Res 91-068 RESOLUTION NO. 91-068
A RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF POWAY, CALIFORNIA,
AMENDING INVESTMENT POLICY FOR PUBLIC FUNDS
AND RESCINDING RESOLUTION NO. 90-116
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BE IT FURTHER RESOLVED, that Resolution No. 90-116 is hereby rescinded.
PASSED, ADOPTED AND APPROVED, by the City Council of the City of Poway,
California, at a regular meeting thereof this 25th day of June, 1991.
ATTEST:
Marjorie K.~ Wahlsten, City Clerk
STATE OF CALIFORNIA )
COUNTY OF SAN DIEGO )
I, Marjorie K. Wahlsten, City Clerk of the City of Poway, do hereby certify
under penalty of perjury that the foregoing Resolution No. 91-068 was duly
adopted by the City Council at a meeting of said City Council held on the 25th
day of June, 1991, and that it was so adopted by the following vote:
AYES: EMERY, HIGGINSON, SNESKO, GOLDSMITH
NOES: NONE
ABSTAIN: NONE
ABSENT: MCINTYRE
Marjorie m~. Wahlsten, City Clerk
City o f ,~p~Way
CZTY OF' PONAY
STATENE~T OF ~NV~ll~EHT POLICY
,lilLY lgg!
Resolution No. 91-068
Page 2
EXHIBIT "A"
INTRQOUCTIQH
This statement is intended to outline the policies for maximizing the efficiency
of the City of Poway's Cash Management System and for prudent investment of the
City's funds, and to provide guidelines for suitable investments.
The ultimate goal is to enhance the economic status of the City while protecting
its funds.
The City's Cash Management System is designed to accurately monitor and forecast
expenditures and revenues, thus striving to maintain the level of investment of
all idle funds as near 100% as possible, through daily and projected cash flow
determinations. The City shall attempt to obtain the highest yield, provided
that all investments meet the criteria established for safety and liquidity.
The investment policies and practices, idle cash management and investment
transactions are the joint responsibility of the City Treasurer and the
Administrative Services Department. These City of Poway policies and practices
are based upon Federal, State, and Local law and prudent money management. The
primary goals of these policies are:
To assure compliance with all Federal, State and Local laws
governing the investment of monies under the control of the
City Treasurer and the Administrative Services Department.
2. To protect the principal monies entrusted to these offices.
e
To generate the maximum amount of investment income within the
parameters of this Statement of Investment Policy and the
guidelines for suitable investments.
In accordance with City of Poway Resolution No. 90-116, the City Treasurer/
Administrative Services Department are authorized to invest the City's
funds in accordance with the California Government Code Sections 53601.1,
53602 and 53635. This investment policy applies to all financial assets,
investment activities and debt issues of the City of Poway {which are
invested by trustees appointed under the indenture, with direction from
the City Treasurer/Administrative Services Department), except for the
employees' retirement and deferred compensation funds.
All monies entrusted to the City Treasurer/Administrative Services Depart-
ment will be pooled in an actively managed portfolio. The Investment Pool
or "Portfolio" will be referred to as the "FUND" throughout the remainder
of this document. The City Treasurer/Administrative Services Department
will observe, review and react to changing conditions that affect the
fund.
Investment Policy
Resolution No. 91-068
Page 3
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Il, OBdL:tTIVL:'S
A. SAFETY OF PRINCIPAL
Safety of principal is the foremost objective of the City of Poway.
Each investment transaction shall seek to ensure that capital losses
are avoided, whether from institution default, broker-dealer default,
or erosion of market value of securities. The City shall seek to
preserve principal by mitigating the two types of risk, credit risk
and market risk.
Credit Risk. Credit risk, defined as the risk of loss due to failure
of an issuer of a security, shall be mitigated by investing in only
very safe institutions and by diversifying the fund so that the
failure of any one issuer would not unduly harm the City's cash flow.
Market Risk. The risk of market value fluctuations due to overall
changes in the general level of interest rates, shall be mitigated
by limiting the weighted average maturity of the City's fund to less
than five years.
B. LIQUIDITY
Liquidity is the second most important objective of the City of
Poway. The basic premise underlying the City's investment policy is
to ensure that money is always available when needed and at the same
time reaping the highest and best return. In order to maintain
liquidity, no more than 50 percent of the portfolio shall have a
maturity in excess of one (1) year. Investments with a maturity in
excess of one year may not be purchased at a premium nor sold at ~-
loss unless the loss is provided for in the City's budget.
C. RETURN ON INVESTMENT
The City's fund shall be designed to attain a market-average rate of
return through economic cycles. The market-average rate of return is
defined as the average return on one-year U.S. Treasury Bills.
Whenever possible, and consistent with risk limitations as defined
herein, and prudent investment principles, the City shall seek to
augment returns above the market average rate of return.
III, AI,ITI~I~IZ~I) I#VEST#L:NT$
The City of Poway has a fiduciary responsibility to maximize the produc-
tive use of assets entrusted to its care and to invest and manage those
public funds wisely and prudently. The City of Poway operates its pooled
idle cash to afford a broad spectrum of investment opportunities that are
deemed prudent and are legally allowable under both state legislation and
local ordinances. These investment decisions shall be made using the
trust principles and general "prudent man theory" outlined below:
Investment Policy
Resolution No. 91-068
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"In acquiring, tnvestlng, reinvesting, exchanging, selllng
and managing property for the benefit of another, a fiduciary
shall exercise the judgment and care under the circumstances
then prevailing, which men of prudence, discretion and
intelligence exerctse In the management of their own affairs,
not In regard to speculatlon but In regard to the permanent
dispositlon of thelr funds, considering the probable income
as well as the probable safety of thelr capital. Within the
11mltations of the foregoing standard, and subject to any
express provlslons or limitations contained in any particular
trust instrument, a fiduciary Is authorized to acqulre and
retain every kind of property--real, personal or mlxed--and
every klnd of Investment specifically Including but not by
way of limitation, debentures and other corporate obligations,
and stocks--preferred or common--which men of prudence,
dlscretlon and Intelligence acqulre for their own account."
In addition, the City recognizes that it has an equal obligation to be
aware of the social and political impacts of its investments, and
subsequently to act responsibly in making its financial decisions.
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.
As stated above, the City is governed by the California Government Code,
Sections 53601.1, 53602 and 53635. Within the context of these limita-
tions, the following investments are authorized, as further limited
herein:
A®
United States Treasury Bills, Notes and Bonds, or those for which the
full faith and credit of the United States are pledged for payment of
principal and interest with remaining maturities of five years or
less. There is no limitation as to the percentage of the fund which
can be invested in this category as they are both safe and liquid.
Be
Obligations issued by the Government National Mortgage Association
(GNMA), the Federal Farm Credit Bank System (FFCB), the Federal Home
Loan Bank Board {FHLB}, the Federal National Mortgage Association
{FNMA), those insured by the Federal Housing Association {FHA), and
other U.S. government agency obligations with remaining maturities of
five years or less. Although there is no percentage limitation on
these issues, the "prudent man theory" shall apply for a single
agency name, as U.S. government backing is implied rather than
guaranteed.
Ce
Bills of exchange or time drafts drawn on and accepted by a com-
mercial bank, otherwise known as banker's acceptances. Investment in
one of the 20 largest {assets) banks in the United States is
authorized. No more than 5% of the market value of the fund may be
invested in banker's acceptances issued by any one bank.
Resolution No. 91-068
Page 5
Investment Policy
Do
Ge
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COfFmFmerclal paper ranked "PI" by Moody's Investor Services and "Al" by
Standard and Poor's, and issued by a domestic corporation having
assets in excess of $500,000,000, and having an "A" or better rating
on its long term debentures as provided by Moody's or Standard and
Poor's. No more than 3% of the market value of the fund may be
invested in commercial paper issued by any one corporation.
Repurchase agreements. The City may invest in repurchase agreements
with banks and dealers with which the City has entered into a master
repurchase contract which specifies terms and conditions of
repurchase agreements, and are fully collateralized by delivery to
an independent third party custodian. In order to conform with
provisions of the Federal Bankruptcy Code which provides for the
liquidation of securities held as collateral for repurchase agree-
ments, the only securities acceptable as collateral shall be eligible
negotiable certificates of deposit, eligible banker's acceptances,
or securities that are direct obligations of, or that are fully
guaranteed as to principal and interest by, the United States or any
agency of the United States.
Reverse repurchase agreements. The City may invest in reverse
repurchase agreements only with those banks and dealers with which
the City has entered into a master repurchase contract outlining
terms and conditions of reverse repurchase agreements, and are fully
collateralized by delivery to an independent third party custodian.
The City may invest in reverse repurchase agreements for the
following purpose: when an unanticipated cash outflow can, in the
judgment of the City Treasurer/Administrative Services Department, be
met more advantageously by entering into a reverse repurchase agree-
ment than by selling securities outright. In such a case, the
reverse repurchase shall not exceed 30 days, and shall be matched to
a known cash inflow of sufficient size to repay the principal and
interest of the reverse repurchase agreement.
Local Agency Investment Fund Demand Deposits. The City may invest in
the Local Agency Investment Fund (LAIF) established by the State
Treasurer for the benefit of local agencies up to the maximum
permitted by State law.
The County of San Diego's Investment Pool. The City may invest in
this investment pool established by the San Diego County Treasurer
for the benefit of local public agencies.
Certificates of Deposit. The City may invest in non-negotiable
insured, or collateralized time deposits in accordance with the
California Government Code, in commercial banks, savings and loan
companies and industrial thrift associations. The City shall deposit
funds only with financial institutions which operate in California.
These institutions must be insured by the Federal Deposit Insurance
Corporation {FDIC), the Federal Savings and Loan Insurance Corpora-
tion {FSLIC), or other federal government insurance banking systems.
Resolution No. 91-068
Page 6
Investment Report
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The City's policy shall be to waive security for the amount insured.
Deposits in excess of the insured amount shall be secured with
eligible securities specified in Government Code Section 53651. The
City shall comply with and act to secure compliance with the security
{collateralization) system specified in the Government Code Section
53649 and 56652.
Je
Insured passbook savings account demand deposits in commercial banks
and savings and loan companies.
Medium-term notes of a maximum of five years maturity 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. Notes eligible for invest-
ment shall be rated in a rating category of "A" or its equivalent or
better by a nationally recognized rating service. No more than
20 percent of the fund may be invested in medium-term notes.
Shares of beneficial interest issued by diversified management com-
panies, otherwise known as mutual funds and as defined in Section
23701{m) of the Revenue and Taxation Code. This includes tax-exempt
bond mutual funds and U.S. government bond mutual funds whose average
maturities are less than four years. Mutual funds must consist of
securities and obligations of the U.S. government authorized by
Section 53601 of the California Government Code as amended. Said
companies shall either:
(1)
Attain the highest ranking or the highest letter and
numerical rating provided by not less than two of the three
largest nationally recognized rating services, or
(2)
Have an investment adviser registered with the Securities
and Exchange Co~i~mission with not less than five years'
experience investing in the securities and obligations as
authorized above, and with assets under management in excess
of $500,000,000. The price of shares of beneficial interest,
{mutual funds) shall not include any comnission that these
companies may charge at the time of purchase or redemption.
No more than 15% of the fund may be invested in mutual funds.
Obligations of state or municipal governments or their public agencies,
which are rated in the three highest categories of a national rating
service.
N. Other prudent investment instruments, approved prior to purchase
by a two-thirds majority of the governing body.
O. Ineligible investments. Investments not described herein, including,
but not limited to con, non stocks are prohibited from use in this fund.
Effective January 1, 1989, all new investments must have a remaining life
to maturity of no more than five years without specific approval from the
City Council. Investments held at December 31, 1988, with maturities
greater than five years may be held until maturity or until they are sold.
Investment Policy
Resolution No. 91-068
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The City shall attempt to ladder its maturities to meet anticipated cash
needs in such a way that new investment money can be placed in maturities
that carry a higher rate than is available in the extremely short market
of thirty days or under.
IV, QOALIFI~ OF:AI.~$ Ali0 I~TITUTI(IN~
VI,
The City shall transact business only with banks, savings and loans, and
registered investment securities dealers. The purchase by the City of any
investment, other than those purchased directly from the issuer, shall be
purchased either from an institution licensed by the State as a broker-
dealer, as defined in Section 25004 of the Corporations Code, who is a
member of the National Association of Securities Dealers, or a member of
a federally regulated securities exchange, a national or state-chartered
bank, a federal or state association {as defined by Section 5102 of the
Financial Code), or a brokerage firm designated as a primary government
dealer by the Federal Reserve Bank. The City Treasurer's/Administrative
Services Department's staffs shall investigate all institutions which
wish to do business with the City in order to determine if they are
adequately capitalized, make markets in securities appropriate to the
City's needs, and agree to abide by the conditions set forth in the
City of Poway's Investment Policy. This will be done by having the
financial institutions complete and return the appropriate questionnaire.
The City shall attempt to obtain the highest yield available when
selecting investments, provided that criteria for safety and liquidity are
met. This may include the payment of fees to brokers to secure a higher
yield than otherwise would be available. When the City uses such ser-
vices, brokers must have offices in the State of California and be well-
versed with the California Government Codes of Investment. When
investments are to be made, a minimum of three bids must be obtained from
qualified brokers before an order may be placed.
,~FEKEEPII~ OF SE~IRITIE$
To protect against potential losses caused by collapse of individual
securities dealers, all securities owned by the City, except securities
used as collateral for repurchase and reverse repurchase agreements, shall
be kept in safekeeping with "perfected interest" by a third party bank
trust department acting as agent for the City under the terms of a
custody agreement executed by the bank and by the City. All securities
will be received and delivered using standard delivery-vs-payment
procedures.
REI~RTI~
Under provision of Section 53646 of the California Government Code, the
Treasurer or chief fiscal officers shall render a monthly report to the
City Council showing the type of investment, institution, date of
maturity, amount of deposit, current market value for all securities with
a maturity of more than twelve months, rate of interest, and such data as
Investment Pollcy
Resolution No. 91-068
Page 8
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may be required by the City Council. The report shall also detail all
repurchase and reverse repurchase agreements, and shall state its
relationship to this Statement of Investment Policy, as directed under
the Code.
VII, I#VE$11~'NT ~)NTROL$
VIII,
The City Treasurer/Administrative Services Department have developed a
system of internal investment controls and a segregation of respon-
sibilities of investment functions in order to assure an adequate system
of internal control over the investment function.
$~L~TIO# O~ R~I~IBILITIE~
FUNCTION
1.0 Investment policy:
1.1 Preparation and annual review
of investment policy.
1.2 Approval of investment policy.
2.0 Investment transactions:
2.1 Calculation of cash position.
2.2 Investment recommendation:
Determination of amount to be invested,
selection of type of investment, and
term of investment,
2,3 Review of investment recomendatlon
and execution of transaction,
3,0 Recording of transactions:
3,1 In investment subsidiary ledgers
3,2 In accounting records,
3,3 Match investment confirmation
to subsidiary ledgers,
4,0 Safeguarding of assets and records:
4,1 Reconciliation of subsidiary records to
the accounting records,
4,2 Reconciliation of subsidiary records to
bank statements and safekeeping records,
4,3 Review of financial institutions and investment
brokers' reputation and financial condition,
4,4 Review of collaterals,
5,0 Investment portfolio:
5,1 Preparation of investment report,
5,2 Review of portfolio for compliance with
stated investment policy,
5,3 Approval of investment report,
RESPONSIBILITY
Director of Admin. Services/
Finance Manager
City Council
Senior Accountant
Senior Accountant/
Finance Manager
Finance Manager/
Director of Admln. Services
Accountant/Account Clerk
Accountant/Account Clerk
Director of Admin. Services/
City Treasurer
Senior Accountant
Senior Accountant
Finance Manager
Senior Accountant
Senior Accountant
Finance Manager/
Director of Admin. Services
City Council
IX,
INVESTMENT INCQNE ALLOCATION
Investment income shall be shared by the General Fund, the Water fund,
the Sewer Fund, and other funds as budgeted or required by legislation.
This income shall be a proportionate ratio of balances to total pooled
cash and investment income credited accordingly on a monthly basis.
[nvestment Policy
Resolution No. 91-068
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XI,
~t~LIF(~#IA t~'~O~ O~ E~H~IC INTrEaT
Additionally, the Investment responsibility carries with It the added
duties of ensuring that Investments placed are done so wtthout the
appearance of improper Influence. The personnel in Administrative
Services or the Treasurer's Office involved In the investment function
shall adhere to the State's Code of Economic Interest and to the
followlng:
All persons authorized to place or approve investments shall not per-
sonally nor through a close relative malntaln any accounts, Interest,
or prtvate deallngs with any fl rmwith whtch the Clty places Invest-
ments, except for regular savlngs accounts, checklng accounts, money
market accounts, or other similar transactions which are offered on a
non-negotiable basis to the general public. Such accounts shall be
disclosed annually to the City Clerk In conjunction with annual
disclosure statements of economic Interest.
Be
All persons authorized to place or approve investments shall report
to the City Clerk kinship relations with principal employees of firms
that the City places investments with.
Ce
All persons authorized to place or approve investments shall report
quarterly to the City Clerk any meals, entertainment, gifts, or other
items of monetary value in excess of $50.00 received from any person
employed by a fi rmwith which the City places investments.
This Investment Policy shall be reviewed at least annually to ensure its
consistency with the overall objectives of SAFETY OF PRINCIPAL,
LIQUIDITY, AND RETURN ON INVESTMENT, and its relevance to current law,
financial and economic trends, and to meet the needs of the City of
Poway.
6-5/X/INVEST1-8