HomeMy WebLinkAboutAgenda Statement 1985/09/24 Item 14 (2) COUNCIL AGENDA STATEMENT
Item 14
Meeting Date 8/26/85
ITEM TITLE: Resolution Approving the City of Chula Vista
Investment Policy and Guidelines
SUBMITTED BY: Director of Finance?
REVIEWED BY: City Manage (4/5ths Vote: Yes No x )
Attached for the City Council review and approval is the proposed statement of
Investment Policy and Guidelines for the investment of City funds.
RECOMMENDATION: That the City Council adopt resolution approving the
Investment Policy.
BOARDS/COMMISSIONS RECOMMENDATION: Not Applicable.
DISCUSSION:
Interest income has, and will continue to be, a major source of revenue to the
City of Chula Vista. In FY 1983-84, the City and Agency earned $1 ,565,246 in
interest income and in FY 1984-85 earned $3,215,515 in interest income. With
an investment portfolio of almost $27 million including the City and
Redevelopment Agency, it is important to have formal written guidelines
regarding the investment of funds.
Investment Policy and Guidelines
In light of the recent scrutiny of the treasury function for municipalities
and other public agencies, staff has prepared the following guidelines for the
Prudent investment of the City's temporary idle cash. The purpose is to
provide broad guidelines to the officers of the City charged with the
responsibility for investment of the City's funds.
These guidelines are not intended to be comprehensive in every situation, but
rather to serve as a tool to help assure adequate safeguarding of the City' s
assets.
As stated in the Investment Policy and Guidelines, the City operates its
investments under the "prudent man" rule concentrating on three major criteria
of Safety, Liquidity, and Yield.
The prudent man rule is contained in Civil Code Section 2261 and states that
"in investment, reinvesting, purchasing, acquiring, exchanging, selling and
managing 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, not in regarding to speculation, but in regard to the permanent
disposition of their funds, considering the probable income, as well - as., the
probable safety of their capital ." This general statement leads to
consideration of major criteria.
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Page 2, Item 14
Meeting Date 8/20/85
Safety - This is the basic premise underlying the investment policy for the
MT-6f Chula Vista. This means minimizing the risk associated with investing
and insuring the safety of funds. The City does not speculate; it does not
buy stocks or deal in futures or options. The City invests only in those
instruments that are considered safe.
Liquidity - The City maintains a portion of its portfolio in liquid short-term
securities which can be converted to cash to meet disbursement requirements.
Ordinarily, because investments carry a positive yield curve, (i.e. , longer
term rates are higher than shorter maturities) , the City attempts 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 30 days or under.
Yield - The City attempts to obtain the highest return on investment that is
avai able, provided that the basic criteria of safety and liquidity have been
met.
In accordance with the guidelines and criteria as stated above, the City of
Chula Vista may invest in the following instruments:
A) Certificates of Deposit
B) Securities of the U.S. Government or its Agencies
C) Treasury Bills and Notes
D) Local Agency Investment Fund
E) Bankers Acceptances
F) Commercial Paper
G) Negotiable Certificates of Deposit
H) Repurchase Agreements
I) Other investments with prior approval of the City Council
The above investment instruments are more fully described in the attached
statement of Investment Policy and Guidelines.
Investment Reports
It is intended that the Director of Finance shall submit a monthly investment
report to the City Manager and City Council .
Attached for Council information and review is the investment report for the
month of July 1985. The first page is a summary that indicates the total
amount of funds invested on behalf of the City of Chula Vista and the
Redevelopment Agency, a summary of investments by type, and an indication of
the par value versus book value of the investments.
Following the summary page is a detailed listing of each investment of the
City that Provides information regarding type, value, acquisition and maturity
date, term, and yield (rate of return). Current market value information is
also provided for those investments with a term in excess of one year.
The format of the investment report may be changed, adjusted, or information
added or deleted at the suggestion of the City Council .
FISCAL IMPACT: None.
WPC 0301G
•
RESOLUTION NO. / ' `
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
CHULA VISTA APPROVING THE CITY OF CHULA VISTA
INVESTMENT i4OLICY AND GUIDELINES
The City Council of the City of Chula Vista does hereby
resolve as follows:
WHEREAS, the Director of Finance has prepared an
Investment Policy and Guidelines, attached hereto as Exhibit A
and incorporated herein by reference as if set forth in full, and
WHEREAS, said 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 City' s cash management system, and
WHEREAS, the investment goal is to enhance the economic
condition of the City while insuring the safety of funds invested.
NOW, THEREFORE, BE IT RESOLVED that the City Council of
the City of Chula Vista does hereby approve the Investment Policy
and Guidelines attached hereto as Exhibit A.
Presented by Approved as to form by
Lyman Christopher , Director of C arles R. Gill, Assistant
Finance City Attorney
0700a
•
EXHIBIT A
8/20/85
CITY OF CHULA VISTA
INVESTMENT POLICY AND GUIDELINES
*r?
1. 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 City's cash management system. The
investment goal is to enhance the economic condition of the City while
insuring the safety of funds invested.
2. OBJECTIVE
The City's cash management system is designed to accurately monitor and
forecast expenditures and revenues, thus enabling the City to invest funds
to the fullest extent possible. The City attempts to obtain the highest
yield on its investments consistent with the criteria established for
safety and liquidity.
3. POLICY
The Finance Director is responsible for investing the surplus funds in the
City Treasury in accordance with the California Government Code, Sections
53600 et seq. and 53635 et seq. The City operates its temporary idle
cash investments under the prudent man rule (Civil Code Sect. 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 promptly 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.
4. INVESTMENT INSTRUMENTS 1
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 Agency 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) Bankers Acceptances. 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 Acceptances may not
exceed 270 days maturity or 40% of the City' s surplus money which may
be invested.
F) Commercial Paper. Paper of the highest rating as provided by Moody's
Investors Service, Inc. , or Standard and Poor's Corporation (A-1 :
P-1 ). 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).
G) 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-licensed 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.
- 2
H) Repurchase Agreements. 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
specified amount. Investments in repos will be used solely as short
term investments not to exceed 90 days.
I) 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 .
5. DIVERSIFICATION
Investments shall be diversified among institutions, types of securities
and maturities to maximize safety and yield with changing market
conditions.
6. SAFEKEEPING
All investments of the City shall have the City of Chula Vista as
registered owner or shall be kept in the custody of the City or by a
qualified safekeeping institution.
7. 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 data as required by the City
B) The Director of Finance shall annually render a Statement of
Investment Policy to the City Council .
WPC 0299G
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