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Home My WebLink AboutReso 1997-18571 RESOLUTION NO. 18571 RESOLUTION OF THE CITY COUNCIL OF THE CiTY OF CHULA VISTA AMENDING CITY INVESTMENT POLICY AND GUIDELINES WHEREAS, the City has an existing Investment Policy and Guidelines to insure the prudent management of idle cash; and WHEREAS, it is recommended that the Council adopt a resolution amending the Policy and Guidelines to add clarity and to bring the City's policy more in line with recently adopted State legislation following the Orange County bankruptcy; and WHEREAS, the existing policy was approved by Resolution 17578 with policy attached. The amended policy is attached as Exhibit A. NOW, THEREFORE, BE IT RESOLVED the City Council of the City of Chula Vista does hereby amend the City investment Policy and Guidelines as set forth in Exhibit A, attached hereto and incorporated herein by reference as if set forth in full. Presented by Approved as to form by ,~- R~obert Powell Director of Finance ' Resolution 18571 EXHIBIT A Page 2 COUNCIL POLICY C CITY OF CHULA VISTA SUBJECT: INVESTMENT POLICY AND GUIDELINES POLICY EFFECTIVE NUMBER DATE PAGE 220-01 02/04/97 ADOFrED BY: Resolution 18571' [ DATED: 02/04/97 PURPOSE Effective cash flow management and cash investment practices are recognized as essential to good fiscal management. This Statement is intended to provide guidelines for the prudent investment of the City's temporarily idle cash in all Funds, and outline the policies for maximizing the efficiency of the City's cash management system. OBjECTIVE The objective of the investment policy is to provide guidelines for insuring the safety of funds invested while maximizing investment interest income to the City. INVESTIVIENT POLICY A. The Finance Director is responsible for investing the cash balances in all City Funds in accordance with the California Government (?ode, Sections 53600 et seq. and 53635 et seq. This policy does not include Long Term Debt Reserve Funds and Deferred Compensation Funds, which are exceptions covered by other more specific Government Code sections and the legal documents unique to each debt transaction. Investment practices shall conform to the prudent man rule (Civil ('ode Section 2261, et seq.) which states, in essence, that "in investing... property for the benefit of another, a trustee shall exercise the judgment and care, under the circumstances then prowriling, which men of prudence, discretion and intelligence exercise in the management of their own affairs..." The Finance Director and other individuals assigned to manage the investment portfolio, acting within the intent and scope of the investment policy and other written procedures, and exercising duc diligence, shall be relieved of persomd responsibility and liability for an individual inw'stment's credit risk or market price changes, provided material deviations from expectations arc reported in a timely manner and appropriate action is taken to control any adverse developments. B. It is the City's full intent, at the time of purchase, to hold all investments until maturity in order to ensure the return of all invested principal. However, it is realistically anticipated that market prices of securities purchased as investments will vary depending on economic conditions, interest rate fluctuations, or individual security credit factors. In a well diversified investment portfolio, such temporary variations in market value will inevitably result in measurable losses at any specific point in time. From time to time, changes in economic or market conditions may dictate that it is in the ('ity's best interest to sell a security prior to maturity. C The three principle factors of Safety, Liquidity and Yield :ire to be taken into consideration, in the specific order listed, when making investment decisions. * Resolution 17578 (07/26/94) Resolution 18571 Page 3 COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: INVESTMENT POLICY AND GUIDELINES POLICY EFFECTIVE NUMBER DATE PAGE 220-01 02/04/97 ADOPTED BY: Resolution 18571* ] DATED: 02/04/97 1. Safety of principal is the foremost factor to be considered during each investment transaction. Safety in investing refers to minimizing the potential for loss of principal, interest or a combination of the two due to the two types of risk, Credit Risk and Market Risk. a) Credit Risk, defined as the risk of loss due to fuilure of the issuer of a security, shall be mitigated by only investing in ve~ safe, or "investment grade" securities and diversifying where feusible. b) Market Risk, defined as market value fluctuations due It} overull changes in interest rates shall bc mitigated by limiting the average maturity ot the investment portlidio to less than 3 years, with a maximum maturity ol any one security ol 5 years withoul prior Council approwd. Also, the portfolio will bc structured based on liquidity needs so as to aw~id the need to sell securities prior to maturity. 2. Liquidity refers to the ability to convert an investment to cash promptly with minimum risk losing some portion of principal or interest. The investment portlillio will bc structured based on historic cash flow analysis in order to provide the necessary liquidity as investments routinely mature. A portion of the portfolio will be maintained in liquid short-term securities which can be converted to cash if necessary to meet unforeseen disbursement requirements. 3. Yield is the average annual return on an investment based on the interest rate, price, and length of time to maturity. The City attempts to obtain the highest yield possible, provided that the basic criteria of safety and liquidity have been mel. AUTHORIZED INVESTMENT INSTRUMENTS The City may invest in the following instruments under the guidelines its provided heroin: A. Certificates of Deposit. Time Certificates of l)eposil will bc made only in FDI(' or FSI.I(' insured accounts. For deposits in excess of the insured maximum of $100,t)(10, approved collateral shall bc required in accordance with California Government Code section 531>52 and/or 53~51 (m) (I). No more than 25% of the investment portfifiio may bc invested in this investment type. B. Securities of the U.S. Government or its AKencies. Includes obligations issued by Federal Home l.oan Banks, Government National Mortgage Association, the Farm ('redit System, the Federal Home Loan Bank, the Federal Homc I.oan Mortgage Association, the Federal Natitmul Mortgage Association, the Student Loan Marketing Association, or t~bligalions or olhcr inslrumcnts ill' {it issued by a federal agency or a United States Government sponsored enterprise. C. Treasury Bills and Notes. U.S. Treasury Bills, Notes, Bonds or ('ertificatcs of Indebtedness, or those for which the full failh and credit of the United States arc pledged ltlr the payment ill principal lind interest. D. Local Agency Investment Fund (LAIF). Investment of funds in the ('ulili~rniu I~AIF which allows the State Treasurer to invest through the Pooled Money Investment Account. Maximum invcstmcnl is subject to state regulation. Resolution 18571 Page 4 COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: INVESTMENT POLICY AND GUIDELINES POLICY EFFECTIVE NUMBER DATE PAGE 220-01 02/04/97 ADOPTED BY: Resolution 18571* ~ DATED: 02/04/97 E. County of San Diego Treasury Pool. Investment of funds in the County of San Diego Treasury which allows the County Treasurer-Tax Collector to invest local funds through a pooled concept. F. Bankers Acceptance. Bills of Exchange or Time Drafts drawn on and accepted by a commercial bank, otherwise known as Bankers Acceptances, both domestic and foreign, which are eligible for purchasc by the Federal Reserve System. Purchases of Bankers Acceptances may not exceed 270 days maturity or total more than 40% of the cost value of the City's investment portfolio. G. Commercial Paper. Paper of the highest rating as provided by Moody's Investors Service, Inc. (P1), or Standard and Poor's Corporation (AI +). Eligible paper is further limited to issuing corporatitms that are organized and operating within the United States and having total assets in excess of five hundred million dollars ($500,000,000). Purchases of eligible commercial paper may not exceed 180 days maturity, represent more than 10% of the outstanding paper of the issuer, or total more than 15% of the cost value of the City's investment portfolio. H. Negotiable Certificates of Deposit. Issued by a nationally or state-chartered hank in' a state or ledoral savings and loan association or by a state-licensed branch of a foreign bank. Purchases ol Negotiable Certificates of Deposit may not total more than 30~, of the cost value I>l' the ('ity's investment portfolio. 1. Repurchase A~reements. A purchase of securities by the City pursuant to a Master Repurchase Agreement agreement by which the seller will repurchase such securities on i~r bel'tlrc a specified date, or on demand of either party, and for a specified amount. Investments in repurchase agreements will be used solely as short term investments not to exceed 90 days and be collateralized by securities having a market wdue of at leust 102% ol the value of the repurchase agreement at all times during the term of the investment. J. Medium Term Corporate Notes. Corporate obligatitms shall bc rated A or better by Ml~odv's and or Standard and Poor's rating agencies. Purchases of corporate medium term notes shall not ltltal more than 30% of the cost value of the City's investment portfolio, nor for any one corpolatkm, when combined with any Commercial Paper issued by the same corporation, total mt~rc than IS~/~ ill Ihc cost value of the City's investment portfolio. K. Various daily cash funds administered for or by Trustees, Paying Agents, or ('ustodian Banks contracted by the City may be purchased as allowed under California Government ('ode. Only those funds holding U.S. Treasury or Government Agency obligations shall be purchased. DIVERSIFICATION Investments shall be diversified among institutions, types of securities and maturities to maxinfizc safety and yield with changing market conditions. Eocal financial institutions will be given preferential consideration for investment of City funas consistent with the City's objective o[ attaining murkct tales ill rc~urn, and consistent with constraints imposed by its safety objectivcs, cash flow considcratkms and State laws. Resolution 18571 Page 5 COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: INVESTMENT POLICY AND GUIDELINES POLICY EFFECTIVE NUMBER DATE PAGE 220-01 02/04/97 ADOPTED BY: Resolution 18571* ~ DATED: 02/04/cY7 SAFEKEEPING All investments of the City shall have the City of Chula Vista as registered owner and shall bc held in safekeeping by a third party bank trust department, acting as agent for the ('ilv under lhc terms .I a ,:usl.dv agreement. INVESTMENT REPOR I'S A. The Director of Finunto shall submit a quarterly invcslnlcnl loptill hi the t'i[~ Mariagel .rod ('il~, Council in accordance with Government ('ode Section 16481.2 containing the hdhlwing inlormati.n for each individual investment: Financial institution Type of investment Purchase Price of investment Rate of interest Purchase date Maturity date Current market value limit securities Other data as required by the City In addition, the report shall include a statcmcnl ol ct~mpliancc ot the ptlrth~lio with the ('t}uncil approved Investment Policy and a slalcmcnl indicating the ability ol Ihc ('ity to mcct its cxpcndilurc requirements for the next six months. POLICY REVIEW l'his investment policy and guidelines shall bc adopted bv rcslllutilln ol the ('ilv ('tlunci[ tin an annual basis after being reviewed to ensure its consistency with the overall objectives tit plcscrvatilln i}l principal, liquidit}. and yield. and its relevance to current law and financial and economic trends. Resolution 18571 Page 6 PASSED, APPROVED, and ADOPTED by the City Council of the City of Chula Vista, California, this 4th day of February, 1997, by the following vote: AYES: Councilmembers: Moot, Rindone, Salas, and Horton NAYES: Councdmembers: None ABSENT: Councilmembers: Padilia ABSTAIN: Councilmembers: None i:~/hirley Horton, Mayor ATTEST- · Authelet, City Clerk STATE OF CALIFORNIA ) COUNTY OF SAN DIEGO ) CITY OF CHULA VISTA ) I, Beverly A. Authelet, City Clerk of the City of Chula Vista, California, do hereby certify that the foregoing Resolution No. 18571 was duly passed, approved, and adopted by the City Council at a regular meeting of the Chula Vista City Council held on the 4th day of February, 1997. Executed this 4th day of February, 1997,