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HomeMy WebLinkAboutReso 1994-17578 RESOLUTION NO. 17578 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA ADOPTING NEW CITY INVESTMENT POLICY AND GUIDELINES WHEREAS, the City's Investment Policy and Guidelines is intended to provide direction for the prudent investment of temporarily idle cash, and for maximizing the efficiency of the cash management process; and, WHEREAS, the stated goal is to enhance the economic condition of the City while insuring the safety of funds invested; and, WHEREAS, on March 24, 1987, the County Board of Supervisors adopted Resolution No. 11, allowing local agencies within the County to deposit idle cash in the ~4.0 billion County Treasury for investment on a pooled basis with other local entities, similar to the Local Agency Investment Fund (LAIF) arrangement; and, WHEREAS, it is recommended that the Council adopt a resolution amending the Policy and Guidelines to add the option of depositing funds n the County Treasury for investment on a pooled basis with other local entities; and, WHEREAS, it is also recommended that the Annual Statement of Investment Policy to the Council currently required by the Policy be deleted in favor of the detailed monthly statements currently provided. NOW, THEREFORE, BE IT RESOLVED the City Council of the City of Chula Vista does hereby adopt new City Investment Policy and Guidelines as set forth in Exhibit "B", attached hereto and incorporated herein by reference as if set forth in full. Presented by A ed a2/Co for ~ ~Boogaa Director of Finance City Attorney Resolution No. 17578 Page 2 D(HI~IT B COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: INVESTMENT POLICY AND GUIDELINES POLICY EFFECTIVE NUMBER DATE PAGE 220-01 07/26/94 1 OF 6 ADOPTED BY: Resolution No. 17578 ] DATED: 07/26/94 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 Cites cash management system. The investment goal is to enhance the economic condition of the City while insuring the safety of funds invested. OBJEL'I'IVE The Git~/s cash management system is designed to accurately monitor and forecast expenditures and revenues, thus enabling the City to invest funds to the fnllest extent possible. The City attempts to obtain the highest yield on its investments consistent with the criteria established for safety and liquidity. The Finance Director is responsible for investing the surplus funds in the City Treasury in accordance with the California Government Code, Sections S3600 et seq. and S3635 et seq. The City operates its temporary idle cash investments under the prudent man rule (Civil Code 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 prevailing, which men of prudence, discretion and intelligence exercise in the management of their own affairs.. ." The three principle factors of safety, liquidity and yield are to be taken into consideration when making investment decisions. A) Safety. Safety and the minimizing of risk associated with investing refers to attempts to reduce the potential for loss of principal, interest or a combination of the two. The City invests only in those instruments that are considered very safe. B) Liquidity. Liquidity refers to the ability to convert an investment to cash promp~y with minimum risk of losing some portion of principal or interest. A portion of the portfolio should be maintained in liquid short-term securities which can be converted to cash if necessary to meet disbursement requirements. C) Yield. 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 met. Resolution No. 17578 Page 3 COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: INVESTMENT POLICY AND GUIDEHNES POLICY EFFECTIVE NUMBER DATE PAGE 220-01 07/26/94 2 OF 6 ADOFrED BY: Resolution No. 17578 ~ DATED: 07/26/94 INVESTMENT INSTRUMENTS The City of Chula Vista may invest in the following instruments under the guidelines as provided herein: A) Certificates of Deposit. Time Certificates of Deposit will be made only in FDIC or FSLIC insured accounts. For deposits in excess of the insured maximum of $100,000, approved collateral shall be required in accordance with California Government Code Section 53652 and/or 53651 (m)(1). B) Securities of the U. S. Government or its Agencies. Includes obligations issued by Federal Home Loan Banks, Government National Mortgage Association, Farm Credit System, the Federal Home Loan Bank, Federal Home Loan Mortgage Association, Federal National Mortgage Association, or obligations or other instruments of or issued by a federal agency or a United States Government sponsored enterprise. C) Treasury Bills and Notes. U. S. Treasury Bills, Notes, Bonds or Certificates of Indebtedness, or those for which the full faith and credit of the United States are pledged for the payment of principal and interest. D) Local Agenov Investment Fund (LAIF). Investment of funds in the California LAIF which allows the State Treasurer to invest through the Pooled Money Investment Account. Maximum investment is subject to state regulation. 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 purchase by the Federal Reserve System. Purchases of Bankers Acceptance may not exceed 270 days maturity or 40% of the City's surplus money which may be invested. G) Commercial Paper. Paper of the highest rating as provided by Moody's Investors Service, Inc., or Standard and Poor's Corporation (A-l: P-l). Purchases of eligible commercial paper may not exceed 180 days maturity or 15% of the City's surplus money which may be invested. Eligible paper is further limited to issuing corporations that are organized and operating within the United States and having total assets in excess of five hundred million dollars ($500,000,000). Resolution No. 17578 Page 4 COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: INVESTMENT POLICY AND GUIDELINES POLICY EFFECTIVE NUMBER DATE PAGE 220-01 07/26/94 3 OF 6 ADOFrED BY: Resolution No. 17578 [ DATED: 07/26/94 H) Negotiable Certificates of Deposit. Issued by a nationally or state-chartered bank or a state or federal savings and loan association or by a state-licenses branch of a foreign bank. Purchases of Negotiable Certificates of Deposit may not exceed 30% of the City's surplus money which may be invested. I) Repurchase A~reements. A purchase of securities by the City pursuant to an agreement by which the seller will repurchase such securities on or before a specified date, or on demand of either party, and for a spedfled amount. Investments in repos will be used solely as short term investments not to exceed 90 days. J) Other. Other investments that are, or may become, legal investments through the State of California Government Code and with prior approval of the City Council. DIVERSIFICATION Investments shah be diversified among institutions, types of securities and maturities to maximize safety and yield with changing market conditions. Local farancial institutions will be given preferential consideration for investment of City funds consistent with the City's objective of attaining market rates of return, and consistent with constraints imposed by its safety objectives, cash flow considerations and State laws. SAFFJ~RPlNG All investments of the City shah have the City of Chula Vista as registered owner or shah be kept in the custody of the City or by a qualified safekeeping institution. INVESTMENT REPORTS A) The Director of Finance shall submit a monthly investment report to the City Manager and City Council containing the following information: Financial institution Type of investment Amount of deposit Rate of interest Purchase date Maturity date Current market value for securities with a maturity of more than 12 months - Other date as required by the City Resolution No. 17578 Page 5 COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: INVESTMENT POLICY AND GUIDELINES POLICY EFFECTIVE NUMBER DATE PAGE 220-01 07/26/94 4 OF 6 ADOPTED BY: Resolution No. 17578 I DATED: 07/26/94 INVESTMENT INSTRUMENTS 1. T-BB.I_(; Direct obligations of U.S. Government Three months and six months duration 2. T-NOTES Direct obligations of U.S. Government Maturities up to 10 years 3. FEDERAL AGENCIES In addition to dixect obligations of U.S. Government, a variety of Federal Agencies issue their own securities. Most carry full faith and credit guarantees. This category includes issues of Department of Housing & Urban Development (FHA and GNMA), Export-Import Bank of U.S., Farmers Home Administration, Government Services Administration SBA and Tennessee Valley Authority. 4. FEDERAL INSTRUMENTALfflES U.S. Government has sponsored creation of a variety of enterprises that operates as separate corporate entities. Underlying security varies by issuer. As with Agency securities, marketability of many sponsored corporations' debt is limited. Examples are Federal National Mortgage Assodation (FNMA), Federal Intermediate Credit (FIC) Banks, Federal Home Loan Banks, and Federal Land Banks, and Federal Land Banks. 5. COMMERCIAL BANK CERTiFiCATES OF DEPOSIT CD's comprise backbone of many government portfolios because of their familiarity, their direct issuance by traditional government depositories, favorable legislation, flexible maturities, and money market rates of returns for larger deposits. Resolution No. 17578 Page 6 EXttlBff B COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: INVESTMENT POLICY AND GUIDELINES POLICY EFFECTIVE NUMBER DATE PAGE 220-01 07/26/94 5 OF 6 ADOPTED BY: Resolution No. 17578 ] DATED: 07/26/94 6. BANKER'S AC(~,PTAN(~ Banker's Acceptance are negotiable time drafts drawn to finance the export, import, shipment or storage of goods, and they are termed "Accepted" when a bank guarantees to pay the face value of maturity. A Banker's Acceptance constitutes an irrevocable obligation of the accepting bank and a contingent obligation of the drawer and of any endorsees whose name appear on it. The bank is protected by its customer's agreement to provide the necessary funds in advance of the maturity of the Acceptance and also by the pledge of documents such as bills of lading, independent warehouse or terminal receipts, and other documents evidencing ownership and the insurance of the goods so financed. Typically created from a letter of credit in a foreign trade transaction. Example - a U.S. corporation planning to import goods from abroad requests that its bank issue a Letter of Credit on its behalf in favor of the foreign supplier. This letter allows the foreign vendor to draw a draft on the importers U.S. bank for payment of the merchandise. Upon receipt of the letter and draft, the supplier to receive immediate payment for the shipment. The foreign bank then forwards the draft to its U.S. correspondent. At this point, the draft is stamped "accepted", with the U.S. bank incurring an obligation to pay the draft (now a bankers acceptance) at maturity. The accepting domestic bank may buy the acceptance, earning the discount between the purchase price and face amount to be reimbursed by the U.S. importer. On the other hand, the acceptance may be sold to a third party, fleeing the bank of all but the contingent liability, for which it collects a small fee. The acceptance - secured by the bank, the goods themselves and the importer - becomes a money market instrument. In 70 years of use in U.S., the Bankers' acceptance has experienced no principal loss to investors. Maturities range from 30 to 180 days. 7. COMMERCIAL PAPER Short term unsecured promissory note issued for a specific maturity. Used primarily by corporations to finance receivables. Maturities from 3 to 270 days. Generally the paper is backed by a credit line to refund the notes in the event the issuer is unable to roll the paper over at maturity. Presently over 1000 corporate entities issue commercial paper. Quality varies considerably so investors closely follow credit ratings issued by Standard & Poor and Moody. Resolution No. 17578 Page 7 COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: INVESTMENT POLICY AND GUIDEHNES POLICY EFFECTIVE NUMBER DATE PAGE 220-01 07/26/94 6 OF 6 ADOFrED BY: Resolution No. 17578 [ DATED: 07/26/94 8. LOCAL AGENCY INVESTMENT FUND Created by the State Legislature in 1976 in order to allow the pooling of monies ~rom all local agencies statewide into one fund for purposes of investing, agencies may deposit funds in LAIF for a length of dine determined solely by the depositing agency. The State Treasurer may invest the monies in LAIF in eligible securities for state investments for the purpose of achieving the highest return consistent with sa~e and prudent treasury management. 9. COUNTY OF SAN DIEGO TREASURY POOL Authorized by State of California Government Code 53684 and County Board of Supervisors Resolution No. 11, dated March 24, 1987, Local Agencies may deposit excess funds in the County Treasury for investment purposes. The County Treasurer-Tax Collector may invest the pooled monies in investments permitted by State of California Government Code S3600 et seq/and 5363S et seq. Resolution No. 17578 Page 8 PASSED, APPROVED and ADOPTED by the City Council of the City of Chula Vista, California, this 26th day of July, 1994, by the following vote: YES: Councilmembers: Fox, Horton, Moore, Rindone, Nader NOES: Councilmembers: None ABSENT: Councilmembers: None ABSTAIN: Councilmembers: None Tim Nader, Mayor ATTEST: STATE OF CALIFORNIA ) COUNTY OF SAN DIEGO ) ss. 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. 17578 was duly passed, approved, and adopted by the City Council at a regular meeting of the Chula Vista City Council held on the 26th day of July, 1994. Executed this 26th day of July, 1994. "" ,/~,~k~'-~ ~/~" /"' ' ~" Beverly A: Authelet, City Clerk