equivalent by an NRSRO.
B. The entity shall (1) be organized within the United States as a special
purpose corporation, trust, or limited liability company, (2) have program
wide credit enhancements, including, but not limited to, over
collateralization, letters of credit or surety bond and (3) have commercial
paper that is rated at least "A -1" or the equivalent by an NRSRO.
Investment in commercial paper shall not exceed 25% of the City's total portfolio.
4. Municipal Bonds including registered notes or bonds of any of the 50 states, including bonds
payable solely out of the revenues from a revenue - producing property owned, controlled, or
operated by a state or by a department, board, agency, or authority of any of the 50 states.
In addition, bonds, notes, warrants, or other evidences of indebtedness of any local agency
in California, including bonds payable solely out of the revenues from a revenue - producing
property owned, controlled, or operated by the local agency, or by a department, board,
agency, or authority of the local agency.
Municipal Bonds must be rated at least "A" or the equivalent by an NRSRO with maturities
not exceeding five years from the date of trade settlement. No more than 5% of the City's
portfolio shall be invested in the obligations of any one issuer, and the aggregate investment
in municipal bonds shall not exceed 30% of the City's total portfolio.
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5. Negotiable Certificates of Deposits (CDs) of commercial banks rated at least "A -1 ", or the
equivalent, with maturities not exceeding five years from the date of trade settlement. In
addition, the City may not invest in the CD of a state or federal credit union where any
person with investment decision making authority at the City also serves on the board of
directors, or any committee appointed by the board of directors, or the credit committee or
the supervisory committee of the state or federal credit union issuing the negotiable
certificates of deposit. No more than 5% of the portfolio may be invested in the CDs of any
one issuer, and the aggregate investment in CDs shall not exceed 30% of the portfolio.
6. Non - negotiable Certificates of Deposit and savings deposits with a maturity not exceeding
five years from the date of trade settlement, in FDIC insured state or nationally chartered
banks or savings banks that qualify as a depository of public funds in the State of California
as defined in California Government Code Section 53630.5.
Deposits in excess of the insured amount shall be secured pursuant to California
Government Code Section 53651 and 53652. The City shall comply with and act to secure
compliance with the security (collateralization) system specified in the Government Code
Section 53649 and 53652.
7. Eligible Banker's Acceptances with a maturity not exceeding 180 days from the date of trade
settlement, drawn on and accepted by a commercial bank whose senior long -term debt is
rated at least "A ", or the equivalent, by an NRSRO at the time of purchase. Banker's
Acceptances shall be rated at least "A-1", or the equivalent, at the time of purchase by an
NRSRO. No more than 5% of the City's total portfolio shall be invested in banker's
acceptances of any one bank and the aggregate investment in banker's acceptances shall
not exceed 40% of the City's total portfolio.
8. Money Market Funds registered under the Investment Company Act of 1940 that (1) are
"no -load" (meaning no commission or fee shall be charged on purchases or sales of
shares); (2) have a constant net asset value per share of $1.00; (3) invest only in the
securities and obligations authorized in the applicable California statutes and (4) have a
rating of at least "AAA ", or the equivalent by at least two NRSROs. No more than 10% of
the portfolio may be invested in any one fund and the aggregate investment in money
market funds shall not exceed 20% of the City's total portfolio.
9. Shares of Beneficial Interest issued by a joint powers authority (e.g., CaITRUST) organized
pursuant to Section 6509.7 that invest in the securities and obligations authorized in
subdivisions (a) to (o), inclusive, of California Government Code Section 53601. Each share
shall represent an equal proportional interest in the underlying pool of securities owned by
the joint powers authority. To be eligible under this section, the joint powers authority issuing
the shares shall have retained an investment advisor that:
(1) is registered or exempt from registration with the Securities and Exchange
Commission.
(2) has at least five years of experience investing in the securities and obligations
authorized in subdivisions (a) to (o), inclusive, of California Government Code
Section 53601.
(3) has assets under management in excess of $500,000,000.
10. State of California's Local Agency Investment Fund (LAIF), pursuant to California
Government Code Section 16429.1.
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11. The San Diego County Investment Pool. The City may invest in this investment pool,
established by the San Diego County Treasurer for the benefit of local public agencies.
The foregoing list of authorized securities and transactions shall be strictly interpreted. Any
deviation from this list must be preapproved by resolution of the City Council.
INVESTMENT MANAGEMENT
If the City has employed an external investment advisor to help manage its portfolio, the
investment advisor shall be bound by the aforementioned list of authorized securities, the state
and local laws and regulations that govern the investment activity of the City, and the following
additional parameters.
While it is understood that occasionally it may be in the best interest of the City to take
losses in its security portfolio, losses taken to increase the yield in the portfolio may only
be taken if the increased yield results in the loss being recouped in one year or less.
Credit - related losses on the other hand are taken to prevent potentially larger losses in
the future. When possible, the investment advisor will get prior approval of the City
before taking credit - related losses. In any case, the City will be notified as soon as
possible about any losses taken in the portfolio.
• Securities that are downgraded by one or more rating agency to below the ratings
required by this Policy do not have to be sold. However, the investment advisor will
immediately notify the City of the downgrade. The advisor will prepare a credit report on
the downgraded security and forward it to the City.
While the City entrusts its investment portfolio to the advisor, the City retains the right to
ultimately make the decisions on how to invest its monies.
INVESTMENT DIVERSIFICATION
The City shall diversify its investments to avoid incurring unreasonable risks inherent in over -
investing in specific instruments, individual financial institutions or maturities. Nevertheless, the
asset allocation in the investment portfolio should be flexible depending upon the outlook for the
economy, the securities markets and the City's anticipated cash flow needs.
PORTFOLIO MATURITIES AND LIQUIDITY
To the extent possible, investments shall be matched with anticipated cash flow requirements
and known future liabilities. The City will not invest in securities maturing more than five years
from the date of trade settlement, unless the City Council has by resolution granted authority to
make such an investment at least three months prior to the date of investment.
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SELECTION OF BROKER/DEALERS
The Finance Manager shall maintain a list of broker /dealers approved for investment
purposes, and it shall be the policy of the City to purchase securities only from those brokers
and the firms they represent. Each approved broker /dealer must possess an authorizing
certificate from the California Commissioner of Corporations as required by Section 25210 of
the California Corporations Code.
To be eligible, a firm must meet at least one of the following criteria:
1. Be recognized as Primary Dealers by the Federal Reserve Bank of New York or have a
primary dealer within their holding company structure, or
2. Report voluntarily to the Federal Reserve Bank of New York, or
3. Qualify under Securities and Exchange Commission (SEC) Rule 15c3 -1 (Uniform Net
Capital Rule).
The Finance Manager will select broker /dealers on the basis of their expertise in public cash
management and their ability to provide service to the City's account. Each authorized
broker /dealer shall submit and annually update a City approved Broker /Dealer Information
Request form that includes the firm's most recent financial statements.
In the event that an external investment advisor is not used in the process of recommending
a particular transaction in the City's portfolio, authorized broker /dealers shall attest in writing
that they have received a copy of this Policy.
The City may purchase commercial paper from direct issuers even though they are not on
the approved broker /dealer list as long as they meet the criteria outlined in Item 3 of the
Authorized Securities and Transactions section of this Investment Policy.
COMPETITIVE TRANSACTIONS
All investment transactions shall be conducted competitively with authorized broker /dealers.
At least three broker /dealers shall be contacted for each transaction and their bid or offering
prices shall be recorded.
If the City is offered a security for which there is no other readily available competitive
offering, then the Finance Manager will document quotations for comparable or alternative
securities.
SELECTION OF BANKS
The Finance Manager shall maintain a list of FDIC insured banks approved to provide
depository and other banking services for the City. To be eligible, a bank shall qualify as a
depository of public funds in the State of California as defined in California Government
Code Section 53630.5 and shall secure deposits in excess of FDIC insurance coverage in
accordance with California Government Code Section 53652.
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SAFEKEEPING AND CUSTODY
The Finance Manager shall select one or more banks to provide safekeeping and custodial
services for the City. A Safekeeping Agreement approved by the City shall be executed with
each custodian bank prior to utilizing that bank's safekeeping services.
Custodian banks will be selected on the basis of their ability to provide services for the City's
account and the competitive pricing of their safekeeping related services.
The purchase and sale of securities and repurchase agreement transactions shall be settled
on a delivery versus payment basis. All securities shall be perfected in the name of the City.
Sufficient evidence to title shall be consistent with modern investment, banking, and
commercial practices.
All investment securities purchased by the City will be delivered by either book entry or
physical delivery and will be held in third -party safekeeping by a City approved custodian
bank, its correspondent bank or its Depository Trust Company (DTC) participant account.
PORTFOLIO PERFORMANCE
The investment portfolio shall be designed to attain a market rate of return throughout
budgetary and economic cycles, taking into account prevailing market conditions, risk
constraints for eligible securities, and cash flow requirements. The performance of the City's
investments shall be compared to the average yield on the U.S. Treasury security that most
closely corresponds to the portfolio's weighted average effective maturity. When comparing
the performance of the City's portfolio, its rate of return will be computed net of all fees and
expenses.
REPORTING
Quarterly, the Director of Administrative Services shall submit to the City Council a report of
the investment earnings and performance results of the City's investment portfolio. The
report shall include the following information:
1. Investment type, issuer, date of maturity, par value and dollar amount invested in all
securities, and investments and monies held by the City;
2. A description of the funds, investments, and programs;
3. A market value as of the date of the report (or the most recent valuation as to assets not
valued monthly) and the source of the valuation;
4. A statement of compliance with the Investment Policy or an explanation for non-
compliance; and
5. A statement of the City's ability to meet expenditure requirements for six months, and an
explanation of why money will not be available if that is the case.
Resolution No. 13 -007
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POLICY REVIEW
This Investment Policy shall be reviewed at least annually to ensure its consistency with the
overall objectives of preservation of principal, liquidity, yield and diversification, and its
relevance to current law and economic trends. Amendments to this Investment Policy shall
be approved by resolution of the City Council.
SEGREGATION OF RESPONSIBILITIES
FUNCTION RESPONSIBILITY
1.0 Investment Policy:
1.1 Preparation and annual review Director of Admin. Services/
of Investment Policy Oversight Committee
1.2 Approval of Investment Policy City Council
2.0 Investment Transactions:
2.1 Calculation of cash position
Sr. Accountant/ Finance Mgr.
2.2 If applicable, notify investment advisor
Written approval by 2 members
of current available cash
of Oversight Committee
to be invested
Senior Accountant
2.3 Investment recommendation:
Determination of amount to be invested,
Investment Advisor/
selection of type of investment, and
Finance Mgr/ Sr. Accountant
term of investment
Investment Adv. /Oversight Comm.
2.4 Review of investment recommendation
Written approval by member
and execution of transaction
of Oversight Committee
3.0 Recording of Transactions:
3.1 In investment subsidiary ledgers Accountant/Account Technician
3.2 In accounting records Accountant/Account Technician
3.3 Match investment confirmation
to subsidiary ledgers Sr. Accountant/Accountant
4.0 Safeguarding of Assets and Records:
4.1 Reconciliation of subsidiary records to
the accounting records
Senior Accountant
4.2 Reconciliation of subsidiary records to
bank statements and safekeeping records
Senior Accountant
4.3 Review of financial institutions and
investment brokers' reputation and
financial condition
Investment Adv. /Oversight Comm.
4.4 Review of collaterals
Investment Adv. /Oversight Comm.
5.0 Investment portfolio:
5.1 Preparation of investment report Senior Accountant
5.2 Review of portfolio for compliance
with stated Investment Policy Oversight Committee
5.3 Approval of investment report City Council
Resolution No. 13 -007
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APPROVED BROKER/DEALERS
The following Broker /Dealers are approved for execution of trades.
Broker /Dealers
Barclays Capital Inc.
Citigroup Global Markets Inc.
Goldman, Sachs & Co.
Jefferies & Company
J.P. Morgan Securities
Merrill Lynch, Pierce, Fenner & Smith Inc.
Mizuho Securities USA Inc.
Morgan Stanley Smith Barney
Raymond James Morgan Keegan
RBC Capital Markets Corporation
UBS Financial Services
Wells Fargo Securities
Wunderlich Securities Inc.
This list of approved broker /dealers is subject to change at any time based upon periodic
recommendations of the investment advisor throughout the year.