HomeMy WebLinkAbout2017-34 CC Reso - Revised Statement of Investment Policy RESOLUTION NO. 2017- 34
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF UKIAH APPROVING REVISED
STATEMENT OF INVESTMENT POLICY
WHEREAS, it is the policy of the City Council of the City of Ukiah to invest its public funds in a
manner that will provide maximum security, adequate liquidity, and sufficient yield, while meeting
the daily cash flow demands of the City and conforming to all statutes and regulations governing
the investment of public funds; and
WHEREAS, Section 53600.5 of the California Government Code states that when investing and
managing public funds, the primary objective of a trustee shall be to safeguard the principal of the
funds under its control; and
WHEREAS, the secondary objective of Section 53600.5 is the requirement to meet the liquidity
needs of the depositor; and
WHEREAS, the third objective of Section 53600.5 is to achieve a return on the funds under its
control; and
WHEREAS, Section III of the City's Statement of Investment Policy clearly specifies the three
principle objectives of the City's investment activities as safety, liquidity, and yield, in that order of
priority; and
WHEREAS, in accordance with California Government Code Section 53646, the City Finance
Director may annually render to the City Council a Statement of Investment Policy, where any
revisions to the Policy shall be considered by the City Council at a public meeting.
NOW, THEREFORE, BE IT RESOLVED the City Council finds that the City's Statement of
Investment Policy complies with the California Government Code, which governs investment
practices of local governments; and
BE IT FURTHER RESOLVED, the City Council of the City of Ukiah adopts the attached Exhibit
A- City of Ukiah Statement of Investment Policy dated July 5, 2017.
PASSED AND ADOPTED this 5th day of July 2017, by the following roll call vote:
AYES: Councilmembers Scalmanini, Crane, Mulheren, Doble, and Mayor Brown
NOES: None
ABSTAIN: None
ABSENT: None
itatifififr&
Jim rown, Mayor
ATTEST:
Kristine Lawler, City Clerk
Page 1 of 1
Exhibit A
assets under management in excess of five hundred million dollars ($500,000,000).
(r) Supranational Debt. United States dollar denominated senior unsecured
unsubordinated obligations issued or unconditionally guaranteed by the International
Bank for Reconstruction and Development, International Finance Corporation,or Inter-
American Development Bank,with a maximum remaining maturity of five years or less,
and eligible for purchase and sale within the United States. Investments under this
subdivision shall be rated in a rating category of"AA"or its equivalent or better by an
NRSRO and shall not exceed 30% of the portfolio.
Credit criteria listed in this section refers to the credit quality of the issuing organization at the
time the security is purchased. The maturity limits are applied at the time of purchase.
VI. INELIGIBLE INVESTMENTS
The City may only invest in those obligations authorized by this policy. The City shall not invest
any funds in inverse floaters, range notes, or interest-only strips that are derived from a pool of
mortgages, or in any security that could result in zero interest accrual if held to maturity.
However, the City may hold prohibited investments until their maturity dates.
VII. PORTFOLIO LIMITS AND DIVERSIFICATION
1. Maximum Investment Maturity: Unless otherwise noted within this investment policy,
the City may not invest in a security with a maturity that exceeds five years from the
date of purchase. Investments which exceed five years in maturity require authority
granted by City Council before purchase. Written authority of the City Council must be
granted specifically or as part of an investment program no less than three months
prior to the date of purchase.
2. Maximum Weighted Average Maturity: The maximum weighted average maturity of
the City's investment portfolio shall not exceed 2.5 years to control overall exposure to
interest rate risk.
3. Diversification: With the exception of obligations of the United States Government
and its Agencies, no more than 10%of the portfolio may be invested in the securities of
any single issuer.
Adopted on the 5th day of July 2017 by the Ukiah City Council.
Signed: Attest:
4414 4'%`
Jim • ' Brown, Mayor Kristine L wler, City Clerk
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Exhibit A
CITY OF UKIAH
STATEMENT OF INVESTMENT POLICY
July 2017
I. PURPOSE
The purpose of this document is to establish and organize investment policies,which will govern
the investment activities of the City of Ukiah.
II. SCOPE
This investment policy covers all the City's surplus funds and investments (except retirement
funds and bond proceeds)and investment activities under the direction of the City. Investment
of bond proceeds will be governed by the provisions of relevant bond documents.
The investment policies of the City of Ukiah are based on state law and prudent money
management practices. All funds will be invested in accordance with this Investment Policy and
applicable California Government Codes, including § 53601 et seq.
III. OBJECTIVES
The primary objectives of the City, in order of priority, shall be:
1) Safety: Safety of principal is the foremost objective of the investment program.
Investments of the City shall be undertaken in a manner that seeks to ensure
preservation of capital in the portfolio.
2) Liquidity: The investment portfolio of the City will remain sufficiently liquid to enable
the City to meet its cash flow requirements.
3) Yield: The investment strategy of the City shall be to earn a reasonable investment
return, considering current market conditions,and within the parameters set forth by
priorities (1) and (2) above.
An adequate percentage of the portfolio shall be maintained in liquid, short-term securities that
can be converted into cash if necessary to meet forecasted disbursement requirements. The
portfolio shall also be appropriately diversified to avoid unreasonable and avoidable risks
regarding specific security types or individual financial institutions.
IV. POLICIES
1. Public Funds: It is the policy of the City of Ukiah to invest public funds in a manner
which will provide the maximum safety and liquidity,while earning an investment return
consistent with the objectives and parameters set forth by this policy.
2. Prudent Investor Standard: Ukiah operates its investments program under the
Prudent Investor Standard,which states that the governing body of the local agency or
Exhibit A
the persons authorized to make investment decisions on behalf of the local agency are
trustees, and, therefore, subject to the Prudent Investor Standard. 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.
3. Management Responsibilities: Management responsibility for the investment
program is delegated,for a one-year period, subject to annual review and delegation,to
the City Treasurer. The City Treasurer may further delegate day-to-day management of
the investment program to a professional external investment advisor.
4. Internal Controls: A system of internal controls shall be established and documented
in writing by the Finance Director. The controls shall be designed to prevent losses of
public funds arising from fraud, employee error, misrepresentation of third parties,
unanticipated changes in financial markets, or imprudent actions by employees and
officers of the City of Ukiah. Controls deemed most important include: minimization of
opportunities for collusion, separation of duties, separation of transaction authority from
accounting and recordkeeping, avoidance of bearer-form securities,specific limitations
regarding securities losses and remedial actions,written confirmation of all transactions,
minimizing the number of authorized investment officials,documentation of transactions
and strategies, and proper review and approval of brokerage accounts and investment
transactions.
5. Safekeeping, Custody, and Delivery: The City's investments shall be held in
safekeeping, in the name of the City of Ukiah, by a third party custodian bank.
Investment transactions shall be executed and settled using the"delivery vs. payment"
method.
6. Reporting: The Finance Director shall review and have available monthly reports in the
Finance Department, and available for public review, which shall include type of
investment, issuer, purchase and maturity dates, rating, purchase price, par, current
market value as of the date of the report and the source of this valuation, and yield to
maturity. These reports shall include a list of all transactions during the past month.
The Investment Advisor will also deliver periodic market updates and portfolio reviews
to the Finance Director. The Finance Director will deliver investment reports to the
Investment Oversight Committee and City Council.
The Oversight Committee will meet at least once annually in order to conduct a
comprehensive review of the investment activities of the City so as to insure that
regulations are being adhered to and that strategies are being followed.
7. Conflict of Interest: In accordance with California Government Code sections 1090,et
Exhibit A
seq. and 87100, et seq., officers and employees of the City will refrain from any activity
that could conflict with the proper execution of the investment program or which could
impair their ability to make impartial investment decisions. All investment personnel
shall comply with the reporting requirements of the Political Reform Act, to include the
annual filing of Statements of Economic Interest.
8. Return on Investment: The City's investment portfolio shall be designed to attain a
market-average rate of return through economic cycles. The Investment Oversight
Committee will measure the portfolio against an appropriate benchmark.
9. Annual Review of Policy: The Investment Advisor shall review the Investment Policy
annually and provide the City Manager and Finance Director with recommendations if
any are needed. The Finance Director will present the Policy, and any recommended
changes, to the Investment Oversight Committee and City Council. City Council will
review the Policy and recommended changes at a public meeting.
V. AUTHORIZED INVESTMENTS
Generally, investments shall be made in the context of the Prudent Investor Standard. The City
is further governed by applicable California Government Codes, including sections 53600 and
53601 et seq. Within the context of these regulations,the following investments are authorized,
and further limited herein:
(a) Ukiah Bonds: Bonds issued by the City of Ukiah, including bonds payable solely out
of the revenues from a revenue-producing property owned, controlled, or operated by
the City or by a department, board, agency, or authority of the City.
(b) U.S.Treasury Obligations: United States Treasury notes, bonds, bills,or certificates
of indebtedness, or those for which the full faith and credit of the United States are
pledged for payment of principal and interest.
(c) California State Obligations: Registered state warrants or treasury notes or bonds of
this state, including bonds payable solely out of the revenues from a revenue-
producing property owned, controlled, or operated by the state or by a department,
board, agency, or authority of the state.
(d) Non-California State Obligations: Registered treasury notes or bonds of any of the
other 49 United States in addition to California, 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 other 49 United
States in addition to California.
(e) Local Agency Obligations: Bonds, notes, warrants, or other certificates of
indebtedness of any local agency within this state, including bonds payable solely out
of the revenues from a revenue-producing property owned, controlled, or operated by
the state or by a department, board, agency, or authority of the state.
�.,
3
Exhibit A
(f) Federal Agency or Government Sponsored Enterprise Obligations: Federal
agency or United States government-sponsored enterprise obligations,participations,
or other instruments, including those issued by or fully guaranteed as to principal and
interest by Federal Agencies or United States Government Sponsored Enterprises.
(g) Bankers' Acceptances: Bills of exchange or time drafts that are drawn on and
accepted by a commercial bank. Purchases of bankers'acceptances may not exceed
180 days maturity or 40%of the portfolio, and no more than 5%of the portfolio may be
invested in the banker's acceptance of any one commercial bank.
(h) Commercial Paper: Commercial paper of"prime"quality of the highest ranking or of
the highest letter and number rating as provided for by a nationally recognized
statistical-rating organization. The entity that issues the commercial paper shall meet
all of the following conditions in either paragraph (1) or paragraph (2):
(1) The entity meets the following criteria: (a) is organized and operating in the
United States as a general corporation; (b) has total assets in excess of five hundred
million dollars ($500,000,000); and (c) has debt other than commercial paper, if any,
that is rated in a rating category of"A" or its equivalent or higher by an NRSRO.
(2)The entity meets the following criteria:(a)is organized within the United States
as a special purpose corporation, trust, or limited liability company; (b) has program-
wide credit enhancements, including, but not limited to,over collateralization,letters of
creditor surety bond;and (c)has commercial paper that is rated "A-1"or higher,or the
equivalent, by an NRSRO.
Eligible commercial paper shall have a maximum maturity of 270 days. Purchases of
commercial paper may not exceed 25% of the City's portfolio. The City may purchase
no more than 10%of the outstanding commercial paper of any single issuer. No more
than 5% of the portfolio may be invested in commercial paper of any one institution.
(i) Negotiable Certificates of Deposit: Negotiable certificates of deposit or deposit
notes issued by a nationally or state-chartered bank, a state or federal savings and
loan association, or a federally-licensed or state-licensed branch of a foreign bank
provided that the senior debt obligations of the issuing institution are rated in a rating
category of"A"(long-term)or its equivalent or better or A-1 (short-term)or its equivalent
or better by an NRSRO. Purchases of negotiable certificates of deposit may not
exceed 30% of the portfolio, and no more than 5% of the City's portfolio may be
invested in any one financial institution.
(j) Repurchase Agreements: The City may invest in repurchase agreements with banks
and dealers with which the City has entered into a master repurchase agreement. The
maturity of repurchase agreements shall not exceed 365 days. The market value of
securities used as collateral for repurchase agreements shall be valued at 102% or
greater of the funds borrowed against those securities at all times and shall be
monitored daily by the investment staff. In order to conform with provisions of the
Exhibit A
Federal Bankruptcy Code, which provide for the liquidation of securities held as
collateral for repurchase agreements,the only securities acceptable as collateral shall
be direct obligations of the United States or any agency of the United States as
described in §V of this policy.
In addition,the City may enter into repurchase agreements only with"primary dealers"
as designated by the Federal Reserve Bank of New York. All securities underlying
Repurchase Agreements must be delivered to the City's custodian bank (delivery vs.
payment) or be handled under a properly executed "tri-party" repurchase agreement.
The market value must be recalculated each time there is a substitution of collateral.
The City or its trustee shall have a perfected first security interest under the Uniform
Commercial Code in all securities subject to Repurchase Agreement.
(k) Reverse Repurchase Agreements: The City may invest in reverse repurchase
agreements only with "primary dealers"with which the City has entered into a master
repurchase agreement contract. The City may invest in reverse repurchase
agreements with the following conditions:
Reverse repurchase agreements may be used only after prior approval of the City
Council. The City may only use reverse repurchase agreements to (1) cover a
temporary cash shortage, or(2)augment earnings. Reverse repos may not be used to
leverage the portfolio. In addition:
If a reverse repurchase agreement is authorized, it may be utilized only if the security
to be sold on a reverse repurchase agreement has been owned and fully paid for by
the City for a minimum of 30 days prior to the sale; the total of all reverse repurchase
agreements on investments owned by the City does not exceed 20% of the portfolio;
and the agreement does not exceed a term of 92 days, unless the agreement includes
a written codicil guaranteeing a minimum earning or spread for the entire period
between the sale of the security using a reverse repurchase agreement and the final
maturity date of the same security. The proceeds of the reverse repurchase
agreement may not be invested in securities whose maturity exceeds the term of the
reverse repurchase agreement.
(I) Medium-term Notes: The City may invest in all corporate and depository institution
debt securities with a maximum remaining maturity of five year or less, issued by
corporations organized and operating within the United States, or by depository
institutions licensed in the United States or any state and operating within the United
States. Notes eligible for investment shall be rated in a rating category of "A" or its
equivalent or better by an NRSRO. Purchase of corporate notes may not exceed 30%
of the portfolio, and no more than 5% of the corporate notes in the portfolio may be
invested in the same corporation.
(m) Money Market Funds: Shares of beneficial interest issued by diversified management
companies that invest in the securities and obligations as authorized by California
Government Code section 53601 subdivisions (a) to (k), inclusive, and subdivisions
5
Exhibit A
(m)to(q), inclusive and that are money market funds registered with the Securities and
Exchange Commission under the Investment Company Act of 1940. To be eligible for
investment these companies shall either: (i)attain the highest ranking or highest letter
and numerical rating provided by not less than two nationally recognized statistical
rating organizations, or (ii) have an investment advisor registered or exempt from
registration with the Securities and Exchange Commission with not less than five years
experience managing money market mutual funds with assets under management in
excess of five hundred million dollars($500,000,000). The purchase price of shares of
beneficial interest purchased shall not include any commission that these companies
may charge and shall not exceed 20% of the City's portfolio.
(n) Local Agency Investment Fund: The City may invest in the Local Agency Investment
Fund (LAIF)established by the State Treasurer for the benefit of local agencies under
§16429.1 of the Government Code.The maximum balance that can be held in the fund
is the maximum amount permitted by LAIF's Local Investment Advisory Board.
(o) Time Deposits: The City may invest in non-negotiable time deposits that are FDIC
insured or fully collateralized in financial institutions located in California, including U.S.
branches of foreign banks licensed to do business in California. To be eligible to
receive local agency deposits, a financial institution must receive a minimum overall
"satisfactory rating"for meeting the credit needs of California Communities in its most
recent evaluation. All time deposits must be collateralized in accordance with the
California Government Code § 53650, et seq. Since time deposits are not liquid, no
more than 25% of the cost value of the portfolio may be invested in this category.
(p) Mortgage-Backed and Asset-Backed Securities: Any mortgage pass-through
security, collateralized mortgage obligation, mortgage-backed or other pay-through
bond, equipment lease-backed certificate, consumer receivable pass-through
certificate, or consumer receivable-backed bond of a maximum of five years maturity.
Securities eligible for investment under this subdivision shall be issued by an issuer
rated in a rating category of"AA" or its equivalent or better by a nationally recognized
rating service and having a rating in a rating category of"A"or equivalent or higher for
the issuer's unsecured debt, as provided by a nationally recognized rating service.
Purchase of securities authorized by this subdivision may not exceed 20% of the
agency's surplus money that may be invested pursuant to this section.
(q) Local Government Investment Pools (LGIPs). Shares of beneficial interest issued
by a joint powers authority organized pursuant to Section 6509.7 that invests in the
securities and obligations authorized in California Government Code section 53601
subdivisions (a) to (q), inclusive. 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 adviser that meets all of the following criteria:(1)The adviser is
registered or exempt from registration with the Securities and exchange Commission.
(2) The adviser has not less than five years of experience investing in the securities
and obligations authorized in subdivisions (a) to (q), inclusive. (3) The adviser has
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